19 December 2006

NBF Upgrades Manulife & Scotiabank

National Bank Financial, 19 December 2006

With the lifeco & bank earnings seasons now complete, we are making several changes to our ratings. In general, the changes are related to valuation. Given we employ sector ratings, and as a result, rate our companies (both banks & lifecos) against one another, changes in relative valuation are frequently the most significant reason for our valuation changes.

In this note, we are making the following changes to our recommendations:

• Bank of Nova Scotia: Upgrading to Outperform on valuation, potential deployment accretions.

• Manulife Financial: Upgrading to Outperform on valuation (and new F2008 estimates).

• Sun Life Financial: Downgrading to Sector Perform on completed recovery.

• Great-West Lifeco: Downgrading to Underperform on valuation and rising acquisition risk.

Overall, our investment thesis for the companies in our universe has not changed materially. Furthermore, notwithstanding our two downgrades, we continue to favour the lifecos compared to the banks over the long-term (i.e. 3 to 5 years), in light of their capital deployment advantages.

In addition to the above rating changes, we have adjusted the targets for some of the other companies in our universe.