##### 



MANAGEMENTS DISCUSSION & ANALYSIS
 
 
 Earnings and Profitability
 FINANCIAL SUMMARY
 (Unaudited)
    
    Quarterly Results
    
    
    Year to DateQ205
    
    

Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues ($ millions)
    
    
    6,026
    
    
    
    5,119
    
    
    
    5,269
    
    
    
    5,390
    
    
    
    5,551
    
    
    
    11,145
    
    
    
    11,089Common Shareholders Net Income ($ millions)
    
    
    477
    
    
    
    458
    
    
    
    438
    
    
    
    439
    
    
    
    438
    
    
    
    935
    
    
    
    803Operating
Earnings(1)($ millions)
    
    
    477
    
    
    
    458
    
    
    
    438
    
    
    
    439
    
    
    
    438
    
    
    
    935
    
    
    
    862Earnings Per Common Share (EPS) ($)
    
    
    0.81
    
    
    
    0.77
    
    
    
    0.74
    
    
    
    0.73
    
    
    
    0.73
    
    
    
    1.58
    
    
    
    1.34Operating
EPS(1)($)
    
    
    0.81
    
    
    
    0.77
    
    
    
    0.74
    
    
    
    0.73
    
    
    
    0.73
    
    
    
    1.58
    
    
    
    1.44Fully diluted operating EPS(1)($)
    
    
    0.81
    
    
    
    0.77
    
    
    
    0.73
    
    
    
    0.73
    
    
    
    0.72
    
    
    
    1.57
    
    
    
    1.42Return on Common Equity (ROE) (%)
    
    
    13.0
    
    
    
    12.6
    
    
    
    12.1
    
    
    
    11.9
    
    
    
    12.0
    
    
    
    12.8
    
    
    
    11.2Operating ROE(1)(%)
    
    
    13.0
    
    
    
    12.6
    
    
    
    12.1
    
    
    
    11.9
    
    
    
    12.0
    
    
    
    12.8
    
    
    
    12.0Average Common Shares Outstanding (millions)
    
    
    587.4
    
    
    
    591.8
    
    
    
    595.2
    
    
    
    598.7
    
    
    
    600.7
    
    
    
    589.6
    
    
    
    600.4S&P 500 Index (daily average)
    
    
    1,181
    
    
    
    1,192
    
    
    
    1,162
    
    
    
    1,104
    
    
    
    1,123
    
    
    
    1,187
    
    
    
    1,128S&P 500 Index (close)
    
    
    1,191
    
    
    
    1,181
    
    
    
    1,212
    
    
    
    1,115
    
    
    
    1,141
    
    
    
    1,191
    
    
    
    1,141
 Certain comparative figures have been restated to conform with the presentation adopted in
the first quarter of 2005.
 (2)
 (1)
  Performance by Business Group
  (1)
    
    See Use of Non-GAAP Financial Measures. As previously disclosed, common
shareholders net income in the first quarter of 2004 included regulatory charges against
MFS.(2)
    
    Or together with its subsidiaries and joint ventures the Company or Sun Life
Financial.
 3




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##### 



SLF CANADA
 Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues ($ millions)
    
    
    2,104
    
    
    
    2,146
    
    
    
    2,029
    
    
    
    1,960
    
    
    
    2,032
    
    
    
    4,250
    
    
    
    4,173Premiums & Deposits ($ millions)
    
    
    3,800
    
    
    
    5,412
    
    
    
    3,900
    
    
    
    3,942
    
    
    
    4,350
    
    
    
    9,212
    
    
    
    8,914Common Shareholders Net Income ($ millions)Individual Insurance & Investments
    
    
    145
    
    
    
    168
    
    
    
    126
    
    
    
    121
    
    
    
    139
    
    
    
    313
    
    
    
    264Group Benefits
    
    
    54
    
    
    
    38
    
    
    
    63
    
    
    
    66
    
    
    
    47
    
    
    
    92
    
    
    
    123Group Retirement Services & Institutional Investments
    
    
    37
    
    
    
    39
    
    
    
    35
    
    
    
    34
    
    
    
    34
    
    
    
    76
    
    
    
    63Total
    
    
    236
    
    
    
    245
    
    
    
    224
    
    
    
    221
    
    
    
    220
    
    
    
    481
    
    
    
    450ROE (%)
    
    
    14.2
    
    
    
    14.8
    
    
    
    13.7
    
    
    
    13.4
    
    
    
    13.2
    
    
    
    14.5
    
    
    
    13.5
    
    
    Individual Insurance & Investments earnings increased 4% over the second quarter of
2004 due to favourable mortality experience, favourable credit experience and increased
earnings from the investment in CI Financial Inc.
    
    Improved mortality and morbidity experience contributed to the 15% earnings growth in
Group Benefits over the second quarter of 2004.
    
    The 9% increase in Group Retirement Services & Institutional Investments earnings
over the second quarter of 2004 was driven by higher AUM, higher
fee income and favourable credit experience.
 SLF U.S.
 Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues (US$ millions)
    
    
    2,281
    
    
    
    1,539
    
    
    
    1,825
    
    
    
    1,832
    
    
    
    1,807
    
    
    
    3,820
    
    
    
    3,588Revenues (C$ millions)
    
    
    2,835
    
    
    
    1,889
    
    
    
    2,228
    
    
    
    2,399
    
    
    
    2,453
    
    
    
    4,724
    
    
    
    4,802Common Shareholders Net Income (US$ millions)Annuities
    
    
    72
    
    
    
    34
    
    
    
    45
    
    
    
    44
    
    
    
    33
    
    
    
    106
    
    
    
    95Individual Life
    
    
    20
    
    
    
    25
    
    
    
    19
    
    
    
    19
    
    
    
    33
    
    
    
    45
    
    
    
    43Group Life & Health
    
    
    15
    
    
    
    6
    
    
    
    12
    
    
    
    7
    
    
    
    14
    
    
    
    21
    
    
    
    16Total (US$ millions)
    
    
    107
    
    
    
    65
    
    
    
    76
    
    
    
    70
    
    
    
    80
    
    
    
    172
    
    
    
    154Total (C$ millions)
    
    
    132
    
    
    
    81
    
    
    
    93
    
    
    
    92
    
    
    
    109
    
    
    
    213
    
    
    
    206ROE (%)
    
    
    13.8
    
    
    
    8.6
    
    
    
    10.5
    
    
    
    9.9
    
    
    
    11.2
    
    
    
    11.2
    
    
    
    10.6
     
    
    Annuities earnings increased US$39 million compared to the second quarter of 2004,
primarily as a result of stronger equity markets, improved spreads, the impact of the
variable annuity economic hedging program in the second quarter of 2005, and reserve
strengthening which negatively affected the second quarter of 2004. The earnings increase
of US$38 million compared to the first quarter of 2005 resulted from stronger equity
markets, improved spreads and the impact of the variable annuity economic hedging program.
 4




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##### 




    
    Individual Life earnings were US$13 million lower in the second quarter of 2005
compared to the second quarter of 2004, primarily due to increased reserves due to lower
interest rates in the second quarter of 2005, which was partially offset by improved
mortality. In addition, the second quarter of 2004 benefited from the implementation of a
hedging program for universal life products.
    
    Group Life & Health earnings increased US$9 million compared to the first quarter of
2005 primarily due to improved claims experience.
  MFS INVESTMENT MANAGEMENT
 Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues (US$ millions)
    
    
    332
    
    
    
    332
    
    
    
    330
    
    
    
    316
    
    
    
    319
    
    
    
    664
    
    
    
    660Revenues (C$ millions)
    
    
    413
    
    
    
    407
    
    
    
    402
    
    
    
    414
    
    
    
    434
    
    
    
    820
    
    
    
    884Common Shareholders Net
Income/(Loss) (US$ millions)
    
    
    34
    
    
    
    37
    
    
    
    36
    
    
    
    32
    
    
    
    30
    
    
    
    71
    
    
    
    20Operating Earnings (US$ millions)
    
    
    34
    
    
    
    37
    
    
    
    36
    
    
    
    32
    
    
    
    30
    
    
    
    71
    
    
    
    65Common Shareholders Net
Income/(Loss) (C$ millions)
    
    
    42
    
    
    
    46
    
    
    
    44
    
    
    
    42
    
    
    
    41
    
    
    
    88
    
    
    
    28Operating Earnings (C$ millions)
    
    
    42
    
    
    
    46
    
    
    
    44
    
    
    
    42
    
    
    
    41
    
    
    
    88
    
    
    
    87Average Net Assets (US$ billions)
    
    
    147
    
    
    
    145
    
    
    
    140
    
    
    
    132
    
    
    
    138
    
    
    
    146
    
    
    
    141Assets Under Management (US$ billions)
    
    
    150
    
    
    
    145
    
    
    
    146
    
    
    
    134
    
    
    
    137
    
    
    
    150
    
    
    
    137Net New Sales/(Redemptions) (US$ billions)
    
    
    3.5
    
    
    
    0.7
    
    
    
    0.1
    
    
    
    (2.5
    )
    
    
    (5.3
    )
    
    
    4.2
    
    
    
    (6.5
    )Market Movement (US$ billions)
    
    
    1.8
    
    
    
    (2.4
    )
    
    
    12.1
    
    
    
    (0.9
    )
    
    
    0.5
    
    
    
    (0.6
    )
    
    
    3.6S&P 500 Index (daily average)
    
    
    1,181
    
    
    
    1,192
    
    
    
    1,162
    
    
    
    1,104
    
    
    
    1,123
    
    
    
    1,187
    
    
    
    1,128
     SLF ASIA
 Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues ($ millions)
    
    
    205
    
    
    
    214
    
    
    
    239
    
    
    
    189
    
    
    
    182
    
    
    
    419
    
    
    
    340Common Shareholders Net
Income ($ millions)
    
    
    19
    
    
    
    6
    
    
    
    18
    
    
    
    10
    
    
    
    10
    
    
    
    25
    
    
    
    17ROE (%)
    
    
    17.6
    
    
    
    5.4
    
    
    
    16.8
    
    
    
    9.3
    
    
    
    9.0
    
    
    
    11.4
    
    
    
    7.6
  5




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##### 



CORPORATE
  Quarterly Results
    
    
    Year to DateQ205
    
    
    Q105
    
    
    Q404
    
    
    Q304
    
    
    Q204
    
    
    2005
    
    
    2004Revenues ($ millions)
    
    
    538
    
    
    
    530
    
    
    
    477
    
    
    
    534
    
    
    
    576
    
    
    
    1,068
    
    
    
    1,126Common Shareholders Net Income/(Loss) ($ millions)SLF U.K.
    
    
    39
    
    
    
    47
    
    
    
    45
    
    
    
    39
    
    
    
    42
    
    
    
    86
    
    
    
    89Reinsurance
    
    
    15
    
    
    
    14
    
    
    
    26
    
    
    
    21
    
    
    
    10
    
    
    
    29
    
    
    
    25Other
    
    
    (6
    )
    
    
    19
    
    
    
    (12
    )
    
    
    14
    
    
    
    6
    
    
    
    13
    
    
    
    (12
    )Total
    
    
    48
    
    
    
    80
    
    
    
    59
    
    
    
    74
    
    
    
    58
    
    
    
    128
    
    
    
    102
    Additional Financial Disclosure
 REVENUE
     6




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##### 



ASSETS UNDER MANAGEMENT
  (i)
    
    an increase of $4.5 billion from market movements,(ii)
    
    net sales of mutual, managed and segregated funds of $4.5 billion, and(iii)
    
    an increase of $1.4 billion due to fluctuation in currency exchange rates.
  (i)
    
    an increase of $19.6 billion from increases in capital markets, and(ii)
    
    $4.9 billion of net sales of mutual, managed and segregated funds, partially offset
by(iii)
    
    $23.9 billion from the strengthening of the Canadian dollar against foreign
currencies.
 CHANGES IN THE BALANCE SHEET AND SHAREHOLDERS EQUITY
        7




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CASH FLOWS
 Quarterly Results
    
    
    Year to Date($ millions)
    
    Q205
    
    
    Q204
    
    
    2005
    
    
    2004Cash and cash equivalents, beginning of period
    
    
    3,961
    
    
    
    3,386
    
    
    
    3,748
    
    
    
    3,175Cash flows provided by (used in):Operating activities
    
    
    1,109
    
    
    
    1,447
    
    
    
    1,900
    
    
    
    1,501Financing activities
    
    
    (425
    )
    
    
    (290
    )
    
    
    (277
    )
    
    
    (280
    )Investing activities
    
    
    (282
    )
    
    
    (971
    )
    
    
    (992
    )
    
    
    (833
    )Changes due to fluctuations in exchange rates
    
    
    (20
    )
    
    
    56
    
    
    
    (36
    )
    
    
    65Increase in cash and cash equivalents
    
    
    382
    
    
    
    242
    
    
    
    595
    
    
    
    453Cash and cash equivalents, end of period
    
    
    4,343
    
    
    
    3,628
    
    
    
    4,343
    
    
    
    3,628Short-term securities, end of period
    
    
    1,892
    
    
    
    2,791
    
    
    
    1,892
    
    
    
    2,791Total cash, cash equivalents and short-term securities
    
    
    6,235
    
    
    
    6,419
    
    
    
    6,235
    
    
    
    6,419
     RISK MANAGEMENT
   OUTLOOK
  8




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REGULATORY MATTERS
  USE OF NON-GAAP FINANCIAL MEASURES
   FORWARD-LOOKING STATEMENTS
    9