Sun Life Financial reports first quarter results



    
    Note to Editors: All figures shown in Canadian dollars unless otherwise
    noted.
    

    TORONTO, May 7 /CNW/ - Sun Life Financial Inc. (TSX/NYSE:   SLF) reported a
net operating loss of $186 million for the first quarter of 2009, compared
with net operating income of $533 million in the same period last year. Fully
diluted operating loss per share(1) was $0.33 compared to operating earnings
per share of $0.93 in the first quarter of 2008, a decrease of $1.26. Results
in the first quarter of 2008 include earnings of $43 million or $0.08 per
share from the Company's 37% ownership interest in CI Financial, which the
Company sold in the fourth quarter of 2008. The operating loss for the first
quarter of 2009 does not include after-tax charges of $27 million for
restructuring costs taken as part of the Company's actions to reduce expense
levels and improve operational efficiency. Including restructuring costs
recorded in the first quarter of 2009, the Company reported a net loss of $213
million or $0.38 per share.
    Results this quarter were impacted by reserve strengthening, net of
hedging, of $325 million related to equity market declines, reserve increases
of $167 million for downgrades on the Company's investment portfolio, and
credit and equity impairments of $34 million and $42 million respectively.
Despite the capital market impacts on the first quarter financial results, the
Company remains well capitalized with a Minimum Continuing Capital Surplus
Requirement (MCCSR) ratio of 223% for Sun Life Assurance Company of Canada.
The Company also reported the 2008 Risk Based Capital Ratio for Sun Life
Assurance Company of Canada (U.S.) of 357%, in excess of its target range of
300%-350%.
    "During this challenging period, individuals and organizations are
increasingly placing their confidence in Sun Life. We are strong, solid and
sustainable. Strong business fundamentals are reflected in the quarter's
higher premium revenues, exceptional fund performance at MFS and impressive
sales momentum. North American group businesses advanced nicely, including
record earnings in our U.S. Employee Benefits Group, as did Asia where we
continue to invest," said Donald A. Stewart, Chief Executive Officer.
    "We are managing through the turbulent times by cutting expenses, driving
efficiencies, enhancing strategic risk management, and maintaining the
flexibility to seize opportunities for growth," he said. "Notwithstanding our
disappointing short-term results, we are very well positioned to emerge from
the recession as a stronger, more focused and competitive company."

    -------------------------------------------
    (1) All earnings per share measures in this document refer to fully
    diluted earnings per share, unless otherwise stated. Operating
    earnings (losses) and 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".

    
    MANAGEMENT'S DISCUSSION & ANALYSIS

    For the period ended March 31, 2009
    Dated May 7, 2009

    Earnings and Profitability

    The financial results presented in this document are unaudited

    FINANCIAL SUMMARY
                                               Quarterly Results
    -------------------------------------------------------------------------
                                       Q1'09   Q4'08   Q3'08   Q2'08   Q1'08
    -------------------------------------------------------------------------
    Common shareholders' net income
     (loss) ($millions)                 (213)    129    (396)    519     533
    Operating earnings (loss)(1)
     ($millions)                        (186)   (696)   (396)    519     533

    Basic earnings (loss) per common
     share (EPS)($)                    (0.38)   0.23   (0.71)   0.92    0.95
    Fully diluted EPS ($)              (0.38)   0.23   (0.71)   0.91    0.93
    Fully diluted operating EPS(1)($)  (0.33)  (1.25)  (0.71)   0.91    0.93

    Return on common equity (ROE)(%)    (5.5)    3.3   (10.2)   12.9    13.4
    Operating ROE(1)                    (4.7)  (17.9)  (10.2)   12.9    13.4

    Average common shares outstanding
     (millions)                        559.7   559.7   559.7   561.6   563.8
    Closing common shares outstanding
     (millions)                        559.7   559.7   559.7   559.9   561.9
    -------------------------------------------------------------------------
    

    Sun Life Financial Inc.(2) reported a net loss attributable to common
shareholders of $213 million for the quarter ended March 31, 2009, compared
with net income of $533 million in the first quarter of 2008. The Company
incurred operating losses of $186 million for the first quarter of 2009
compared with operating earnings of $533 million in the first quarter of 2008.
First quarter 2009 earnings were unfavourably impacted by $65 million from
changes in the value of the Canadian dollar. Results in the first quarter of
2008 include earnings of $43 million or $0.08 per share from the Company's 37%
ownership interest in CI Financial, which the Company sold in the fourth
quarter of 2008. The operating loss for the first quarter of 2009 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.
    Net losses in the first quarter of 2009 were driven primarily by reserve
strengthening, net of hedging, of $325 million related to equity market
declines, reserve increases of $167 million for downgrades on the Company's
investment portfolio, equity impairments of $42 million and net credit
impairments of $34 million. The Company's equity hedging program operated as
planned, offsetting some of the impact of reserve strengthening related to
segregated fund and variable annuity guarantees as a result of volatility in
capital markets during the quarter. First quarter results were also
unfavourably impacted by increases in actuarial reserves related to the very
low interest rate environment reflecting current and prior period experience.

    
    Q1 2009 - EQUITY MARKET RESERVE IMPACTS

    ($ millions, after-tax)
    -------------------------------------------------------------------------
    Impact on current period fees & present value of future fees due
     to lower account values                                              85
    Increase in reserves for segregated fund guarantee benefits &
     other reserve changes                                               228
    Increase in reserves for universal life benefits                      12
    -------------------------------------------------------------------------
    Total                                                                325
    -------------------------------------------------------------------------
    

    ROE for the first quarter of 2009 was negative 5.5% compared with 13.4%
for the first quarter of 2008. The decline in ROE resulted from the loss per
share of $0.38, which was lower than EPS(3) of $0.93 reported in the prior
year.
    The Company had an operating loss per share of $0.33 in the first quarter
of 2009 compared with operating EPS of $0.93 in the first quarter of 2008, a
decline of $1.26 per share. Operating ROE for the quarter was negative 4.7%
compared with operating ROE of 13.4% in the first quarter of 2008.

    Financial Market Conditions

    Economic conditions in the first quarter of 2009 continued to deteriorate
even as national governments launched stimulus packages and central banks
pursued aggressive monetary policy in an attempt to ease credit conditions.
Market indices were volatile and tested new lows with the S&P 500 dropping as
much as 26% to a low of 667 during the quarter before ending the quarter at
798, a decrease of 12%. The TSX/S&P Composite Index experienced similar
volatility, dropping by as much as 17% during the quarter before reaching its
March 31, 2009 level of 8,720, a drop of 2%. In light of the economic
environment, the Company has taken further measures to enhance its liquidity
and strategic risk management.
    The Company 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 and maintains a
liquidity position that exceeds all the liabilities payable on demand. In
light of current market conditions, the Company is maintaining higher than
normal levels of liquidity. As at March 31, 2009, Sun Life maintained $10.4
billion in cash, cash equivalents and short-term securities as well as $15.6
billion of government bonds.

    Impact of Currency

    During the first quarter of 2009 the Canadian dollar continued to
depreciate 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 first quarter of 2009, 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 $65 million from the weakening of the Canadian dollar relative to
the first quarter of 2008.
    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 $375.0 billion as at March 31,
2009 was down from $381.1 billion from December 31, 2008, and $415.3 billion
from March 31, 2008. The weakening of the Canadian dollar had a positive
impact on AUM of $8.7 billion compared with AUM as at December 31, 2008, and
$50.7 billion compared with AUM as at March 31, 2008.

    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 Interim 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.

    
    SLF Canada

                                               Quarterly results
    -------------------------------------------------------------------------
                                       Q1'09   Q4'08   Q3'08   Q2'08   Q1'08
    -------------------------------------------------------------------------
    Common shareholders' net income
     (loss) ($ millions)
      Individual Insurance &
       Investments                        77    (130)     28     177     149
      Group Benefits                      65      74      81      80      49
      Group Wealth                        52       1      48      39      49
    -------------------------------------------------------------------------
        Total                            194     (55)    157     296     247
    -------------------------------------------------------------------------

    

    SLF Canada had net income of $194 million in the first quarter of 2009
compared to a loss of $55 million in the fourth quarter of 2008 and earnings
of $247 million in the prior year. The decrease in earnings from the first
quarter of 2008 was mainly attributable to reserve strengthening of $61
million in the first quarter of 2009 related to declining equity markets,
lower asset reinvestment gains from changes in credit spreads, and a reduction
of $43 million due to the sale of the Company's interest in CI Financial in
the fourth quarter of 2008. This was partly offset by increased interest rates
and the benefit from the enactment of tax rules related to the 2007 accounting
changes with respect to financial instruments.

    
    -   Individual Insurance & Investments earnings were $77 million for the
        first quarter of 2009 compared to earnings of $149 million in the
        first quarter of 2008. Earnings in the first quarter of 2009 were
        unfavourably impacted by reserve strengthening related to declining
        equity markets, lower asset reinvestment gains from changes in credit
        spreads and lower earnings due to the sale of the Company's holdings
        in CI Financial in the fourth quarter of 2008, partially offset by
        the impact of improved interest rate experience and the benefit from
        the enactment of tax rules related to the 2007 accounting changes
        with respect to financial instruments.

    -   Group Benefits earnings were $65 million for the first quarter of
        2009 compared to $49 million for the same period one year ago largely
        due to the impact of favourable morbidity experience.

    -   Group Wealth earnings for the first quarter of 2009 were relatively
        unchanged compared to the first quarter of 2008.
    

    Despite the challenging economic environment in the first quarter of
2009, SLF Canada maintained strong sales momentum. In Individual Insurance &
Investments, segregated fund sales in Canada, including sales of SunWise Elite
Plus with the guaranteed minimum withdrawal benefit rider, increased by 17% in
the first quarter of 2009 over the same period last year. Sales of fixed
interest products, including accumulation annuities, GICs and payout
annuities, increased 128% to $305 million. In Group Benefits, sales increased
by 97% in the first quarter of 2009 over the same period last year. In Group
Wealth, Group Retirement Services (GRS) sales increased by 32% over the first
quarter of 2008 to $1.1 billion, including $160 million of retained assets
from members leaving plans, representing a 42% retention ratio. GRS continued
to build on its leadership position in the Defined Contribution (DC) industry
in 2008 capturing 47% of the industry's new sales and 51% of total DC market
activity, as recently reported by LIMRA.

    
    SLF U.S.

                                               Quarterly results
    -------------------------------------------------------------------------
                                       Q1'09   Q4'08   Q3'08   Q2'08   Q1'08
    -------------------------------------------------------------------------
    Common shareholders' net income
     (loss) (US$ millions)
      Annuities                         (324)   (672)   (456)     22      75
      Individual Insurance               (57)     95     (76)     35      19
      Employee Benefits Group             48       1      30      25      19
    -------------------------------------------------------------------------
        Total (US$ millions)            (333)   (576)   (502)     82     113
        Total (C$ millions)             (407)   (679)   (533)     83     113
    -------------------------------------------------------------------------
    

    SLF U.S.'s loss of C$407 million in the first quarter of 2009 compares to
a loss of C$679 million in the fourth quarter of 2008 and to earnings of C$113
million in the first quarter of the prior year. The depreciation of the
Canadian dollar against the U.S. dollar increased the reported loss in SLF
U.S. by C$78 million in the first quarter of 2009 compared to the first
quarter of 2008.
    In U.S. dollars, the loss of US$333 million compared to earnings of
US$113 million in the first quarter of 2008 was primarily from external
factors resulting in reserve strengthening of US$220 million, net of hedging,
from equity market declines and US$160 million relating to credit market
conditions, as well as increases in actuarial reserves, reflecting current and
prior period experience, related to the very low interest rate environment.

    
    -   Annuities incurred a loss of US$324 million compared to earnings of
        US$75 million in the first quarter of 2008 as a result of an increase
        in annuity reserves related to declining equity markets and the
        negative impact of credit-related allowances and credit-related
        losses. The increase in variable annuity reserves was driven by a
        decline in variable annuity account values, which increased the value
        of guaranteed benefits and lowered the expected stream of future fee
        income. This reserve impact was partially offset by the benefit of
        equity hedges.

    -   Individual Insurance incurred a loss for the first quarter of 2009 of
        US$57 million compared to earnings of US$19 million in the first
        quarter of 2008. Earnings decreased primarily as a result of
        increases in actuarial reserves, reflecting current and prior period
        experience, related to the very low interest rate environment as well
        as the unfavourable earnings impact from the implementation of an
        internal reinsurance transaction for capital efficiency.

    -   Employee Benefits Group (EBG) earnings were US$48 million compared to
        US$19 million in the first quarter of 2008. Earnings were higher as a
        result of increased interest rates during the quarter and the impact
        of favourable claims experience.
    

    Despite challenging financial markets, domestic variable and fixed
annuity sales in the first quarter of 2009 were US$988 million, an increase of
57%, and sales in EBG of US$63 million were higher by 15% compared to the
first quarter of 2008. Sales in Individual Insurance were US$33 million. While
a slight decrease of 3% compared to the same period one year ago, sales of
Individual Life core products were up 15%.

    
    MFS Investment Management

                                               Quarterly Results
    -------------------------------------------------------------------------
                                       Q1'09   Q4'08   Q3'08   Q2'08   Q1'08
    -------------------------------------------------------------------------
    Common shareholders' net income
     (US$ millions)                       23      25      47      55      59
    Common shareholders' net income
     (C$ millions)                        28      30      49      56      59

    Pre-tax operating profit margin
     ratio(4)                            21%     21%     29%     34%     35%
    Average net assets (US$ billions)    125     133     176     191     187
    Assets under management
     (US$ billions)                      124     134     162     183     184
    Net sales (redemptions) (US$
     billions)                           0.2    (2.1)   (2.0)    1.0    (2.7)
    Market movement (US$ billions)     (10.7)  (25.5)  (19.4)   (2.0)  (12.5)

    S&P 500 Index (daily average)        811     910   1,255   1,371   1,349
    -------------------------------------------------------------------------
    

    First quarter 2009 earnings for MFS decreased C$31 million compared to
the first quarter of 2008. The movement of the Canadian dollar against the
U.S. dollar increased earnings for MFS by C$5 million in the first quarter of
2009 compared to the first quarter of 2008.
    In U.S. dollars, first quarter earnings were US$23 million compared to
US$59 million in the first quarter of 2008. The decrease in earnings was
primarily due to lower average net assets as a result of the decline in global
financial markets.
    Total assets under management at March 31, 2009 were US$124 billion, a
decrease of US$10 billion compared to December 31, 2008, driven by market
depreciation of US$10.7 billion, partially offset by net inflows of US$200
million.
    MFS's retail fund performance continues to be extremely strong with 93%
of funds ranked in the top half of their respective Lipper categories based on
three-year performance as of March 31, 2009. Performance in the U.S. equity
and global/international equity categories has also been exceptional, with 93%
and 97% of fund assets ranking in the top half of their respective three-year
Lipper averages as of March 31, 2009.

    
    SLF Asia

                                               Quarterly results
    -------------------------------------------------------------------------
                                       Q1'09   Q4'08   Q3'08   Q2'08   Q1'08
    -------------------------------------------------------------------------
    Common shareholders' net income
     (loss) ($ millions)                  17      16      (8)     12      13
    -------------------------------------------------------------------------
    

    First quarter 2009 earnings for SLF Asia were $17 million compared to
earnings of $13 million in the first quarter of 2008. The increase in earnings
was primarily due to higher earnings in the Philippines and Indonesia from
business growth, as well as Hong Kong, where first quarter 2008 earnings were
unfavourably impacted by widening credit spreads. Those positive variances
were partially offset by continued investment in growth in India.
    First quarter 2009 individual insurance sales were up 8% over the same
period last year driven by continued growth in India. Elsewhere, sales were
down as the reduced demand for investment-linked products more than offset the
triple-digit growth in sales of protection products. In Indonesia, Sun Life
Financial and Commerce International Merchant Bankers Group have agreed to
form a joint venture to distribute Sun Life Financial's life, accident and
health insurance products through the 600-plus retail branches of PT Bank CIMB
Niaga in Indonesia. Sun Life Everbright, Sun Life Financial's life insurance
joint venture in China, opened its seventh branch in the country in the
municipality of Chongqing, which has a population of over 30 million people.

    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
    -------------------------------------------------------------------------
                                       Q1'09   Q4'08   Q3'08   Q2'08   Q1'08
    -------------------------------------------------------------------------
    Common shareholders' net income
     (loss) ($ millions)
      SLF U.K.                             -      40      69      41      59
      Corporate Support(5)               (45)    777    (130)     31      42
    -------------------------------------------------------------------------
        Total                            (45)    817     (61)     72     101
    -------------------------------------------------------------------------
    

    Earnings in the first quarter of 2009 decreased by $146 million compared
to the first quarter of 2008. Results in SLF U.K. were lower by $59 million
due to changes in interest rates and lower equity markets, as well as
increases in actuarial reserves to reflect cash flow modelling for current and
prior period experience. In Corporate Support, earnings were lower by $87
million primarily as a result of restructuring costs taken as part of the
Company's efforts to reduce expense levels and improve operational efficiency,
as well as the positive effect of changes in income tax liabilities which
benefited Corporate Support results in the first quarter of 2008.

    Additional Financial Disclosure

    REVENUE

    Under Canadian GAAP, revenues include (i) regular premiums received on
life and health insurance policies and fixed annuity products, (ii) net
investment income comprised of income earned on general fund assets and
changes in the value of held-for-trading assets and derivative instruments,
and (iii) fee income received for services provided. 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), which can be retrieved
from the Company's website at www.sunlife.com.

    
                                               Quarterly Results
    -------------------------------------------------------------------------
                                       Q1'09   Q4'08   Q3'08   Q2'08   Q1'08
    -------------------------------------------------------------------------
    Revenues ($ millions)
      SLF Canada                       2,249   2,052   1,279   2,276   2,320
      SLF U.S.                         2,360     587     546   1,624   1,060
      MFS                                288     310     342     367     362
      SLF Asia                           238     128     180      71     119
      Corporate                         (107)  1,629     213      73      25
    -------------------------------------------------------------------------
    Total as reported                  5,028   4,706   2,560   4,411   3,886
    -------------------------------------------------------------------------

    Impact of currency and changes in
     the fair value of held-for-trading
     assets and derivative instruments  (358) (1,352) (2,889) (1,098) (1,640)
    -------------------------------------------------------------------------
    Total adjusted revenue             5,386   6,058   5,449   5,509   5,526
    -------------------------------------------------------------------------
    

    Revenues for the first quarter of 2009 were $1.1 billion higher than the
comparable period a year ago. Premium revenue was higher by $834 million, with
$407 million arising from the weakening of the Canadian dollar against the
U.S. currency and an increase of $374 million, without the effect of currency,
from higher annuity revenues in SLF Canada and SLF U.S. In addition, changes
in the fair value of held-for-trading assets and derivative instruments, which
are recorded in investment income, had a relatively smaller unfavourable
impact in the first quarter of 2009 compared to the same period one year ago.
After adjusting for the impact of currency and fair value changes in held-for-
trading assets, the first quarter 2009 revenue of $5.4 billion was $140
million lower than the same period a year ago mainly due to lower fee income
on reduced asset values.
    Premium revenue of $4.0 billion in the first quarter of 2009 was up $834
million from the first quarter of 2008. The weakening of the Canadian currency
against the U.S. dollar contributed $407 million to the increase. The
remainder of the increase was mostly due to higher fixed annuity premiums in
SLF U.S. and SLF Canada.
    Net investment income of $407 million was $411 million higher in the
first quarter of 2009 compared to the same period a year ago. The changes in
fair market value of held-for-trading assets and derivatives in the first
quarter of 2009 decreased net investment income by $955 million compared to a
decrease of $1.6 billion in the first quarter of 2008. There was also a $96
million increase due to currency fluctuations primarily as a result of a lower
level of realized and unrealized losses in SLF U.S. These increases were
partially offset by lower investment income in SLF Canada due to the sale of
the Company's interest in CI Financial in the fourth quarter of 2008 and a
decrease in SLF U.S. which included a gain on the sale of Sun Life Retirement
Services (U.S.) Inc. in the first quarter of 2008.
    Fee income of $602 million in the first quarter of 2009 was lower by $103
million compared to the same period in the previous year as a decrease of $188
million from lower fees on reduced asset values in the wealth businesses was
partially offset by an increase of $85 million from the weakening of the
Canadian dollar relative to the U.S. dollar.

    Assets Under Management (AUM)

    AUM were $375.0 billion as at March 31, 2009 compared to $381.1 billion
as at December 31, 2008, and $415.3 billion as at March 31, 2008. The decrease
of $6.1 billion between December 31, 2008 and March 31, 2009 resulted
primarily from:

    
    (i)    negative market movements of $16.8 billion;
    (ii)   a decrease of $955 million from the change in value of held-for-
           trading assets; partially offset by
    (iii)  an increase of $8.7 billion from a weaker Canadian dollar compared
           to the prior period exchange rates;
    (iv)   net sales of mutual, managed and segregated funds of $2.6 billion;
           and
    (v)    business growth.

    AUM decreased $40.2 billion between March 31, 2008 and March 31, 2009. The
decrease in AUM related primarily to:

    (i)    declining market performance that lowered AUM by $87.5 billion;
    (ii)   a decrease of $6.8 billion from the change in value of held-for-
           trading assets; partially offset by
    (iii)  an increase of $50.7 billion from the weakening of the Canadian
           dollar against foreign currencies;
    (iv)   net sales of mutual, managed and segregated funds of $236 million;
           and
    (v)    business growth.
    

    Changes in the Balance Sheet and Shareholders' Equity

    Total general fund assets were $121.3 billion as at March 31, 2009,
compared to $115.2 billion a year earlier. Total general fund assets were up
$6.1 billion from the March 31, 2008 level primarily due to an increase of
$9.7 billion from the weakening of the Canadian dollar against foreign
currencies and a gain from business growth, partly offset by a reduction of
$6.8 billion from the change in value of held-for-trading assets.
    Total general fund assets increased by $1.5 billion from the December 31,
2008 level of $119.8 billion. The favourable impact of $2.1 billion from
currency fluctuations and business growth boosted general fund assets in the
first quarter of 2009. These increases were partially offset by a reduction of
$955 million from the change in value of held-for-trading assets.
    Actuarial and other policy liabilities of $83.4 billion as at March 31,
2009 increased by $2.0 billion compared to December 31, 2008, with an increase
of $1.4 billion from the weakening of the Canadian dollar against foreign
currencies and a gain from business growth mostly from annuity sales in SLF
U.S. and SLF Canada.
    Actuarial and other policy liabilities were up by $3.9 billion from the
March 31, 2008 amount of $79.4 billion. The increase of $6.3 billion resulting
from the weakening of the Canadian dollar against foreign currencies and a
positive impact of business growth was partially offset by the decrease
related to corresponding changes in fair value of held-for-trading assets.
    Shareholders' equity, including Sun Life Financial's preferred share
capital, was $16.9 billion as at March 31, 2009 compared to $17.3 billion as
at December 31, 2008 and $17.4 billion as at March 31, 2008. The decrease of
$358 million between December 31, 2008 and March 31, 2009 resulted primarily
from:

    
    (i)    shareholders' net loss of $195 million, before preferred share
           dividends of $18 million;
    (ii)   unrealized losses on available-for-sale assets in other
           comprehensive income (OCI) of $302 million;
    (iii)  common share dividend payments of $201 million; partly offset by
    (iv)   an increase of $354 million from currency fluctuations.

    As at May 4, 2009, Sun Life Financial Inc. had 559.7 million common shares
and 61.0 million preferred shares outstanding.

    CASH FLOWS

                                                                 Quarterly
                                                                  Results
    -------------------------------------------------------------------------
    ($ millions)                                               Q1'09   Q1'08
    -------------------------------------------------------------------------
    Cash and cash equivalents, beginning of period             7,263   3,603
    Cash flows provided by (used in):
      Operating activities                                       698     193
      Financing activities                                       552      54
      Investing activities                                       693    (602)
    Changes due to fluctuations in exchange rates                160       9
    -------------------------------------------------------------------------
    Increase in cash and cash equivalents                      2,103    (346)
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period                   9,366   3,257
    Short-term securities, end of period                       1,061   2,016
    -------------------------------------------------------------------------
    Total cash, cash equivalents and short-term securities    10,427   5,273
    -------------------------------------------------------------------------
    

    Net cash, cash equivalents and short-term securities of $10.4 billion as
at the end of the first quarter of 2009 were higher by $5.2 billion compared
to the first quarter of 2008. Cash generated by operations was $505 million
higher in the first quarter of 2009 than 2008. The improvement was mainly due
to increased premiums partly offset by lower fee income and higher benefit
payments. Cash provided by financing activities in the first quarter of 2009
was $498 million higher than in the same period a year ago. An increase of
$100 million in the amount of subordinated debt issued in the first quarter of
2009 compared to 2008, an increase of $93 million in borrowed funds and
unsecured debt financing and a reduction of $110 million in the amount of
common share repurchases were the primary reasons for the increase. Cash
provided by investing activities was up by $1.3 billion in the first quarter
of 2009 compared with the same quarter of 2008 from a higher level of long-
term asset sales over purchases in the first quarter of 2009 compared to 2008
as a result of the Company's intention to maintain higher levels of liquidity.
Currency fluctuations increased cash balances by $160 million in the first
quarter of 2009 compared to $9 million in the comparable period a year ago.

    QUARTERLY FINANCIAL RESULTS

    The following table provides a summary of Sun Life Financial's results
for the eight most recently completed quarters.

    
    -------------------------------------------------------------------------
                      Q1'09  Q4'08  Q3'08  Q2'08  Q1'08  Q4'07  Q3'07  Q2'07
    -------------------------------------------------------------------------
    Common
     shareholders' net
     income (loss)
     ($millions)       (213)   129   (396)   519    533    555    577    590
    Operating earnings
     (loss)
     ($millions)       (186)  (696)  (396)   519    533    560    583    593
    Basic EPS ($)     (0.38)  0.23  (0.71)  0.92   0.95   0.98   1.02   1.03
    Fully diluted
     EPS ($)          (0.38)  0.23  (0.71)  0.91   0.93   0.97   1.00   1.02
    Fully diluted
     operating
     EPS ($)          (0.33) (1.25) (0.71)  0.91   0.93   0.98   1.01   1.03
    Total revenue
     ($millions)      5,028  4,706  2,560  4,411  3,886  5,405  5,699  4,500
    Total AUM
     ($billions)        375    381    389    413    415    425    427    440
    -------------------------------------------------------------------------
    

    INVESTMENTS

    The Company had total general fund invested assets of $107.8 billion as
at March 31, 2009. 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 85% of the general funds
in cash and fixed income investments. Stocks and real estate comprised 4% and
5% of the portfolio, respectively, as at March 31, 2009. The remaining 6% of
the portfolio is comprised of policy loans, other invested assets and
derivative assets.
    As at March 31, 2009, the Company held $59.2 billion of bonds, which
constituted 55% of the Company's overall investment portfolio. Bonds with an
investment grade of "A" or higher represented 67%, and bonds rated "BBB" or
higher represented 96% of the total bond portfolio as at March 31, 2009, down
from 97% at December 31, 2008.
    As at March 31, 2009, the Company held $12.6 billion of privately held
bonds, which constituted 21.2% of the Company's overall bond portfolio. Bonds
(excluding asset-backed) that are not issued or guaranteed by sovereign,
regional and municipal governments represented 74% of the total bond portfolio
as at March 31, 2009, compared to 75% as at December 31, 2008.
    The Company's gross unrealized losses as at March 31, 2009 for available-
for-sale bonds and held-for-trading bonds were $2.2 billion and $7.8 billion,
respectively, compared with $1.9 billion and $7.1 billion, respectively, at
December 31, 2008. Gross unrealized losses reflect the difference between the
fair value and amortized cost and are primarily due to the widening of credit
spreads.
    The Company's bond portfolio as at March 31, 2009 included $14.4 billion
in the financial sector, representing approximately 24% of the Company's bond
portfolio, or 13% of the Company's total invested assets. This compares to
$15.5 billion as at December 31, 2008. The $1.1 billion decrease in the value
of financial sector bond holdings is primarily the result of the increase in
interest rates and the widening of credit spreads in the sector partially
offset by movements in foreign currencies.
    The Company's bond portfolio as at March 31, 2009 included $4.9 billion
of asset-backed securities reported as bonds, representing approximately 8% of
the Company's bond portfolio, or 5% of the Company's total invested assets.
This compares to $5.1 billion as at December 31, 2008.

    
                                          March 31, 2009   December 31, 2008
    -------------------------------------------------------------------------
                                        Fair  Investment    Fair  Investment
    ($ millions)                        value    grade %    value    grade %
    -------------------------------------------------------------------------
    Commercial mortgage-backed
     securities                         1,828      98.6%     1,889     99.7%
    Residential mortgage-backed
     securities
      Agency                            1,127     100.0%     1,138    100.0%
      Non-agency                        1,051      95.3%     1,092     98.4%
    Collateralized debt obligations       179      72.2%       215     80.8%
    Other(*)                              700      92.7%       754     97.3%
    -------------------------------------------------------------------------
    Total                               4,885      96.4%     5,088     98.3%
    -------------------------------------------------------------------------
    (*) Other includes sub-prime, 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 -
    March 31, 2009      CMBS      Agency  Non-agency        CDOs       Other
    -------------------------------------------------------------------------
    Rating
    AAA                75.8%      100.0%       33.2%       17.5%       51.0%
    AA                  6.8%        0.0%       46.4%       25.7%        9.3%
    A                   8.0%        0.0%       12.1%        2.2%       19.7%
    BBB                 8.0%        0.0%        3.7%       26.8%       12.7%
    BB & Below          1.4%        0.0%        4.6%       27.8%        7.3%
    -------------------------------------------------------------------------
    Total             100.0%      100.0%      100.0%      100.0%      100.0%
    -------------------------------------------------------------------------

    Vintage
    2005 & Prior       86.3%       58.7%       90.6%       72.1%       58.5%
    2006               10.4%       11.4%        8.0%        9.4%       17.5%
    2007                3.2%       13.2%        1.4%       18.5%        2.3%
    2008                0.1%       16.2%        0.0%        0.0%       21.7%
    2009                0.0%        0.5%        0.0%        0.0%        0.0%
    -------------------------------------------------------------------------
    Total             100.0%      100.0%      100.0%      100.0%      100.0%
    -------------------------------------------------------------------------
    CMBS= Commercial Mortgage-Backed Securities;
    RMBS = Residential Mortgage-Backed Securities;
    CDOs = Collateralized Debt Obligations

    As at
    December 31,                  RMBS -      RMBS -
    2008                CMBS      Agency  Non-agency        CDOs       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;
    CDOs = Collateralized Debt Obligations
    

    As at March 31, 2009, the Company had indirect exposure to residential
sub-prime and Alternative-A (Alt-A) loans of $170 million and $140 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.
90.4% of these investments either were issued before 2006 or have an "AAA"
rating.
    The Company's mortgage portfolio consists almost entirely 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 March 31, 2009, 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. As at
March 31, 2009, the Company's commercial mortgage portfolio had a carrying
value of $15.7 billion, which is spread across approximately 4,200 loans.

    
    -------------------------------------------------------------------------
    ($ millions)               March 31, 2009              December 31, 2008
    -------------------------------------------------------------------------
                                  Non-                           Non-
               Residential Residential  Total Residential Residential  Total
    -------------------------------------------------------------------------
    Canada           2,590       5,727  8,317       2,620       5,896  8,516
    United
     States            353       7,509  7,862         342       7,338  7,680
    United
     Kingdom             -          72     72           -          71     71
    -------------------------------------------------------------------------
    Total
     Mortgages       2,943      13,308 16,251       2,962      13,305 16,267
    -------------------------------------------------------------------------
    Corporate
     Loans               -           -  6,060           -           -  6,035
    -------------------------------------------------------------------------
    Total
     Mortgages
     & Corporate
     Loans                             22,311                         22,302
    -------------------------------------------------------------------------

    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)                           March 31, 2009  December 31, 2008
    -------------------------------------------------------------------------
    Net fair value                                 (1,176)              (550)
    Total notional amount                          50,128             50,796
    Credit equivalent amount                        1,049              1,260
    Risk-weighted credit equivalent amount              7                 28
    -------------------------------------------------------------------------
    

    The total notional amount decreased to $50.1 billion as at March 31,
2009, from $50.8 billion as at December 31, 2008, and the net fair value
decreased to $(1.2) billion as at March 31, 2009 from the December 31, 2008
amount of $(0.6) billion. The change was primarily due to a decrease in the
market value of interest rate contracts resulting from an increase in interest
rates and 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 $127 million as at March 31, 2009, $1 million more than the
December 31, 2008 level for these assets. In addition to allowances reflected
in the carrying value of mortgages and corporate loans, the Company had $2.8
billion for possible future asset defaults for all financial assets included
in its actuarial liabilities as at March 31, 2009.
    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 Inc. 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 Company of Canada (Sun Life Assurance), the Company's
principal operating subsidiary in Canada, is subject to the Minimum Continuing
Capital Surplus Requirements (MCCSR) of the Office of the Superintendent of
Financial Institutions, Canada (OSFI). OSFI's capital target for life
insurance companies is an MCCSR ratio of 150% or greater. With an MCCSR ratio
of 223% Sun Life Assurance was well above the supervisory target as at March
31, 2009, compared to 232% as at December 31, 2008. The decrease in the MCCSR
ratio is primarily due to capital market impacts including equity and credit
experience.
    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. During the first quarter of 2009, the
Company issued $500 million principal amount of Series 2009-1 Subordinated
Unsecured 7.90% Fixed/Floating Debentures due in 2019. The net proceeds of the
offering will be used for general corporate purposes, including investments in
subsidiaries.
    During the fourth quarter of 2008, Standard & Poor's, Moody's and A.M.
Best revised their respective outlooks for the North American life insurance
sector to negative from stable. Following this change, these rating agencies
downgraded the financial strength ratings of Sun Life Assurance in the first
quarter of 2009. The ratings changes for Sun Life Assurance are summarized in
the table below.

    
    -------------------------------------------------------------------------
    Rating Agency                     March 31, 2009       December 31, 2008
    -------------------------------------------------------------------------
    Standard & Poor's           AA (negative outlook)    AA+ (stable outlook)
    Moody's                      Aa3 (stable outlook)  Aa2 (negative outlook)
    A.M. Best                     A+ (stable outlook)    A++ (stable outlook)
    -------------------------------------------------------------------------
    

    OUTLOOK AND MARKET SENSITIVITY

    Global equity markets continued to struggle for most of the first quarter
of 2009 - the sixth consecutive down quarter. As investors began to have faith
that the new credit enhancing programs would gain traction, the S&P 500
recorded an increase of 8.5% in March and a further 9.4% in April, its best
monthly return since March 2000. The U.S. Federal Reserve kept interest rates
unchanged at essentially zero or in a range of 0 to 0.25% at their two
meetings held during the first quarter of 2009. The near-term economic outlook
is weak, and the level of uncertainty in the market remains high. Regulators
in the U.S. will publicly release results of recently performed stress tests
on U.S. banks, which could have an impact on financial markets. However, the
Federal Reserve anticipates that policy actions to stabilize financial markets
and institutions, together with fiscal and monetary stimulus, will contribute
to a gradual resumption of sustainable economic growth.
    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 March 31, 2009, would
be an increase in net income in the range of $250 million to $325 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 $250 million to
$325 million.
    The estimated impact from these obligations of an immediate parallel
increase of 1% in interest rates as at March 31, 2009, across the yield curve
in all markets, would be an increase in net income in the range of $125
million to $175 million. Conversely, an immediate 1% parallel decrease in
interest rates would result in an estimated decrease in net income in the
range of $250 million to $325 million. Interest rate sensitivities increased
from prior quarter levels as a result of a number of factors, including
increases in actuarial reserves, reflecting current and prior period
experience, related to the very low interest rate environment as well as
changes in market levels and interest rate hedging during the quarter.
    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 March 31, 2009 would
result in an increase in MCCSR of up to 5 percentage points. Conversely, the
estimated impact on the MCCSR of Sun Life Assurance from an immediate 10% drop
across all equity markets would result in a decrease in MCCSR of up to 8
percentage points.
    The equity, interest rate and MCCSR sensitivities above are forward-
looking statements. These are measures of the Company's estimated net income
and capital sensitivity to the changes in interest rate and equity market
level described above, based on a starting point and business mix in place as
of March 31, 2009. Each of these sensitivities is determined independently and
therefore generally assumes that all other variables stay constant. Actual
results can differ materially from these estimates for a variety of reasons
including differences in the pattern or distribution of the prescribed shocks,
the interaction between these factors, model error, or changes in other
underlying assumptions such as business mix, effective tax rates, and other
market variables. 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.
    The Company provides guarantees through its variable annuity business in
Canada and the United States which are linked to underlying fund performance.
Declines in equity markets have increased the Company's exposure to various
annuity and segregated fund benefit guarantees.

    
    -------------------------------------------------------------------------
                         March 31, 2009               December 31, 2008
    -------------------------------------------------------------------------
                          Amount                        Amount
                    Fund      at     Actuarial    Fund      at     Actuarial
    ($ millions)   Value  Risk(6)  Liabilities   Value  Risk(6)  Liabilities
    -------------------------------------------------------------------------
    Total         29,509  10,309         3,601  29,730   9,063         3,036
    -------------------------------------------------------------------------
    

    Guaranteed benefits are contingent and only payable upon death, maturity,
withdrawal or annuitization if fund values remain below guaranteed values. If
markets do not recover, liabilities on current in-force business would be due
primarily in the period from 2013 to 2031. The amount at risk at March 31,
2009 increased from December 31, 2008 as a result of declining equity markets.
Additional reserves were established as at March 31, 2009 to reflect the $1.2
billion increase in the amount at risk.

    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
Annual Information Form (AIF) for the year ended December 31, 2008.

    LEGAL AND REGULATORY 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 in the Company's internal control over financial
reporting during the period beginning on January 1, 2009 and ended on March
31, 2009 that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.

    TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

    The Canadian Accounting Standards Board confirmed January 1, 2011 as the
date IFRS will replace current Canadian standards and interpretations as
Canadian GAAP for publicly accountable enterprises. In order to prepare for
the conversion to IFRS, Sun Life Financial has developed an IFRS changeover
plan. This plan addresses key elements of the Company's conversion to IFRS
including:

    
    -   Education and training requirements
    -   Accounting policy changes
    -   Information technology and data systems impacts
    -   Impacts on business activities
    -   Financial reporting requirements
    -   Internal control over financial reporting
    

    The IFRS changeover plan is well underway, with key IFRS standards
analyzed and compared against Sun Life Financial's current Canadian GAAP
policies. The key accounting policy alternatives have been identified,
including contract classification and first-time adoption of IFRS, however
final decisions are pending. The impacts of these are currently being
assessed.
    A focused education and training plan for employees has been established
throughout the organization; this plan includes external IFRS courses,
internal presentations and workshops. These will continue to evolve throughout
the implementation period and beyond and have involved members of the core
IFRS Project team, and the wider finance and other functional audience within
the organization.
    The core IFRS team has partnered with all of the relevant functional
areas of the Company to assess the specific and overall impact of IFRS,
including information technology, data systems, Treasury and Taxation. As the
implementation process moves forward, the Company expects to continue to
revisit its changeover plan; accordingly, changes to the existing plan may be
required.

    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.
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

    ($ millions)                         Quarterly results
    -------------------------------------------------------------------------
                      Q1'09  Q4'08  Q3'08  Q2'08  Q1'08  Q4'07  Q3'07  Q2'07
    -------------------------------------------------------------------------
    Reported Earnings
     (GAAP)            (213)   129   (396)   519    533    555    577    590
    After-tax gain
     (loss) on special
     items
      Re-branding
       expenses in
       Canada             -      -      -      -      -     (3)    (5)    (2)
      EBG integration
       costs              -      -      -      -      -     (2)    (1)    (1)
      Gain on sale of
       interest in CI
       Financial          -    825      -      -      -      -      -      -
      Restructuring
       costs to reduce
       expense levels   (27)     -      -      -      -      -      -      -
    -------------------------------------------------------------------------
    Total special
     items              (27)   825      -      -      -     (5)    (6)    (3)
    -------------------------------------------------------------------------
    Operating earnings (186)  (696)  (396)   519    533    560    583    593
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    

    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.

    EARNINGS CONFERENCE CALL

    The Company's first quarter 2009 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 Q1 results from the
"Investors" 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.
    The conference call can also be accessed by phone by dialing 416-644-
3416 (Toronto), or 1-800-732-9307 (Canada/U.S.).

    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
March 31, 2009, the Sun Life Financial group of companies had total assets
under management of $375 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.

    
    SUMMARY CONSOLIDATED FINANCIAL STATEMENTS

    Consolidated Statements of Operations
                                                  For the three months ended
    -------------------------------------------------------------------------
    (unaudited, in millions of Canadian dollars        March 31,    March 31,
     except for per share amounts)                         2009         2008
    -------------------------------------------------------------------------
    Revenue
      Premium Income:
        Annuities                                    $    1,353   $      817
        Life insurance                                    1,549        1,388
        Health insurance                                  1,117          980
    -------------------------------------------------------------------------
                                                          4,019        3,185
    -------------------------------------------------------------------------
      Net investment income (loss):
        Changes in fair value of held-for-trading
         assets                                            (905)      (1,172)
        Income (loss) from derivative instruments           (81)        (470)
        Net gains (losses) on available-for-sale
         assets                                             (50)          28
        Other net investment income                       1,443        1,610
    -------------------------------------------------------------------------
                                                            407           (4)
    -------------------------------------------------------------------------
      Fee income                                            602          705
    -------------------------------------------------------------------------
                                                          5,028        3,886
    -------------------------------------------------------------------------
    Policy benefits and expenses
      Payments to policyholders, beneficiaries and
       depositors:
        Maturities and surrenders                         1,380        1,269
        Annuity payments                                    343          339
        Death and disability benefits                       848          681
        Health benefits                                     800          718
        Policyholder dividends and interest on claims
         and deposits                                       332          279
    -------------------------------------------------------------------------
                                                          3,703        3,286
      Net transfers to (from) segregated funds              108          112
      Increase (decrease) in actuarial liabilities          528       (1,540)
      Commissions                                           397          375
      Operating expenses                                    777          752
      Premium taxes                                          55           52
      Interest expense                                       97           98
    -------------------------------------------------------------------------
                                                          5,665        3,135
    -------------------------------------------------------------------------
    Income (loss) before income taxes and
     non-controlling interests                             (637)         751
      Income tax expense (benefit)                         (445)         190
      Non-controlling interests in net income of
       subsidiaries                                           3            9
    -------------------------------------------------------------------------
    Total net income (loss)                                (195)         552
      Less: Participating policyholders' net income           -            1
    -------------------------------------------------------------------------
    Shareholders' net income (loss)                        (195)         551
      Less: Preferred shareholder dividends                  18           18
    -------------------------------------------------------------------------
    Common shareholders' net income (loss)           $     (213)  $      533
    -------------------------------------------------------------------------


    Earnings (loss) per share
      Basic                                          $    (0.38)  $     0.95
      Diluted                                        $    (0.38)  $     0.93



    Consolidated Balance Sheets
                                                               As at
    -------------------------------------------------------------------------
    (unaudited, in millions of Canadian dollars)       March 31,    March 31,
                                                           2009         2008
    -------------------------------------------------------------------------
    Assets
      Bonds - held-for-trading                       $   48,963   $   50,348
      Bonds - available-for-sale                         10,205        9,949
      Mortgages and corporate loans                      22,311       21,181
      Stocks - held-for-trading                           3,256        4,262
      Stocks - available-for-sale                           913          729
      Real estate                                         5,027        4,412
      Cash, cash equivalents and short-term
       securities                                        10,427        5,273
      Derivative assets                                   2,077        1,825
      Policy loans and other invested assets              3,686        4,421
      Other invested assets - held-for-trading              400          451
      Other invested assets - available-for-sale            538          711
    -------------------------------------------------------------------------
      Invested assets                                   107,803      103,562
      Goodwill                                            6,724        6,098
      Intangible assets                                   1,001          797
      Other assets                                        5,809        4,792
    -------------------------------------------------------------------------
      Total general fund assets                      $  121,337   $  115,249
    -------------------------------------------------------------------------

      Segregated funds net assets                    $   65,448   $   72,071
    -------------------------------------------------------------------------


    Liabilities and equity
      Actuarial liabilities and other policy
       liabilities                                   $   83,376   $   79,428
      Amounts on deposit                                  4,111        3,749
      Deferred net realized gains                           248          272
      Senior debentures                                   3,013        3,014
      Derivative liabilities                              3,253        1,141
      Other liabilities                                   7,178        7,899
    -------------------------------------------------------------------------
      Total general fund liabilities                    101,179       95,503
      Subordinated debt                                   3,079        2,199
      Non-controlling interests in subsidiaries              27           46
      Total equity                                       17,052       17,501
    -------------------------------------------------------------------------
      Total general fund liabilities and equity      $  121,337   $  115,249
    -------------------------------------------------------------------------

    Segregated funds contract liabilities            $   65,448   $   72,071
    -------------------------------------------------------------------------


    -------------------------------------------

    (1) Operating earnings (losses) and financial information based on
        operating earnings such as operating earnings per share (EPS) and
        operating return on equity (ROE) are non-GAAP financial measures. For
        additional information please see "Use of Non-GAAP Financial
        Measures".
    (2) Together with its subsidiaries and joint ventures "the Company" or
        "Sun Life Financial".
    (3) All EPS measures in this document refer to fully diluted EPS, unless
        otherwise stated.
    (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.
    (6) Amount at risk is the excess of guaranteed values over fund values on
        all policies where the guaranteed value exceeds the fund value. Fund
        value and amount at risk are net of amounts reinsured. This amount is
        not currently payable.
    





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


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