##### 



Exhibit 1
  Managements
 Discussion
and
 Analysis
 Sun Life Financial Inc.
 For the Year Ended December 31, 2007
 February 13, 2008
 Lifes brighter under the sun




---



##### 



TABLE OF CONTENTS
 Enterprise Mission, Vision, Values and Strategy
    
    
    3Financial Performance and Objectives
    
    
    4Business Overview
    
    
    5Performance Overview
    
    
    6Corporate Developments
    
    
    9Critical Accounting Estimates
    
    
    11Accounting Policies
    
    
    15Non-GAAP Financial Measures
    
    
    16Financial Highlights
    
    
    18Consolidated Results of Operations
    
    
    19Investments
    
    
    24Business Segment Overview
    
    
    29SLF Canada
    
    
    29SLF U.S.
    
    
    33MFS
    
    
    37SLF ASIA
    
    
    40Corporate
    
    
    43Risk Management
    
    
    45Financial Position and Liquidity
    
    
    48Legal and Regulatory Proceedings
    
    
    53Controls and Procedures
    
    
    53
 
 Use
of Non-GAAP Financial Measures
 Sun Life Financial Inc.
    
    1




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##### 



Forward-looking Statements
 
 Sun Life Financial Inc.
    
    2




---



##### 



Enterprise Mission, Vision, Values and Strategy
 Mission
  Vision
  Values
  Values
    
    
    Integrity
    
    
    EngagementWe are committed to the highest
standards of business ethics and
good governance.
    
    
    We value our diverse, talented
workforce and encourage, support
and reward them in contributing to the full extent of their potential.Customer Focus
    
    
    Excellence
    
    
    ValueWe provide sound financial
solutions for our customers and
always work with their interests in
mind.
    
    
    We pursue operational excellence
through our dedicated people, our
quality products and services, and
our value-based risk management.
    
    
    We deliver value to the customers
and shareholders we serve and to
the communities in which we
operate.
 Strategy
   Priorities
    
    
    Generate value-building growth
    
    
    Intensify customer focusSustain profitable top-line growth
and deliver on key medium-term
financial targets.
    
    
    Meet the needs of our customers by
delivering top quality products and
services.Enhance productivity and
efficiencyContinuously improve productivity
and efficiency to increase
competitiveness.
    
    
    Strengthen risk managementEnhance risk management
processes and practices to
maximize shareholder value.
    
    
    Foster innovationEmbed creativity and innovation
throughout the organization to
improve business results and gain
competitive advantage.
 Sun Life Financial Inc.
    
    3




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##### 



Financial Performance and Objectives
 Measure(1)
    
    
    Medium-Term
Objectives
    
    
    2007 AccomplishmentsOperating EPS growth
Growth in EPS reflects the Companys focus
on generating sustainable earnings for
shareholders.
    
    
    10%
    
    
     11% exceeded average annual
target Up 13% on a constant
currency basisOperating ROE growth
Growth in ROE is a significant driver of
shareholder value and is a major focus for
management across all businesses.
    
    
    15%
    
    
     14.3% on track to meet
 medium term objective
January 1, 2007 changes to Canadian accounting rules
reduced ROE by 48 basis
points
Currency movements benefited 2007 ROE by 38 basis pointsCapital Deployment
Effective deployment of capital serves to
enhance shareholder value and is a
significant focus for the Companys
management
    
    
    
Invest in organic growth Maintain 30%-40% dividend payout ratio Make selective
acquisitions Repurchase common shares
    
    
     Invested in global distribution
and product innovation acrossthe enterprise
 2007 dividend payout ratio 33%
 Completed acquisition of
Genworth Employee Benefits Group business
 Repurchased
$502 million of common shares
  
    
    A rise in the annual average level
of key equity market indices, primarily
the S&P 500, by approximately 7%-8%
 
    
    Stability in North American interest
rates across the yield curve
    
    A credit environment within historical norms
    
    Stability in exchange rates between the
Canadian dollar and foreign currencies,
primarily the U.S. dollar and the British
pound sterling
   
 (1)
    
    Operating EPS, operating ROE and the dividend payout ratio are non-GAAP financial
measures. The dividend payout ratio represents the ratio of common shareholders dividends to
operating earnings. For additional information, see the section under the heading Non-GAAP
Financial Measures on page 16. Sun Life Financial Inc.
    
    4




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##### 



Business Overview
 
   Products
    
    SLF Canada
    
    SLF U.S.
    
    MFS
    
    SLF Asia
    
    CorporateIndividual life insurance
    
    n
    
    n
    
    
    
    n
    
    nIndividual annuity and savings
    
    n
    
    n
    
    
    
    n
    
    nGroup life and health
    
    n
    
    n
    
    
    
    nGroup pension and retirement
    
    n
    
    n
    
    
    
    nMutual funds
    
    n
    
    
    
    n
    
    nAsset management
    
    n
    
    n
    
    n
    
    nIndividual health insurance
    
    n
    
    
    
    
    
    nReinsurance (life retrocession)
    
    
    
    
    
    
    
    
    
    n
  Distribution Channels
    
    SLF Canada
    
    SLF U.S.
    
    MFS
    
    SLF AsiaDirect sales agents
    
    n
    
    
    
    
    
    nIndependent and managing general agents
    
    n
    
    n
    
    
    
    nFinancial intermediaries (e.g., brokers)
    
    n
    
    n
    
    n
    
    nBanks
    
    
    
    n
    
    n
    
    nPension and benefit consultants
    
    n
    
    n
    
    n
    
    nDirect sales (including Internet)
    
    n
    
    
    
    n
    
    n
 Drivers of Profitability
  
    
    Equity market performance
    
    Interest rates
    
    Credit experience
    
    Mortality and morbidity experience
    
    Surrender and lapse experience
 
    
    Spreads between the interest
credited to policyholders and
investment returns
    
    Currency exchange rates, regulatory
environment and other external factors
 Sun Life Financial Inc.
    
    5




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##### 



Performance Overview
 Business Segment
    
    
    2007 Priorities
    
    
    2007 AchievementsSLF Canada
    
    
       Grow the wholesale
distribution channel and continue
to strengthen distribution
capabilities in the career sales
force   Increase market
share in the small to
medium-sized group business
market segments
   Continue
to grow the rollover and
voluntary group retirement
businesses and enhance the
advice-based channels to meet
the needs of baby boomers as
their demand for advice increases   Maintain disciplined
focus on expense management
    
    
       The Company integrated
its brand strategy in Canada to
leverage more effectively the Sun
Life Financial brand. As part of
the integration strategy, the
Company retired the Clarica name
and re-branded its career sales
force as the Sun Life Financial
Advisor Sales Force  
Individual Insurance and
Investments sales from the
Wholesale Distribution channel
increased by 44% in 2007 from
2006   The launch of SunWise
Elite Plus Guaranteed
Minimum Withdrawal Benefit
contributed to meeting the needs
of those Canadians who are
focused on the income phase of
their retirement planning. This
new product contributed to an
increase of 32% in individual segregated
fund sales over 2006   Sales in the small and
medium-sized Group business
segments continued to grow with a
17% sales growth over 2006   Group Retirement Services
(GRS) grew its sales by 61%
compared to 2006 as a result of
the increased placement of large
plans. In addition, plan members
leaving their employers defined
contribution plans for retirement
or other reasons during 2007
entrusted $725 million of their
plan assets to Sun Life
Financial, a growth of 33% over
2006   Productivity and
efficiency improved in both
wealth and insurance operations
in 2007, with increases ranging
from 2.5% to 4.5%2008 Priorities   Continue to increase Individual Insurance and Investment sales
through the Sun Life Financial Advisor Sales Force and the Wholesale
distribution channel by enhancing distribution capabilities with a focus
on lifetime relationships and holistic advice   Continue to build
and expand the retirement rollover business by providing advice and
incorporating group life and health products   Continue to increase
market share in the small to medium-sized group business market segments   Continue to maintain disciplined focus on expense management
 Sun Life Financial Inc.
    
    
    6




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##### 



Business Segment
    
    
    2007 Priorities
    
    
    2007 AchievementsSLF U.S.
    
    
       Improve
Individual Life
profitability
  
Successfully complete the
acquisition and integrate
the employee benefits
group business acquired
from Genworth
  
Continue growth in
variable annuities
   Expand
the
geographic reach and
range of product
offerings
   Continue
service centre
improvement initiatives
    
    
       Implemented an
unsecured financing
arrangement to address
U.S. statutory reserve
requirements for certain
universal life products.
This financing
arrangement reduced new
business strain on
universal life sales, in
addition to the recovery
of previously reported
new business strain
   Completed
its
acquisition of Genworth
Financial, Inc.s U.S.
Employee Benefits Group
(Genworth EBG) on May 31,
2007. Integration is
proceeding on target. In
2007, the field forces
were combined and the
sales expense synergies
and integration cost
targets were exceeded.
These achievements
supported reaching the
2007 earnings goal for
the combined business
   Continued
its
product enhancement
initiatives in variable
annuities with the launch
of Income on
Demandsm in
March of 2007
  
Gross domestic variable
annuity sales increased
65% over 2006 and net
redemptions improved to
US$0.1 billion in 2007 as
compared to net
redemptions of US$1.0
billion in 2006
  
Introduced Sun Global
Freedom Offshore
Universal Life and built
a dedicated distribution
team focused on offshore
variable products
   The
service centre
continued its improvement
initiatives, receiving a
DALBAR Customer Service
award and Operations
Managers Round Table
(OMR) Service award2008 Priorities   Grow sales by
maintaining and increasing product
competitiveness across all lines of business through
innovation and quality service
   Continue
the
integration of the Genworth EBG acquisition and leverage
the expanded distribution capabilities
   Deepen
distribution relationships through improved service and
enhanced marketing
   Leverage
product and
innovation skills to expand in global markets
 Sun Life Financial Inc.
    
    
    7




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##### 



2007 Priorities
    
    
    2007 AchievementsMFS
    
    
       Improve
domestic
equity investment performance
and sustain long-term
performance   Increase
domestic mutual fund sales
and net flows  
Increase profit margins
    
    
       U.S. retail
equity
investment performance
improved during 2007 with 73%
of funds ranking in the top
half of their respective
three-year Lipper categories
as of December 31, 2007
compared with 67% as at
December 31, 2006  
Funds in the large cap value
and core equity institutional
categories significantly
outperformed their benchmark
based on one and three-year
performance   Gross
U.S. domestic mutual fund
sales increased by 9% over
2006 and U.S. domestic mutual
fund net outflows improved by
approximately US$0.7 billion
compared to 2006  
Pre-tax operating profit
margins improved by 660 basis
points from 20062008 Priorities   Sustain
long-term investment performance   Improve
U.S. domestic mutual fund net sales   Continue
expansion of
institutional distribution footprint2007 Priorities
    
    
    2007 AchievementsSLF Asia
    
    
       Continue to
leverage
the expanded distribution
capacity and synergies
achieved through the CMG Asia
acquisition   Expand
the geographic reach and
range of product offerings
for multi-channel
distribution in the
Philippines   Explore
cross-selling opportunities
by leveraging the
distribution channels of the
joint venture in India   Continue
the
geographic expansion in China   Secure
new
distribution alliances,
including bancassurance in
key markets
    
    
       Hong Kong
individual
insurance sales were up 38%
over 2006, driven by strong
demand for investment-linked
products and improved agency
productivity   Hong
Kong operations shifted its
focus to strengthening the
product range by launching
new unit-linked, health
insurance and traditional
protection products
  
The Philippines mutual fund
net sales more than doubled
in 2007 from 2006, driven by
an increased awareness and
demand for investment
products and solid investment
performance   In India,
Birla Sun Life Insurance
Company Limited (Birla Sun
Life) sales were up 111% as
the joint venture continued
to expand its distribution
with its direct sales force
to 85,000 advisors in 339
branches   In China,
Sun Life Everbright Life
Insurance Company Limited
(Sun Life Everbright) opened
a branch in Shanghai. The
joint venture also increased
its footprint in the Jiangsu
province with the opening of
four sales offices in that
province, and now operates in
16 cities in China   Alternate
distribution sales
were up 47% over 2006 as new
telemarketing distribution
alliances were forged in
China and Indonesia. Birla
Sun Life renewed its
exclusive bancassurance
agreement with a large
multinational bank and Sun
Life Everbright established
new bancassurance
partnerships2008 Priorities   Achieve
operational efficiencies through regional centres
of excellence   Expand
product offerings, including
innovative health insurance solutions   Leverage
global
expertise to explore wealth management opportunities in new
markets  
Strengthen distribution management and expand
alternate distribution by leveraging regional expertise   Increase
opportunities to cross-sell to existing customers   Continue
accelerated expansion in India
 Sun Life Financial Inc.
    
    
    8




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##### 



Outlook
  Corporate Developments
  U.S. Employee Benefits Group Business Acquisition
  .
 Other Acquisitions and Disposals
 Share Repurchase Program
  Increased Quarterly Shareholder Dividends
   Financing Arrangements
 Sun Life Financial Inc.
    
    9




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##### 



Other Corporate Developments
 Sun Life Financial Inc.
    
    10




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##### 



Critical Accounting Estimates
  Benefits to Policyholders
 
    
    when taken one at a time, each provision is reasonable with respect to the
underlying best estimate assumption and the extent of uncertainty present in making that
assumption; and
    
    in total, the cumulative effect of all provisions is reasonable with respect to the
total actuarial liabilities.
 Sun Life Financial Inc.
    
    11




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##### 



Critical Accounting
    
    
    Determination Methodology and
    
    
    Financial SignificanceEstimate
    
    
    Assumptions
    
    
    (measured as at December 31, 2007)Equity markets
the value of the
Companys
policyholder
obligations for
certain products is
dependent on
assumptions about
the future level of
equity markets
    
    
       The calculation of
actuarial liabilities for
equity market-sensitive
products includes adequate
provisions to absorb
moderate changes in rates of
equity market return with
provisions determined using
scenario testing under the
standards established by the
Canadian Institute of
Actuaries
    
    
       For participating
insurance and universal life
products, a large portion of the
effect of equity market changes
is passed through to
policyholders as changes in the
amounts of dividends declared or
in the rate of interest credited   Products such as
segregated fund and annuity
option guarantees are affected by
equity movements even though
mitigating hedge programs are in
place   An immediate 10%
increase across all equity
markets would result in an
estimated increase in net income
of $40 million   An
immediate 10% decrease across all
equity markets would result in an
estimated decrease in net income
of $61 millionInterest rates
the value of the
Companys
policyholder
obligations for all
policies is
sensitive to
changes in interest
rates
    
    
       The calculation of
actuarial liabilities for
all policies includes
adequate provisions to
absorb moderate changes in
interest rates with
provisions determined using
scenario testing under the
standards established by the
Canadian Institute of
Actuaries   The major
part of this sensitivity is
offset with a similar
sensitivity in the value of
the Companys assets held to
support liabilities
    
    
       For certain product
types, including participating
insurance policies and certain
forms of universal life policies
and annuities, the effect of
changes in interest rates is
largely passed through to
policyholders as changes in the
amount of dividends declared or
in the rate of interest credited   An immediate 1% parallel
increase in interest rates across
the entire yield curve would
result in an estimated increase
of $164 million in net income   An immediate 1% parallel
decrease in interest rates would
result in an estimated decrease
in net income of $286 millionAsset defaultprovisions are
included in
actuarial
liabilities for
possible future
asset defaults and
loss of asset value
on current assets
and future
purchases
    
    
       The amount included
in actuarial liabilities is
based on possible reductions
in the expected future
investment yield depending
on the creditworthiness of
the asset class and includes
any reductions in the value
of equity and real estate
assets supporting actuarial
liabilities
    
    
       Asset default provisions
included in actuarial liabilities
amounted to $2.9 billion on a
pre-tax basis as at December 31,
2007Mortality the
rate of death for
defined groups of
people
    
    
       Generally based on
the Companys average
five-year experience  
Industry experience
considered where the
Companys experience is not
sufficient   Where
lower mortality rates result
in an increase in actuarial
liabilities, the mortality
rates are adjusted to
reflect estimated future
improvements in life span   Where lower
mortality rates result in a
decrease in actuarial
liabilities, the mortality
rates do not reflect any
future improvement that
might be expected
    
    
       For products for which
higher mortality would be
financially adverse to the
Company, a 1% increase in the
best estimate assumption would
decrease net income by $73
million   For products for
which lower mortality would be
financially adverse to the
Company, a 1% decrease in the
mortality assumption would
decrease net income by $50
million
 Sun Life Financial Inc.
    
    
    12




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##### 



Critical Accounting
    
    
    Determination Methodology and
    
    
    Financial SignificanceEstimate
    
    
    Assumptions
    
    
    (measured as at December 31, 2007)Morbidity both the rates
of accident or sickness and
the rates of subsequent
recovery for defined groups
of people
    
    
       Generally based on the Companys average
five-year experience   Industry experience
considered where the Companys experience
is not sufficient   Long-term care and
critical illness insurance assumptions
developed in collaboration with reinsurers
and largely based on their experience   For
those benefits where the Company or
industry experience is limited, larger
provisions for adverse deviation are
included
    
    
       For products for which the morbidity is a
significant assumption, a 1% adverse change in
that assumption would reduce net income by $21
millionPolicy termination rates
the rates at which policies
terminate prior to the end
of the contractual coverage
periods
    
    
       Generally based on the Companys average
five-year experience   Industry studies
used where the Companys experience is not
sufficient   Rates may vary by plan, age at
issue, method of premium payment and policy
duration   Assumptions for premium
cessation occurring prior to termination of
the policy required for universal life
contracts
    
    
       For individual life insurance products for
which fewer terminations would be financially
adverse to the Company, net income would
decrease $105 million if the termination rate
assumption were reduced by 10% starting in
policy year six (5% for participating policies
and policies with adjustable premiums)   For
products for which more terminations would be
financially adverse to the Company, net income
would decrease $74 million if an extra 1% of
the in-force policies were assumed to
terminate each year beginning in policy year
six (0.5% for participating policies and
policies with adjustable premiums)Operating expenses and
inflation actuarial
liabilities provide for
future policy-related
expenses
    
    
       Mainly based on recent Company experience
using an internal expense allocation
methodology   The increases assumed in
future expenses are consistent with the
future interest rates used in the scenario
testing under the standards established by
the Canadian Institute of Actuaries
    
    
       A 10% increase in unit expenses Company-wide
would result in a decrease in net income of $
229 million
  Fair Value of Investments
 
  Sun Life Financial Inc.
    
    
    13




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##### 



Allowance for Investment Losses
  .
 Goodwill and Other Intangibles
 Sun Life Financial Inc.
    
    14




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##### 



Income Taxes
  Accounting Policies
 Changes in Accounting Policies in 2007
  Financial Instruments, Hedges and Comprehensive Income Overview
 Assets Supporting Actuarial Liabilities
  Assets Not Supporting Actuarial Liabilities
 Sun Life Financial Inc.
    
    15




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##### 



Retained Earnings Adjustments
   Determining the Variability to be Considered in
Applying the Variable Interest Entity (VIE)
Standards
  Convertible and Other Debt Instruments With
Embedded Derivatives
 Accounting Policy Choice for Transaction Costs:
  Future Adoption
 Capital Disclosures and Financial Instruments
 Disclosure and Presentation
  Non-GAAP Financial Measures
 Sun Life Financial Inc.
    
    16




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##### 



Impact of Special Items on Fully Diluted Operating EPS
 ($ per share)
    
    2007
    
    
    
    2006
    
    
    2005EPS(1)  Reported (GAAP)
    
    
    3.85
    
    
    
    
    3.58
    
    
    
    3.12Net gains (losses) on
special items
    
    
    (0.13
    )
    
    
    
    
    
    
    
    (0.11
    )EPS
(1) Operating
    
    
    3.98
    
    
    
    
    3.58
    
    
    
    3.23
 (1)
    
    EPS refers to fully diluted earnings per share in the table.
   Reconciliation of Operating Earnings
 ($ millions)
    
    2007
    
    
    
    2006Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    Total
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    TotalReported earnings(GAAP)
    
    
    555
    
    
    
    577
    
    
    
    590
    
    
    
    497
    
    
    
    2,219
    
    
    
    
    545
    
    
    
    541
    
    
    
    512
    
    
    
    491
    
    
    
    2,089After-tax gains (losses) on special itemsIntangible asset write-down for Clarica brand
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43
    )
    
    
    (43
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Premium paid to redeem Partnership Capital Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Re-branding expenses
    
    
    (3
    )
    
    
    (5
    )
    
    
    (2
    )
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Genworth EBG business integration costs
    
    
    (2
    )
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Hong Kong integration costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Total special items
    
    
    (5
    )
    
    
    (6
    )
    
    
    (3
    )
    
    
    (61
    )
    
    
    (75
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )Operating earnings
    
    
    560
    
    
    
    583
    
    
    
    593
    
    
    
    558
    
    
    
    2,294
    
    
    
    
    545
    
    
    
    541
    
    
    
    512
    
    
    
    493
    
    
    
    2,091
 Sun Life Financial Inc.
    
    17




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##### 



Financial Highlights
 ($ millions, unless otherwise noted)
    
    2007
    
    
    
    2006
    
    
    2005Common shareholders net incomeOperating(1)
    
    
    2,294
    
    
    
    
    2,091
    
    
    
    1,906Reported
    
    
    2,219
    
    
    
    
    2,089
    
    
    
    1,843Basic reported EPS ($)
    
    
    3.90
    
    
    
    
    3.62
    
    
    
    3.14Fully diluted EPS ($)Operating(1)
    
    
    3.98
    
    
    
    
    3.58
    
    
    
    3.23Reported
    
    
    3.85
    
    
    
    
    3.58
    
    
    
    3.12ROE (%)Operating(1)
    
    
    14.3
    %
    
    
    
    13.8
    %
    
    
    13.1
    %Reported
    
    
    13.8
    %
    
    
    
    13.8
    %
    
    
    12.6
    %Dividends per common share ($)
    
    
    1.32
    
    
    
    
    1.15
    
    
    
    0.99Dividend payout
ratio(1) (%)
    
    
    33
    %
    
    
    
    32
    %
    
    
    31
    %Dividend yield(2)(%)
    
    
    2.5
    %
    
    
    
    2.5
    %
    
    
    2.3
    %Total revenue
    
    
    21,188
    
    
    
    
    24,287
    
    
    
    21,918Premiums, deposits and fund
salesPremium revenue, including
administration services onlypremium equivalents
    
    
    16,124
    
    
    
    
    17,327
    
    
    
    15,329Segregated fund deposits
    
    
    13,320
    
    
    
    
    8,753
    
    
    
    7,205Mutual fund sales
    
    
    22,586
    
    
    
    
    20,412
    
    
    
    20,329Managed fund sales
    
    
    27,613
    
    
    
    
    26,116
    
    
    
    31,135Total premiums, deposits and
fund sales
    
    
    79,643
    
    
    
    
    72,608
    
    
    
    73,998Assets under management
(AUM)(as at December 31)General fund assets
    
    
    114,291
    
    
    
    
    117,831
    
    
    
    110,866Segregated fund net assets
    
    
    73,205
    
    
    
    
    70,789
    
    
    
    60,984Mutual fund
assets (3)
    
    
    101,858
    
    
    
    
    110,186
    
    
    
    103,753Managed fund assets
    
    
    134,297
    
    
    
    
    140,551
    
    
    
    112,938Other AUM
    
    
    1,613
    
    
    
    
    2,075
    
    
    
    2,348Total AUM
    
    
    425,264
    
    
    
    
    441,432
    
    
    
    390,889Capital(as at December 31)Subordinated debt and other
capital(4)
    
    
    2,946
    
    
    
    
    3,305
    
    
    
    3,305Participating policyholders
equity
    
    
    95
    
    
    
    
    92
    
    
    
    85Total shareholders equity
    
    
    17,122
    
    
    
    
    17,092
    
    
    
    15,461Total capital
    
    
    20,163
    
    
    
    
    20,489
    
    
    
    18,851
 (1)
    
    Operating earnings, fully diluted operating EPS, operating ROE and dividend payout ratio
are non-GAAP measures and exclude certain items described on page 16 under the heading
Non-GAAP financial measures. The dividend payout ratio represents the ratio of common
shareholders dividends to operating earnings.(2)
    
    The dividend yield represents the common dividend per share as a percentage of the
average of the high and low share price.(3)
    
    Prior periods have been restated to include AUM of Birla Sun Life Asset Management
Company Limited (BSLAMC). The Company has a 50% interest in BSLAMC.(4)
    
    Other capital refers to Partnership Capital Securities and Sun Life ExchangEable Capital
Securities (SLEECS).
These securities qualify as capital for Canadian regulatory purposes. Starting
January 1, 2005 Partnership Capital Securities and SLEECS were deconsolidated and
reclassified as debentures in SLF Inc.s Consolidated Financial
Statements. The Partnership Capital Securities were redeemed in May 2007. Additional
information is available on page 49 under the heading Capital.
 Sun Life Financial Inc.
    
    18




---



##### 



Consolidated Results of Operations
 Common Shareholders Net Income
  Earnings and EPS
 ($ millions, unless otherwise noted)
    
    2007
    
    
    
    2006
    
    
    2005Total net income
    
    
    2,290
    
    
    
    
    2,144
    
    
    
    1,876Less:Participating
policyholders net income
    
    
    2
    
    
    
    
    7
    
    
    
    9Dividends paid to
preferred shareholders
    
    
    69
    
    
    
    
    48
    
    
    
    24Common shareholders net income
    
    
    2,219
    
    
    
    
    2,089
    
    
    
    1,843Plus: Special items(1)
    
    
    75
    
    
    
    
    2
    
    
    
    63Operating earnings
    
    
    2,294
    
    
    
    
    2,091
    
    
    
    1,906Basic EPS ($) from:Common shareholders net income
    
    
    3.90
    
    
    
    
    3.62
    
    
    
    3.14Operating earnings(1)
    
    
    4.03
    
    
    
    
    3.62
    
    
    
    3.24Diluted EPS ($) from:Common shareholders net income
    
    
    3.85
    
    
    
    
    3.58
    
    
    
    3.12Operating earnings(1)
    
    
    3.98
    
    
    
    
    3.58
    
    
    
    3.23Common shareholders net income by segmentSLF Canada
    
    
    1,050
    
    
    
    
    995
    
    
    
    963SLF U.S.
    
    
    581
    
    
    
    
    448
    
    
    
    495MFS
    
    
    281
    
    
    
    
    234
    
    
    
    179SLF Asia
    
    
    123
    
    
    
    
    101
    
    
    
    42Corporate
    
    
    184
    
    
    
    
    311
    
    
    
    164Total
    
    
    2,219
    
    
    
    
    2,089
    
    
    
    1,843
 (1)
    
    The impact of special items on EPS is described on page 16 under the heading
Non-GAAP Financial Measures.
 Return on Equity
 Sun Life Financial Inc.
    
    19




---



##### 



Assets Under Management
 Revenue
 Sun Life Financial Inc.
    
    20




---



##### 



Total Revenue
 ($ millions)
    
    2007
    
    
    
    2006
    
    
    2005PremiumsAnnuities
    
    
    3,530
    
    
    
    
    5,380
    
    
    
    4,556Life insurance
    
    
    6,010
    
    
    
    
    6,168
    
    
    
    5,683Health insurance
    
    
    3,584
    
    
    
    
    3,061
    
    
    
    2,701Total premiums
    
    
    13,124
    
    
    
    
    14,609
    
    
    
    12,940Net investment income
    
    
    4,852
    
    
    
    
    6,664
    
    
    
    6,079Fee Income
    
    
    3,212
    
    
    
    
    3,014
    
    
    
    2,899Total
    
    
    21,188
    
    
    
    
    24,287
    
    
    
    21,918
      Policy Benefits
 Policy Benefits
 ($ millions)
    
    2007
    
    
    
    2006
    
    
    2005Payments to policyholders, beneficiaries and depositors
    
    
    14,244
    
    
    
    
    12,895
    
    
    
    12,802Net transfers to segregated funds
    
    
    952
    
    
    
    
    835
    
    
    
    704Increase in actuarial liabilities
    
    
    (2,515
    )
    
    
    
    2,525
    
    
    
    872Total
    
    
    12,681
    
    
    
    
    16,255
    
    
    
    14,378
 Expenses and Other
  Sun Life Financial Inc.
    
    21




---



##### 



Expenses and Other
 ($ millions)
    
    2007
    
    
    
    2006
    
    
    2005Commissions
    
    
    1,811
    
    
    
    
    1,916
    
    
    
    1,726Operating expenses
    
    
    3,183
    
    
    
    
    3,003
    
    
    
    2,899Intangibles amortization
    
    
    77
    
    
    
    
    25
    
    
    
    22Premium taxes
    
    
    240
    
    
    
    
    205
    
    
    
    190Interest expenses
    
    
    349
    
    
    
    
    323
    
    
    
    273Income taxes
    
    
    522
    
    
    
    
    389
    
    
    
    531Non-controlling interests in net income of subsidiaries
    
    
    35
    
    
    
    
    27
    
    
    
    23Participating policyholders net income (loss)
    
    
    2
    
    
    
    
    7
    
    
    
    9Dividends to preferred shareholders
    
    
    69
    
    
    
    
    48
    
    
    
    24Total
    
    
    6,288
    
    
    
    
    5,943
    
    
    
    5,697
 Quarterly Information
   Quarterly Information
 ($ millions, unless otherwise noted)
    
    2007
    
    
    
    2006Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1
    
    
    
    Q4
    
    
    Q3
    
    
    Q2
    
    
    Q1Common shareholders net incomeOperating (1)
    
    
    560
    
    
    
    583
    
    
    
    593
    
    
    
    558
    
    
    
    
    545
    
    
    
    541
    
    
    
    512
    
    
    
    493Reported
    
    
    555
    
    
    
    577
    
    
    
    590
    
    
    
    497
    
    
    
    
    545
    
    
    
    541
    
    
    
    512
    
    
    
    491Fully diluted EPS (in dollars)Operating (1)
    
    
    0.98
    
    
    
    1.01
    
    
    
    1.03
    
    
    
    0.96
    
    
    
    
    0.94
    
    
    
    0.93
    
    
    
    0.88
    
    
    
    0.84Reported
    
    
    0.97
    
    
    
    1.00
    
    
    
    1.02
    
    
    
    0.86
    
    
    
    
    0.94
    
    
    
    0.93
    
    
    
    0.88
    
    
    
    0.84Basic reported EPS (in dollars)
    
    
    0.98
    
    
    
    1.02
    
    
    
    1.03
    
    
    
    0.87
    
    
    
    
    0.95
    
    
    
    0.94
    
    
    
    0.88
    
    
    
    0.84Return on Shareholders Equity
(ROE) (annualized)Operating (1)
    
    
    14.3
    %
    
    
    14.8
    %
    
    
    14.6
    %
    
    
    13.5
    %
    
    
    
    14.0
    %
    
    
    14.4
    %
    
    
    13.6
    %
    
    
    13.2
    %Reported
    
    
    14.2
    %
    
    
    14.7
    %
    
    
    14.5
    %
    
    
    12.0
    %
    
    
    
    14.0
    %
    
    
    14.4
    %
    
    
    13.6
    %
    
    
    13.1
    %Business Groups common
shareholders net incomeSLF Canada
    
    
    263
    
    
    
    257
    
    
    
    280
    
    
    
    250
    
    
    
    
    257
    
    
    
    240
    
    
    
    264
    
    
    
    234SLF U.S.
    
    
    157
    
    
    
    170
    
    
    
    156
    
    
    
    98
    
    
    
    
    97
    
    
    
    136
    
    
    
    90
    
    
    
    125MFS
    
    
    73
    
    
    
    68
    
    
    
    68
    
    
    
    72
    
    
    
    
    71
    
    
    
    58
    
    
    
    53
    
    
    
    52SLF Asia
    
    
    38
    
    
    
    30
    
    
    
    17
    
    
    
    38
    
    
    
    
    33
    
    
    
    13
    
    
    
    31
    
    
    
    24Corporate
    
    
    24
    
    
    
    52
    
    
    
    69
    
    
    
    39
    
    
    
    
    87
    
    
    
    94
    
    
    
    74
    
    
    
    56Total
    
    
    555
    
    
    
    577
    
    
    
    590
    
    
    
    497
    
    
    
    
    545
    
    
    
    541
    
    
    
    512
    
    
    
    491Total revenue
    
    
    5,405
    
    
    
    5,699
    
    
    
    4,500
    
    
    
    5,584
    
    
    
    
    6,137
    
    
    
    6,604
    
    
    
    6,231
    
    
    
    5,315Total AUM ($ billions)
    
    
    425
    
    
    
    427
    
    
    
    440
    
    
    
    451
    
    
    
    
    442
    
    
    
    405
    
    
    
    391
    
    
    
    407
 (1)
    
    Operating earnings, fully diluted operating EPS and
operating ROE are non-GAAP measures and exclude the items
described under the heading Non-GAAP Financial Measures on
page 16.
 Sun Life Financial Inc.
    
    22




---



##### 



Fourth Quarter 2007 Performance
 (i)
    
    unfavourable market movements of $1.9 billion, and(ii)
    
    net outflows of mutual, managed and segregated funds of $1.6 billion partly offset by(iii)
    
    an increase of $1.2 billion from the
Fluctuation Canadian dollar relative to the prior
period currency exchange rates.
 Sun Life Financial Inc.
    
    23




---



##### 



Investments
  Investment Profile
 
   Investments
 ($ millions)
    
    2007
    
    
    
    2006% of total
    
    
    
    
    
    
    
    
    
    
    
    % of totalCarrying
    
    
    
    
    
    
    carrying
    
    
    
    Carrying
    
    
    
    
    
    
    carryingvalue
    
    
    Fair value
    
    
    value
    
    
    
    value
    
    
    Fair value
    
    
    valueBonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,230
    
    
    
    72,524
    
    
    
    65Held-for-trading bonds
    
    
    50,608
    
    
    
    50,608
    
    
    
    49Available-for-sale bonds
    
    
    9,148
    
    
    
    9,148
    
    
    
    9Mortgages and corporate loans
    
    
    20,742
    
    
    
    21,046
    
    
    
    20
    
    
    
    
    15,993
    
    
    
    16,322
    
    
    
    15Stocks
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,899
    
    
    
    5,544
    
    
    
    4Held-for-trading stocks
    
    
    4,438
    
    
    
    4,438
    
    
    
    4Available-for-sale stocks
    
    
    788
    
    
    
    788
    
    
    
    1Real estate
    
    
    4,303
    
    
    
    5,183
    
    
    
    4
    
    
    
    
    3,825
    
    
    
    4,549
    
    
    
    4Policy loans
    
    
    2,959
    
    
    
    2,959
    
    
    
    3
    
    
    
    
    3,105
    
    
    
    3,105
    
    
    
    3Cash, cash equivalents and
short-term securities
    
    
    5,500
    
    
    
    5,500
    
    
    
    5
    
    
    
    
    6,239
    
    
    
    6,239
    
    
    
    6Derivative assets
    
    
    1,947
    
    
    
    1,947
    
    
    
    2Other invested assets
including held-for-trading
and available-for-sale other
invested assets
    
    
    2,587
    
    
    
    4,295
    
    
    
    3
    
    
    
    
    2,908
    
    
    
    4,605
    
    
    
    3Total invested assets
    
    
    103,020
    
    
    
    105,912
    
    
    
    100
    
    
    
    
    106,199
    
    
    
    112,888
    
    
    
    100
  
 Bonds
 Sun Life Financial Inc.
    
    24




---



##### 



($ millions)
    
    2007
    
    
    2006Fair
    
    
    Investment
    
    
    Fair
    
    
    InvestmentValue
    
    
    Grade %
    
    
    Value
    
    
    Grade %Commercial mortgage- backed securities
    
    
    2,523
    
    
    
    99
    
    
    
    2,592
    
    
    
    99Residential mortgage- backed securities: Non- Agency
    
    
    1,486
    
    
    
    100
    
    
    
    2,221
    
    
    
    100Residential mortgage- backed securities: Agency
    
    
    1,112
    
    
    
    100
    
    
    
    1,541
    
    
    
    100Collateralized debt obligations
    
    
    422
    
    
    
    97
    
    
    
    411
    
    
    
    93Other
    
    
    1,075
    
    
    
    99
    
    
    
    1,543
    
    
    
    99Total
    
    
    6,618
    
    
    
    99
    
    
    
    8,308
    
    
    
    99
 Mortgages and Corporate Loans
   Mortgages by Type and Location
 ($ millions)
    
    Residential
    
    
    Non-Residential
    
    
    Total2007Canada
    
    
    2,723
    
    
    
    6,382
    
    
    
    9,105United States
    
    
    274
    
    
    
    6,005
    
    
    
    6,279United Kingdom
    
    
    
    
    
    
    84
    
    
    
    84Total Mortgages
    
    
    2,997
    
    
    
    12,471
    
    
    
    15,468Corporate Loans
    
    
    
    
    
    
    
    
    
    
    5,274Total Mortgages and Corporate Loans
    
    
    20,7422006Canada
    
    
    2,794
    
    
    
    6,347
    
    
    
    9,141United States
    
    
    306
    
    
    
    6,404
    
    
    
    6,710United Kingdom
    
    
    
    
    
    
    142
    
    
    
    142Total Mortgages
    
    
    3,100
    
    
    
    12,893
    
    
    
    15,993
  Sun Life Financial Inc.
    
    25




---



##### 



Stocks
  Real Estate
 Derivative Financial Instruments and Risk
Mitigation
   Products/Application
    
    
    Use of Derivative
    
    
    Derivative UsedU.S. universal life
contracts, and U.K.
unit-linked pension
products with guaranteed
annuity rate options
    
    
    To limit potential
financial losses
from significant
reductions in asset
earned rates
relative to
contract guarantees
and manage the
equity exposure due
to certain
regulatory
requirements for
the U.K. unit-
linked pension
products
    
    
    Interest rate options and
swaps; short equity forwardsInterest rate exposure in
relation to
asset/liability
management
    
    
    To manage the
sensitivity of the
duration gap
between assets and
liabilities to
interest rate
changes
    
    
    Interest rate swaps and optionsU.S. variable annuities,
Canadian segregated funds
and reinsurance on
variable annuity
guarantees offered by
other insurance companies
    
    
    To manage the
exposure to product
guarantees
sensitive to
movement in equity
market and interest
rate levels
    
    
    Put options on equity index;
futures on equity indices and
on interest ratesU.S. fixed index annuities
    
    
    To manage the
exposure to product
guarantees related
to equity market
performance
    
    
    Futures and options on equity
indices and interest ratesCurrency exposure in
relation to
asset/liability
management
    
    
    To reduce the
sensitivity to
currency
fluctuations by
matching the value
and cash flows of
specific assets
denominated in one
currency with the
value and cash
flows of the
corresponding
liabilities
denominated in
another currency
    
    
    Currency swaps and forwards
 Sun Life Financial Inc.
    
    26




---



##### 



($ millions)
    
    2007
    
    
    
    2006As at December 31Net fair value
    
    
    1,309
    
    
    
    
    1,122Total notional amount
    
    
    42,642
    
    
    
    
    44,140Credit equivalent amount
    
    
    2,351
    
    
    
    
    2,361Risk-weighted credit equivalent amount
    
    
    56
    
    
    
    
    55
 Deferred Net Realized Gains
   Impaired Assets
 Sun Life Financial Inc.
    
    27




---



##### 



Sun Life Financial Inc.
    
    28




---



##### 



Business Segment Overview
 
 
   SLF Canada
 Business Highlights
 
    
    Integrated its brand strategy in Canada to leverage more effectively the Sun Life
Financial brand and launched its multimedia advertising campaign to support its brand
strategy and reinforce the important role Sun Life Financial plays in the lives of Canadians
    
    Introduced SunWise Elite Plus Guaranteed Minimum Withdrawal Benefit rider in the first
quarter of 2007, contributing to an increase in individual segregated fund sales of 32%
over 2006
    
    Continued to expand success in GRS with an overall sales increase of 61% and growth in
the rollover market with the retention of $725 million in assets from members leaving plans
in 2007, representing an increase of 33%over 2006 and a retention ratio of 40%as at
December 31, 2007
 
 Business Profile  SLF Canada is a market leader with a customer base representing one in five Canadians. SLF Canadas
business units, consisting of Individual Insurance & Investments, Group Benefits and Group Wealth,
offer a full range of protection and wealth accumulation products and services to individuals and
corporate clients. SLF Canada also has investments in the Canadian asset management sector.
Individual Insurance & Investments includes the Companys 36. 6% interest in CI Financial and Group
Wealth includes a 59% economic interest in McLean Budden Limited.
 
 Industry Profile  Three large Canadian insurers account for approximately two-thirds of the life, health and annuity
segments in Canada as measured by premiums. These companies serve the core markets, while regional
and niche markets are served by a number of small to medium-sized companies. It is becoming
increasingly important that a company have economies of scale, good customer service, strong
distribution capabilities, technological innovation and operational excellence to succeed in a
consolidated industry.
 
 Business Strength  SLF Canada has a well-positioned franchise in the Canadian marketplace. Its distribution breadth
and strong service and technology infrastructure help sustain its reputation as a leading Canadian
financial services company.
 Strengths
 
    
    National market leadership positions in Individual and Group businesses
    
    A multi-distribution strategy for Individual Insurance & Investments with Sun Life
Financial Advisors providing a stable level of insurance and wealth sales and the growing
third-party channel focusing on the affluent market
    
    The strategic partnership with CI Financial leverages its strong asset management
products and SLF Canadas unique distribution capabilities
    
    The group businesses differentiate themselves from the competition with long-standing
customer relationships, a regional service delivery model, service innovations and
recognized capability in delivering holistic solutions
    
    Leading provider in the asset retention rollover business, which is a growing market
segment
    
    Strong ability to work across business units to serve customers as demonstrated by the
Total Benefits offering that allows for integrated access to group products and services by
plan members and sponsors
    
    Solid risk management focus that continues to strengthen and enable business decision making
 Opportunities
 
    
    Leverage SLF Canadas strengths across its businesses to capitalize on increasing retirement needs
    
    Build lifelong relationships with Canadians by offering improved services to
transitioning plan members through cross-business unit collaboration
    
    Expand rollover business by continuing to increase asset retention for retirement assets,
and focus on group benefits and expanding participation in voluntary benefits
 
 Sun Life Financial Inc.
    
    29




---



##### 



Strategy
   Financial and Business Results
 Summary Statement of Operations
 (C$ millions)
    
    2007
    
    
    
    2006
    
    
    2005Premiums
    
    
    6,004
    
    
    
    
    5,721
    
    
    
    5,314Net investment income
    
    
    2,586
    
    
    
    
    2,993
    
    
    
    2,780Fee income
    
    
    695
    
    
    
    
    619
    
    
    
    564Total revenue
    
    
    9,285
    
    
    
    
    9,333
    
    
    
    8,658Client
disbursements and change
in actuarial liabilities
    
    
    6,149
    
    
    
    
    6,277
    
    
    
    5,625Commissions and other expenses
    
    
    1,868
    
    
    
    
    1,774
    
    
    
    1,660Income taxes
    
    
    200
    
    
    
    
    262
    
    
    
    385Non-controlling interests in net income of
subsidiaries and par policyholders income
    
    
    18
    
    
    
    
    25
    
    
    
    25Common shareholders net income
    
    
    1,050
    
    
    
    
    995
    
    
    
    963
    (1)
 
 (1)
    
    ROE for the business segments is
a non-GAAP measure. For additional information,
see Non-GAAP financial measures on page 16.
 Results by Business Unit
  Sun Life Financial Inc.
    
    30




---



##### 



Individual Insurance & Investments
      Group Benefits
 Group Wealth
 (1)
  
 (1)
    
    As measured by Benefits
Canada magazines 2007 Defined Contribution
Plan Survey released in December 2007.
  Sun Life Financial Inc.
    
    31




---



##### 



Sun Life Financial Inc.
    
    32




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##### 



SLF U.S.
 Business Highlights
 
    
    Acquired the Genworth EBG business on May 31, 2007
    
    Launched the Annuities business units innovative Income ON Demand sm
guaranteed income rider on the variable annuity (VA) product in early March of 2007. The
offering has been favourably received in the market and generated sales of US$1.3 billion
through December 31, 2007, representing 46% of total domestic VA sales for the year
    
    Implemented a financing arrangement to address the U.S. statutory reserve requirements
for certain universal life products; this financing arrangement reduced new business strain,
in addition to recovering previously reported new business strain
 
 Business Profile  SLF U.S. delivers innovative protection and wealth accumulation products to individuals and
businesses through its three business units. The Annuities business unit offers variable annuities,
fixed and fixed index annuities, private placement variable annuities for high net worth clients
and investment management services. The Individual Life business unit offers protection products,
such as single and joint universal life and variable universal life to affluent individuals,
private placement variable universal life for high net worth clients (PPVUL) and corporate-owned
and bank-owned life insurance (COLI/BOLI). The Employee Benefits Group, formerly named Group Life &
Health, offers group life insurance, short-term and long-term disability insurance, medical
stop-loss insurance, dental insurance for employers and voluntary worksite products.
 
 Industry Profile  In an industry that is highly competitive, the top ten companies hold over 50% of the overall
market share in all markets in which SLF U.S. competes. The need for operational scale within this
environment continues to drive organizations to seek acquisition opportunities.
  
 Business Strength  SLF U.S. chooses to focus on selected strategic market segments to compete effectively in its
marketplace. SLF U.S. concentrates on organic growth and growth from focused acquisitions by
providing broad and expanding product and distribution capabilities along with innovative product
solutions.
 Strengths
 
    
    Competitive and innovative products such as Income ON Demandsm designed to
provide customer value and achieve profit targets
    
    Strong training and marketing support that increases wholesaler productivity and
enhances sales growth momentum
    
    Multi-site service strategy that allows for enhanced efficiency and customer service
    
    Strong risk management helping to ensure financial stability
    
    Strong financial and insurance ratings
 Opportunities
 
    
    Leverage the power of SLF U.S.s distribution network across all product lines
    
    Serve the needs of the growing retirement market with innovative customer solutions
    
    Augment operations through additional focused acquisitions, which provide operational
scale in SLF U.S.s core businesses
    
    Leverage scale resulting from the Genworth EBG acquisition to expand market reach
    
    Leverage product and innovation skills to expand in global markets
 
 Sun Life Financial Inc.
    
    33




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##### 



Strategy
 Financial and Business Results
 Summary Statement of Operations(C$ millions)
    
    2007
    
    
    
    2006
    
    
    2005Premiums
    
    
    5,528
    
    
    
    
    7,261
    
    
    
    6,246Net investment income
    
    
    1,560
    
    
    
    
    2,512
    
    
    
    2,298Fee income
    
    
    742
    
    
    
    
    692
    
    
    
    617Total revenue
    
    
    7,830
    
    
    
    
    10,465
    
    
    
    9,161Client
disbursements and change
in actuarial liabilities
    
    
    5,057
    
    
    
    
    8,054
    
    
    
    6,993Commissions and other expenses
    
    
    2,047
    
    
    
    
    1,941
    
    
    
    1,560Income taxes
    
    
    142
    
    
    
    
    21
    
    
    
    113Non-controlling interests in net income of
subsidiaries and par policyholders income
    
    
    3
    
    
    
    
    1
    
    
    
    Common shareholders net income
    
    
    581
    
    
    
    
    448
    
    
    
    495Selected financial information
(US$ millions)Total revenue
    
    
    7,276
    
    
    
    
    9,248
    
    
    
    7,539Common shareholders net income
    
    
    553
    
    
    
    
    395
    
    
    
    409
 (1)
 
  
 (1)
    
    ROE for the business
segments is a non-GAAP measure. For additional
information, see Non-GAAP
Financial Measures on page 16.
  Sun Life Financial Inc.
    
    34




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##### 



Results by Business Unit
 
 Annuities
 SM
  Individual Life
     Employee Benefits Group
  Sun Life Financial Inc.
    
    35




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##### 



Sun Life Financial Inc.
    
    36




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##### 



MFS
 Business Highlights
 
    
    The pre-tax operating profit margin for 2007 increased to 36% from 29% in 2006
    
    Gross sales increased by 16% over 2006 to US$43 billion in 2007 and AUM grew by 7% during
2007 to US$200 billion
    
    U.S. retail equity investment performance improved during 2007 with 73% of funds ranking
in the top half of their respective three-year Lipper categories as of December 31, 2007
compared with 67% as at December 31, 2006
 
 Business Profile
 
 Industry Profile
   
 Business Strength
  Strengths
 
    
    Diversified investment platform that can counteract the volatility of an investment
performance strategy
    
    Breadth of product
    
    Strong client/wholesaler relationships
    
    Its global investment platform distinguishes MFS in the global institutional marketplace
    
    Strong long-term performance in a number of key investment styles
 Opportunities
 
    
    Continued strength in the demand for international assets
    
    Increased institutional demand for global equities in the Asia Pacific marketplace
    
    More products with stronger investment performance records could provide additional
opportunities in the institutional marketplace
    
    The marked increase in U.S. Equity performance provides opportunity for improved net
sales in select mutual funds
    
    A distribution model which will compete more effectively in the defined contribution
investment only (DCIO) marketplace
 
 Sun Life Financial Inc.
    
    37




---



##### 



Strategy
   Financial and Business Results
 Summary Statement of Operations
 (C$ millions)
    
    2007
    
    
    
    2006
    
    
    2005Total revenue
    
    
    1,687
    
    
    
    
    1,662
    
    
    
    1,648Commissions and other expenses
    
    
    1,206
    
    
    
    
    1,271
    
    
    
    1,355Income taxes
    
    
    185
    
    
    
    
    150
    
    
    
    110Non-controlling interests in net income of
subsidiaries
    
    
    15
    
    
    
    
    7
    
    
    
    4Common shareholders net income
    
    
    281
    
    
    
    
    234
    
    
    
    179
 Selected financial information
(US$ millions, unless otherwise noted)Total revenue
    
    
    1,573
    
    
    
    
    1,464
    
    
    
    1,360Common shareholders net income
    
    
    262
    
    
    
    
    206
    
    
    
    147Sales(US$ billions)Gross
    
    
    42.7
    
    
    
    
    37.0
    
    
    
    38.8Net
    
    
    (4.0
    )
    
    
    
    0.2
    
    
    
    7.5Average net assets(US$ billions)
    
    
    198
    
    
    
    
    172
    
    
    
    151
 (1)
    
    The pre-tax operating
profit margin ratio is a non-GAAP
measure described under the heading
Non-GAAP Financial Measures on page 16.
  Sun Life Financial Inc.
    
    38




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##### 



Sun Life Financial Inc.
    
    39




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##### 



SLF ASIA
 Business Highlights
 
    
    Individual insurance sales rose by 77% in 2007 over 2006, with triple-digit growth in
India and China, while Hong Kong and Indonesia achieved double-digit growth, driven by
strong demand for investment-linked products
    
    Sun Life Everbright Life Insurance Company Limited (Sun Life Everbright) was awarded two
significant group benefits plans during the third quarter of 2007; Sun Life Everbright
offers group life and health benefits to the 13,000 employees of China Everbright Group and
Everbright Bank, and provides claims administration for the 3 million members of the Tianjin
Bureau of Labour and Social Security
    
    Birla Sun Life increased its footprint with the opening of 202 branches during 2007 that
grew the operation to 339 offices in 256 cities in India
 
 Business Profile  SLF Asia operates through subsidiaries in the Philippines, Hong Kong and Indonesia and through
joint ventures with local partners in India and China. These five markets hold 70% of the total
Asian population. The Regional Office in Hong Kong facilitates best practices and sharing of
resources, as well as drives the development of markets and new lines of business.
  
 Industry Profile  The life insurance markets in which SLF Asia competes range from developing and increasingly
competitive markets such as India and China to the more mature market of Hong Kong. The increasing
competition in India and China is characterized by the continued inflow of new entrants that
include both local and foreign companies. The low insurance penetration rates, measured by
insurance premiums relative to Gross Domestic Product in these developing markets, provide the
impetus for companies to enter and expand their operations.
  
 Business Strength  SLF Asia represents a long-term growth engine for Sun Life Financial. Its accelerated penetration,
particularly into India and China, the largest and fastest growing Asian life insurance markets,
focuses on increasing sales and expanding business operations to achieve scale rapidly.
 Strengths
 
    
    Solid foundations in Hong Kong and the Philippines to support SLF Asias growth in
developing markets
    
    SLF Asia can leverage the Companys international resources and expertise to develop
innovative, value-added products
    
    The Philippines has strong asset management practices, demonstrating superior investment
performance
 Opportunities
 
    
    The demand for innovative health and wealth management products exists as the public
safety net is limited
    
    Intensive competition for agent recruitment combined with increased public acceptance
of alternate distribution channels provide opportunities to leverage SLF Asias
telemarketing expertise
    
    Indias middle class, with its increasing wealth, provides opportunities to offer
innovative wealth accumulation and protection products
 
 Sun Life Financial Inc.
    
    40




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##### 



Strategy
  Financial and Business Results
 Summary Statement of Operations(C$ millions)
    
    2007
    
    
    
    2006
    
    
    2005Premiums
    
    
    629
    
    
    
    
    640
    
    
    
    524Net investment income
    
    
    255
    
    
    
    
    318
    
    
    
    223Fee income
    
    
    93
    
    
    
    
    64
    
    
    
    12Total revenue
    
    
    977
    
    
    
    
    1,022
    
    
    
    759Client disbursements and change
in actuarial liabilities
    
    
    501
    
    
    
    
    621
    
    
    
    499Commissions and other expenses
    
    
    330
    
    
    
    
    283
    
    
    
    201Income taxes
    
    
    23
    
    
    
    
    17
    
    
    
    17Common shareholders net income
    
    
    123
    
    
    
    
    101
    
    
    
    42
   (1)
 
 (1)
    
    ROE for the business segments
is a non-GAAP measure. For additional
information, see Non-GAAP financial measures
on page 16.
 ,
 
 
 (1)
    
    Includes 100% of sales for joint ventures. Results by Business Unit
 Hong
Kong
  Sun Life Financial Inc.
    
    41




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##### 



Philippines
   India
 China
   Indonesia
  Sun Life Financial Inc.
    
    42




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##### 



Corporate
  Financial and Business Results
 Summary Statement of Operations(1)(C$ millions)
    
    2007
    
    
    
    2006
    
    
    2005Premiums
    
    
    963
    
    
    
    
    987
    
    
    
    856Net investment income
    
    
    421
    
    
    
    
    802
    
    
    
    791Fee income
    
    
    25
    
    
    
    
    16
    
    
    
    45Total revenue
    
    
    1,409
    
    
    
    
    1,805
    
    
    
    1,692Client
disbursements and change
in actuarial liabilities
    
    
    974
    
    
    
    
    1,303
    
    
    
    1,261Commissions and other expenses
    
    
    209
    
    
    
    
    203
    
    
    
    334Income taxes
    
    
    (28
    )
    
    
    
    (61
    )
    
    
    (94
    )Non-controlling interests in net income of
subsidiaries
    
    
    1
    
    
    
    
    1
    
    
    
    3Dividends paid to preferred shareholders
    
    
    69
    
    
    
    
    48
    
    
    
    24Common shareholders net income
    
    
    184
    
    
    
    
    311
    
    
    
    164Plus: Special items(2)
    
    
    61
    
    
    
    
    
    
    
    
    60Operating earnings
    
    
    245
    
    
    
    
    311
    
    
    
    224
 
 (1)
    
    Including
consolidation
adjustments related
to activities
between
segments.(2)
    
    The impact of
special items on
earnings is
described on page 17 under
the heading Non-GAAP Financial Measures.
 Results by Business Unit
 
 SLF U.K.
   SLF Reinsurance
  Sun Life Financial Inc.
    
    43




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##### 



Corporate Support
 
  Sun Life Financial Inc.
    
    44




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##### 



Risk Management
 Introduction
  Objectives
 (i)
    
    avoid risks that could materially adversely affect the value or reputation of the
Company(ii)
    
    contribute to sustainable earnings(iii)
    
    identify risks that the Company can manage in order to increase returns(iv)
    
    provide transparency of the Companys risks through internal and external reporting
 Risk Philosophy
 Risk Culture
  (i)
    
    acting with integrity(ii)
    
    understanding the impact of risk on customers(iii)
    
    embedding risk management into the business(iv)
    
    promoting full and transparent communications(v)
    
    collaboration(vi)
    
    aligning of objectives and incentives
  Accountabilities
 Key Risk Processes
     Market Risk Tolerance and Earnings-at-Risk
   Sensitivity of Earnings
  Sun Life Financial Inc.
    
    
    
    45




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##### 



Increase (Decrease) in Earnings($ millions)Interest Rate Sensitivity (1)1% Increase
    
    
    2061% Decrease
    
    
    (298
    )Equity Market Sensitivity (2)10% Increase
    
    
    12110% Decrease
    
    
    (131
    )
 (1)
    
    Represents a 100 basis point parallel shift in assumed
interest rates across the entire yield curve.(2)
    
    Represents the percentage change in equity markets.
     Risk Category
    
    
    Risk Management Approach  HighlightsStrategic risk the risk of failure to achieve
the Companys vision, mission, or long-term
business objectives, either through incorrect
strategy choices or improper implementation of
those choices
    
    

   The Companys Strategic and Business Planning Processes address key
strategic risks and are integrated with the Key Risk Process   Regular
review by the SLF Inc. Board of Directors of progress on business plans  
Annual Business Reviews of Key Risks with the Executive Risk CommitteeMarket risk the uncertainty in the valuation
of assets and the cost of embedded options and
guarantees arising from changes in equity
markets, interest rates and/or other market
variables
    
    

   The Companys insurance liabilities are segmented according to major
product type, with investment guidelines established for each segment  
Exposure to capital markets is monitored and managed against established
risk tolerance limits   Individual stock holdings are diversified by
industry type and corporate entity   Real estate holdings are diversified
by location and property type   Effects of large and sustained adverse
market movement are monitored through Dynamic Capital Adequacy Testing and
other stress-testing techniques   The Company maintains specific policies
related to the management of liquidity (see
pages 48 to 49 in this MD&A under the heading Financial Position and
Liquidity) and foreign exchange risks   Consideration is given to the use of specific derivatives in
the management of specific market-related risksInterest rate risk the risk of asset/liability
mismatch resulting from interest rate volatility
    
    

   Matching policy established for each portfolio of assets and associated
liabilities to keep potential losses within acceptable limits   Key rate
duration technique employed for certain interest-sensitive businesses
(e.g., individual and group annuities) to examine duration gaps of assets
and liabilities at discrete points on the yield curve and to manage these
gaps within specified tolerance limits
 Sun Life Financial Inc.
    
    
    
    46




---



##### 



Risk Category
    
    
    Risk Management Approach  HighlightsCredit risk the uncertainty surrounding the
likelihood of default or credit downgrade
    
    

   Credit risks associated with fixed income investments are managed by
major business segment and the Company in aggregate using:    Detailed
credit and underwriting policies   Specific diversification requirements
  
Comprehensive due diligence and ongoing credit analysis   Aggregate
counterparty exposure limits  
Monitoring against pre-established limits
  
Provisions for impaired assets are charged against the carrying value of
the asset with additional allowances provided for in actuarial liabilitiesReinsurance ceded risk the counterparty risk
relating to externally reinsuring exposures
    
    

   Policy established to set acceptance criteria and monitor the level of
reinsurance ceded to any single reinsurer or group of reinsurers.Product design and pricing risk the risk
arising from inappropriate or inadequate
product design and pricing, including
deviations from the assumptions used in pricing
products as a result of uncertainty concerning
future investment yields, mortality and
morbidity experience, expenses, changes in
policyholder behaviour, and taxes
    
    

   Enterprise-wide policy for product design and pricing   Annual compliance
assessment is performed by all business units against policies and
guidelines for product design and pricing methods, pricing assumptions,
profit margin objectives, required scenario analysis, documentation,
internal peer review and pricing approval processes   Internal audit of
business unit pricing processes and compliance to product design and
pricing policy is performed on a rotating basisMortality and morbidity risk the risk of
incurring higher than anticipated mortality and
morbidity claim losses on any one policy or
group of policies
    
    

   Detailed uniform underwriting procedures have been established to
determine the insurability of applicants and to manage exposure to large
claims   Underwriting requirements are regularly scrutinized against
industry guidelines   Group insurance policies are underwritten prior to
initial issue and renewals, driven by risk selection, plan design and
rating techniques   Risk policies approved by the Risk Review Committee of
the Board of Directors include limits on the maximum amount of insurance
that may be issued under one policy and the maximum amount that may be
retained, varying by geographical region   Amounts in excess of limits are
reinsuredLegal, regulatory and market conduct risk
management the risk associated with failure
to comply with laws or to conduct business
consistent with changing regulatory or public
expectations
    
    

   A strong compliance culture is promoted by setting the appropriate tone
at the top with respect to compliance with laws and regulations  
Enterprise-wide compliance policies and framework established with annual
self-assessment by all business units   Annual enterprise-wide attestation
by all employees regarding compliance with the Code of Business Conduct  
Key compliance risks are monitored at the corporate and business segment
levels
 Sun Life Financial Inc.
    
    
    
    47




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##### 



Risk Category
    
    
    Risk Management Approach  HighlightsOperational risk the uncertainty arising
from internal events caused by failures of
people, process and technology as well as
external events
    
    
       Strong operational risk management culture with emphasis on the
identification, assessment, mitigation, tracking and reporting of
operational risks   Enterprise-wide and business-specific operational
policies and guidelines established, including an annual attestation of
compliance to policies and operating guidelines   Comprehensive insurance
program, including appropriate levels of self-insurance, is maintained to
provide protection against potential losses   Environmental risk management
program is maintained to help protect investment assets (primarily real
estate, mortgage and structured finance portfolios) from losses due to
environmental issues and to help ensure compliance with applicable laws
 Financial Position and Liquidity
  Principal
Sources of Funds
 
  Sun Life Financial Inc.
    
    
    
    48




---



##### 



Cash Flow
 ($ millions )
    
    2007
    
    
    
    2006
    
    
    2005Net cash provided by operating activities
    
    
    1,042
    
    
    
    
    4,469
    
    
    
    2,777Net cash provided by (used in) financing activities
    
    
    (92
    )
    
    
    
    356
    
    
    
    290Net cash provided by (used in) investing activities
    
    
    (2,324
    )
    
    
    
    (2,647
    )
    
    
    (3,974
    )Changes due to fluctuations in exchange rates
    
    
    41
    
    
    
    
    18
    
    
    
    (101
    )Increase (decrease) in cash and cash equivalents
    
    
    (1,333
    )
    
    
    
    2,196
    
    
    
    (1,008
    )Cash and cash equivalents, beginning of period
    
    
    4,936
    
    
    
    
    2,740
    
    
    
    3,748Cash and cash equivalents, end of period
    
    
    3,603
    
    
    
    
    4,936
    
    
    
    2,740Short-term securities, end of period
    
    
    1,897
    
    
    
    
    1,303
    
    
    
    2,351Cash, cash equivalents and short-term securities, end of period
    
    
    5,500
    
    
    
    
    6,239
    
    
    
    5,091
 Liquidity
  
    
    capital levels
    
    asset levels
    
    matching position
    
    diversification and credit quality of its investments
    
    cash forecasts and actual amounts against established targets
 Capital
 Sun Life Financial Inc.
    
    49




---



##### 



($ millions)
    
    2007
    
    
    2006
    
    
    2005Balance, beginning of year
    
    
    20,489
    
    
    
    18,851
    
    
    
    17,899Adjustment to opening retained earnings and other comprehensive
income for changes to investment accounting rules effective January 1, 2007
    
    
    545
    
    
    
    
    
    
    
    Common shareholders net income
    
    
    2,219
    
    
    
    2,089
    
    
    
    1,843Common share dividends
    
    
    (752
    )
    
    
    (663
    )
    
    
    (581
    )Issuance (buyback) of common shares (net of expenses)
    
    
    (447
    )
    
    
    (514
    )
    
    
    (466
    )Stock option compensation
    
    
    1
    
    
    
    18
    
    
    
    17Effect of changes in exchange rates
    
    
    (1,491
    )
    
    
    163
    
    
    
    (402
    )Other comprehensive income (loss), net of taxes
    
    
    (290
    )
    
    
    
    
    
    
    Total change in common shareholders equity
    
    
    (215
    )
    
    
    1,093
    
    
    
    411Partnership Capital Securities redemption
    
    
    (698
    )
    
    
    
    
    
    
    Exchange rate changes 
Subordinated notes and Partnership Capital Securities
    
    
    (26
    )
    
    
    
    
    
    
    (27
    )Issuance of subordinated debt (net of redemptions and expenses)
    
    
    366
    
    
    
    
    
    
    
    Issuance of preferred shares (net of redemptions and expenses)
    
    
    245
    
    
    
    538
    
    
    
    562Accounting policy and other changes
    
    
    2
    
    
    
    7
    
    
    
    6Balance, end of year
    
    
    20,163
    
    
    
    20,489
    
    
    
    18,851
 Number of Common Shares Outstanding
 (in millions)
    
    2007
    
    
    2006
    
    
    2005Balance, beginning of year
    
    
    571.8
    
    
    
    582.0
    
    
    
    592.0Stock options exercised
    
    
    2.1
    
    
    
    2.2
    
    
    
    3.1Shares repurchased
    
    
    (9.8
    )
    
    
    (12.4
    )
    
    
    (13.1
    )Balance, end of year
    
    
    564.1
    
    
    
    571.8
    
    
    
    582.0
 Number of Stock Options Outstanding
 (in millions)
    
    2007
    
    
    2006
    
    
    2005Balance, beginning of year
    
    
    9.1
    
    
    
    10.0
    
    
    
    12.4Options issued
    
    
    1.3
    
    
    
    1.5
    
    
    
    1.3Options exercised or cancelled
    
    
    (2.2
    )
    
    
    (2.4
    )
    
    
    (3.7
    )Balance, end of year
    
    
    8.2
    
    
    
    9.1
    
    
    
    10.0
 Shareholders Dividends
 Long-Term Debt
 Sun Life Financial Inc.
    
    50




---



##### 



Capital Adequacy
 
  Sun Life Financial Inc.
    
    51




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##### 



Off-balance Sheet Arrangements
  
    
    earn management fees and additional spread on a matched book of business
    
    reduce financing costs
  
    
    asset securitizations
    
    securities lending
 Asset securitizations
 ($millions)
    
    2007
    
    
    
    2006As at December 31Securitized assets under
management
    
    
    1,939
    
    
    
    
    2,595The Companys retained
interests
    
    
    91
    
    
    
    
    103For the year ended December 31Cash flow received on
retained interests and
servicing fees
    
    
    14
    
    
    
    
    18
 Securities Lending
  Commitments, Guarantees, Contingencies and
Reinsurance Matters
 Sun Life Financial Inc.
    
    52




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##### 



Contractual Obligations
 Payments due by period($ millions)
    
    Total
    
    
    Within 1 year
    
    
    1-3 years
    
    
    4-5 years
    
    
    Over 5 yearsSenior debentures and unsecured financing
    
    
    4,010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,010Subordinated debt
    
    
    1,796
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,796Operating leases
    
    
    408
    
    
    
    88
    
    
    
    147
    
    
    
    98
    
    
    
    75Credit-related arrangementsContractual commitments
    
    
    1,809
    
    
    
    1,085
    
    
    
    724
    
    
    
    
    
    
    
    Letters of credit
    
    
    373
    
    
    
    373
    
    
    
    
    
    
    
    
    
    
    
    General fund policyholder liabilities(1)
    
    
    198,504
    
    
    
    13,299
    
    
    
    13,169
    
    
    
    11,798
    
    
    
    160,238Total contractual obligations
    
    
    206,900
    
    
    
    14,845
    
    
    
    14,040
    
    
    
    11,896
    
    
    
    166,119
 (1)
    
    General fund policyholder liability cash flows include estimates related to the
timing and payment of death and disability claims, policy surrenders, policy maturities, annuity
payments, minimum guarantees on segregated fund products, policyholder dividends, commissions and
premium taxes offset by contractual future premiums and fees on in-force contracts. These estimated
cash flows are based on the best estimate assumptions used in the determination of policy
liabilities. These amounts are undiscounted and do not reflect recoveries from reinsurance
agreements. The actuarial and other policy liability amounts included in the 2007 SLF Inc.
Consolidated Financial Statements are based on the present value of the estimated cash flows and
are net of reinsured amounts. Due to the use of assumptions, actual cash flows will differ from
these estimates.
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 Internal Control Over Financial Reporting
 Sun Life Financial Inc.
    
    53