Sun Life 2012 Annual Report Download - page 44

Results by Business Unit
Net income by business unit
(US$ millions) 2012 2011(1)
Employee Benefits Group(2) 26 86
Life and Investment Products(2) 298 (381)
Operating net income (loss) from Continuing Operations(2) 324 (295)
Restructuring and other related costs –(6)
Goodwill and intangible asset impairment charges –(2)
Reported net income (loss) from Continuing Operations 324 (303)
Reported net income (loss) 496 (909)
(1) Some periods have been restated. See Accounting Adjustments.
(2) Represents a non-IFRS financial measure. See Use of Non-IFRS Financial Measures.
Employee Benefits Group
The SLF U.S. EBG business unit leverages its strong underwriting expertise and extensive distribution capabilities to provide group life,
long-term and short-term disability, medical stop-loss and dental insurance, as well as a suite of voluntary benefits products, to over
10 million group plan members. EBG currently provides products and services to meet the protection needs of principally small- and
medium-sized employers and their employees.
Our group and voluntary benefits insurance products are sold through approximately 30,000 independent brokers and benefit
consultants. We support these brokers and consultants through 34 regional group offices across the United States and approximately
200 employee sales representatives. Retaining quality business, building distribution scale and continuing to drive operational
efficiency are key drivers of EBG’s growth strategy.
In 2011, we announced a significant investment in the voluntary benefits business that will be made over the next several years with
the goal of becoming a top five player by the end of 2016. The voluntary benefits business refers to group insurance that is fully paid
for by the employee and sold through the workplace. As we focus on growing our voluntary benefits business, the established
relationships and capabilities in EBG will provide a strong baseline from which to grow. We also benefit from leveraging technology and
processes between our group insurance businesses in Canada and the United States.
EBG has no Discontinued Operations. EBG’s reported net income was US$26 million in 2012, compared to US$86 million in 2011.
There were no items that gave rise to differences between reported and operating net income in the current or comparative periods.
Net income in 2012 reflected unfavourable claims experience, primarily with our long-term disability product, and a charge related to a
premiums receivable account reconciliation issue, as well as investment in our voluntary benefits capabilities discussed above. Net
income in 2011 reflected unfavourable claims experience, primarily with our disability products.
EBG sales in 2012 were US$563 million, an increase of 26% compared to 2011, reflecting significant improvement across all products.
Within EBG, voluntary sales of US$141 million increased 81% compared to 2011. BIF of US$2.3 billion at December 31, 2012
increased 5% compared to 2011, driven by positive net sales.
Life and Investment Products
The Life and Investment Products business includes our international business, which provides international high net worth clients with
insurance and investment products, and those closed domestic individual life insurance products that are part of our Continuing
Operations. The closed block of individual life insurance products primarily includes whole life, universal life and term insurance.
Life and Investment Products’ reported income from Continuing Operations was US$298 million in 2012, compared to a reported loss
from Continuing Operations of US$389 million in 2011. Operating income from Continuing Operations was US$298 million in 2012,
compared to an operating loss from Continuing Operations of US$381 million in 2011. Net income from Continuing Operations in 2012
reflected positive impacts from improved equity markets and investment activity on insurance contract liabilities, partially offset by the
unfavourable impact of reduced interest rates and credit spread movements. The loss from Continuing Operations in 2011 reflected the
unfavourable impacts of volatile equity markets and the implementation of a change related to Hedging in the Liabilities.
Sales in Life and Investment Products were US$741 million, a decrease of 26% compared to 2011, primarily driven by lower
international investment product sales, reflecting product de-risking actions, and the closure of our domestic life products to new sales.
2013 Outlook and Priorities
SLF U.S. will focus on growth opportunities in the U.S. group and voluntary benefits markets. Our actions over the past several years,
along with the focused investment in voluntary benefits, position SLF U.S. to build sustainable leading positions in these two markets.
We can compete effectively in these markets because our capital, regulatory and accounting requirements for these U.S. businesses
do not disadvantage us relative to our U.S. competitors.
In addition, there are significant macro trends in the United States that provide opportunities for us to grow these two core businesses.
As employers strive to stem rising expenses, voluntary benefits offer employers the ability to manage costs while providing their
employees with the opportunity to obtain protection products important to their financial security. Employers and brokers are also
evaluating various strategies in light of recent U.S. healthcare reform. Supplemental group and voluntary benefits will provide attractive
benefit solutions for these stakeholders, and the demand for medical stop loss products could increase should more employers decide
to self-insure. Lastly, the micro-to-small business market is underserved, creating an attractive growth opportunity where we can offer
packaged solutions and efficient processes.
42 Sun Life Financial Inc. Annual Report 2012 Management’s Discussion and Analysis