Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q4 2005 Earnings Presentation
34 slides from Sun Life Financial's earnings presentation, February 2006
Slide 1: Fourth Quarter 2005 Financial and Operating Results
Q4 Fourth Quarter 2005 Financial and Operating Results For the period ended December 31, 2005 Sun Life Financial Inc. (unaudited)
Slide 2: Forward-Looking Statement
Q4 Forward-Looking Statement 2005 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 Highlights
Q4 Financial Highlights 2005 Delivered on Commitments to Shareholders: • Record operating EPS of $3.24 for 2005, up 11% over 2004, 15.5% in constant currency • Operating ROE of 13.1% in 2005, up 110 bps • Operating EPS of $0.84, up 13.5% Q4/Q4, 16.2% in constant currency • Q4 ROE up 120 basis points
Slide 4: Business Highlights
Q4 Business Highlights 2005 • Value of New Business up 18% year-over-year • Fifth consecutive quarter of positive net flows at MFS • SLF Canada Individual Insurance market share up 120 bps to 12.6% • Increased GRS asset retention by 53% to $497 million • GRS ranked #1 in Canada for Defined Contribut
Slide 5: Operating EPS
Q4 Operating EPS 2005 (Cents) • Up 13.5% Q4/Q4 86 83 • Up 16.2% constant 80 77 84 currency Q4/Q4 74 81 82 77 74 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 EPS EPS constant currency (1) 5 (1) Using constant currency exchange rates based on average of the fourth quarter of 2004
Slide 6: Operating ROE
Q4 Operating ROE 2005 S&P 500 1,223 1,232 (average) 1,192 1,181 1,162 • Up 120 bps Q4/Q4 • Full year ROE 13.1%, 13.3% up 110 bps 13.0% 13.1% 12.6% 12.1% Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 ROE (%) 12.1 12.6 13.0 13.1 13.3 Operating Net Income 438 458 477 481 490 (C$ mm) 6
Slide 7: Sources of Earnings
Q4 Sources of Earnings 2005 (C$ millions) Q4'04 Q4'05 Change Expected profit 371 405 34 Impact of new business (24) (58) (34) Experience gains or losses 106 68 (38) Assumption changes and management actions (84) 17 101 Earnings from operations 369 432 63 Earnings on surplus 130 150 20 Earnings befor
Slide 8: Value of New Business up 18%
Q4 Value of New Business up 18% 2005 (C$ millions) 791 672 FY 2004 FY 2005 MFS 197 231 Non-MFS 475 560 Total 672 791 Note: All amounts are based on 2004 annual average exchange rates 8 Q4’05 amounts are estimated
Slide 9: Canada: Revenue and Net Income
Q4 SLF Canada 2005 • Earnings up on business growth and: (C$ millions) – Favourable investment 2,500 280 experience in Group Benefits 260 Net Income 2,000 Revenue – Higher fee income in GRS 240 – Increased earnings from CI 1,500 Financial 220 • ROE up 140 basis points 1,000 200 Q4'04 Q1'05 Q2'05 Q3'
Slide 10: Canada: Individual Life & Health Quarterly Sales
Q4 SLF Canada: Individual Life & Health 2005 • Market share(1) of 12.6%, Life & Health Sales up 120 basis points (C$ Millions) 50 160 • Sales up 15% Q4/Q4 Rolling 4 quarters Quarterly Sales – Wholesale gaining traction 150 – Productivity increases in 25 Clarica Sales Force 140 0 130 Q4'04 Q1'05 Q2'0
Slide 11: Canada: Individual Wealth
Q4 SLF Canada: Individual Wealth 2005 Premiums and Deposits(1) (C$ millions) • Premiums and deposits 875 up 30% Q4/Q4 714 654 550 586 • Clarica Sales Force accounted for 42% of CI net fund sales Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 (1) Represents premiums & deposits of retail annuities and sales of CI mutu
Slide 12: Canada: Group Retirement Services
Q4 SLF Canada: Group Retirement Services 2005 Sales and DC Plan Assets 27 1,500 DC Plan Assets (C$ billions) (C$ millions) • Increased AUM by 11% 1,000 Sales Q4/Q4 21 500 • #1 market share for Defined 15 0 Contribution Plans (1) Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 • 53% asset retention increase DC Plan 22
Slide 13: Canada: Group Benefits
Q4 SLF Canada: Group Benefits 2005 • Gross sales up 175% Q4/Q4 Business In-Force and Sales • Business in-force up 9% Q4/Q4 (C$ millions) • Sales boosted by Total Benefits 120 5,500 Business In-Force strategy 90 Total Sales 5,000 60 4,500 30 0 4,000 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Business In-Force 4,7
Slide 14: US: Revenue and Net Income
Q4 SLF US 2005 (US$ millions) • ROE increased 510 bps 2,400 Q4/Q4 on strong earnings 160 • Earnings up 68% Q4/Q4 1,600 – Higher fee income Revenue Net Income 120 – Improved interest spreads – AXXX structure 800 80 – Additional tax benefits 0 40 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Revenue 1,825 1,539 2,281
Slide 15: US: Annuities
Q4 SLF US: Annuities (US$ millions) 2005 935 867 888 849 730 • VA gross sales up 9% Q4/Q4 • Maintaining VA market share • Spreads increased 23 bps Q4/Q4 to 1.53% Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Gross Sales Variable Annuities 421 487 483 523 459 Fixed Annuities 86 65 149 68 55 Indexed Annuities 359 306
Slide 16: US: Individual Life Sales
Q4 SLF US: Individual Life Sales 2005 • Expanded distribution Sales relationship with NFP on 120 (US$ millions) February 6, 2006 Quarterly Sales • SLF will become a core carrier and gain access to 80 NFP's extensive retail producer network 40 0 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 BOLI, COLI, PPVUL 11 37 6
Slide 17: US: Group Life and Health
Q4 SLF US: Group Life and Health 2005 • Record sales in Q4 and full Business In-Force and Sales year 2005 (US$ millions) • Exceeded the US$1 billion 200 1000 B usiness In-Force milestone for business in-force 150 900 Sales 100 800 50 700 0 600 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Business 874 868 912 928 1
Slide 18: MFS
Q4 MFS 2005 • Fifth consecutive quarter of positive net sales 1,223 1,232 S&P 500 1,192 1,181 (average) • AUM up 11% Q4/Q4, 1,162 reaching a record of US$167.7 billion in January 50 30% 2006 • Net sales of US$1.9 billion, Pre-Tax Margin (US$ millions) up from US$0.1 billion Net Income Q4/04 25 20% •
Slide 19: MFS: Assets Under Management
Q4 MFS: Assets Under Management 2005 (US$ billions) 157 162 146 145 150 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Domestic Mutual Funds 76 74 74 75 75 Other Investment 5 5 6 6 7 Products MFS/Sun Funds 11 10 10 10 10 Institutional Accounts 46 47 51 56 60 International Funds 8 9 9 10 10 19
Slide 20: MFS: Net Fund Sales
Q4 MFS: Net Fund Sales 2005 Net New Sales Market Movement (US$ billions) (US$ billions) Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Mutual Funds Mutual Funds 6.6 (1.6) 1.3 2.9 1.2 Gross New Sales 3.7 4.3 4.0 3.8 3.7 Managed Redemptions (5.4) (5.2) (4.7) (4.5) (5.2) Funds 5.5 (0.8) 0.
Slide 21: Asia: Revenue and Net Income
Q4 SLF Asia 2005 • Completed CMG Asia (C$ millions) acquisition • Revenue up 18% Q4/Q4 300 30 • Earnings lower due to: Net Income – CMG integration costs 200 20 Revenue – Impact of currency – New business strain – Continued investment in 100 10 developing markets 0 0 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Re
Slide 22: Asia: Sales
Q4 SLF Asia: Sales 2005 Sales • Sales up 31% Q4/Q4 (C$ millions) • Expanded operations in China to 4th city, Wenzhou 63 • Sales Force in Hong Kong 48 51 increased to over 1,700 36 31 • Significant increase in pre- need sales in Philippines • Approximately 14,000 agents in India up from 9,500 at Dece
Slide 23: Asset Quality Remains Strong
Q4 Asset Quality Remains Strong 2005 500 0.30% Impaired Asset Ratio C$ millions 250 0.15% 0 0.00% Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 Gross Impaired Assets 441 347 298 326 321 Total Allowances 263 203 155 144 140 Net Impaired Assets (1) 178 144 143 182 181 Net Impaired Assets as 0.18% 0.15% 0.14% 0.19% 0.
Slide 24: Capital Management
Q4 Capital Management 2005 • Repurchased 13.5 million 247% 248% shares during the year for 238% 236% $555 million 216% • Completed a $600 million offering of 4.8% Fixed/Floating Debentures, and $250 Q4'04 Q1'05 Q2'05 Q3'05 Q4'05 million 4.45% perpetual MCCSR Ratio (1) 238% 247% 248% 236% 216% prefer
Slide 25: Conclusion: Delivering on Commitments to Shareholders
Q4 Conclusion: Delivering on Commitments to Shareholders 2005 Medium-Term 2005 Measure Status Goals (1) Results Operating EPS Growth 11.3% Exceeded Constant Currency 10% 15.5% 75-100 110 Operating ROE Growth Exceeded basis points basis points Dividend Payout Ratio 25%-35% 31% Met Share Buyback $500
Slide 26: Update on SLF Canada: Growth in Individual Business
Update on SLF Canada Growth in Individual Business Kevin P. Dougherty President, Sun Life Financial Canada
Slide 27: Canada: Progress in Individual
Q4 SLF Canada: Progress in Individual 2005 • Product development initiatives • Multi-channel distribution – Clarica Sales Force – Third Party • Sales growth • Financial results 27
Slide 28: Canada: Individual Product Development
Q4 SLF Canada: Individual Product Development 2005 Enhancements Launched new Enhancements to Sun Critical Sun Critical to Term Illness Illness Insurance Launched Insurance Universal Life Launched new Launched Sun Limited Pay new Long- Enhancements Universal Life Term Care to Sun Product Payout annui
Slide 29: Canada: CI Financial Partnership
Q4 SLF Canada: CI Financial Partnership 2005 • 35% ownership of CI Long-term Assets Under Management Financial December 31, 2005(1) • Clarica Sales Force generated 42% of Rank Company C$B CI’s net fund sales in 1 IGM Financial Inc. 92 Q4’05 2 CI Investments 53 3 RBC Asset Management 49 4 CIBC Asset
Slide 30: Canada: Clarica Sales Force Productivity
Q4 SLF Canada: Clarica Sales Force Productivity 2005 (C$000’s) Insurance Annualized Premium Wealth Deposits per Advisor per Advisor 40.5 743 35.9 561 2004 2005 2004 2005 Exclusive Sales Force 2004 2005 Year-end total # 3,869 3,664 30
Slide 31: Canada: Third-Party Distribution
Q4 SLF Canada: Third-Party Distribution 2005 Insurance Sales • Re-tooled product lineup (C$ millions) • Added underwriters and 20 advanced sales specialists 20 • Added 10 MGA partners in 2005 to bring the total under 15 contract to 14 10 8 5 0 2004 2005 MGA National Accounts PPGA & Other 31
Slide 32: Canada: Individual Sales Growth
Q4 SLF Canada: Individual Sales Growth 2005 (C$ millions) 22% 11% $2,878 3,000 160 $151 $2,355 526 $136 120 2,000 547 1,074 823 80 1,000 40 1,278 985 0 0 2004 2005 2004 2005 Annuities Life Insurance Sales Health Insurance Sales CI Mutual Funds - Clarica Sales Segregated Funds 32
Slide 33: Canada: Individual Financial Results
Q4 SLF Canada: Individual Financial Results 2005 (C$ millions) Canadian Individual 750 15.0% 500 10.0% 250 5.0% 0 0.0% 2003 2004 2005 Net Income 431 511 572 ROE 10.7% 12.0% 13.2% 33
Slide 34: Questions & Answers
Questions & Answers Sun Life Financial