Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q1 2002 Earnings Presentation
36 slides from Sun Life Financial's earnings presentation, May 1, 2002
Slide 1: Presentation to Analysts and Investors
Presentation to Analysts and Investors First Quarter 2002 May 1, 2002
Slide 2: Forward Looking Information
Forward Looking Information This presentation contains forward looking statements with respect to the Company, including its business operations and strategy and financial performance and condition. Although Management believes that the expectations reflected in such forward looking statements are r
Slide 3: First Quarter 2002 - Highlights
First Quarter 2002 - Highlights • Earnings up 27 per cent from 1Q’01 (EPS up 23 per cent) • Keyport integration remains ahead of schedule and adding 4 cents to earnings • Continued solid momentum in core businesses • Improving sales at MFS, but mix shift has narrowed margins • Cost containment effor
Slide 4: Shareholders' Net Income
Shareholders’ Net Income ($ Millions) 1,273 1,234 S&P 500 (average) 1,154 1,115 1,132 253 256 10 212 215 243 202 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 4 Non-recurring gains
Slide 5: Financial Performance
Financial Performance EPS ROE 0.60 0.59 0.59 16.0% 0.02 0.55 0.57 0.51 0.50 14.0% 0.50 0.48 0.45 12.0% 0.40 0.35 10.0% Q 1/01 Q 2/01 Q 3/01 Q 4/01 Q 1/02 EPS 0.48 0.50 0.51 0.59 0.59 * ROE 12.3% 12.6% 12.5% 12.9% 13.2% Non-recurring gains * Excludes the impact of non-recurring gains. ROE including t
Slide 6: Premiums and Segregated Fund Deposits
Premiums and Segregated Fund Deposits ($ Billions) 5.2 4.8 4.5 4.0 3.2 Q 1/01 Q 2/01 Q 3/01 Q 4/01 Q 1/02 S egregated F und 1.9 1.5 1.0 1.5 1.5 D eposits P rem ium s 2.6 2.2 1.9 2.7 3.4 AS O P rem ium 0.3 0.3 0.3 0.3 0.3 E quivalents* * Represents in-force Administrative Services Only (ASO) premium
Slide 7: First Year Annualized Premiums
First Year Annualized Premiums ($ Millions) Individual Life Group Life & Health 202 170 130 129 130 116 128 74 66 53 Q 1/01 Q 2/01 Q 3/01 Q 4/01 Q 1/02 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 C ana da 39 23 26 21 43 Canada 13 16 14 18 15 -AS O 73 21 20 12 14 (1) U.S. 28 47 37 157 95 U.S . 51 77 64 86 64 Asia
Slide 8: Assets Under Management
Assets Under Management ($ Billions) 352 357 316 326 299 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Mutual Funds 152 158 137 153 152 Managed Funds 61 66 61 70 75 and Other Segregated Funds 46 46 43 49 49 General Funds 57 56 58 80 81 8
Slide 9: Total Net Fund Sales
Total Net Fund Sales Net New Sales Market and Currency ($ Billions) Movements ($ Billions) 13.1 26.4 8.1 3.8 5.2 4.1 -2.6 3.3 -26.6 -33.6 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Mutual Funds Gross New Sales 12.3 10.3 8.1 8.7 9.6 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Redemptions -6.9 -6.4 -7.3 -7.3 -8.2 Mutual Funds -
Slide 10: MFS - Net New Flows
MFS - Net New Flows NE T NE W F L O W S NE T NE W F L O W S (Non- P roprietary Channel) (O verall Industry ) Y e ar to Date Y e ar to Date Ma rc h 31, 2002 $US B illions Ma rc h 31, 2002 $US B illions A m erican F unds 13.8 V anguard 16.6 P IM CO F unds 3.6 A m erican F unds 13.8 O ppenheim erF unds
Slide 11: U.S. Annuity Sales
U.S. Annuity Sales (US$ Millions) 1,458 1,022 1,007 791 540 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Gross Sales Variable Annuities 1,022 791 540 714 1,084 Fixed Annuities - - - 238 314 Indexed Annuities - - - 55 60 Total Gross Sales 1,022 791 540 1,007 1,458 Net Sales Variable Annuities 487 283 10 54 276 Fixe
Slide 12: Revenue
Revenue ($ Millions) 5,413 4,885 4,333 3,945 3,526 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Fee Income 831 819 762 803 820 Investment Income 941 925 891 1,363 1,160 Life & Health Premiums 1,302 1,256 1,216 1,384 1,345 Annuity Premiums 1,259 945 657 1,335 2,088 12
Slide 13: Operating Expenses
Operating Expenses ($ Millions) Total (Non-MFS) MFS $400 366 40% 357 357 317 $350 298 $300 30% 280 60% 263 256 249 $200 20% 236 $225 $100 10% 40% $0 0% Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 $100 20% Sun Bank/SLCAM 15 13 15 6 - Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Keyport/IFMG - - - 25 39 Operating 280 263 236 249
Slide 14: Financial Strength
Financial Strength Debt to Total Capital* MCCSR 25.8% 299% 288% 284% 23.2% 20.2% 19.8% 190% 193% 19.3% Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q 1/01 Q 2/01 Q 3/01 Q 4/01 Q 1/02 * Includes SLEECS as part of debt capital. 14
Slide 15: Financial Results by Country
Financial Results by Country 15
Slide 16: Canadian Operations
Canadian Operations ($ Millions) 1,200 70 Net Income Revenue 800 50 400 0 30 Q 1/ 01 Q 2/ 01 Q 3/ 01 Q 4/ 01 Q 1/ 02 R e venue 1,030 932 896 997 982 N e t Incom e 49 55 51 57 61 ROE 13.6% 17.6% 16.5% 18.6% 20.0% 16
Slide 17: U.S. Annuity and Insurance Operations
U.S. Annuity and Insurance Operations ($ Millions) 130 3,000 Net Income Revenue 90 2,000 50 1,000 0 10 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Revenue 2,021 1,755 1,528 2,507 3,314 Net Income 50 27 55 90 98 ROE 15.8% 7.7% 15.1% 10.6% 8.7% 17
Slide 18: Keyport Integration Well Ahead of Schedule
Keyport Integration Well Ahead of Schedule • Today’s run rate at Keyport has fully achieved initially targeted savings of over US$20mm (pre-tax), C$21mm (after-tax) – Expect to improve run rate by an additonal US$10mm (pre-tax), or C$10 mm (after-tax) by 2002. – Remain committed to US$38mm (pre-tax)
Slide 19: MFS
MFS Assets Under Management Net Income* ($ Billions) 1,273 (average) 1,234 S&P 500 1,154 1,115 1,132 220 218 220 209 192 80 60 Net Income ($ Millions) 40 20 Q 1/01 Q 2/01 Q 3/01 Q 4/01 Q 1/02 0 143 149 129 146 145 Q 1/01 Q 2/01 Q 3/01 Q 4/01 Q 1/02 M utual Funds M anaged 66 71 63 72 75 N et Incom e
Slide 20: U.K. Operations
U.K. Operations ($ Millions) 600 60 Net Income Revenue 400 40 200 20 0 0 Q 1/ 01 Q 2/ 01 Q 3/ 01 Q 4/ 01 Q 1/ 02 R evenue 557 538 449 523 464 Net Incom e 39 50 37 54 42 ROE 13.9% 17.5% 12.2% 19.9% 20.1% 20
Slide 21: Asia Operations
Asia Operations ($ Millions) 150 25 20 Net Income 100 15 Revenue 10 50 5 0 0 -5 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Revenue 103 106 107 148 123 Net Income 8 10 3 (1) 2 ROE 7.5% 8.6% 2.5% -0.8% 1.6% 21
Slide 22: Embedded Value at December 31, 2001
Embedded Value at December 31, 2001 Robert Wilson, Vice-President and Actuary 22
Slide 23: Embedded Value Highlights
Embedded Value Highlights • Embedded Value (EV) increased to $11.3 billion at December 31, 2001 from $11.0 billion at December 31, 2000 • Value of new business (VNB) written during 2001 was $512 million, down from $563 million in 2000, because of reductions in variable annuity sales and MFS business
Slide 24: Sun Life Financial's Growth in Embedded Value
Sun Life Financial’s Growth in Embedded Value ($mm) 2001 2000 E m bedded V alue at January 1 11,025 9,640 ( 1) R eturn on in-force business E xpected growth 836 771 E xperience V ariances - stock (970) 0 ( 2) E xperience V ariances - other 167 0 33 771 ( 3) V alue of New B usiness 512 563 C apitalTr
Slide 25: Embedded Value Principal Assumptions
Embedded Value Principal Assumptions Canada United States United Kingdom Asia GAAP Basis Canadian Canadian Local Local Solvency Capital 150% MCCSR 150% MCCSR Local Solvency margin Local Solvency margin Discount Rate 9.25 8-9 8.5 8 - 17 Risk Margin 3.5 3.5 - 4.5 3.5 n/a Equity Return (%) 9.25 8-9 7.5
Slide 26: Embedded Value and Sensitivities
Embedded Value and Sensitivities E m bedded Value: Value of In- F orce Business $5.8 B Value of S hareholder Net W orth $5.5 B E m bedded Value at Decem ber 31, 2001 $11.3 B S ens itivities : E V at Decem ber 31, 2001 $11.3 B E V with R isk Discount R ate increased by 1% $10.7 B Value of New Busines
Slide 27: Sun Life Financial/Clarica Integration
Sun Life Financial/Clarica Integration Bob Astley, President & Chief Executive Officer, Clarica 27
Slide 28: Sun Life Financial / Clarica: Integration Timeline
Sun Life Financial / Clarica: Integration Timeline • Announcement - December 17, 2001 • Special Meeting - March 6, 2002 • Regulatory Process - began January 2002 – anticipate closing by end of May 2002 • Integration - Planning began January 2002 28
Slide 29: Sun Life Financial / Clarica: Integration Goals
Sun Life Financial / Clarica: Integration Goals • Integration substantially complete by December 2003 – Integration costs - $242mm (after-tax), excluding recommissioning costs • Achieve synergy target of $270mm (pre-tax) in 2004 • Ensure business momentum maintained • Build dynamic culture 29
Slide 30: Sun Life Financial / Clarica: Integration Decisions
Sun Life Financial / Clarica: Integration Decisions • Canadian Executive Team – Phased approach – Principled process • Brand Strategy – Clarica & Sun Life Financial brand names ! Clarica: retail markets & reinsurance ! Sun Life Financial: group & selected retail products/markets 30
Slide 31: Sun Life Financial / Clarica: Integration Decisions
Sun Life Financial / Clarica: Integration Decisions • U.S. Operations and Reinsurance • Investments: best of both • Group: Insurance, Retirement Services – Build on Sun Life Financial platform – Separate conversion from ongoing service – Growth model, building on #1 market share 31
Slide 32: Sun Life Financial / Clarica: Integration Decisions
Sun Life Financial / Clarica: Integration Decisions • Retail Distribution Model – Independent Career Advisor Channel – Wholesale Channel – Internet Channel 32
Slide 33: Sun Life Financial / Clarica: Integration Decisions
Sun Life Financial / Clarica: Integration Decisions • Sun Life Financial Advisors (1,225) – Meetings held to explore options – 2 distinct channels for advisors’ preference and business profile – April 30 deadline to make their choice – Recommissioning costs: $50-100mm (after-tax) • Clarica Sales For
Slide 34: Sun Life Financial / Clarica: Synergy Target
Sun Life Financial / Clarica: Synergy Target • Target - $270mm in 2004 – Corporate and U.S. functions: 15% – Information Technology: 25% – Business unit expense reductions: 60% 34
Slide 35: Sun Life Financial / Clarica: Value Creation
Sun Life Financial / Clarica: Value Creation • Deliver shareholder value: – Achieve synergy savings – Maintain organizational commitment – Maintain superior levels of customer service – Position for continued business growth 35
Slide 36: Sun Life Financial
\ e Sun Se. Life Financial