Sun Life Financial Services
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Case Code: BSTR112 Case Length: 32 Pages Period: 1982 - 2002 Pub Date: 2002 Teaching Note: Not Available |
Price: Rs.500 Organization: Sun Life Financial Services Industry: Financial Services Countries : Canada Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Mergers & Acquisitions
Sun Life adopted mergers and acquisitions to expand in new markets and also to consolidate its position in markets where it already had a presence. In 1982, Sun Life acquired an 85% stake in the US-based Massachusetts Financial Services (MFS), which was an established player in the management and distribution of mutual funds and institutional funds. It was also a leading player in the variable annuity products management for other companies, including financial services companies. In 2001, MFS was ranked fourth in the mutual funds industry, on the basis of new flows generated in retail mutual funds. By the end of 2001, MFS was managing US$ 120 billion in assets for more than five million individual and institutional mutual fund and annuity investors worldwide...
Business Segments
Sun Life's business, spread across four geographic segments, Canada, the US, the UK and Asia, was divided into two principal business segments - 'Wealth Management' and 'Protection.'
Wealth Management:The wealth management business consisted of asset management, mutual fund, pension, and annuity & brokerage operations. Considered to be the 'growth segment' of Sun Life, the wealth management segment managed assets worth C$315.2 billion in 2001 - 90% of the company's total assets under management. In the same year, wealth management represented around 55% of the total revenues earned by the company...
Products & Services
The products and services offered by the company under its wealth and protection businesses were divided into the following categories - Insurance Products, Investments, Savings & Loans, and Services (Refer Table IV for the insurance products).
INSURANCE PRODUCTS
In its life insurance plans, Sun Life offered various products, which targeted different segments of customers. The insurance products were broadly classified into the categories of Individual Insurance and Group Insurance (Refer Table IV for the product profile)...
Investments
Along with its insurance products, Sun Life also offered investment services to its customers. The products and services under investment services were:
Mutual funds: The company offered various kinds of accounts through which customers could invest in mutual funds.
Segregated funds: These funds ensured that an individual's investment was secure, no matter how the market performed. The investor was guaranteed to receive 75% of the initial investment.
Annuities: These provided a guaranteed interest rate while protecting the savings. Sun Life offered various kinds of annuity plans such as Superflex, Non-redeemable Guaranteed Investment Account, and Income master...
Marketing
Sun Life believed in 'always working with the customers' perspective in the mind'. From the time it was set up, the company catered to the needs of customers by creating innovative products and services. It was one of the first insurance companies to issue unconditional polices. Over the decades, Sun Life devised many innovative policies, which helped it gain a competitive advantage in the insurance market the world over. Many insurance companies charged extra premium from military personnel, as the risk involved for their lives was higher...
Globalization
Sun Life's international growth began in the early 1890s, with the company expanding into the Asia-Pacific region, the United States, the United Kingdom and Latin America. By the 1930s, Sun Life was operating in nearly 60 countries - however, due to political instability, currency devaluation and war, the company was forced to withdraw its operations from most of these countries. In 2001, Sun Life had operations in over 17 countries and derived around 77% of its total revenues from its global operations. United States was the largest source of revenues, contributing around 47% of total revenues...
Human Resources
Sun Life focused on employee development and offered a comprehensive package of benefits to ensure that its employees were happy to work for the organization. The culture of the organization was people-focused. The company wished to develop a set of shared values, which would serve as a guide for all employees. Sun Life encouraged employees to 'deliver excellence, make a difference, anticipate the future, be open-minded and act with integrity', as was stated in its business code for its employees. To fulfil its role as a socially responsible corporate entity, Sun Life encouraged its employees to support a variety of non-profit organizations and to participate in charitable activities...
Corporate Governance
Sun Life followed a strong 'code of business conduct' right from its inception, and this formed the basis of its principles of corporate governance in later years. The objectives of Sun Life's 'code of business conduct' were:
To demonstrate to the public and stakeholders that Sun Life's ethics were sound;
To describe Sun Life Financial's values and standards of business conduct;
To guide employees on how to resolve potentially difficult situations and conflicts of interest;
To promote principles of respect and fairness in the workplace and in dealings with the public and stakeholders...
Financial Performance
Sun Life's revenues increased to C$16.7 billion in 2001 from C$16.2 billion in 2000, an increase of C$483 million or 3% (Refer Table IX for Sun Life' financial performance summary). The company's strong performance in insurance premiums and higher investment income was offset by decreases in annuity premiums and fee income. In 2001, ROE declined to 12.8% from 13.1% in 2000 - this decrease was attributed to the increased equity base in 2001. Another reason for the decrease was that Sun Life had invested some excess funds, which had been raised for the acquisition of Keyport Financial, in low-yield short-term securities. This adversely affected the company's overall performance in 2001...
Future Outlook
With the acquisition of Keyport, IFMG and Clarica, Sun Life emerged as one of the largest players in the North American insurance markets in 2002. The company's management stated that it would strive to consolidate its business operations and achieve its objective of being among the top ten players in the North American market. Analysts pointed out that with the enactment of new financial services legislation in Canada in late 2001, consolidation in the industry would increase, and by 2004, the Canadian insurance market would be dominated by only three or four players...
The Global Life Insurance Industry
Insurance is essentially a social device to reduce or eliminate risk of loss to life and property. A large number of people form an association that shares risks attached to individuals. The risks which can be insured against include fire, the perils of sea, death, accidents and burglary. Any risk contingent upon these may be insured against at a premium commensurate with the risk involved. The insurance business is divided into 1) life insurance and 2) non-life (general) insurance, which includes fire, marine, social, and various other forms of insurance. The life insurance industry across the world has evolved over many decades based on the principle of insurance being a collective bearing of risk, which offers individuals an opportunity to protect themselves...
The Canadian Life Insurance Industry
Canada, like the US, is a high-tech industrialized country. Its market-oriented economic system, pattern of production, and high living standards are points of similarity with the US. Canada had an annual growth rate of 3% on average since1993. In the same period, unemployment was falling and government budget surpluses were being diverted to the reduction of public sector debt. There was a dramatic increase in trade and economic integration with US due to 1989 US-Canada Free Trade Agreement and the 1994 North America Free Trade Agreement (which included Mexico)...
Exhibits
Exhibit I: Sun Life - Employee Benefits
Exhibit II: Consolidated Statement of Operations
Exhibit III: Consolidated Statements of Cash Flows
Exhibit IV: Stock Price Chart (1999-2002)
Exhibit V: Eight-Year Summary Financial Statements
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