Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — AIFA 2005 Mid-Winter Conference
31 slides from Sun Life Financial's conference presentation, Mar 8, 2005
Slide 1: Sun Life Financial's Perspective on Trends in Individual Life Insurance
Sun Life Financial’s Perspective on Trends in Individual Life Insurance AIFA 2005 Mid-Winter Conference Robert C. Salipante President, Sun Life Financial U.S. March 8, 2005
Slide 2: Sun Life Financial Overview
Sun Life Financial Overview 2 2
Slide 3: SLF: World-Class Ranking
SLF: World-Class Ranking Market Capitalization (US$ billions) Mar. 22, Jan. 28, % Rank Company 2000 2005 change 1 AIG 230.8 171.5 -26% 2 ING Groep 54.4 62.0 14% 3 Allianz 98.0 43.0 -56% 4 AXA 24.9 42.3 70% 5 Manulife 6.7 35.5 426% 6 Fortis 34.7 35.3 2% Top tier Industry 7 Assic. Generali 34.4 32.1 -
Slide 4: Proven Strength in Retail Life
Proven Strength in Retail Life Country Years Agents Rank Canada 140 years ~4,000 agents #2 Individual Insurance Inforce India 6 years* ~9,500 agents; #2 Private insurer adding 4,000 next 4 months Philippines 110 years ~2,200 agents #2 Life Insurer United States 110 years #20 in UL; Goal = Top 10 *St
Slide 5: U.S. Individual Life Business Earnings Contribution
U.S. Individual Life Business Earnings Contribution Group Life & Health Individual 12% 27% Annuities 61% US 22% Canada SLF U.S. 2004 Earnings $300mm 55% MFS 2004 Operating Earnings by Business Unit 10% Asia UK 3% 10% Sun Life Financial 5 5
Slide 6: Life Insurance Market & Demographic Trends
Life Insurance Market & Demographic Trends 6 6
Slide 7: Life Insurance Market Trends
Life Insurance Market Trends • Mix has changed to fixed/guaranteed vs. variable products – No-lapse guarantees are in demand • Population demographics are changing as Baby Boomers age • Life reinsurance markets have tightened • Brokerage channel increasing share of life insurance sales 7 7
Slide 8: Brokerage Channel Emerging as Leader in Life Sales
Brokerage Channel Emerging as Leader in Life Sales 40% Share of Life Sales by Channel Brokerage Agency PPGA 10% 2000 2003 2004Q3 8 8
Slide 9: Life Insurance Market Trends (cont'd)
Life Insurance Market Trends (cont’d) • Increased NAIC reserve requirements for embedded options (e.g., AXXX) • Prolonged low interest rates will pressure margins • Increasing compliance costs fueling pace of industry consolidation 9 9
Slide 10: Variable Life Sales Have Not Followed Recovery in Stock Market
Variable Life Sales Have Not Followed Recovery in Stock Market S&P 500 VUL+VL share UL + WL N ew L ife P rem iu m 3000 80% P ro d u ct S h are 2500 60% S & P 500 2000 1500 40% 1000 20% 500 0 0% 95 96 97 98 99 00 01 02 03 04 19 19 19 19 19 20 20 20 20 20 Source: LIMRA 10 10
Slide 11: VUL Market is More Concentrated
VUL Market is More Concentrated VUL Market Share of Top N UL 80% VUL more concentrated. Need 13 companies to get to 80% VUL market Need 18 companies to get to 80% UL market 40% 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 N=Numbe r o f Co mpanie s 11 Source:LIMRA 11
Slide 12: VUL & UL Market Concentration of Top 10
VUL & UL Market Concentration of Top 10 75% VUL 70% Market Share (Sales) of Top Ten VUL market more consolidated VUL consolidation not increasing 65% UL market less consolidated UL market on consolidation trend 60% UL 55% 2000 2001 2002 2003 2004 12 Source: LIMRA 12
Slide 13: VUL Competitors have Migrated into UL Market
VUL Competitors have Migrated into UL Market 500,000 Each line depicts change in company UL SPECIALISTS sales from 2000 to 2004. 86 companies depicted from LIMRA data. GREEN end of line is position in 2000. Red end is position in 2004Q3 (annualized). UL Sales $000's VUL SPECIALISTS 250,000 0 0 200,0
Slide 14: Changes in the Baby Boomer Market
Changes in the Baby Boomer Market 1960 1990 2030 85+ Male Female 85+ 85+ Male Female 80-84 Male Female 80-84 80-84 75-79 75-79 75-79 70-74 70-74 70-74 65-69 65-69 65-69 60-64 60-64 60-64 55-59 55-59 55-59 50-54 50-54 50-54 45-49 45-49 45-49 40-44 40-44 40-44 35-39 35-39 35-39 30-34 30-34 30-34 25-29
Slide 15: The Baby Boomer Market
The Baby Boomer Market Addressing the Needs of Consumers Aged 55-64 • Using the years 1946 – 1964 as boundaries, Baby Boomers now (in 2004) between 40 and 58 years old • By 2015, all Baby Boomers over 50 years old • By 2030, 20% of US population 65 or older • Boomers can expect long retirements due
Slide 16: Reinsurance Market Trends
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 • Increased auditing by reinsurers • Reinsurance rates hardening • Shrinking capacity on large policies 16 16
Slide 17: Regulatory Trends
Regulatory Trends • Regulators increasingly reactive – e.g., NY emergency amendment AG38 (AXXX) • Uncertainty about future changes in Estate Tax legislation • Deferred Compensation Plan legislation and OCC banking regulations implemented in 2004 have stabilized COLI markets 17 17
Slide 18: Sun Life Financial U.S. Individual Life Insurance Business Overview
Sun Life Financial U.S. Individual Life Insurance Business Overview 18 18
Slide 19: Products
Products • Affluent/Wealthy Individuals & Business Owners – Fixed Universal Life (single life & survivorship) – Variable Universal Life (single life & survivorship) • High Net Worth – Private Placement Variable Universal Life – Private Placement Variable Annuity • Corporate Markets – COLI Universal
Slide 20: Sun Life Individual Life Target Markets
Sun Life Individual Life Target Markets Business Individuals Estate Planning, Needs Addressed/ Business Planning, Death Protection, Market Segments Employee Benefit Funding Retirement Needs Businesses: 10-99 Employees Individual: Emerging Affluent Businesses: 100-999 Employees Individual: Affluent U
Slide 21: Sun Life's Domestic Target Market Reflected in Average Size Policies
Sun Life’s Domestic Target Market Reflected in Average Size Policies Rank* • Universal Life – Avg. Face Issued - $1,041,075 #2 – Avg. Premium Issued - $17,686 #5 • Variable Universal Life – Avg. Face Issued - $587,021 #9 – Avg. Premium Issued - $14,087 #6 * Source: Q4 2004 LIMRA Sales Survey 21 21
Slide 22: Strong Revenue & Sales Growth in Strategic Product Lines
Strong Revenue & Sales Growth in Strategic Product Lines (US$ millions) CAGR 2000 2004 2000-2004 Revenue* Life Products $ 439 $1,355 33% Closed-Block Participating Life 881 764 -3% Total Revenue $1,320 $2,119 13% Sales Domestic UL/VUL Sales $ 34 $ 76 22% Specialty Product Sales 127 231 16% Other Pro
Slide 23: Sun Life's Life Strengths
Sun Life’s Life Strengths • Expertise in the affluent and wealthy consumer and business segments – Recognized for underwriting expertise at older ages – Expertise in meeting needs of these market segments • Reputation/credibility in these market segments – Established presence in brokerage distribut
Slide 24: Sun Life's Life Strengths (cont'd)
Sun Life’s Life Strengths (cont’d) • High Net Worth PPVUL & PPVA meet tax efficiency needs • Competitive suite of UL & VUL single and joint life products • COLI & BOLI Private Placement products appeal to the business market. 24 24
Slide 25: Sun Life's Strengths Underwriting & Reinsurance
Sun Life’s Strengths Underwriting & Reinsurance • Sun Power Points underwriting program – Fact/scientifically based – Superior to table shaving – Sustainable and approved by reinsurers • Sun Life has strong capital and letter of credit capacity to support the U.S. Individual Life business • Sun Life
Slide 26: Sun Life's Strengths Risk Management
Sun Life’s Strengths Risk Management • Leading edge risk management and ALM capabilities • $950mm hedges purchased to mitigate interest risk in UL secondary guarantees • Canadian reserving requirements mandate stochastic analysis, which is also built into product pricing 26 26
Slide 27: Sun Life's Investment Expertise and Strong Investment Performance
Sun Life’s Investment Expertise and Strong Investment Performance 7.5% Individual Life UL Net Portfolio Rate 7.0% 6.5% 6.0% 5.5% Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Individual Life UL Earned Spread 1.8% 1.4% 1.0% 0.6% 0.2% Dec-02 Jun-03 27 Dec-03 Jun-04 Dec-04 27
Slide 28: Individual Life Growth Strategy
Individual Life Growth Strategy • Strong anchor position in growing segment, UL sold through brokerage channel • “Roll-up” brokerage organizations are emerging forces – Leveraging Sun Life expertise to develop relationships • Core strengths in affluent & wealthy market segment leveraged for High Net
Slide 29: Individual Life Growth Strategy (cont'd)
Individual Life Growth Strategy (cont’d) • New product development to extend market reach • UL products are cloned and sold offshore • Investing to grow select non-brokerage channel relationships • Exploring acquisitions to improve scale 29 29
Slide 30: Forward-Looking Statement
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 31: Questions & Answers
Questions & Answers 31 31