Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Investor Day (November 2005)
149 slides from Sun Life Financial's investor day presentation, Nov 15, 2005
Slide 1: Investor Day 2005
Sun Life Financial November 15, 2005 www.sunlife.com Investor Day 2005
Slide 2: Welcome to Sun Life Financial Investor Day 2005
WELCOME TO SUN LIFE FINANCIAL INVESTOR DAY 2005
Slide 3: Agenda
Agenda Financial Overview Paul Derksen SLF U.S. Bob Salipante SLF U.S. Hedge Keith Gubbay MFS Rob Manning BREAK CEO Remarks Don Stewart SLF Asia Jim Prieur SLF Canada Kevin Dougherty Closing Remarks Paul Derksen 2
Slide 4: Forward-Looking Statements
Forward-Looking Statements 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”, “intends”
Slide 5: Meeting Our Commitments to Shareholders
Paul Derksen Executive Vice-President & Chief Financial Officer November 15, 2005 Meeting Our Commitments to Shareholders
Slide 6: Highlights
Highlights • Excellent EPS track record – 3 year CAGR 16% constant currency • Strong business momentum generating stable and predictable earnings growth – Well-positioned Canadian franchise – Premier asset management operations – Strong U.S. earnings improvements – Asia poised for significant growth
Slide 7: 2005 Performance at a Glance
2005 Performance at a Glance Medium- 2005 Measure Term Expected Status Goal Results Operating EPS Growth * 10% Constant Currency * 10% 15% Exceeds 75-100 100+ Operating ROE Growth basis points basis points Exceeds Dividend Payout Ratio 25%-35% 31% Meets Share Buyback $500 million >$500 million Excee
Slide 8: Drivers of 2005 EPS Growth
Drivers of 2005 EPS Growth • Focus on Value of New Business • Increasing value from the in-force block • Well-positioned asset management companies benefiting from positive markets • High level of asset quality in positive credit environment • Active capital management and focused, accretive acquisi
Slide 9: Strong EPS Performance
Strong EPS Performance Constant 2002 Dollars EPS % CAGR 16 * 3.62 3.15 2.63 2.32 3.21 2.91 2.50 2.32 2002 2003 2004 2005 Reported Currency Impact 8 * For illustrative purposes only, I/B/E/S consensus estimate
Slide 10: High Quality Earnings
High Quality Earnings • Expected profits up 13% Q3/Q3 • New business strain decreasing due to expense management and increasing VNB • Experience gains reflective of conservative actuarial assumptions • Assumption changes a modest piece of earnings ranging from (1)% - 4% since 2002 9
Slide 11: Sources of Earnings
Sources of Earnings Source Description Annual release of profit from PfADs Expected Profits (Provision for Adverse Deviations) & fee income New Business Gains/ PV of profits exceeds PV of PfADs/ New Business Strain PV of PfADs exceeds PV of profits Actual result versus best estimate assumptions • Ex
Slide 12: Sources of Operating Earnings
Sources of Operating Earnings Constant 2002 dollars LTM 3-year (C$ millions) 2002 Q3 2005 CAGR Expected profit on in-force business 989 1,369 11.4% Expected profit -- MFS 306 370 6.5% New business strain (170) (148) Experience gains 137 444 48.0% Assumption changes/management actions 78 56 -10.5% Ea
Slide 13: Profitable Sales Growth
Profitable Sales Growth 3-year CAGR MFS (6.5)% Constant 2002 Dollars (C$ millions) Non-MFS 34.3% Value of New Business 846 746 673 574 584 496 372 241 Twelve months Q3'02 Q3'03 Q3'04 Q3'05 ended Non-MFS MFS 12
Slide 14: High Asset Quality
High Asset Quality 0.41 0.34 0.18 0.19 Net Impaired Ratio (%) Net Impaired Assets (C$ millions) 457 333 178 182 2002 2003 2004 Q3'05 13
Slide 15: Solid Dividend Growth
Solid Dividend Growth % CAGR Payout 22 30% 31% Ratio 26% 25% 25.5 22 Dividends (cents per share) 17 14 14 Q3'02 Q3'03 Q3'04 Q3'05
Slide 16: Return of Capital to Shareholders
Return of Capital to Shareholders Average Share $40.84 Price $35.79 $28.63 $28.06 (C$ millions) 1600 65% 1,080 1200 940 903 800 500 527 388 400 515 580 294 413 0 0% 2002 2003 2004 2005 Dividends Share Repurchases Capital Distribution Ratio* 15 * Represents capital distribution to operating earnings
Slide 17: Capital Strength
Capital Strength • Issued $725 million perpetual preferred shares receiving Tier 1 capital treatment at 4.75% - 4.80% • Redeemed $150 million 6.5% preferred shares • Asset management companies restructured to optimise capital • Excess capital of $2 billion after the CMG acquisition 16
Slide 18: ROE: Up 100+ Basis Points in 2005
ROE: Up 100+ Basis Points in 2005 13.1% 12.0% 10.7% 10.6% 2002 2003 2004 2005 Estimate 17
Slide 19: Strong Organic ROE Growth
Strong Organic ROE Growth 0.2% 0.5% 0.8% 13.1% 12.0% ROE 2004 Estimated Estimated Estimated Estimated Earnings Return to S/H Currency ROE 2005 18
Slide 20: SLF Stock Performance
SLF Stock Performance Sun Life Financial vs Markets Dec 31, 2002 to Nov 7, 2005 180 140 100 60 Dec-02 Apr-03 Aug-03 Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 European Insurers Canadian Banks Canadian Insurers Sun Life Financial S&P 500 U.S. Insurers 19
Slide 21: Questions and Answers
Questions and Answers 20
Slide 22: Sun Life Financial U.S.
Robert C. Salipante President, Sun Life Financial U.S. Sun Life Financial U.S.
Slide 23: Operating Earnings
Operating Earnings (last twelve months Q3’05) Group 12% Individual 24% Annuities 64% U.S. Canada 24% 51% MFS SLF U.S. = US$357 million 10% U.K. Asia RBU 10% 3% 2% 22 Note: all numbers in this presentation are in US dollars
Slide 24: Consistent U.S. Strategy
Consistent U.S. Strategy • Deliver solid organic growth – Deeper penetration of existing markets – Extend product and distribution reach • Pursue “bolt-on” acquisitions to augment organic growth 23
Slide 25: Industry Overview
Industry Overview • Market Pressures – Low interest rates; flat yield curve – Lackluster equity markets – Investor/stranger owned life insurance • Capital Pressures – AXXX modifications – NAIC C3 Phase II • Regulatory Pressures – Sales suitability – Market timing – Broker commissions – Estate tax un
Slide 26: Solid Earnings Trend
Solid Earnings Trend SLF U.S. Earnings and ROE (US$ millions) 11.7% 10.4% 7.3% 7.3% 357 300 238 218 2002 2003 2004 LTM Q3'05 Earnings ROE 25
Slide 27: Annuities
Annuities Group 12% Product Lineup Individual 24% Annuities • Fixed 64% • Equity Indexed • Variable Earnings (US$ millions) 229 184 Total Account Value as of Q3’05 111 US$35 billion 2003 2004 LTM 26
Slide 28: Annuities: Strategy
Annuities: Strategy • Focus on organic growth strategies – Strengthen and extend distribution • 90 wholesalers by 2006 • Indexed products through bank channel (2006) – Extend the product range • Withdrawal, death and accumulation benefits • Lifetime income rider (Q4’05) – Build payout capabilities t
Slide 29: Annuities: Progress
Annuities: Progress • Restructuring of SLFD complete – 75+ wholesalers with average 13+ years experience – New hires have historical production of US$50+ million • Veteran wholesaler sales up 19% Q3/Q3 • New hire sales steadily improving • Number of producers selling SLF VA up 11% vs 2004 • Quarterl
Slide 30: Annuities: Progress
Annuities: Progress Number of Wholesalers on Board vs VA Market Share 1.22% 1.19% 1.08% 1.04% 1.06% 1.05% 0.99% 1.01% 0.99% 28 39 57 63 67 75 77 75 76 Jan Feb Mar Apr May Jun Jul Aug Sep # Wholesalers VA market share 29 Source: Morningstar/VARDS Monthly VA Sales Report
Slide 31: Annuities: Industry Context
Annuities: Industry Context Recent Sun Life Financial market research shows increasing need for financial advice: 1999 2005 Anticipated Retirement Age 60 63 “Very Afraid” of out-living income 10% 19% 50% of pre-retirees surveyed do not know how much they need to save for retirement Source: Sun Life
Slide 32: Annuities: Pay-Out Product Potential
Annuities: Pay-Out Product Potential As Boomers retire, focus will shift from accumulation to income as they roll-over accumulated assets Assets in Pay-Out Phase - Immediate Annuities - Deferred Annuities w/ Income Benefits US$8 trillion in 2004 Assets in Accumulation Phase - Individual Retirement A
Slide 33: Annuities: Earnings Drivers
Annuities: Earnings Drivers 2005 Quarterly Earnings 1,229 1,181 1,191 (+38) (-31) (+10) 1.72 1.51 1.19 34 72 78 Q1'05 Q2'05 Q3'05 Earnings Spread S&P 500 Impact of the hedge 32
Slide 34: Annuities: Spread Income
Annuities: Spread Income Fixed Accounts In-Force 9/30/05 • Near-term, spreads within by Potential Crediting Rate target range as policies reset 2.0 at lower rates 3.7 5.6 – Of US$5.6 billion above minimum rate, US$3.6 billion scheduled for reset 8.5 over next 2 years 6.8 4.9 – Average crediting rate
Slide 35: Annuities: Spread Income
Annuities: Spread Income Longer-Term Interest Rate Scenarios Rates Spread Impact Spreads improve as earned rates increase and Slow in-force resets to crediting rates consistent with Increase pricing targets Rapid Spreads squeezed as crediting rates rise faster Increase than earned rates to stave off
Slide 36: Annuities: Positioned for Growth
Annuities: Positioned for Growth • Competitive suite of products • Experienced wholesaling team • Significant shelf space access • Leading-edge ALM capabilities • Disciplined crediting strategy 35
Slide 37: Individual Life
Individual Life Group 12% Individual Product Lineup 24% Annuities 64% • UL (Single & Joint Life) • VUL (Single & Joint Life) • PPVUL & PPVA for High Net Worth Earnings (US$ millions) 85 81 77 Total Account Value as of Q3’05* US$8.3 billion 2003 2004 LTM Q3'05 36 *Active product lines only; excludes
Slide 38: Individual: Strategy
Individual: Strategy • Organic growth strategies – Strengthen distribution • Ramping up wholesaling bench-strength – Expand distribution reach • Bank channel product launch (SPUL Q4’05) – Extend the product range – Extend offshore and private client group programs • “Bolt-on” M&A program 37
Slide 39: Individual: Core Markets
Individual: Core Markets Core Products (for wealthy individuals & business owners) • Fixed & Variable Universal Life • Single life & survivorship • Estate planning, liquidity management, wealth or business transfer • Distribution: primarily brokerage General Agents • LTM Sales: US$82 million (total
Slide 40: Individual: Offshore & Private Client Group
Individual: Offshore & Private Client Group Offshore Brokerage: Bermuda Life & Annuities • US style UL and VA products to ultra high net worth market • Sold via brokers; working to expand relationships • Predominantly Asia for UL and Latin America for VA • LTM Life Sales: US$43 million Life (total n
Slide 41: Individual: Increasing Assets
Individual: Increasing Assets Account Value - Active Products (US$ billions) 8.3 7.4 0.2 0.1 5.5 4.1 3.8 2.9 1.8 1.5 0.9 1.7 2.0 2.2 2003 2004 Q3'05 Core Offshore COLI/BOLI HNW 40
Slide 42: Individual: High Average Policy Size
Individual: High Average Policy Size SLF target market reflected in average policy size Average Face Amount Average Premium 1,015 33.9 739 21.3 ($000) 376 230 5.9 4.5 Product UL VUL UL VUL SLF Rank 2 4 5 1 SLF Industry 41 Source: Q2 2005 LIMRA Sales Survey
Slide 43: Individual: Competitive Strengths
Individual: Competitive Strengths • Competitive product suite – With increased jumbo and retention limits • Expertise in upscale market – Distribution access – Reputation/credibility in marketplace – Advanced underwriting skills • Superior risk management – Underwriting discipline (e.g. reject IOLI/
Slide 44: Group Life & Health
Group Life & Health Group 12% Product Lineup Individual 24% Annuities 64% • Stop-Loss • Life • Disability (STD, LTD) Earnings (US$millions) 43 35 Business In-Force as of Q3’05 30 US$928 million 2003 2004 LTM Q3'05 43
Slide 45: Group: Business Mix
Group: Business Mix Disability Insurance 26% Life Insurance 38% Medical Stop-Loss 36% Business In-Force = US$928 million as of September 30, 2005 44
Slide 46: Group: Strategy
Group: Strategy • Organic growth strategies – Leverage current distribution with enhanced product suite – Extend reach to larger case market – Expand “employee paid” capabilities – Improve operational efficiency • “Bolt-on” acquisitions 45
Slide 47: Group: Proven Track Record
Group: Proven Track Record Sales: 19% CAGR Business In-Force: 13% CAGR (US$ millions) (US$ millions) 288 928 874 252 764 233 191 683 180 590 136 483 104 437 % +177 % +112 1999 2000 2001 2002 2003 2004 LTM Q3'05 1999 2000 2001 2002 2003 2004 Q3'05 Earnings: 22% CAGR (US$ millions) 43 35 31 30 27 17 1
Slide 48: Group: Building on Success
Group: Building on Success • Grow core business – Via product enhancements and joint ventures • Gain efficiency in small case market • Tap potential within distribution organization – Expand key broker program – Intensify management of underperforming offices • Gain share of large case market – Prod
Slide 49: Service Centre: Strategic Initiatives
Service Centre: Strategic Initiatives • Continue emphasis on expense management • Expand offsite call center & service functions – Over 25% of tech and operations staff are offsite – Currently saving US$8 million in annualized compensation Average Compensation US$ (000s) Operations Technology Welles
Slide 50: U.S. Strategy
U.S. Strategy • Deliver solid organic growth – Deeper penetration of existing markets – Extend product and distribution reach • Pursue “bolt-on” acquisitions to augment organic growth 49
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Slide 52: Sun Life Financial U.S. Hedging Programs
Keith Gubbay Vice-President & Chief Actuary Sun Life Financial U.S. Hedging Programs
Slide 53: Risk Management
Risk Management • Comprehensive management of market risk – Top level management focus – Disciplined product development and sign-off process – Stochastic reserving methods – Comprehensive ALM and hedging programs – Reporting and monitoring of earnings at risk and other stress tests – Incorporation
Slide 54: Risk Exposures
Risk Exposures • ALM and hedging programs are in place to address option and guarantee exposures: – Fixed Annuity • Minimum interest and book value cash-out guarantees – Equity Indexed Annuity • Index performance and book value cash-out guarantees – Variable Annuity • Death and living benefits – Lif
Slide 55: Fixed Annuity
Fixed Annuity Total Account Values US$8.7 billion % with surrrender charge protection 70% % at minimum guarantee 49% Average crediting rate 3.94% • Objective: hedge economic exposures and constrain impact of interest rate changes on reserves • Duration and convexity closely monitored and managed – D
Slide 56: Equity Indexed Annuity
Equity Indexed Annuity Total Account Values US$3.4 billion • Objective: offset changes in economic (market) value of equity-linked options • Fully hedge Delta (underlying) with index futures and options of varying maturities • Manage exposure to Gamma (convexity), Rho (interest) and Vega (volatility
Slide 57: Variable Annuity – Risk Profile
Variable Annuity – Risk Profile (US$ billions) Post-2003 In-Force Sales Total VA Account Value $18.9 $3.1 Death Benefit Exposure $2.1 $0.0 % AV with Accumulation Benefit 9% 45% % AV with Withdrawal Benefit 1% 3% 56 As of 9/30/05
Slide 58: Variable Annuity – Risk Profile
Variable Annuity – Risk Profile • Optional benefits are at standard-to-conservative end of competitive landscape – Disciplined approach to living and death benefits • e.g. delayed launch of benefits when market was irrational • Stochastic cost of policyholder options fully priced into products 57
Slide 59: Variable Annuity Hedging Programs
Variable Annuity Hedging Programs • Objective: mitigate impact of significant equity market decline on earnings and economic capital • Static Hedge: matrix of S&P puts, ¼-7 year terms – US$1B notional at Q3’05; average strike price 1,049 – Monitored monthly; periodic rebalancing – Provides significa
Slide 60: VA Income Sensitivity
VA Income Sensitivity Impact of Change in S&P 500 on Earnings Change in CGAAP Reserve 865 905 942 982 1,022 1,062 1,106 1,146 1,186 1,229 1,269 1,309 1,352 1,392 1,432 1,472 1,512 59 Value of S&P Index
Slide 61: VA Income Sensitivity
VA Income Sensitivity Impact of Change in S&P 500 on Earnings Change in CGAAP Reserve Net Impact of Reserve and Hedge 865 905 942 982 1,022 1,062 1,106 1,146 1,186 1,229 1,269 1,309 1,352 1,392 1,432 1,472 1,512 60 Value of S&P Index
Slide 62: VA Income Sensitivity
VA Income Sensitivity Potential for short-term earnings noise with minor movement in S&P, due to impact of volatility and interest rates Impact of Change in S&P 500 on Earnings Range of impact of vols and int rates Change in CGAAP Reserve Net Impact of Reserve and Hedge 865 905 942 982 1,022 1,062 1
Slide 63: VA Impact on Statutory Capital
VA Impact on Statutory Capital • Impact on statutory capital is less than Canadian GAAP due to differences in reserve methodology • RBC C-3 Phase II – To be implemented by year-end – 2005 implementation not expected to have significant impact on statutory capital 62
Slide 64: Universal Life
Universal Life Total UL Cash Value US$3.1 billion • Minimum interest guarantees create exposure to sustained low interest rates – Risk of portfolio rate going below the level needed to support primary guarantees and secondary no-lapse guarantees • Book value cash-out guarantees create exposure to sh
Slide 65: Universal Life Hedging Program
Universal Life Hedging Program • Duration monitored and managed to targets and within ranges • Hedges in place to reduce impact of prolonged low interest rate scenarios – Initially executed in January 2000 with US$300 million notional floors – Today, hedge consists of: • US$1.75 billion notional flo
Slide 66: Universal Life Income Sensitivity
Universal Life Income Sensitivity Reserves Varying by Average Interest Rates* Without Hedge With Hedge Best Estimate Reserves 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 20-year average of 10-year Treasury rate 65 * Domestic UL business; based on stochastic scenarios projected from 6/30/2005
Slide 67: Summary
Summary • Market risks are managed within a well-developed enterprise risk management framework • Sun Life Financial U.S. was an early adopter of hedging programs and is among the industry leaders • Awareness of risk has resulted in a more prudent position than many competitors 66
Slide 68: Questions & Answers
Questions & Answers 67
Slide 69: Slide 69
Slide 70: MFS Investment Management
Robert J. Manning Chief Executive Officer & Chief Investment Officer MFS Investment Management
Slide 71: MFS Company Overview
MFS Company Overview • Uniquely positioned as a global asset manager • Strong management team • Strong investment results • Positive net asset flows • Powerful earnings leverage 70
Slide 72: Competitive Advantages
Competitive Advantages • Strong corporate culture • Organically grown company – not built through acquisitions • Global research platform • Team approach to managing money • Distribution relationships • In the ‘sweet spot’- company size vs. alpha 71
Slide 73: MFS Culture
MFS Culture • Culture revolves around four key pillars – Putting customers and MFS before self-interests – Mutual respect – Teamwork – Humility • Critical to attracting and retaining high quality talent • Culture extends to intermediaries and ultimately the client experience – a competitive advantag
Slide 74: Assets Under Management
Assets Under Management (US$ Billions) 180 157 147 140 146 September 2005 137 Asset Mix 120 113 U.S. Equity 44% Intl Equity 24% Balanced 12% 60 Fixed Income 19% Money Market 1% 0 2000 2001 2002 2003 2004 Q3'05 73
Slide 75: Asset Mix
Asset Mix (US$ Billions) Balanced $19.4 International Taxable $38.1 Fixed Income $24.8 Tax-Free Value Equity Fixed Income Growth Equity $30.5 $6.2 $27.0 Core Equity $11.4 As of September 30, 2005 74
Slide 76: Assets Under Management by Product
Assets Under Management by Product (US$ Billions) September Mix 2005 Percentage U.S. Retail Mutual Funds $75.6 48% MFS/Sun Insurance Products $10.3 6% MFS Managed Insurance Products $25.3 16% Institutional Products $32.7 21% Non-U.S. Retail Products $7.6 5% Other Investment Products* $5.9 4% Total A
Slide 77: Gross Sales Trends by Investment Style
Gross Sales Trends by Investment Style 2000 Q3 2005 U.S. Equity 1% Global/Int'l Equity 5% 26% 4% 2%5% Balanced 1% 3% 4% 84% 11% Fixed Income 44% Money Market 10% Structured Product Asset Allocation 76
Slide 78: Sales Trends by Distribution Channel
Sales Trends by Distribution Channel 2000 Q3 2005 U.S. Retail Funds 4% 8% MFS/Sun Insurance 6% Products MFS Managed 21% Insurance Products 40% 36% Institutional Products 7% 60% Non-U.S. Retail Products 16% 2% 77
Slide 79: Sales Distribution by Client Type and Geography
Sales Distribution by Client Type and Geography Client Type U.S. and non-U.S. Sales 100% 100% 75% 75% 50% 50% 25% 25% 0% 0% 2000 2001 2002 2003 2004 Q2'05 2000 2001 2002 2003 2004 Q2'05 Institutional Retail Total Non-U.S. Total U.S. 78
Slide 80: Net Flows
Net Flows (US $ Billions) 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 Q1'03 Q2'03 Q3'03 Q4'03 Q1'04 Q2'04 Q3'04 Q4'04 Q1'05 Q2'05 Q3'05 U.S. Retail Mutual Funds Institutional & all Other Products Total Net Flows 79
Slide 81: Global Distribution
Global Distribution • Strong relationships • Experienced leadership – Director of Global Distribution: Marty Beaulieu • Institutional: Carol Geremia • Retail: Jim Jessee • Advisory Resources: Bill Rittling • Alignment by client requirements, not by firm type, product, or geography 80
Slide 82: Distribution
Distribution Packaging Distribution • Multi-Share Class Mutual Funds Retail/Broker • Variable Annuities • Closed-End • Individual Separate Account Management Institutional • Structured Financial Products • Institutional Separate Accounts Bank Trust • Sub-Advisory • Variable Insurance Trust RIA • Ins
Slide 83: Retail Business
Retail Business U.S. Mutual Fund Industry Total Long-Term Assets by Channel ($T) MFS Retail Asset Mix $2.1 46% Domestic Equity Non-Proprietary 4% Int'l/Global Proprietary $0.47 1% Direct $1.0 2% Taxable Fixed Income Institutional 12% 34% Money Market $2.0 Stable Value Tax-Free Fixed Income Market Si
Slide 84: Global Institutional Market
Global Institutional Market Region Opportunity MFS AUM North America $9.0 trillion $12.4 billion Europe $4.1 trillion $6.1 billion Asia (includes Japan & $1.2 trillion $7.0 billion Australia) Total $14.3 trillion $25.5 billion 83
Slide 85: Investment Management Committee
Investment Management Committee Industry MFS Experience Experience Robert Manning President CEO & Chief Investment Officer 21 21 David Antonelli Chief Equity Officer, Director of Global Equity Research 18 14 Deborah Miller Director, Quantitative Equity Research 25 5 Michael Roberge Chief Fixed Incom
Slide 86: Investment Management Process
Investment Management Process • Portfolio Management – Accountability created by meritocracy – pay for performance – Continually augmenting portfolio management by adding experienced analysts to portfolio teams – Use quantitative tools to help manage risk, provide attribution as well as reinforce st
Slide 87: Global Research Platform
Global Research Platform LONDON BOSTON MEXICO CITY TOKYO SINGAPORE 86
Slide 88: MFS Overall Fund Performance
MFS Overall Fund Performance % of MFS Funds Ranked in the Top Half of their Lipper Category 100% 80% 75% 70% 69% 65% 60% 40% 20% 0% 1 Year 3 Year 5 Year 10 Year Actual Rank/ Total # of Funds 43/62 39/60 41/55 26/37 Based on Class A shares at NAV (as of 9/30/05) Source: Lipper, Inc. Based on 1-year c
Slide 89: Questions & Answers
Questions & Answers 88
Slide 90: CEO Remarks
Donald A. Stewart Chief Executive Officer November 15, 2005 CEO Remarks
Slide 91: Questions and Answers
Questions and Answers 90
Slide 92: Sun Life Financial Asia
C. James Prieur President & Chief Operating Officer November 15, 2005 Sun Life Financial Asia
Slide 93: SLF Asia Strategy: Growth
SLF Asia Strategy India / China: the Largest and Fastest Growing Asian Insurance Markets 35% Vietnam Taiwan China Hong Kong India Malaysia Growth Thailand Indonesia 10% Philippines South Korea Japan 0 300 mm 1,300 mm Population 92 Source: Swiss Re World Insurance in 2004 Sun Life Financial operation
Slide 94: Premium % of GDP
93 Premium % of GDP Vi 0 4 8 12 et na m I Ph n di i lip a pi ne In do s ne si a Source: Swiss Re World Insurance in 2004 C Life hi n Th a ai la M nd al with GDP per Capita ay si Ta a GDP/Capita So iw ut an h Ko H on rea g Ko Premium Growth Accelerates ng Ja pa n 0 15 30 45 GDP per Capita
Slide 95: SLF Asia Strategy: Multi-channel Distribution
SLF Asia Strategy Multi-channel Distribution Country Agency Bancassurance Group Hong Kong 3 3 3 India 3 3 3 China 3 3 3 Indonesia 3 3 Philippines 3 3 3 94
Slide 96: SLF Asia: Rapid Sales Growth
SLF Asia: Rapid Sales Growth 300 Life Insurance Sales (C$ millions) 250 200 150 SLF Canada 100 50 0 2002 2003 2004 LTM Q3'05 Asia + proforma 2005 CMG 95
Slide 97: Hong Kong
Hong Kong Core Competencies • Effective multi-channel distribution management • Diversified product offering • Ability to leverage international capabilities Strategy • Integration of CMG • Continue to grow organically – Retain CMG sales force – Expand bancassurance relationships – Increase share of
Slide 98: CMG Acquisition: Product Line & Distribution Enhanced
CMG Acquisition: Product Line & Distribution Enhanced • #7 position for individual life • Significant presence in group life • Increased product breadth • Tripled number of agents to 1,700 • Leverages existing Sun Life Financial strengths – Modern technology platform – Meaningful global capabilities
Slide 99: CMG Acquisition: Top Position in Life Insurance
CMG Acquisition: Top 10 Position in Life Insurance (HK$ millions) (1) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 IA na h ia a Zu ) t.) in n iti ur . ) ua e fe an ife IN v . fic fe ) fe SL K ) LC p G a l e nt K K K si ric bo if nd u A M (I n Li hi i o Li h H (U (H H sM a L L Pa G L lA ro Pr rt C C F(
Slide 100: India Strategy
India Strategy • Strategic alliance with AV Birla Group • Top 3 market share in life insurance and asset management • Multi-channel distribution • Product leadership • Lead in advisor productivity 99
Slide 101: Birla Sun Life Insurance Company Overview
Birla Sun Life Insurance Company Overview Sales • Building successful 200 (C$ millions) multi-channel distribution platform 100 • Highest productivity per agent in industry • Increased focus on 0 2001-2002 2002-2003 2003-2004 2004-2005 growth in agency and mid-market 75,000 # of Agents • Leader in 5
Slide 102: China Overview
China Overview • Demographic and social structure creates opportunities • Significant and growing middle class • Evolving regulatory and investment environment • Rapid JV expansion 1H 2006 2H 2006 101 2007
Slide 103: China
China Core Competencies • Effective multi-channel distribution management • Distinctive product development • People development • Turn-key city expansion Strategy • Broaden the business from life insurance to include group benefits and pensions • Rapidly expand number of branches • Target high inco
Slide 104: Indonesia Overview
Indonesia Overview (C$ millions) 2002 2003 2004 2005 LTM Sales 6 9 16 20 • Political, economic and social situation is increasingly stable • Highest productivity per agent in industry • Insurance market is growing at double digit levels 103
Slide 105: Indonesia
Indonesia Core Competencies • Agency force is strong and committed • Brand identity is as a “professional company” • Successful reaching high end of the target market • Diversified product offering Strategy • Grow size and productivity of agency force • Grow non-agency distribution channel • Recogni
Slide 106: Philippines Overview
Philippines Overview 2002 2003 2004 2005 LTM Net income (C$ millions) 42 47 47 57 ROE 15.4% 20.9% 23.1% 28.6% • Well established and generating good profits and ROE • #2 position in individual life market • Diversified business lines 105
Slide 107: Philippines
Philippines Core Competencies • Strong brand image • Employer of choice • Risk management leadership Strategy • Organic growth through geographic expansion • Alternate channel development, in particular bancassurance and telemarketing • Leverage technology to create productivity improvements 106
Slide 108: India Service and Technology Centre
India Service and Technology Centre • Greenfield with significant growth plans • Sun Life Financial wholly-owned facility • Mandate to create an efficient operation providing service in three ways – Local management for sourcing of Indian vendors – Business processing (back office) • Began underwrit
Slide 109: Asia Strategy
Asia Strategy • Focus on countries with the highest growth potential • Multi-channel distribution focused on career and bancassurance • Leading edge products geared to affluent customers • Leverage Sun Life Financial world-wide strengths and capabilities 108
Slide 110: Questions and Answers
Questions and Answers 109
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Slide 112: Sun Life Financial Canada
Kevin P. Dougherty President, Sun Life Financial Canada November 15, 2005 Sun Life Financial Canada
Slide 113: Operating Earnings
Operating Earnings (last twelve months Q3’05) Group Retirement Services Group 15% Individual Benefits 61% 24% RBU U.K. 2% Asia 10% 3% MFS 10% Canada 51% SLF Canada = $933 million U.S. 24% Sun Life Financial = $1,831 million 112
Slide 114: SLF Canada: Unique Strategic Positioning
SLF Canada Unique Strategic Positioning • Clarica Sales Force / Wholesale • CI Investments • GRS asset retention • Technology in the Group businesses • Total Benefits 113
Slide 115: Industry Overview
Industry Overview • Final stages of industry consolidation • Aging population creating opportunities for growth − Health care − Retirement savings − Estate planning • Continued trend toward market-based and fee- based products • Technology a major factor driving competitiveness 114
Slide 116: Financial Results
Financial Results (C$ millions) 1,000 20.0% 800 15.0% 600 10.0% 400 5.0% 200 0 0.0% 2001 2002 2003 2004 1 Net Income 212 481 773 895 1 ROE 16.5% 10.9% 12.0% 13.5% 115 1 2001 excludes Clarica; 2002 includes 7 months of Clarica
Slide 117: Growth in Core Canadian Products
Growth in Core Canadian Products (C$ millions) 18,000 12,000 Premiums & Deposits 6,000 Managed Fund Sales 0 2001 2002 2003 2004 LTM Q3 '05 116
Slide 118: Competitor Benchmarks
Competitor Benchmarks Canadian Operations (C$ millions) Premiums & Net Income Revenue Deposits LTM Q3'05 LTM Q3'05 LTM Q3'05 SLF Canada 933 8,399 16,613 Manulife 785 9,120 13,405 Great-West 752 9,614 13,212 117
Slide 119: Individual
Individual Product Lineup Group Retirement • Universal Life Services Group 15% Individual • Term Insurance Benefits 61% 24% • Permanent Insurance • CI Investments • Guaranteed Annuities • Payout Annuities Net Income • Segregated Funds Q3’04 Q2’05 Q3’05 • Critical Illness Insurance 121 145 128 • Long
Slide 120: Individual: Rankings
Individual Ranking New Ranking Product Sales In-Force (premiums)(1) (premiums)(2) Life 4 2 Health: Critical Illness 3 1 Long-term Care 1 1 Guaranteed Annuities(3) 3 1 (1) Source: LIMRA Q2’05 (2) Source: OSFI 2004 119 (3) Guaranteed Annuities in-force ranking based on assets
Slide 121: Individual: Clarica Sales Force Location of Advisors
Individual Clarica Sales Force –Location of advisors 120
Slide 122: Individual: Clarica Sales Force Successful Model
Individual Clarica Sales Force - Successful Model Industry-leading persistency Leading 5-year agent retention in North America Strong margins Unique level commission system 121
Slide 123: Individual: Long-term Assets Under Management
Individual Long-term Assets Under Management • 35% ownership of September 30, 2005 CI Investments • $52 billion in long- Rank Company C$B term assets under 1 IGM Financial Inc. 90 management 2 CI Investments 52 3 RBC Asset Management 47 • Clarica Sales Force 4 CIBC Asset Management 44 generated 21%
Slide 124: Individual: Wealth Sales
Individual (C$ millions) Wealth Sales 3,000 2,759 2,355 2,003 2,000 1,387 1,064 1,000 0 2001 2002 2003 2004 LTM Q3'05 • Successful Partnership – Clarica Sales Force & CI Investments 123
Slide 125: Individual: Re-establishing Presence in Wholesale
Individual Re-establishing Presence in Wholesale • New management team in place • Added 12 managing general agencies (MGAs) • Significant investment in product development • Strengthened underwriting capability • Strengthening advisor support services 124
Slide 126: Individual: Re-positioning Products for Wholesale
Individual Re-positioning Products for Wholesale Enhancements Launched to SunTerm new Sun and Customer Launched Critical Term Universal Illness Launched Life Insurance new Sun Launch Limited new Long- Pay Enhancements Term Care Universal to Sun Product Payout annuity Life Universal Life re-pricing E
Slide 127: Group Benefits
Group Benefits Group Retirement Services Group 15% Individual Benefits 24% 61% Product Lineup • Life • Disability (LTD, STD) • Health Net Income • Dental Q3’04 Q2’05 Q3’05 • Creditor Insurance 66 54 69 126
Slide 128: Group Benefits: SLF Market Share
Group Benefits SLF Market Share SLF 21% 79% SLF Market Share by Case Size 1000+ Lives 50 - 999 Lives < 50 Lives 0% 5% 10% 15% 20% 25% 30% 127 Source: Fraser Report
Slide 129: Group Benefits: Customer Loyalty Drives Growth
Group Benefits Customer Loyalty Drives Growth (C$ millions) Business In-Force 5,500 5,098 5,011 4,928 5,000 4,765 4,689 4,699 4,739 4,507 4,500 4,000 Q4 '03 Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Q3'05 SLF Lapse Rates 2002 2003 2004 Market 6.2% 5.8% 5.1% Average* 128 * Source: Fraser Report SLF 4
Slide 130: Group Benefits: Sources of Competitive Advantage
Group Benefits Sources of Competitive Advantage • Leading web and call centre technology • Regional delivery model • Total Benefits platform 129
Slide 131: Group Retirement Services & Institutional Investments
Group Retirement Services & Institutional Investments Group Retirement Product Lineup Services Group 15% Individual • Defined Contribution Plans Benefits 61% 24% • Pension Plans • Group RRSPs • Payout Annuities • Non-Registered Employer Savings Plans Net Income • McLean Budden Q3’04 Q2’05 Q3’05 34 3
Slide 132: Group Retirement Services
Group Retirement Services (C$ billions) 21.0 Defined Contribution Market Share - 2004 20.2 14.0 14.0 7.0 6.9 4.4 3.1 2.0 1.9 1.9 1.6 1.6 0.0 F L r d f e a u O al n ity L W a li ti ea M n l lo l S G a nd anu Sco orn B ati o Me Fide St M M N 2004 2002 Market Share as measured by Assets Under Administr
Slide 133: Group Retirement Services: Sources of Competitive Advantage
Group Retirement Services Sources of Competitive Advantage • Leading web and call centre technology • Large case market expertise • Total Benefits platform 132
Slide 134: Group Retirement Services: Asset Retention (Rollovers)
Group Retirement Services Asset Retention (Rollovers) (C$ millions) 500 24% 25% 375 19% 463 18% 20% 250 326 15% 125 228 0 10% 2003 2004 LTM Q3 '05 Retention $ Retention % 133
Slide 135: Group Retirement Services: Asset Retention
Group Retirement Services Asset Retention (C$ millions) • Rollover produced over $300 million in 2004 1,800 2004 DC Sales 1,200 • Equivalent of total 600 defined contribution pension sales of most 0 companies SLF #2 #3 #4 SLF Retention Pension Sales 134 Source: LIMRA 2004
Slide 136: Total Benefits
Total Benefits One access ID Multiple Providers Multiple Plans One password Totally Connected One entry point “Sun Life Financial distinguishes itself as an innovator in its approach to benefit and retirement programs. They have a number of unique strengths, including their Total Benefits strategy.
Slide 137: Joint Clients
Joint Clients 90% 80% 80% 80% 68% 64% 60% 54% 48% 60% 43% 48% 52% 46% 34% 40% 30% 33% 28% 0% Top 200 GRS Top 100 GRS Top 50 GRS Top 25 GRS Top 10 GRS Top 5 GRS clients clients clients clients clients clients Q3 2005 Q1 2005 Q1 2004 136 • Percentage of clients, within GRS top 200, where a GB relation
Slide 138: Total Benefits Employers
Total Benefits Employers 137
Slide 139: Unique Strategic Positioning
Unique Strategic Positioning • Clarica Sales Force • CI Investments • GRS asset retention • Technology in the Group businesses • Total Benefits 138
Slide 140: Questions and Answers
Questions and Answers 139
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140
Slide 142: Closing Remarks
Paul Derksen Executive Vice-President & Chief Financial Officer November 15, 2005 Closing Remarks
Slide 143: 2005 Performance at a Glance
2005 Performance at a Glance Medium- 2005 Measure Term Expected Status Goal Results Operating EPS Growth * 10% Exceeds Constant Currency * 10% 15% 75-100 100+ Operating ROE Growth Exceeds basis points basis points Dividend Payout Ratio 25%-35% 31% Meets Share Buyback $500 million >$500 million Excee
Slide 144: Diverse Business Mix
Diverse Business Mix Well-positioned Canadian franchise Strong organic growth and pursuing bolt-on acquisitions International opportunities in wealth management Long-term growth engine 143
Slide 145: AXXX – Background
AXXX – Background • Universal life products sold in the U.S. with a no-lapse guarantee require significant additional NAIC reserves • Insurers are allowed to back reserves with letters of credit (LOC) or assets held in trust • LOCs are not effective over the longer term due to – ALM mismatch between
Slide 146: AXXX Funding Requirements
AXXX Funding Requirements (US$ billions) Forecasted LOC Demand 160 80 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Based on Reinsurer Data Low Estimate High Estimate Source: Moody’s Investors Service, Inc. 145
Slide 147: AXXX – SLF Implementation
AXXX – SLF Implementation Action Plan • Use assets to secure AXXX reserves Benefits • Reduces LOC cost • Positive impact on UL pricing and earnings through – Experience gains – Assumption changes • Asset/liability duration matched 146
Slide 148: Medium-Term Financial Objectives
Medium-Term Financial Objectives Medium-Term Measure Goal Operating EPS Growth Constant Currency 10% 75 Operating ROE Growth basis points Dividend Payout Ratio 25% - 35% Share Buyback $500 million 147
Slide 149: Questions and Answers
Questions and Answers 148