Sun Life AGM: Advisors may face worried policyholders

(May 11, 2005) Financial advisors may receive some worried telephone calls from policyholders over the next few weeks as a result of remarks at today’s Sun Life Financial Services annual meeting.

In one of his 10 proposals, all of them rejected, shareholder activist Robert Verdun alleged that the Office of the Superintendent of Financial Institutions has started investigating Sun Life’s interpretation of the setting of dividends on participating policies issued by Clarica Life Insurance Company and Clarica’s predecessor company, Mutual Life Assurance Company of Canada. Sun Life took over Clarica in 2002.

“I can tell you beyond a shadow of a doubt that the Clarica policies are not being properly handled by this company,” Verdun told the meeting Verdun said. He referred to existing guarantees of dividends provided for Clarica policyholders before de-mutualization.

“You’re in trouble with the Clarica policies,” he said.

Responding to a question from Advisor.ca during a press briefing following the meeting, Sun Life CEO Donald Stewart dismissed Verdun’s claims. “We don’t believe that the premise on which the question [by Verdun] was based, which is that there was some original guarantee in the original demutualization documents of Mutual Life Assurance Company of Canada — we don’t believe that to be a correct premise,” he said.

Stewart also stated that there is no OSFI investigation the company’s treatment of Clarica policyholders. “Absolutely not to our knowledge,” he said.

The company also wants to upgrade many of the advisors in its distribution system, Stewart said. “In Canada, the focus is on advisor productivity and [the company plans] to raise what we call the proportion of Level 3 advisors,” he said, referring to the top producers’ group in the career agency sales force acquired as part of the takeover of Clarica in 2002.

Sun Life wants to increase the total number of Level 3 advisors by year end, Stewart noted, while not planning any significant change in total numbers overall beyond the current 3,700 to 3,800 individuals. “What we’re thinking of more is as people graduate to Level 3 advisors, as opposed to adding [new agents] at the front end, make sure that the people we have on board or in the pipeline make it to this magic point [Level 3] where, instead of just adding people who have one year or less of experience, we are able to build up the people we already have on the advisor team and get them to be more productive so that they can be more successful.”

The company believes that productivity increases will flow from training, technology tools, improved underwriting and service. The result, Stewart said, would be reduced administrative burdens for advisors.

Meanwhile, the Sun Life shareholders will feel cheered by the company’s record profits and other figures reviewed by Stewart during the meeting, as earnings per share grew by 16% from $2.50 to $2.91, a figure that Stewart said would have been higher in the absence of the stronger Canadian dollar.

“The stronger Canadian currency cost us 8 cents per share, excluding which earnings per share would have been up an impressive 20%,” he said. Return on equity rose by 140 basis points to 12.0%, while net impaired assets decreased from $333 million at the end of 2003 to $178 million.

The company expects to decrease provision for losses this year, meaning a boost for earnings, reported Stewart. Sun Life also has capital on hand of more than $2 billion in excess of regulatory requirements and can use the funds for dividends and acquisitions.

Al Emid is a freelance writer based in Toronto.

(05/11/05)