Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Investor Presentation (March 2006)
41 slides from Sun Life Financial's investor presentation, Mar 7, 2006
Slide 1: Perspective on the Life Insurance Industry: Challenges & Opportunities
Sun Life Financial U.S. Perspective on the Life Insurance Industry: Challenges & Opportunities Claude Accum Vice-President & General Manager Individual Division March 7, 2006
Slide 2: Agenda
Agenda • Sun Life Financial Overview • SLF US Individual Life Insurance • Life Insurance Industry Trends 1
Slide 3: Creating Shareholder Value
SLF Overview SLF Overview Creating Shareholder Value • Significant improvements in ROE • High quality earnings • Strong growth in Value of New Business • Diversified business mix with strategic assets – MFS, CI Financial, McLean Budden • Growing presence in Asia • Strong capital position and effecti
Slide 4: North American Life Insurers Market Capitalization
SLF Overview SLF Overview North American Life Insurers Market MarketCapitalization Capitalization February February28, 28,2006 2006 Market Cap Rank Company (US$ B) 1 AIG 172.2 2 Manulife 50.6 3 Prudential 39.1 4 MetLife 38.0 5 Sun Life Financial 25.4 6 Hartford 24.9 7 AFLAC 23.0 8 Great-West Life 22
Slide 5: Stock Market Performance
SLF Overview SLF Overview Stock Market Performance Sun SunLife Lifevs. vs.Markets Markets Jan Jan1,1,2005 2005--Feb Feb28, 28,2006 2006 130 120 110 100 90 Jan'05 Apr'05 Jul'05 Oct'05 Jan'06 Sun Life European Insurers Can Banks US Insurers S&P 500 Can Insurers 4
Slide 6: Diversified Earnings
SLF Overview SLF Overview Diversified Earnings U.S. 26% Canada 51% MFS 10% Asia U.K. 2% RBU* 10% 1% 2005 Operating Earnings, Excluding Corporate & Other 5 * Reinsurance Business Unit (RBU)
Slide 7: Proven Strength in Retail Life
SLF Overview SLF Overview Proven Strength in Retail Life Country Years Agents Rank Canada 140 ~3,700 #2 Individual Insurance In-force Hong Kong 113 ~ 1,700 #7 Life Insurer Sales India* 113 ~14,000 #4 Private Insurer Sales Philippines 110 ~ 3,500 #2 Life Insurer Sales United States 110 #19 Life Insur
Slide 8: U.S. Operations
SLF Overview SLF Overview U.S. Operations SLF SLFU.S. U.S. 2005 2005Earnings Earnings • Annuities – Fixed – Variable Group 10% – Equity Indexed Individual • Individual Life 24% – UL (Single & Joint Life) Annuities – VUL (Single & Joint Life) 66% – COLI / BOLI – PPVUL (High Net Worth) US$409 million
Slide 9: Individual Life Overview
SLF US SLF US Individual Individual Life Life Individual Life Overview SLF SLFU.S. U.S. 2005 2005Earnings Earnings • Product Offerings – UL (Single & Joint Life) Group – VUL (Single & Joint Life) 10% – COLI / BOLI Individual 24% – PPVUL for High Net Worth Annuities 66% Earnings Trend (US$ millions)
Slide 10: Individual Life Strategy
SLF US SLF US Individual Individual Life Life Individual Life Strategy • Organic growth strategies – Strengthen existing distribution • Enhance wholesaling organization, account management – Expand distribution reach • Recently signed with NFP and M Financial Group – Extend the product range – Exten
Slide 11: Core Markets
SLF US SLF US Individual Individual Life Life Core Markets Core CoreProducts Products(for (forwealthy wealthyindividuals individuals&&business businessowners) owners) • Fixed & Variable Universal Life • Single life & survivorship • Estate planning, liquidity management, wealth/business transfer • Di
Slide 12: Offshore & Private Client Group
SLF US SLF US Individual Individual Life Life Offshore & Private Client Group Offshore OffshoreBrokerage: Brokerage:Bermuda BermudaLife Life&&Annuities Annuities • US style UL and VA products to ultra high net worth market • Sold via brokers; working to expand relationships • Predominantly Asia for
Slide 13: Policy Size
SLF US SLF US Individual Individual Life Life Policy Size SLF expertise reflected in high average policy size Average AverageFace FaceAmount Amount (US$ (US$millions) millions) 23.4 6.8 1.2 0.2 U.S. Industry SLF SLF Offshore SLF PPVUL Domestic 12 Source: Q4 2005 LIMRA Sales Survey, SLF Data
Slide 14: Large Case Underwriting Expertise
SLF US SLF US Individual Individual Life Life Large Case Underwriting Expertise • Sun Power Points Program sustainable and approved by reinsurance carriers • Strength in underwriting older, rated classes • Critical areas of expertise for older age affluent market • Increased jumbo case and retention
Slide 15: Expanding Distribution Partnerships
SLF US SLF US Individual Individual Life Life Expanding Distribution Partnerships • 2,000+ producers in 41 states • 160 owned firms • 210+ affiliated third-party distributors • Target clients: – High net worth individuals – Growing entrepreneurial companies • 110 member firms in 35 states • 500 prod
Slide 16: Product Mix – 2005 Sales
SLF US SLF US Individual Individual Life Life Product Mix – 2005 Sales PPVUL 15% Core COLI/ 43% BOLI 27% Offshore 15% US$208 million annualized premium 15
Slide 17: Increasing Book of Business
SLF US SLF US Individual Individual Life Life Increasing Book of Business Account AccountValue Value--Active ActiveProducts Products (US$ (US$billions) billions) 8.6 0.1 7.3 4.2 5.5 3.8 2.9 1.9 1.5 0.9 2.0 2.4 1.7 2003 2004 2005 Core Offshore COLI/BOLI HNW 16 2-year CAGR: 25%
Slide 18: Universal Life Hedging Program
SLF US SLF US Individual Individual Life Life Universal Life Hedging Program • Objective: to protect against low interest rates – Initiated in January 2000 – Today, hedge consists of: • US$1.8 billion notional floors • US$0.2 billion notional swaptions (mostly deferred to staggered periods after mat
Slide 19: Secondary Guarantee Expertise
SLF US SLF US Individual Individual Life Life Secondary Guarantee Expertise • Using Canadian experience to avoid “Term-to-100” problem • Innovative proprietary AXXX solution: – Provides a superior solution to short term LOCs – Positive impact on “No-Lapse Guarantee” pricing and staying power 18
Slide 20: Competitive Strengths
SLF US SLF US Individual Individual Life Life 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 – Underwri
Slide 21: Life Insurance Industry Challenges
Industry Challenges Industry Challenges Life Insurance Industry Challenges • Uncertain economic environment • Consumer trends • Product development trends • Industry consolidation • Tightening reinsurance market • Increasing capital requirements 20
Slide 22: Equity Markets
Economic Environment Economic Environment Equity Markets S&P S&P500 500 1,499 1,455 1,437 1,320 1,248 1,224 1,212 1,191 1,148 1,141 1,147 1,112 1,228 1,181 1,160 996 1,126 1,115 990 975 1,041 880 848 815 Q1 Q4 Q4 Q4 Q4 Q4 Q4 '00 '00 '01 '02 '03 '04 '05 21
Slide 23: Interest Rates
Economic Environment Economic Environment Interest Rates U.S. U.S.Treasury TreasuryRates Rates 6.28% 6.07% 5.42% 6.03% 4.93% 5.80% 4.14% 4.50% 4.39% 4.34% 3.83% 3.96% 4.60% 4.09% 4.38% 3.86% 4.01% 3.63% 3.35% 2.49% 2.70% 2.21% 1.53% 1.19% 1.15% 1.20% Q1 Q4 Q4 Q4 Q4 Q4 Q4 '00 '00 '01 '02 '03 '04 '05
Slide 24: Yield Curve
Economic Environment Economic Environment Yield Curve Mid -year Yield Mid-year YieldCurves Curves 5% 2/23/06 4% 3% 2% 1% 0 5 10 15 20 25 30 2003 2004 2005 2006/02/23 23
Slide 25: Credit Spreads
Economic Environment Economic Environment Credit Spreads BBB BBBCredit CreditSpreads Spreads 370 287 286 209 174 124 135 118 Q1 Q4 Q4 Q4 Q4 Q4 Q4 '00 '00 '01 '02 '03 '04 '05 24
Slide 26: More Older, Wealthy Americans
Consumer Trends Consumer Trends More Older, Wealthy Americans Number NumberofofHigh -Net-Worth* Households High-Net-Worth* Households Age Age65 65or orOlder Olderininthe theUnited UnitedStates States (US$ (US$millions) millions) 7.9 1 3% = 9( E) –201 2 3.6 199 AGR C 1.1 0.3 1992 2001 2010E 2019E 25
Slide 27: Growing Concerns
Consumer Trends Consumer Trends Growing Concerns High -Net-Worth Retirees High-Net-Worth Retireesand andPre -Retirees’ Financial Pre-Retirees’ FinancialGoals, Goals,2003 2003 Assure a Comfortable Standard 81.1% of Living During Retirement 87.6% Maintain Current 58.5% Standard of Living 76.2% 52.1% P
Slide 28: Global High Net Worth Trends
Consumer Trends Consumer Trends Global High Net Worth Trends HNWI* HNWI*Financial FinancialWealth WealthForecast Forecastby byRegion Region (US$ (US$trillions) trillions) $42 0.9 1.5 5.0 $29 $31 0.7 1.0 10.1 0.6 0.8 3.7 al 3.4 lob R G AG 7.2 % C 6.6 6.5 wth o Gr 13.9 8.5 9.3 8.6 8.9 10.7 2003 2004 2
Slide 29: Industry Sales Trends
Product Trends Product Trends Industry Sales Trends Overall industry sales continue shift toward UL US USLife LifeInsurance InsuranceSales: Sales: Annualized AnnualizedPremium Premium (US$ (US$billions) billions) 11.5 11.2 11.7 11.8 12.4 12.6* 23% 25% 27% 27% 25% 24% 23% 21% 22% 23% 23% 23% 15% 13
Slide 30: Industry Sales Trends: Fixed vs. Variable
Product Trends Product Trends Industry Sales Trends: Fixed vs. Variable VL sales have not followed stock market recovery Share S&P of Life 500 S&P 500 UL + WL Share VUL+VL Share Sales 3,000 80% 70% 2,500 60% 2,000 50% 1,500 40% 30% 1,000 20% 500 10% 0 0% 1 1 1 1 1 1 1 1 1 1 1 Q Q Q Q Q Q Q Q Q Q Q
Slide 31: Evolving Product Concepts
Product Trends Product Trends Evolving Product Concepts • IOLI/SOLI • Non-Recourse Financing • Off-Shore Life Products (clones of U.S. products) • Leveraged COLI • 412i Retirement Funding 30
Slide 32: Market Share of New Sales
Consolidation Consolidation Market Share of New Sales 2000 2000 2005 2005 Top Top Ten Ten 66% 34% 57% 43% Northwestern 5.3% 5.7% MetLife MetLife 4.4% 5.0% Lincoln/JP Pacific Life 3.7% 5.0% AIG-American Gen'l New York Life 3.5% 4.9% John Hancock/Manulife ING 3.3% The The 4.7% Northwestern American Ge
Slide 33: VUL & UL Market Concentration
Consolidation Consolidation VUL & UL Market Concentration Concentration Concentrationof ofTop Top10 10Companies Companies 80% VUL market more consolidated 75% VUL consolidation not increasing 70% 65% 60% UL market less consolidated UL market on consolidation trend 55% 50% 2000 2001 2002 2003 2004 20
Slide 34: Reinsurance Market Trends
Reinsurance Reinsurance Reinsurance Market Trends • Down to 5 large well-rated reinsurers • LOC risk concentration Ö higher capital costs Ö passed to direct writers • Less discretion or exceptions available • More aggressive claims auditing by reinsurers • Increasing reinsurance rates • Shrinking ca
Slide 35: Reinsurance Market Trends
Reinsurance Reinsurance Reinsurance Market Trends Amount retained has begun to increase US USLife LifeInsurance InsuranceSales: Sales: Face FaceAmount Amount (US$ (US$billions) billions) 31 24 33 48 62 25 54 40 1,029 35 33 811 985 1,078 1,043 261 350 507 679 947 830 784 718 646 633 711 590 518 542
Slide 36: Reinsurance Outlook
Reinsurance Reinsurance Reinsurance Outlook • Direct writers will retain more of the risk – Leading to more disciplined underwriting overall • Direct rates will have to increase – Short-term disruption to sales – Who goes first? • Will diversify risks for direct insurers – Mortality is “desirable” r
Slide 37: Increasing Capital Requirements
Capital Requirements Capital Requirements Increasing Capital Requirements • Regulators increasingly active – AXXX – C3 Phase II – Move toward principles based reserving 36
Slide 38: Challenges Bring Opportunities
SLF US SLF US Individual Individual Life Life Challenges Bring Opportunities Industry IndustryChallenge Challenge Sun SunLife LifeOpportunity Opportunity Uncertain Economic Î Superior ALM & Hedging Environment capabilities Î Competitive products geared Market Trends toward older, affluent consum
Slide 39: Positioned for Growth
SLF US SLF US Individual Individual Life Life Positioned for Growth • 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 – Underwri
Slide 40: Forward-Looking Statement. Non-GAAP Measures
Forward-Looking Statement. 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 41: Questions & Answers
Questions & Answers Claude Accum Vice-President & General Manager Individual Division March 7, 2006 40
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