Sun Life Financial Reports Record 2007 and Solid Fourth Quarter Results
Feb 14, 2008
Annual operating earnings up 10%, earnings per share up 11%
Note to Editors: All figures shown in Canadian dollars unless otherwise
noted.
TORONTO, Feb. 14 /CNW/ - Sun Life Financial Inc.(1) (TSX/NYSE: SLF) today
announced operating earnings(2) of $560 million for the fourth quarter of
2007. Fully diluted operating earnings per share (EPS)(3) of $0.98 increased
4% over the fourth quarter of 2006. The strengthening of the Canadian dollar
relative to foreign currencies since the fourth quarter of 2006 reduced
operating earnings by $41 million or $0.07 per share. Excluding the impact of
currency, operating EPS would have increased by 12% over the same period last
year. Operating return on equity (ROE) was 14.3% for the quarter.
Operating earnings for the full year 2007 increased by 10% to a record
$2.3 billion. Operating EPS for the full year 2007 were $3.98, up 11% over
full year 2006 operating EPS of $3.58. Operating ROE was 14.3% for the year,
up 50 basis points from operating ROE of 13.8% in 2006. On a constant currency
basis, operating EPS were up 13% for the full year 2007.
"Despite a year characterized by economic uncertainty, we enjoyed record
financial results, reflecting Sun Life's strategy in action. Investments in
our distribution platform, product development and international reach fueled
sales, while brand building, select divestitures and a focused acquisition
strengthened Sun Life's competitive position even further," said Donald A.
Stewart, Chief Executive Officer. "Market volatility and uncertainty will
likely characterize the months ahead, although we believe that these economic
challenges may also offer opportunities to an organization with a strong risk
management culture, intense customer focus and innovative product solutions."
"Our 2007 EPS growth and ROE are strong despite volatile economic
conditions," said Richard P. McKenney, Chief Financial Officer. "The strength
of our balance sheet enables our continued pursuit of our growth objectives."
Operating earnings, operating EPS and operating ROE for the fourth
quarter of 2007 exclude after-tax charges to earnings of $3 million for
re-branding expenses in Canada and $2 million for integration costs in Sun
Life Financial's U.S. Employee Benefits Group. Including these charges, EPS
and ROE for the quarter were $0.97 and 14.2%, respectively.
Business Highlights
During the fourth quarter of 2007, the Company progressed on a number of
its strategic objectives and continued to deliver on its growth and
distribution expansion strategies in each of its markets.Sun Life Financial Canada (SLF Canada)
- Individual segregated fund sales in Canada, including sales of
SunWise Elite Plus with the guaranteed minimum withdrawal benefit
rider, increased by 37% to $426 million in the fourth quarter of 2007
over the same period last year.
- Group Retirement Services (GRS) sales increased by 76% over the
fourth quarter of 2006 including contracts with Canadian Tire, Suncor
Energy and Tenaris. Full year sales of $3.3 billion increased by 61%
over 2006. In addition, GRS retained $725 million of assets from
members leaving plans for the full year in 2007, an increase of 33%
over full year 2006.
- GRS ranked number one for the sixth consecutive year in Benefits
Canada magazine's December 2007 annual Defined Contribution (DC) Plan
Survey. With a market share of 32%, the annual survey also recognized
GRS as the fastest growing DC provider measured in dollars.
Sun Life Financial U.S. (SLF U.S.)
- The Employee Benefits Group (EBG) continued to successfully integrate
the acquisition made in the second quarter of 2007. Full year sales
of US$502 million were 30% ahead of full year 2006, while business
in-force increased to US$2.1 billion compared to US$1.2 billion at
the end of 2006, reflecting the impact of the acquisition.
- SLF U.S. continued to build upon the success of its Income ON
Demand(SM) product and enhanced distribution capabilities with gross
domestic variable annuity sales of US$718 million, an increase of 38%
over the fourth quarter of 2006. Full year 2007 gross domestic
variable annuity sales of US$2.8 billion exceeded full year 2006
sales by 65%.
- SLF U.S. established an unsecured long-term financing arrangement to
address U.S. statutory reserve requirements for certain universal
life policies under Actuarial Guideline 38 (also known as Regulation
AXXX).
MFS
- MFS's pre-tax operating margin ratio increased to 40% in the fourth
quarter of 2007 from 34% in the fourth quarter of 2006. The pre-tax
operating margin ratio for the full year 2007 increased to 36% from
29% for the full year in 2006.
- MFS's gross sales increased by 16% to US$43 billion for the full year
2007. Assets under management grew by 7% to US$200 billion from
US$187 billion one year ago.
- MFS's record of strong long-term performance in key asset classes was
recognized in the most recent Lipper/Barron's Fund Family Survey,
where MFS ranked 14th of 52 major fund families based on 10-year
performance.
Sun Life Financial Asia (SLF Asia)
- In China, Sun Life Everbright Life Insurance Company (Sun Life
Everbright) opened a branch in Shanghai, China's financial centre,
with sales beginning in January 2008. Sun Life Everbright, now
operating in 16 cities in China, continued its rapid geographic
expansion resulting in a second consecutive year of triple digit
sales growth.
- In India, Birla Sun Life Asset Management Company launched the Birla
Sun Life International Equity Fund, one of the most successful new
fund offerings in India in 2007, garnering $322 million in new funds.
Birla Sun Life Asset Management ranks fifth in terms of mutual fund
assets under management in India.
- Birla Sun Life Insurance Company (Birla Sun Life) sales grew by 106%
for the full year 2007, driven by increased investment in expansion.
Assets under management (AUM) increased by 89% in 2007 and now exceed
$1.6 billion. Driven by strong sales and superior fund performance
Birla Sun Life ranks among the leaders in AUM amongst private life
insurers.
Financial Highlights
- Operating ROE in the fourth quarter of 2007 increased 30 basis points
to 14.3% from operating ROE of 14.0% in the fourth quarter of 2006.
ROE of 14.2% increased 20 basis points from ROE of 14.0% in the
fourth quarter of 2006.
- Operating EPS of $0.98 for the quarter increased 4.3% compared to
operating EPS of $0.94 in the fourth quarter of 2006. EPS of
$0.97 for the quarter increased 3.2% compared to EPS of $0.94 in the
fourth quarter of 2006.
- Sun Life Financial declared $193 million in common shareholder
dividends during the quarter, representing a payout ratio of 34%.
Dividends for the full year 2007 were $752 million, an increase of
13% over 2006.
- Sun Life Financial repurchased approximately 2.5 million common
shares for $129 million during the fourth quarter of 2007, for a
total share buyback of $502 million in 2007.
- On January 30, 2008, Sun Life Financial completed a public offering
in Canada of $400 million principal amount of Series 2008-1
Subordinated Unsecured 5.59% Fixed/Floating Debentures due in 2023.
- On February 13, 2008, the Board of Directors approved an increase in
the quarterly dividend on common shares to 36 cents per share, up
from 34 cents per share paid previously. This represents an increase
of 12.5% over the past twelve months.
Earnings and Profitability
The financial results presented in this document are unaudited.
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FINANCIAL SUMMARY
Quarterly Results Full Year
---------------------------------- -------------
Q4/07 Q3/07 Q2/07 Q1/07 Q4/06 2007 2006
----- ----- ----- ----- ----- ---- ----
Common Shareholders'
Net Income ($mm) 555 577 590 497 545 2,219 2,089
Operating
Earnings ($mm) 560 583 593 558 545 2,294 2,091
Basic EPS ($) 0.98 1.02 1.03 0.87 0.95 3.90 3.62
Fully Diluted EPS ($) 0.97 1.00 1.02 0.86 0.94 3.85 3.58
Fully Diluted
Operating EPS($) 0.98 1.01 1.03 0.96 0.94 3.98 3.58
ROE (%) 14.2 14.7 14.5 12.0 14.0 13.8 13.8
Operating ROE(%) 14.3 14.8 14.6 13.5 14.0 14.3 13.8
Average Common Shares
Outstanding (mm) 566.2 567.8 570.1 572.0 572.6 569.0 576.8
Closing Common Shares
Outstanding (mm) 564.1 566.4 568.1 571.4 571.8 564.1 571.8
-------------------------------------------------------------------------Sun Life Financial reported common shareholders' net income of
$555 million for the quarter ended December 31, 2007, up $10 million from
$545 million in the fourth quarter of 2006. The strengthening of the Canadian
dollar relative to foreign currencies since the fourth quarter of 2006 reduced
quarterly earnings by $41 million. On a constant currency basis, earnings in
the fourth quarter of 2007 were up $51 million or 9%. The increase in common
shareholders' net income was primarily due to increased earnings in SLF U.S.'s
Individual Life business on reduced new business strain and the recovery of
previously recorded new business strain due to the implementation of a
financing structure to support statutory reserves for certain universal life
policies in the U.S. These gains were partially offset by lower earnings from
run-off reinsurance in Corporate Support related to updates in interest rate
and equity market assumptions.
ROE for the fourth quarter of 2007 was 14.2% compared with 14.0% for the
fourth quarter of 2006. The 20 basis point increase was primarily the result
of increased earnings. EPS of $0.97 were 3.2% higher than the $0.94 reported
in the prior year.
Operating EPS for the fourth quarter of 2007, were $0.98 for the quarter,
up 4.3% over operating EPS of $0.94 in the fourth quarter of 2006. Operating
ROE of 14.3% for the quarter was up from operating ROE of 14.0% in the fourth
quarter of 2006. Excluding the impact of currency, operating EPS would have
been $1.05, an increase of 12% over the fourth quarter of 2006.
Performance by Business Group
The Company currently manages its operations and reports its results in
five business segments: SLF Canada, SLF U.S., MFS Investment Management (MFS),
SLF Asia and Corporate. Additional details concerning the segments and the
purpose and use of the segmented information are outlined in Note 4 to Sun
Life Financial Inc.'s 2007 Consolidated Financial Statements, which are
prepared in accordance with Canadian generally accepted accounting principles
(GAAP). Where appropriate, information on a business segment has been
presented both in Canadian dollars and the segment's local currency to
facilitate the analysis of underlying business trends. ROE for the business
segments is a "Non-GAAP" financial measure as outlined under "Use of Non-GAAP
Financial Measures."SLF Canada
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Quarterly Results Full Year
---------------------------------- -------------
Q4/07 Q3/07 Q2/07 Q1/07 Q4/06 2007 2006
----- ----- ----- ----- ----- ---- ----
Common Shareholders'
Net Income ($mm)
Individual Insurance
& Investments 147 152 177 146 156 622 585
Group Benefits 76 59 69 51 60 255 247
Group Wealth 40 46 34 53 41 173 163
----- ----- ----- ----- ----- ---- ----
Total 263 257 280 250 257 1,050 995
ROE (%) 15.0 14.7 16.1 14.3 14.3 15.0 14.1
-------------------------------------------------------------------------
SLF Canada's earnings increased by $6 million or 2%, compared to the
fourth quarter of 2006. SLF Canada benefited from favourable morbidity,
partially offset by lower investment gains in Individual Insurance &
Investments and Group Wealth.
- Individual Insurance & Investments earnings for the fourth quarter of
2007 decreased by 6% from the fourth quarter of 2006 due to lower
investment gains and re-branding expenses of $3 million. The earnings
impact in the fourth quarter of 2007 from the federal tax rate
reduction was similar to the positive earnings impact from an Ontario
tax change that was recorded in the fourth quarter of 2006.
- Group Benefits earnings for the fourth quarter of 2007 increased by
27% over the fourth quarter of 2006 resulting primarily from more
favourable mortality and morbidity experience. The fourth quarter of
2006 benefited from the positive reserve impact of cash-flow
methodology refinements, which did not recur in the fourth quarter of
2007.
- Group Wealth earnings for the fourth quarter of 2007 decreased by
2% from the fourth quarter of 2006 as the favourable impact of asset
growth on fee income was more than offset by lower investment gains.
Full year earnings increased by $55 million, or 6%, over full year 2006
due to higher Individual Insurance & Investment and Group Wealth earnings from
the favourable impact of internal reinsurance transactions on actuarial
reserves and favourable morbidity experience in Group Benefits, partially
offset by the positive reserve impact from cash-flow methodology refinements
in 2006 and re-branding expenses of $10 million in 2007.
SLF U.S.
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Quarterly Results Full Year
---------------------------------- -------------
Q4/07 Q3/07 Q2/07 Q1/07 Q4/06 2007 2006
----- ----- ----- ----- ----- ---- ----
Common Shareholders'
Net Income (US$mm)
Annuities 57 99 80 80 61 316 298
Individual Life 84 41 37 5 9 167 50
Employee Benefits
Group 24 22 25 (1) 16 70 47
----- ----- ----- ----- ----- ---- ----
Total (US$mm) 165 162 142 84 86 553 395
Total (C$mm) 157 170 156 98 97 581 448
ROE (%) 15.3 14.7 14.0 9.4 9.7 13.5 11.5
-------------------------------------------------------------------------
Earnings for SLF U.S. increased C$60 million or 62% compared to the fourth
quarter of 2006. The appreciation of the Canadian dollar against the U.S.
dollar reduced earnings in SLF U.S. by C$25 million or 26% in the fourth
quarter of 2007 compared to the fourth quarter of 2006, and by C$32 million or
7% for the full year 2007.
In U.S. dollars, earnings were US$165 million, US$79 million or 92% higher
than in the fourth quarter of 2006. Earnings increased this quarter primarily
as a result of decreased new business strain on universal life sales and the
favourable impact of the implementation of the new financing arrangement for
AXXX reserves, partially offset by net reserve strengthening due to actuarial
assumption changes.
- Annuities earnings decreased by US$4 million or 7% compared to the
fourth quarter of 2006 as a result of the unfavourable impact of
wider credit spreads and lower earnings on surplus, partially offset
by favourable variable annuity hedge experience.
- Individual Life earnings increased by US$75 million compared to the
fourth quarter of 2006 due to decreased new business strain on
universal life sales and the favourable impact of the implementation
of the new financing arrangement for AXXX reserves including the
recovery of prior period new business strain. These positive factors
were partially offset by net reserve strengthening due to actuarial
assumption changes. The reserve strengthening related primarily to
lower lapse and interest rate assumptions partially offset by the
favourable impact of a reduction in mortality assumptions.
- EBG earnings increased by US$8 million, or 50% compared to the fourth
quarter of 2006 as a result of growth in the business, including the
impact of the acquisition in the second quarter of 2007. Earnings in
the fourth quarter of 2007 reflect net integration costs of
$2 million related to the acquisition.Full year 2007 earnings increased by US$158 million, or 40%, over the
prior year. Individual Life earnings increased due to decreased new business
strain on universal life sales and the favourable impact of the implementation
of the new financing arrangement for AXXX reserves, partially offset by
reserve strengthening as a result of actuarial assumption changes in the
fourth quarter. EBG earnings increased due to the growth in the business
including the impact of the acquisition made in the second quarter of 2007.
Annuity earnings benefited from the positive impact of equity market movements
and favourable variable annuity hedge experience, partially offset by the
unfavourable impact of wider credit spreads.MFS
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Quarterly Results Full Year
---------------------------------- -------------
Q4/07 Q3/07 Q2/07 Q1/07 Q4/06 2007 2006
----- ----- ----- ----- ----- ---- ----
Common Shareholders'
Net Income (US$mm) 74 65 62 61 62 262 206
Common Shareholders'
Net Income (C$mm) 73 68 68 72 71 281 234
Pre-tax Operating
Profit Margin Ratio(*) 40% 36% 34% 34% 34% 36% 29%
Average Net Assets (US$B) 203 199 200 189 182 198 172
Assets Under
Management (US$B) 200 204 202 192 187 200 187
Net Sales/(Redemptions)
(US$B) (3.2) (0.9) (0.1) 0.2 1.0 (4.0) 0.2
Market Movement (US$B) (1.5) 3.3 9.5 4.4 11.0 15.7 24.4
S&P 500 Index
(daily average) 1,495 1,489 1,497 1,425 1,389 1,477 1,311
S&P 500 Index (close) 1,468 1,527 1,503 1,421 1,418 1,468 1,418
(*) Pre-Tax Operating Profit Margin Ratio is a non-GAAP financial
measure. See "Use of Non-GAAP Financial Measures"
-------------------------------------------------------------------------
Earnings for MFS increased C$2 million, or 3%, compared to the fourth
quarter of 2006. The appreciation of the Canadian dollar against the U.S.
dollar reduced earnings for MFS by C$12 million in the fourth quarter of 2007
compared to the fourth quarter of 2006 and by C$16 million for the full year
2006.
In U.S. dollars, fourth quarter earnings were US$74 million, or 19%,
higher than in the fourth quarter of 2006 primarily due to growth in assets
under management and improved margins. Average net assets of US$203 billion in
the fourth quarter of 2007 increased 12% compared to the fourth quarter of
2006.
Full year 2007 earnings of US$262 million increased by US$56 million, or
27%, over the full year 2006 primarily due to increased assets under
management and improved margins.
Total assets under management at December 31, 2007 were US$200 billion, an
increase of US$13 billion over the full year 2006, driven by market
appreciation of US$16 billion, the acquisition of six closed-end funds
totaling AUM of US$1 billion, partially offset by net outflows of
US$4 billion.
SLF Asia
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Quarterly Results Full Year
---------------------------------- -------------
Q4/07 Q3/07 Q2/07 Q1/07 Q4/06 2007 2006
----- ----- ----- ----- ----- ---- ----
Common Shareholders'
Net Income ($mm) 38 30 17 38 33 123 101
ROE (%) 13.6 10.9 6.0 13.5 12.6 11.0 10.2
-------------------------------------------------------------------------Fourth quarter 2007 earnings of $38 million were up by $5 million, or
15%, from the fourth quarter of 2006 primarily due to improved earnings in the
Philippines from reserve releases as a result of expense management and
interest rate movement. These earnings increases were partially offset by
lower earnings in Hong Kong, where 2006 results were favourably impacted by
improved asset and liability management, and in India and China as a result of
increased investment in expansion.
Full year 2007 earnings of $123 million were up by $22 million compared
with the same period last year, primarily due to improved earnings in Hong
Kong from the effect of strong equity markets and business growth, expense and
interest rate reserve releases in the Philippines, and in Indonesia where
reserve strengthening negatively impacted 2006 results. These favourable
variances were partially offset by lower earnings in India and China from
increased investment in business growth.
SLF Asia sales(4) for the full year 2007 were up 77% in Canadian dollars
over the same period in 2006 driven by strong demand for investment linked
products. In local currency, 2007 sales were up 50% in Hong Kong and 39% in
Indonesia over 2006, with improved agent productivity. In India, sales grew by
106% over 2006 as the investment in direct sales force expansion continued,
reaching 85,000 advisors. In China, Sun Life Everbright opened up offices in
five new cities in 2007, including Shanghai, China's financial centre. Sun
Life Everbright sales increased by 108% over 2006.
Corporate
Corporate includes the results of Sun Life Financial U.K. (SLF U.K.), Sun
Life Financial Reinsurance (SLF Reinsurance) and Corporate Support, which
includes run-off reinsurance as well as investment income, expenses, capital
and other items not allocated to Sun Life Financial's other business groups.-------------------------------------------------------------------------
Quarterly Results Full Year
---------------------------------- -------------
Q4/07 Q3/07 Q2/07 Q1/07 Q4/06 2007 2006
----- ----- ----- ----- ----- ---- ----
Common Shareholders'
Net Income/(Loss) ($mm)
SLF U.K. 23 48 42 100 28 213 171
SLF Reinsurance 25 21 33 18 35 97 93
Corporate Support (24) (17) (6) (79) 24 (126) 47
----- ----- ----- ----- ----- ---- ----
Total 24 52 69 39 87 184 311
-------------------------------------------------------------------------Earnings in the fourth quarter 2007 decreased by $63 million compared to
the fourth quarter of 2006 due to the impact of negative financial market
movements and reserve strengthening in run-off reinsurance related to updates
in interest rate and equity market assumptions. In SLF Reinsurance, earnings
were lower from less favourable mortality compared to the fourth quarter of
2006 and adverse lapse experience.
Full year 2007 earnings of $184 million decreased by $127 million, or
41%, over the same period in 2006 due to the after tax charges to earnings
related to the intangible asset write-down for the retirement of the Clarica
brand, the premium paid to redeem US$600 million of 8.526% Partnership Capital
Securities and reserve strengthening in run-off reinsurance related to
interest rate and equity market assumptions.
Additional Financial Disclosure
Revenue
Under Canadian GAAP, revenues include regular premiums received on life
and health insurance policies as well as fixed annuity products. Net
investment income earned on general fund assets and fee income received for
services provided are also included. Revenue does not include segregated fund
deposits, mutual fund deposits or managed fund deposits.
Changes to Canadian investment accounting rules that became effective on
January 1, 2007, resulted in increased net investment income volatility
arising from quarterly fluctuation in the value of held-for-trading assets.
Changes in the value of these assets were largely offset by corresponding
changes in the value of actuarial liabilities.-------------------------------------------------------------------------
Quarterly Results Full Year
---------------------------------- --------------
Q4/07 Q3/07 Q2/07 Q1/07 Q4/06 2007 2006
----- ----- ----- ----- ----- ---- ----
Revenues ($mm)
SLF Canada 2,610 2,500 1,801 2,374 2,520 9,285 9,333
SLF U.S. 1,637 2,052 1,944 2,197 2,392 7,830 10,465
MFS 390 417 433 447 444 1,687 1,662
SLF Asia 294 286 182 215 297 977 1,022
Corporate 474 444 140 351 484 1,409 1,805
----- ----- ----- ----- ----- ----- -----
Total 5,405 5,699 4,500 5,584 6,137 21,188 24,287
-------------------------------------------------------------------------Revenues of $5.4 billion earned in the fourth quarter of 2007 decreased
by $732 million from the same period in 2006 due to lower annuity premiums of
$363 million and lower net investment income of $340 million. Excluding the
impact of currency from the appreciated Canadian dollar relative to other
foreign currencies, revenues were $5.8 billion in the fourth quarter of 2007
as compared to the $6.1 billion in the fourth quarter of 2006.
Premium revenues of $3.1 billion in the fourth quarter of 2007 were
$374 million less than the same quarter in 2006 with a reduction of $248
million from currency fluctuations. Life insurance premiums decreased by $181
million from the fourth quarter of 2006 as the stronger Canadian dollar caused
the unfavourable currency impact of $122 million. The remainder was primarily
attributable to lower SLF U.S. core universal life premiums on lower sales.
These decreases were significantly offset by the $170 million growth in health
insurance premiums over the fourth quarter of 2006. SLF U.S. Employee Benefits
Group contributed $133 million of the overall increase in health insurance
premiums, reflecting the favourable impact of the EBG acquisition in the
second quarter of 2007.
Fourth quarter 2007 premium revenue also included annuity premiums of
$733 million, which were lower by $363 million than during the same period in
2006, including the unfavourable currency impact of $74 million. SLF Canada's
annuity premiums decreased by $107 million from the fourth quarter of 2006,
with about half of the amount related to a drop in guaranteed fund
contributions. Annuity premiums in SLF U.S. declined by $241 million for the
fourth quarter 2007 compared to the similar period in 2006, mainly
attributable to lower fixed and fixed index annuity premiums.
Net investment income of $1.5 billion in the fourth quarter of 2007
declined by $340 million compared to the fourth quarter of 2006 due to the
impact of changes in Canadian investment accounting rules that became
effective on January 1, 2007 and a $69 million reduction from the impact of a
strengthened Canadian dollar.
Fee income of $760 million in the fourth quarter of 2007 fell by
$18 million from the same period in 2006. The increase in asset management
fees earned on higher average net asset levels was diminished by the $96
million unfavourable currency effect of changes in foreign exchange rates.
Actuarial liabilities decreased by $379 million in the fourth quarter of
2007 compared to an increase of $492 million in the fourth quarter of 2006.
The fluctuation of $871 million mostly related to the impact of changes in
Canadian investment accounting rules previously mentioned and lower fourth
quarter 2007 premiums than for the comparable period in 2006.
Revenues of $21.2 billion for the year ended December 31, 2007, decreased
by $3.1 billion compared to 2006 primarily due to lower annuity premiums and
lower net investment income. Excluding the impact of currency from the
appreciation of the Canadian dollar relative to other foreign currencies,
revenues were $21.8 billion in 2007 as compared to the $24.3 billion in 2006.
Annuity premiums of $3.5 billion for the year ended December 31, 2007
declined by $1.9 billion from 2006 as SLF U.S. issued US$1.8 billion in
medium-term notes in the second and third quarters of 2006, which were not
repeated in 2007. Net investment income for the year ended December 31, 2007,
dropped by $1.8 billion from 2006 due to a decrease in the value of
held-for-trading assets, with a corresponding decrease in actuarial
liabilities. Higher health insurance premiums of $523 million over 2006, which
included the favourable impact of the EBG acquisition that occurred in the
second quarter of 2007 and business growth in SLF Canada Group Benefits
somewhat diminished these decreases.
Assets Under Management (AUM)
AUM were $425.3 billion as at December 31, 2007 compared to
$426.7 billion as at September 30, 2007, and $441.4 billion as at December 31,
2006. The decrease of $1.4 billion between September 30, 2007 and December 31,
2007 resulted primarily from:(i) unfavourable market movements of $1.9 billion, and
(ii) net redemptions of mutual, managed and segregated funds of
$1.6 billion; partially offset by
(iii) an increase of $1.2 billion from changes in currency exchange
rates relative to the prior period.
AUM decreased $16.1 billion between December 31, 2006 and December 31,
2007. The decrease primarily reflected:
(i) a decrease of $48.0 billion from currency fluctuations; partly
moderated by
(ii) market performance that generated $21.6 billion in additional
value;
(iii) net sales of mutual, managed and segregated funds of $3.3 billion;
(iv) an increase of $4.2 billion in general fund assets on January 1,
2007 related to the changes to Canadian investment accounting
rules; and
(v) an increase of $1.1 billion in mutual funds during June 2007 due
to the acquisition of six closed-end funds in MFS.Changes in the Balance Sheet and Shareholders' Equity
Total general fund assets were $114.3 billion as at December 31, 2007,
compared to $117.8 billion as at December 31, 2006. The strengthening of the
Canadian dollar against other foreign currencies caused an unfavourable
currency effect of $9.4 billion. This decline was partly offset by an increase
of $4.2 billion in general fund assets on January 1, 2007 that arose from the
changes to Canadian investment accounting rules. Continued business growth,
primarily in SLF Canada and SLF U.S., including the EBG acquisition at the end
of May 2007 also contributed to the growth of general fund assets during 2007.
Actuarial and other policy liabilities of $79.8 billion as at December
31, 2007 decreased by $1.2 billion compared to December 31, 2006. The
reduction of $6.5 billion from currency fluctuations were offset by the
$7.2 billion increase on January 1, 2007 related to the change in value of
held-for-trading assets, the reversal of deferred net realized gains and other
fair value adjustments resulting from changes to Canadian investment
accounting rules.
Shareholders' equity, including Sun Life Financial Inc.'s preferred share
capital and accumulated other comprehensive income, increased by $30 million
from $17.1 billion as at December 31, 2006. Shareholders' net income, before
preferred share dividends of $69 million, contributed $2.3 billion to
additional equity and the issuance of Class A Non-cumulative Preferred Shares,
Series 5 added $245 million, net of expenses. The adjustments to shareholders'
equity related to the implementation of changes to Canadian investment
accounting rules on January 1, 2007 contributed $545 million and were
partially offset by $290 million in other comprehensive income due to loss
recognition on available-for-sale assets. Dividend payments on common shares
of $752 million and $446 million for the cost of common shares repurchased and
cancelled, net of stock-based compensation costs (including stock options
exercised) also diminished the increases. Currency fluctuations further
reduced shareholders' equity by $1.5 billion.
Shareholders' equity, including Sun Life Financial Inc.'s preferred share
capital and accumulated other comprehensive income, increased from
$16.9 billion as at September 30, 2007 to $17.1 billion as at December 31,
2007. Shareholders' net income, before preferred share dividends of
$17 million, generated $572 million of additional equity. Dividend payments on
common shares of $193 million and $122 million for the cost of common shares
repurchased and cancelled, net of stock-based compensation costs (including
stock options exercised) diminished shareholders' equity. The impact of
changes to Canadian investment accounting rules from January 1, 2007 also
reduced shareholders' equity during the fourth quarter by $32 million due to
losses on available-for-sale assets in other comprehensive income. Currency
fluctuations further decreased shareholders' equity by $15 million.
Quarterly Financial Results
The following table provides a summary of Sun Life Financial's results
for the eight most recently completed quarters.-------------------------------------------------------------------------
QUARTERLY FINANCIAL SUMMARY
Unaudited
-------------------------------------------------------
Quarterly Results
-------------------------------------------------------
Q4/07 Q3/07 Q2/07 Q1/07 Q4/06 Q3/06 Q2/06 Q1/06
------ ------ ------ ------ ------ ------ ------ ------
Common
Shareholders'
Net Income ($mm) 555 577 590 497 545 541 512 491
Operating
Earnings($mm) 560 583 593 558 545 541 512 493
Basic EPS ($) 0.98 1.02 1.03 0.87 0.95 0.94 0.88 0.84
Fully Diluted
EPS ($) 0.97 1.00 1.02 0.86 0.94 0.93 0.88 0.84
Fully Diluted
Operating
EPS ($) 0.98 1.01 1.03 0.96 0.94 0.93 0.88 0.84
Total Revenue
($mm) 5,405 5,699 4,500 5,584 6,137 6,604 6,231 5,315
Total AUM ($B) 425 427 440 451 442 405 391 407
-------------------------------------------------------------------------Enterprise Risk Management
Sun Life Financial deploys an enterprise risk management framework to
assist in identifying, monitoring and managing the risks to which it is
exposed. The major categories of risk are strategic risk, market risk,
interest rate risk, credit risk, insurance risk and operational risk.
Operational risk is a broad category that includes legal and regulatory risks,
people risks and systems and processing risks.
Through its ongoing enterprise risk management procedures, Sun Life
Financial reviews the risk factors identified in the framework and reports to
senior management and to the Risk Review Committee of the Board at least
quarterly. Sun Life Financial's enterprise risk management procedures and risk
factors are described in Sun Life Financial Inc.'s Management's Discussion and
Analysis (MD&A) and Annual Information Form (AIF) for the year ended
December 31, 2007, copies of which are available on the Company's website at
www.sunlife.com and at www.sedar.com and www.sec.gov. Interest rate and equity
market sensitivities are disclosed in the annual MD&A, but evolve as market
levels change, new business is added or as management actions are taken.
Regulatory and Legal Matters
Information concerning regulatory and legal matters is provided in SLF
Inc.'s annual and interim consolidated financial statements, MD&A and AIF.
Use of Non-GAAP Financial Measures
Management evaluates the Company's performance on the basis of financial
measures prepared in accordance with GAAP, including earnings, fully diluted
EPS and ROE. Management also measures the Company's performance based on
certain non-GAAP measures, including operating earnings, and financial
measures based on operating earnings, including operating EPS and operating
ROE, that exclude certain items that are not operational or ongoing in nature.
Management also uses financial performance measures that are prepared on a
constant currency basis, which exclude the impact of currency fluctuations.
Management measures the performance of the Company's business segments using
ROE that is based on an allocation of common equity or risk capital to the
business segments, using assumptions, judgments and methodologies that are
regularly reviewed and revised by management. Management also monitors MFS's
pre-tax operating profit margin ratio, the denominator of which excludes
certain investment income and includes certain commission expenses, as a means
of measuring the underlying profitability of MFS. Embedded value and value of
new business are used to measure overall profitability. Embedded value and
value of new business are based on actuarial amounts for which there are no
comparable amounts under GAAP. Management believes that these non-GAAP
financial measures provide information useful to investors in understanding
the Company's performance and facilitate the comparison of the quarterly and
full-year results of the Company's ongoing operations. These non-GAAP
financial measures do not have any standardized meaning and may not be
comparable with similar measures used by other companies. They should not be
viewed as an alternative to measures of financial performance determined in
accordance with GAAP. Additional information concerning these non-GAAP
financial measures and reconciliations to GAAP measures are included in Sun
Life Financial Inc.'s annual and interim MD&A and the Supplementary Financial
Information packages that are available in the Investor Relations - Financial
Publications section of Sun Life Financial's website, www.sunlife.com.
The following table sets out the items that have been excluded from the
Company's operating earnings in the eight most recently completed quarters and
provides a reconciliation to the Company's earnings based on Canadian GAAP.-------------------------------------------------------------------------
RECONCILIATION OF OPERATING EARNINGS
Unaudited - in millions of Canadian dollars
-------------------------------------------------------
Quarterly Results
-------------------------------------------------------
Q4/07 Q3/07 Q2/07 Q1/07 Q4/06 Q3/06 Q2/06 Q1/06
------ ------ ------ ------ ------ ------ ------ ------
Reported Earnings
(GAAP-based) 555 577 590 497 545 541 512 491
After-tax gain
(loss) on
special items
Clarica brand
write-off - - - (43) - - - -
Re-branding
expenses in
Canada (3) (5) (2) - - - - -
EBG integration
costs (2) (1) (1) - - - - -
Hong Kong
Integration
Costs - - - - - - - (2)
Premium to redeem
Partnership
Capital
Securities - - - (18) - - - -
-------------------------------------------------------
Total special
items (5) (6) (3) (61) - - - (2)
-------------------------------------------------------
Operating
Earnings 560 583 593 558 545 541 512 493
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------------------------Forward-Looking Statements
Certain statements in this document, 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", "plans", "believes", "estimates"
or similar expressions, are forward-looking statements within the meaning of
securities laws. Forward-looking statements include the information concerning
possible or assumed future results of operations of the Company. These
statements represent the Company's expectations, estimates and projections
regarding future events and are not historical facts. Forward-looking
statements are not guarantees of future performance and involve certain risks
and uncertainties that are difficult to predict. Future results and
stockholder value may differ materially from those expressed in these
forward-looking statements due to, among other factors, the matters set out
under "Risk Factors" in the Company's AIF and the factors detailed in its
other filings with Canadian and U.S. securities regulators, including its
annual and interim MD&A, and financial statements, which are available for
review at www.sedar.com and www.sec.gov.
Factors that could cause actual results to differ materially from
expectations include, but are not limited to, the performance of equity
markets; interest rate fluctuations; investment losses and defaults; the cost,
effectiveness and availability of risk-mitigating hedging programs; the credit
worthiness of guarantors and counterparties to derivatives; risks related to
market liquidity; changes in legislation and regulations including tax laws;
regulatory investigations and proceedings and private legal proceedings and
class actions relating to practices in the mutual fund, insurance, annuity and
financial product distribution industries; risks relating to product design
and pricing; insurance risks including mortality, morbidity, longevity and
policy holder behaviour including the occurrence of natural or man-made
disasters, pandemic diseases and acts of terrorism; risks relating to
operations in Asia including risks relating to joint ventures; currency
exchange rate fluctuations; the impact of competition; risks relating to
financial modeling errors; business continuity risks; failure of information
systems and Internet enabled technology; breaches of computer security and
privacy; the availability, cost and effectiveness of reinsurance; the
inability to maintain strong distribution channels and risks relating to
market conduct by intermediaries and agents; dependence on third party
relationships including outsourcing arrangements; downgrades in financial
strength or credit ratings; the ability to successfully complete and integrate
acquisitions; the ability to attract and retain employees; and the performance
of the Company's investments and investment portfolios managed for clients
such as segregated and mutual funds. The Company does not undertake any
obligation to update or revise these forward-looking statements to reflect
events or circumstances after the date of this report or to reflect the
occurrence of unanticipated events, except as required by law.
Analysts' Conference Call
The Company's fourth quarter 2007 financial results will be reviewed at a
conference call today at 11 a.m. ET. To listen to the call via live audio
webcast and to view the presentation slides, please visit our website and
click the Q4 Results link from the homepage 10 minutes prior to the start of
the presentation to access the webcast, along with related information. The
webcast and presentation will be archived on our website following the event.
Sun Life Financial
Sun Life Financial is a leading international financial services
organization providing a diverse range of protection and wealth accumulation
products and services to individuals and corporate customers. Chartered in
1865, Sun Life Financial and its partners today have operations in key markets
worldwide, including Canada, the United States, the United Kingdom, Ireland,
Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of
December 31, 2007, the Sun Life Financial group of companies had total assets
under management of $425 billion.
Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and
Philippine (PSE) stock exchanges under ticker symbol SLF.-------------------------
(1) Together with its subsidiaries and joint ventures "the Company" or
"Sun Life Financial."
(2) Operating earnings and other financial information based on
operating earnings such as operating earnings per share and
operating return on equity are non-GAAP financial measures. For
additional information see "Use of Non-GAAP Financial Measures."
(3) All EPS measures in this document refer to fully diluted EPS,
unless otherwise stated.
(4) Includes 100% of the sales from the Company's joint ventures in
India and China.
For further information:
For further information: Media Relations Contact: Susan Jantzi, Senior Manager, External Communications & Corporate Affairs, Tel: (519) 888-3160, susan.jantzi@sunlife.com; Investor Relations Contact: Paul Petrelli, Vice-President, Investor Relations, Tel: (416) 204-8163, investor.relations@sunlife.com