Friday, February 10, 2006

Scotia Capital's Comment on Sun Life's Q4 2005 Earnings

• Steady quarter. In-line. We look for steady 11% growth through 2007. This growth, combined with moderate to perhaps aggressive levels of buyback, we estimate should add 140 basis points to company's 13.1% 2005 ROE over the next two years, just under the low end of the company's targeted 75-100 basis points increase in the ROE on an
annual basis.

• Still a "show me" story in terms of sales growth, and as Canadian individual insurance sales start to hit stride, U.S. variable annuity were somewhat disappointing.

• Modest increase in EPS $0.05 in 2006 and $0.08 in 2007, reflecting the added benefit of AXXX funding solution, slightly larger and more profitable business than expected in Canadian and U.S. group, and slightly more aggressive buybacks. Target price increased accordingly $2 to $52.