Sun Life 2010 Annual Report Download - page 45

business strain, which was partially offset by lower earnings in Hong Kong from higher new business strain. The net impact of these
items resulted in a level of earnings in the fourth quarter of 2010 that was relatively unchanged from the same period one year ago as
earnings in the fourth quarter of 2009 included favourable mortality and credit experience.
The Corporate segment had a net loss of $26 million in the fourth quarter of 2010 compared to a loss of $14 million in the fourth quarter
of 2009. SLF U.K. reported a loss of $11 million in the fourth quarter of 2010, compared to net income of $9 million in the fourth quarter
of 2009. Results were lower primarily as a result of downgrades on the investment portfolio and increased expense levels related to
increased regulatory costs and other business restructuring. Results in the fourth quarter of 2009 in SLF U.K. reflected the adverse
impact of changes in interest rates and equity values, including hedge impacts. In Corporate Support, the loss in the fourth quarter of
2010 was $15 million, compared to a loss of $23 million one year earlier. The improvement year-over-year was primarily attributable to
improved results in the life reinsurance business, partially offset by increased expense levels in Corporate Support and lower income
tax benefits relative to the prior year. On December 31, 2010, we completed the sale of our life reinsurance business. The net gain on
sale was approximately $1 million.
Additional Financial Disclosure
Revenues for the fourth quarter of 2010 were $4.0 billion, down $959 million from the comparable period a year ago. The overall
decrease in revenue included a reduction of $59 million from the strengthening of the Canadian dollar relative to average exchange
rates in the fourth quarter of 2009. Other impacts on revenue, which exclude the impact of currency, included:
(i) a decrease in net investment income of $1.0 billion. This was primarily due to a reduction in the change in fair value of HFT
assets and non-hedging derivatives of $1.2 billion, which was partially offset by a pre-tax gain of $130 million associated with
the sale of our life reinsurance business recorded in investment income and reduced asset provisions; partially offset by
(ii) an increase of $44 million in premium revenue. Reduced annuity premiums in SLF U.S. were more than offset by higher
annuity premiums in SLF Canada and growth in health premiums; and
(iii) an increase in fee income of $120 million on growth in fee-based businesses, including MFS, SLF Canada and SLF U.S.
AUM increased $9.5 billion between September 30, 2010 and December 31, 2010. The increase in AUM related primarily to:
(i) positive market movements of mutual, managed and segregated funds totalling $17.4 billion; and
(ii) net sales of mutual, managed and segregated funds of $5.2 billion; partially offset by
(iii) a decrease of $10.4 billion from the strengthening of the Canadian dollar against foreign currencies;
(iv) a decrease of $1.7 billion from the change in fair value of HFT assets and non-hedging derivatives; and
(v) a reduction of $881 million, which included $309 million in goodwill, arising from the sale of our life reinsurance business.
Quarterly Information
The following table provides a summary of our results for the eight most recently completed quarters. A more complete discussion of
our historical quarterly results can be found our interim MD&A’s.
($ millions, unless otherwise noted) 2010 2009
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Common shareholders’ net income (loss)
Operating(1) 508 453 213 409 296 (140) 591 (186)
Reported 508 453 213 409 296 (140) 591 (213)
Diluted EPS (in dollars)
Operating(1) 0.88 0.79 0.37 0.72 0.52 (0.25) 1.05 (0.33)
Reported 0.88 0.79 0.37 0.72 0.52 (0.25) 1.05 (0.38)
Basic Reported EPS (in dollars) 0.89 0.80 0.38 0.72 0.53 (0.25) 1.06 (0.38)
ROE annualized
Operating(1) 12.4% 11.2% 5.4% 10.5% 7.6% -3.5% 14.9% -4.7%
Reported 12.4% 11.2% 5.4% 10.5% 7.6% -3.5% 14.9% -5.5%
Common shareholders’ net income (loss) by segment
SLF Canada 182 262 146 238 243 219 210 194
SLF U.S. 267 41 (95) 88 (9) (413) 364 (407)
MFS 57 55 47 49 49 43 32 28
SLF Asia 28 37 23 4 27 13 19 17
Corporate (26) 58 92 30 (14) (2) (34) (45)
Total 508 453 213 409 296 (140) 591 (213)
Total revenue 4,034 7,745 6,806 6,055 4,993 8,831 8,720 5,028
Total AUM ($ billions) 464 455 434 435 433 412 397 375
(1) Operating earnings, diluted operating EPS and operating ROE are non-GAAP measures and exclude the items described under the heading Non-GAAP Financial Measures.
Third Quarter 2010
Net income of $453 million in the third quarter of 2010 was favourably impacted by improved equity market conditions, and assumption
changes and management actions. We increased our mortgage sectoral allowance in anticipation of continued pressure in the U.S.
commercial mortgage market, however overall credit experience continued to show improvement over the prior year. The net impact
from interest rates on third quarter results was not material as the unfavourable impact of lower interest rates was largely offset by
favourable movement in interest rate swaps used for asset-liability management.
Management’s Discussion and Analysis Sun Life Financial Inc. Annual Report 2010 41