Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q3 2004 Earnings Presentation
29 slides from Sun Life Financial's earnings presentation, November 2004
Slide 1: Third Quarter 2004 Financial and Operating Results
Q3 Third Quarter 2004 Financial and Operating Results Nine months ended September 30, 2004 Sun Life Financial Inc.
Slide 2: Forward Looking Statement
1 2 Forward Looking Statement 4 Q 3 Some of the statements in this presentation, including those relating to the Company’s strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates”,
Slide 3: Third Quarter 2004 Highlights
1 2 Third Quarter 2004 Highlights 4 Q 3 • Earnings of $439 million up 11% over 3Q’03, EPS of 73c up 12%. • 20% increase in YTD operating EPS. • YTD operating ROE of 11.9% up 160 bps compared to first nine months 2003. • Repurchased 3.4 million shares during 3Q’04, 5.1 million repurchased YTD. • Reor
Slide 4: Operating EPS up 12% from 3Q'03
1 2 Operating EPS up 12% from 3Q’03 4 Q 3 1,132 S&P 500 1,123 1,104 (average) 1,056 1,000 % up 12 73 73 71 69 65 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Operating EPS (cents) 65 69 71 73 73 Reported EPS (cents) 65 34 61 73 73 4
Slide 5: Operating Earnings up 11% from 3Q'03
1 2 Operating Earnings up 11% from 3Q’03 4 Q 3 S&P 500 (average) 1,132 1,123 1,104 1,056 1,000 438 439 425 417 394 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Operating Earnings ($ millions) 394 417 425 438 439 (1) ROE (%) 11.3 11.8 12.0 12.0 11.9 (1) Based on operating earnings 5
Slide 6: SLF Canada Revenue and Net Income
1 2 SLF Canada 4 Q 3 (C$ Millions) 2,500 250 • 17% increase in 2,000 200 Net Income earnings 3Q/3Q Revenue 1,500 150 1,000 100 • ROE up 140 bps 3Q/3Q 500 50 0 0 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Revenue 2,109 2,265 2,261 2,139 2,081 Net Income 206 221 245 230 242 ROE 12.0% 12.4% 13.5% 12.7% 13.4% 6
Slide 7: Individual Sales - Canada
Individual Sales - Canada 1 Q 2 4 3 (1) Premiums and Deposits (C$ Millions) Individual Wealth 744 • Premiums and deposits 568 511 463 383 up 21% over 3Q’03 • 46% of CI retail net sales from Sun Life 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Individual Life and Health Sales (C$ Millions) • Sales down from 2Q’04
Slide 8: Group Retirement Services - Canada
1 2 Group Retirement Services - Canada 4 Q 3 • GRS accounted for 58% Defined Contribution Plan Assets of DC plan sales and (C$ Billions) 47% of total pension 21.7 sales in Canada for the 20.2 21.4 21.6 first half of 2004 (Fraser 18.9 study) • Defined contribution plan 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 a
Slide 9: Group Benefits - Canada
Group Benefits - Canada 1 2 4 Q 3 Sales and Business In-Force (C$ Millions) • Business in-force 97 up 6% over a year ago 46 43 40 30 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 ASO Premium 15 9 56 10 11 Equivalents Regular Group 31 21 41 30 32 Annualized Premiums Business In-Force 4,480 4,507 4,689 4,699 4,739 9
Slide 10: SLF United States Revenue and Net Income
1 2 SLF United States 4 Q 3 • 13% increase in revenues (US$ Millions) 2,000 100 3Q/3Q on higher indexed Net Income 1,500 80 Revenue annuity premiums 60 1,000 40 500 20 • 2004 YTD earnings up 0 0 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 49% compared to YTD Revenue 1,622 1,654 1,781 1,807 1,832 2003 Net Income 7
Slide 11: U.S. Annuity Sales
U.S. Annuity Sales 1 Q 2 4 3 (US$ Millions) • Variable annuity sales 1,053 1,129 1,014 – $1.5 billion YTD up 5% 775 883 • Continued strong EIA sales 5 times 3Q’03 – #3 in industry EIA sales 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Gross Sales • New GMAB product Variable Annuities Fixed Annuities 584 102 519 14
Slide 12: First Year Annualized Premiums – U.S.
1 2 First Year Annualized Premiums – U.S. 4 Q 3 Sales and Business In-Force (US$ Millions) Group Life & Health 119 • Business in-force up 12% 34 30 54 43 3Q/3Q 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 • Growing distribution Sales 34 119 30 54 43 network Business In- 692 764 756 772 777 • Strong life & disabili
Slide 13: MFS Investment Management Operating Earnings
1 2 MFS Investment Management 4 Q 3 S&P 500 1,132 1,123 (average) 1,104 • Revenues flat compared to 1,056 1,000 3Q’03, operating earnings down due to higher 40 Operating Earnings (1) expenses 30 (US$ Millions) • 15% growth in YTD 20 operating earnings 10 0 • Significant improvement in 3Q'03 4Q'03 1Q
Slide 14: MFS Assets Under Management
1 2 MFS Assets Under Management 4 Q 3 Assets Under Management (US$ Billions) 140 142 137 134 • AUM up $5 billion 129 over 3Q’03 with institutional assets up 14% 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Domestic Funds 72 77 77 74 72 Other Investment 4 4 4 4 4 Products MFS/Sun Funds 11 11 11 11 10 Institutional
Slide 15: MFS Net Fund Sales
MFS Net Fund Sales 1 Q 2 4 3 Net New Sales Market Movement (US$ Billions) (US$ Billions) 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Mutual Funds Mutual Funds 1.2 6.0 1.6 0.2 (0.7) Gross New Sales 4.5 4.4 4.7 3.4 2.9 Managed Redemptions (6.5) (4.8) (6.3) (6.3) (5.1) Funds 1.1 4.8 1.5
Slide 16: MFS – Improving Trend in Monthly Net Flows
MFS – Improving Trend in Monthly 1 2 Net Flows(1) 4 Q 3 (US$ Billions) 2.0 1.0 0 (1.0) (2.0) (3.0) Jan Feb Mar Apr May Jun Jul Aug Sep 0.9 (1.3) (0.8) (1.2) (1.9) (2.2) (1.9) (0.6) - (1) Includes domestic, institutional , international and other investment funds 16
Slide 17: MFS Sales and Market Ranking
1 2 MFS Sales and Market Ranking 4 Q 3 • MFS – one of only 4 companies to • MFS continues to rank maintain top 10 ranking in YTD among the largest U.S. gross sales in each of the 4 major mutual fund managers industry categories Sep '04 1 Vanguard 641 2 Fidelity 617 3 American Funds 568 Domestic Equi
Slide 18: SLF Asia Revenue and Net Income
1 2 SLF Asia 4 Q 3 • Revenues up 22% 3Q/3Q (C$ Millions) (30% in local currency) 200 15 150 – VUL product launched in Net Income 10 Revenue Philippines 100 5 – New UL product 50 introduced in Hong Kong 0 0 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 – New bancassurance UL Revenue 144 158 145 154 175 product to be
Slide 19: First Year Annualized Premiums - Asia
1 2 (1) 4 Q 3 First Year Annualized Premiums - Asia (C$ Millions) • Significant increases in 43 YTD individual life sales in 40 local currency 33 31 24 – Philippines up 12% – Hong Kong up 35% – India up 197% – China up 39% – Indonesia up 179% 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 (1) Includes 50% of the sal
Slide 20: SLF United Kingdom Revenue and Net Income
1 2 SLF United Kingdom 4 Q 3 (£ Millions) • Stable earnings from closed 200 30 block business with 21% Net Income Revenue 150 ROE 20 100 10 50 0 0 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Revenue 154 146 134 136 133 Net Income 28 21 19 17 17 ROE 27.9% 20.4% 19.1% 18.9% 21.2% 20
Slide 21: Operating Expenses
Operating Expenses 1 2 4 Q 3 Non-MFS MFS (C$ Millions) (US$ Millions) $500 484 30% 60% 454 445 429 417 $200 $400 175 165 161 20% 147 153 40% $300 $100 10% 20% $200 $100 0% $0 0% 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Operating 429 484 417 454 445 Operating 147 153 175 165 161 (1
Slide 22: Impaired Asset Ratio
1 2 Net Impaired Assets 4 Q 3 1,000 1.00% 806 Impaired Asset Ratio 750 699 0.75% C$ Millions 563 522 512 500 0.50% 250 0.25% 0 0.00% 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 Gross Impaired Assets 806 699 563 522 512 Total Allowances 403 366 336 330 295 Net Impaired Assets (1) 403 333 227 192 217 Net Impaired A
Slide 23: Capital Management
1 2 Capital Management 4 Q 3 • 3.4 million shares ($124 million) repurchased in 3Q/04 239% 238% 235% 232% 228% • $250 million debt to be repurchased Nov. 15 • Reorganization (1) 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 MCCSR Ratio 228% 232% 235% 239% 238% planned for Jan 2005 Debt Ratio (2) 21.4% 21.4% 21.0% 2
Slide 24: Sources of Earnings
1 2 Sources of Earnings 4 Q 3 2004 - 2003 (C$ Millions) 3Q'04 3Q'03 Change Expected profit 423 464 (41) New business gain or loss (64) (61) (3) Experience gains or losses 22 (58) 80 Assumption changes (59) 39 (98) Earnings from operations 322 384 (62) Earnings on surplus 138 117 21 Operating earning
Slide 25: Corporate Reorganization
1 2 4 Q 3 Sun Life Financial Corporate Reorganization 25
Slide 26: Background
1 2 Background 4 Q 3 • OSFI has proposed the elimination of a minimum capital requirement at the holding company level (SLF) • Among other things, allows SLF (U.S.) to maintain capital levels based solely on NAIC (Risk Based Capital or RBC) requirements – MCCSR no longer applicable at SLF (U.S.) lev
Slide 27: Current and Post-Reorganization Corporate Structure
1 2 Current Corporate Structure SLF Inc. 4 Q 3 SLA US Insurance Branch 100% 94% 55% 34% SLF US Asia /UK MFS McLean Budden CI Funds Corporate Structure After Reorganization SLF Inc. SLA AMC 100% 94% 55% 34% Asia /UK US Insurance SLF US MFS McLean Budden CI Funds Branch 27
Slide 28: Primary Benefits of Reorganization
Primary Benefits of Reorganization 1 2 4 Q 3 • Structural flexibility to pursue strategic alternatives • Over $1B incremental capital accessible subject to leverage constraints • Potential lower cost of capital and higher ROE • Ability to separate regulated business from non-regulated businesses • E
Slide 29: Questions & Answers
Questions & Answers