Sun Life Financial reports third quarter 2008 results



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

    TORONTO, Oct. 21 /CNW/ - Sun Life Financial Inc.(1) (TSX/NYSE:   SLF) today
announced a net loss of $396 million for the third quarter of 2008, compared
with net income of $577 million in the same period last year. Fully diluted
loss per share of $0.71 decreased $1.71 from earnings per share (EPS)(2) of
$1.00 in the third quarter of 2007.
    Third quarter results were significantly impacted by a deterioration in
global capital markets. Results this quarter include credit market impacts of
$636 million, including the charges related to the Company's previously
disclosed holdings in Lehman Brothers, Washington Mutual and American
International Group (AIG), as well as $326 million of charges related to
equity market impacts.
    "Unprecedented events in the global financial sector characterized the
third quarter and significantly impacted our results. Despite these
extraordinary occurrences, Sun Life is well positioned to manage through this
challenging economic environment," said Donald A. Stewart, Chief Executive
Officer.
    "The organization's operations, earnings power, and strong brands remain
fundamentally sound, further supported by its solid capital position, strong
balance sheet and diversified business model.
    Sun Life is undertaking a number of steps to address current disruptions
in the markets which demonstrates our confidence in our business model,
strategy and the future. This includes augmented management in key affected
businesses and investing for the future in Asia. We plan to maintain our
existing dividend policy and level of common shareholder dividends," he added.
    "Sun Life remains well positioned to capitalize on the intensifying
demand from individuals and corporations for reliable protection and
investment products. Most importantly, we are maintaining an intense focus on
serving our 25 million customers worldwide."

    Earnings and Profitability

    The financial results presented in this document are unaudited.

    
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    FINANCIAL SUMMARY
                             ---------------------------------- -------------
                                     Quarterly Results          Year to Date
                             ---------------------------------- -------------
                             Q3/08  Q2/08  Q1/08  Q4/07  Q3/07   2008   2007
                             -----  -----  -----  -----  -----   ----   ----
    Common Shareholders'
     Net Income/(Loss)
     ($millions)              (396)   519    533    555    577    656  1,664
    Operating Earnings/
     (Loss)(3)($millions)     (396)   519    533    560    583    656  1,734

    Basic Earnings/(Loss)
     per Common Share
     (EPS) ($)               (0.71)  0.92   0.95   0.98   1.02   1.17   2.92
    Fully Diluted EPS ($)    (0.71)  0.91   0.93   0.97   1.00   1.14   2.88
    Fully Diluted Operating
     EPS(3)($)               (0.71)  0.91   0.93   0.98   1.01   1.14   3.00

    Return on Common Equity
     (ROE) (%)               (10.2)  12.9   13.4   14.2   14.7    5.6   13.7
    Operating ROE(3)(%)      (10.2)  12.9   13.4   14.3   14.8    5.6   14.3

    Average Common Shares
     Outstanding (millions)  559.7  561.6  563.8  566.2  567.8  561.7  570.0
    Closing Common Shares
     Outstanding (millions)  559.7  559.9  561.9  564.1  566.4  559.7  566.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The Company reported a net loss attributable to common shareholders of
$396 million for the quarter ended September 30, 2008, compared with net
income of $577 million in the third quarter of 2007. The Company incurred
operating losses of $396 million for the third quarter of 2008 compared with
operating earnings of $583 million in the third quarter of 2007.
    Net losses in the third quarter of 2008 were driven by asset impairments
and credit-related losses, including write-downs related to the Company's
holdings in Lehman Brothers, Washington Mutual and AIG, of $636 million, a
steep decline in equity markets, resulting in charges to net income of
$326 million, as well as the unfavourable impact of claims and higher future
lapse assumptions in SLF Reinsurance.

    
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                 Q3 2008 - Capital Market Impact on Earnings

    ($millions, after-tax)

    Asset Impairments &
     Credit Related Losses              Equity Markets
    ----------------------              --------------

    Write-downs:                        Impact on Current Period Fees &
      Lehman Brothers             234   Present Value of Future Fees
                                        due to Lower Account Values
      Washington Mutual           228   (unhedged)                       131

      Other                       114   Increase in Reserves for
                             ---------  Segregated Fund Guarantee
                                  576   Benefits & Other Reserve
                                        Changes (net of hedging)         134
    Downgrades:                    60
                             ---------  Increase in Reserves for
                                        Universal Life Benefits
                                        (unhedged)                        61

                                                                    ---------
    Total                         636   Total                            326
                             ---------                              ---------
                             ---------                              ---------

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


    Excluding the capital market impacts described in the table above,
earnings for the third quarter of 2008 were $566 million or $1.00 per share.
    ROE for the third quarter of 2008 was a negative 10.2% compared with
14.7% for the third quarter of 2007. The negative ROE resulted from the loss
per share of $0.71, which was lower than EPS of $1.00 reported in the prior
year.
    Operating loss per share for the third quarter of 2008 was $0.71, down
$1.72 from operating EPS of $1.01 in the third quarter of 2007. Operating ROE
of negative 10.2% for the quarter was down from operating ROE of 14.8% in the
third quarter of 2007.
    Common shareholders net income for the first nine months of 2008 was
$656 million, a decrease of $1.0 billion compared to the same period in 2007.
Earnings in the first nine months of 2008 were affected by credit-related
losses, including write-downs related to the Company's holdings in Lehman
Brothers, Washington Mutual and AIG, a steep decline in equity markets, the
impact of wider credit spreads and increased investment in growth in SLF Asia
as well as the unfavourable impact of claims and higher future lapse
assumptions in SLF Reinsurance. Results for the first nine months of 2007
included after-tax charges to earnings related to the intangible asset
write-down for the retirement of the Clarica brand and for the premium payable
to redeem Partnership Capital Securities in Corporate Support as well as
higher earnings in SLF U.K. as a result of several non-recurring items.

    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 details concerning the segments and the
purpose and use of the segmented information are outlined in the notes to Sun
Life Financial Inc.'s financial statements, which are prepared in accordance
with Canadian generally accepted accounting principles (GAAP). Where
appropriate, information on a business segment has been presented both in
Canadian dollars and the segment's local currency to facilitate the analysis
of underlying business trends. ROE for the business segments is a "Non-GAAP"
financial measure as outlined under "Use of Non-GAAP Financial Measures."

    
    SLF Canada
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                             ---------------------------------- -------------
                                     Quarterly Results          Year to Date
                             ---------------------------------- -------------
                             Q3/08  Q2/08  Q1/08  Q4/07  Q3/07   2008   2007
                             -----  -----  -----  -----  -----   ----   ----
    Common Shareholders'
     Net Income ($millions)
      Individual Insurance
       & Investments            28    177    149    147    152    354    475
      Group Benefits            81     80     49     76     59    210    179
      Group Wealth              48     39     49     40     46    136    133
                               ----   ----   ----   ----   ----   ----   ----
        Total                  157    296    247    263    257    700    787

    ROE (%)                    8.8   16.7   14.1   15.0   14.7   13.2   15.0
    -------------------------------------------------------------------------


    SLF Canada's earnings decreased by $100 million, or 39%, compared to the
third quarter of 2007. This decrease is mainly attributable to charges of
$126 million from the impact of declining equity markets and asset impairments
and credit-related losses of $59 million. This was partly offset by favourable
morbidity experience, increased interest rates and asset reinvestment gains
from wider credit spreads.

    -   Individual Insurance & Investments earnings for the third quarter of
        2008 decreased by 82% from the third quarter of 2007. Earnings in the
        third quarter of 2008 were unfavourably impacted by charges of
        $126 million related to a decline in equity markets and asset
        impairments and credit-related losses of $38 million. These charges
        were partially offset by increased interest rates and asset
        reinvestment gains from wider credit spreads.

    -   Group Benefits earnings for the third quarter of 2008 increased by
        37% from the third quarter of 2007 due primarily to favourable
        morbidity experience.

    -   Group Wealth earnings for the third quarter of 2008 were relatively
        unchanged compared to the third quarter of 2007.
    

    Nine-month earnings decreased by $87 million, or 11%, over the same
period in 2007. This decrease was mainly attributable to the impact of
declining equity markets and credit-related losses, partially offset by more
favourable morbidity experience and asset reinvestment gains from wider credit
spreads in 2008.
    Despite the volatility and uncertainty created by the disruption in
global capital markets, SLF Canada maintained strong sales momentum. In
Individual Insurance and Investments, segregated fund sales, including sales
of SunWise Elite Plus with the guaranteed minimum withdrawal benefit rider,
increased by 34% to $598 million in the third quarter of 2008 over the same
period last year. In Group Wealth, Group Retirement Services sales increased
by 128% to $1.2 billion over the third quarter of 2007, and $174 million of
retained assets from members leaving plans, representing a 41% retention
ratio.

    
    SLF U.S.
    -------------------------------------------------------------------------
                             ---------------------------------- -------------
                                     Quarterly Results          Year to Date
                             ---------------------------------- -------------
                             Q3/08  Q2/08  Q1/08  Q4/07  Q3/07   2008   2007
                             -----  -----  -----  -----  -----   ----   ----
    Common Shareholders'
     Net Income/(Loss)
     (US$millions)
      Annuities               (456)    22     75     57     99   (359)   259
      Individual Insurance     (76)    35     19     84     41    (22)    83
      Employee Benefits
       Group (EBG)              30     25     19     24     22     74     46
                               ----   ----   ----   ----   ----   ----   ----
        Total (US$mm)         (502)    82    113    165    162   (307)   388

        Total (C$mm)          (533)    83    113    157    170   (337)   424

    ROE (%)                    n/m    7.8   10.7   15.3   14.7    n/m   12.9
    -------------------------------------------------------------------------
    


    Earnings for SLF U.S. decreased C$703 million, compared to the third
quarter of 2007. In U.S. dollars, earnings decreased by US$664 million,
compared to the third quarter of 2007. Earnings decreased in the third quarter
of 2008 primarily as a result of credit-related losses, including impairments
of US$460 million, and the reserve impact of US$170 million required by
changes in capital markets. The increase in variable annuity reserves was
driven by a decline in variable annuity accounts which, although partially
offset by the benefit of hedges, increased the value of guaranteed benefits,
and lowered the expected stream of future fee income.

    
    -   Annuities earnings decreased by US$555 million compared to the third
        quarter of 2007 primarily as a result of credit related losses,
        including impairments of US$328 million, and the negative impact of
        capital market movements on annuity reserves amounting to
        US$170 million.

    -   Individual Insurance earnings were lower by US$117 million compared
        to the third quarter of 2007 primarily due to credit related losses,
        including impairments of US$124 million.

    -   Employee Benefits Group earnings were higher by US$8 million compared
        to the third quarter of 2007 as a result of favourable morbidity
        experience.
    

    Nine-month earnings decreased by US$695 million compared to the same
period in 2007 due to credit related losses, including impairments, the
negative impact of financial market movements on actuarial reserves for the
variable annuity block and the negative impact of wider credit spreads and
credit related allowances on actuarial reserves for the fixed annuity block.
The negative impact of these amounts was partially offset by positive variable
annuity hedge experience in Annuities, the favorable impact of the of the
acquisition in the second quarter of 2007 in EBG and decreased new business
strain on universal life sales in Individual Insurance.
    During the third quarter of 2008 Sun Life Financial appointed Jon A.
Boscia as President, Sun Life Financial, with overall responsibility for the
Company's U.S. business as well as worldwide marketing. Also joining SLF
U.S.'s operations are Westley V. Thompson and Terrence J. Mullen who will
serve as President, SLF U.S. and President, Sun Life Financial Distributors,
respectively. Bob Salipante, former President of SLF U.S., was appointed
President, SLF International, assuming enterprise-wide responsibility for
information technology, shared business services, SLF U.K., Reinsurance and
other international strategic initiatives, with continued responsibility for
leading Sun Life's Bermuda operations, International Variable Annuity Center,
Group Business International, and International Distribution.

    
    MFS

    -------------------------------------------------------------------------
                             ---------------------------------- -------------
                                     Quarterly Results          Year to Date
                             ---------------------------------- -------------
                             Q3/08  Q2/08  Q1/08  Q4/07  Q3/07   2008   2007
                             -----  -----  -----  -----  -----   ----   ----
    Common Shareholders'
     Net Income
     (US$ millions)             47     55     59     74     65    161    188
    Common Shareholders'
     Net Income
     (C$ millions)              49     56     59     73     68    164    208

    Pre-tax Operating
     Profit Margin Ratio(4)    29%    34%    35%    40%    36%    33%    35%
    Average Net Assets
     (US$ billions)            176    191    187    203    199    185    196
    Assets Under Management
     (US$ billions)            162    183    184    200    204    162    204
    Net Sales/(Redemptions)
     (US$ billions)           (2.0)   1.0   (2.7)  (3.2)  (0.9)  (3.7)  (0.8)
    Market Movement
     (US$ billions)          (19.4)  (2.0) (12.5)  (1.5)   3.3  (33.9)  17.2
    S&P 500 Index
     (daily average)         1,255  1,371  1,349  1,495  1,489  1,325  1,471
    -------------------------------------------------------------------------
    


    Earnings for MFS decreased C$19 million, or 28%, compared to the third
quarter of 2007. In U.S. dollars, third quarter earnings were US$47 million,
US$18 million, or 28%, lower than in the third quarter of 2007 primarily due
to lower average net assets as a result of a decline in equity markets.
Average net assets of US$176 billion decreased 12% compared to the third
quarter of 2007.
    Nine-month earnings decreased by US$27 million, or 14%, compared to the
same period in 2007 primarily due to lower average net assets as a result of a
decline in equity markets.
    Total assets under management at September 30, 2008 were US$162 billion,
a decrease of US$21 billion compared to June 30, 2008, driven by market
depreciation of US$19.4 billion, and net redemptions of US$2.0 billion.
Despite volatile market conditions, fund performance at MFS remained strong
with 95%, 95% and 83% of fund assets ranked in the top half of their Lipper
Category Average over 3, 5 and 10 years respectively, as of September 30,
2008.

    
    SLF Asia

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                             ---------------------------------- -------------
                                     Quarterly Results          Year to Date
                             ---------------------------------- -------------
                             Q3/08  Q2/08  Q1/08  Q4/07  Q3/07   2008   2007
                             -----  -----  -----  -----  -----   ----   ----
    Common Shareholders'
     Net Income/(Loss)
     ($millions)                (8)    12     13     38     30     17     85

    ROE (%)                   (2.7)   4.1    4.4   13.6   10.9    1.9   10.1
    -------------------------------------------------------------------------
    


    Third quarter 2008 loss for SLF Asia of $8 million was down by
$38 million from earnings of $30 million in the third quarter of 2007
primarily due to credit-related losses of $18 million, and increased
investment in growth in India.
    Nine-month earnings for the period ended September 30, 2008 were down 80%
from last year due to the effect of wider credit spreads in Hong Kong and
increased investment in growth in India. These decreases were partially offset
by the effect of reserve changes in Hong Kong and in the Philippines.
    SLF Asia individual life insurance sales in the third quarter of 2008
were up 11% over the same period last year, driven primarily by continued
sales momentum in India. In local currency, individual life insurance sales in
India were up 33% from increased distribution reach, where the direct sales
force now exceeds 130,000 advisors across 600 branches. In the Philippines,
individual life insurance sales were up 6% from higher traditional product
sales. Traditional product sales were up in Hong Kong and China by 130% and
70%, respectively, offset by lower unit linked product sales on concerns over
market volatility. In China, Sun Life Everbright Life Insurance Company opened
its sixth branch in Guangzhou, the capital city of the Guangdong province in
Southern China, bringing its presence to 18 cities in China.

    Corporate

    Corporate includes the results of Sun Life Financial U.K. (SLF U.K.), Sun
Life Financial Reinsurance (SLF Reinsurance) and Corporate Support, which
includes run-off reinsurance as well as investment income, expenses, capital
and other items not allocated to Sun Life Financial's other business groups.

    
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                             ---------------------------------- -------------
                                     Quarterly Results          Year to Date
                             ---------------------------------- -------------
                             Q3/08  Q2/08  Q1/08  Q4/07  Q3/07   2008   2007
                             -----  -----  -----  -----  -----   ----   ----
    Common Shareholders'
     Net Income/(Loss)
     ($millions)
      SLF U.K.                  69     41     59     23     48    169    190
      SLF Reinsurance          (93)    (1)    22     25     21    (72)    72
      Corporate Support        (37)    32     20    (24)   (17)    15   (102)
                               ----   ----   ----   ----   ----   ----   ----
        Total                  (61)    72    101     24     52    112    160
    -------------------------------------------------------------------------
    


    Earnings in the third quarter of 2008 decreased by $113 million compared
to the third quarter of 2007 due to the unfavourable impact of claims and
higher future lapse assumptions in SLF Reinsurance as well as a decline due to
equity markets of $12 million and losses on asset impairments of $43 million
in Corporate Support. These decreases were partially offset by higher earnings
in SLF U.K. as a result of the favourable impact of an internal reinsurance
transaction.
    Nine-month earnings decreased by $48 million, or 30%, over the same
period in 2007 due to the unfavourable impact of mortality and the recapture
of reinsurance treaties in SLF Reinsurance. Results in the first nine months
of 2007 included after-tax charges to earnings related to the intangible asset
write-down for the retirement of the Clarica brand and for the premium payable
to redeem Partnership Capital Securities in Corporate Support as well as
higher earnings in SLF U.K. as a result of several non-recurring items.

    Additional Financial Disclosure

    Revenue

    Under Canadian GAAP, revenues include regular premiums received on life
and health insurance policies as well as fixed annuity products and fee income
received for services provided. Net investment income comprised of income
earned on general fund assets and changes in the value of held-for-trading
assets and derivative instruments are also included. 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).

    
    -------------------------------------------------------------------------
                                  Quarterly Results             Year to Date

                       Q3/08   Q2/08   Q1/08   Q4/07   Q3/07    2008    2007
                       -----   -----   -----   -----   -----    ----    ----
    Revenues
     ($millions)
      SLF Canada       1,279   2,276   2,320   2,610   2,500   5,875   6,675
      SLF U.S.           546   1,624   1,060   1,637   2,052   3,230   6,193
      MFS                342     367     362     390     417   1,071   1,297
      SLF Asia           180      71     119     294     286     370     683
      Corporate          213      73      25     474     444     311     935
                      ------- ------- ------- ------- ------- ------- -------
    Total as Reported  2,560   4,411   3,886   5,405   5,699  10,857  15,783

    Impact of currency
     and changes in
     the fair value of
     held-for-trading
     assets and
     derivative
     instruments      (3,009) (1,214) (1,760)   (209)   (154) (5,983) (1,467)
                      ------- ------- ------- ------- ------- ------- -------

    Total Adjusted
     Revenue           5,569   5,625   5,646   5,614   5,853  16,840  17,250
    -------------------------------------------------------------------------
    


    Revenues for the third quarter of 2008 were $2.6 billion, down
$3.1 billion from the comparable period a year ago. The primary reason for the
decrease was the unfavourable impact on market values of $3.0 billion for
held-for-trading assets and non-hedging derivatives compared to $154 million
in the third quarter of 2007. After adjusting for the impact of currency and
fair value changes in held-for-trading assets the third quarter 2008 revenue
of $5.6 billion was $284 million lower than the same period a year ago. This
decrease was primarily driven by an increase of $237 million in realized
losses and write-downs on available-for-sale assets, lower interest and
limited partnership income and lower fee income of $105 million only partly
offset by increased premium income of $153 million.
    Premium revenue of $3.6 billion in the third quarter of 2008 was up
$153 million from the third quarter of 2007. Increased annuity revenues of
$237 million in SLF U.S. on higher sales, higher Life and Health insurance
premiums of $70 million in SLF Canada, growth of $43 million in Life insurance
premiums in SLF Asia and SLF Reinsurance were partly offset by a reduction of
$167 million in SLF U.S. Life insurance premiums, mostly from lower sales.
    Net investment losses were $1.7 billion in the third quarter of 2008
compared to net investment income of $1.4 billion in the same period a year
ago. The third quarter 2008 income was negatively impacted by unrealized
losses of $3.0 billion on held-for-trading assets and derivatives compared to
unrealized losses of $154 million a year ago. Volatile equity markets, wider
credit spreads and global economic turbulence, particularly in the financial
sector, were the most significant reasons for the negative results in 2008.
    Fee income of $693 million in the third quarter of 2008 was down
$105 million compared to the same period in the previous year with lower fees
of $47 million earned in SLF U.S. mostly due to the sale of Independent
Financial Marketing Group and Sun Life Retirement Services (U.S.), Inc. MFS
was also down $56 million mostly from the impact of lower average net assets.
    Total revenues of $10.9 billion for the nine months ended September 30,
2008 decreased by $4.9 billion compared to the same period in 2007 primarily
from lower net investment income. Net investment losses were $1.4 billion for
the nine months ended September 30, 2008 compared to net investment income of
$3.4 billion for the same period a year ago. The decrease was primarily due to
the volatile market conditions and the tight credit environment that resulted
in fair value losses on held-for-trading assets and non-hedging derivatives
during the first nine months of 2008 of $5.7 billion compared to $1.5 billion
for the same period a year ago. There was also a reduction of $415 million in
total revenues as a result of changes in foreign exchange rates and a
reduction of $246 million due to higher realized losses and write-downs on
available-for-sale assets.

    Assets Under Management (AUM)

    AUM were $388.7 billion as at September 30, 2008 compared to
$414.2 billion as at June 30, 2008, and $428.1 billion as at September 30,
2007. The decrease of $25.5 billion between June 30, 2008 and September 30,
2008 resulted primarily from:

    
    (i)   negative market movements of $29.4 billion;
    (ii)  a decrease of $3.0 billion from the change in value of held-for-
          trading assets;
    (iii) net redemptions of mutual, managed and segregated funds of
          $2.1 billion; partially offset by
    (iv)  an increase of $8.7 billion from a weaker Canadian dollar compared
          to the prior period exchange rates.

    AUM decreased $39.4 billion between September 30, 2007 and September 30,
2008. The reduction in AUM related primarily to:

    (i)   declining market performance that lowered AUM by $48.9 billion;
    (ii)  net redemptions of mutual, managed and segregated funds of
          $2.3 billion;
    (iii) a decrease of $5.7 billion from the change in value of held-for-
          trading assets; partly offset by
    (iv)  an increase of $16.0 billion from the weakening of the Canadian
          dollar against foreign currencies.
    

    Changes in the Balance Sheet and Shareholders' Equity

    Total general fund assets were $113.2 billion as at September 30, 2008,
compared to $114.7 billion a year earlier, with the unfavourable impact of
$5.7 billion from the change in value of held-for-trading assets only partly
offset by an increase of $2.7 billion from currency fluctuations.
    Total general fund assets decreased by $2.3 billion from the December 31,
2007 level of $115.5 billion. The favourable impact of $2.5 billion from
currency fluctuations was more than offset by the declines in general fund
assets in SLF U.S. and SLF U.K. that included the negative changes in value of
held-for-trading assets.
    Actuarial and other policy liabilities of $77.6 billion as at
September 30, 2008 decreased by $2.5 billion compared to September 30, 2007,
mainly due to the decrease in actuarial and other policy liabilities related
to the corresponding changes in fair value of held-for-trading assets. The
currency effect resulting from an appreciated Canadian dollar at the end of
the third quarter of 2008 compared to the same period a year ago increased
actuarial and other policy liabilities by $1.7 billion.
    Actuarial and other policy liabilities were lower by $2.3 billion
compared to the December 31, 2007 amount of $79.8 billion. The decrease in
actuarial and other policy liabilities resulting from the corresponding
changes in fair value of held-for-trading assets was partially offset by
$1.6 billion in currency fluctuations.
    Shareholders equity, including Sun Life Financial Inc.'s preferred share
capital, was $16.5 billion as at September 30, 2008 compared to $17.5 billion
as at June 30, 2008 and $17.1 billion as at December 31, 2007. The decrease of
$964 million between June 30, 2008 and September 30, 2008 resulted primarily
from:

    
    (i)   shareholders' net loss of $378 million, before preferred share
          dividends of $18 million;
    (ii)  unrealized losses on available-for-sale assets in other
          comprehensive income (OCI) of $659 million;
    (iii) common share dividend payments of $202 million; partly offset by
    (iv)  the contribution from common shares repurchased and cancelled, net
          of stock-based compensation costs (including stock options
          exercised) of $4 million; and
    (v)   an increase of $289 million from currency fluctuations

    Shareholders' equity decreased $603 million between December 31, 2007 and
September 30, 2008. The decrease in shareholders' equity related primarily to:

    (i)   unrealized losses on available-for-sale assets in OCI of
          $1.0 billion;
    (ii)  common share dividend payments of $607 million; and
    (iii) the cost of common shares repurchased and cancelled, net of stock-
          based compensation costs (including stock options exercised) of
          $161 million; partially offset by
    (iv)  shareholders' net income of $709 million, before preferred share
          dividends of $53 million; and
    (v)   an increase of $536 million from currency fluctuations.

    As at September 30, 2008, Sun Life Financial Inc. had 559.7 million common
shares and 61.0 million preferred shares outstanding.

    Cash Flows

    -------------------------------------------------------------------------
                                       -----------------   -----------------
                                       Quarterly Results       Year to Date
                                       -----------------   -----------------
    ($millions)                          Q3/08    Q3/07       2008      2007
                                         -----    -----       ----      ----
    Cash and cash equivalents,
     beginning of period                 3,114    3,313      3,603     4,936
    Cash flows provided by (used in):
      Operating activities               1,126      794      1,918       587
      Financing activities                (188)    (326)       (10)     (726)
      Investing activities                 949      299       (534)     (530)
    Changes due to fluctuations in
     exchange rates                        117     (191)       141      (378)
                                         ------   ------     ------    ------
    Increase (decrease) in cash and
     cash equivalents                    2,004      576      1,515    (1,047)
                                         ------   ------     ------    ------
    Cash and cash equivalents,
     end of period                       5,118    3,889      5,118     3,889
    Short-term securities,
     end of period                       1,496    1,016      1,496     1,016
                                         ------   ------     ------    ------
    Total cash, cash equivalents
     and short-term securities           6,614    4,905      6,614     4,905
                                         ------   ------     ------    ------
                                         ------   ------     ------    ------

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


    Net cash, cash equivalents and short-term securities of $6.6 billion as
at the end of the third quarter of 2008 were up by $1.7 billion compared to
the third quarter of 2007. Cash generated by operations was $332 million
higher in the third quarter of 2008 than 2007. The increase was mainly due to
increased premiums and lower maturities and surrenders in SLF U.S. annuities.
Cash provided by investing activities was up by $650 million in the third
quarter of 2008 compared with the same quarter of 2007. The increase was due
to lower levels of bond investments in the third quarter of 2008 than 2007.
Cash used by financing activities in the third quarter of 2008 was
$138 million lower than in the same period a year ago mainly from lower levels
of common share repurchase. Currency fluctuations increased cash balances by
$117 million in the third quarter of 2008 compared to a reduction of
$191 million in the comparable period a year ago.
    There was an increase in cash and cash equivalents of $1.5 billion in the
first nine months of 2008 compared to a $1.0 billion decrease in cash and cash
equivalents in the same period of 2007. Cash generated from operating
activities was up by $1.3 billion, primarily due to decreased commissions and
operating expenses and lower levels of maturities and surrenders.
    Cash used in financing activities in the first nine months of 2008
decreased by $716 million from the first nine months of 2007 as the
US$600 million Partnership Capital Securities were redeemed during 2007.
Financing activities also reflected the issuance of $750 million in principal
amount of subordinated unsecured debentures in the first nine months of 2008
as compared to the $400 million in principal amount of subordinated unsecured
debentures, $250 million in principal amount of senior unsecured debentures
and preferred shares of $250 million issued in the first three quarters of
2007. Repurchase of common shares was also lower by $156 million in the first
nine months of 2008 than 2007.
    Currency fluctuations increased cash balances by $141 million in the
first nine months of 2008 compared to a reduction of $378 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.

    
    -------------------------------------------------------------------------
    QUARTERLY FINANCIAL SUMMARY

                      -------------------------------------------------------
                                        Quarterly Results
                      -------------------------------------------------------
                      Q3/08  Q2/08  Q1/08  Q4/07  Q3/07  Q2/07  Q1/07  Q4/06
                      -----  -----  -----  -----  -----  -----  -----  -----
    Common
     Shareholders'
    Net Income (Loss)
     ($millions)       (396)   519    533    555    577    590    497    545
    Operating
     Earnings (Loss)
     ($millions)       (396)   519    533    560    583    593    558    545

    Basic EPS ($)     (0.71)  0.92   0.95   0.98   1.02   1.03   0.87   0.95
    Fully Diluted
     EPS ($)          (0.71)  0.91   0.93   0.97   1.00   1.02   0.86   0.94
    Fully Diluted
     Operating EPS($) (0.71)  0.91   0.93   0.98   1.01   1.03   0.96   0.94

    Total Revenue
     ($millions)      2,560  4,411  3,886  5,405  5,699  4,500  5,584  6,137

    Total AUM
     ($billions)        389    414    417    426    428    440    451    442
    -------------------------------------------------------------------------
    

    Investments

    The Company had total general fund invested assets of $100.7 billion as
at September 30, 2008. 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 84% of
the general funds in cash and fixed income investments. Stocks and real estate
comprised 4% and 5% of the portfolio respectively as at September 30, 2008.
The remaining 7% of the portfolio is comprised of policy loans, other invested
assets and derivative assets.
    As at September 30, 2008, the Company held $56.6 billion of bonds, which
constituted 56% of the Company's overall investment portfolio. Bonds with an
investment grade of "A" or higher represented 68%, and bonds rated "BBB" or
higher represented 97% of the total bond portfolio as at September 30, 2008
down from 98% at December 31, 2007.
    As at September 30, 2008, the Company held $10.5 billion of non-public
bonds, which constituted 18.6% of the Company's overall bond portfolio.
Corporate bonds that are not issued or guaranteed by sovereign, regional and
municipal governments represented 77% of the total bond portfolio as at
September 30, 2008, compared to 76% as at December 31, 2007.
    The Company had total exposure of $750 million to monoline insurers as at
September 30, 2008, of which $80 million, or 10.7%, represented direct
exposure to the monoline insurers and $670 million was indirect exposure. The
indirect exposure represents the total value of bonds for which the monoline
insurers have provided credit insurance. Credit insurance generally provides
the underlying bonds with a credit rating of AAA. Absent the credit insurance,
94% of the underlying bonds have an investment grade credit rating (0.7% AAA,
9.9% AA, 35.7% A and 47.3% BBB) and 6% have a rating of BB or lower. At
September 30, 2008, no single insurer represented more than 35.5% of the total
monoline exposure and no underlying issuer represented more than 10.5% of the
total exposure in connection with monoline insurers.
    In the aggregate, the Company recognized impairment related pre-tax
losses of $702 million during the quarter in connection with held-for-trading
and available-for-sale assets. These impairments were mainly due to Lehman
Brothers and Washington Mutual bond holdings. Tax recoveries of $65 million
and related actuarial reserve adjustments in connection with these impairments
resulted in the Company recording an after tax loss of $576 million on the
impairments during the quarter. The Company has not recognized a tax recovery
on $268 million of unrealized capital losses related to these impairments in
SLF U.S., which are only available in the U.S. to offset capital gains. In the
future when capital gains are available to offset these capital losses, it is
estimated that an additional tax benefit of $94 million, based on current tax
rules, will be recorded on these losses.
    The Company's gross unrealized losses as at September 30, 2008 for
available-for-sale bonds were $1.1 billion. In addition, the fair value of
held-for-trading bonds was $4.4 billion below par as at September 30, 2008.
The total difference between fair value and par value is largely due to the
widening of credit spreads primarily in the financial and securitization
sectors representing $3.7 billion of the total.
    The Company's bond portfolio as at September 30, 2008 included
$15.0 billion in the financial sector, representing approximately 26% of the
Company's bond portfolio, or 14.9% of the Company's total invested assets.
This compares to $16.6 billion as at December 31, 2007. The $1.6 billion
decrease in the value of financial sector bond holdings is primarily the
result of the impact of higher credit spreads on asset values.
    The Company's bond portfolio as at September 30, 2008 included
$5.7 billion of asset-backed securities reported as bonds, representing
approximately 10% of the Company's bond portfolio, or 5.6% of the Company's
total invested assets. This compares to $6.6 billion as at December 31, 2007.
The $0.9 billion decrease in the value of asset-backed securities is primarily
the result of the impact of higher credit spreads on asset values.

    
    -------------------------------------------------------------------------
                                       September 30, 2008   December 31, 2007
    -------------------------------------------------------------------------
                                         Fair  Investment    Fair  Investment
    ($millions)                          Value   Grade %     Value   Grade %
    -------------------------------------------------------------------------
    Commercial Mortgage-Backed
     Securities                          2,149     99.6%     2,523     99.6%
    Residential Mortgage-Backed
     Securities
      Agency                             1,145    100.0%     1,112    100.0%
      Non-Agency                         1,156     98.7%     1,486     99.9%
    Collateralized Debt Obligations        337     96.9%       422     97.5%
    Other(*)                               874     98.3%     1,075     99.6%
    -------------------------------------------------------------------------
    Total                                5,661     99.1%     6,618     99.6%
    -------------------------------------------------------------------------
    (*) Other includes subprime, a portion of the Company's exposure to alt-a
        and other asset-backed securities


    The Company's asset-backed securities are further broken down in the
tables below to reflect ratings and vintages of the assets within this
portfolio.

    -------------------------------------------------------------------------
    As at                           RMBS -      RMBS -
     September 30, 2008    CMBS     Agency   Non-Agency     CDOs      Other
    -------------------------------------------------------------------------
    Rating
    AAA                    66.6%     100.0%      34.3%      48.1%      34.7%
    AA                      8.3%       0.0%      45.3%      19.8%      20.6%
    A                      10.4%       0.0%      13.9%      16.6%      30.4%
    BBB                    14.3%       0.0%       5.2%      12.4%      12.6%
    BB & Below              0.4%       0.0%       1.3%       3.1%       1.7%
    -------------------------------------------------------------------------
    Total                 100.0%     100.0%     100.0%     100.0%     100.0%
    -------------------------------------------------------------------------
    Vintage
    2005 & Prior           80.3%      60.9%      86.9%      67.5%      71.0%
    2006                   14.7%       9.7%      11.0%      17.0%      14.9%
    2007                    4.8%      11.4%       2.1%      15.5%       2.5%
    2008                    0.2%      18.0%       0.0%       0.0%      11.6%
    -------------------------------------------------------------------------
    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                           RMBS -      RMBS -
     December 31, 2007     CMBS     Agency   Non-Agency     CDOs      Other
    -------------------------------------------------------------------------
    Rating
    AAA                    63.2%     100.0%      31.8%      43.8%      35.0%
    AA                      8.3%       0.0%      48.2%      41.4%      22.5%
    A                      10.5%       0.0%      14.7%      11.7%      28.4%
    BBB                    17.6%       0.0%       5.2%       0.6%      13.7%
    BB & Below              0.4%       0.0%       0.1%       2.5%       0.4%
    -------------------------------------------------------------------------
    Total                 100.0%     100.0%     100.0%     100.0%     100.0%
    -------------------------------------------------------------------------
    Vintage
    2005 & Prior           79.9%      68.6%      84.7%      61.5%      80.4%
    2006                   15.3%      10.3%      12.6%      21.0%      15.9%
    2007                    4.8%      21.1%       2.7%      17.5%       3.7%
    -------------------------------------------------------------------------
    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 September 30, 2008, the Company had indirect exposure to
residential sub-prime and Alternative-A (Alt-A) loans of $229 million and
$158 million, respectively, together representing approximately 0.4% 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. 94% of these investments either were issued before 2006 or
have an "AAA" rating.
    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)                       September 30, 2008   December 31, 2007
    -------------------------------------------------------------------------

    Net fair value                                   504               1,309
    Total notional amount                         49,852              42,642
    Credit equivalent amount                       1,983               2,351
    Risk weighted credit equivalent amount            46                  56
    -------------------------------------------------------------------------
    

    The total notional amount increased to $49.9 billion as at September 30,
2008, from $42.6 billion as at December 31, 2007, and the net fair value
decreased to $0.5 billion as at September 30, 2008 from the December 31, 2007
amount of $1.3 billion. 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 $86.9 million as at September 30, 2008, $38.2 million more than
the December 31, 2007 level for these assets. In addition to allowances
reflected in the carrying value of mortgages and corporate loans, the Company
had $3.0 billion for possible future asset defaults for all financial assets
included in its actuarial liabilities as at September 30, 2008, compared with
$2.9 billion as at December 31, 2007.

    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 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 Minimum Continuing
Capital Surplus Requirements (MCCSR). The Office of the Superintendent of
Financial Institutions (OSFI) generally expects life insurance companies to
maintain an MCCSR ratio of 150% or greater. With an MCCSR ratio of 202% Sun
Life Assurance was well above minimum regulatory capital levels as at
September 30, 2008 compared to 213% as at December 31, 2007. The 11 percentage
drop is primarily due to market impacts during the first nine-months of 2008
and write-downs on assets in Sun Life Assurance's investment portfolio. Other
subsidiaries are subject to local capital requirements in the jurisdictions in
which they operate.
    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. The Company also raises funds from time
to time, through borrowing and issuing of securities, to finance growth,
acquisitions or other needs. As at September 30, 2008 Sun Life maintained
cash, cash equivalents and short-term securities totaling more than
$6.6 billion. In addition, the Company's investment portfolio contains over
$12 billion of government bonds.

    Outlook and Risk Factors

    During the third quarter of 2008, global capital markets deteriorated,
increasing the possibility that the global economy could be entering a
recessionary period. If these unprecedented levels of volatility and market
turmoil continue, the Company's financial results would be materially
impacted. The risks described below should be considered in conjunction with
other risk factors described in Sun Life Financial Inc.'s MD&A and Annual
Information Form (AIF) for the year ended December 31, 2007.
    The Company has a high quality, well diversified investment portfolio in
several asset classes. The bond portfolio (making up $56.6 billion of the
Company's total invested assets) is well diversified, both geographically and
by sector. The Company also has a $15 billion mortgage portfolio with
approximately 4,500 mortgages and $4.6 billion in direct real estate.
Continued deterioration in the global markets could adversely impact the
Company's invested asset portfolio, including asset classes such as equities,
commercial mortgages and real estate, through realized or unrealized losses
and increased provisions for asset default.
    Continued volatility in the capital markets, including deteriorating
credit, may also have a significant impact on the value of the fixed income
assets in the Company's investment portfolio. Events that result in defaults,
impairments or downgrades of the securities within the investment portfolio
would cause the Company to record realized or unrealized losses and increase
its provisions for asset default, adversely impacting earnings.
    Credit spreads on corporate bonds and asset backed securities have
widened significantly throughout the first nine months of 2008. Further
widening of credit spreads may have a material impact on the value of fixed
income assets. For certain products the decrease in market value due to spread
widening may lead to losses in the event of the liquidation of assets prior to
maturity.
    Declining and volatile equity markets may have a negative impact on sales
and redemptions of variable insurance and annuity products. As well, certain
annuity and segregated fund products have guarantees that are exposed to
equity market performance. The cost of providing for these guarantees
increases under adverse market conditions. Declines in equity markets will
result in lower fee income and earnings in the Company's wealth management
businesses where results of these operations are based upon the fair value of
assets under management or administration. Furthermore, declining equity
markets may result in an increase in required capital for regulatory purposes.
    Movements in interest rates could have an adverse impact on the Company's
business and profitability in several ways. Volatility in interest rates may
have a negative impact on sales of certain insurance and annuity products and
adversely impact the expected pattern of surrenders on existing policies.
Rapid increases in interest rates may increase the risk that policyholders
will surrender their contracts forcing the Company to liquidate investment
assets at a loss. Conversely, rapid declines in interest rates would increase
the value of fixed income assets, but may result in reinvestment at
significantly lower investment yields resulting in lower earnings. The Company
manages the risk of investing in a changing interest rate environment, but may
not be able to fully mitigate the interest rate risk of the Company's assets
relative to its liabilities. As well, certain products have explicit or
implicit interest rate guarantees and, if interest rates fall below those
guarantee levels, the Company may be required to increase actuarial
liabilities with an adverse affect on earnings.
    Sun Life has implemented hedging programs aimed at reducing the potential
impact of capital market volatility on the value of certain guaranteed
benefits. To the extent that positions are not fully hedged, or are subject to
other risk factors such as model risk, basis risk and operational risk, the
hedging programs may be subject to reduced effectiveness or increased costs,
adversely impacting the Company's financial position and results of
operations.
    The Company engages in transactions including securities lending,
repurchase agreements and capital markets transactions, including reserve
financing and corporate funding. The cost and the Company's ability to execute
these transactions may be negatively impacted by market volatility. Continued
disruption in financial markets may limit the Company's access to capital in
the event the Company is required to seek additional liquidity.
    The Company's earnings will also be impacted by changes in the value of
the Canadian dollar versus foreign currencies, most notably the U.S. dollar.

    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 strategic risk, credit risk, market risk,
insurance risk and operational 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 MD&A and AIF for
the year ended December 31, 2007. Interest rate and equity market
sensitivities are disclosed in the annual MD&A, but change with movements in
market levels, business portfolio changes, or as management actions are taken.
Additional discussion on risks associated with global market disruptions can
be found in "Outlook and Risk Factors".

    Regulatory and Legal 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, 2007, 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 during the Company's most recent three-month period
ended September 30, 2008 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 (AcSB) confirmed January 1, 2011
as the date IFRS will replace current Canadian standards and interpretations
as Canadian generally accepted accounting principles (Canadian GAAP) for
publicly accountable enterprises. In order to prepare for the conversion to
IFRS, the Company 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;
    -   financial disclosure requirements;
    -   information technology and data systems impacts;
    -   internal control over financial reporting and
    -   impacts on business groups and functions
    

    The Company has established a formal project governance structure that
includes a Steering Committee (consisting of senior management from Finance
throughout the organization, Internal Audit and Information Technology), a
Technical and Business Review Committee and many issue-specific working
groups. Periodic updates are provided to the senior executives and to the
Audit Committee of our Board of Directors.
    Key elements of the plan that are currently in progress include on-going
education and training sessions for employees throughout the organization,
determination of changes in accounting policies (including insurance contract
classifications), the related impact analysis and financial disclosure
requirements.
    As implications of the adoption are identified, information technology
and data systems impacts will be assessed. Similarly, impacts on business
activities will be assessed as differences are identified between the
Company's current accounting policies and IFRS. As the implementation process
develops, the Company will continue to revisit its changeover plan,
accordingly changes to the plan may be required as more information on the
adoption of IFRS becomes known.

    Subsequent Events

    On October 6, 2008, Sun Life Financial announced the sale of its 37%
interest in CI Financial Income Fund for $2.3 billion to Scotiabank in an all
cash, private transaction. The transaction, which is subject to regulatory
approval, is expected to close in the fourth quarter and generate a pre-tax
accounting gain of $1.1 billion.

    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.
Management measures the performance of the Company's business segments using
ROE that is based on an allocation of common equity or risk capital to the
business segments, using assumptions, judgments and methodologies that are
regularly reviewed and revised by management. 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 in the Investor Relations - Financial Publications section
of Sun Life Financial's website, www.sunlife.com.
    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
                      -------------------------------------------------------
                      Q3/08  Q2/08  Q1/08  Q4/07  Q3/07  Q2/07  Q1/07  Q4/06
                      -----  -----  -----  -----  -----  -----  -----  -----
    Reported
     Earnings (GAAP)   (396)   519    533    555    577    590    497    545
    After-tax gain
     (loss) on
     special items
      Clarica brand
       write-off          -      -      -      -      -      -    (43)     -
      Re-branding
       expenses in
       Canada             -      -      -     (3)    (5)    (2)     -      -
      EBG integration
       costs              -      -      -     (2)    (1)    (1)     -      -
      Premium to redeem
       Partnership
       Capital
       Securities         -      -      -      -      -      -    (18)     -
                      -------------------------------------------------------
    Total special
     items                -      -      -     (5)    (6)    (3)   (61)     -
                      -------------------------------------------------------

    Operating Earnings (396)   519    533    560    583    593    558    545
                      -------------------------------------------------------
                      -------------------------------------------------------
    -------------------------------------------------------------------------
    

    Forward-Looking Statements

    Certain statements 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 certain risks
and uncertainties that are difficult to predict. Future results and
stockholder value 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 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, the performance of equity
markets; interest rate fluctuations; investment losses and defaults; movements
in credit spreads; the cost, effectiveness and availability of risk mitigating
hedging programs; the creditworthiness of guarantors and counterparties to
derivatives; risks related to market liquidity; 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; insurance risks including
mortality, morbidity, longevity and policyholder behaviour including the
occurrence of natural or man-made disasters, pandemic diseases and acts of
terrorism; risks relating to operations in Asia including risks relating to
joint ventures; currency exchange rate fluctuations; 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; the availability, cost and
effectiveness of reinsurance; the inability to maintain strong distribution
channels and risks relating to market conduct by intermediaries and agents;
dependence on third party relationships including outsourcing arrangements;
downgrades in financial strength or credit ratings; the ability to
successfully complete and integrate acquisitions; the ability to attract and
retain employees; and the performance of the Company's investments and
investment portfolios managed for clients such as segregated and mutual funds.
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.

    Analysts' Conference Call

    The Company's third quarter 2008 financial results will be reviewed at a
conference call today at 8:30 a.m. ET. To listen to the conference call via
teleconference, please call 416-644-3414 (Toronto) and 1-800-732-1073
(Canada/U.S.). A playback of the call will be available Tuesday, October 21,
2008 from 10:30 am until Tuesday, November 4, 2008 at 11:59 pm by dialing 416-
640-1917 (Toronto) - Passcode: 21286408 followed by the number sign,
1-877-289- 8525 (Canada, U.S.) - Passcode: 21286408 followed by the number
sign.
    To listen to the call via live audio webcast and to view the presentation
slides, please visit www.sunlife.com and click on the link to Q3 results from
the "Highlights" 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/QuarterlyReports.
    The financial results presented in this press release, as well as those
discussed during today's call, are preliminary and unaudited. The Company
expects to file its interim financial statements and MD&A on October 30, 2008.

    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
September 30, 2008, the Sun Life Financial group of companies had total assets
under management of $389 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.

    
    --------------------
    (1) Together with its subsidiaries and joint ventures "the Company" or
        "Sun Life Financial"
    (2) All EPS measures in this document refer to fully diluted EPS, unless
        otherwise stated.
    (3) Operating earnings and other 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."
    (4) Pre-Tax Operating Profit Margin Ratio is a non-GAAP financial
        measure. See "Use of Non-GAAP Financial Measures."
    





For further information:

For further information: Media Relations Contact: Susan Jantzi, Public &
Corporate Affairs, Tel: (519) 888-3160, susan.jantzi@sunlife.com; Investor
Relations Contact: Paul Petrelli, Vice-President, Investor Relations, Tel:
(416) 204-8163, investor.relations@sunlife.com


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