Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q4 2002 Earnings Presentation
40 slides from Sun Life Financial's earnings presentation, Feb 12, 2003
Slide 1: Analyst Presentation: Financial and Operating Results
Analyst Presentation Financial and Operating Results Fourth Quarter 2002 February 12, 2003
Slide 2: Forward Looking Information
Forward Looking Information This presentation contains forward looking statements with respect to the Company, including its business operations and strategy and financial performance and condition. Although Management believes that the expectations reflected in such forward looking statements are r
Slide 3: Fourth Quarter 2002 - Highlights
Fourth Quarter 2002 - Highlights • 2002 Operating EPS of $2.32, up 13 percent from 2001 • Operating EPS of 58 cents, up 2 percent over Q4/01 • Net Special Items reduce EPS by 8 cents - including charge from sale of Clarica US • Keyport adds 20 cents to 2002 EPS (on original share count), at top end
Slide 4: Shareholders' Net Income
Shareholders’ Net Income ($ Millions) 350 361 293 243 256 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Operating Earnings 243 256 293 350 361 Special Items 10 - (222) 11 (51) Reported Earnings 253 256 71 361 310 4
Slide 5: Business Mix
Business Mix Operating Earnings ($ millions) 400 300 Acquisitions 200 Protection & Other 100 Equity-Linked 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2000 2001 2002 5
Slide 6: Special Items - Q4 2002
Special Items - Q4 2002 Total Company Cents $ millions per share Earnings Before Stock Options 317 51 Stock Options (7) (1) Reported Shareholder Earnings 310 50 Special Items US Canada UK Reserve Changes 55 17 (74) (2) Asset Provisions (60) (10) (70) Income Tax Items 10 59 69 Loss on Sale of Clarica
Slide 7: Financial Performance
Financial Performance 1,115 1,132 1,070 S&P 500 (average) 895 886 60 59 59 18.0% 57 57 58 55 16.0% EPS (cents) 50 14.0% ROTE 45 12.0% 40 10.0% 35 8.0% Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Operating EPS 57 59 59 57 58 ROTE (1) (2) 15.1% 16.6% 15.7% 14.1% 14.0% (2) ROE 12.9% 13.2% 11.7% 9.8% 9.8% (1) Return
Slide 8: Business Mix - EPS
Business Mix - EPS Operating EPS $0.60 Acquisitions $0.40 Protection & Other $0.20 Equity-Linked $0.00 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2000 2001 2002 8
Slide 9: Premiums and Segregated Fund Deposits
Premiums and Segregated Fund Deposits ($ Billions) 6.6 5.8 5.3 5.3 4.5 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Segregated Fund 1.5 1.5 1.5 1.3 2.3 Deposits Premiums and 3.0 3.8 4.3 4.0 4.3 Premium Equivalents 9
Slide 10: First Year Annualized Premiums
First Year Annualized Premiums ($ Millions) Individual Life & Health Group Life & Health 269 203 189 129 130 134 130 118 103 98 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 U.S. - BOLI (1) 111 16 2 14 105 Canada 21 43 25 36 26 U.S. - Individual 46 79 53 47 91 - ASO 12 14 10 19 19 Cana
Slide 11: Assets Under Management
Assets Under Management ($ Billions) 352 357 369 361 347 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Mutual Funds 153 152 131 113 117 Managed Funds 70 75 66 61 68 and Other Segregated Funds 49 49 54 50 53 General Funds 80 81 118 123 123 11
Slide 12: MFS Net Fund Sales
MFS Net Fund Sales Net New Sales Market Movement (US$ Billion) (US$ Billion) 2.9 14.2 1.3 1.0 0.9 4.4 -1.9 -1.4 -14.0 -16.3 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Mutual Funds Gross New Sales 5.4 5.9 5.0 4.4 4.5 Redemptions (4.7) (5.0) (5.6) (5.0) (4.6) Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Net New Sales 0.8 0.9 (0.
Slide 13: MFS - Top U.S. Mutual Fund Companies
MFS - Top 10 U.S. Mutual Fund Companies Net New Assets Flows (Dec. 31/02) (YTD Dec/02) ($US Billions) 1 Vanguard 453 36.3 2 Fidelity 451 8.0 3 American Funds 325 39.6 4 Franklin Templeton 150 4.6 5 Putnam 133 (14.9) 6 PIMCO Funds 112 27.4 7 T. Rowe Price 76 3.1 8 OppenheimerFunds 73 4.8 9 Janus 72 (
Slide 14: U.S. Annuity Sales
U.S. Annuity Sales (US$ Millions) 1,458 1,200 1,007 1,007 896 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Gross Sales Variable Annuities 714 1,084 611 456 388 Fixed Annuities 238 314 519 467 390 Indexed Annuities 55 60 70 84 118 Total Gross Sales 1,007 1,458 1,200 1,007 896 Net Sales Variable Annuities 54 276 (27
Slide 15: Revenue
Revenue ($ Millions) 5,832 5,803 6,028 5,438 4,906 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Fee Income 804 820 821 730 724 Investment Income 1,370 1,167 1,136 1,377 1,451 Life & Health 1,397 1,363 1,646 2,067 2,397 Premiums Annuity Premiums 1,335 2,088 2,229 1,629 1,456 15
Slide 16: Operating Expenses
Operating Expenses ($ Millions) Non-MFS MFS 502 40% $300 60% $500 436 255 411 248 242 $400 357 30% 317 224 217 $300 20% $200 40% $200 10% $100 $0 0% $100 20% Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Dispositions 19 16 14 2 - Operating (1) 248 255 242 224 217 Acquisitions, net of 2
Slide 17: Asset Quality
Asset Quality Bonds by Investment Grade (%) Q4/01 Q3/02 Q4/02 AAA 28.7% 31.5% 32.0% AA 11.1% 12.5% 12.2% A 28.0% 27.6% 27.6% BBB 26.7% 24.8% 24.4% BB & Lower 5.5% 3.6% 3.8% Total 100.0% 100.0% 100.0% Total Book Value ($billions) 28.6 70.9 73.4 Impaired Assets ($millions) - Net of Specific Allowances
Slide 18: Financial Strength
Financial Strength (1) Debt to Total Capital MCCSR 230% 206% 210% 190% 193% 25.8% 23.2% 23.2% 22.6% 22.1% Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Q4/01 Q1/02 Q2/01 Q3/02 Q4/02 (1) Includes preferred shares and SLEECS as part of debt capital. 18
Slide 19: SLF Canada Revenue
SLF Canada ($ Millions) 200 2,000 160 1,500 Net Income Revenue 120 1,000 80 500 40 0 0 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Revenue 997 982 1,323 2,059 2,199 Net Income 57 61 94 173 185 ROTE 17.0% 18.3% ROE 18.6% 20.0% 12.3% 10.1% 10.8% 19
Slide 20: SLF United States Revenue
SLF United States ($ Millions) 3,000 120 Net Income Revenue 2,000 80 1,000 40 0 0 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Revenue 2,507 3,314 3,247 2,559 2,757 Net Income 90 98 75 101 100 ROTE 14.9% 12.9% 8.7% 10.2% 10.2% ROE 10.6% 8.7% 6.1% 7.4% 7.3% 20
Slide 21: S&P Puts
S&P 500 Puts • Purpose - partially hedge GMDB and DAC exposure • Units Purchased in Q2, 2001 - 1.23 million • Strike Price - 995 • S&P 500 at December 31 - 880 • Intrinsic Value at December 31 - US $142 million, Cdn. $223 million • Market Value at December 31 - US $213 million, Cdn. $335 million • E
Slide 22: MFS Assets Under Management and Net Income
MFS S&P 500 (average) Assets Under Management 1,115 1,132 ($ Billions) 1,070 895 886 218 220 186 60 170 178 Net Income ($ Millions) 40 20 0 Q4/01 Q1/02 Q2/01 Q3/02 Q4/02 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 (1) Mutual Funds 146 145 122 113 117 Net Income 50 47 58 39 30 Managed Funds 72 75 64 57 61 ROE 47.0
Slide 23: SLF United Kingdom Revenue
SLF United Kingdom ($ Millions) 600 80 60 400 Net Income Revenue 40 200 20 0 0 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Revenue 523 464 537 395 432 Net Income 54 42 66 34 48 ROE 19.9% 20.1% 32.7% 14.8% 20.4% 23
Slide 24: SLF Asia Revenue
SLF Asia ($ Millions) 200 15 150 Net Income Revenue 100 5 50 0 -5 Q4/01 Q1/02 Q2/01 Q3/02 Q4/02 Revenue 148 123 185 161 192 Net Income (1) 2 4 6 12 ROE -0.8% 1.6% 3.3% 4.9% 9.4% 24
Slide 25: SLF Canada Update
SLF Canada Update Bob Astley February 12, 2003
Slide 26: Overview
Overview • Integration • Milestones • Business Momentum 26
Slide 27: Integration
Integration • Accretion of 6 cents EPS for 2002 • Savings: • Realized $76 million in 2002 • Sustainable month run rate savings topped $13 million in December • Expenses: • Costs are within plan 27
Slide 28: FTE Reductions
FTE Reductions Net reduction to-date 682 Termination notices 842 Planned attrition 165 Sub-total 1,689 IBM Outsourcing 111 Total reductions 1,800 28
Slide 29: Milestones
Milestones • Reached all of the planned milestones for Q4/02 – Amalgamation – Conversion to CI Funds – Payroll system harmonization – General ledger integration – Implementation of US GAAP for Clarica 29
Slide 30: 2003 Conversion Calendar – Group Benefits and Group Retirement Services
2003 Conversion Calendar – Group Benefits and Group Retirement Services 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Q1/03 Q2/03 Q3/03 Q4/03 Cumulative percentage of clients converted by quarter 30
Slide 31: Looking Forward
Looking Forward • Key milestones for Q1/03 – Harmonize employee benefit plans and compensation policy – Convert traditional Sun Life retail policies to the common system – First wave of Group Benefits and Group Retirement Services conversions 31
Slide 32: Business Momentum
Business Momentum • $185 million net income in Q4/02 • Strong contribution to Sun Life Financial 32
Slide 33: Canadian Individual Insurance Sales
Canadian Individual Insurance Sales Sales Market Share ($ millions) (%) 60.1 40% 49 44 44 30% 38 39 40.1 36 20% 20.1 10% 0.1 0% Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Sales 38 49 39 44 36 44 Market Share 14.3% 17.3% 15.1% 15.5% 14.2% N/A (1) Represents the combined Sun Life and Clarica sales 33
Slide 34: ICA Growth
ICA Growth 4,216 4500 4000 3500 3000 2500 2000 1500 1000 500 0 Q2/00 Q4/00 Q2/01 Q4/01 Q2/02 Q4/02 34
Slide 35: Retail Distribution Update
Retail Distribution Update • Independent Career Advisors – 11th consecutive quarter of net growth – Focus on productivity – High morale evident • Wholesale – Continue to build – Introduced Hub Capital and Synera – Solid value proposition 35
Slide 36: Business Momentum
Business Momentum • Group sales and retention on track • Plan member, sponsor and advisor satisfaction scores increasing • Sale of Sun Life Securities brokerage accounts to E*Trade Canada • Continued focus on culture 36
Slide 37: SLF Canada Summary
SLF Canada Summary • Integration on track on all measures • At the halfway point • Continued confidence 37
Slide 38: Questions & Answers
questions & answers badge a: Sun As Life Financial
Slide 39: Summary
Summary • 2002 Operating EPS of $2.32, up 13 percent from 2001 • Keyport integration complete, Clarica achieving interim financial targets • Solid organic growth in US Individual and Group • Strong revenue growth in Asia • UK risk reduced and capital released • Risk management actions mitigate downs
Slide 40: Sun Se.
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