Sun Life 2012 Annual Report Download - page 32

Net life, health and annuity premiums were $8.2 billion in 2012, largely unchanged from 2011. The weakening of the Canadian dollar
relative to average exchange rates in 2011 increased net premiums by $48 million.
Segregated fund deposits were $6.9 billion in 2012, compared to $7.5 billion in 2011. The decrease was largely attributable to reduced
sales in Canada.
Sales of mutual funds and managed funds were $87.2 billion in 2012, compared to $57.0 billion in 2011, driven by higher MFS sales.
Benefits and Expenses from Continuing Operations
Total benefits and expenses were $15.8 billion in 2012, down $3.8 billion from $19.6 billion in 2011.
Benefits and Expenses from Continuing Operations
($ millions) 2012 2011(1)
Benefits & Expenses
Gross claims and benefits paid 11,347 11,152
Changes in insurance/investment contract liabilities and reinsurance assets (net of reinsurance
recoveries)(2) (929) 3,201
Commissions 1,399 1,307
Operating expenses 3,507 3,262
Impairment of goodwill and intangible assets –204
Other(3) 524 514
Total benefits and expenses 15,848 19,640
(1) Some periods have been restated. See Accounting Adjustments.
(2) Includes increase (decrease) in insurance contract liabilities, decrease (increase) in reinsurance assets, increase (decrease) in investment contract liabilities, and
reinsurance expenses (recoveries).
(3) Other includes net transfer to (from) segregated funds, premium taxes and interest expense.
Gross claims and benefits paid in 2012 were $11.3 billion, up $0.2 billion from 2011 primarily as a result of higher claims and benefits
paid in our SLF Canada’s GB and Individual Insurance businesses.
Changes in insurance/investment contract liabilities and reinsurance assets (net of recoveries) of negative $0.9 billion decreased by
$4.1 billion over 2011. The change was primarily attributable to a smaller increase in the fair value of FVTPL assets supporting
insurance contract liabilities, changes in reinsurance assets and higher reinsurance recoveries in SLF U.S.
Commission expenses of $1.4 billion in 2012 were up $0.1 billion from 2011. The increase was mainly attributable to increases from
MFS, the SLF Canada’s Individual Insurance and U.S. EBG voluntary benefits businesses.
Operating expenses of $3.5 billion in 2012 were $0.2 billion higher than 2011. Expenses increased primarily as a result of increases in
MFS, SLF Canada’s Individual Insurance and SLF U.S.’s EBG voluntary businesses. Additional information on operating expenses can
be found in Note 19 in our 2012 Consolidated Financial Statements.
Other expenses of $0.5 billion were largely unchanged from 2011.
Assumption Changes and Management Actions
Due to the long-term nature of our business, we make certain judgments involving assumptions and estimates to value our obligations
to policyholders. Many of these assumptions relate to matters that are inherently uncertain. The valuation of these obligations is
fundamental to our financial results and requires us to make assumptions about equity market performance, interest rates, asset
default, mortality and morbidity rates, policy terminations, expenses and inflation and other factors over the life of our products. Our
benefit payment obligations, net of future expected revenues, are estimated over the life of our annuity and insurance products based
on internal valuation models and are recorded in our financial statements, primarily in the form of insurance contract liabilities. We
review our actuarial assumptions each year, generally in the third and fourth quarters, and revise these assumptions if appropriate.
In 2012, the net impact of assumption changes and management actions resulted in an increase in net income from Combined
Operations of $108 million and an increase in net income from Continuing Operations of $221 million.
2012 Assumption Changes and Management Actions from Combined Operations by Type
($ millions)
Increase/
(Decrease)
in operating
net income Comments
Mortality/Morbidity (16) Driven primarily by updates to reflect recent experience in SLF U.S. and SLF Canada
Lapse and other
policyholder
behaviour
(45) Largely due to a reduction in SLF U.S. variable annuity lapse assumptions reflecting recent
company and industry experience
Expense 37 Reflects the positive impact of updates to expenses, lower fund management fees and a
management action to transfer the asset management of a block of assets to MFS and
other updates
Investment returns (2) Resulting primarily from updates to our economic scenario generator, offset by an increase
in average long-term credit spreads and favourable impact from implementing additional
hedges
Model enhancements
and other
134 Reflects the impact of modelling enhancements, management actions in SLF Canada and
SLF U.S. and assumptions relating to our ability to recapture certain reinsurance treaties in
the U.S.
Total 108
30 Sun Life Financial Inc. Annual Report 2012 Management’s Discussion and Analysis