Sun Life Financial reports fourth quarter and 2008 results
Feb 12, 2009
Net income of $785 million for 2008, $129 million in Q4
Note to Editors: All figures shown in Canadian dollars unless otherwise
noted.TORONTO, Feb. 12 /CNW/ - Sun Life Financial Inc.(1) (TSX/NYSE: SLF)
reported net income of $129 million for the fourth quarter of 2008, compared
with net income of $555 million in the same period last year. Fully diluted
earnings per share (EPS)(2) were $0.23 compared to $0.97 in the fourth quarter
of 2007, a decrease of $0.74. Excluding the after-tax gain of $825 million
related to the sale of the Company's 37% interest in CI Financial Income Fund
("CI Financial"), the Company reported an operating loss of $696 million or
$1.25 per share in the fourth quarter of 2008 compared to net operating income
of $560 million or $0.98 per share in the fourth quarter of 2007.
Fourth quarter results were most significantly impacted by the continued
deterioration in global capital markets. Results this quarter include $682
million in charges related to equity markets, $365 million from asset
impairments, credit-related write-downs and spread widening, as well as $164
million from changes to asset default assumptions in anticipation of higher
future credit-related losses.
Earnings for the full year 2008 were $785 million, compared to $2.2
billion for the full year 2007. The operating loss for the full year 2008,
which excludes the gain related to the sale of the Company's interest in CI
Financial, was $40 million, compared with operating earnings of $2.3 billion
in the same period last year.
With a Minimum Continuing Capital Surplus Requirement (MCCSR) ratio of
232% for Sun Life Assurance Company of Canada (Sun Life Assurance), the
Company ended the year in a solid financial position and continues to maintain
capital levels well in excess of regulatory requirements.
"The fourth quarter concluded an extremely challenging year across the
global financial services sector. While Sun Life's overall financial returns
are very disappointing, reflecting negative equity markets and a stressed
credit environment, our balance sheet remains strong and well diversified,"
said Donald A. Stewart, Chief Executive Officer. "We are well positioned to
win customers and pursue opportunities in 2009."
"We remain financially disciplined and focused on performance. We will
continue to prioritize expenses and increase our focus on costs in 2009.
Although this will be a challenging year, we are continuing to take action to
improve results for our shareholders while maintaining a strong value
proposition for our customers. Our strong capital base provides added
protection from market volatility, as well as enhances our ability to make
acquisitions and expand our business. Furthermore, our financial position
enables us to maintain our current level of dividends."Earnings and Profitability
FINANCIAL SUMMARY
Quarterly Results Year to Date
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Q4'08 Q3'08 Q2'08 Q1'08 Q4'07 2008 2007
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Common shareholders'
net income (loss)
($millions) 129 (396) 519 533 555 785 2,219
Operating earnings
(loss)(3) ($millions) (696) (396) 519 533 560 (40) 2,294
Basic earnings (loss)
per common share
(EPS) ($) 0.23 (0.71) 0.92 0.95 0.98 1.40 3.90
Fully diluted EPS ($) 0.23 (0.71) 0.91 0.93 0.97 1.37 3.85
Fully diluted operating
EPS(3) ($) (1.25) (0.71) 0.91 0.93 0.98 (0.10) 3.98
Return on common equity
(ROE) (%) 3.3 (10.2) 12.9 13.4 14.2 5.1 13.8
Operating ROE(3) (17.9) (10.2) 12.9 13.4 14.3 (0.3) 14.3
Average common shares
outstanding (millions) 559.7 559.7 561.6 563.8 566.2 561.2 569.0
Closing common shares
outstanding (millions) 559.7 559.7 559.9 561.9 564.1 559.7 564.1
-------------------------------------------------------------------------Sun Life Financial Inc. reported net income attributable to common
shareholders of $129 million for the quarter ended December 31, 2008, compared
with net income of $555 million in the fourth quarter of 2007. The Company
incurred operating losses of $696 million for the fourth quarter of 2008
compared with operating earnings of $560 million in the fourth quarter of
2007.
Net income of $129 million for the fourth quarter of 2008 was driven by
an after-tax gain of $825 million from the Company's sale of its interest in
CI Financial. This was offset by a significant decline in equity markets,
asset impairments, credit-related write-downs and spread widening, changes to
asset default assumptions in anticipation of higher future credit-related
losses, charges taken in the Company's life retrocession reinsurance business
related to the strengthening of actuarial reserves to reflect more
comprehensive information on potential future premiums and claims as well as
the weakening of the Canadian dollar relative to foreign currencies from
losses in business segments in which the U.S. dollar is the primary currency.
The Company's hedging program helped offset some of the losses related to
volatility in capital markets during the quarter.Q4 2008 - CAPITAL MARKET IMPACT ON EARNINGS
($ millions, after-tax)
-------------------------------------------------------------------------
Asset impairments &
credit-related losses Equity markets
-------------------------------------------------------------------------
Write-downs 155 Impact of current period fees & 249
& Realized Losses present value of future fees
due to lower account values
(unhedged)
Downgrades 55 Increase in reserves for 349
segregated fund guarantee
benefits & other reserve
changes (net of hedging)
Spread widening 155 Increase in reserves for 84
universal life benefits
(unhedged)
Strengthening of Reserves
for Asset Default
Assumptions 164
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Total 529 Total 682
-------------------------------------------------------------------------Excluding the capital market impacts described in the table above and the
gain related to the sale of Company's interest in CI Financial, earnings for
the fourth quarter of 2008 were $515 million or $0.92 per share.
ROE for the fourth quarter of 2008 was 3.3% compared with 14.2% for the
fourth quarter of 2007. The decline in ROE resulted from earnings per share of
$0.23, which was lower than EPS of $0.97 reported in the prior year.
The Company had an operating loss per share of $1.25 in the fourth
quarter of 2008, compared with operating EPS of $0.98 in the fourth quarter of
2007, a decline of $2.23 per share. Operating ROE for the quarter was negative
17.9%, compared with operating ROE of 14.3% in the fourth quarter of 2007.
Common shareholders net income for the twelve months ended December 31,
2008 was $785 million, compared to net income of $2.2 billion for the same
period in 2007. Earnings for the full-year 2008 were affected by
credit-related losses, including write-downs related to the Company's holdings
in Lehman Brothers and Washington Mutual, a steep decline in equity markets,
the impact of wider credit spreads, changes to asset default assumptions in
anticipation of higher future credit-related losses and increased investment
in growth in SLF Asia as well as the unfavourable impact of claims, higher
future lapse assumptions and the strengthening of actuarial reserves to
reflect more comprehensive information on potential future premiums and claims
in the Company's life retrocession reinsurance business. The Company's hedging
program helped offset some of the losses related to the significant decline in
capital markets during 2008. During 2008, the Company also divested its 37%
interest in CI Financial, resulting in an after-tax gain of $825 million.
Results for the full-year 2007 included $61 million in after-tax charges to
earnings related to the intangible asset write-down for the retirement of the
Clarica brand and for the premium paid to redeem Partnership Capital
Securities in Corporate Support.
Impact of Currency
During the fourth quarter of 2008 the Canadian dollar depreciated
markedly relative to the U.S. dollar. In general, the Company's net income
benefits from a weakening Canadian dollar as net income from the Company's
international operations is translated back to Canadian dollars. However in
the fourth quarter of 2008, due to losses incurred in some of the Company's
businesses which operate in U.S. dollars, the Company's overall net income was
reduced by $153 million from the weakening of the Canadian dollar relative to
the fourth quarter of 2007. On a constant currency basis, earnings for the
full year 2008 were reduced by $214 million from the weakening of the Canadian
dollar relative to the same period last year.
Like net income, assets under management (AUM) are also affected by
changes in the value of the Canadian dollar. The weakening of the Canadian
dollar results in an increase in reported AUM as assets from the Company's
international operations are translated back to Canadian dollars. AUM of
$381.1 billion as at December 31, 2008 was down from $388.7 billion from
September 30, 2008 and $425.3 billion from December 31, 2007. Despite the
decline in AUM, the weakening of the Canadian dollar had a positive impact on
AUM of $35.4 billion compared with AUM as at September 30, 2008, and $50.3
billion compared with AUM as at December 31, 2007.
Performance by Business Group
The Company manages its operations and reports its results in five
business segments: Sun Life Financial Canada (SLF Canada), Sun Life Financial
U.S. (SLF U.S.), MFS Investment Management (MFS), Sun Life Financial Asia (SLF
Asia) and Corporate. Additional detail concerning the segments is outlined in
Note 4 to Sun Life Financial Inc.'s 2008 Consolidated Financial Statements,
which are prepared in accordance with Canadian generally accepted accounting
principles (GAAP). Where appropriate, information on a business segment is
presented both in Canadian dollars and the segment's local currency to
facilitate the analysis of underlying business trends. ROE for the business
segments is a "non-GAAP" financial measure as outlined under "Use of Non-GAAP
Financial Measures."SLF Canada
Quarterly results Full Year
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Q4'08 Q3'08 Q2'08 Q1'08 Q4'07 2008 2007
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Common shareholders'
net income
(loss) ($ millions)
Individual Insurance
& Investments (130) 28 177 149 147 224 622
Group Benefits 74 81 80 49 76 284 255
Group Wealth 1 48 39 49 40 137 173
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Total (55) 157 296 247 263 645 1,050
ROE (%) (3.3) 8.8 16.7 14.1 15.0 9.5 15.0
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SLF Canada had a loss of $55 million in the fourth quarter of 2008
compared to earnings of $263 million in the prior year, a decrease of $318
million. This decrease was mainly attributable to charges of $211 million from
the impact of declining equity markets, $75 million from declining interest
rates, and $48 million related to asset default assumptions in anticipation of
higher future credit-related losses. This decrease was partly offset by the
favourable impact of trading gains arising from asset liability management
activities as well as the impact of more favourable morbidity experience.
- Individual Insurance & Investments incurred a loss of $130 million
for the fourth quarter of 2008 compared to earnings of $147 million
in the fourth quarter of 2007. Earnings in the fourth quarter of 2008
were unfavourably impacted by reserve increases of $194 million net
of hedge impacts related to equity markets. Fourth quarter results
were also negatively impacted by reserve increases of $74 million net
of hedge impacts from declining interest rates, and changes to asset
default assumptions. The decline in earnings was partially offset by
the favourable impact of trading gains arising from asset liability
management activities in Individual Insurance.
- Group Benefits earnings for the fourth quarter of 2008 were
relatively unchanged compared to the fourth quarter of 2007 as
changes to asset default assumptions were largely offset by the
impact of more favourable morbidity experience.
- Group Wealth earnings for the fourth quarter of 2008 were $1 million
compared to $40 million in the fourth quarter of 2007. Earnings
decreased primarily from changes to asset default assumptions, the
unfavourable impact of declining equity markets on fee income and
lower investment gains.Full year earnings for SLF Canada were $645 million compared to $1,050
million for the full year 2007. The decrease in earnings was mainly
attributable to the impact of declining equity markets, decreased interest
rates, changes to asset default assumptions and higher asset impairments and
other credit-related losses recorded in 2008. This decrease was partially
offset by the impact of more favourable morbidity experience and favourable
asset reinvestment gains from wider credit spreads in 2008.
Despite volatile economic conditions and less favourable financial
results in 2008, SLF Canada's underlying core businesses continued to grow. In
Individual Insurance and Investments, segregated fund sales in Canada,
including sales of SunWise Elite Plus with the guaranteed minimum withdrawal
benefit rider, increased by 58% in the fourth quarter of 2008 over the same
period last year and by 44% for the full year 2008 over 2007. In Group Wealth,
Group Retirement Services (GRS) ranked number one for the seventh consecutive
year in Benefits Canada magazine's December 2008 annual Defined Contribution
(DC) Plan Survey. With a market share of 34%, the annual survey also
recognized GRS as the fastest growing DC provider measured in dollars.SLF U.S.
Quarterly results Full Year
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Q4'08 Q3'08 Q2'08 Q1'08 Q4'07 2008 2007
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Common shareholders'
net income (loss)
(US$ millions)
Annuities (672) (456) 22 75 57 (1,031) 316
Individual Insurance 95 (76) 35 19 84 73 167
Employee Benefits
Group 1 30 25 19 24 75 70
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Total
(US$ millions) (576) (502) 82 113 165 (883) 553
Total
(C$ millions) (679) (533) 83 113 157 (1,016) 581
-------------------------------------------------------------------------
ROE (%) n/m n/m 7.8 10.7 15.3 n/m 13.5
-------------------------------------------------------------------------
SLF U.S. had a loss of C$679 million in the fourth quarter of 2008
compared to earnings of C$157 million in the prior year, a decrease of C$836
million. The depreciation of the Canadian dollar against the U.S. dollar
increased the reported loss in SLF U.S. by C$129 million in the fourth quarter
of 2008 compared to the fourth quarter of 2007, and increased full year
reported losses by C$152 million.
In U.S. dollars, earnings decreased by US$741 million compared to the
fourth quarter of 2007 primarily as a result of the impact of declining equity
markets and the negative impact of credit markets.
- Annuities incurred a loss of US$672 million compared to earnings of
US$57 million in the fourth quarter of 2007 primarily as a result of
an increase in annuity reserves required by the impact of declining
equity markets of US$340 million, the negative impact of credit
spreads and credit-related allowances of US$140 million,
credit-related losses, including impairments of US$75 million and
changes to asset default assumptions in anticipation of higher future
credit-related losses of US$70 million. The increase in variable
annuity reserves was driven by a decline in variable annuity account
values, which, although partially offset by the benefits of equity
and interest rate hedges, increased the value of guaranteed benefits
and lowered the expected stream of future fee income.
- Individual Insurance earnings for the fourth quarter of 2008 were
US$95 million compared to US$84 million in the fourth quarter of
2007. Earnings increased primarily from the gain on sale of interest
rate derivatives resulting from a decrease in interest rates and swap
yields partially offset by higher credit related allowances,
including impairments, as well as reserve strengthening for changes
in lapse assumptions. Fourth quarter 2007 results included a benefit
from the implementation of a financing arrangement for AXXX reserves.
- Employee Benefits Group (EBG) earnings were US$1 million compared to
US$24 million in the fourth quarter of 2007. Earnings were lower as a
result of the impact of declining interest rates on actuarial
reserves and credit-related losses, including impairments.The full year 2008 loss for SLF U.S. of US$883 million compared to
earnings of US$553 million for the same period in 2007. Losses incurred in
2008 were due to the negative impact of declining equity markets on actuarial
reserves for the annuity block, credit-related losses including impairments,
and the negative impact of wider credit spreads and credit-related allowances
on actuarial reserves. The negative impact of these amounts was partially
offset by positive variable annuity hedge experience, the gain on sale of
interest rate derivatives in Individual Insurance and the favorable impact of
the EBG acquisition in the second quarter of 2007.
Market volatility and economic instability led to reduced sales of
variable annuities in the fourth quarter of 2008, where sales fell by 38%
compared to the same period last year. Sales in Individual Insurance increased
by US$27 million over last year on higher core sales, and EBG sales of US$323
million were a record high for the business.MFS
Quarterly Results Full Year
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Q4'08 Q3'08 Q2'08 Q1'08 Q4'07 2008 2007
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Common shareholders'
net income
(US$ millions) 25 47 55 59 74 186 262
Common shareholders'
net income
(C$ millions) 30 49 56 59 73 194 281
Pre-tax operating
profit margin ratio(4) 21% 29% 34% 35% 40% 30% 36%
Average net assets
(US$ billions) 133 176 191 187 203 172 198
Assets under management
(US$ billions) 134 162 183 184 200 134 200
Net sales (redemptions)
(US$ billions) (2.1) (2.0) 1.0 (2.7) (3.2) (5.8) (4.0)
Market movement
(US$ billions) (25.5) (19.4) (2.0) (12.5) (1.5) (59.4) 15.7
S&P 500 Index
(daily average) 910 1,255 1,371 1,349 1,495 1,221 1,477
-------------------------------------------------------------------------Earnings for MFS decreased C$43 million compared to the fourth quarter of
2007. The movement of the Canadian dollar against the U.S. dollar increased
earnings for MFS by C$6 million in the fourth quarter of 2008 compared to the
fourth quarter of 2007, and reduced full year earnings by C$9 million.
In U.S. dollars, fourth quarter earnings were US$25 million compared to
US$74 million in the fourth quarter of 2007. The decrease in earnings was
primarily due to lower average net assets as a result of the decline in global
financial markets.
Full year 2008 earnings were US$186 million compared to US$262 million
for the same period in 2007. The decrease in earnings was primarily due to
lower average net assets as a result of a decline in global financial markets.
Total assets under management at December 31, 2008 were US$134 billion, a
decrease of US$28 billion compared to September 30, 2008, driven by market
depreciation of US$25.5 billion, and net redemptions of US$2.1 billion.
Relative investment fund performance at MFS remained strong with 86%, 89%
and 84% of U.S. retail fund assets ranked in the top half of their Lipper
Category Average over 3, 5 and 10 years, respectively, as of December 31,
2008. In addition, MFS ranked 4th overall out of 59 firms for 1 year
asset-weighted returns in the 2008 Lipper/Barron's Best Fund Family Survey.
MFS also had overall rankings of 4th for 5 years and 5th for 10 years in the
survey. MFS was the only fund family mentioned as having a top 5 or better
finish for 1, 5 and 10 years in this year's rankings.SLF Asia
Quarterly results Full Year
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Q4'08 Q3'08 Q2'08 Q1'08 Q4'07 2008 2007
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Common shareholders'
net income (loss)
($ millions) 16 (8) 12 13 38 33 123
ROE (%) 4.4 (2.7) 4.1 4.4 13.6 2.6 11.0
-------------------------------------------------------------------------Fourth quarter 2008 earnings for SLF Asia were $16 million compared to
earnings of $38 million in the fourth quarter of 2007. The decrease in
earnings was primarily due to lower earnings in the Philippines where reserve
releases had a favourable impact on the fourth quarter 2007 earnings, as well
as impairments in Hong Kong, and increased investment in growth in India.
These were partially offset by the impact of reserve changes related to asset
liability matching in Hong Kong.
Full year 2008 earnings for SLF Asia were $33 million compared to $123
million last year. The decrease in earnings was due to lower earnings in Hong
Kong from investment related losses, and to increased investment in growth in
India.
SLF Asia individual traditional life insurance product sales in the
fourth quarter of 2008 were up 76% over the same period last year as
customers' preference shifted away from investment linked products as a result
of market volatility. Total individual life insurance sales were down 8%
quarter over quarter, with the continued growth in India offset by the
slowdown in other markets. In local currency, individual life insurance sales
in India were up 13% over the fourth quarter last year from increased
distribution, where the direct sales force now exceeds 160,000 advisors across
600 branches.
Full year 2008 sales were up by 34% over last year, driven by continued
strong growth momentum in India resulting from increased distribution reach.
Corporate
Corporate includes the results of Sun Life Financial U.K. (SLF U.K.) and
Corporate Support, which includes the Company's reinsurance businesses as well
as investment income, expenses, capital and other items not allocated to Sun
Life Financial's other business segments.Quarterly results Full Year
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Q4'08 Q3'08 Q2'08 Q1'08 Q4'07 2008 2007
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Common shareholders'
net income (loss)
($ millions)
SLF U.K. 40 69 41 59 23 209 213
Corporate Support(5) 777 (130) 31 42 1 720 (29)
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Total 817 (61) 72 101 24 929 184
-------------------------------------------------------------------------Earnings in the fourth quarter of 2008 increased by $793 million compared
to the fourth quarter of 2007 due to higher earnings in Corporate Support from
an after-tax gain of $825 million related to the sale of the Company's 37%
interest in CI Financial, as well as realized tax benefits associated with
unrecognized tax losses from impairments taken in prior years. This was
partially offset by losses in the Company's life retrocession reinsurance
business of $129 million in the quarter. The losses in the reinsurance
business were primarily the result of the strengthening of actuarial reserves
to reflect more comprehensive information on potential future premiums and
claims.
Full year 2008 earnings were $929 million compared to $184 million in the
prior year due to higher earnings in Corporate Support as a result of the sale
of the Company's 37% interest in CI Financial and realized tax benefits
associated with unrecognized tax losses from impairments taken in prior years.
This was partially offset by losses in the Company's life retrocession
reinsurance business from the unfavourable impact of claims in 2008 as well as
the strengthening of actuarial reserves to reflect more comprehensive
information on potential future premiums and claims. Results for the full year
2007 included $61 million of after-tax charges to earnings related to the
intangible asset write-down for the retirement of the Clarica brand and for
the premium paid to redeem Partnership Capital Securities in Corporate
Support.
Additional Financial Disclosure
REVENUE
Under Canadian GAAP, revenues include (i) regular premiums received on
life and health insurance policies and fixed annuity products, (ii) fee income
received for services provided, and (iii) net investment income comprised of
income earned on general fund assets and changes in the value of
held-for-trading assets and derivative instruments are also included.
Segregated fund deposits, mutual fund deposits and managed fund deposits are
not included in revenues.
Net investment income can experience volatility arising from quarterly
fluctuation in the value of held-for-trading assets. The bonds and stocks
which support actuarial liabilities are designated as held-for-trading, and
consequently changes in fair values of these assets are recorded in net
investment income in the consolidated statement of operations. Changes in the
fair values of these assets are largely offset by changes in the fair value of
the actuarial liabilities, where there is an effective matching of assets and
liabilities. The Company performs cash flow testing whereby asset and
liability cash flows are projected under various scenarios. When an asset
backing liabilities is written down in value to reflect impairment or default,
the actuarial assumptions about the cash flows required to support the
liabilities will change, resulting in an increase in actuarial liabilities
charged through the consolidated statement of operations. Additional detail on
the Company's accounting policies can be found in Sun Life Financial Inc.'s
annual Management's Discussion and Analysis (MD&A).Quarterly Results Full Year
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Q4'08 Q3'08 Q2'08 Q1'08 Q4'07 2008 2007
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Revenues
($ millions)
SLF Canada 2,052 1,279 2,276 2,320 2,610 7,927 9,285
SLF U.S. 587 546 1,624 1,060 1,637 3,817 7,830
MFS 310 342 367 362 390 1,381 1,687
SLF Asia 128 180 71 119 294 498 977
Corporate 1,629 213 73 25 474 1,940 1,409
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Total as reported 4,706 2,560 4,411 3,886 5,405 15,563 21,188
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Impact of currency
and changes in
the fair value of
held-for-trading
assets and
derivative
instruments (1,284) (2,817) (1,028) (1,568) (16) (6,696) (1,483)
-------------------------------------------------------------------------
Total adjusted
revenue 5,990 5,377 5,439 5,454 5,421 22,259 22,671
-------------------------------------------------------------------------Revenues for the fourth quarter of 2008 were $4.7 billion, down $699
million from the comparable period a year ago. The primary reason for the
decrease was the unfavourable impact on market values of $1.8 billion for
held-for-trading assets and non-hedging derivatives compared to the fourth
quarter of 2007. After adjusting for the impact of currency and fair value
changes in held-for-trading assets the fourth quarter 2008 revenue of $6.0
billion was $569 million higher than the same period a year ago. This increase
included a $1.0 billion pre-tax gain related to the sale of the Company's
interest in CI Financial, partially offset by lower fee income from the impact
of declining equity markets.
Premium revenue of $3.5 billion in the fourth quarter of 2008 was up $336
million from the fourth quarter of 2007. The strengthening of the U.S.
currency against the Canadian dollar contributed $339 million to the increase
and SLF Asia was up $52 million mostly on sales growth.
Net investment income was $905 million lower in the fourth quarter of
2008 compared to the same period a year ago. The changes in fair market value
of held-for-trading assets and derivatives in the fourth quarter of 2008
reduced net investment income by $1.8 billion compared to the fourth quarter
of 2007. There was also a $184 million decrease due to currency fluctuations
primarily as a result of realized and unrealized losses in SLF U.S. These
reductions were partly offset by the $1.0 billion pre-tax gain related to the
disposition of the Company's interest in CI Financial included in investment
income.
Fee income of $630 million in the fourth quarter of 2008 was down $130
million compared to the same period in the previous year. An increase of $87
million from the weakening of the Canadian dollar relative to the U.S. dollar
was more than offset by reductions of $81 million in MFS and $16 million in
SLF Canada primarily from the impact of declining market values. SLF U.S. was
down $32 million mostly due to the reduction of fee income from the sale of
Sun Life Retirement Services (U.S.) Inc. in the first quarter of 2008.
Total revenues of $15.6 billion for the twelve months ended December 31,
2008 decreased by $5.6 billion compared to the same period in 2007 primarily
from lower net investment income. Net investment losses, including net losses
of $241 million on available-for-sale assets, were $767 million for the twelve
months ended December 31, 2008 compared to net investment income of $4.9
billion for the same period a year ago. The decrease was primarily due to the
volatile market conditions and the tight credit environment that resulted in
fair value losses on held-for-trading assets and non-hedging derivatives
during 2008 of $7.6 billion compared to $1.5 billion for the same period a
year ago. Revenues for the twelve months ended December 31, 2008 included a
$1.0 billion pre tax gain related to the Company's sale of its interest in CI
Financial in the fourth quarter of 2008. There were also decreases of $218
million in total revenues as a result of changes in foreign exchange rates and
$342 million due to higher realized losses and write-downs on
available-for-sale assets.ASSETS UNDER MANAGEMENT (AUM)
AUM were $381.1 billion as at December 31, 2008 compared to $388.7 billion
as at September 30, 2008, and $425.3 billion as at December 31, 2007. The
decrease of $7.6 billion between September 30, 2008 and December 31, 2008
resulted primarily from:
(i) negative market movements of $40.5 billion;
(ii) net redemptions of mutual, managed and segregated funds of
$2.5 billion;
(iii) a decrease of $2.2 billion from the change in value of
held-for-trading assets; partially offset by
(iv) an increase of $35.4 billion from a weaker Canadian dollar
compared to the prior period exchange rates; and
(v) business growth.
AUM decreased $44.2 billion between December 31, 2007 and December 31,
2008. The reduction in AUM related primarily to:
(i) declining market performance that lowered AUM by $87.6 billion;
(ii) net redemptions of mutual, managed and segregated funds of
$3.2 billion;
(iii) a decrease of $7.4 billion from the change in value of
held-for-trading assets; partially offset by
(iv) an increase of $50.3 billion from the weakening of the
Canadian dollar against foreign currencies; and
(v) business growth.
CHANGES IN THE BALANCE SHEET AND SHAREHOLDERS' EQUITY
Total general fund assets were $119.8 billion as at December 31, 2008,
compared to $114.3 billion a year earlier. Total general fund assets were up
$5.5 billion from the December 31, 2007 level primarily due to an increase of
$9.2 billion from the weakening of the Canadian dollar against foreign
currencies and a gain from business growth, partly offset by a reduction of
$7.4 billion from the change in value of held-for-trading assets.
Actuarial and other policy liabilities of $81.4 billion as at December 31,
2008 increased by $3.9 billion compared to September 30, 2008, with an
increase of $4.2 billion from the weakening of the Canadian dollar against
foreign currencies and a gain from business growth partly offset by a
reduction of $2.2 billion from actuarial impact of the change in value of
held-for-trading assets.
Actuarial and other policy liabilities were up by $1.6 billion from the
December 31, 2007 amount of $79.8 billion. The increase of $5.8 billion in
actuarial and other policy liabilities resulting from the weakening of the
Canadian dollar against foreign currencies and a positive impact of business
growth was partially offset by the decrease of $7.4 billion related to
corresponding changes in fair value of held-for-trading assets.
Shareholders' equity, including Sun Life Financial Inc.'s preferred share
capital, was $17.3 billion as at December 31, 2008 compared to $16.5 billion
as at September 30, 2008 and $17.1 billion as at December 31, 2007. The
increase of $0.8 billion between September 30, 2008 and December 31, 2008
resulted primarily from:
(i) shareholders' net income of $146 million, before preferred
share dividends of $17 million;
(ii) unrealized losses on available-for-sale assets in other
comprehensive income (OCI) of $662 million;
(iii) common share dividend payments of $202 million; partly offset
by
(iv) the contribution from compensation costs (including stock
options exercised) of $10 million; and
(v) an increase of $1.5 billion from currency fluctuations
Shareholders' equity increased $181 million between December 31, 2007 and
December 31, 2008. The increase in shareholders' equity related primarily to:
(i) shareholders' net income of $855 million, before preferred
share dividends of $70 million; and
(ii) an increase of $1.8 billion from currency fluctuations;
partially offset by
(iii) unrealized losses on available-for-sale assets in OCI of
$1.4 billion;
(iv) common share dividend payments of $809 million; and
(v) the cost of common shares repurchased and cancelled, net of
stock-based compensation costs (including stock options
exercised) of $151 million
QUARTERLY FINANCIAL RESULTS
The following table provides a summary of Sun Life Financial's results for
the eight most recently completed quarters.
-------------------------------------------------------------------------
Q4'08 Q3'08 Q2'08 Q1'08 Q4'07 Q3'07 Q2'07 Q1'07
-------------------------------------------------------------------------
Common
shareholders'
net income (loss)
($millions) 129 (396) 519 533 555 577 590 497
Operating
earnings (loss)
($millions) (696) (396) 519 533 560 583 593 558
Basic EPS ($) 0.23 (0.71) 0.92 0.95 0.98 1.02 1.03 0.87
Fully diluted
EPS ($) 0.23 (0.71) 0.92 0.93 0.97 1.00 1.02 0.86
Fully diluted
operating
EPS ($) (1.25) (0.71) 0.91 0.93 0.98 1.01 1.03 0.96
Total revenue
($millions) 4,706 2,560 4,411 3,886 5,405 5,699 4,500 5,584
Total AUM
($billions) 381 389 413 415 425 427 440 451
-------------------------------------------------------------------------INVESTMENTS
The Company had total general fund invested assets of $106.9 billion as
at December 31, 2008. The majority of the Company's general funds are invested
in medium-to long-term fixed income instruments such as bonds and mortgages.
The Company's portfolio composition is conservative, with 84% of the general
funds in cash and fixed income investments. Stocks and real estate comprised
4% and 5% of the portfolio, respectively, as at December 31, 2008. The
remaining 7% of the portfolio is comprised of policy loans, other invested
assets and derivative assets.
As at December 31, 2008, the Company held $59.1 billion of bonds, which
constituted 55% of the Company's overall investment portfolio. Bonds with an
investment grade of "A" or higher represented 69%, and bonds rated "BBB" or
higher represented 97% of the total bond portfolio as at December 31, 2008,
down from 98% at December 31, 2007.
As at December 31, 2008, the Company held $12.7 billion of non-public
bonds, which constituted 21.4% of the Company's overall bond portfolio.
Corporate bonds that are not issued or guaranteed by sovereign, regional and
municipal governments represented 75% of the total bond portfolio as at
December 31, 2008, compared to 76% as at December 31, 2007.
The Company's gross unrealized losses as at December 31, 2008 for
available-for-sale bonds and held-for-trading bonds were $1.9 billion and $7.1
billion respectively, compared with $0.3 billion and $1.2 billion,
respectively at December 31, 2007. The increase in gross unrealized losses is
largely due to the widening of credit spreads primarily in the financial and
securitization sectors, partially offset by movements in interest rates.
The Company's bond portfolio as at December 31, 2008 included $15.5
billion in the financial sector, representing approximately 26% of the
Company's bond portfolio, or 14.5% of the Company's total invested assets.
This compares to $16.6 billion as at December 31, 2007. The $1.1 billion
decrease in the value of financial sector bond holdings is primarily the
result of write-downs in Washington Mutual and Lehman Brothers and the impact
of higher credit spreads on asset values partially offset by movements in
interest rates and foreign currency.
The Company's bond portfolio as at December 31, 2008 included $5.1
billion of asset-backed securities reported as bonds, representing
approximately 8.6% of the Company's bond portfolio, or 4.8% of the Company's
total invested assets. This compares to $6.6 billion as at December 31, 2007.
The $1.5 billion decrease in the value of asset-backed securities is primarily
the result of the impact of higher credit spreads on asset values, partially
offset by movements in interest rates and foreign currency.December 31, 2008 December 31, 2007
-------------------------------------------------------------------------
Fair Investment Fair Investment
($ millions) value grade % value grade %
-------------------------------------------------------------------------
Commercial mortgage-backed
securities 1,889 99.7% 2,523 99.6%
Residential mortgage-backed
securities
Agency 1,138 100.0% 1,112 100.0%
Non-agency 1,092 98.4% 1,486 99.6%
Collateralized debt obligations 215 80.8% 422 97.5%
Other(*) 754 97.3% 1,075 99.6%
-------------------------------------------------------------------------
Total 5,088 98.3% 6,618 99.6%
-------------------------------------------------------------------------
(*) Other includes subprime, a portion of the Company's exposure to
Alt-A and other asset-backed securities
The fair value of the Company's asset-backed securities is further broken
down in the tables below to reflect ratings and vintages of the assets within
this portfolio.
As at RMBS - RMBS -
December 31, 2008 CMBS Agency Non-agency CDO's Other
-------------------------------------------------------------------------
Rating
AAA 74.5% 100.0% 33.2% 19.1% 51.3%
AA 7.7% 0.0% 48.0% 46.5% 13.9%
A 8.3% 0.0% 11.6% 10.5% 20.4%
BBB 9.2% 0.0% 5.6% 4.7% 11.7%
BB & Below 0.3% 0.0% 1.6% 19.2% 2.7%
-------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
-------------------------------------------------------------------------
Vintage
2005 & Prior 85.6% 59.2% 90.2% 75.0% 59.3%
2006 10.8% 11.1% 8.2% 9.5% 18.5%
2007 3.5% 13.1% 1.6% 15.5% 2.5%
2008 0.1% 16.6% 0.0% 0.0% 19.7%
-------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
-------------------------------------------------------------------------
CMBS= Commercial Mortgage-Backed Securities; RMBS =
Residential Mortgage-Backed Securities, CDO's = Collateralized
Debt Obligations
As at RMBS - RMBS -
December 31, 2007 CMBS Agency Non-agency CDO's Other
-------------------------------------------------------------------------
Rating
AAA 63.2% 100.0% 31.8% 43.8% 35.0%
AA 8.3% 0.0% 48.2% 41.4% 22.5%
A 10.5% 0.0% 14.7% 11.7% 28.4%
BBB 17.6% 0.0% 5.2% 0.6% 13.7%
BB & Below 0.4% 0.0% 0.1% 2.5% 0.4%
-------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
-------------------------------------------------------------------------
Vintage
2005 & Prior 79.9% 68.6% 84.7% 61.5% 80.4%
2006 15.3% 10.3% 12.6% 21.0% 15.9%
2007 4.8% 21.1% 2.7% 17.5% 3.7%
-------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
-------------------------------------------------------------------------
CMBS= Commercial Mortgage-Backed Securities; RMBS =
Residential Mortgage-Backed Securities, CDO's = Collateralized
Debt ObligationsAs at December 31, 2008, the Company had indirect exposure to residential
sub-prime and Alternative-A (Alt-A) loans of $202 million and $145 million,
respectively, together representing approximately 0.3% of the Company's total
invested assets. Alt-A loans generally are residential loans made to borrowers
with credit profiles that are stronger than sub-prime but weaker than prime.
92% of these investments either were issued before 2006 or have an "AAA"
rating.
The Company had total exposure of $708 million to monoline insurers as at
December 31, 2008, of which $45 million, or 6%, represented direct exposure to
the monoline insurers and $663 million was indirect exposure. The indirect
exposure represents the total value of bonds for which the monoline insurers
have provided credit insurance. Credit insurance generally provides the
underlying bonds with a credit rating of AAA. Absent the credit insurance,
86.7% of the underlying bonds have an investment grade credit rating (0.1%
AAA, 10.1% AA, 31.1% A and 45.4% BBB) and 13.3% have a rating of BB or lower.
At December 31, 2008, no single insurer represented more than 39% of the total
monoline exposure and no underlying issuer represented more than 11% of the
total exposure in connection with monoline insurers.
The Company's mortgage portfolio almost entirely consists of first
mortgages. While the Company generally requires a maximum loan-to-value ratio
of 75%, it may invest in mortgages with a higher loan-to-value ratio in Canada
if the mortgage is insured. As at December 31, 2008, the mix of the Company's
mortgage portfolio was 82% non-residential and 18% residential and
approximately 34% of mortgage loans will mature by December 31, 2013.-------------------------------------------------------------------------
($ millions) December 31, 2008 December 31, 2007
-------------------------------------------------------------------------
Non- Non-
Residential Residential Total Residential Residential Total
-------------------------------------------------------------------------
Canada 2,620 5,896 8,516 2,723 6,382 9,105
United
States 342 7,338 7,680 274 6,005 6,279
United
Kingdom - 71 71 - 84 84
-------------------------------------------------------------------------
Total
Mortgages 2,962 13,305 16,267 2,997 12,471 15,468
-------------------------------------------------------------------------
Corporate
Loans - - 6,035 - - 5,274
-------------------------------------------------------------------------
Total
Mortgages
& Corporate
Loans 22,302 20,742
-------------------------------------------------------------------------
The values of the Company's derivative instruments are summarized in the
following table. The use of derivatives is measured in terms of notional
amounts, which serve as the basis for calculating payments and are generally
not actual amounts that are exchanged.
-------------------------------------------------------------------------
($ millions) December 31, 2008 December 31, 2007
-------------------------------------------------------------------------
Net fair value (550) 1,309
Total notional amount 50,796 42,642
Credit equivalent amount 1,260 2,351
Risk-weighted credit equivalent amount 28 56
-------------------------------------------------------------------------The total notional amount increased to $50.8 billion as at December 31,
2008, from $42.6 billion as at December 31, 2007, and the net fair value
decreased to $(0.6) billion as at December 31, 2008 from the December 31, 2007
amount of $1.3 billion. The change was primarily due to a decrease in the
market value of foreign exchange contracts resulting from a weakening in the
Canadian dollar relative to other foreign currencies. The credit equivalent
amount, a measure used to approximate the potential credit exposure, is
determined as the replacement cost of the derivative contracts having a
positive fair value plus an amount representing the potential future credit
exposure. The risk-weighted credit equivalent amount is a measure used to
determine the amount of capital necessary to support derivative transactions
for certain Canadian regulatory purposes. It is determined by weighting the
credit equivalent amount according to the nature of the derivative and the
creditworthiness of the counterparties.
Net impaired assets for mortgages and corporate loans, net of allowances,
amounted to $126 million as at December 31, 2008, $77 million more than the
December 31, 2007 level for these assets. In addition to allowances reflected
in the carrying value of mortgages and corporate loans, the Company had $2.3
billion for possible future asset defaults for all financial assets included
in its actuarial liabilities as at December 31, 2008. In 2008, the approach
for presenting allowances for possible future asset defaults was modified to
exclude the portion of the provision that can be passed through to
participating policyholders as well as to exclude projected reductions in the
value of equity and real estate assets supporting actuarial liabilities.
The invested asset values and ratios presented in this section are based
on the carrying value of the respective asset categories. Carrying value for
available-for-sale and held-for-trading invested assets are equal to fair
value. In the event of default, if the amounts recovered are insufficient to
satisfy the related actuarial liability cash flows that the assets are
intended to support, credit exposure may be greater than the carrying value of
the asset.
CAPITAL MANAGEMENT AND LIQUIDITY
Sun Life Financial has a policy designed to maintain a strong capital
position and provide the flexibility necessary to take advantage of growth
opportunities, to support the risk associated with its businesses and to
optimize shareholder return. The Company's capital base is structured to
exceed regulatory and internal capital targets and maintain strong credit
ratings while maintaining a capital efficient structure and desired capital
ratios. Capital is managed both on a consolidated basis under principles that
consider all the risks associated with the business as well as at the business
unit level under the principles appropriate to the jurisdiction in which it
operates.
As an insurance holding company, Sun Life Financial is expected to manage
its capital for all of its subsidiaries in a manner commensurate with its risk
profile and control environment.
Sun Life Assurance, the Company's principal operating subsidiary in
Canada, is subject to the MCCSR requirements of the Office of the
Superintendent of Financial Institutions (OSFI). OSFI generally expects life
insurance companies to maintain an MCCSR ratio of 150% or greater. With an
MCCSR ratio of 232% Sun Life Assurance was well above minimum regulatory
capital levels as at December 31, 2008, compared to 213% as at December 31,
2007. The increase in the MCCSR ratio is primarily due to revisions by OSFI to
the MCCSR rules in the fourth quarter of 2008, as well as the impact of the
portion of the proceeds of the CI Financial transaction attributable to Sun
Life Assurance. This was partially offset by market impacts experienced during
2008 and write-downs on assets in Sun Life Assurance's investment portfolio.
Other subsidiaries are subject to local capital requirements in the
jurisdictions in which they operate.
The current market environment highlighted the need to revise the
treatment of certain components of capital to better reflect both the nature
of the risks and the quality of capital supporting these risks. In response to
the issues surfaced, OSFI issued several revisions to the current MCCSR rules
effective December 2008. First, the minimum capital rules for segregated fund
guarantees were updated to differentiate between near-term and long-term
obligations. Second, companies were given the option to exclude from available
capital the net after-tax unrealized gains and losses on available-for-sale
bonds reflected in other comprehensive income to better reflect the long-term
nature of these bonds. Finally, the requirement to hold capital for future
pricing decisions was eliminated to avoid potential redundancy with risk
charges and actuarial reserves.
The Company maintains a liquidity position that exceeds all the
liabilities payable on demand. The Company also actively manages and monitors
the matching of its asset positions against its commitments, together with the
diversification and credit quality of its investments, against established
targets.
The Company's primary source of funds is cash provided by operating
activities, including premiums, investment management fees and net investment
income. These funds are used primarily to pay policy benefits, dividends to
policyholders, claims, commissions, operating expenses, interest expenses and
shareholder dividends. Cash flows generated from operating activities are
generally invested to support future payment requirements, including the
payment of dividends to shareholders. The Company also raises funds from time
to time, through borrowing and issuing of securities, to finance growth,
acquisitions or other needs. As at December 31, 2008 Sun Life maintained cash,
cash equivalents and short-term securities totalling more than $8.9 billion.
In addition, the Company's investment portfolio contains over $13 billion of
government bonds.
MARKET SENSITIVITY
The Company's earnings are dependent on the determination of its
policyholder obligations under its annuity and insurance contracts. These
amounts are determined using internal valuation models and are recorded in the
Company's financial statements, primarily as actuarial liabilities. The
determination of these obligations requires management to make assumptions
about equity market performance, interest rates and other factors over the
life of its products.
The estimated impact on the Company's policyholder obligations from an
immediate 10% increase across all equity markets as at December 31, 2008,
would be an increase in net income in the range of $250 to $300 million;
conversely, the impact of an immediate 10% drop across all equity markets
would be an estimated decrease in net income in the range of $275 to $350
million.
The estimated impact from these obligations of an immediate parallel
increase of 1% in interest rates as at December 31, 2008, across the yield
curve in all markets, would be an increase in net income in the range of $100
to $150 million. Conversely, an immediate 1% parallel decrease in interest
rates would result in an estimated decrease in net income in the range of $150
to $200 million.
The Company's principal operating subsidiary, Sun Life Assurance, is
subject to the MCCSR capital rules for a life insurance company in Canada. The
MCCSR calculation involves using qualifying models or applying quantitative
factors to specific assets and liabilities based on a number of risk
components to arrive at required capital and comparing this requirement to
available capital to assess capital adequacy. Certain of these risk
components, along with available capital, are sensitive to changes in equity
markets. The estimated impact on the MCCSR of Sun Life Assurance from an
immediate 10% increase across all equity markets as at December 31, 2008 would
be an approximate 2% - 4% increase in MCCSR. Conversely, the estimated impact
on the MCCSR of Sun Life Assurance from an immediate 10% drop across all
equity markets would be an approximate 3% - 5% decrease in MCCSR.
The equity and interest rate sensitivities are forward looking
statements. These sensitivities measure the estimated impact on net income and
capital based on a starting point of December 31, 2008 based on the above
noted immediate changes in interest rates and equity market prices as well as
business mix on that date. Changes to starting point interest rates, equity
market prices and business mix will result in different estimated
sensitivities. Further, changes in interest rates and equity market prices in
excess of the ranges illustrated will generally result in greater than
proportional impacts. Additional information concerning the Company's
sensitivities is included in Sun Life Financial's 2008 Annual MD&A and 2008
Consolidated Financial Statements.
ENTERPRISE RISK MANAGEMENT
Sun Life Financial uses an enterprise risk management framework to assist
in categorizing, monitoring and managing the risks to which it is exposed. The
major categories of risk are credit risk, market risk, insurance risk,
operational risk and strategic 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 various 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 annual MD&A and
AIF for the year ended December 31, 2008.
REGULATORY AND LEGAL MATTERS
Information concerning legal and regulatory matters is provided in Sun
Life Financial Inc.'s annual Consolidated Financial Statements, annual MD&A
and AIF for the year ended December 31, 2008, copies of which are available on
the Company's website at www.sunlife.com and at www.sedar.com and www.sec.gov.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate
internal control over financial reporting to provide reasonable assurance
regarding the reliability of the Company's financial reporting and the
preparation of its financial statements in accordance with GAAP.
There were no changes during the Company's most recent three-month period
ended December 31, 2008 that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over financial
reporting.
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. The Company also reviews
adjusted revenue, which excludes the impact of currency and fair value changes
in held-for-trading assets and derivative instruments from total revenue.
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. Value of new business is used to measure overall profitability. Value of
new business is 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 on www.sunlife.com under Investors - Financial Results &
Reports - Year-end Reports.
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
Quarterly results
-------------------------------------------------------------------------
Q4'08 Q3'08 Q2'08 Q1'08 Q4'07 Q3'07 Q2'07 Q1'07
-------------------------------------------------------------------------
Reported
Earnings (GAAP) 129 (396) 519 533 555 577 590 497
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) -
Premium to redeem
Partnership
Capital
Securities - - - - - - - (18)
Gain on sale of
interest in
CI Financial 825 - - - - - - -
-------------------------------------------------------------------------
Total special
items 825 - - - (5) (6) (3) (61)
-------------------------------------------------------------------------
Operating
earnings (696) (396) 519 533 560 583 593 558
-------------------------------------------------------------------------FORWARD-LOOKING STATEMENTS
Certain statements contained 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 risks and uncertainties that are difficult to predict. Future results
and stockholder value of SLF Inc. 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 annual and interim 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, investment losses and defaults
and changes to investment valuations; the performance of equity markets;
interest rate fluctuations; other market risks including movement in credit
spreads; possible sustained economic downturn; risks related to market
liquidity; market conditions that adversely affect the company's capital
position or its ability to raise capital; downgrades in financial strength or
credit ratings; the impact of mergers and acquisitions; the performance of the
Company's investments and investment portfolios managed for clients such as
segregated and mutual funds; insurance risks including mortality, morbidity,
longevity and policyholder behaviour including the occurrence of natural or
man-made disasters, pandemic diseases and acts of terrorism; 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; the
availability, cost and effectiveness of reinsurance; the inability to maintain
strong distribution channels and risks relating to market conduct by
intermediaries and agents; currency exchange rate fluctuations; the cost,
effectiveness and availability of risk-mitigating hedging programs; the
creditworthiness of guarantors and counterparties to derivatives; risks
relating to operations in Asia including risks relating to joint ventures; the
impact of competition; risks relating to financial modelling errors; business
continuity risks; failure of information systems and Internet-enabled
technology; breaches of computer security and privacy; dependence on third
party relationships including outsourcing arrangements; the ability to attract
and retain employees; the impact of adverse results in the closed block of
business; the ineffectiveness of risk management policies and procedures and
the potential for financial loss related to changes in the environment. 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.
The financial results presented in this document are unaudited.
Analysts' Conference Call
The Company's fourth quarter 2008 financial results will be reviewed at a
conference call today at 9 a.m. ET. To listen to the call via live audio
webcast and to view the presentation slides, as well as related information,
please visit www.sunlife.com and click on the link to Q4 results from the
"News & perspectives" section of the home page 10 minutes prior to the start
of the presentation. The webcast and presentation will be archived on our
website following the call and can be found at www.sunlife.com.
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, 2008, the Sun Life Financial group of companies had total assets
under management of $381 billion. For more information please visit
www.sunlife.com.
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) All EPS measures in this document refer to fully diluted EPS, unless
otherwise stated.
(3) 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
please see "Use of Non-GAAP Financial Measures."
(4) Pre-tax operating profit margin ratio is a non-GAAP measure. See
"Use of Non-GAAP Financial Measures."
(5) Beginning in Q4 2008, financial results for SLF Reinsurance have been
consolidated into Corporate Support. Prior period information has
been restated.
For further information:
For further information: Media Relations Contact: Steve Kee, Assistant Vice-President, Communications, Tel: (416) 979-6237, steve.kee@sunlife.com; Investor Relations Contact: Paul Petrelli, Vice-President, Investor Relations, Tel: (416) 204-8163, investor.relations@sunlife.com