Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q3 2002 Earnings Presentation
37 slides from Sun Life Financial's earnings presentation, Oct 31, 2002
Slide 1: Analyst Presentation: Financial and Operating Results, Third Quarter 2002
Analyst Presentation Financial and Operating Results Third Quarter 2002 October 31, 2002
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: Third Quarter 2002 - Highlights
Third Quarter 2002 - Highlights • Operating EPS of 57 cents, up 12 percent over 3Q’01 • Special items add $11 million, or 1 cent per share • Equity-sensitive earnings decline by $32 million from Q3’01 • Acquisitions strongly accretive – 3 cents from Keyport – 3 cents from Clarica • Stock option expe
Slide 4: Shareholders' Net Income
Shareholders’ Net Income ($ Millions) 350 293 243 256 215 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Operating Earnings 215 243 256 293 350 Special Items - 10 - (222) 11 Reported Earnings 215 253 256 71 361 4
Slide 5: Special Items - Q3 2002
Special Items - Q3 2002 Cents $ millions per share Earnings Before Stock Options 368 59 Stock Options (7) (1) Reported Shareholder Earnings 361 58 Special Items Gain on Sale of Spectrum 173 28 Discontinued Business Charge (150) (25) Additional US Loan Loss Provisions (68) (11) US Tax Settlements 56
Slide 6: Financial Performance
Financial Performance 1,154 1,115 1,132 S&P 500 (average) 1,070 895 60 59 59 18.0% 57 57 55 16.0% 51 EPS (cents) 50 14.0% ROTE 45 12.0% 40 10.0% 35 8.0% Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Operating EPS 51 57 59 59 57 ROTE (1) (2) 12.8% 15.1% 16.6% 15.7% 14.1% ROE (2) 12.5% 12.9% 13.2% 11.7% 9.8% (1) Retu
Slide 7: Premiums and Segregated Fund Deposits
Premiums and Segregated Fund Deposits ($ Billions) 5.9 5.6 5.2 4.5 3.2 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Segregated Fund 1.0 1.5 1.5 1.5 1.3 Deposits Premiums and 2.2 3.0 3.7 4.4 4.3 (1) Premium Equivalents (1) Includes in-force Administrative Services Only (ASO) premium equivalents. 7
Slide 8: First Year Annualized Premiums
First Year Annualized Premiums ($ Millions) Individual Life & Health Group Life & Health 203 130 138 129 130 134 116 103 103 66 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 U.S. - BOLI (1) 8 111 16 3 20 Canada 26 21 43 25 36 U.S. - Individual 29 46 79 57 61 - ASO 20 12 14 10 19 Canada
Slide 9: Assets Under Management
Assets Under Management ($ Billions) 352 357 369 347 299 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Mutual Funds 137 153 152 131 113 Managed Funds and 61 70 75 66 61 Other Segregated Funds 43 49 49 54 50 General Funds 58 80 81 118 123 9
Slide 10: MFS Net Fund Sales
MFS Net Fund Sales Net New Sales Market Movement (US$ Billions) (US$ Billions) 2.5 2.9 14.2 1.0 1.3 -1.9 -1.4 -14.0 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 -16.3 Mutual Funds Gross New Sales 5.2 5.4 5.9 5.0 4.4 -25.6 Redemptions -4.6 -4.7 -5.0 -5.6 -5.0 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Net New Sales 0.6 0.8 0.9
Slide 11: MFS - Top 10 U.S. Mutual Fund Companies
MFS - Top 10 U.S. Mutual Fund Companies Net New Assets Flows (Sept. 30/02) (YTD Sept/02) ($US Billions) 1 Vanguard 427 33.0 2 Fidelity 422 6.6 3 American Funds 296 32.1 4 Franklin Templeton 146 4.7 5 Putnam 130 (10.7) 6 PIMCO Funds 105 22.7 7 Janus 72 (11.3) 8 T. Rowe Price 71 3.0 9 OppenheimerFunds
Slide 12: U.S. Annuity Sales
U.S. Annuity Sales (US$ Millions) 1,458 1,200 1,007 1,007 540 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Gross Sales Variable Annuities 540 714 1,084 611 456 Fixed Annuities - 238 314 519 467 Indexed Annuities - 55 60 70 84 Total Gross Sales 540 1,007 1,458 1,200 1,007 Net Sales Variable Annuities 10 54 276 (278
Slide 13: Revenue
Revenue ($ Millions) 6,202 5,931 5,413 4,885 3,526 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Fee Income 762 803 820 824 743 Investment Income 891 1,363 1,160 1,150 1,433 Life & Health 1,216 1,384 1,345 1,664 2,169 Premiums Annuity Premiums 657 1,335 2,088 2,293 1,857 13
Slide 14: Operating Expenses
Operating Expenses ($ Millions) Non-MFS MFS $500 450 40% $300 60% 411 255 $400 356 248 242 30% 235 298 315 224 $300 20% $200 40% $200 10% $100 $0 0% $100 20% Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Dispositions 32 19 16 14 2 Operating (1) 235 248 255 242 224 Acquisitions, net - 2
Slide 15: Synergy Savings From Acquisitions
Synergy Savings From Acquisitions ($ Millions) 45 14 8 Q1/02 Q2/02 Q3/02 Keyport 8 10 15 Clarica - 4 30 Total 8 14 45 15
Slide 16: Asset Quality
Asset Quality Bonds by Investment Grade Q4/01 Q2/02 Q3/02 AAA 28.7% 32.9% 31.5% AA 11.1% 12.1% 12.5% A 28.0% 27.0% 27.6% BBB 26.7% 23.9% 24.8% BB & Lower 5.5% 4.1% 3.6% Total 100.0% 100.0% 100.0% Total Book Value ($billions) 28.6 67.5 70.9 Impaired Assets (1) ($millions) 233 196 279 Coverage Ratio (
Slide 17: Financial Strength
Financial Strength (1) Debt to Total Capital MCCSR 284% 25.8% 23.2% 23.2% 22.6% 206% 210% 190% 193% 19.3% Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 (1) Includes preferred shares issued by Clarica and SLEECS as part of debt capital. 17
Slide 18: Canadian Operations
Canadian Operations ($ Millions) 200 2,000 160 1,500 Net Income Revenue 120 1,000 80 500 40 0 0 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Revenue 896 997 982 1,323 2,059 Net Income 51 57 61 94 173 ROTE 18.5% 17.0% ROE 16.5% 18.6% 20.0% 12.3% 10.1% 18
Slide 19: U.S. Annuity and Insurance Operations
U.S. Annuity and Insurance Operations ($ Millions) 3,000 120 Net Income Revenue 2,000 80 1,000 40 0 0 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Revenue 1,528 2,507 3,314 3,370 2,983 Net Income 55 90 98 75 101 ROTE 14.9% 12.9% 8.7% 10.2% ROE 15.1% 10.6% 8.7% 6.1% 7.4% 19
Slide 20: 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 September 30 - 815 • Intrinsic Value at September 30 - US $221 million, Cdn. $345 million • Market Value at September 30 - US $234 million, Cdn. $365 million
Slide 21: Keyport Integration
Keyport Integration • Operational integration is essentially complete. SLF U.S. and Keyport operating as single company • Year-to-date pre-tax savings were C$33 million which, on an annualized basis, exceed 2002 targeted savings of C$30-35 million (pre-tax) • The 2003 targeted savings run rate of C$
Slide 22: MFS
MFS 1,154 S&P 500 (average) 1,115 1,132 Assets Under Management 1,070 ($ Billions) 895 218 220 60 192 186 Net Income 170 ($ Millions) 40 20 0 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Mutual Funds 129 146 145 122 113 Net Income (1) 58 50 47 58 39 Managed Funds 63 72 75 64 57 ROE 60
Slide 23: U.K. Operations
U.K. Operations ($ Millions) 600 80 60 Net Income 400 Revenue 40 200 20 0 0 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Revenue 449 523 464 537 395 Net Income 37 54 42 66 34 ROE 12.2% 19.9% 20.1% 32.7% 14.8% 23
Slide 24: Asia Operations
Asia Operations ($ Millions) 200 15 150 Net Income Revenue 100 5 50 0 -5 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 (1) Revenue 107 148 123 132 138 Net Income 3 (1) 2 4 6 ROE 2.5% -0.8% 1.6% 3.3% 4.9% (1) Excludes single premium revenue. 24
Slide 25: Financial Review Summary
Financial Review Summary • Decisive risk management actions taken in 2001 have successfully mitigated the impact of GMDB and DAC on earnings in 2002. • Strengthened reserves for credit, GMIB and other discontinued reinsurance risks. • Integration of Keyport and Clarica meeting or exceeding expectati
Slide 26: SLF Canada Update
SLF Canada Update Bob Astley October 31, 2002
Slide 27: Overview
Overview • Integration • Retail distribution update • Milestones • Business Momentum 27
Slide 28: Integration
Integration Savings: • Ahead of plan on YTD savings • Sustainable monthly run rate savings increased to $11 million in September • Realized 52% of our 2004 target of $270 million based on our sustainable monthly run-rate Expenses: • Costs are well within target 28
Slide 29: FTE Reductions
FTE Reductions FTE count January 1, 2002 9351 FTE count September 30, 2002 8741 Reduction to-date 610 Termination notices 1090 Planned attrition 165 Total Reductions 1865 29
Slide 30: Retail Distribution Update
Retail Distribution Update Independent Career Advisors: • 10th consecutive quarter of net growth • 2002 YTD sales up 5% • Seeing good momentum Wholesale: • Implementation of Wholesale distribution model • September sales up 2% 30
Slide 31: Canadian Retail Insurance Sales
Canadian Retail Insurance Sales Sales Market Share ($ millions) (%) 60 40% 49 44 30% 40 38 39 36 20% 20 10% 0 0% Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Sales (1) 38 49 39 44 36 Market Share 14.3% 17.3% 15.1% 15.5% N/A • Represents the combined Sun Life and Clarica sales of life and health insurance 31
Slide 32: Milestones
Milestones • Met all of the planned milestones for Q3/02 • Realized the benefits of scale and purchasing power • Key milestones planned for Q4/02: – Amalgamation – Harmonized financial reporting – Completion of the CI conversion – Harmonized investment policies 32
Slide 33: Business Momentum
Business Momentum • Q3/02 results are solid • Life sales remain ahead of 2001 YTD • Client retention is good • Group sales are solid • Communicated clear course for the organization • Continued progress in building a cohesive, high performance culture 33
Slide 34: SLF Canada Summary
SLF Canada Summary • Integration is on track • Ahead of plan for integration savings, FTE reductions and expenses • Business momentum continues • Named one of Canada’s Top 100 Employers 34
Slide 35: Questions & Answers
questions & answers badge a: Sun As Life Financial
Slide 36: Summary
Summary • Diversified business model balancing growth and consistency proves resilient • 12 percent EPS growth in a challenging environment • Acquisition integration an additional growth catalyst in 2003 36
Slide 37: Sun Se.
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