Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q1 2004 Earnings Presentation
28 slides from Sun Life Financial's earnings presentation, Apr 29, 2004
Slide 1: First Quarter 2004 Financial and Operating Results
Sun Life Financial Inc. First Quarter 2004 Financial and Operating Results Analyst Presentation April 29, 2004
Slide 2: Forward Looking Statement
3 4 Forward Looking Statement 2 Q 1 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: First Quarter 2004 Highlights
3 4 First Quarter 2004 Highlights 2 Q 1 • Record operating earnings of $425 million, up 24% from 1Q/03 despite negative currency impact of $25 million • Operating ROE at 12%, up 270 basis points from 1Q/03 • Net Income of $366 million after $59 million charge related to MFS • SLF US 1Q/04 earnings i
Slide 4: Record Operating EPS - up 27% from 1Q'03
3 4 Record Operating EPS - up 27% from 1Q’03 2 Q 1 1,132 1,132 S&P 500 1,070 1,056 1,000 (average) 938 895 886 861 7% up 2 71 69 65 59 59 57 58 60 56 1Q'02 2Q'02 3Q'02 4Q'02 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Operating EPS (cents) 59 59 57 58 56 60 65 69 71 Reported EPS (cents) 59 14 58 50 56 60 65 34 61
Slide 5: Record Operating Earnings - up 24% from 1Q'03
3 4 Record Operating Earnings - up 24% from 1Q’03 2 Q 1 1,132 1,056 S&P 500 1,000 (average) 938 861 417 425 394 366 343 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Operating Earnings 343 366 394 417 425 ROE (1) (%) 9.3 10.3 11.3 11.8 12.0 (1) Based on operating earnings 5
Slide 6: SLF Canada
3 4 SLF Canada 2 Q 1 • Strong RRSP sales from (C$ Millions) improved equity markets and 2,500 250 strategic alliance 2,000 200 1,500 150 • Net Income up 33% 1Q/1Q 1,000 100 – Benefits of full integration 500 50 – Improved equity/credit markets 0 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 0 – Earnings from invest
Slide 7: Retail Sales - Canada
3 4 Retail Sales - Canada (C$ Millions) 2 Q 1 Sales 744 (1) 568 Retail Wealth 525 389 383 • Sales up from 1Q/03 and 4Q/03 on strong RRSP season 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Individual Life & Health Sales • 1Q sales affected by focus on 42 38 wealth products during RRSP 30 31 27 season • Annualized
Slide 8: Group Retirement Services - Canada
3 4 Group Retirement Services - Canada 2 Q 1 • Defined Contribution Plan Defined Contribution Plan Assets assets up 25% over 1Q/03 on ($ billions) strong sales and capital 21.4 markets 20.2 18.9 18.2 17.1 • Earnings up 21% over 1Q/03 on improved markets and pricing gains • #1 provider of defined 1Q'
Slide 9: Group Life and Health - Canada
3 4 Group Life and Health - Canada 2 Q 1 (C$ Millions) Sales and Business In-Force 97 • IBM contract boosts premium 66 equivalents in 1Q/04 46 39 30 • Positive trend in business in-force continues 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 ASO Premium 16 7 15 9 56 Equivalents Regular Group 50 32 31 21 41 Annuali
Slide 10: SLF United States
3 4 SLF United States 2 Q 1 (US$ Millions) • Net income up 106% 1Q/1Q 2,000 80 – Annuities up 212% 1,500 60 Net Income Revenue – Improved equity and credit 1,000 40 markets 500 20 • ROE doubled 1Q/1Q 0 0 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Revenue 1,733 1,878 1,622 1,654 1,781 Net Income 36 44 70 68 74 RO
Slide 11: U.S. Annuity Sales
3 4 U.S. Annuity Sales (US$ Millions) 2 Q 1 • Variable annuity gross sales 980 951 1,053 883 up 51% 1Q/1Q aided by 775 streamlined product offerings • Customer preferences shifting from fixed to variable products 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Gross Sales • Equity indexed annuities sales Variable Ann
Slide 12: First Year Annualized Premiums – U.S.
3 4 First Year Annualized Premiums – U.S. 2 Q 1 (US$ Millions) Sales 85 Individual Life 64 68 48 38 • Annualized premiums up 124% 1Q/1Q with strong high net worth product sales 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 BOLI (1) 2 9 4 2 1 Individual 36 55 64 46 84 Group Life & Health Sales and Business In-Force
Slide 13: MFS Investment Management
3 4 MFS Investment Management 2 Q 1 1,132 S&P 500 1,056 1,000 (average) 938 861 • 1Q/1Q operating earnings up 94% Operating Earnings (1) 40 • Improved equity markets 30 (US$ millions) contributed to strong operating earnings 20 • 1Q/04 included management 10 restructuring costs and legal fees 0 1Q'0
Slide 14: MFS Assets Under Management up 27%
3 4 MFS Assets Under Management up 27% 2 Q 1 (US$ Billions) Assets Under Management 140 142 128 129 112 • AUM up $30.4 billion or 27% over 1Q’03 • Sales contributed $1.7 billion and market improvements $28.7 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 billion Domestic Funds 65 73 72 77 77 Other Investment 4 4 4 4
Slide 15: MFS Net Fund Sales
3 4 MFS Net Fund Sales 2 Q 1 Net New Sales Market Movement (US$ Billions) (US$ Billions) 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Mutual Funds Mutual Funds (1.3) 7.8 1.2 6.0 1.6 Gross New Sales 5.0 5.4 4.5 4.4 4.7 Managed Redemptions (4.5) (4.5) (6.5) (4.8) (6.3) Funds (1.1) 4.8 1
Slide 16: SLF Asia
3 4 SLF Asia 2 Q 1 (C$ Millions) 200 15 • Revenue up 15% 1Q/1Q in local 150 Net Income currencies 10 Revenue 100 • Net Income up 29% before 50 5 impact of currency 1Q/1Q – Lower expense levels in the 0 0 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Philippines and Hong Kong Revenue 145 140 144 158 145 contribute t
Slide 17: First Year Annualized Premiums - Asia
3 4 First Year Annualized Premiums(1) - Asia 2 Q 1 (C$ Millions) • Annualized premiums up 82% 1Q/1Q in Canadian dollars 40 33 • Hong Kong: success in 24 22 recruiting and sales incentive 18 programs led to 45% increase in sales 1Q/1Q in local currency • India: Life insurance sales up 1Q'03 2Q'03 3Q'
Slide 18: SLF United Kingdom
3 4 SLF United Kingdom 2 Q 1 (£ Millions) 200 30 • Stable earnings from closed- Net Income 150 Revenue block business with 19.1% ROE 20 100 10 50 • Persistency in line with expectations 0 0 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Revenue 166 164 154 146 134 Net Income 21 19 28 21 19 ROE 19.5% 18.3% 27.9% 20.4
Slide 19: Operating Expenses
3 4 Operating Expenses 2 Q 1 (C$ Millions) Non-MFS MFS 30% 231 60% $500 465 484 206 199 204 201 427 429 417 $200 20% 40% $250 $100 10% 20% $0 0% $0 0% 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Operating 427 465 429 484 417 Operating 206 199 204 201 231 (1) Expenses Expenses (3) (2)
Slide 20: Impaired Assets
3 4 Impaired Assets 2 Q 1 (C$ Millions) 1,000 919 1.00% 810 806 Impaired Asset Ratio 750 699 0.75% C$ millions 563 500 0.50% 250 0.25% 0 0.00% 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 Gross Impaired Assets 919 810 806 699 563 Total Allowances 422 402 403 366 336 Net Impaired Assets(1) 497 408 403 333 227 Net I
Slide 21: Capital Management
3 4 Capital Management 2 Q 1 MCCSR Ratio(1) 239% 241% 238% • MCCSR at 241% up from 238% 230% 234% at 4Q/03 • Debt to total capital ratio reduced to 21.0% from 21.4% at the end of the year 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 (1) Represents the MCCSR ratio of Sun Life Assurance Company of Canada 21
Slide 22: Sources of Earnings
3 4 Sources of Earnings 2 Q 1 (C$ Millions) 1Q 2004 1Q 2003 Change Expected profit 411 406 5 New business gain or loss (75) (73) (2) Experience gains or losses 100 6 94 Assumption changes 34 23 11 Earnings from operations 470 362 108 Earnings on surplus 113 104 9 Operating earnings before taxes 583
Slide 23: Embedded Value at December 31, 2003
3 4 2 Q 1 Embedded Value at December 31, 2003 23
Slide 24: Embedded Value Highlights
3 4 Embedded Value Highlights 2 Q 1 • Embedded Value (EV) increased at an annual rate of 15% to $16.4 billion for the year before capital transactions and currency. • Value of New Business (VNB) grew by 10% to $700 million on a constant currency basis. • Gain on in-force business was $1.5 billion af
Slide 25: Growth in Embedded Value
3 4 Growth in Embedded Value 2 Q 1 ($ millions) December 31 December 31 2003 2002 Embedded value at January 1 14,179 11,277 (1) Gain on in-force business Expected growth 1,096 947 Experience variances - stock 434 (924) Experience variances - fixed income (58) (205) Experience variances - other (55)
Slide 26: Embedded Value Principal Assumptions for December 31, 2003
3 4 Embedded Value Principal Assumptions for December 31, 2003 2 Q 1 Canada United States United Kingdom Asia GAAP Basis Canadian Canadian Local Canadian Solvency Capital 150% MCCSR 150% MCCSR Local Solvency margin 150% MCCSR Discount Rate 8.75 7.75 - 8.75 8.00 8 - 15 Risk Margin 3.5 3.5 - 4.5 3.5 4
Slide 27: Embedded Value and Sensitivities
3 4 Embedded Value and Sensitivities 2 Q 1 Embedded Value: Value of In-Force Business $ 6.4 B Value of Shareholder Net Worth $ 6.8 B Embedded Value at December 31, 2003 $ 13.2 B Sensitivities: EV at December 31, 2003 $ 13.2 B EV with Risk Discount Rate increased by 1% $ 12.4 B EV with Risk Discount
Slide 28: Questions & Answers
a, @uvestions'& Answers