Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — National Bank Financial Canadian Financial Services Conference (March 2006)
35 slides from Sun Life Financial's conference presentation, Mar 29, 2006
Slide 1: National Bank Financial Canadian Financial Services Conference
National Bank Financial Canadian Financial Services Conference Bob Salipante President, Sun Life Financial U.S. March 29, 2006
Slide 2: Creating Shareholder Value
SLF Overview Creating Shareholder Value • Significant improvements in ROE • High quality earnings • Strong Value of New Business growth • Disciplined risk management culture • Diversified business mix with strategic assets – MFS, CI Financial, McLean Budden • Growing presence in Asia • Strong capita
Slide 3: Diversified Earnings
SLF Overview Diversified Earnings U.S. 26% Canada 51% Sun Life Financial MFS 10% Asia 2% U.K. RBU* 10% 1% 2005 Operating Earnings, excluding Corporate Other * Reinsurance Business Unit (RBU) 2
Slide 4: U.S. Operations
SLF U.S. U.S. Operations SLF U.S. 2005 Earnings • Annuities – Fixed Group 10% – Variable – Equity Indexed Individual 24% – PPVA Annuities 66% • Individual Life – UL (Single & Joint Life) – VUL (Single & Joint Life) – COLI / BOLI – PPVUL US$409 million • Group Insurance – Life – Short and Long-Term D
Slide 5: Consistent U.S. Strategy
SLF U.S. Consistent U.S. Strategy • Deliver solid organic growth – Deeper penetration of existing markets – Extend product and distribution reach • Pursue “bolt-on” transactions to augment organic growth 4
Slide 6: SLF U.S. - Strong Earnings & ROE Improvement
SLF U.S. SLF U.S. - Strong Earnings & ROE Improvement SLF U.S. Earnings and ROE 12.9% 10.4% (US$ millions) 7.3% 7.3% 409 300 238 218 2002 2003 2004 2005 Earnings ROE 5
Slide 7: U.S. Annuities Overview
U.S. Annuities U.S. Annuities Overview SLF U.S. 2005 Earnings • Annuity Products – Fixed Group – Variable 10% – Equity Indexed Individual – PPVA 24% Annuities 66% Earnings Trend (US$ millions) 268 184 AUM as of Q4’05 111 US$ 42.3 billion 2003 2004 2005 6
Slide 8: U.S. Annuities Strategy
U.S. Annuities U.S. Annuities Strategy • Focus on organic growth – Strengthen and extend distribution • Increased wholesaler distribution • Indexed products through bank channel (2006) – Extend the product range • Withdrawal, death and accumulation benefits • Lifetime income rider – Build payout cap
Slide 9: Confronting the Challenges
U.S. Annuities Confronting the Challenges Industry Challenge Sun Life Opportunity Uncertain Economic Î Superior Asset Liability Matching & Environment Hedging Capabilities Demographic Î Competitive products geared & Consumer Trends toward retiree markets Î RSI opportunity Î Disciplined approach
Slide 10: Product Solutions for Each Segment
U.S. Annuities Product Solutions for Each Segment • Unique SLF features plus state-of-the-art options Segment Pre- Recent Established Segment Retirees Retirees Retirees Accumulation Accumulation Income Income Estate Estate Benefits Benefits Benefits Benefits Benefits Benefits Solutions SLFSolutions
Slide 11: Distribution - SLFD Initiatives
U.S. Annuities Distribution - SLFD Initiatives • Field force of scale SLF U.S. – 78 wholesalers at year-end 2005 New Sales 2005 US$1.3 billion • Experienced, mature sales force – Average industry experience Indep. > 10 years Firms Bank 33% 34% • Distribution access – Financial planners Wirehse/ Regi
Slide 12: Gaining Traction
U.S. Annuities Gaining Traction Domestic VA Sales by Quarter (US$ millions) 451 374 349 341 334 291 291 296 Q1 '04 Q2 '04 Q3 '04 Q4 '04 Q1 '05 Q2 '05 Q3 '05 Q4 '05 11
Slide 13: Equity Indexed Annuities
U.S. Annuities Equity Indexed Annuities • Offer products focused on value to consumer – No excessive surrender charges or surrender periods • Out in front on market conduct – In 2004, implemented new sales practices to enhance producer and consumer understanding • Targeting bank channel as opportuni
Slide 14: Annuities - Spread Income
U.S. Annuities Annuities - Spread Income Fixed Accounts In-Force 12/30/05 • Near-term, spreads within by Potential Crediting Rate target range as policies reset US$ millions at lower rates – Of US$5.3 billion above 1.8 3.4 minimum rate, US$3.5 billion 5.3 scheduled for reset over next 2 years 8.4 –
Slide 15: Annuities - Spread Income
U.S. Annuities Annuities - Spread Income Longer-Term Interest Rate Scenarios Rates Spread Impact Spreads improve as earned rates increase and Slow in-force resets to crediting rates consistent with Increase pricing targets Rapid Spreads squeezed as crediting rates rise faster Increase than earned ra
Slide 16: Risk Management
U.S. Annuities Risk Management • ALM and hedging programs are in place to address option and guarantee exposures: – Fixed Annuity • Exposure: minimum interest and BV cash-out guarantees • Objective: hedge economic exposures and constrain impact of interest rate changes on reserves – Equity Indexed A
Slide 17: Positioned for Profitable Growth
U.S. Annuities Positioned for Profitable Growth • Competitive suite of products • Experienced wholesaling team • Significant shelf space access • Efficient operating platform • Leading edge risk management capabilities • Disciplined pricing approach 16
Slide 18: Individual Life Overview
SLF U.S. Individual Life Individual Life Overview SLF U.S. 2005 Earnings • Product Offerings – UL (Single & Joint Life) Group – VUL (Single & Joint Life) 10% – COLI / BOLI Individual – PPVUL 24% Annuities 66% Earnings Trend (US$ millions) 100 77 81 Total Account Value as at 12/31/05* US$8.6 billion
Slide 19: Individual Life Strategy
SLF U.S. Individual Life Individual Life Strategy • Organic growth strategies – Expand distribution reach • E.g., new partnerships with NFP and M Financial Group – Strengthen existing distribution • Enhance wholesaling organization, account management – Extend the product range – Extend offshore and
Slide 20: Confronting the Challenges
SLF U.S. Individual Life Confronting the Challenges Industry Challenge Sun Life Opportunity Uncertain Economic Î Superior ALM & Hedging Environment capabilities Demographic Î Competitive products geared & Consumer Trends toward older, affluent consumers Î Offshore network Product Development Î
Slide 21: More Older, Wealthy Americans
SLF U.S. Individual Life More Older, Wealthy Americans Number of High-Net-Worth* Households Age 65 or Older in the United States (US$ millions) 7.9 1 3% (E )= 1 9 2 – 20 3.6 R 199 G CA 1.1 0.3 1992 2001 2010E 2019E * Households with investable assets of $1 million or more Source: The VIP Forum, “Com
Slide 22: Industry Sales Trends
SLF U.S. Individual Life Industry Sales Trends Overall industry sales continue shift toward UL US Life Insurance Sales: Annualized Premium (US$ billions) 11.5 12.6* 3.0 2.7 2.9 2.7 1.6 4.1 5.0 2.1 2000 2001 2002 2003 2004 2005 E Universal Variable Term Whole Source: LIMRA, *Sun Life estimate based
Slide 23: Policy Size
SLF U.S. Individual Life Policy Size • SLF expertise reflected in high average policy size Average Face Amount (US$ millions) 23.4 6.8 1.2 0.2 U.S. Industry SLF SLF Offshore SLF PPVUL Domestic Source: Q4 2005 LIMRA Sales Survey, SLF Data 22
Slide 24: Increasing Book of Business
SLF U.S. Individual Life Increasing Book of Business Account Value - Active Products (US$ 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 2-year CAGR: 25% 23
Slide 25: Expanding Distribution Partnerships
SLF U.S. Individual 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 producers • Target client
Slide 26: Underwriting Expertise & Capacity
SLF U.S. Individual Life Underwriting Expertise & Capacity • Strength in underwriting affluent, older age cases • Increased jumbo case and retention limits • Sun Power Points Program (SPPP) acknowledged by reinsurers – Credit program that identifies favorable factors during underwriting to offset de
Slide 27: Competitive Strengths
SLF U.S. Individual 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 – Underwriting discipline – Hed
Slide 28: Group Life & Health Overview
SLF U.S. Group Group Life & Health Overview SLF U.S. 2005 Earnings • Product Offerings – Stop-Loss Group 10% – Life – Disability (STD, LTD) Individual 24% Earnings Trend Annuities (US$ millions) 66% 41 35 30 Business In-Force as of Q4’05 US$1,038 million • Disability 26% • Life 38% • Stop-Loss 36% 2
Slide 29: Group - Strategy
SLF U.S. Group 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” transactions 28
Slide 30: 2006 Progress - MGIS
SLF U.S. Group 2006 Progress - MGIS • SLF declared exclusive provider of group life and disability benefits to Medical Group Insurance Services physician groups • Enter physician segment as market leader • Potential to convert $50 - $70 million BIF to SLF paper • Opportunity to significantly grow •
Slide 31: Group - Proven Track Record
SLF U.S. Group Group - Proven Track Record Sales: 20% CAGR In-Force: 16% CAGR (US$ millions) (US$ millions) 1,038 314 874 252 764 233 683 191 590 180 483 136 437 104 % +202 % +138 1999 2000 2001 2002 2003 2004 2005 1999 2000 2001 2002 2003 2004 2005 Earnings: 21% CAGR (US$ millions) 41 35 31 30 27 1
Slide 32: Group - Building on Success
SLF U.S. Group 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 distribution franchise by adding regional offices – Expand key broker program • Gain share of
Slide 33: Executing U.S. Strategy
SLF U.S. Executing U.S. Strategy • Improvements in earnings and ROE – U.S. Annuities 51% 2 year CAGR – Innovative capital management • Extended distribution reach – NFP and M Financial – 78 experienced VA wholesalers – Added 4 new Group regional offices • ‘Acquiring’ business of MGIS 32
Slide 34: 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 35: Questions & Answers
Questions & Answers Building Excellence