Sun Life Financial Services

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"Extremely strong consolidated capital, very strong business profile, and very strong operating performance. Partially offsetting these strengths are strong competitive pressures in most insurance markets in which Sun Life competes, and operating challenges associated with the insurer's U.K. operations."

- Standard & Poor, explaining its AA+ (Very strong) rating for Sun Life, in 2001.

Introduction

By 2001, with revenues of C$ 16.7 billion,¹ Sun Life Financial Services (Sun Life) had emerged as the largest insurer and leading financial services provider in Canada. Sun Life served institutional and individual customers through an extensive distribution sales force network, independent agents, investment dealers and financial planners. The company operated in the wealth management and protection businesses in more than 16 countries with over 11,800 employees.

It had over 7 million customers in Canada alone. Sun Life's common stock was listed on the stock exchanges of Toronto, New York, London and Manila (Philippines). Sun Life offered integrated financial services, in the areas of wealth management and protection. Wealth management included asset management, mutual funds, and pension plans; while protection included life insurance, general and health insurance. The company had formed strategic alliances with leading companies in countries across the globe, in addition to the many mergers and acquisitions it had undertaken. In 1999, the company announced its decision to exit the reinsurance2 business due to continuous losses incurred in the business.

In the same year, the company's policyholders approved the company's move towards demutualisation.³ In 2001, with a market capitalization of $ 9.6 billion, Sun Life was strongly established in all its markets it was operating in. With the takeover of Clarica Life Insurance Company,⁴ Sun Life emerged as the sixth largest life insurer in North America in terms of market capitalization. On March 31, 2002, the group had C$ 359.9 billion of assets under management of which the wealth management business accounted for C$ 320.3 billion - 90% of Sun Life's total assets.

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1] In August 2002, 1 C$ equalled 0.64 US $.

2] Reinsurance is defined as process through which an insurance company shares the risk involved a policy by reinsuring with multiple insurers in order to reduce the risk.

3] Through demutualisation, a company held by its policyholders is converted into a company with common shares. The company's net worth is distributed to policyholders in exchange for their membership rights.

4] Clarica is one of the leading financial services company in Canada with more than 4 million customers offering a diversified range of financial services. It has the largest sales and service force in Canada.

5] Manulife is a leading Canada based financial services company offering a diversified range of financial protection products and wealth management services. It is the second largest player in the individual life insurance market based on annualized premiums.