Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q2 2006 Earnings Presentation
38 slides from Sun Life Financial's earnings presentation, August 2006
Slide 1: Second Quarter 2006 Financial and Operating Results
Second Quarter 2006 Financial and Operating Results For the period ended June 30, 2006 Sun Life Financial Inc. (unaudited) Q2 2006
Slide 2: Forward-Looking Statement
Q2 2006 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”, “i
Slide 3: Financial Performance and Objectives
Q2 2006 Financial Performance and Objectives Medium- Q2 Measures Term Status 2006 Objectives* Operating EPS Growth 8.6% Exceeding Constant Currency 10% 14.8% Operating ROE Growth 60 bps 75 bps 100 bps Exceeding Constant Currency Dividend Payout Ratio 30%-40% 31% On Track Share Buyback $297 Exceeding
Slide 4: Highlights
Q2 2006 Highlights During the quarter we continued to execute on key elements of our strategy • Sustainable Earnings Growth • Diversified Earnings Platform • Global Distribution Capabilities 4
Slide 5: Sustainable Earnings Growth
Q2 2006 Sustainable Earnings Growth Consistent Record of Quarterly EPS Growth • Expected profit up 22%, 31% in constant currency • VNB up 14% Q2/Q2, 9% in constant currency for the twelve months ending Q2’06 • MFS pre-tax profit margins up 6% Q2/Q2 to 27% • Credit continues to be strong with net imp
Slide 6: Diversified Earnings Platform
Q2 2006 Diversified Earnings Platform • Geographic and business balance – 50/50 Canada/International – 50/50 Protection/Wealth • Canadian earnings up 12% on continued growth in all lines • US earnings down on – New business strain and reserve impact of reinsurance in Individual Life – Equity market
Slide 7: Global Distribution Capabilities
Q2 2006 Global Distribution Capabilities • Worldwide protection sales double Q2/Q2 to $453 million • Executing on Asia growth strategy – India agency sales up 114% YTD in local currency, over 18,000 advisors and 84 branches – China sales up 121% in local currency on advisor productivity improvements
Slide 8: Operating EPS and Operating ROE
Q2 2006 Operating EPS and Operating ROE 13.6 13.3 • ROE up 60 bps 13.1 13.2 Q2/Q2 13.0 93 – Strong earnings 87 88 88 – Share repurchase 84 85 program 84 81 81 82 • EPS up 8.6% Q2/Q2, up 14.8% constant currency Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 EPS (cents) EPS (cents - constant currency) ROE (%) 8
Slide 9: Q2 Sources of Earnings
Q2 2006 Q2 Sources of Earnings (C$ millions) Q2'05 Q2'06 Change Expected profit on in-force business 366 448 82 22% Q2/Q2 Impact of new business (23) (77) (54) Experience gains or losses 111 30 (81) Management actions / changes in assumptions 38 60 22 Other - Par policyholder adjustment - (58) (58)
Slide 10: Effective Tax Rate
Q2 2006 Effective Tax Rate Pre-Tax Income After-Tax Effective • Effective tax rate of Income Taxes Income Tax Rate 16% down from 23% in Q2’05 (C$ millions) (1) As Reported Q2 2006 538 7 531 1% – Increased earnings Add (Deduct): from lower tax jurisdictions Impact of Federal Tax Rate Change on 58 58
Slide 11: PfADs and Equivalents
Q2 2006 PfADs and Equivalents (C$ billions) • General Account PfADs +9.5% have grown at a CAGR 14.5 of 9.3% to $9.8 billion 12.1 13.0 • PV of expected pre-tax profits have grown at a CAGR of 9.5% 2003 2004 2005 Expected Pre-Tax Profits 3.0 3.4 3.8 (Asset Mgmt) Expected Pre-Tax Profits 9.1 9.6 10.7 (
Slide 12: Value of New Business
Q2 2006 Value of New Business (C$ millions) 711 772 12 Months Ended 12 Months Ended Q2'05 Q2'06 MFS 195 205 Non-MFS 516 567 Total 711 772 Note: All amounts are based on 2005 annual average exchange rates Q2’06 amounts are estimated 12
Slide 13: SLF Canada
Q2 2006 SLF Canada • Record earnings of $264 million, (C$ millions) up 12% Q2/Q2 – Solid business growth and lower tax rates – Improved investment results in Group Benefits – Improved mortality in GRS – Higher CI Financial earnings • ROE increased 80 bps Q2/Q2 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Revenue 2
Slide 14: SLF Canada - Individual Life & Health
Q2 2006 SLF Canada - Individual Life & Health (1) Life & Health Sales • Individual Life market share (C$ millions) of 11.8%, up from 11.2% 45 40 42 • Steady progress in Wholesale 36 channel 31 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Wholesale 4 6 6 7 8 Clarica Sales Force 36 30 39 24 34 Total 40 36 45 31 42 R
Slide 15: SLF Canada - Individual Wealth
Q2 2006 SLF Canada - Individual Wealth (1) Premiums and Deposits • Annuity market share (C$ millions) of 24.3% up from 16.1% 981 in Q2’05 • Sale of CI mutual funds 714 688 through Clarica Sales 654 586 Force up 13% Q2/Q2, representing 35% of CI Financial net fund sales Q2'05 Q3'05 Q4'05 Q1'06 Q2'06
Slide 16: SLF Canada - Group Benefits
Q2 2006 SLF Canada - Group Benefits Business In-Force and Sales • Business in-force up 10% (C$ millions) Q2/Q2 • Sales up over 200% on several large wins • Industry leading retention Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Business In-Force 5,011 5,098 5,211 5,377 5,532 Sales ASO 6 31 33 38 110 Insured 43 44
Slide 17: SLF Canada - Group Retirement Services
Q2 2006 SLF Canada - Group Retirement Services Sales and DC Plan Assets • Retained $119 million of rollover assets, up 12% • DC assets down from Q1’06 due to weak equity markets Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Assets 24.6 25.7 26.3 27.3 26.6 (C$ billions) Sales 285 293 364 495 244 (C$ m illions) 17
Slide 18: SLF U.S.
Q2 2006 SLF U.S. • Earnings down on (US$ millions) – New business strain and reserve strengthening in Individual – Reserve strengthening on lower equity markets in Annuities, partially offset by – Improved claims experience and business growth in Group Life & Health Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Rev
Slide 19: SLF U.S. - Annuities
Q2 2006 SLF U.S. - Annuities (US$ millions) • Domestic variable annuity gross sales up 23%, net redemptions improved 10% Q2/Q2 • Fixed annuity redemptions higher, consistent with the aging of the block Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Gross Sales • Spreads increased 46 Dom estic Variable 334 349 341 37
Slide 20: SLF U.S. - Individual
Q2 2006 SLF U.S. - Individual Sales(1) (US$ millions) 97 • Expanded distribution contributed to strong core 65 61 sales growth in Q2’06 33 36 • BOLI/COLI growth primarily from large BOLI sale Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 BOLI/COLI/PPVUL 6 7 14 16 30 Individual 27 29 47 49 67 Total 33 36 61 65 97 Ac
Slide 21: SLF U.S. - Group Life & Health
Q2 2006 SLF U.S. – Group Life & Health Business In-Force and Sales (US$ millions) • Business in-force up 19% Q2/Q2 • Sales up 20% with a significant contribution from Medical Group Insurance Services Inc. (MGIS) Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Business 912 928 1,038 1,016 1,089 In-Force Sales 70 65 15
Slide 22: MFS
Q2 2006 MFS • Net income up 38% Q2/Q2 1,283 1,282 S&P 500 on higher AUM and RSI 1,223 1,232 (average) transfer to SLF U.S. 1,181 • AUM of US$168 billion up 12% Q2/Q2 • Margins continue to improve on higher revenues and cost containment Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Net Income 34 38 38 45 47 (US$ mil
Slide 23: MFS - Assets Under Management
Q2 2006 MFS - Assets Under Management (US$ billions) 170 168 157 162 150 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Non-U.S. Retail Funds 7 8 8 8 8 Institutional Products 35 39 43 48 50 Managed Insurance 34 35 36 38 37 Products U.S. Retail Mutual Funds 74 75 75 76 73 23
Slide 24: MFS - Net Fund Sales
Q2 2006 MFS - Net Fund Sales Net Sales Market Movement (US$ billions) (US$ billions) 7.5 6.3 2.9 1.8 -1.0 Q2’05 Q3’05 Q4’05 Q1’06 Q2’06 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Retail Mutual Funds Gross New Sales 4.0 3.8 3.7 4.5 4.0 Redemptions (4.7) (4.5) (5.2) (6.0) (5.6) Net New Sales (0.7) (0.7) (1.5) (1.5
Slide 25: SLF Asia
Q2 2006 SLF Asia • Earnings up 63% Q2/Q2 on (C$ millions) the strength of CMG acquisition, up 79% in constant currency • CMG integration on track Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Revenue 167 152 257 226 259 Net Income 19 10 7 24 31 Net Income (1) (Constant Currency) n/a n/a n/a n/a 34 ROE 17.6% 9.8% 4.
Slide 26: SLF Asia - Life Sales
Q2 2006 SLF Asia - Life Sales Sales(1) (C$ millions) • Sales up 45% Q2/Q2, up 61% in constant currency 66 63 • India sales force doubled to 18,000 from Q2’05, 114% YTD increase in 50 45 sales (local currency) • China sales up 121% 36 31 (local currency) Q2/Q2 on productivity improvements and additio
Slide 27: High Quality Assets
Q2 2006 High Quality Assets (C$ millions) 326 321 298 279 237 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 Gross Im paired Assets 298 326 321 279 237 Total Allow ances 155 144 140 118 92 (1) Net Im paired Assets 143 182 181 161 145 Net Im paired Assets as 0.14% 0.19% 0.18% 0.16% 0.15% % of Invested Assets (1) Net
Slide 28: Capital Management
Q2 2006 Capital Management • Repurchased more than 248% 6.5 million shares during 236% the quarter for $297 223% 221% 216% million ($398 million YTD) • Quarterly dividend increased to $0.30 per share, up 18% this year • Completed a $300 million Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 offering of 5% Senior MCC
Slide 29: Commitments to Shareholders
Q2 2006 Commitments to Shareholders Medium- Q2 Measures Term Status 2006 Objectives* Operating EPS Growth 8.6% Exceeding Constant Currency 10% 14.8% Operating ROE Growth 60 bps 75 bps 100 bps Exceeding Constant Currency Dividend Payout Ratio 30%-40% 31% On Track Share Buyback $297 Exceeding (C$ mill
Slide 30: Total Benefits from Sun Life Financial Canada
Total Benefits from Sun Life Financial Canada Kevin Dougherty President, Sun Life Financial Canada Q2 2006
Slide 31: Market Leadership
Q2 2006 Market Leadership Group Retirement Services Market Share Group Benefits Market Share • #1 Large Case Provider • #1 Large Case Provider 30.6% 23.3% 21.2% 21.1% 20.0% 10.9% SLF Canada Great-West Life Standard Life Manulife Great-West Life SLF Canada Sources: Benefits Canada 2005 Capital Accumu
Slide 32: Integrating Information Systems
Q2 2006 Integrating Information Systems “While many insurance executives are still struggling to understand how technology advancement enables a complete view of the customer, a few have not only grasped this concept but are acting on it ... Canada’s Sun Life Financial ... has made significant advan
Slide 33: Customer Friendly / Customer Branded
Q2 2006 Customer Friendly / Customer Branded 33
Slide 34: A Single Point of Access
Q2 2006 A Single Point of Access Before Total Benefits After Total Benefits • Group Benefits and Group Retirement Services Web, access ID and password • Defined Benefit Plan Web, access ID and password • One single Web, access • Flexible Benefits Enrolment Web, access ID ID and password and password
Slide 35: Total Benefits Results
Q2 2006 Total Benefits Results • Total joint clients > 500 • Total employer branding innovation 120 clients • Superior customer retention rates • Deepening relationships • Enhanced plan member online self-service. – Clients with no Total Benefits innovations – 11.3% using online self-service – Joint
Slide 36: Integrated Benefits Solution
Q2 2006 Integrated Benefits Solution Group Benefits Integrating employee records across multiple providers and multiple application systems Web Self into one Web and call centre Service experience. Plan Group Individual Member Call Insurance & IVR Retirement “Total Benefits … is much Investments Cus
Slide 37: Total Benefits Employers
Q2 2006 Total Benefits Employers 37
Slide 38: Questions & Answers
Building Excellence Questions & Answers Q2 2006 whey . = &: Sun ‘S&«< Life Financial