##### 



Interim Consolidated Financial Statements Consolidated Statements of Operations For the three months ended
    
    
    For the nine months endedSeptember 30
    
    
    September 30
    
    
    September 30
    
    
    September 30(unaudited, in millions of Canadian dollars, except for per share amounts)
    
    2004
    
    
    2003
    
    
    2004
    
    
    2003RevenuePremium income:Annuities
    
    $
    1,176
    
    
    $
    906
    
    
    $
    3,691
    
    
    $
    3,743Life insurance
    
    
    1,474
    
    
    
    1,669
    
    
    
    4,347
    
    
    
    4,773Health insurance
    
    
    611
    
    
    
    591
    
    
    
    1,800
    
    
    
    1,7493,261
    
    
    
    3,166
    
    
    
    9,838
    
    
    
    10,265Net investment income
    
    
    1,430
    
    
    
    1,409
    
    
    
    4,422
    
    
    
    4,258Fee income
    
    
    699
    
    
    
    707
    
    
    
    2,219
    
    
    
    2,0965,390
    
    
    
    5,282
    
    
    
    16,479
    
    
    
    16,619Policy Benefits and ExpensesPayments to policyholders, beneficiaries
and depositors:Maturities and surrenders
    
    
    1,400
    
    
    
    1,906
    
    
    
    4,551
    
    
    
    4,811Annuity payments
    
    
    370
    
    
    
    374
    
    
    
    1,128
    
    
    
    1,189Death and disability benefits
    
    
    607
    
    
    
    593
    
    
    
    1,933
    
    
    
    1,904Health benefits
    
    
    426
    
    
    
    430
    
    
    
    1,323
    
    
    
    1,191Policyholder dividends and interest
on claims and deposits
    
    
    239
    
    
    
    316
    
    
    
    774
    
    
    
    9473,042
    
    
    
    3,619
    
    
    
    9,709
    
    
    
    10,042Net transfers to segregated funds
    
    
    84
    
    
    
    190
    
    
    
    447
    
    
    
    309Increase
(decrease) in actuarial liabilities (Note 6)
    
    
    572
    
    
    
    (269
    )
    
    
    963
    
    
    
    1,051Commissions
    
    
    478
    
    
    
    476
    
    
    
    1,453
    
    
    
    1,391Operating expenses
    
    
    663
    
    
    
    670
    
    
    
    2,085
    
    
    
    2,045Premium taxes
    
    
    44
    
    
    
    39
    
    
    
    135
    
    
    
    128Interest expense
    
    
    47
    
    
    
    54
    
    
    
    140
    
    
    
    1624,930
    
    
    
    4,779
    
    
    
    14,932
    
    
    
    15,128Income Before Income Taxes and
Non-Controlling Interests
    
    
    460
    
    
    
    503
    
    
    
    1,547
    
    
    
    1,491Income taxes
    
    
    1
    
    
    
    87
    
    
    
    236
    
    
    
    325Non-controlling interests in net income of subsidiaries
    
    
    20
    
    
    
    21
    
    
    
    59
    
    
    
    60Total Net Income
    
    
    439
    
    
    
    395
    
    
    
    1,252
    
    
    
    1,106Less participating policyholders net income
    
    
    
    
    
    
    1
    
    
    
    9
    
    
    
    3Shareholders Net Income
    
    $
    439
    
    
    $
    394
    
    
    $
    1,243
    
    
    $
    1,103Average exchange rates:U.S. Dollars
    
    
    1.31
    
    
    
    1.38
    
    
    
    1.33
    
    
    
    1.43U.K. Pounds
    
    
    2.38
    
    
    
    2.22
    
    
    
    2.42
    
    
    
    2.30Basic earnings per share (Note 4)
    
    $
    0.73
    
    
    $
    0.65
    
    
    $
    2.07
    
    
    $
    1.81Diluted earnings per share (Note 4)
    
    $
    0.73
    
    
    $
    0.65
    
    
    $
    2.06
    
    
    $
    1.81
 The attached notes form part of these interim consolidated financial statements. 10   Sun Life
Financial Inc. / Third Quarter 2004




---



##### 



Interim Consolidated Financial Statements Consolidated Balance Sheets As atSeptember 30
    
    
    
    December 31
    
    
    
    September 30(unaudited, in millions of Canadian dollars)
    
    2004
    
    
    2003
    
    
    2003AssetsBonds
    
    $
    66,151
    
    
    $
    66,090
    
    
    $
    66,561Mortgages
    
    
    13,968
    
    
    
    13,601
    
    
    
    13,602Stocks
    
    
    3,640
    
    
    
    3,473
    
    
    
    3,354Real estate
    
    
    3,157
    
    
    
    3,067
    
    
    
    3,077Cash, cash equivalents and short-term securities
    
    
    5,935
    
    
    
    4,972
    
    
    
    5,713Policy loans and other invested assets
    
    
    6,033
    
    
    
    5,973
    
    
    
    6,002Invested assets
    
    
    98,884
    
    
    
    97,176
    
    
    
    98,309Goodwill
    
    
    5,575
    
    
    
    5,573
    
    
    
    5,656Other assets
    
    
    6,578
    
    
    
    6,460
    
    
    
    6,686Total general fund assets
    
    $
    111,037
    
    
    $
    109,209
    
    
    $
    110,651Segregated funds net assets
    
    $
    55,054
    
    
    $
    54,086
    
    
    $
    51,362Liabilities and EquityActuarial liabilities and other policy liabilities (Note 6)
    
    $
    77,835
    
    
    $
    77,354
    
    
    $
    78,363Amounts on deposit
    
    
    3,147
    
    
    
    3,120
    
    
    
    3,089Deferred net realized gains
    
    
    3,348
    
    
    
    3,124
    
    
    
    3,162Other liabilities
    
    
    8,225
    
    
    
    7,795
    
    
    
    7,978Total general fund liabilities
    
    
    92,555
    
    
    
    91,393
    
    
    
    92,592Subordinated debt
    
    
    2,497
    
    
    
    2,504
    
    
    
    2,551Non-controlling interests in subsidiaries
    
    
    1,334
    
    
    
    1,336
    
    
    
    1,346Total equity
    
    
    14,651
    
    
    
    13,976
    
    
    
    14,162Total general fund liabilities and equity
    
    $
    111,037
    
    
    $
    109,209
    
    
    $
    110,651Segregated funds contract liabilities
    
    $
    55,054
    
    
    $
    54,086
    
    
    $
    51,362Exchange rate at balance sheet date:U.S. Dollars
    
    
    1.28
    
    
    
    1.29
    
    
    
    1.35U.K. Pounds
    
    
    2.30
    
    
    
    2.30
    
    
    
    2.24
 The attached notes form part of these interim consolidated financial statements.  Approved on behalf of the Board of Directors -s- Donald A. Stewart Donald A. Stewart
Chief Executive Officer  -s- Ronald W. Osborne Ronald W. Osborne
Director www.sunlife.com   11




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##### 



Interim Consolidated Financial Statements Consolidated Statements of Equity For the nine months endedParticipating
    
    
    
    
    
    
    September 30
    
    
    September 30(unaudited, in millions of Canadian dollars)
    
    Policyholders
    
    
    Shareholders
    
    
    2004
    
    
    2003Share CapitalBalance, beginning of period
    
    $
    
    
    
    $
    7,289
    
    
    $
    7,289
    
    
    $
    7,420Common shares issued, net of issuance costs
as consideration for business acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63Stock options exercised
    
    
    
    
    
    
    54
    
    
    
    54
    
    
    
    19Common shares purchased for cancellation (Note 3)
    
    
    
    
    
    
    (62
    )
    
    
    (62
    )
    
    
    (193
    )Balance, end of period
    
    
    
    
    
    
    7,281
    
    
    
    7,281
    
    
    
    7,309Contributed SurplusBalance, beginning of period
    
    
    
    
    
    
    76
    
    
    
    76
    
    
    
    57Stock option compensation
    
    
    
    
    
    
    11
    
    
    
    11
    
    
    
    24Stock options exercised
    
    
    
    
    
    
    (13
    )
    
    
    (13
    )
    
    
    (5
    )Balance, end of period
    
    
    
    
    
    
    74
    
    
    
    74
    
    
    
    76Retained EarningsBalance, beginning of period
    
    
    72
    
    
    
    7,212
    
    
    
    7,284
    
    
    
    6,694Net income
    
    
    9
    
    
    
    1,243
    
    
    
    1,252
    
    
    
    1,106Dividends on common shares
    
    
    
    
    
    
    (384
    )
    
    
    (384
    )
    
    
    (311
    )Common shares purchased for cancellation (Note 3)
    
    
    
    
    
    
    (123
    )
    
    
    (123
    )
    
    
    (259
    )Balance, end of period
    
    
    81
    
    
    
    7,948
    
    
    
    8,029
    
    
    
    7,230Currency Translation AccountBalance, beginning of period
    
    
    (5
    )
    
    
    (668
    )
    
    
    (673
    )
    
    
    738Changes for the period
    
    
    (1
    )
    
    
    (59
    )
    
    
    (60
    )
    
    
    (1,191
    )Balance, end of period
    
    
    (6
    )
    
    
    (727
    )
    
    
    (733
    )
    
    
    (453
    )Total equity
    
    $
    75
    
    
    $
    14,576
    
    
    $
    14,651
    
    
    $
    14,162
 The attached notes form part of these interim consolidated financial statements. 12   Sun Life
Financial Inc. / Third Quarter 2004




---



##### 



Interim Consolidated Financial Statements Condensed Consolidated Statements of Cash Flows For the three months ended
    
    For the nine months endedSeptember 30
    
    
    
    September 30
    
    
    
    September 30
    
    
    
    September 30(unaudited, in millions of Canadian dollars)
    
    2004
    
    
    2003
    
    
    2004
    
    
    2003Cash Flows Provided by (Used in)
Operating ActivitiesTotal net income
    
    $
    439
    
    
    $
    395
    
    
    $
    1,252
    
    
    $
    1,106New mutual fund business acquisition
costs capitalized
    
    
    (23
    )
    
    
    (32
    )
    
    
    (74
    )
    
    
    (119
    )Redemption fees of mutual funds
    
    
    16
    
    
    
    16
    
    
    
    51
    
    
    
    56Items not affecting cash
    
    
    239
    
    
    
    (446
    )
    
    
    945
    
    
    
    1,141Net cash provided by (used in) operating activities
    
    
    671
    
    
    
    (67
    )
    
    
    2,174
    
    
    
    2,184Cash Flows Provided by (Used in)
Financing ActivitiesBorrowed funds
    
    
    29
    
    
    
    (37
    )
    
    
    23
    
    
    
    28Redemption
of subordinated debt (Note 9)
    
    
    
    
    
    
    (189
    )
    
    
    
    
    
    
    (189
    )Issuance of common shares on exercise
of stock options
    
    
    6
    
    
    
    11
    
    
    
    41
    
    
    
    14Common shares purchased
for cancellation (Note 3)
    
    
    (128
    )
    
    
    (135
    )
    
    
    (185
    )
    
    
    (452
    )Dividends paid on common shares
    
    
    (132
    )
    
    
    (103
    )
    
    
    (384
    )
    
    
    (311
    )Net cash provided by (used in) financing activities
    
    
    (225
    )
    
    
    (453
    )
    
    
    (505
    )
    
    
    (910
    )Cash Flows Provided by (Used in)
Investing ActivitiesSales, maturities and repayments of bonds,
mortgages, stocks and real estate
    
    
    7,880
    
    
    
    12,897
    
    
    
    29,552
    
    
    
    31,809Purchases of bonds, mortgages,
stocks and real estate
    
    
    (8,725
    )
    
    
    (13,249
    )
    
    
    (30,212
    )
    
    
    (34,297
    )Policy loans
    
    
    (6
    )
    
    
    (7
    )
    
    
    (7
    )
    
    
    (69
    )Short-term securities
    
    
    18
    
    
    
    1,307
    
    
    
    (981
    )
    
    
    1,535Other investments
    
    
    24
    
    
    
    85
    
    
    
    3
    
    
    
    57Net cash provided by (used in) investing activities
    
    
    (809
    )
    
    
    1,033
    
    
    
    (1,645
    )
    
    
    (965
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273Changes due to fluctuations in exchange rates
    
    
    (83
    )
    
    
    36
    
    
    
    (18
    )
    
    
    (382
    )Increase (decrease) in cash and cash equivalents
    
    
    (446
    )
    
    
    549
    
    
    
    6
    
    
    
    200Cash and cash equivalents, beginning of period
    
    
    3,630
    
    
    
    3,807
    
    
    
    3,178
    
    
    
    4,156Cash and cash equivalents, end of period
    
    
    3,184
    
    
    
    4,356
    
    
    
    3,184
    
    
    
    4,356Short-term securities, end of period
    
    
    2,751
    
    
    
    1,357
    
    
    
    2,751
    
    
    
    1,357Cash, cash equivalents and
short-term securities, end of period
    
    $
    5,935
    
    
    $
    5,713
    
    
    $
    5,935
    
    
    $
    5,713Supplementary InformationCash and cash equivalents:Cash
    
    
    
    
    
    
    
    
    
    $
    258
    
    
    $
    395Cash equivalents
    
    
    
    
    
    
    
    
    
    
    2,926
    
    
    
    3,961$
    3,184
    
    
    $
    4,356Cash disbursements made for:Interest on borrowed funds and subordinated debt
    
    $
    1
    
    
    $
    9
    
    
    $
    95
    
    
    $
    116Income taxes, net of refunds
    
    $
    75
    
    
    $
    30
    
    
    $
    191
    
    
    $
    80
 The attached notes form part
of these financial statements. www.sunlife.com     13




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##### 



Interim Consolidated Financial Statements Consolidated Statements of Changes in Segregated Funds Net Assets For the three months ended
    
    For the nine months endedSeptember 30
    
    
    September 30
    
    
    September 30
    
    
    September 30(unaudited, in millions of Canadian dollars)
    
    2004
    
    
    2003
    
    
    2004
    
    
    2003Additions to Segregated FundsDeposits:Annuities
    
    $
    1,191
    
    
    $
    1,443
    
    
    $
    4,567
    
    
    $
    3,909Life insurance
    
    
    777
    
    
    
    83
    
    
    
    1,086
    
    
    
    3121,968
    
    
    
    1,526
    
    
    
    5,653
    
    
    
    4,221Net transfers from general funds
    
    
    84
    
    
    
    190
    
    
    
    447
    
    
    
    309Net realized and unrealized gains (losses)
    
    
    (314
    )
    
    
    1,216
    
    
    
    940
    
    
    
    3,251Other investment income
    
    
    246
    
    
    
    231
    
    
    
    921
    
    
    
    9751,984
    
    
    
    3,163
    
    
    
    7,961
    
    
    
    8,756Deductions from Segregated FundsPayments to policyholders and their beneficiaries
    
    
    2,583
    
    
    
    1,478
    
    
    
    6,220
    
    
    
    4,987Management fees
    
    
    155
    
    
    
    140
    
    
    
    466
    
    
    
    410Taxes and other expenses
    
    
    29
    
    
    
    65
    
    
    
    89
    
    
    
    123Effect of changes in currency exchange rates
    
    
    1,761
    
    
    
    (136
    )
    
    
    218
    
    
    
    4,6294,528
    
    
    
    1,547
    
    
    
    6,993
    
    
    
    10,149Net additions (reductions) to segregated fundsfor the period
    
    
    (2,544
    )
    
    
    1,616
    
    
    
    968
    
    
    
    (1,393
    )Segregated funds net assets, beginning of period
    
    
    57,598
    
    
    
    49,746
    
    
    
    54,086
    
    
    
    52,755Segregated funds net assets, end of period
    
    $
    55,054
    
    
    $
    51,362
    
    
    $
    55,054
    
    
    $
    51,362
 Consolidated Statements of Segregated Funds Net Assets As AtSeptember 30
    
    
    December 31
    
    
    September 30(unaudited, in millions of Canadian dollars)
    
    2004
    
    
    2003
    
    
    2003AssetsSegregated and mutual fund units
    
    $
    42,154
    
    
    $
    40,721
    
    
    $
    38,418Stocks
    
    
    6,792
    
    
    
    7,892
    
    
    
    7,108Bonds
    
    
    5,625
    
    
    
    5,546
    
    
    
    5,763Cash, cash equivalents and short-term securities
    
    
    1,396
    
    
    
    686
    
    
    
    1,077Real estate
    
    
    153
    
    
    
    148
    
    
    
    132Mortgages
    
    
    67
    
    
    
    78
    
    
    
    118Other assets
    
    
    1,764
    
    
    
    580
    
    
    
    1,36557,951
    
    
    
    55,651
    
    
    
    53,981Liabilities
    
    
    2,897
    
    
    
    1,565
    
    
    
    2,619Net assets attributable to segregated funds policyholders
    
    $
    55,054
    
    
    $
    54,086
    
    
    $
    51,362
 The attached notes form part of these interim consolidated financial statements. 14     Sun Life Financial Inc. / Third Quarter 2004




---



##### 



Condensed Notes to the Interim Consolidated Financial Statements  1.    Basis of Presentation Sun Life Financial Inc. together with all its subsidiaries, including its
wholly-owned consolidated subsidiary Sun Life Assurance Company of Canada (Sun
Life Assurance), are collectively referred to as Sun Life Financial or the
Company. The Company prepares its interim consolidated financial statements
according to Canadian generally accepted accounting principles (GAAP). The
accounting policies and methods of computation applied in these interim
consolidated financial statements are the same as those applied in the 2003
annual consolidated financial statements, except as described in Note 2. The
interim consolidated financial statements should be read in conjunction with
the most recent annual consolidated financial statements, as they do not
include all information and notes required by GAAP for annual consolidated
financial statements. 2.    Changes in Accounting Policies Hedging Relationships:The Company adopted Hedging Relationships, Canadian
Institute of Chartered Accountants (CICA) Handbook Accounting Guideline 13,
effective January 1, 2004, on a prospective basis. This Accounting Guideline
requires that all conditions with respect to identification, documentation,
designation and effectiveness of hedges be satisfied before companies choose to
use hedge accounting. These conditions are applicable to hedges existing on or
after January 1, 2004. Certain derivatives that were considered to be part of a
hedging relationship, including the options that hedge the Guaranteed Minimum
Death Benefit (GMDB) products, did not qualify for hedge accounting under the
new requirements in Accounting Guideline 13 as described in Note 2 of the 2003
annual consolidated financial statements. As a result, these derivatives are
reported in other invested assets on the interim consolidated balance sheets at
their fair values effective January 1, 2004. The resulting transitional gain of
$46 as at January 1, 2004, was deferred in other liabilities on the interim
consolidated balance sheet and will be recognized in income in the same period
as the original hedged items. Increases or decreases in the fair values of
these derivatives subsequent to January 1, 2004, are reported in net investment
income in the interim consolidated statements of operations. This change in
accounting policy did not have a material impact on these interim consolidated
financial statements. Generally Accepted Accounting Principles:The Company adopted Generally
Accepted Accounting Principles, CICA Handbook Section 1100, on January 1, 2004.
This standard establishes standards for financial reporting in accordance with
GAAP, and provides guidance on sources to consult when selecting accounting
policies and determining appropriate disclosures when a matter is not dealt
with explicitly in the primary sources of GAAP. While the Company is continuing
to assess the implications of this section on its consolidated financial
statements, the changes identified to date have not had a material effect on
these interim consolidated financial statements. Employee Future Benefits:In January 2004, CICA Handbook Section 3461, Employee
Future Benefits (CICA 3461R) was amended to require additional annual disclosure
about the assets and cash flows and additional interim disclosure of the net
periodic benefit cost of defined benefit pension plans and other post-retirement
benefit plans. The new annual disclosures are effective for years ending on or
after June 30, 2004, and the new interim disclosures are effective for periods
ending on or after that date. The additional interim period disclosures of the
Companys pension and other post-retirement benefit plans are provided in Note
7. 3.    Normal Course Issuer Bid and Cancellation of Common Shares On January 8, 2004, the Company announced that the Board of Directors had
authorized the purchase of up to 30 million common shares, representing
approximately 5% of the common shares issued and outstanding at that time. The
purchases will be made under a normal course issuer bid pursuant to the rules
of the Toronto Stock Exchange (Exchange). This normal course issuer bid covers
the period from January 12, 2004 to January 11, 2005, unless the maximum number
of common shares is purchased before January 11, 2005. Transactions were and
will be executed on the Exchange at the prevailing market price in amounts and
times determined by the Company. The Company will make no purchases of common
shares other than open-market purchases. The shares purchased as part of the
normal course issuer bid are cancelled following purchases. In the first three
quarters of 2004, the Company purchased approximately 5 million of its common
shares at an average price of $36.66 per share for a total amount of $185. Of
this amount, purchases of approximately $4 were not cancelled until October
2004. Approximately 3 million of the common share purchases occurred during the
current quarter at an average price of $36.39 per share for a total amount of
$128. An additional $7 were subscribed for but not settled at September 30,
2004. www.sunlife.com     15




---



##### 



Condensed Notes to the Interim Consolidated Financial Statements 4.  Earnings Per Share For the three months ended
    
    For the nine months endedSeptember 30
    
    
    September 30
    
    
    September 30
    
    
    September 302004
    
    
    2003
    
    
    2004
    
    
    2003Basic Earnings Per ShareShareholders net income
    
    $
    439
    
    
    $
    394
    
    
    $
    1,243
    
    
    $
    1,103Weighted average number of shares
outstanding (in millions)
    
    
    599
    
    
    
    603
    
    
    
    600
    
    
    
    610Basic earnings per share
    
    $
    0.73
    
    
    $
    0.65
    
    
    $
    2.07
    
    
    $
    1.81Diluted Earnings Per ShareShareholders net income
    
    $
    439
    
    
    $
    394
    
    
    $
    1,243
    
    
    $
    1,103Less: Effect of stock options of subsidiaries(1)
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    1Shareholders net income on a diluted basis
    
    $
    438
    
    
    $
    394
    
    
    $
    1,242
    
    
    $
    1,102Weighted average number of shares
outstanding on a diluted basis (in millions)(1)
    
    
    601
    
    
    
    603
    
    
    
    603
    
    
    
    610Diluted earnings per share
    
    $
    0.73
    
    
    $
    0.65
    
    
    $
    2.06
    
    
    $
    1.81
  (1)
    
    The effect of stock options is calculated based on the treasury stock
method requirements which assume that any proceeds from the exercise of the
options would be used to purchase common shares at the average market prices
during the period. 5.  Segmented Information The Company has six reportable segments: SLF Canada, SLF United States, MFS
Investment Management (MFS), SLF Asia, SLF United Kingdom and Corporate
Capital. These reportable segments reflect the Companys management structure
and internal financial reporting. Each of these segments operates in the
financial services industry and has its own management. They derive their
revenues principally from mutual funds, investment management and annuities,
life and health insurance, life retrocession and financial reinsurance.
Revenues not attributed to the strategic business units are derived primarily
from investments of a corporate nature and earnings on capital. Corporate Capital includes the run-off reinsurance operations and those other
operations for which management responsibility resides in head office. Net
income (loss) in this category is shown net of certain expenses borne
centrally. Inter-segment transactions consist primarily of internal financing agreements.
They are measured at market values prevailing when the arrangements were
negotiated. Inter-segment revenue for the three and nine months ended September
30, 2004 consists of interest of $81 and $253, respectively ($85 and $270,
respectively, in 2003) and fee income of $11 and $34, respectively ($11 and
$34, respectively, in 2003). The results for the nine months ended September 30, 2004 for MFS include the
$59 net provision for regulatory issues as described in Note 8. Results by segment for the three months ended September 30, 2004United States
    
    
    
    
    
    United
    
    
    Corporate
    
    
    ConsolidationCanada
    
    
    Sun Life
    
    
    MFS
    
    
    Asia
    
    
    Kingdom
    
    
    Capital
    
    
    Adjustments
    
    
    TotalRevenue
    
    $
    2,081
    
    
    $
    2,399
    
    
    $
    414
    
    
    $
    175
    
    
    $
    316
    
    
    $
    97
    
    
    $
    (92
    )
    
    $
    5,390Total net income
(loss)
    
    $
    242
    
    
    $
    92
    
    
    $
    42
    
    
    $
    10
    
    
    $
    39
    
    
    $
    14
    
    
    $
    
    
    
    $
    439
 Results by segment for the three months ended September 30, 2003United States
    
    
    
    
    
    United
    
    
    Corporate
    
    
    ConsolidationCanada
    
    
    Sun Life
    
    
    MFS
    
    
    Asia
    
    
    Kingdom
    
    
    Capital
    
    
    Adjustments
    
    
    TotalRevenue
    
    $
    2,109
    
    
    $
    2,239
    
    
    $
    437
    
    
    $
    144
    
    
    $
    342
    
    
    $
    107
    
    
    $
    (96
    )
    
    $
    5,282Total net income
(loss)
    
    $
    207
    
    
    $
    97
    
    
    $
    49
    
    
    $
    11
    
    
    $
    63
    
    
    $
    (32
    )
    
    $
    
    
    
    $
    395
 16     Sun Life Financial Inc. / Third Quarter 2004




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##### 



Condensed Notes to the Interim Consolidated Financial Statements 5.  Segmented Information (Contd) Results and assets by segment for the nine months ended September 30, 2004United States
    
    
    
    
    
    United
    
    
    Corporate
    
    
    ConsolidationCanada
    
    
    Sun Life
    
    
    MFS
    
    
    Asia
    
    
    Kingdom
    
    
    Capital
    
    
    Adjustments
    
    
    TotalRevenue
    
    $
    6,481
    
    
    $
    7,201
    
    
    $
    1,298
    
    
    $
    474
    
    
    $
    975
    
    
    $
    337
    
    
    $
    (287
    )
    
    $
    16,479Total net income
(loss)
    
    $
    725
    
    
    $
    299
    
    
    $
    70
    
    
    $
    27
    
    
    $
    128
    
    
    $
    3
    
    
    $
    
    
    
    $
    1,252ASSETSGeneral fund assets
    
    $
    52,048
    
    
    $
    41,580
    
    
    $
    861
    
    
    $
    2,219
    
    
    $
    10,160
    
    
    $
    4,964
    
    
    $
    (795
    )
    
    $
    111,037Segregated funds
net assets
    
    $
    22,909
    
    
    $
    25,220
    
    
    $
    
    
    
    $
    24
    
    
    $
    6,901
    
    
    $
    
    
    
    $
    
    
    
    $
    55,054Other assets under
management
    
    $
    28,353
    
    
    $
    2,581
    
    
    $
    171,430
    
    
    $
    105
    
    
    $
    
    
    
    $
    
    
    
    $
    (13,169
    )
    
    $
    189,300
 Results and assets by segment for the nine months ended September 30, 2003United States
    
    
    
    
    
    United
    
    
    Corporate
    
    
    ConsolidationCanada
    
    
    Sun Life
    
    
    MFS
    
    
    Asia
    
    
    Kingdom
    
    
    Capital
    
    
    Adjustments
    
    
    TotalRevenue
    
    $
    6,371
    
    
    $
    7,486
    
    
    $
    1,256
    
    
    $
    429
    
    
    $
    1,116
    
    
    $
    265
    
    
    $
    (304
    )
    
    $
    16,619Total net income
(loss)
    
    $
    611
    
    
    $
    214
    
    
    $
    119
    
    
    $
    24
    
    
    $
    156
    
    
    $
    (18
    )
    
    $
    
    
    
    $
    1,106ASSETSGeneral fund assets
    
    $
    50,882
    
    
    $
    42,180
    
    
    $
    1,115
    
    
    $
    2,037
    
    
    $
    10,401
    
    
    $
    4,428
    
    
    $
    (392
    )
    
    $
    110,651Segregated funds
net assets
    
    $
    20,778
    
    
    $
    24,074
    
    
    $
    
    
    
    $
    7
    
    
    $
    6,503
    
    
    $
    
    
    
    $
    
    
    
    $
    51,362Other assets under
management
    
    $
    23,669
    
    
    $
    2,900
    
    
    $
    173,817
    
    
    $
    95
    
    
    $
    
    
    
    $
    
    
    
    $
    (14,013
    )
    
    $
    186,468
 6.  Changes in Actuarial Liabilities Changes in actuarial liabilities for the nine months ended September 30, 2004
and September 30, 2003 are as follows: 2004
    
    
    2003Actuarial liabilities, January 1
    
    $
    75,124
    
    
    $
    87,165Normal increase in liabilities from new policies and in-force business
    
    
    963
    
    
    
    1,045Significant changes in assumptions and methodology:Gross increases
    
    
    
    
    
    
    143Gross decreases
    
    
    
    
    
    
    (137
    )Increase in actuarial liabilities
    
    
    963
    
    
    
    1,051Changes in intrinsic value of options that hedge the GMDB(1)
    
    
    
    
    
    
    (203
    )Dispositions
    
    
    
    
    
    
    (4,683
    )Other
    
    
    (73
    )
    
    
    (368
    )Effect of changes in currency exchange rates
    
    
    (325
    )
    
    
    (6,991
    )Actuarial liabilities, September 30
    
    
    75,689
    
    
    
    75,971Add: other policy liabilities
    
    
    2,146
    
    
    
    2,392Actuarial liabilities and other policy liabilities, September 30
    
    $
    77,835
    
    
    $
    78,363
 (1)
    
    The changes in intrinsic value of the options that hedge GMDB products
were included in the increase in actuarial liabilities in the interim
consolidated statements of operations and other invested assets in the interim
consolidated balance sheets for 2003. In 2004, these options no longer qualify
for hedge accounting as per CICA Handbook Accounting Guideline 13, as described
in Note 2. 7.  Pension Plans and Other Post-Retirement Benefits For the three months ended
    
    For the nine months endedSeptember 30
    
    
    September 30
    
    
    September 30
    
    
    September 302004
    
    
    2003
    
    
    2004
    
    
    2003Pension benefit cost
    
    $
    2
    
    
    $
    1
    
    
    $
    7
    
    
    $
    5Other post-retirement benefit cost
    
    $

5
    
    
    $

6
    
    
    $

18
    
    
    $

18
 www.sunlife.com     17




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##### 



Condensed Notes to the Interim Consolidated Financial Statements 8.  Contingencies Reinsurance Matters Certain of the arrangements in the Companys run-off reinsurance operations are
subject to litigation or arbitration. The liabilities of the Company under
these arrangements are subject to measurement uncertainty, but they are not
expected to have a material adverse effect on the consolidated financial
position of the Company. Legal and Regulatory Proceedings The United States Securities and Exchange Commission (SEC) and other regulators
are conducting investigations and examinations of certain of the Companys U.S.
subsidiaries relating to various issues, including market timing and late
trading of mutual funds and variable insurance products, directed brokerage,
revenue-sharing and other arrangements with distributors and recordkeeping
requirements. These subsidiaries are co-operating in these examinations. The
outcome of these investigations is not yet determinable. The Company, MFS and certain of its officers and certain MFS funds and trustees
of these MFS funds, have been named as defendants in purported class action
lawsuits, individual actions or derivative actions filed in the United States
seeking damages of unspecified amounts. The lawsuits were purportedly filed on
behalf of people who purchased, owned and/or redeemed shares of MFS funds
(including variable accounts) during specified periods and participants in
certain retirement plan accounts. The suits generally allege that certain
defendants (i) permitted or acquiesced in market timing and/or late trading in
the MFS funds, inadequately disclosed MFS internal policies concerning market
timing and such matters, and received excessive compensation as fiduciaries to
the MFS funds, or (ii) permitted or acquiesced in the improper use of fund
assets by MFS to support the distribution of fund shares and inadequately
disclosed MFS use of fund assets in this manner, which allegedly caused
financial injury to fund shareholders, or (iii) charged discriminatory and
excessive investment advisory fees, made excess profits from economies of
scale, and made improper use of directed brokerage and soft dollar
arrangements. All of these lawsuits seek an unspecified amount of damages. The
defendants are reviewing the allegations and will respond appropriately.
Additional lawsuits based upon similar allegations may be filed in the future.
The Company cannot predict the outcome of these actions with certainty and is
accordingly unable to determine the total potential impact that they may have
on the Companys results of operations, financial position and cash flows. On March 31, 2004, MFS and the SEC announced that they had reached a settlement
related to an
administrative proceeding alleging that MFS failed to adequately disclose its
brokerage allocation practices in connection with fund sales. Under the terms
of the settlement, in which MFS neither admitted nor denied any wrongdoing, MFS
agreed to pay US one dollar in disgorgement and a US$50 penalty to compensate
certain MFS funds. The Company recorded a $59 net of minority interest charge
to income in the first quarter of 2004 in connection with this settlement. Additional information concerning these and related matters is provided in Note
21 to the Companys 2003 annual consolidated financial statements. Provisions in the United Kingdom The Companys United Kingdom operations continue to be subject to regulatory
overview in the United Kingdom, including the handling of complaints about
mortgage endowments. The Company has regularly engaged in discussions with
United Kingdom regulators with respect to these and other matters. Endowment policies are sometimes sold to provide customers with a method of
repaying mortgage debt at the end of a mortgage term. There can be no assurance
that United Kingdom regulators will not, in the future, require providers of
endowment products to bear some or all of the additional costs required to
ensure that such policies meet their target mortgage debts. The Company has provisions for future costs and expenses relating to all
reviews of past business sold in both actuarial liabilities and in other
liabilities. At September 30, 2004, the combined provision was $96 ($119 in
2003). 9.    Significant Capital Transaction On September 15, 2004, the Company announced its intention to redeem all of its
$250, 5.80% debentures that are due May 15, 2013. These debentures have a
carrying amount of $253. The debentures will be redeemed on November 15, 2004.
Redemption premiums of $17 ($12 net of taxes), were recorded in net investment
income in the third quarter of 2004. 10.  Comparative Figures Certain comparative figures have been restated to conform with the presentation
adopted in 2004. 18     Sun Life Financial Inc. / Third Quarter 2004