Sun Life Financial Reports Fourth Quarter and Full Year 2012 Results

     Sun Life Financial Reports Fourth Quarter and Full Year 2012 Results

PR Newswire

TORONTO, Feb. 13, 2013

Unless otherwise noted, all amounts are in Canadian dollars.

Fourth Quarter 2012 Financial Highlights

  *Operating net income^(1) of $453 million, compared to an operating loss of
    $221 million in the fourth quarter of 2011. Reported net income of $395
    million, compared to a reported loss of $525 million in the fourth quarter
    of 2011. Results reflect continued execution against our growth strategy
    and positive impact from investment activity. Market factors had no
    material impact in the quarter
  *Operating earnings per share^(1) ("EPS") of $0.76, compared to an
    operating loss per share of $0.38 in the fourth quarter of 2011. Reported
    EPS of $0.65, compared to a reported loss per share of $0.90 in the fourth
    quarter of 2011
  *Operating return on equity^(1) ("ROE") of 12.9%, compared to a negative
    6.5% in the fourth quarter of 2011. Reported ROE of 11.3%, compared to
    negative 15.4% in the fourth quarter of 2011
  *Quarterly dividend of $0.36 per share
  *MCCSR ratio for Sun Life Assurance^(2) of 209%

2012 Annual Financial Highlights

  *Operating net income of $1,679 million, compared to operating net income
    of $34 million in 2011. Reported net income of $1,554 million, compared to
    a reported loss of $370 million in 2011
  *Operating EPS of $2.83, compared to operating EPS of $0.06 in 2011.
    Reported EPS of $2.59, compared to a reported loss per share of $0.64 in
    2011
  *Operating ROE of 12.3%, compared to 0.3% in 2011. Reported ROE of 11.4%,
    compared to negative 2.7% in 2011
  *Annual dividend of $1.44 per share

TORONTO, Feb. 13, 2013 /PRNewswire/ - Sun Life Financial Inc.^(3) (TSX: SLF)
(NYSE: SLF) had operating net income of $453 million in the fourth quarter of
2012, compared to an operating loss of $221 million in the fourth quarter of
2011. Our operating EPS was $0.76 in the fourth quarter of 2012, compared to
an operating loss per share of $0.38 in the fourth quarter of 2011. Reported
net income was $395 million or $0.65 per share in the fourth quarter of 2012,
compared to a reported loss of $525 million or a reported loss per share of
$0.90 in the fourth quarter of 2011.

Our financial results in the fourth quarter reflect continued execution
against our growth strategy, as well as positive impact from investment
activity. Market factors had no material impact in the quarter, as the
positive impact of improved equity markets was largely offset by declines in
the fixed income reinvestment rates in our insurance contract liabilities,
which were driven by the continued low interest rate environment, and
unfavourable impact from credit spread and swap spread movements. Operating
net income excluding the net impact of market factors^(1) was $420 million.
The following table sets out our operating net income measures for the fourth
quarter of 2012.

^(1)  Operating net income (loss) and financial information based on operating
      net income (loss), such as operating earnings (loss) per share,
      operating ROE and operating net income (loss) excluding the net impact
      of market factors, are not based on International Financial Reporting
      Standards ("IFRS"). See Use of Non-IFRS Financial Measures. All EPS
      measures refer to fully diluted EPS, unless otherwise stated.
^(2) MCCSR represents the Minimum Continuing Capital and Surplus Requirements
      ("MCCSR") ratio of Sun Life Assurance Company of Canada ("Sun Life
      Assurance").
^(3)  Together with its subsidiaries and joint ventures, collectively referred
      to as "the Company", "Sun Life Financial", "we", "our" and "us".

                                                                        
($ millions, after-tax)                                                  Q4'12
Operating net income (loss)                                                453
   Net equity market impact                                                49
   Net interest rate impact                                              (51)
   Net gains from increases in the fair value of real estate               20
   Actuarial assumption changes driven by changes in capital market        15
    movements
Operating net income (loss) excluding the net impact of market factors     420
   

The Board of Directors of Sun Life Financial Inc. today declared a quarterly
shareholder dividend of $0.36 per common share, maintaining the current
quarterly dividend.

"Sun Life's fourth quarter results reflect overall solid earnings
performance," Dean Connor, President and CEO, said. "It was a transformational
year for Sun Life as we significantly reduced our risk profile and made
important strides in implementing our four pillar growth strategy."

"Operating earnings in 2012 at SLF Canada were up more than 25% from 2011,
with strong growth across all business units, reflecting asset growth, greater
distribution strength and a more profitable business mix," Connor said. "We
remain number one in our group benefits and pension businesses and improved
our position in individual insurance sales."

"Our asset management businesses had an outstanding year, capped by a strong
fourth quarter," Connor said. "MFS recorded the strongest net inflows in
the firm's history, ending the year with assets under management of nearly
US$325 billion, an all-time high. In Canada, sales of mutual funds increased
more than 40% compared to the fourth quarter of 2011, including strong sales
of Sun Life Global Investments mutual funds."

"The sale of our domestic U.S. annuity business, announced in the fourth
quarter, was a major milestone in our strategy of reducing our risk profile,"
Connor said. "Our U.S. insurance operations are now focused primarily on
growing our employee benefits and voluntary benefits businesses, which
recorded significant sales growth on both a quarterly and annual basis, and
hit all milestones for expanding distribution and introducing new products."

"Our Asia operations concluded the year with a strong fourth quarter. We made
good progress in 2012 by expanding distribution and our overall Asian
footprint. Subsequent to the quarter, we announced our entry into the
fast-growing Malaysian market and received regulatory approval to commence
operations in Vietnam."

Operational Highlights

2012 Achievements and Milestones

Canada

  *Group Benefits ("GB") retained the #1 group life and health insurance
    provider position in the 2011 Fraser Group Universe Report (issued in
    July, 2012), based on business in-force;
  *Group Retirement Services ("GRS") ranked #1 in total assets across all
    pension products in the December 2012 Benefits Canada magazine (based on
    June 2012 data); and
  *Individual Insurance & Investments moved up to second position in the
    Canadian retail life market as measured by LIMRA (based on the nine months
    ended September 30, 2012).

United States

  *Employee Benefits Group ("EBG") launched a new voluntary benefits suite of
    products, which includes long-term disability, short-term disability,
    critical illness, cancer and customized disability, and made enhancements
    to its existing voluntary life and dental products;
  *EBG enhanced its enrolment solutions, by simplifying employer benefits
    administration and expanding its portfolio of broker tools, through
    partnerships with BeneTrac, bswift and benefitsCONNECT; and
  *Sun Life Financial U.S. expanded its EBG distribution organization to
    almost 200 sales professionals, up approximately 35% from year end 2011,
    by adding experienced sales representatives, creating a Small Business
    Center and building a dedicated voluntary benefits distribution team.

Asset Management

  *Sun Life Financial's assets under management ("AUM") surpassed $500
    billion in 2012;
  *MFS Investment Management ("MFS") had record gross sales in 2012 of
    approximately US$86 billion. MFS had US$29 billion of net in-flows, and
    ended 2012 with AUM of US$323 billion, surpassing US$300 billion for the
    first time;
  *90% and 88% of MFS's retail fund assets ranked in the top half of their
    respective five- and ten-year Lipper categories at December 31, 2012;
  *MFS was named "Equity Manager of the Year" for Europe by Financial News
    for the second time in three years;
  *MFS grew its Asia-sourced AUM to $33 billion from $22 billion in 2011, and
    was ranked in Asian Investor's December 2012 Top 100 Managers issue;
  *Sun Life Global Investments (Canada) Inc. ("SLGI") completed its second
    full year of operations with sales reaching more than $2 billion, client
    managed AUM growing to over $6 billion, and all twelve of the original
    long-term mutual funds ranking above the median and seven of twelve mutual
    funds ranking in the top quartile for their respective two-year categories
    as measured by Morningstar Research; and
  *SLGI was named "Fastest Growing Institutional Money Manager", debuted in
    the Top 40 Money Manager rankings issue as #33 and ranked as sixth largest
    Capital Accumulation Plan Asset Manager in 2012 in Benefits Canada
    magazine.

Asia

  *Our Philippines business continued its strong performance and achieved
    record insurance sales in 2012, with sales growth of 58% from 2011;
  *Sun Life Hong Kong Limited was named "Mandatory Provident Fund Provider of
    the Year" for 2011 by Benchmark magazine, and its Mandatory Provident Fund
    ("MPF") scheme won seven Lipper Fund Awards during the year;
  *In Indonesia, PT CIMB Sun Life, our joint venture business, was named the
    "Most Prospective Life Insurance Company" by Business Review magazine in
    2012, based on growth of its customer base;
  *In India, Birla Sun Life Asset Management Company Limited was recognized
    as the 2012 "Debt Mutual Fund House of the Year" by Credit Rating and
    Information Services of India Limited;
  *In China, Sun Life Everbright Asset Management Co., Ltd. commenced
    operations during the first quarter of 2012;
  *In May 2012, Sun Life Assurance entered into an agreement with PVI
    Holdings to form PVI Sun Life Insurance Company Limited in Vietnam, a
    joint venture life insurance company, and received its license to operate
    from the Ministry of Finance of Vietnam in January 2013; and
  *In January 2013, we entered into a strategic partnership with Khazanah
    Nasional Berhad to acquire 98% of each of CIMB Aviva Assurance Berhad and
    CIMB Aviva Takaful Berhad (together, "CIMB Aviva") in Malaysia, as a
    result of which Sun Life Assurance will acquire a 49% interest in CIMB
    Aviva. The transaction is subject to regulatory approvals and is expected
    to close in the first half of 2013.

Fourth Quarter Highlights
On December 17, 2012, we entered into a definitive stock purchase agreement to
sell our U.S. annuities business and certain of our U.S. life insurance
businesses (the "U.S. Annuity Business"), including all of the issued and
outstanding shares of Sun Life Assurance Company of Canada (U.S.) ("Sun Life
(U.S.)"). Our U.S. Annuity Business includes our domestic U.S. variable
annuity, fixed annuity and fixed indexed annuity products, corporate and
bank-owned life insurance products and variable life insurance products. The
transaction is subject to regulatory approvals and other closing conditions
and is expected to close before the end of the second quarter of 2013.

Our strategy is focused on four key pillars of growth. We detail our continued
progress against these pillars below.

Becoming the best performing life insurer in Canada
Sun Life Financial Canada continues to grow and optimize its businesses, and
build on its leadership position.

Individual Insurance & Investments expanded its distribution capability and
product portfolio. The Sun Life Financial Career Sales Force ("CSF") grew by
42 advisors in the quarter (119 in the year) to a total count of 3,713
advisors and managers. Individual Wealth successfully launched its SunFlex
Retirement Income product in December, which includes investment in nine SLGI
mutual funds.

Sun Life Financial Canada continued to advance its industry leading group
businesses. GB sales were up 36% from the fourth quarter of 2011. The business
introduced a new e-payment standard to improve the speed, ease-of-use and
sustainability of claims payments, and achieved a significant improvement in
claims experience through its new Claims Quality Assurance Program. Pension
rollover sales increased 26% from the fourth quarter of 2011.

Becoming a leader in group insurance and voluntary benefits in the United
States
Sun Life Financial U.S. continues to grow its group insurance and voluntary
benefits businesses, by expanding its product offerings, sales force and
technology capabilities. EBG sales increased 25% in the fourth quarter, with
growth across all business lines and voluntary benefits sales up 78%. Sun Life
Financial U.S. launched new, more comprehensive enrolment capabilities and
stop-loss services.

Growing our asset management businesses globally
MFS had another record quarter. AUM ended the year at US$323 billion, an
all-time high. Gross sales achieved a new record at US$26 billion, almost 70%
higher than sales in the fourth quarter of 2011. This included a one-time
inflow from Sun Capital Advisers, LLC of US$7 billion. Net inflows represented
the firm's best quarter ever with strong contribution across retail, insurance
and institutional business lines.

Strengthening our competitive position in Asia

Sun Life of Canada (Philippines), Inc. capped a strong year with fourth
quarter sales that were more than 60% higher than the same period in 2011. The
integration of Sun Life Grepa Financial, Inc., the bancassurance joint venture
in the Philippines, is on track for completion in mid-2013.

In Indonesia, PT Sun Life Financial Indonesia added more than 750 advisors to
its agency force in the fourth quarter, surpassing 5,000 advisors. Shariah
sales continued to grow, accounting for 37% of agency sales and 30% of total
Sun Life sales in Indonesia.

Sun Life Hong Kong Limited achieved strong fourth quarter sales in its pension
business, reflecting continued contribution from its MPF business. MPF sales
in the quarter benefited from the Employee Choice Arrangement legislation
enacted in November, which provides employees more flexibility in their choice
of MPF provider.

Birla Sun Life Insurance Company Limited retained its ranking as the fifth
largest private insurance company in India. Birla Sun Life Asset Management
Company Limited is ranked fourth amongst all asset managers in India.

Other highlights
In 2013, Corporate Knights ranked Sun Life Financial among the Global 100 Most
Sustainable Corporations in the World, for the seventh time in nine years, in
recognition of Sun Life's sustainability performance.

How We Report Our Results
We manage our operations and report our financial results in five business
segments: Sun Life Financial Canada ("SLF Canada"), Sun Life Financial United
States ("SLF U.S."), MFS Investment Management ("MFS"), Sun Life Financial
Asia ("SLF Asia") and Corporate. The Corporate segment includes the operations
of our United Kingdom business unit ("SLF U.K.") and Corporate Support
operations. Our Corporate Support operations includes our run-off reinsurance
business and investment income, expenses, capital and other items not
allocated to other business segments. Information concerning these segments is
included in our annual and interim consolidated financial statements and
accompanying notes ("Consolidated Financial Statements").

We use certain financial measures that are not based on IFRS ("non-IFRS
financial measures"), including operating net income (loss), as key metrics in
our financial reporting to enable our stakeholders to better assess the
underlying performance of our businesses. Operating net income (loss) and
other financial information based on operating net income (loss), including
operating EPS or operating loss per share, operating ROE and operating net
income (loss) excluding the net impact of market factors, are non-IFRS
financial measures. We believe that these non-IFRS financial measures provide
information that is useful to investors in understanding our performance and
facilitates the comparison of the quarterly and full year results from period
to period. Operating net income (loss) excludes: (i) the impact of certain
hedges in SLF Canada that do not qualify for hedge accounting; (ii) fair value
adjustments on share-based payment awards at MFS; (iii) restructuring and
other related costs; (iv) goodwill and intangible asset impairment charges;
and (v) other items that are not operational or ongoing in nature. Operating
EPS also excludes the dilutive impact of convertible securities.

Operating net income (loss) excluding the net impact of market factors removes
from operating net income (loss) certain market-related factors that create
volatility in our results under IFRS. Specifically, it adjusts operating net
income (loss) to exclude the following amounts: (i) the net impact of changes
in interest rates in the reporting period, including changes in credit and
swap spreads, and any changes to the fixed income reinvestment rates assumed
in determining the actuarial liabilities; (ii) the net impact of changes in
equity markets above or below the expected level of change in the reporting
period and of basis risk inherent in our hedging program; (iii) the net impact
of changes in the fair value of real estate properties in the reporting
period; and (iv) the net impact of changes in actuarial assumptions driven by
capital market movements. Unless indicated otherwise, all other factors
discussed in this document that impact our results are applicable to both
reported net income (loss) and operating net income (loss). Reported net
income (loss) refers to net income (loss) determined in accordance with IFRS.

Other non-IFRS financial measures that we use include adjusted revenue,
administrative services only ("ASO") premium and deposit equivalents, mutual
fund assets and sales, managed fund assets and sales, premiums and deposits,
adjusted premiums and deposits, AUM and assets under administration.
Additional information about non-IFRS financial measures and reconciliations
to the closest IFRS measure can be found in this document and in our annual
and interim management's discussion and analysis ("MD&A") under the heading
Use of Non-IFRS Financial Measures.

The information contained in this document is in Canadian dollars unless
otherwise noted and is based on our interim unaudited consolidated financial
statements for the period ended December31, 2012. All EPS measures in this
document refer to fully diluted EPS, unless otherwise stated.

On December 17, 2012, we entered into a definitive stock purchase agreement to
sell our U.S. Annuity Business, including all of the issued and outstanding
shares of Sun Life (U.S.). Our U.S. Annuity Business includes our domestic
U.S. variable annuity, fixed annuity and fixed indexed annuity products,
corporate and bank-owned life insurance products and variable life insurance
products. The transaction is subject to regulatory approvals and other closing
conditions and is expected to close before the end of the second quarter of
2013.

As a result of this agreement, we have defined our U.S. Annuity Business as
"Discontinued Operations", the remaining operations as "Continuing
Operations", and the total Discontinued Operations and Continuing Operations
as "Combined Operations". Note that in accordance with the requirements of
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, income
and expenses associated with the business to be sold have been classified as
discontinued operations in our Consolidated Statements of Operations for all
periods presented. Associated assets and liabilities have been classified as
held for sale in our Consolidated Statements of Financial Position
prospectively from December 31, 2012 and comparative information has not been
adjusted. Unless otherwise indicated, net income (loss), and other financial
information based on net income (loss), reflect the results of our Combined
Operations for all periods presented.

Additional information about Sun Life Financial Inc. ^ can be found in its
annual and interim Consolidated Financial Statements, annual and interim MD&A
and Annual Information Form ("AIF"). These documents are filed with securities
regulators in Canada and are available at www.sedar.com. Our annual MD&A,
annual Consolidated Financial Statements and AIF are filed with the United
States Securities and Exchange Commission ("SEC") in our annual report on Form
40-F and our interim MD&As and interim financial statements are furnished to
the SEC on Form 6-Ks and are available at www.sec.gov.

Accounting Adjustments
During 2012, we identified required adjustments for two prior year errors. For
SLF Canada, there was an aggregate understatement in the future cost of
reinsurance for our non-participating contracts of $47 million after tax. For
SLF U.S., there was an aggregate understatement of projections of the future
cost of mortality for individual life insurance contracts of $39 million after
tax. For SLF U.S., the adjustment to correct the error was initially recorded
in the second quarter of 2012, however the subsequent detection of the error
in SLF Canada has caused us to adjust for both items in prior years.

Adjustments have been made to income, insurance contract liabilities,
reinsurance assets and deferred tax assets to reflect the above items in the
periods to which they relate. These adjustments are not material to our
Consolidated Financial Statements, but correcting for the cumulative impact of
these errors in 2012 would have distorted the results of that year.
Accordingly, we restated our Consolidated Statements of Operations and
Consolidated Statements of Changes in Equity for the years and interim periods
to which they apply and our opening Consolidated Statement of Financial
Position for the earliest comparative period presented, January 1, 2011.
Additional information can be found in Note 2B in our 2012 Consolidated
Financial Statements.

Financial Summary

                              Quarterly results^(1)                 Full year^(1) 
($ millions,        Q4'12    Q3'12    Q2'12    Q1'12    Q4'11      2012     2011 
unless otherwise
noted)
Total Company                                                             
(Combined
Operations)
Net income (loss)                                                         
 Operating net       453      401       98      727    (221)     1,679       34 
  income
  (loss)^(2)
 Reported net        395      383       90      686    (525)     1,554    (370) 
  income (loss)
 Operating net       420      405      418      357      n/a     1,600      n/a 
  income (loss)
  excluding the
  net impact of
  market
  factors^(2)
Diluted EPS ($)                                                           
 Operating^(2)      0.76     0.68     0.17     1.24   (0.38)      2.83     0.06 
 Reported           0.65     0.64     0.15     1.15   (0.90)      2.59   (0.64) 
Basic EPS ($)                                                             
 Operating^(2)      0.76     0.68     0.17     1.24   (0.38)      2.83     0.06 
 Reported           0.66     0.64     0.15     1.17   (0.90)      2.62   (0.64) 
Return on equity                                                          
(%)
 Operating^(2)      12.9 %    11.7 %     2.9 %    21.8 %   (6.5) %     12.3 %     0.3 %
 Reported           11.3 %    11.1 %     2.6 %    20.5 %  (15.4) %     11.4 %   (2.7) %
Avg. common           597      594      591      588      584       593      579 
shares
outstanding
(millions)
Closing common             596.8    594.0    590.9    587.8     599.6    587.8 
shares              599.6
outstanding
(millions)
Dividends per             0.36     0.36     0.36     0.36              1.44 
common share ($)     0.36                                           1.44
MCCSR ratio           209 %     213 %     210 %     213 %     211 %      209 %     211 %
                                                                         
Continuing                                                                
Operations
Net income (loss)                                                         
 Operating net       333      459      250      437      210     1,479      533 
  income (loss)
  from Continuing
  Operations^(2)
 Reported net        284      441      244      405        2     1,374      225 
  income (loss)
  from Continuing
  Operations
Diluted EPS ($)                                                           
 Operating EPS      0.56     0.77     0.42     0.74     0.36      2.49     0.92 
  from Continuing
  Operations
  (diluted)^(2)
 Reported EPS       0.47     0.74     0.41     0.68     0.00      2.29     0.39 
  from Continuing
  Operations
  (diluted)
Basic EPS ($)                                                             
 Operating EPS      0.56     0.77     0.42     0.74     0.36      2.49     0.92 
  from Continuing
  Operations
  (basic)^(2)
 Reported EPS       0.48     0.74     0.41     0.69     0.00      2.32     0.39 
  from Continuing
  Operations
  (basic)
                                                                         
Premiums and                                                              
deposits from
Continuing
Operations
 Net premium       2,457    1,927    1,865    1,998    2,032    8,247    8,238 
  revenue
 Segregated fund   1,681    1,534    1,753    1,967    2,272     6,935    7,508 
  deposits
 Mutual fund      11,294   10,129   12,060    9,820    7,334   43,303   28,941 
  sales^(2)
 Managed fund     14,938   11,065    7,999    9,849    8,682   43,851   28,019 
  sales^(2)
 ASO premium and   1,512    1,405    1,380    1,440    1,391    5,737    5,661 
  deposit
  equivalents^(2)
 Total premiums   31,882   26,060   25,057   25,074   21,711            78,367 
  & deposits^(2)                                                     108,073
Assets under                                                              
management
(Combined
Operations)
 General fund    133,127  132,109  132,151  129,186  130,071   133,127  130,071 
  assets
 Segregated       92,655   91,429   90,160   91,934   88,183    92,655   88,183 
  funds
 Mutual funds,   307,040  291,322  273,944  273,295  247,503   307,040  247,503 
  managed funds &
  other AUM^(2)
 Total AUM^(2)   532,822  514,860  496,255  494,415  465,757   532,822  465,757 
                                                                         
Capital (Combined                                                         
Operations)
 Subordinated      3,436    3,433    3,438    4,235    3,441     3,436    3,441 
  debt and other
  capital^(3)
 Participating       128      132      124      124      123       128      123 
  policyholders'
  equity
 Total            16,623   16,276   16,112   16,065   15,521    16,623   15,521 
  shareholders'
  equity
 Total capital    20,187   19,841   19,674   20,424   19,085    20,187   19,085 
^(1) Some periods have been restated. See Accounting Adjustments. 
^(2) Represents a non-IFRS financial measure. See Use of Non-IFRS Financial Measures. 
^(3) Other capital refers to Sun Life Exchangeable Capital Securities ("SLEECS"), which
qualify as capital for Canadian regulatory purposes. See Capital and Liquidity
Management - Capital in our annual MD&A. 

Q4 2012 vs. Q4 2011

Our reported net income ^ was $395 million in the fourth quarter of 2012,
compared to a reported loss of $525 million in the fourth quarter of 2011.
Reported ROE was 11.3%, compared to negative 15.4% in the fourth quarter of
2011.

Operating net income was $453 million for the quarter ended December31, 2012,
compared to an operating loss of $221 million for the quarter ended
December31, 2011. Operating ROE was 12.9%, compared to negative 6.5% in the
fourth quarter of 2011.

Operating net income excluding the net impact of market factors was $420
million in the fourth quarter of 2012.

The following table reconciles our net income measures and sets out the impact
that other notable items had on our net income in the fourth quarter of 2012.
Unless indicated otherwise, all other factors discussed in this document that
impact our results are applicable to both reported net income (loss) and
operating net income (loss).

                                                                            
($ millions, after-tax)                                                  Q4'12
Reported net income                                                        395
        Certain hedges that do not qualify for hedge accounting in        (6)
         SLF Canada
        Fair value adjustments on share-based payment awards at MFS      (39)
        Restructuring and other related costs                             (7)
        Goodwill and intangible asset impairment charges                  (6)
Operating net income                                                       453
        Equity market impact                                                
                      Net impact from equity market changes               35
                      Net basis risk impact                               14
        Net equity market impact^(1)                                       49
        Interest rate impact                                                
                      Net impact from interest rate changes               33
                      Net impact of decline in fixed income             (44)
                        reinvestment rates
                      Net impact of credit spread movements             (21)
                      Net impact of swap spread movements               (19)
        Net interest rate impact^(2)                                     (51)
        Net gains from increases in the fair value of real estate          20
        Actuarial assumption changes driven by changes in capital          15
         market movements
Operating net income excluding the net impact of market factors            420
                                                                            
Impact of other notable items on our net income:                             
Experience related items^(3)                                                 
        Impact of investment activity on insurance contract                46
         liabilities
        Mortality/morbidity                                               (5)
        Credit                                                             11
        Lapse and other policyholder behaviour                           (16)
        Expenses                                                         (67)
        Other                                                             (8)
                                                                            
Other Assumption Changes and Management Actions (excludes actuarial         61
assumption changes
driven by changes in capital market movements)
                                                                            
Other items^(4)                                                              6
^(1) Net equity market impact consists primarily of the effect of changes in
equity markets during the quarter, net of hedging, that
differ from the best estimate assumptions used in the determination of our
insurance contract liabilities of approximately 2%
growth per quarter in equity markets. Net equity market impact also includes
the income impact of the basis risk inherent in our
hedging program, which is the difference between the return on underlying
funds of products that provide benefit guarantees
and the return on the derivative assets used to hedge those benefit
guarantees. 
^(2) Net interest rate impact includes the effect of interest rate changes on
investment returns that differ from best estimate
assumptions, and on the value of derivative instruments used in our hedging
programs. Our exposure to interest rates varies
by product type, line of business and geography. Given the long-term nature of
our business, we have a higher degree of
sensitivity in respect of interest rates at long durations. Net interest rate
impact also includes the income impact of declines in
fixed income reinvestment rates and of credit and swap spread movements. 
^(3) Experience related items reflects the difference between actual
experience during the reporting period and best estimate
assumptions used in the determination of our insurance contract liabilities. 
^(4) Primarily due to tax-related benefits in SLF U.K. 

Our reported net income for the fourth quarter of 2012 included items that are
not operational or ongoing in nature and are, therefore, excluded in our
calculation of operating net income. The net impact of certain hedges that do
not qualify for hedge accounting in SLF Canada, fair value adjustments on
share-based awards at MFS, restructuring and other related costs and goodwill
and intangible asset impairment charges reduced reported net income by
$58million in the fourth quarter of 2012, compared to a reduction of $304
million in the fourth quarter of 2011. The fourth quarter 2011 charge was
primarily related to goodwill and intangible asset impairments.

Net income in the fourth quarter of 2012 reflected favourable impacts from
equity markets, basis risk and increases in the fair value of real estate
classified as investment properties, offset by declines in the fixed income
reinvestment rates in our insurance contract liabilities that were driven by
the continued low interest rate environment, and unfavourable impact from
credit spread and swap spread movements. Investment activity on insurance
contract liabilities and credit experience contributed positively, but were
offset by unfavourable expense-related items, largely comprised of
project-related, seasonal and non-recurring costs, as well as lapse and other
policyholder behaviour experience. Non-capital, market-related assumption
changes and management actions added $61 million to net income in the fourth
quarter of 2012.

The loss in the fourth quarter of 2011 was impacted significantly by a change
related to the valuation of our variable annuity and segregated fund insurance
contract liabilities ("Hedging in the Liabilities"), which resulted in a
one-time charge to net income of $635 million. Partially offsetting the loss
was the positive impact of a net tax benefit related to the reorganization of
our U.K. operations and net realized gains on available-for-sale ("AFS")
securities.

2012 vs. 2011
 ($ millions, after-tax)                                          2012   2011
 Reported net income (loss)                                      1,554 (370)
 Certain hedges that do not qualify for hedge accounting in SLF    (7)   (3)
  Canada
 Fair value adjustments on share-based payment awards at MFS      (94)  (80)
 Restructuring and other related costs                            (18)  (55)
 Goodwill and intangible asset impairment charges                  (6) (266)
 Operating net income (loss)                                     1,679    34

Reported net income was $1,554 million in 2012, compared to a reported loss of
$370 million in 2011. Reported ROE was 11.4%, compared to negative 2.7% in
2011. Operating net income was $1,679 million in 2012, compared to $34 million
in 2011. Operating ROE was 12.3% in 2012, compared to 0.3% in 2011. The net
impact of certain hedges that do not qualify for hedge accounting in SLF
Canada, fair value adjustments on share-based awards at MFS, restructuring and
other related costs and goodwill and intangible asset impairment charges
reduced reported net income by $125 million in 2012, compared to a reduction
of $404 million in 2011. The 2011 reported loss included $266 million for
goodwill and intangible asset impairments.

Net income in 2012 reflected favourable impacts from equity markets, basis
risk and increases in the fair value of real estate classified as investment
properties, offset by declines in the fixed income reinvestment rates in our
insurance contract liabilities that were driven by the continued low interest
rate environment, and unfavourable impact from credit spread and swap spread
movements. Investment activity on insurance contract liabilities and credit
experience contributed positively, but were offset by unfavourable
expense-related items, largely comprised of project-related and non-recurring
costs, model experience and other refinements in our variable annuity products
being sold, as well as lapse and other policyholder behaviour experience. Net
realized gains on sales of AFS securities and assumption changes and
management actions contributed to net income in 2012.

Net income in 2011 was unfavourably impacted by the net impact of assumption
changes and management actions of $910 million, including a $635 million
charge to net income in the fourth quarter related to Hedging in the
Liabilities. Results in 2011 were also unfavourably impacted by declines in
equity markets and interest rate levels, which reduced net income by $356
million and $224 million, respectively. This was partially offset by the
favourable impact of investment activity on insurance contract liabilities,
net realized gains on AFS securities, a net tax benefit from the
reorganization of our U.K. operations and increases in the fair value of real
estate classified as investment properties.

Impact of Sale of U.S. Annuity Business
On December 17, 2012, SLF Inc. and certain of its subsidiaries entered into a
definitive stock purchase agreement with Delaware Life Holdings, LLC, pursuant
to which we agreed to sell our U.S. Annuity Business to Delaware Life
Holdings, LLC for a base purchase price of US$1,350 million, which will be
adjusted to reflect the performance of the business through closing. The
transaction will consist primarily of the sale of 100% of the shares of Sun
Life (U.S.), which includes the U.S. domestic variable annuity, fixed annuity
and fixed indexed annuity products, corporate and bank-owned life insurance
products and variable life insurance products. This transaction will include
the transfer of certain related operating assets, systems and employees that
support these businesses. The transaction is expected to close by the end of
the second quarter of 2013, subject to regulatory approvals and other closing
conditions.

As disclosed in Note 3 in our 2012 Consolidated Financial Statements, we will
recognize a loss on disposition at the time the sale of our U.S. Annuity
Business is closed. The amount of the loss will include closing price
adjustments, pre-closing transactions, closing costs and certain tax
adjustments. The net carrying value of the assets and liabilities classified
as held for sale as at December 31, 2012 does not include pre-close
adjustments and certain balances of the Discontinued Operations that have been
eliminated for consolidation purposes. The financial impact of these
adjustments is not known and could not be estimated with precision as at
December 31, 2012. Some of the adjustments will be realized in income prior to
the close of the transaction and we will identify these as operating
adjustments as they occur. The loss related to the sale is estimated to be
$1,050 million.

The transaction is not expected to have a direct impact on Sun Life
Assurance's MCCSR, although pre-closing transactions between Sun Life
Financial and Sun Life Assurance will have a minor impact on the ratio.

Impact of the Low Interest Rate Environment on Continuing Operations
Sun Life Financial's overall business and financial operations are affected by
the global economic and capital market environment. Our results are sensitive
to interest rates, which have declined in response to more challenging
conditions in the European Union and monetary policy actions in the United
States.

During the fourth quarter of 2012, we incurred a charge of $44 million due to
declines in fixed income reinvestment rates in our insurance contract
liabilities. Assuming continuation of December31, 2012 interest rate levels
through the end of 2015, our net income from Continuing Operations for the
2013 to 2015 period would be reduced by up to $350 million due to declines in
fixed income reinvestment rates. This reflects a $150 million improvement from
the estimate we disclosed in the third quarter of 2012 related to increased
interest rates, the impact of methodology changes for determining liabilities
in SLF Asia and the removal of the impact from Discontinued Operations. This
is forward-looking information and assumes the continuation of December31,
2012 interest rate levels through the end of 2015, as applied to the block of
business in force and using other assumptions in effect at December31, 2012.

In addition to the impact on fixed income reinvestment rates in insurance
contract liabilities, a prolonged period of low interest rates can pressure
our earnings, regulatory capital requirements and our ability to implement our
business strategy and plans in several ways, including:

               
  (i)         lower sales of certain protection and wealth products, which
                can in turn pressure our operating expense levels;
  (ii)        shifts in the expected pattern of redemptions (surrenders) on
                existing policies;
  (iii)       higher equity hedging costs;
  (iv)        higher new business strain reflecting lower new business
                profitability;
  (v)         reduced return on new fixed income asset purchases;
  (vi)        the impact of changes in actuarial assumptions driven by
                capital market movements;
  (vii)       impairment of goodwill; and
  (viii) additional valuation allowances against our deferred tax
                assets.

Actuarial Standards
On December 21, 2012, the Actuarial Standards Board proposed to revise the
Canadian actuarial standards of practice with respect to economic reinvestment
assumptions. Any impact of such revision to our liabilities has not yet been
determined.

Annual Goodwill and Intangibles Impairment Testing
The Company completed its annual goodwill and intangibles impairment testing
in the fourth quarter. No impairment charges were taken as a result of this
testing. However, in accordance with IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations, we have written down $6 million of intangibles
and have recorded this charge in Discontinued Operations.

At the end of 2011, we took an impairment charge in our Canadian Individual
Wealth cash generating unit ("CGU"). Although no further impairment charge is
required in 2012, the excess of fair value over carrying value for this CGU
remains small as a result of low interest rates, market volatility affecting
the cost of hedging and uncertainty regarding future capital requirements for
segregated funds. The goodwill associated with this CGU was $160 million at
December 31, 2012.

The Impact of Foreign Exchange Rates
We have operations in many markets worldwide, including Canada, the United
States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan,
Indonesia, India, China, Australia, Singapore, Vietnam and Bermuda, and
generate revenues and incur expenses in local currencies in these
jurisdictions, which are translated to Canadian dollars. The bulk of our
exposure to movements in foreign exchange rates is to the U.S. dollar.

Items impacting our Consolidated Statements of Operations are translated to
Canadian dollars using average exchange rates for the respective period. For
items impacting our Consolidated Statements of Financial Position, period end
rates are used for currency translation purposes. The following table provides
the most relevant foreign exchange rates over the past several quarters.

Exchange rate               Quarterly                 Full year
             Q4'12   Q3'12   Q2'12   Q1'12   Q4'11    2012  2011
Average                                                   
 U.S. Dollar 0.991  0.995  1.010  1.002  1.023  1.000 0.989
 U.K. Pounds 1.592  1.573  1.598  1.574  1.609  1.584 1.585
Period end                                                
 U.S. Dollar 0.992  0.984  1.017  0.998  1.019  0.992 1.019
 U.K. Pounds 1.612  1.590  1.596  1.597  1.583  1.612 1.583

In general, our net income benefits from a weakening Canadian dollar and is
adversely affected by a strengthening Canadian dollar as net income from the
Company's international operations is translated back to Canadian dollars.
However, in a period of losses, the weakening of the Canadian dollar has the
effect of increasing the losses. The relative impact of foreign exchange in
any given period is driven by the movement of currency rates as well as the
proportion of earnings generated in our foreign operations. We generally
express the impact of foreign exchange on net income on a year-over-year
basis. During the fourth quarter of 2012, our operating net income decreased
by $11 million as a result of movements in currency rates relative to the
fourth quarter of 2011. For the year ended December31, 2012, our operating
net income increased by $12 million as a result of movements in currency rates
relative to the prior year.

Performance by Business Group

In recognition of the pending sale of our U.S. Annuity Business, results from
SLF U.S. and Corporate have been presented on both Continuing Operations and
Combined Operations bases. Other business segments have no Discontinued
Operations.

SLF Canada

                                   Quarterly results         Full year^(1) 
($ millions)              Q4'12   Q3'12   Q2'12   Q1'12   Q4'11   2012   2011
Operating net income                                                   
(loss)^(2)
   Individual Insurance     42     26     59    154     73   281     212
    & Investments^(2)
   Group Benefits^(2)       72    137     94     44     65   347     268
   Group Retirement         35     58     33     41     44   167     139
    Services^(2)
Total operating net         149    221    186    239    182   795     619
income (loss)^(2)
Operating adjustments:                                                 
   Hedges that do not      (6)      16    (5)    (12)      50   (7)     (3)
    qualify for hedge
    accounting
   Goodwill and              —      —      —      —  (194)      —  (194)
    intangible asset
    impairment charges
Reported net income         143    237    181    227     38   788    422
(loss)
Operating ROE (%)^(2)       8.3   12.7   11.0   14.5   11.3  11.5    9.6
^(1) Some periods have been restated. See Accounting Adjustments. 
^(2) Represents a non-IFRS financial measure that excludes the impact of
certain hedges in SLF Canada that do not qualify for hedge accounting and
goodwill and intangible asset impairment charges. See Use of Non-IFRS
Financial Measures. 

Q4 2012 vs. Q4 2011
SLF Canada's reported net income was $143 million in the fourth quarter of
2012, compared to $38 million in the fourth quarter of 2011. Operating net
income was $149 million, compared to $182 million in the fourth quarter of
2011. Operating net income in SLF Canada excludes the impact of certain hedges
that do not qualify for hedge accounting, and goodwill and intangible asset
impairment charges recorded in the fourth quarter of 2011, which are set out
in the table above.

Net income in the fourth quarter of 2012 reflected the favourable impact of
investment activity on insurance contract liabilities in Individual Insurance
& Investments and GRS, and positive morbidity and mortality experience in GB.
Offsetting these items were declines in fixed income reinvestment rates in our
insurance contract liabilities, driven by the continued low interest rate
environment, and adverse policyholder behaviour experience in Individual
Insurance & Investments.

Net income in the fourth quarter of 2011 reflected the unfavourable impact of
the implementation of a change related to Hedging in the Liabilities. This
resulted in a charge of $103 million, which is reflected in Individual
Insurance & Investments. This was partially offset by net realized gains on
AFS securities, the favourable impact of investment activity on insurance
contract liabilities and favourable lapse experience as a result of
policyholder behaviour.

In the fourth quarter of 2012, sales of individual life and health insurance
were down 6% from the fourth quarter of 2011, due to planned lower universal
life sales and the impact of higher critical illness sales in advance of
announced price increases in the third quarter of 2012. Sales of par permanent
insurance were up 18% from the fourth quarter of 2011 due to the continued
success of the Sun Par product. Sales of individual wealth products decreased
10% from the fourth quarter of 2011, reflecting the planned decrease in
segregated fund sales. Sales of mutual funds increased 41% from the fourth
quarter of 2011, which included the continued growth of SLGI mutual funds.
Sales of SLGI mutual funds through the CSF nearly doubled from the fourth
quarter of 2011.

GB sales were up 36% from the fourth quarter of 2011, primarily due to greater
activity in the large case market. GRS sales increased 4% from the fourth
quarter of 2011. Assets under administration for GRS ended the quarter at
$54.7 billion. Pension rollover sales were $360 million, an increase of 26%
from the fourth quarter of 2011.

2012 vs. 2011
Reported net income was $788 million in 2012, compared to $422 million in
2011. Operating net income was $795million in 2012, compared to $619 million
in 2011. Operating net income in SLF Canada excludes the impact of certain
hedges that do not qualify for hedge accounting, and goodwill and intangible
asset impairment charges recorded in 2011, which are set out in the table
above.

Net income in 2012 reflected gains from increases in the value of real estate
properties, the favourable impact of assumption changes and management actions
in GB and GRS, and net realized gains on AFS securities. These items were
partially offset by declines in fixed income reinvestment rates in our
insurance contract liabilities in Individual Insurance & Investments that were
driven by the continued low interest rate environment.

Net income in 2011 reflected the net unfavourable impact of assumption changes
and management actions, as well as lower equity market levels. The impact of
these unfavourable items was partially offset by net realized gains on AFS
securities, the favourable impact of fixed income investment activity on
insurance contract liabilities and gains from increases in the value of real
estate properties.

SLF U.S.
As a result of the pending sale of our U.S. Annuity Business, we present the
results on a Continuing Operations basis, with a focus on EBG and Life and
Investment Products. EBG provides protection solutions to employers and
employees including group life, disability, medical stop-loss and dental
insurance products, as well as a suite of voluntary benefits products. The
Life and Investment Products results include our international business, which
offers life insurance and investment products to clients in international
markets, and those closed individual life insurance products that are still
part of our Continuing Operations, primarily whole life, universal life and
term insurance.

                             Quarterly results^(1)                      Full
                                                                    year^(1) 
(US$ millions)    Q4'12    Q3'12    Q2'12  Q1'12    Q4'11   2012   2011
Operating net                                                    
income (loss)
from Continuing
Operations^(2)
  EBG^(2)            —       12      (8)     22       9    26     86
  Life and          93       67       16    122    (84)    298       
   Investment                                                            (381)
   Products^(2)
Total operating      93       79        8   144    (75)    324       
net income (loss)                                                        (295)
from Continuing
Operations^(2)
Operating                                                        
adjustments:
  Restructuring      —        —        —     —     (6)      —     (6)
   and other
   related costs
  Goodwill and       —        —        —     —     (2)      —     (2)
   intangible
   asset
   impairment
   charges
Reported net         93      79        8   144    (83)    324   (303)
income (loss)
from Continuing
Operations
Reported net        109    (62)    (155)    280   (518)    172   (606)
income (loss)
from Discontinued
Operations
Reported net        202      17    (147)    424   (601)    496   (909)
income (loss)
Operating ROE      16.1     1.3   (10.8)   30.8            9.5  (15.0)
(%)^(2)                                                (36.3)
                                                                
(C$ millions)                                                    
                         
Operating net        93      79       6    144     (77)    322   (301)
income (loss)
from Continuing
Operations^(2)
Operating                                                        
adjustments:
  Restructuring      —       —       —     —     (6)      —    (6)
   and other
   related costs
  Goodwill and       —       —       —     —     (2)      —    (2)
   intangible
   asset
   impairment
   charges
Reported net         93      79       6   144    (85)    322       
income (loss)                                                            (309)
from Continuing
Operations
Reported net        109    (61)    (156)    281    (530)    173       
income (loss)                                                            (624)
from Discontinued
Operations
Reported net        202      18   (150)    425    (615)    495       
income (loss)                                                            (933)
^(1) Some periods have been restated. See Accounting Adjustments. 
^(2) Represents a non-IFRS financial measure. See Use of Non-IFRS Financial
Measures. 

Q4 2012 vs. Q4 2011
SLF U.S.'s reported net income from Continuing Operations was C$93 million in
the fourth quarter of 2012, compared to a reported loss from Continuing
Operations of C$85 million in the fourth quarter of 2011. Operating net income
from Continuing Operations was C$93 million, compared to an operating loss
from Continuing Operations of C$77 million in the fourth quarter of 2011.
Operating net income in SLF U.S. excludes restructuring and other related
costs and goodwill and intangible asset impairment charges recorded in the
fourth quarter of 2011 due to our decision to discontinue certain products to
new sales, which are set out in the table above.

In U.S. dollars, SLF U.S.'s reported net income from Continuing Operations was
US$93 million in the fourth quarter of 2012, compared to a reported loss from
Continuing Operations of US$83 million in the fourth quarter of 2011.
Operating net income from Continuing Operations was US$93 million in the
fourth quarter of 2012, compared to an operating loss from Continuing
Operations of US$75 million in the fourth quarter of 2011. Net income from
Continuing Operations in the fourth quarter of 2012 was favourably impacted by
the refinement of certain actuarial assumption updates from the prior quarter,
partially offset by unfavourable morbidity experience in EBG, as well as an
investment in our voluntary benefits capabilities.

The loss from Continuing Operations in the fourth quarter of 2011 included the
unfavourable impact of the implementation of a change related to Hedging in
the Liabilities in Life and Investment Products. The loss in Life and
Investment Products also included updates to the prior quarter's estimate of
policy liabilities related to the significant market volatility experienced in
the third quarter of 2011 and unfavourable mortality. EBG results in the
fourth quarter of 2011 reflected unfavourable morbidity experience as well.

Reported net income from Discontinued Operations was US$109 million in the
fourth quarter of 2012, compared to a reported loss from Discontinued
Operations of US$518 million in the fourth quarter of 2011. Net income from
Discontinued Operations in the fourth quarter of 2012 reflected favourable
market impacts, gains from investment activity on insurance contract
liabilities and an update to the prior quarter's estimate of actuarial
assumptions related to annuitant mortality. These positive items were
partially offset by unfavourable policyholder behaviour associated with our
domestic life products. The loss from Discontinued Operations in the fourth
quarter of 2011 included the unfavourable impact of the implementation of a
change related to Hedging in the Liabilities.

Reported net income (Combined Operations) was US$202 million in the fourth
quarter of 2012, compared to a reported loss (Combined Operations) of US$601
million in the fourth quarter of 2011.

EBG sales in the fourth quarter of 2012 increased 25% compared to the fourth
quarter of 2011, reflecting significant improvement across all product lines.
Within EBG, voluntary benefits sales increased 78% compared to the prior year
period, reflecting an increase across all voluntary benefits products.

Sales in Life and Investment Products increased 173% compared to the fourth
quarter of 2011 driven by increases in both international life and investment
product sales.

2012 vs. 2011
Reported net income from Continuing Operations was US$324 million in 2012,
compared to a reported loss from Continuing Operations of US$303 million in
2011. Operating net income from Continuing Operations was US$324million in
2012, compared to an operating loss from Continuing Operations of US$295
million in 2011. Operating net income in SLF U.S. excludes restructuring and
other related costs and goodwill and intangible asset impairment charges
recorded in 2011, which are set out in the table above.

Net income from Continuing Operations in 2012 included favourable impacts from
improved equity markets, investment activity on insurance contract liabilities
and updates to actuarial assumptions. These items were partially offset by
unfavourable impacts from reduced interest rates and credit spread movements.
Net income in EBG included unfavourable morbidity experience, an investment in
our voluntary benefits capabilities and a charge related to a premiums
receivable account reconciliation issue.

The loss from Continuing Operations in 2011 reflected the net unfavourable
impact of assumption changes and management actions including the
implementation of a change related to Hedging in the Liabilities. The loss
also reflected the unfavourable impacts of interest rates, equity markets and
mortality and morbidity experience, partially offset by gains from investment
activity on insurance contract liabilities.

Reported net income from Discontinued Operations was US$172 million in 2012,
compared to a reported loss from Discontinued Operations of US$606 million in
2011. Net income from Discontinued Operations in 2012 reflected the favourable
impact of improved equity markets and gains from investment activity on
insurance contract liabilities, partially offset by unfavourable impacts from
reduced interest rates and updates to actuarial assumptions.

The loss from Discontinued Operations in 2011 reflected the net unfavourable
impact of assumption changes and management actions including the
implementation of a change related to Hedging in the Liabilities. The loss
also reflected the unfavourable impact of interest rates and equity markets,
partially offset by the favourable impact of investment activity on insurance
contract liabilities.

Reported net income (Combined Operations) was US$496 million in 2012, compared
to a reported net loss (Combined Operations) of US$909 million in 2011.

MFS Investment Management

                              Quarterly results                Full year 
(US$ millions)     Q4'12    Q3'12   Q2'12  Q1'12  Q4'11    2012       
                                                                        2011
Operating net         85       80     67    70    66    302   271 
income^(1)
Operating                                                       
adjustments:
  Fair value       (38)     (34)     (1)   (21)   (32)    (94)   (79) 
   adjustments on
   share-based
   payment awards
  Restructuring       —        —      —     —   (4)       —   (4) 
   and other
   related costs
Reported net          47       46     66    49    30    208   188 
income
                                                               
(C$ millions)                                                   
Operating net         85       80     68    69    68     302    270 
income^(1)
Operating                                                       
adjustments:
  Fair value       (39)     (34)     (1)   (20)   (33)    (94)   (80) 
   adjustments on
   share-based
   payment awards
  Restructuring       —        —      —     —   (4)       —   (4) 
   and other
   related costs
Reported net          46       46     67    49    31    208   186 
income
Pre-tax operating     35  %     36 %     32 %    33 %    32 %     34 %    33 %
profit margin
ratio^(2)
Average net        309.7    290.5                                 
assets (US$                           273.2   270.1   249.5    286.0   261.0
billions)
Assets under       322.8    303.6                     322.8  253.2 
management (US$                       278.2   284.8   253.2
billions)^(2)
Net sales (US$      11.5      7.9    4.2   5.9   1.7   29.4   5.4 
billions)
Asset                8.3     17.5          25.7         40.7       
appreciation                         (10.8)            15.1            (8.7)
(depreciation)
(US$ billions)
                                                               
S&P 500 Index      1,420    1,402                                 
(daily average)                       1,350   1,346   1,225    1,379   1,268
MSCI EAFE Index    1,544    1,468                                 
(daily average)                       1,427   1,516   1,420    1,489   1,590
^(1) Represents a non-IFRS financial measure that excludes fair value
adjustments on share-based payment awards at MFS and restructuring
and other related costs. See Use of Non-IFRS Financial Measures.
^(2) Pre-tax operating profit margin ratio and AUM are non-IFRS financial
measures. See Use of Non-IFRS Financial Measures. Monthly
information on AUM is provided by MFS at www.mfs.com. 

Q4 2012 vs. Q4 2011
MFS's reported net income was C$46 million in the fourth quarter of 2012,
compared to C$31 million in the fourth quarter of 2011. MFS had operating net
income of C$85 million in the fourth quarter of 2012, compared to C$68 million
in the fourth quarter of 2011. Operating net income in MFS excludes the impact
of fair value adjustments on share-based payment awards, and restructuring and
other related costs related to the transition of McLean Budden to MFS in the
fourth quarter of 2011, which are set out in the table above.

In U.S. dollars, MFS's reported net income was US$47 million in the fourth
quarter of 2012, compared to US$30million in the fourth quarter of 2011.
Operating net income was US$85 million in the fourth quarter of 2012, compared
to US$66 million in the fourth quarter of 2011.

The increase in net income from the fourth quarter of 2011 reflects the impact
of higher average net assets. MFS's pre-tax operating profit margin ratio was
35% in the fourth quarter of 2012, up from 32% in the fourth quarter of 2011.

Total AUM as at December31, 2012 was US$322.8 billion, compared to US$253.2
billion at December31, 2011. The increase of US$69.6 billion was driven by
gross sales of US$86.3 billion and asset appreciation of US$40.7billion,
partially offset by redemptions of US$56.8 billion and a $0.6 billion
disposition. Gross sales of US$26.2 billion during the fourth quarter of 2012
included a one-time inflow from Sun Capital Advisers, LLC of US$6.7 billion
representing variable annuity assets previously managed by third-party
managers. Retail fund performance remained strong with 90% and 88% of fund
assets ranked in the top half of their Lipper categories based on five- and
ten-year performance, respectively.

2012 vs. 2011

Reported net income was US$208 million in 2012, compared to US$188 million in
2011. Operating net income was US$302 million in 2012, compared to US$271
million in 2011. Operating net income in MFS excludes the impact of fair value
adjustments on share-based payment awards, and restructuring and other related
costs related to the transition of McLean Budden to MFS in 2011, which are set
out in the table above. The increase reflected higher average net assets,
which increased from US$261.0 billion at December 31, 2011 to US$286.0 billion
at December 31, 2012.

SLF Asia

                               Quarterly results                 Full year 
($ millions)       Q4'12    Q3'12    Q2'12    Q1'12  Q4'11  2012      
                                                                        2011
Operating net         50       35      15      29    44           
income (loss)^(1)                                                 129    144
Operating                                                       
adjustments:              
  Restructuring       —        —       —       —   (6)     —      
   and other                                                             (6)
   related costs
Reported net          50       35      15      29    38           
income (loss)                                                     129    138
Operating ROE       10.4      7.6     3.2     6.6   9.9           
(%)^(1)                                                           7.0    8.5
^(1) Represents a non-IFRS financial measure that excludes restructuring and
other related costs recorded as a result of the acquisition
of Grepalife Financial Inc. See Use of Non-IFRS Financial Measures. 

Q4 2012 vs. Q4 2011
SLF Asia's reported net income was $50 million in the fourth quarter of 2012,
compared to reported net income of $38 million in the fourth quarter of 2011.
Operating net income was $50 million in the fourth quarter of 2012, compared
to $44 million in the fourth quarter of 2011. Operating net income in SLF Asia
excludes restructuring and other related costs recorded in the fourth quarter
of 2011, primarily related to the acquisition of 49% of Grepalife Financial
Inc., which are set out in the table above.

Net income in the fourth quarter of 2012 reflected the favourable impact of
assumption changes and management actions and higher earnings in the
Philippines due to business growth. Net income in the fourth quarter of 2011
reflected the net favourable impact of assumption changes and management
actions during the quarter, realized gains on AFS securities and business
growth, partially offset by high levels of new business strain as a result of
sales in China.

Total individual life sales in the fourth quarter of 2012 were down 20% from
the fourth quarter of 2011. Sales increases in the Philippines, Indonesia and
Hong Kong were offset by lower sales in India and China. Sales in the
Philippines grew by 61%, and sales in Indonesia and Hong Kong were up by 14%
and 6%, respectively, measured in local currency.

2012 vs. 2011
Reported net income was $129 million in 2012, compared to reported net income
of $138 million in 2011. Operating net income was $129 million in 2012,
compared to $144 million in 2011. Operating net income in SLF Asia excludes
restructuring and other related costs recorded in 2011, which are set out in
the table above.

Net income in 2012 included the unfavourable impact of declining interest
rates in Hong Kong and higher levels of new business strain from increased
sales in China and the Philippines. These items were partially offset by the
favourable impact of assumption changes and management actions, and higher
earnings in the Philippines due to business growth. Net income in 2011
reflected business growth, realized gains on AFS securities, the net
favourable impact of assumption changes and management actions and low levels
of new business strain as a result of sales levels in India and Hong Kong.

Individual life sales in 2012 were flat from 2011. On a local currency basis,
sales growth in the Philippines and China was offset by lower sales in India.
Excluding India, individual life sales were up 19%. Sales in the Philippines
were up 58% due to agency expansion, and the launch of Sun Life Grepa
Financial, Inc. in October 2011. Sales in China were up 17% as a result of
distribution growth.

Corporate

Corporate includes the results of SLF U.K. and Corporate Support. Corporate
Support includes our run-off reinsurance business as well as investment
income, expenses, capital and other items that have not been allocated to our
other business segments. Discontinued Operations in Corporate relate to
Corporate Support only.

                                Quarterly results               Full year 
($ millions)          Q4'12    Q3'12   Q2'12  Q1'12  Q4'11   2012      
                                                                          2011
SLF U.K.                                                         
Operating net income     28     107     52    26    71   213   156
(loss)^(1)
Operating                                                        
adjustments:
    Restructuring       —       —      —     —   (3)      —   (3)
      and other
      related costs:
  Reported net          28     107     52    26    68   213   153
   income (loss)
                                                                
Corporate Support                                                
Operating net income   (72)     (63)    (77)   (70)   (78)  (282)  (355)
(loss) from
Continuing
Operations^(1)
Operating                                                        
adjustments:
  Restructuring and    (4)        —      —     —          (4)   (10)
   other related                                          (10)
   costs:
Reported net income    (76)     (63)    (77)   (70)   (88)  (286)  (365)
(loss) from
Continuing
Operations
                                                                
Corporate (total)                                                
Total operating net    (44)       44          (44)    (7)   (69)  (199)
income (loss) from                        (25)
Continuing
Operations^(1)
Total Operating                                                  
adjustments:
  Restructuring and    (4)        —      —     —          (4)   (13)
   other related                                          (13)
   costs:
Total reported net     (48)       44          (44)   (20)   (73)  (212)
income (loss) from                        (25)
Continuing
Operations^(1)
Total reported net        2        3      2     —     3     7    29
income (loss) from
Discontinued
Operations
Reported net income    (46)       47          (44)   (17)   (66)  (183)
(loss)                                    (23)
^(1) Represents a non-IFRS financial measure that excludes restructuring and
other related costs. See Use of Non-IFRS Financial Measures. 

Q4 2012 vs. Q4 2011
Corporate had a reported loss from Continuing Operations of $48 million in the
fourth quarter of 2012, compared to a reported loss from Continuing Operations
of $20 million in the fourth quarter of 2011. The operating net loss from
Continuing Operations was $44 million in the fourth quarter of 2012, compared
to an operating loss from Continuing Operations of $7 million in the fourth
quarter of 2011. Operating net income (loss) in Corporate excludes
restructuring and other related costs, which are set out in the table above.

SLF U.K.'s reported net income was $28 million in the fourth quarter of 2012,
compared to $68 million in the fourth quarter of 2011. Restructuring and other
related costs were nil, compared to $3 million in the fourth quarter of 2011.
Operating net income was $28 million in the fourth quarter of 2012, compared
to $71 million in the fourth quarter of 2011. SLF U.K.'s net income in the
fourth quarter of 2012 reflected favourable impacts from tax related items.
Net income in the fourth quarter of 2011 included a net tax benefit related to
the reorganization of our U.K. operations, partially offset by the
unfavourable impact of investment activity on insurance contract liabilities.

Corporate Support had a reported loss from Continuing Operations of $76
million in the fourth quarter of 2012, compared to a reported loss from
Continuing Operations of $88 million in the fourth quarter of 2011.
Restructuring and other related costs were $4 million, compared to $10 million
in the fourth quarter of 2011. The operating loss from Continuing Operations
was $72 million in the fourth quarter of 2012, compared to an operating loss
from Continuing Operations of $78 million in the fourth quarter of 2011. Net
income from Continuing Operations in the fourth quarter of 2012 reflected
favourable impact from lower debt financing costs and lower losses in our
run-off reinsurance business, partially offset by higher expenses. Net income
from Continuing Operations in the fourth quarter of 2011 included net
impairments on AFS securities.

Corporate's reported net income from Discontinued Operations was $2 million in
the fourth quarter of 2012, compared to $3 million in the fourth quarter of
2011. Corporate's reported loss (Combined Operations) was $46million in the
fourth quarter of 2012, compared to a reported loss of $17 million in the
fourth quarter of 2011.

2012 vs. 2011

Corporate had a reported loss from Continuing Operations of $73 million in
2012, compared to a reported loss from Continuing Operations of $212 million
in 2011. The operating loss from Continuing Operations was $69 million in
2012, compared to an operating loss from Continuing Operations of $199 million
in 2011. Operating net income (loss) in Corporate excludes restructuring and
other related costs, which are set out in the table above.

SLF U.K.'s reported net income was $213 million in 2012, compared to $153
million in 2011. Restructuring and other related costs were nil in 2012,
compared to $3 million in 2011. Operating net income was $213 million in 2012,
compared to $156 million in 2011. Net income in 2012 reflected favourable
impacts from investment activity on insurance contract liabilities,
refinements to actuarial models and tax related items. Net income in 2011
included a net tax benefit related to the reorganization of our U.K.
operations, partially offset by the unfavourable impact of investment activity
on insurance contract liabilities. Net income in both 2012 and 2011 reflected
investment in regulatory initiatives such as Solvency II.

In Corporate Support, the reported loss from Continuing Operations was $286
million in 2012, compared to a reported loss of $365 million in 2011.
Restructuring and other related costs were $4 million, compared to $10 million
in 2011. The operating loss from Continuing Operations was $282 million in
2012, compared to an operating loss from Continuing Operations of $355 million
in 2011. The loss from Continuing Operations in 2012 reflected lower expenses
and lower losses in our run-off reinsurance business than the prior year. The
loss from Continuing Operations in 2011 included an impairment of AFS
securities. Both 2012 and 2011 reflected the net cost of reinsurance for the
insured business in SLF Canada's GB operations.

Corporate's reported net income from Discontinued Operations was $7 million in
2012, compared to $29 million in 2011. The reported loss (Combined Operations)
for Corporate was $66 million in 2012, compared to $183 million in 2011.

Additional Financial Disclosure

Revenue from Continuing Operations

Revenue from                                                           
Continuing
Operations
                               Quarterly results                     Full year
($ millions)       Q4'12    Q3'12    Q2'12    Q1'12    Q4'11     2012    2011
Premiums                                                               
 Gross         3,779    3,200    3,130   3,306   3,308                
                                                                    13,415    13,221
 Ceded       (1,322)  (1,273)  (1,265)  (1,308)  (1,276)  (5,168)  (4,983)
Net premium        2,457    1,927    1,865   1,998   2,032   8,247   8,238
revenue
Net investment                                                         
income 
    Interest      1,202    1,023    1,192   1,013   1,006   4,430   4,388
     and other
     investment
     income
    Changes in    (274)    1,233    1,339   (570)    1,538   1,728   4,257
     fair value
     of FVTPL
     assets and
     liabilities
    Net gains        23       16       68      19      63     126     151
     (losses) on
     AFS assets
Fee income           842      753      718     715     735   3,028   2,796
Total revenue      4,250    4,952    5,182   3,175   5,374                
                                                                    17,559    19,830
Adjusted           5,554    4,735    4,787   4,725   4,712                
revenue^(1)                                                         19,541    19,117
^(1) Represents a non-IFRS financial measure that excludes the impact of fair value
changes in Fair Value Through Profit and Loss ("FVTPL") assets and liabilities,
currency,
reinsurance for the insured business in SLF Canada's GB operations and net premiums
from Life and Investment Products in SLF U.S. that
were closed to new sales effective December 30, 2011. For additional information,
see Use of Non-IFRS Financial Measures. 

Revenues were $4.3 billion in the fourth quarter of 2012, compared to $5.4
billion in the fourth quarter of 2011. Revenues decreased primarily as a
result of lower net gains in the fair value of FVTPL assets and liabilities,
partially offset by higher premium revenue from SLF Canada's GRS and SLF
U.S.'s Life and Investment Products businesses, higher investment income and
increased fee income from MFS. Adjusted revenue was $5.6 billion in the fourth
quarter of 2012, compared to $4.7 billion in the fourth quarter of 2011
primarily due to higher premium revenue from SLF Canada's GRS and SLF U.S.'s
Life and Investment Products businesses, higher investment income and
increased fee income from MFS.

Revenues of $17.6 billion in 2012 were down $2.2 billion from revenue of $19.8
billion in 2011 due to lower net gains in the fair value of FVTPL assets and
liabilities, partially offset by higher fee income from MFS. Adjusted revenue
of $19.5 billion was up $0.4 billion from 2011 largely driven by higher fee
income from MFS and favourable impact from currency movements.

Premiums and Deposits from Continuing Operations

Premiums and Deposits from Continuing Operations 
                              Quarterly results                  Full year 
($ millions)       Q4'12   Q3'12   Q2'12   Q1'12    Q4'11     2012   2011
                                                                               
Premiums and                                                    
Deposits               
 Net premium      2,457                        2,032   8,247       
  revenue                   1,927    1,865    1,998                        8,238
                                                                               
 Segregated fund  1,681                        2,272   6,935       
  deposits                  1,534    1,753    1,967                        7,508
                                                                               
 Mutual fund     11,294                        7,334               
  sales^(1)                10,129   12,060    9,820              43,303   28,941
                                                                               
 Managed fund    14,938                        8,682               
  sales^(1)                11,065    7,999    9,849              43,851   28,019
                                                                               
 ASO premium and  1,512                        1,391   5,737       
  deposit                   1,405    1,380    1,440                        5,661
  equivalents^(1)                                                              
Total premiums    31,882                       21,711  108,073  78,367
and deposits^(1)           26,060   25,057   25,074                            
Total adjusted    33,724                               110,847       
premiums and               27,642   26,249   26,446    22,587             81,904
deposits^(1),(2)                                                               
^(1)Represents a non-IFRS financial measure. See Use of Non-IFRS Financial
Measures. 
^(2) Excludes the impact of foreign exchange, reinsurance for the insured
business in SLF Canada's GB operations and net premiums and
deposits from Life and Investment Products in SLF U.S. that were closed to new
sales effective December 30, 2011. 

Premiums and deposits ^ were $31.9 billion for the quarter ended December31,
2012, compared to $21.7 billion for the quarter ended December 31, 2011.
Adjusted premiums and deposits ^ of $33.7 billion in the fourth quarter of
2012 increased $11.1 billion from 2011. In both cases, the increase was
primarily the result of higher fund sales at MFS.

Premiums and deposits were $108.1 billion in 2012, compared to $78.4 billion
in 2011. Adjusted premiums and deposits of $110.8 billion in 2012 increased
$28.9 billion from 2011. Both increases were primarily due to higher MFS fund
sales.

Net life, health and annuity premium revenues, which reflect gross premiums
less amounts ceded to reinsurers, were $2.5 billion in the fourth quarter of
2012, compared to $2.0 billion in the fourth quarter of 2011. The increase was
primarily due to higher premium revenue from SLF Canada's GRS and SLF U.S.'s
Life and Investment Products businesses. Net life, health and annuity premium
revenues were $8.2 billion for 2012, largely unchanged from 2011.

Segregated fund deposits were $1.7 billion in the fourth quarter of 2012,
compared to $2.3 billion in the fourth quarter of 2011. Segregated fund
deposits were $6.9 billion in 2012, compared to $7.5 billion in 2011. The
decrease in both periods was largely attributable to planned reductions in
sales in SLF Canada.

Sales of mutual funds and managed funds were $26.2 billion in the fourth
quarter of 2012, an increase of $10.2billion over the fourth quarter of 2011,
reflecting strong sales from MFS. Mutual and managed fund sales were $87.2
billion in 2012, compared to $57.0 billion in 2011, also driven by higher MFS
sales.

ASO premium and deposit equivalents of $1.5 billion in the fourth quarter of
2012 were largely unchanged from the fourth quarter of 2011. ASO premium and
deposit equivalents for 2012 were also in line with 2011.

Assets Under Management (Combined Operations)

AUM consists of general funds, segregated funds and other AUM. Other AUM
includes mutual funds and managed funds, which include institutional and other
third-party assets managed by the Company.

AUM ^ were $532.8 billion as at December31, 2012, compared to $465.8 billion
as at December31, 2011 and $514.9 billion as at September 30, 2012. The
increase in AUM of $67.0 billion between December31, 2012 and December31,
2011 resulted primarily from:

              
  (i)   favourable market movements on the value of mutual funds,
               managed funds and segregated funds of $48.5 billion;
  (ii)  net sales of mutual, managed and segregated funds of $24.0
               billion, net of the inflow from Sun Capital Advisers;
  (iii) business growth of $3.4 billion; and
  (iv)  an increase of $1.5 billion from the change in value of FVTPL
               assets and liabilities; partially offset by
               a decrease of $9.8 billion from the strengthening of the
  (v)   Canadian dollar against foreign currencies compared to the
               prior period exchange rates; and
  (vi)  a decrease of $0.6 billion related to the sale of MFS McLean
               Budden's private wealth business.

AUM increased $17.9 billion between September 30, 2012 and December 31, 2012.
The increase in AUM related primarily to:

              
  (i)   favourable market movements on the value of mutual funds,
               managed funds and segregated funds of $11.1 billion;
  (ii)  net sales of mutual, managed and segregated funds of $3.9
               billion net of the inflow from Sun Capital Advisers;
               an increase of $3.5 billion from the weakening of the Canadian
  (iii) dollar against foreign currencies compared to the prior period
               exchange rates; and
  (iv)   business growth of $0.4 billion; partially offset by
  (v)   a decrease of $0.6 billion related to the sale of MFS McLean
               Budden's private wealth business; and
  (vi)  a decrease of $0.4 billion from the change in value of FVTPL
               assets and liabilities.

Changes in the Statements of Financial Position and in Shareholders' Equity
Total general fund assets were $133.1 billion as at December31, 2012,
compared to $130.1 billion a year earlier and $132.1 billion as at September
30, 2012. The increase in general fund assets from December31, 2011 was
primarily the result of an increase of $3.4 billion from business growth and
$1.4 billion from the change in value of FVTPL assets and liabilities,
partially offset by currency loss of $1.8 billion.

Insurance contract liabilities from Continuing Operations (excluding other
policy liabilities and assets) of $82.2billion as at December31, 2012
decreased by $9.0 billion compared to December31, 2011, mainly due to the
impact from the pending sale of our U.S. Annuity Business and unfavourable
impact from currency movements, partially offset by balances arising from new
policies and changes in balances on in-force policies (which includes fair
value changes on FVTPL assets supporting insurance contract liabilities).

Shareholders' equity, including preferred share capital, was $16.6 billion as
at December31, 2012, compared to $15.5 billion as at December31, 2011. The
$1.1 billion increase in shareholders' equity was primarily due to:

              
  (i)   shareholders' net income of $1,674 million in 2012, before
               preferred share dividends of $120million;
  (ii)  net unrealized gains on AFS assets in other comprehensive
               income ("OCI") of $288 million;
               proceeds of $266 million from the issuance of common shares
  (iii) through the Canadian Dividend Reinvestment Plan and $15 million
               from stock-based compensation; partially offset by
  (iv)  common share dividend payments of $844 million;
  (v)    a decrease of $177 million from the strengthening of the
               Canadian dollar relative to foreign currencies.

Income Taxes
In the fourth quarter of 2012, for our Continuing Operations, we reported an
income tax expense of $18 million on reported income before taxes of $328
million, representing an effective income tax rate of 5.5%. This compares to
an income tax recovery of $116 million on our reported loss before taxes of
$85 million and an effective tax rate of 136.5% for Continuing Operations in
the fourth quarter of 2011. Our Combined Operations had an income tax expense
of $73 million on reported income before taxes of $494 million, which resulted
in an effective income tax rate of 14.8%. This compares to an income tax
recovery of $399 million on our reported loss before taxes of $895million and
an effective tax rate of 44.6% for Combined Operations in the fourth quarter
of 2011.

In the fourth quarter of 2012, our effective tax rate of 5.5% was considerably
lower than the statutory income tax rate of 26.5% (28% in 2011) due to a
sustainable stream of tax benefits, such as lower taxes on income subject to
tax in foreign jurisdictions, a range of tax exempt investment income and
other items. Our tax expense in the quarter was reduced by adjustments related
to prior years, including successful resolution of tax audits and the impact
of the new legislation for life companies in the U.K. In Canada, we also
recorded a higher tax benefit related to the appreciation of real estate
properties during the quarter.

In the fourth quarter of 2011, in addition to our sustainable tax benefits, we
recorded a tax benefit of $68 million related to previously unrecognized
losses in SLF U.K. following the reorganization of our principal U.K.
subsidiaries. Our fourth quarter 2011 tax recovery also included the impact of
the impairment of goodwill in SLF Canada, which was not deductible for tax
purposes.

Discontinued Operations
On December 17, 2012, we entered into a definitive stock purchase agreement to
sell our U.S. Annuity Business, including all of the issued and outstanding
shares of Sun Life (U.S.). Our U.S. Annuity Business includes our domestic
U.S. variable annuity, fixed annuity and fixed indexed annuity products,
corporate and bank-owned life insurance products and variable life insurance
products. The transaction is subject to regulatory approvals and other closing
conditions and is expected to close before the end of the second quarter of
2013.

The following table sets out the financial information associated with the
discontinued operations.

                                                             
(C$ millions, unless           Q4'12       Q4'11          2012         2011
otherwise noted)
Net Income - Reported                                                 
 Net income from                111       (527)           180      (595)
  Discontinued Operations
 Diluted EPS from              0.18      (0.90)          0.30     (1.03)
  Discontinued Operations ($)
 Basic EPS from Discontinued   0.18     (0.90)          0.30     (1.03)
  Operations ($)
Revenue                                                               
 Net premiums                    79        273           282      1,076
 Net investment income            1       (80)           457      1,118
 Fee income                     131        148           589        557
 Total revenue                  211        341         1,328      2,751
Premiums and Deposits                                               
 Net premium revenue             79        273           282      1,076
 Segregated fund deposits       105        640           392      2,674
 Mutual fund sales                —          —             —        — 
 Managed fund sales               —          —             —        — 
 ASO premium and deposit          —          —             —        — 
  equivalents
 Total premiums and deposits    184        913           674      3,750
Assets                                                               
 General funds               15,067                 15,067          
 Segregated funds            27,668                 27,668           
 Total assets                42,735                 42,735          
Liabilities                                                          
 General funds               12,689                  12,689          
 Segregated funds            27,668                  27,668          
 Total liabilities           40,357                  40,357          

Investments
The assets and liabilities of our Discontinued Operations have been classified
as Assets of disposal group classified as held for sale and Liabilities of
disposal group classified as held for sale on our 2012 Consolidated Statement
of Financial Position. Comparative information for 2011 has not been restated.
The information in this section has been completed on the same basis. Total
general fund invested assets does not include $14,347 million of invested
assets separately disclosed in Assets of disposal group classified as held for
sale. See Note 3 in our 2012 Consolidated Financial Statements for additional
information.

We had total general fund invested assets of $105.7 billion as at December31,
2012. The majority of our general fund is invested in medium- to long-term
fixed income instruments, such as debt securities, mortgages and loans. 83.9%
of the general fund assets are invested in cash and fixed income investments.
Equity securities and investment properties comprised 4.8% and 5.6% of the
portfolio, respectively. The remaining 5.7% of the portfolio is comprised of
policy loans, derivative assets and other invested assets.

The following table sets out the composition of our invested assets.

                                                                
Investments^(1)               December31,                 December31,
                                2012^(2)                    2011^(2)  
($ millions)            Carrying    % of total      Carrying    % of total
                           value       carrying           value       carrying
                                          value                        value 
Cash, cash                 7,034          6.7%         8,837          7.6%
equivalents and
short-term securities
Debt securities -         43,773         41.4%        51,627         44.2%
FVTPL^(3)
Debt securities - AFS     10,589         10.0%        11,303          9.7%
Equity securities -        4,169          4.0%         3,731          3.2%
FVTPL
Equity securities -          857          0.8%           839          0.7%
AFS
Mortgages and loans       27,248         25.8%        27,755         23.8%
Derivative assets          2,113          2.0%         2,632          2.3%
Other invested assets      1,269          1.2%         1,348          1.2%
Policy loans               2,681          2.5%         3,276          2.8%
Investment properties      5,942          5.6%         5,313          4.5%
Total invested assets    105,675          100%       116,661          100%
^(1) The invested asset values and ratios presented are based on the carrying
value of the respective asset categories. Carrying values for
FVTPL and AFS invested assets are generally equal to fair value. In the event
of default, if the amounts recovered are insufficient to satisfy
the related insurance contract liability cash flows that the assets are
intended to support, credit exposure may be greater than the carrying
value of the asset.
^(2) Values as at December 31, 2012 do not include assets of the Discontinued
Operations which are separately disclosed in Assets of
disposal group classified as held for sale. Comparative 2011 values have not
been restated to reflect this presentation.
^(3) Not included in Debt securities are certain asset-backed securities
currently classified as Assets of disposal group classified as held for
sale. We expect that a portion of these assets will be retained and redeployed
as assets backing liabilities in the Continuing Operations upon
sale of our U.S. Annuity Business. See Note 3 in our 2012 Consolidated
Financial Statements.

Debt Securities
As at December31, 2012, we held $54.4 billion of debt securities, which
constituted 51.4% of our overall investment portfolio. Debt securities with an
investment grade of "A" or higher represented 69.9% of the total debt
securities as at December31, 2012, compared to 68.4% as at December31, 2011.
Debt securities rated "BBB" or higher represented 98.2% of total debt
securities as at December31, 2012, 1.1% higher than at December31, 2011.

Corporate debt securities that are not issued or guaranteed by sovereign,
regional and municipal governments represented 64.3% of our total debt
securities as at December31, 2012, compared to 65.8% as at December31, 2011.
Total government issued or guaranteed debt securities as at December31, 2012
were $19.4 billion, compared to $21.5 billion as at December31, 2011. Of this
amount, $1.6 billion relates to debt securities issued by the U.S. government
and other U.S. agencies. Our exposure to debt securities to any single country
does not exceed 1% of total assets on our Consolidated Statements of Financial
Position as at December 31, 2012 with the exception of the following countries
where we have business operations: Canada, the United States, and the United
Kingdom. As outlined in the table below, we have an immaterial amount of
direct exposure to Eurozone sovereign credits.

Debt Securities of Governments and Financial Institutions by Geography

                                                                   
                    December 31, 2012^(1)        December31, 2011^(1)    
                                                                             
                                                                             
($ millions)        Government                                            
                        issued                    Government
                            or                     issued or
                    guaranteed     Financials     guaranteed     Financials
Canada                  12,902         1,718       13,051         1,607  
                                                                             
United States            1,569         4,485        3,092         6,298  
                                                                             
United Kingdom           1,912         1,391        2,533         1,245  
                                                                             
Eurozone                                                              
                                                                             
    France                 16            76           25           101  
                                                                             
    Germany               179            20          180            28  
                                                                             
    Greece                  —             —            —             —  
                                                                             
    Ireland                 —             —            —             —  
                                                                             
    Italy                   —             5            —            21  
                                                                             
    Netherlands             2           342            4           311  
                                                                             
    Portugal                —             —            —             —  
                                                                             
    Spain                   —            37            3            55  
                                                                             
   Residual                —           197            2           170  
     Eurozone                                                                
Other                    2,825           993        2,605         1,547  
                                                                             
Total                   19,405         9,264       21,495        11,383  
                                                                             
^(1) Amounts as at December 31, 2012 do not include assets of the Discontinued
Operations which are separately disclosed in
Assets of disposal group classified as held for sale. Comparative 2011 amounts
have not been restated to reflect this presentation. 

Our gross unrealized losses as at December31, 2012 for FVTPL and AFS debt
securities were $0.17 billion and $0.03 billion, respectively, compared with
$1.0 billion and $0.1 billion, respectively, as at December31, 2011. Gross
unrealized losses as at December31, 2012 included $0.01 billion related to
Eurozone sovereign and financial debt securities.

Our debt securities as at December31, 2012 included $9.3 billion in the
financial sector, representing approximately 17.0% of our total debt
securities, or 8.8% of our total invested assets. This compares to
$11.4billion, or 18.1%, of the debt security portfolio as at December31,
2011. The $2.1 billion decrease in the value of financial sector debt
securities holdings is due to debt securities separately disclosed in Assets
of disposal group classified as held for sale.

Asset-backed Securities
Our debt securities as at December31, 2012 included $1.9 billion of
asset-backed securities reported at fair value, representing approximately
3.6% of our debt securities, or 1.8% of our total invested assets. This was
$1.8 billion lower than the level reported as at December31, 2011. The
decrease in the value of asset-backed securities is primarily due to the
securities separately disclosed in Assets of disposal group classified as held
for sale. The credit quality of asset-backed securities remained relatively
stable for 2012. There were no changes to the lifetime expected losses for
these assets, and any realized losses in the portfolio were substantially
offset by previously established actuarial reserves.

Asset-backed Securities

                                                              
                     December 31, 2012^(1)          December 31, 2011^(1) 
($ millions)    Amortized   Fair     BBB        Amortized   Fair     BBB
                     cost   value      and               cost   value      and
                                    higher                              higher
                                                                            
Commercial            824    896   95.2%            1,703  1,662     85%
mortgage-backed
securities
Residential                                                     
mortgage-backed
securities
   Agency            321    337  100.0%              510    538    100%
   Non-agency         43     47   95.7%              771    602   47.4%
Collateralized         75     70   26.0%         127     99   20.3%
debt
obligations
Other^(2)             592    598   99.1%              935    833   84.8%
Total               1,855  1,948   94.7%            4,046  3,734   79.4%
asset-backed
securities
^(1) Amounts as at December 31, 2012 do not include assets of the Discontinued
Operations which are separately
disclosed in Assets of disposal group classified as held for sale. Comparative
2011 amounts have not been restated
to reflect this presentation. Not included in the $1,948 million fair value
above is $1,694 million of asset-backed securities
currently classified as Assets of disposal group classified as held for sale. We
expect that a portion of these asset-
backed securities will be retained and redeployed as assets backing liabilities
in the Continuing Operations upon sale
of our U.S. Annuity Business. See Note 3 in our 2012 Consolidated Financial
Statements.
^(2) Other includes sub-prime, a portion of the Company's exposure to
Alternative-A and other asset-backed securities.

Deterioration in economic factors, such as property values and unemployment
rates, or changes in the assumed default rate of the collateral pool or
loss-given-default expectations may result in write-downs of our asset-backed
securities. We have seen an improvement in the U.S. housing market with prices
rising for several consecutive months and mortgage rates remaining at record
lows. With improved house prices and reduced inventories, sales of foreclosed
properties have picked up and several servicers have ended their foreclosure
moratoriums. However, downside risk still exists as the economy remains weak
and unemployment rates have yet to substantially decrease. This environment
could have an adverse impact on our residential mortgage-backed portfolio.
Additional information on our asset-backed securities can be found in our 2012
MD&A.

Mortgages and Loans
As at December31, 2012, we had a total of $27.2 billion in mortgages and
loans compared to $27.8 billion in 2011. Our mortgage portfolio, which
consists almost entirely of first mortgages, was $12.0 billion. Our loan
portfolio, which consists of private placement assets, was $15.3 billion. The
carrying value of mortgages and loans by geographic location is set out in the
following table. The geographic location for mortgages is based on location of
the property, while for loans it is based on the country of the creditor's
parent.

Mortgages and Loans by Geography

                                                                 
               December31, 2012^(1)            December31, 2011^(1)  
($          Mortgages     Loans     Total    Mortgages    Loans   Total 
millions)
Canada          7,457     9,946    17,403        7,500    9,154  16,654 
                                                                             
United          4,515     3,399     7,914        5,831    3,135   8,966 
States                                                                       
United             22       420       442           24      253     277 
Kingdom
Other               —     1,489     1,489            —    1,858   1,858 
Total          11,994    15,254    27,248       13,355   14,400  27,755 
^(1) Amounts as at December 31, 2012 do not include assets of the Discontinued
Operations which are separately disclosed in
Assets of disposal group classified as held for sale. Comparative 2011 amounts
have not been restated to reflect this presentation.

As at December31, 2012, our mortgage portfolio consisted mainly of commercial
mortgages with a carrying value of $12.0 billion, spread across approximately
3,200 loans. Commercial mortgages include retail, office, multi-family,
industrial and land properties. Our commercial portfolio has a weighted
average loan-to-value ratio of approximately 60%. The estimated weighted
average debt service coverage is 1.6 times, consistent with December31, 2011.
The Canada Mortgage and Housing Corporation insures 20.8% of the Canadian
commercial mortgage portfolio.

In the United States, core markets have stabilized for institutional quality
assets. However, lower quality properties in secondary and tertiary markets
continue to struggle. We have witnessed increased secondary market demand for
stressed loans, and we have capitalized on this by selling a number of our
distressed commercial mortgages. Many of our properties continue to face weak
demand, as office tenants are generally utilizing less space and vacant large
box retail space is challenging to lease. A prolonged improvement in real
estate fundamentals will be largely dependent on job creation, which continues
to lag.

Mortgages and Loans Past Due or Impaired

                                December31, 2012^(1)                      
                                                                            
                 Gross carrying value            Allowance for losses   
($           Mortgages     Loans     Total    Mortgages   Loans  Total 
millions)
Not past        11,865    15,230    27,095           —       —      — 
due                                                                         
Past due:                                                        
  Past due          7         —         7           —       —      — 
   less                                                                     
   than 90
   days
  Past due          —         —         —           —       —      — 
   90 to                                                                    
   179 days
  Past due          —         —         —           —       —      — 
   180 days                                                                 
   or more
Impaired           201        40       241      79^(2)      16     95 
                                                                            
Total           12,073    15,270    27,343      79      16     95 
                                                                            
                                December31, 2011^(1)                      
                                                                            
                 Gross carrying value            Allowance for losses    
            Mortgages     Loans     Total    Mortgages   Loans  Total 
Not past        13,001    14,358    27,359           —       —      — 
due                                                                         
Past due:                                                        
                                              
  Past due         10         —        10           —       —      — 
   less                                                                     
   than 90
   days
  Past due          —         —         —           —       —      — 
   90 to                                                                    
   179 days
  Past due          —         —         —           —       —      — 
   180 days                                                                 
   or more
Impaired           540        69       609     196^(2)      27    223 
                                                                            
Total           13,551    14,427    27,978      196      27    223 
                                                                            
^(1) Amounts as at December 31, 2012 do not include assets of the
Discontinued Operations which are separately
disclosed in Assets of disposal group classified as held for sale.
Comparative 2011 amounts have not been restated to
reflect this presentation.
^(2) Includes $42 million of sectoral provisions as at December 31, 2012 and
$68 million of sectoral provisions as at
December 31, 2011.

Impaired mortgages and loans, net of allowance for losses, amounted to $146
million as at December31, 2012, $240 million lower than the December31, 2011
level for these assets. The net carrying value of impaired mortgages amounted
to $122 million as at December31, 2012, $222 million lower than December31,
2011. The allowance for losses related to impaired mortgages amounted to $79
million as at December31, 2012, $117 million lower than December31, 2011. A
significant portion of the decline in all these balances is due to mortgages
that are separately disclosed in Assets of disposal group held for sale.
Included in the Assets of disposal group held for sale as at December31,
2012, are impaired mortgages with a net carrying value of $92 million, a gross
carrying value of $115 million and allowance for losses amounting to $23
million. The remaining decline in these balances is primarily due to the sale
of impaired mortgages during the year. The sectoral provision related to
mortgages included in the allowance for losses decreased by $26 million to $42
million, which reflects the sale or workout of a number of distressed loans as
well as $12 million included in mortgages separately disclosed in Assets of
disposal group held for sale. Approximately 87.8% of the impaired mortgage
loans are in the United States.

Asset Default Provision
We make provisions for possible future credit events in the determination of
our insurance contract liabilities. The amount of the provision for asset
default included in insurance contract liabilities is based on possible
reductions in future investment yield that vary by factors such as type of
asset, asset credit quality (rating), duration and country of origin. To the
extent that an asset is written off, or disposed of, any amounts that were set
aside in our insurance contract liabilities for possible future asset defaults
in respect of that asset are released.

Beginning in the fourth quarter of 2012, our asset default provision
disclosure reflects the provision relating to future credit events for fixed
income assets currently held by the Company that support our insurance
contract liabilities. Amounts previously reported as the asset default
provision included amounts held for future credit events on future asset
purchases, some equity and real estate growth provisions for adverse
deviations, and other items. As at December 31, 2011, approximately $1,764
million of the $3,376 million previously reported asset default provision
related to these items. Under the revised disclosure the asset default
provision as at December 31, 2011 was $1,612 million.

Our asset default provision as at December 31, 2012 was $1,468 million for
losses related to possible future credit events for fixed income assets
currently held by the Company that support our insurance contract liabilities
compared to $1,612 million in 2011.

Derivative Financial Instruments
The values of our derivative instruments are set out 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.

Derivative Instruments

                                                                       
($ millions)              December31, 2012 ^(1 ^)      December31, 2011   
                                                                    ^(1 ^)
Net fair value                               1,519               1,573    
Total notional amount                       42,478              50,859    
Credit equivalent amount                       953               1,026    
Risk-weighted credit                             8                   8    
equivalent amount
^(1)Amounts as at December 31, 2012 do not include assets of the Discontinued
Operations which are separately
disclosed in Assets of disposal group classified as held for sale. Comparative
2011 amounts have not been restated to
reflect this presentation. 

The total notional amount of derivatives in our portfolio decreased to $42.5
billion as at December31, 2012, from $50.9 billion at the end of 2011. This
decrease is attributable to notional balances of $15.0 billion included in the
Discontinued Operations and the fair value of these derivatives is separately
disclosed in Assets and Liabilities of disposal group classified as held for
sale. This is offset by an increase of $6.6 billion, primarily related to
interest rate swaps and swaptions entered into for the purposes of
economically hedging against interest rate risk including disintermediation
risk and to improve the matching of our assets and liabilities.

Capital Management
Our capital base consists mainly of common shareholders' equity, preferred
shareholders' equity and subordinated debt. As at December31, 2012, our total
capital was $20.2 billion, up from $19.1 billion as at December31, 2011. The
increase in total capital was primarily the result of common shareholders' net
income of $1,554 million, partially offset by common shareholders' dividends
(net of the dividend reinvestment and share repurchase plan) of $703million.

Sun Life Assurance's MCCSR ratio was 209% as at December31, 2012, compared to
211% as at December31, 2011. Low interest rates and volatile equity markets
reduced the MCCSR ratio in 2012. The impact of the Sun Life Assurance's
subordinated debt redemption was offset by net financing activities.

In December 2012, Office of the Superintendent of Financial Institutions
("OSFI") released the 2013 MCCSR Guideline effective for January 1, 2013. The
guideline includes two significant changes that impact Sun Life Assurance's
MCCSR ratio: (i) the impact of the change in accounting for defined benefit
pension plans (IAS 19); and (ii) reduced lapse risk requirement. In relation
to the changes for defined benefit pension plans, the actual impact is based
on the balances as at December 31, 2012. Sun Life Assurance will phase in a
reduction of approximately $152 million to its gross tier 1 available capital
over eight quarters, ending in the fourth quarter of 2014, resulting in a
reduction of Sun Life Assurance's MCCSR ratio of approximately three
percentage points over this two year period. The reduced lapse risk capital
requirement is effective first quarter of 2013. The reduced requirement will
be immediately implemented with no transition. The impact to Sun Life
Assurance's MCCSR ratio is expected to be an increase of three percentage
points. Other changes do not have a material impact on Sun Life Assurance's
MCCSR ratio.

In September 2012, OSFI issued a report titled the Life Insurance Regulatory
Framework to provide life insurance companies and industry stakeholders with
an overview of regulatory initiatives that OSFI will focus on over the period
to 2016. The initiatives cover three broad areas: risk management and
governance, evolving regulatory capital requirements and transparency of
financial disclosure, and have potential impact on life insurance company
capital levels and resourcing for governance and risk management.

In addition to the priorities outlined in the Framework, OSFI is considering a
number of changes to the insurance company capital rules, including new
guidelines that would establish stand-alone capital adequacy requirements for
operating life insurance companies, such as Sun Life Assurance, and would
update OSFI's regulatory guidance for non-operating insurance companies acting
as holding companies, such as Sun Life Financial Inc. In relation to the
guidance for holding companies, OSFI has indicated that it expects to further
develop and apply MCCSR and Internal Target Capital Ratio guidelines to
holding companies by 2016. Furthermore, OSFI is reviewing the alignment of
some insurance regulations with analogous changes made to the regulatory
framework for banks under the recent Basel III Capital Accord. The outcomes of
these initiatives are uncertain and may impact our position relative to that
of other Canadian and international financial institutions with which we
compete for business and capital.

Risk Management
We use an enterprise risk management framework to assist in categorizing,
monitoring and managing the risks to which we are exposed. The major
categories of risk are credit risk, market risk, insurance risk, operational
risk and strategic risk. Operational risk is a broad category that includes
legal and regulatory risks, people risks and systems and processing risks.

Through our ongoing enterprise risk management procedures, we review the
various risk factors identified in the framework and report to senior
management and to the Risk Review Committee of the Board at least quarterly.
Our enterprise risk management procedures and risk factors are described in
our annual MD&A and AIF.

The assets and liabilities of our Discontinued Operations have been classified
as Assets of disposal group classified as held for sale and Liabilities of
disposal group classified as held for sale on our 2012 Consolidated Statement
of Financial Position. Comparative information for 2011 has not been restated.
As a result, current year information does not include the products of the
Discontinued Operations, primarily domestic U.S. variable and fixed annuities.
Unless otherwise indicated, amounts presented in the sections that follow
reflect the results of our Continuing Operations. When referring to segregated
funds it is inclusive of segregated fund guarantees, variable annuities and
investment products, and includes Run-off reinsurance in our Corporate
business segment.

Market Risk Sensitivities
Our earnings are affected by the determination of policyholder obligations
under our annuity and insurance contracts. These amounts are determined using
internal valuation models and are recorded in our Consolidated Financial
Statements, primarily as insurance contract liabilities. The determination of
these obligations requires management to make assumptions about the future
level of equity market performance, interest rates (including credit and swap
spreads) and other factors over the life of our products. Differences between
our actual experience and our best estimate assumptions are reflected in our
financial statements.

The market value of our investments in fixed income and equity securities
fluctuate based on movements in interest rates and equity markets. The market
value of fixed income assets designated as AFS that are held primarily in our
surplus segment increases (decreases) with declining (rising) interest rates.
Similarly, the market value of equities designated as AFS and held primarily
in our surplus segment increases (decreases) with rising (declining) equity
markets. Changes in the market value of AFS assets flow through OCI and are
only recognized in net income when realized upon sale, or when considered
impaired. The amount of realized gains (losses) recorded in net income in any
period is equal to the initial unrealized gains (losses) or OCI position at
the start of the period plus the change in market values during the current
period up to the point of sale for those assets which were sold. The sale of
AFS assets held in surplus can therefore have the effect of modifying our net
income sensitivity.

In 2012, we realized $126 million (pre-tax) in net gains on the sale of AFS
assets for Continuing Operations. At December31, 2012, the net unrealized
gains or OCI position on AFS fixed income and equity assets for Continuing
Operations was $446 million and $86 million, respectively, after-tax.

The following table sets out the estimated immediate impact or sensitivity of
our net income, OCI and Sun Life Assurance's MCCSR ratio to certain
instantaneous changes in interest rates and equity market prices as at
December 31, 2012 and December 31, 2011.

Interest Rate and Equity Market Sensitivities
As at December 31, 2012^(1)
Interest rate              100 basis     50 basis   50 basis        100
sensitivity^(2)                 point          point        point        basis
                             decrease       decrease     increase        point
                                                                      increase
  Potential impact on                                             
   net income^(3)
    Individual          $     (300)    $    (150)  $      100        200
      Insurance                                                     $
    Segregated Fund              -            -          -         -
      Guarantees^(4)
    Fixed Annuity and            -            -          -  $     (50)
      Other
    Total               $     (300)    $    (150)  $      100        150
                                                                    $
                                                                  
  Potential impact on    $       300          150      (150)  $    (300)
   OCI^(5)                                $            $
  Potential impact on     6% points           3%   1% point         3%
   MCCSR^(6)                 decrease         points     increase       points
                                            decrease                  increase
                                                                  
Equity markets                   25%          10%        10%        25%
sensitivity^(7)              decrease       decrease     increase     increase
  Potential impact on    $     (150)    $     (50)  $       50        100
   net income^(3)                                                   $
  Potential impact on    $     (150)    $     (50)  $       50        150
   OCI^(5)                                                          $
  Potential impact on     8% points           3%         4%         5%
   MCCSR^(6)                 decrease         points       points       points
                                            decrease     increase     increase
                                                                  
                                                                  
As at December 31,                                                 
2011^(1)
Interest rate              100 basis     50 basis   50 basis        100
sensitivity^(2)                 point          point        point        basis
                             decrease       decrease     increase        point
                                                                      increase
  Potential impact on                                             
   net income^(3)
    Individual          $     (400)    $    (200)  $      150        250
      Insurance                                                     $
    Segregated Fund     $     (250)    $    (100)  $      100        200
      Guarantees^(1)(4)                                             $
    Fixed Annuity and   $      (50)            -          -  $       50
      Other
    Total               $     (700)    $    (300)  $      250        500
                                                                    
                                                                    $
                                                                  
  Potential impact on    $       350          200      (150)  $    (350)
   OCI^(5)                                $            $
  Potential impact on     9% points           3%         3%         7%
   MCCSR^(6)                 decrease         points       points       points
                                            decrease     increase     increase
                                                                  
Equity markets                   25%          10%        10%        25%
sensitivity^(7)              decrease       decrease     increase     increase
  Potential impact on    $     (350)    $    (150)  $      100        200
   net income^(3)                                                   $
  Potential impact on    $     (150)    $     (50)  $       50        150
   OCI^(5)                                                          
                                                                    $
  Potential impact on     6% points           2%         3%         4%
   MCCSR^(6)                 decrease         points       points       points
                                            decrease     increase     increase
                                                                  
^(1) Amounts as at December 31, 2012 do not include the impact of assets and
liabilities of the Discontinued Operations. Comparative
amounts have not been restated. Net income and OCI sensitivities have been
rounded to the nearest $50 million.
^(2) Represents a parallel shift in assumed interest rates across the entire
yield curve as at December 31, 2012 and December 31, 2011,
respectively. Variations in realized yields based on factors such as different
terms to maturity and geographies may result in realized
sensitivities being significantly different from those illustrated above.
Sensitivities include the impact of re-balancing interest rate hedges
for segregated funds at 10 basis point intervals (for 50 basis point changes
in interest rates) and at 20 basis point intervals (for 100
basis point changes in interest rates).
^(3) The market risk sensitivities include the estimated mitigation impact of
our hedging programs in effect as at December 31, 2012 and
December 31, 2011, respectively, and include new business added and product
changes implemented prior to such dates.
^(4) Segregated Fund Guarantees is inclusive of segregated funds, variable
annuities and investment products, and includes Run-off
reinsurance in our Corporate business segment.
^(5) A portion of assets designated as AFS are required to support certain
policyholder liabilities and any realized gains (losses) on these
securities would result in a commensurate increase (decrease) in actuarial
liabilities, with no net income impact in the reporting period.
^(6) The MCCSR sensitivities illustrate the impact on Sun Life Assurance as at
December 31, 2012 and December 31, 2011, respectively.
This excludes the impact on assets and liabilities that are in Sun Life
Financial Inc. but not included in Sun Life Assurance.
^(7) Represents the respective change across all equity markets as at December
31, 2012 and December 31, 2011, respectively. Assumes
that actual equity exposures consistently and precisely track the broader
equity markets. Since in actual practice equity-related exposures
generally differ from broad market indices (due to the impact of active
management, basis risk and other factors), realized sensitivities may
differ significantly from those illustrated above. Sensitivities include the
impact of re-balancing equity hedges for segregated funds at 2%
intervals (for 10% changes in equity markets) and at 5% intervals (for 25%
changes in equity markets).

Our net income sensitivity to interest rates and equity markets has decreased
since December31, 2011. Approximately one third of the decrease in interest
rate sensitivity and nearly all of the decrease in equity market sensitivity
results from assets and liabilities of the Discontinued Operations which are
separately classified as Assets of disposal group classified as held for sale
and Liabilities of disposal group classified as held for sale and are not
included in our current year sensitivities. Our interest rate sensitivities
have also decreased since December31, 2011 as a result of increased hedging
done throughout 2012 in our segregated fund guarantees and individual
insurance lines of business. The balance results primarily from changes in
actuarial methods, assumptions and modelling, which reduce the sensitivity of
our liabilities and net income to interest rates. In addition, included in our
Discontinued Operations are asset-backed securities that we expect to retain
and redeploy as assets-backing liabilities in the Continuing Operations upon
sale of our U.S. Annuity Business. As at December 31, 2012 we estimate that
these assets would not have a material impact on our net income sensitivity to
interest rates.

Credit Spread and Swap Spread Sensitivities
We have estimated the immediate impact or sensitivity of our shareholder net
income attributable to certain instantaneous changes in credit and swap
spreads. The credit spread sensitivities reflect the impact of changes in
credit spreads on non-sovereign fixed income assets, including provincial
governments, corporate bonds and other fixed income assets. The swap spread
sensitivities reflect the impact of changes in swap spreads on swap-based
derivative positions.

As of December31, 2012, we estimate that an increase of 50 basis points in
credit spread levels would increase net income by approximately $125 million
and a decrease of 50 basis points in credit spread levels would decrease net
income by approximately $125 million. In most instances, credit spreads are
assumed to revert to long-term actuarial liability assumptions generally over
a five-year period.

As of December31, 2012, we estimate that a 20 basis point increase in swap
spread levels would decrease net income by approximately $25 million and a
decrease of 20 basis points in swap spread levels would increase net income by
approximately $50 million.

The spread sensitivities assume parallel shifts in the indicated spreads (i.e.
equal shift across the entire spread term structure). Variations in realized
spread changes based on different terms to maturity, geographies, asset
class/derivative types, underlying interest rate movements and ratings may
result in realized sensitivities being significantly different from those
provided above. The credit spread sensitivity estimates also exclude any
credit spread impact that may arise in connection with any asset positions
held in segregated funds. Spread sensitivities are provided for the
consolidated entity and may not be proportional across all reporting segments.
Please refer to the section Additional Cautionary Language and Key Assumptions
Related to Sensitivities for important additional information regarding these
estimates.

General Account Insurance and Annuity Products
Most of our sensitivity to interest rate risk is derived from our general
account insurance and annuity products. We have implemented market risk
management strategies to mitigate a portion of the market risk related to our
general account insurance and annuity products.

Individual insurance products include universal life and other long-term life
and health insurance products. A major source of market risk exposure for
individual insurance products is the reinvestment risk related to future
premiums and the guaranteed cost of insurance. Interest rate risk for
individual insurance products is typically managed on a duration basis, within
tolerance ranges set out in the applicable investment guidelines. Targets and
limits are established so that the level of residual exposure is commensurate
with our risk tolerance. Exposures are monitored frequently, and assets are
rebalanced as necessary to maintain compliance within policy limits using a
combination of assets and derivative instruments. A portion of the longer term
cash flows are backed with equities and real estate.

For participating insurance products and other insurance products with
adjustability features the investment strategy objective is to provide a total
rate of return given a constant risk profile over the long term.

Fixed annuity products generally provide the policyholder with a guaranteed
investment return or crediting rate. Interest rate risk for these products is
typically managed on a duration basis, within tolerance ranges set out in the
applicable investment guidelines. Targets and limits are established such that
the level of residual exposure is commensurate with our risk tolerance.
Exposures are monitored frequently, and are rebalanced as necessary to
maintain compliance within prescribed tolerances using a combination of fixed
income assets and derivative instruments.

Certain insurance and annuity products contain minimum interest rate
guarantees. Market risk management strategies are implemented to limit
potential financial loss due to significant reductions in asset earned rates
relative to contract guarantees. These typically involve the use of hedging
strategies utilizing interest rate derivatives such as interest rate floors,
swaps and swaptions.

Certain insurance and annuity products contain features which allow the
policyholder to surrender their policy at book value. Market risk management
strategies are implemented to limit the potential financial loss due to
changes in interest rate levels and policyholder behaviour. These typically
involve the use of hedging strategies such as dynamic option replication and
the purchase of interest rate swaptions.

Certain products have guaranteed minimum annuitization rates. This exposure is
hedged using both assets and derivative instruments. Interest rate derivatives
used in the hedging strategy may include interest rate swaps and swaptions.

Segregated Fund Guarantees
Approximately one third of our expected sensitivity to equity market risk and
a small amount of interest rate risk sensitivity for Continuing Operations is
derived from segregated fund products. These products provide benefit
guarantees, which are linked to underlying fund performance and may be
triggered upon death, maturity, withdrawal or annuitization. The cost of
providing for the guarantees in respect of our segregated fund contracts is
uncertain and will depend upon a number of factors including general capital
market conditions, our hedging strategies, policyholder behaviour and
mortality experience, each of which may result in negative impacts on net
income and capital.

The following table provides information with respect to the guarantees
provided in our segregated fund businesses.

                                   December31, 2012^(1)                    
($ millions)                                                   Insurance 
                       Fund    Amount at          Value of          contract
                      value     risk^(2)    guarantees^(3)   liabilities^(4)
SLF Canada          12,283         554           11,731              488 
SLF U.S.             4,062         238            4,164              101 
Run-off              2,335         597            2,106              500 
reinsurance^(5)
Total               18,680       1,389           18,001            1,089 
                                                                    
                                 December 31, 2011^(1)(6)                   
($ millions)                                                   Insurance 
                       Fund    Amount at          Value of          contract
                      value     risk^(2)    guarantees^(3)   liabilities^(4)
SLF Canada          11,823         769           11,704              655 
SLF U.S.            24,692       3,123           26,914            1,997 
Run-off              2,542         642            2,267              536 
reinsurance^(5)
Total               39,057       4,534           40,885            3,188 
^(1) Amounts as at December 31, 2012 do not include the impact of assets and
liabilities of the Discontinued Operations. Comparative
amounts have not been restated.
^(2) The "amount at risk" represents the excess of the value of the guarantees
over fund values on all policies where the value of the
guarantees exceeds the fund value. The amount at risk is not currently payable
as the guarantees are only payable upon death,
maturity, withdrawal or annuitization if fund values remain below guaranteed
values.
^(3) For guaranteed lifetime withdrawal benefits, the "value of guarantees" is
calculated as the present value of the maximum future
withdrawals assuming market conditions remain unchanged from current levels.
For all other benefits, the value of guarantees is
determined assuming 100% of the claims are made at the valuation date.
^(4) The "insurance contract liabilities" represent management's provision for
future costs associated with these guarantees and include
a provision for adverse deviation in accordance with Canadian actuarial
standards of practice.
^(5) The Run-off reinsurance business includes risks assumed through
reinsurance of variable annuity products issued by various North
American insurance companies between 1997 and 2001. This line of business is
part of a closed block of reinsurance, which is included
in the Corporate segment.
^(6) Fund value and value of guarantees for SLF U.S. as at December 31, 2011
have been restated to reflect a change in methodology
adopted in 2012.

The movement of the items in the table above from December31, 2011 to
December31, 2012 was primarily as a result of the following factors:

            Fund values decreased due to the exclusion of the Discontinued
  (i)     Operations and the strengthening of the Canadian dollar against
            the U.S. dollar, partially offset by favourable equity market
            movements.
  (ii)   The amount at risk decreased due to exclusion of the Discontinued
            Operations and favourable equity market movements.
            The value of guarantees decreased due to exclusion of the
  (iii)  Discontinued Operations and the strengthening of the Canadian
            dollar against the U.S. dollar.
            Insurance contract liabilities decreased due to the exclusion of
  (iv)   the Discontinued Operations and favourable equity market
            movements.

Segregated Fund Hedging
We have implemented hedging programs, involving the use of derivative
instruments, to mitigate a portion of the cost of interest rate and equity
market-related volatility in providing for segregated fund guarantees. As at
December31, 2012, over 90% of our segregated fund contracts, as measured by
associated fund values, were included in a hedging program. While a large
percentage of contracts are included in the hedging program, not all of our
equity and interest rate exposure related to these contracts is hedged. For
those segregated fund contracts included in the hedging program, we generally
hedge the value of expected future net claims costs and a portion of the
policy fees as we are primarily focused on hedging the expected economic costs
associated with providing these guarantees.

The following table illustrates the impact of our hedging program related to
our sensitivity to a 50 basis point and 100 basis point decrease in interest
rates and 10% and 25% decrease in equity markets for segregated fund contracts
as at December 31, 2012.

Impact of Segregated Fund Hedging for Continuing Operations

($ millions)               Changes in interest           Changes in equity
                                rates^(3)                    markets^(4)
Net income                  50 basis    100 basis             10%         25%
sensitivity^(1)(2)            points       points         decrease    decrease
                            decrease     decrease
Before hedging                 (200)        (400)           (200)       (650)
Hedging impact                   200          400             200         600
Net of hedging                     —            —               —        (50)
^(1) Since the fair value of benefits being hedged will generally differ from
the financial statement value (due to different valuation
methods and the inclusion of valuation margins in respect of financial
statement values), this approach will result in residual volatility to
interest rate and equity market shocks in reported income and capital. The
general availability and cost of these hedging instruments
may be adversely impacted by a number of factors, including volatile and
declining equity and interest rate market conditions.
^(2) Amounts as at December 31, 2012 do not include the impact of assets and
liabilities of the Discontinued Operations. Net income sensitivities have been
rounded to the nearest $50 million.
^(3) Represents a parallel shift in assumed interest rates across the entire
yield curve as at December 31, 2012. Variations in realized
yields based on factors such as different terms to maturity and geographies
may result in realized sensitivities being significantly
different from those illustrated above. Sensitivities include the impact of
re-balancing interest rate hedges for segregated funds at 10
basis point intervals (for 50 basis point changes in interest rates) and at 20
basis point intervals (for 100basis point changes in interest
rates).
^(4) Represents the change across all equity markets as at December 31, 2012.
Assumes that actual equity exposures consistently and
precisely track the broader equity markets. Since in actual practice
equity-related exposures generally differ from broad market indices
(due to the impact of active management, basis risk and other factors),
realized sensitivities may differ significantly from those illustrated
above. Sensitivities include the impact of re-balancing equity hedges for
segregated funds at 2% intervals (for 10% changes in equity
markets) and at 5% intervals (for 25% changes in equity markets).

Real Estate Risk
We are exposed to real estate risk arising from fluctuations in the value of,
or future cash flows on, real estate classified as investment properties. We
may experience financial losses resulting from the direct ownership of real
estate investments or indirectly through fixed income investments secured by
real estate property, leasehold interests, ground rents and purchase and
leaseback transactions. Real estate price risk may arise from external market
conditions, inadequate property analysis, inadequate insurance coverage,
inappropriate real estate appraisals or from environmental risk exposures. We
hold direct real estate investments that support general account liabilities
and surplus, and fluctuations in value will impact our profitability and
financial position. An instantaneous 10% decrease in the value of our direct
real estate investments as at December 31, 2012 would decrease net income by
approximately $150 million. Conversely, an instantaneous 10% increase in the
value of our direct real estate investments as at December 31, 2012 would
increase net income by approximately $150 million.

Additional Cautionary Language and Key Assumptions Related to Sensitivities
Our market risk sensitivities are forward-looking information. They are
measures of our estimated net income, OCI and MCCSR ratio sensitivity to
changes in interest rate and equity market price levels described above, based
on interest rates, equity market prices and business mix in place as at the
respective calculation dates. These sensitivities are calculated independently
for each risk factor, generally assuming that all other risk variables stay
constant. The sensitivities do not take into account indirect effects such as
potential impacts on goodwill impairment or the valuation allowance on
deferred tax assets. The sensitivities are provided for the consolidated
entity and may not be proportional across all reporting segments. Actual
results can differ materially from these estimates for a variety of reasons,
including differences in the pattern or distribution of the market shocks, the
interaction between these risk factors, model error, or changes in other
assumptions such as business mix, effective tax rates, policyholder behaviour,
currency exchange rates and other market variables relative to those
underlying the calculation of these sensitivities. The potential extent to
which actual results may differ from the indicative ranges will generally
increase with larger capital market movements. Our sensitivities as at
December 31, 2011 have been included for comparative purposes only.

We have also provided measures of our net income sensitivity to instantaneous
changes in credit spreads, swap spreads, real estate price levels and capital
sensitivities to changes in interest rates and equity price levels. These
sensitivities are also forward-looking statements and MCCSR ratio
sensitivities are non-IFRS financial measures. For additional information, see
Use of Non-IFRS Financial Measures. The cautionary language which appears in
this section is also applicable to the credit spread, swap spread, real estate
and MCCSR ratio sensitivities. In particular, these sensitivities are based on
interest rates, credit and swap spreads, equity market and real estate price
levels as at the respective calculation dates and assume that all other risk
variables remain constant. Changes in interest rates, credit and swap spreads,
equity market and real estate prices in excess of the ranges illustrated may
result in other-than-proportionate impacts.

The sensitivities reflect the composition of our assets and liabilities as at
December31, 2012 and December31, 2011. Changes in these positions due to new
sales or maturities, asset purchases/sales or other management actions could
result in material changes to these reported sensitivities. In particular,
these sensitivities reflect the expected impact of hedging activities based on
the hedge assets and programs in place as at the December 31 calculation
dates. The actual impact of these hedging activities can differ materially
from that assumed in the determination of these indicative sensitivities due
to ongoing hedge re-balancing activities, changes in the scale or scope of
hedging activities, changes in the cost or general availability of hedging
instruments, basis risk (the risk that hedges do not exactly replicate the
underlying portfolio experience), model risk and other operational risks in
the ongoing management of the hedge programs or the potential failure of hedge
counterparties to perform in accordance with expectations.

The sensitivities are based on methods and assumptions in effect as at
December 31, 2012 and December 31, 2011, as applicable. Changes in the
regulatory environment, accounting or actuarial valuation methods, models or
assumptions after this date could result in material changes to these reported
sensitivities. Changes in interest rates and equity market prices in excess of
the ranges illustrated may result in other-than-proportionate impacts.

Our hedging programs may themselves expose us to other risks, including basis
risk (the risk that hedges do not exactly replicate the underlying portfolio
experience), derivative counterparty credit risk, and increased levels of
liquidity risk, model risk, and other operational risks. These factors may
adversely impact the net effectiveness, costs and financial viability of
maintaining these hedging programs and therefore adversely impact our
profitability and financial position. While our hedging programs include
various elements aimed at mitigating these effects (for example, hedge
counterparty credit risk is managed by maintaining broad diversification,
dealing primarily with highly rated counterparties and transacting through
ISDA agreements that generally include applicable credit support annexes),
residual risk and potential reported earnings and capital volatility remain.

For the reasons outlined above, these sensitivities should only be viewed as
directional estimates of the underlying sensitivities of each factor under
these specialized assumptions, and should not be viewed as predictors of our
future net income, OCI and capital sensitivities. Given the nature of these
calculations, we cannot provide assurance that actual impact will be
consistent with the estimates provided.

Information related to market risk sensitivities and guarantees related to
segregated fund products should be read in conjunction with the information
contained in the Outlook, Critical Accounting Policies and Estimates and Risk
Management sections in our annual MD&A and in the Risk Factors and Regulatory
Matters sections in our AIF.

Use of Non-IFRS Financial Measures
We report certain financial information using non-IFRS financial measures, as
we believe that they provide information that is useful to investors in
understanding our performance and facilitate a comparison of the quarterly and
full year results from period to period. These non-IFRS financial measures do
not have any standardized meaning and may not be comparable with similar
measures used by other companies. For certain non-IFRS financial measures,
there are no directly comparable amounts under IFRS. They should not be viewed
as an alternative to measures of financial performance determined in
accordance with IFRS. Additional information concerning these non-IFRS
financial measures and reconciliations to IFRS measures are included in our
annual and interim MD&A and the Supplementary Financial Information packages
that are available on www.sunlife.com under Investors - Financial Results &
Reports.

Operating net income (loss) and other financial information based on operating
net income (loss), including operating EPS or operating loss per share,
operating ROE and operating net income (loss) excluding the net impact of
market factors, are non-IFRS financial measures. Operating net income (loss)
excludes: (i) the impact of certain hedges in SLF Canada that do not qualify
for hedge accounting; (ii) fair value adjustments on share-based payment
awards at MFS; (iii) restructuring and other related costs; (iv) goodwill and
intangible asset impairment charges; and (v) other items that are not
operational or ongoing in nature. Operating EPS also excludes the dilutive
impact of convertible securities.

Operating net income (loss) excluding the net impact of market factors removes
from operating net income (loss) certain market-related factors that create
volatility in our results under IFRS. Specifically, it adjusts operating net
income (loss) to exclude the following amounts: (i) the net impact of changes
in interest rates in the reporting period, including changes in credit and
swap spreads, and any changes to the fixed income reinvestment rates assumed
in determining the actuarial liabilities; (ii) the net impact of changes in
equity markets above or below the expected level of change in the reporting
period and of basis risk inherent in our hedging program; (iii) the net impact
of changes in the fair value of real estate properties in the reporting
period; and (iv) the net impact of changes in actuarial assumptions driven by
capital market movements. Unless indicated otherwise, all other factors
discussed in this document that impact our results are applicable to both
reported net income (loss) and operating net income (loss). Reported net
income (loss) refers to net income (loss) determined in accordance with IFRS.
Unless indicated otherwise, all other factors discussed in this document that
impact our results are applicable to both reported net income (loss) and
operating net income (loss). Reported net income (loss) refers to net income
(loss) determined in accordance with IFRS.

The following tables set out the amounts that were excluded from our operating
net income (loss), operating net income (loss) excluding the net impact of
market factors, operating EPS and operating ROE, and provides a reconciliation
to our reported net income (loss), EPS and ROE based on IFRS.

Reconciliations of Select Net Income Measures from Combined Operations

                                                                                          IFRS^(1)
                               Q4'12                   Q3'12                   Q2'12                  Q1'12                  Q4'11         
Net income ($ millions)                 395                       383                        90                    686                 (525)         
Impact of certain hedges in             (6)                         16                       (5)                   (12)                     50         
SLF Canada that do not
qualify for hedge accounting
Fair value adjustments on              (39)                       (34)                        (1)                   (20)                   (33)         
share-based payment awards at
MFS
Restructuring and other                 (7)                          —                       (2)                    (9)                   (55)         
related costs
Goodwill and intangible asset           (6)                          —                         —                     —                 (266)         
impairment charges
Operating net income (loss)             453                        401                        98                    727                 (221)         
                                                                                                                                                 
Net equity market impact                 49                         89                      (131)                    253                   n/a         
Net interest rate impact               (51)                       (64)                      (196)                     95                   n/a         
Net gains from changes in the            20                         13                          7                    22                   n/a         
fair value of real estate
Actuarial assumption changes             15                       (42)                          —                     —                   n/a         
driven by changes in capital
market movements
Operating net income (loss)             420                        405                        418                   357                   n/a         
excluding the net impact of
market factors
                                                                                                                                                
Reported EPS (diluted) ($)             0.65                       0.64                       0.15                  1.15                (0.90)         
Impact of certain hedges in          (0.01)                       0.03                     (0.01)                 (0.02)                   0.09         
SLF Canada that do not
qualify for hedge accounting
Fair value adjustments on            (0.07)                     (0.06)                          —                (0.03)                 (0.06)         
share-based payment awards at
MFS
Restructuring and other              (0.01)                          —                     (0.01)                (0.02)                 (0.09)         
related costs
Goodwill and intangible asset        (0.01)                          —                          —                     —                (0.46)         
impairment charges
Impact of convertible                (0.01)                     (0.01)                          —                (0.02)                      —         
securities on diluted EPS
Operating EPS (diluted)                0.76                       0.68                      0.17                  1.24                (0.38)         
                                                                                                                                                
Reported ROE (annualized)              11.3      %                 11.1      %                  2.6     %              20.5     %            (15.4)         %
Impact of certain hedges in           (0.2)      %                  0.4      %                (0.2)     %             (0.4)     %               1.5         %
SLF Canada that do not
qualify for hedge accounting
Fair value adjustments on             (1.0)      %                (1.0)      %                    —                 (0.6)     %             (1.0)         %
share-based payment awards at
MFS
Restructuring and other               (0.2)      %                    —                     (0.1)     %             (0.3)     %             (1.6)         %
related costs
Goodwill and intangible asset         (0.2)      %                    —                         —                     —                 (7.8)         %
impairment charges
Operating ROE (annualized)             12.9      %                 11.7      %                  2.9     %              21.8     %             (6.5)         %
^(1) 2011 quarterly Operating net income (loss) excluding the net impact of market factors are "n/a" as they have not been restated
for the Discontinued Operations.


Reconciliations of Select Net Income Measures from Continuing Operations

                                             IFRS^(1)
                           
                       Q4'12            Q3'12    Q2'12           Q1'12          Q4'11
Net income               284             441    244           405            2 
from
Continuing
Operations ($
millions)
Impact of                (6)              16    (5)           (12)            50 
certain
hedges in SLF
Canada that
do not
qualify for
hedge
accounting
Fair value              (39)            (34)     (1)           (20)          (33) 
adjustments
on
share-based
payment
awards at MFS
Restructuring            (4)               —      —             —         (29) 
and other
related costs
Goodwill and               —              —      —             —        (196) 
intangible
asset
impairment
charges
Operating net            333             459    250           437          210 
income (loss)
from
Continuing
Operations
                                                                            
Reported EPS            0.47           0.74   0.41          0.68            — 
from
Continuing
Operations
(diluted) ($)
Impact of             (0.01)            0.03                (0.02)          0.09 
certain                                         (0.01)
hedges in SLF
Canada that
do not
qualify for
hedge
accounting
Fair value            (0.07)          (0.06)       —        (0.03)        (0.06) 
adjustments
on
share-based
payment
awards at MFS
Restructuring         (0.01)               —      —             —       (0.05) 
and other
related costs
Goodwill and               —              —      —             —       (0.34) 
intangible
asset
impairment
charges
Impact of                  —              —      —        (0.01)             — 
convertible
securities on
diluted EPS
Operating EPS           0.56           0.77   0.42          0.74         0.36 
from
Continuing
Operations
(diluted)
^(1) 2011 quarterly Operating net income (loss) excluding the net impact of market
factors are "n/a" as they have not been restated for the Discontinued
Operations.

Management also uses the following non-IFRS financial measures:

Adjusted revenue. This measure excludes from revenue the impact of: (i)
currency; (ii) fair value changes in FVTPL assets and liabilities; (iii)
reinsurance for the insured business in SLF Canada's GB operations; and (iv)
net premiums from Life and Investment Products in SLF U.S. that closed to new
sales effective December 30, 2011. This measure is an alternative measure of
revenue that provides greater comparability across reporting periods.

                                                             
($ millions)                 Q4'12    Q3'12    Q2'12    Q1'12    Q4'11   
Revenues                     4,250    4,952    5,182   3,175    5,374   
 Adjustments                                                      
  Foreign exchange          (59)     (68)     (36)     (33)        —   
  Fair value changes in    (277)    1,246   1,349   (579)    1,538   
    FVTPL assets and
    liabilities
  Reinsurance in SLF     (1,074)  (1,073)  (1,064)  (1,087)  (1,039)   
    Canada's Group
    Benefits operations
  Net premiums from          106     112      146      149      163   
    domestic individual
    insurance operations
    in SLF U.S.
Adjusted revenue             5,554   4,735    4,787    4,725    4,712   

Adjusted premiums and deposits. This measure excludes from premiums and
deposits the impact of: (i) currency; (ii) reinsurance for the insured
business in SLF Canada's GB operations; and (iii) net premiums and deposits
from Life and Investment Products in SLF U.S. that closed to new sales
effective December 30, 2011. This measure is an alternative measure of
premiums and deposits that provides greater comparability across reporting
periods.

                                                                           
($ millions)                      Q4'12   Q3'12    Q2'12    Q1'12     Q4'11
Premiums and deposits            31,882  26,060  25,057  25,074  21,711
 Adjustments                                                          
  Foreign exchange              (874)   (622)    (274)    (449)        —
  Reinsurance in SLF Canada's (1,074) (1,073)  (1,064)  (1,087)  (1,039)
    Group Benefits operations
  Net premiums and deposits
    from domestic
    individual insurance
    operations in SLF U.S.          106     113      146     164     163
Adjusted premiums and deposits   33,724  27,642   26,249  26,446  22,587

Pre-tax operating profit margin ratio for MFS. This ratio is a measure of the
underlying profitability of MFS, which excludes certain investment income and
commission expenses that are offsetting. These amounts are excluded in order
to neutralize the impact these items have on the pre-tax operating profit
margin ratio, as they are offsetting in nature and have no impact on the
underlying profitability of MFS.

Impact of foreign exchange. Several IFRS financial measures are adjusted to
exclude the impact of currency fluctuations. These measures are calculated
using the average currency and period end rates, as appropriate, in effect at
the date of the comparative period.

Equity market, interest rate, credit spread, swap spread and real estate
market sensitivities. Our equity market, interest rate, credit spread, swap
spread and real estate market sensitivities are non-IFRS financial measures,
for which there are no directly comparable measures under IFRS. It is not
possible to provide a reconciliation of these amounts to the most directly
comparable IFRS measures on a forward-looking basis because we believe it is
only possible to provide ranges of the assumptions used in determining those
non-IFRS financial measures, as actual results can fluctuate significantly
inside or outside those ranges and from period to period.

Other. Management also uses the following non-IFRS financial measures for
which there are no comparable financial measures in IFRS: (i) ASO premium and
deposit equivalents, mutual fund sales, managed fund sales and total premiums
and deposits; (ii) AUM, mutual fund assets, managed fund assets, other AUM and
assets under administration; (iii) the value of new business, which is used to
measure the estimated lifetime profitability of new sales and is based on
actuarial calculations; and (iv) assumption changes and management actions,
which is a component of our sources of earnings disclosure. Sources of
earnings is an alternative presentation of our Consolidated Statements of
Operations that identifies and quantifies various sources of income. The
Company is required to disclose its sources of earnings by its principal
regulator, OSFI.

Forward-Looking Statements
Certain statements in this document, including (i) statements concerning the
anticipated timing and impact of our proposed sale of our U.S. Annuity
Business and our proposed investment in CIMB Aviva, (ii) statements relating
to our strategies, (iii) statements that are predictive in nature, (iv)
statements that depend upon or refer to future events or conditions, and (v)
that include words such as "aim", "anticipate", "assumption", "believe",
"could", "estimate", "expect", "goal", "intend", "may", "objective",
"outlook", "plan", "project", "seek", "should", "initiatives", "strategy",
"strive", "target", "will" and similar expressions are forward-looking
statements. Forward-looking statements include the information concerning our
possible or assumed future results of operations of Sun Life Financial. These
statements represent our current expectations, estimates and projections
regarding future events and are not historical facts. Forward-looking
statements are not a guarantee of future performance and involve risks and
uncertainties that are difficult to predict. Future results and shareholder
value may differ materially from those expressed in these forward-looking
statements due to, among other factors, the matters set out in this document
under the headings Impact of the Low Interest Rate Environment, Annual
Goodwill and Intangibles Impairment Testing and Capital Management, in Sun
Life Financial Inc.'s annual MD&A under the headings Critical Accounting
Policies and Estimates and Risk Management and in Sun Life Financial Inc.'s
2012 AIF under the headings Risk Factors and the factors detailed in Sun Life
Financial Inc.'s other filings with Canadian and U.S. securities regulators,
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: economic uncertainty; changes or volatility
in interest rates and spreads; credit risks related to issuers of securities
held in our investment portfolio, debtors, structured securities, reinsurers,
derivative counterparties, other financial institutions and other entities;
changes in legislation and regulations including capital requirements and tax
laws; legal and regulatory proceedings, including inquiries and
investigations; risks relating to product design and pricing; the performance
of equity markets; risks in implementing business strategies; risk management;
market conditions that affect the Company's capital position or its ability to
raise capital; risks related to the sale of our U.S. Annuity Business;
downgrades in financial strength or credit ratings; risks relating to
financial modelling errors; the impact of higher-than-expected future
expenses; risks relating to mortality and morbidity, including the occurrence
of natural or man-made disasters, pandemic diseases and acts of terrorism;
risks relating to the rate of mortality improvement; risks relating to
policyholder behaviour; risks related to liquidity; the ability to attract and
retain employees; the performance of the Company's investments and investment
portfolios managed for clients such as segregated and mutual funds; risks
relating to our information technology infrastructure; breaches or failure of
information system security and privacy, including cyber terrorism; dependence
on third-party relationships including outsourcing arrangements; risks
relating to real estate investments; risks relating to operations in Asia
including the Company's joint ventures; the inability to maintain strong
distribution channels and risks relating to market conduct by intermediaries
and agents; business continuity risks; failure of information systems and
Internet-enabled technology; risks relating to estimates and judgments used in
calculating taxes; the impact of mergers and acquisitions; the impact of
competition; fluctuations in foreign currency exchange rate; the availability,
cost and effectiveness of reinsurance; risks relating to the closed block of
business and risks relating to the environment, environmental laws and
regulations and third-party policies.

The Company does not undertake any obligation to update or revise its
forward-looking information to reflect events or circumstances after the date
of this document or to reflect the occurrence of unanticipated events, except
as required by law.

Earnings Conference Call
The Company's fourth  quarter 2012  financial results  will be  reviewed at  a 
conference call on Thursday, February 14, 2013, at 10:00 a.m. ET. To listen to
the call via live audio webcast and  to view the presentation slides, as  well 
as related information, please visit www.sunlife.com and click on the link  to 
Q4 results from the "Investors" section on  the home page 10 minutes prior  to 
the start of  the presentation.  Individuals participating  in the  call in  a 
listen-only mode are encouraged  to connect via our  webcast. The webcast  and 
presentation will be  archived and  made available on  the Company's  website, 
www.sunlife.com, following the call. The conference call can also be  accessed 
by phone by dialing 416 644-3415 (Toronto) or 1 877 974-0445 (Canada/U.S.).

About 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. Sun Life Financial and its
partners have operations in key markets worldwide, including Canada, the
United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan,
Indonesia, India, China, Australia, Singapore, Vietnam and Bermuda. As of
December 31, 2012, the Sun Life Financial group of companies had total assets
under management of $533billion.

Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and
Philippine (PSE) stock exchanges under the ticker symbol SLF.

Consolidated Statements of Operations

                                                                                  
                                      For the three months ended                      For the twelve months ended
(Unaudited, in millions     December31,         December31,            December31,            December31,
of Canadian dollars                          2012      2011^(1)
except for per share                 2012               2011^(1)
amounts)
Revenue                                                                                                  
  Premiums:                                                                                             
   Gross              $           3,779  $              3,308  $                13,415  $                13,221
   Less: Ceded                   1,322                1,276                   5,168                   4,983
  Net                             2,457                2,032                   8,247                   8,238
                                                                                                        
  Net investment                                                                                        
   income (loss):
   Interest and other            1,202                1,006                   4,430                   4,388
     investment income
   Changes in fair               (274)                1,538                   1,728                   4,257
     value through
     profit or loss
     assets and
     liabilities
   Net gains (losses)               23                   63                     126                     151
     on
     available-for-sale
     assets
  Net investment                    951                2,607                   6,284                   8,796
   income (loss)
  Fee income                        842                  735                   3,028                   2,796
  Total revenue                   4,250                5,374                  17,559                  19,830
                                                                                                        
Benefits and expenses                                                                                    
  Gross claims and                2,983                2,863                  11,347                  11,152
   benefits paid
  Increase (decrease)               619                2,220                   3,718                   7,391
   in insurance
   contract liabilities
  Decrease (increase)              (71)                    6                     134                     384
   in reinsurance
   assets
  Increase (decrease)                22                 (13)                      51                    (34)
   in investment
   contract liabilities
  Reinsurance expenses          (1,181)              (1,150)                 (4,832)                 (4,540)
   (recoveries)
  Commissions                       389                  328                   1,399                   1,307
  Net transfers to                 (15)                 (62)                    (79)                   (149)
   (from) segregated
   funds
  Operating expenses              1,030                  892                   3,507                   3,262
  Impairment of                       —                  204                       —                     204
   goodwill and
   intangible assets
  Premium taxes                      59                   62                     236                     233
  Interest expense                   87                  109                     367                     430
  Total benefits and              3,922                5,459                  15,848                  19,640
   expenses
                                                                                                        
Income (loss) before                 328                 (85)                   1,711                     190
income taxes
  Less: Income tax                   18                (116)                     210                   (151)
   expense (benefit)
Total net income (loss)              310                   31                   1,501                     341
from continuing
operations
  Less: Net income                (4)                    1       
   (loss) attributable                                                                   7                         7
   to participating
   policyholders
  Less: Net income                    —                    1    —   
   (loss) attributable                                                                                             9
   to non-controlling
   interests
Shareholders' net                    314                   29                   1,494                     325
income (loss) from
continuing operations
  Less: Preferred                    30                   27                     120                     100
   shareholders'
   dividends
Common shareholders'    $    $   $     1,374  $     225
net income (loss) from                284                    2 
continuing operations
Common shareholders'    $     $        $    180  $    (595)
net income (loss) from                111                  (527)
discontinued operations
Common shareholders'    $             395  $              (525)  $                 1,554  $                 (370)
net income (loss)
^(1) Balances have been                                                                                  
restated. Refer to
Notes 2 and 3 in our
2012 Consolidated
Financial Statements.
Earnings (loss) per                                                                                      
share
 Basic earnings       $            0.48  $                  —  $                  2.32  $                  0.39
   (loss) per share
   from continuing
   operations
  Basic earnings       $            0.18  $             (0.90)  $                  0.30  $                (1.03)
   (loss) per share
   from discontinued
   operations
  Basic earnings       $            0.66  $             (0.90)  $                  2.62  $                (0.64)
   (loss) per share
                                                                                                        
 Diluted earnings     $            0.47  $                  —  $                  2.29  $                  0.39
   (loss) per share
   from continuing
   operations
 Diluted earnings     $            0.18  $             (0.90)  $                  0.30  $                (1.03)
   (loss) per share
   from discontinued
   operations
 Diluted earnings     $            0.65  $             (0.90)  $                  2.59  $                (0.64)
   (loss) per share

Consolidated Statements of Financial Position

                                                   As at
                                          December31,         December31,
(unaudited, in millions of            
Canadian dollars)                                  2012               2011^(1)
Assets                                                                  
 Cash, cash equivalents and   $                  7,034  $        8,837     
  short-term securities
 Debt securities                               54,362         62,930     
 Equity securities                              5,026          4,570     
 Mortgages and loans                           27,248         27,755     
 Derivative assets                              2,113          2,632     
 Other invested assets                          1,269          1,348     
 Policy loans                                   2,681          3,276     
 Investment properties                          5,942          5,313     
 Invested assets                              105,675        116,661     
 Other assets                                   2,702          2,885     
 Reinsurance assets                             3,240          3,458     
 Deferred tax assets                            1,005          1,694     
 Property and equipment                           665            546     
 Intangible assets                                862            885     
 Goodwill                                       3,911          3,942     
 Assets of disposal group                      15,067                   
  classified as held for sale
 Total general fund assets                    133,127        130,071     
 Investments for account of                    64,987         88,183     
  segregated fund holders from
  continuing operations
 Investments for account of                    27,668                   
  segregated fund holders
  classified as held for sale
 Total assets                 $                225,782  $      218,254     
                                                                       
Liabilities and equity                                                  
Liabilities                                                             
 Insurance contract           $                 87,275  $       96,687     
  liabilities
 Investment contract                            2,303          3,073     
  liabilities
 Derivative liabilities                           594          1,059     
 Deferred tax liabilities                           5              7     
 Other liabilities                              7,925          8,011     
 Senior debentures                              2,149          2,149     
 Innovative capital                               696            695     
  instruments
 Subordinated debt                              2,740          2,746     
 Liabilities of disposal                       12,689                   
  group classified as held for
  sale
 Total general fund                           116,376        114,427     
  liabilities
 Insurance contracts for                       59,025         82,650     
  account of segregated fund
  holders from continuing
  operations
 Investment contracts for                       5,962          5,533     
  account of segregated fund
  holders from continuing
  operations
 Insurance contracts for                       27,668                   
  account of segregated fund
  holders classified as held
  for sale
 Total liabilities            $                209,031  $      202,610     
                                                                       
Equity                                                                  
 Issued share capital and     $                 10,621  $       10,340     
  contributed surplus
 Retained earnings and                          6,130          5,304     
  accumulated other
  comprehensive income
 Total equity                 $                 16,751  $       15,644     
 Total equity and liabilities $                225,782  $      218,254     

^(1) Balances have been restated. Refer to Note 2 in our 2012 Consolidated
Financial Statements.

























SOURCE Sun Life Financial Inc.

Contact:

Media Relations Contact:
Frank Switzer
Vice-President, Corporate Communications
Tel: 416-979-4086
frank.switzer@sunlife.com

Investor Relations Contact:
Phil Malek
Vice-President, Investor Relations
Tel: 416-979-4198
investor.relations@sunlife.com
 
Press spacebar to pause and continue. Press esc to stop.