Sun Life 2010 Annual Report Download - page 41

Net income for the twelve months ended December 31, 2009 was impacted primarily by downgrades of $670 million on our investment
portfolio, the negative impact of the implementation of equity- and interest rate-related actuarial assumption updates of $513 million
and net impairments of $431 million. These adverse impacts were partially offset by the favourable impact of improved equity markets
of $306 million and increased interest rates of $206 million.
Return on Equity
ROE based on common shareholders’ net income was 9.9% in 2010, up from 3.4% in 2009 primarily as a result of higher earnings.
There was no difference between reported and operating ROE in 2010. Operating ROE in 2009, which does not include after-tax
charges of $27 million for restructuring costs taken as part of the Company’s efforts to reduce expense levels and improve operational
efficiency, was 3.5%.
Assets Under Management
AUM consist of general funds, segregated funds and other
AUM(1). Other AUM includes mutual and managed funds which
include institutional and other third-party assets managed by the
Company.
Total AUM were $464.2 billion as at December 31, 2010,
compared to $432.6 billion as at December 31, 2009. The
increase of $31.6 billion between December 31, 2008 and
December 31, 2009 resulted primarily from:
(i) positive market movements of $29.7 billion;
(ii) net sales of mutual, managed and segregated funds of
$14.9 billion;
(iii) an increase of $2.6 billion from the change in value of
HFT assets and non-hedging derivatives;
(iv) business growth of $2.2 billion, mostly in the wealth
businesses; partially offset by
Other AUM 195 232 254
Segregated funds 66 81 89
General funds 120 120 121
Assets Under Management
($ billions)
2008 20102009
381
464
433
(v) a decrease of $17.2 billion from a strengthening Canadian dollar against foreign currencies compared to the prior period
exchange rates; and
(vi) a reduction of $631 million from the sale of our life reinsurance business in the fourth quarter of 2010.
General fund assets were $120.9 billion at December 31, 2010, up $0.8 billion, from the December 31, 2009 level. The increase in
general fund assets resulted primarily from:
(i) an increase of $2.7 billion from the change in value of HFT assets; and
(ii) business growth of $2.2 billion; partly offset by
(iii) a decrease of $3.4 billion from a strengthening Canadian dollar against foreign currencies compared to the prior period
exchange rates; and
(iv) a reduction of $631 million arising from the sale of our life reinsurance business in the fourth quarter of 2010
Segregated fund assets were $88.9 billion as at December 31, 2010, compared to $81.3 billion as at December 31, 2009. The increase
in segregated fund assets was due to an increase of $7.5 billion from equity market improvements and $2.6 billion from net sales,
partially offset by the unfavourable impact of currency of $2.5 billion.
Other AUM, which includes MFS assets under management of $221.3 billion, grew to $254.5 billion, $23.2 billion higher than as at
December 31, 2009. Improved market conditions increased values by $22.2 billion and net sales for the year further increased other
AUM by $12.3 billion. These increases were partially offset by the unfavourable impact of currency of $11.3 billion.
Revenue
Under Canadian GAAP, revenues include (i) regular premiums received on life and health insurance policies and fixed annuity
products, net of premiums ceded to reinsurers; (ii) net investment income comprised of income earned on general fund assets, realized
gains and losses on AFS assets and changes in the value of HFT assets and derivative instruments; and (iii) fee income received for
services provided. Under Canadian GAAP, segregated fund deposits, mutual fund deposits and managed fund deposits are not
included in revenues. As a result, revenue does not fully represent sales taking place during the respective periods.
Net investment income can experience volatility arising from quarterly fluctuation in the value of HFT assets. The bonds and stocks
which support actuarial liabilities are designated as HFT and, consequently, changes in fair values of these assets are recorded in net
investment income in our Consolidated Statement of Operations. Changes in the fair values of assets supporting actuarial liabilities are
largely offset by a corresponding movement of the liabilities. We perform cash flow testing whereby asset and liability cash flows are
projected under various scenarios. When assets backing liabilities are written down in value to reflect impairment or default, we
conduct actuarial assessments of the amount of assets required to support our actuarial liabilities. Additional detail on the Company’s
accounting policies can be found in this MD&A under the heading, Critical Accounting Policies and Estimates.
(1) AUM, mutual fund assets, managed fund assets, other AUM and total AUM are Non-GAAP Financial Measures. See the section under the heading Non-GAAP Financial
Measures.
Management’s Discussion and Analysis Sun Life Financial Inc. Annual Report 2010 37