Sun Life Financial Inc (SLF) 2015 Q4 法說會逐字稿

Good morning, my name is Chris, and I'll be your conference operator today. At the time, I'd like to welcome everyone to the Sun Life Financial Q4 2015 financial results conference call.

(Operator Instructions)

Thank you. Gregory Dilworth, Vice President Investor Relations, you may begin your conference.

Thank you, Chris, and good morning, everyone. Welcome to Sun Life Financial's earnings conference call for the fourth quarter of 2015. Our earnings release, and the slides for today's call, are available on the investor relations section of our website, at sunlife.com. We will begin today's presentation with an overview of our fourth quarter and full year results by Dean Connor, President and Chief Executive Officer of Sun Life Financial. Colm Freyne, Executive Vice President and Chief Financial Officer, will present the fourth-quarter financial results.

Following Colm's remarks, Steve Peacher, Executive Vice President and President of Sun Life Investment Management, will provide an update on Sun Life's investment portfolio. After the prepared remarks, we will move to the question-and-answer portion of the call. Other members of Management will also be available to answer your questions on today's call. Turning to slide 2, I draw your attention to the cautionary language regarding the use of forward-looking statements and non-IFRS financial measures, which form part of this morning's remarks. As noted in the slides, forward-looking statements may be rendered inaccurate by subsequent events. And with that, I'll turn things over to Dean.

Thanks, Greg, and good morning, everyone. Turning to slide 4, the Company reported strong results for both the fourth quarter and the full year in 2015. Underlying net income for the fourth quarter was CAD646 million, up from CAD360 million in the same period last year, and our underlying return on equity was 13.8%. Underlying net income for the full year was CAD2.3 billion, up 27% from the CAD1.8 billion of underlying net income we reported last year.

Earnings were higher across all four pillars, including a 12% increase in expected profit, and the benefit of currency that comes from our geographically diversified business model. Growth was balanced between wealth and protection, with double-digit earnings growth from each over the same period last year. Insurance sales were CAD2.2 billion of annualized premium, and sales of wealth products totaled CAD123 billion in 2015. Assets under management grew to CAD891 billion.

Over the course of the year, we deployed a substantial amount of capital to drive long term earnings growth and ROE improvement, through both organic and inorganic initiatives. We also increased our quarterly common share dividend by 8%, and repurchased and canceled over 5 million common shares. The value of our four pillar strategy, diversified business mix, de-risking actions and investment in growth, were quite evident in 2015. On the one hand, commodity prices fell, the TSX declined, and interest rates were lower, all creating headwinds for SLF Canada.

On the other hand, our businesses in the US and Asia benefited from stronger economic growth in those markets, and in currencies that appreciated against the Canadian dollar. Turning to slide 5, I'll discuss a few key highlights for the quarter. In Canada, our defined benefit solutions business continued to bring innovative client solutions to the market, with a groundbreaking CAD530 million combined annuity buy-in transaction, the largest group annuity transaction in Canadian history.

Together with the CAD5.3 billion longevity transaction with BCE earlier in 2015, we've established ourselves as the clear leader in the pension de-risking market in Canada. In our individual wealth business, Sun Life Global Investments completed its fifth full year of operations, with 15 out of 17 funds with five-year performance records exceeding the peer median. Retail sales of SLGI mutual funds were CAD383 million in the quarter, an increase of 88% over the same period last year.

And our new suit of segregated fund products Sun Life guaranteed investment funds, generated sales of CAD125 million, representing over 80% of our total seg fund sales for the quarter. In individual insurance, our career sales force grew to 4,100 strong, surpassing our 2015 objective. And Q4 insurance sales reached CAD100 million of new annual premium for the first time. Turning to asset management, Sun Life investment management completed its first full quarter following the completion of the acquisitions made in 2015, generating gross sales of CAD2.2 billion, and ending the year with assets under management of CAD58 billion.

This business has come a long way in just under two years. MFS ended the year with assets under management of $413 billion, and achieved an operating margin of 38% in the fourth quarter, in line with our communicated range. The volatile markets of 2015 once again demonstrated the power of MFS's investment style, which is to focus on asset generation over longer horizons, while managing downside risk for clients.

This strong performance was recognized this past weekend, when Barron's ranked MFS Number 5 out of 67 mutual fund families, in its annual ranking of US asset managers. And not only was MFS ranked Number 5 for 1-year results, but it was ranked Number 1 for 5-year results and Number 2 for 10-year results. This remarkable result is a team effort, and one that speaks to MFS's long term focus and unique culture. Net outflows of $4.7 billion were improved from last quarter, but flows nonetheless continued to be impacted by industry trends, and the prior closing of certain funds to new sales, in order to protect clients' returns.

Turning next to the US, we continued to make good progress in improving the profitability of our group life and disability business, and we see that in the significant improvement in underlying earnings, year over year. Sales in group benefits overall were lower by 9%, reflecting repricing in this business to balance business growth and profitability. With our most recent January 1 renewals, we've now repriced just over half of our group life and disability business, and we're well positioned to begin the integration of Assurant employee benefits business when the transaction closes in the first quarter of 2016.

In December, we ceased sales in our international wealth business, where we were sub-scale, in order to accelerate our efforts on international life insurance, where we have a leading position, serving high net worth clients outside of North America. For global high net worth clients, accessing life insurance solutions that safely and efficiently support estate planning needs is a key priority, and we're committed to growing this business. Moving to Asia, we strengthened our presence in the region this quarter, signing agreements to increase our joint venture ownership positions in India and Vietnam.

These investments are directly on strategy, and support our intent to make Asia a larger part of Sun Life. Overall sales of individual insurance products in Asia were up 11%, reflecting currency, higher agency sales in most markets, and strong growth in health and accident sales. Asian wealth sales were down, primarily in India and China, where we had benefited from higher sales in the fourth quarter of the previous year. On slide 6, I'll make a few remarks on our performance for the year overall.

I'm pleased to report that we've not only delivered, but well exceeded, our Investor Day objective of CAD1.8 billion of net income in 2015, and have achieved a return on equity that was at the top end of the range. We achieved these results in the face of a challenging economic environment, all while strengthening our businesses and continuing to invest in our future growth. In 2015, we committed CAD2.4 billion in capital through six acquisitions, adding both heft and capabilities in asset management, US group benefits, and our Asian pillars.

The investments we've made to drive organic growth also benefited from strong execution in 2015. In Canada, Sun Life global investments delivered CAD1.1 billion of retail net sales for the year, up 75% over prior, and pretty remarkable from a standing start just five years ago. The new seg fund platform was well executed, with CAD259 million of sales since the launch last May. Defined benefit solutions had a fine year, with the large sales that I described a moment ago.

We launched the digital benefits assistant, and more recently, we rolled out something called Max My Money at Work in group retirement. And this is a digital enrollment tool that nudges and helps plan members to take full advantage of their retirement savings at work. In the US, the investments we made in disability management, along with pricing and expense actions, led to significant improvements in the profitability of our group business. And in Asia, we delivered on one of our most ambitious 2015 net income objectives. Underlying earnings in 2015 grew by 45% over the prior year, from growth in our in-force base, a favorable business mix, and the benefit of currency.

We continue to see good progress on our most respected agency initiative, which is being reflected in greater productivity and an increased number of advisors in several markets. We've also executed well on growing higher value, health and accident benefits to be a greater share of our sales. So as we close the books on 2015, I'm proud of what we accomplished in this milestone year of our 150th birthday. We're making real progress in each of the four pillars, and maintaining a strong focus on growing the right businesses in the right markets.

In January of this year, Sun Life was one of 12 Canadian companies, and the only North American life insurer, to be included in the newly launched Standard & Poor's long term value creation global index. The index is comprised of 246 companies globally that have demonstrated a sustained history of financial quality, and a focus on long term strategy, innovation and productivity. We're six weeks into 2016, and volatility and uncertainty permeate the markets.

But the steps we've taken in recent years to de-risk the Company, to shape the four pillar strategy, to acquire strategic assets, and to invest in the right talent, have positioned us well, with growth options in each of our four pillars. I'll now turn the call over to Colm Freyne, who will take us through the financial results.

Thank you, Dean, and good morning, everyone. Turning to slide 8, we take a look at some of the financial results from the fourth quarter of 2015. Our operating net income for the quarter was CAD598 million, up from CAD511 million in the fourth quarter last year. Operating net income for the quarter excludes an adjustment of CAD66 million, which consists primarily of restructuring costs of CAD22 million, and assumption changes of CAD41 million, to reflect our best estimates on expense and policyholder behavior impacts associated with the decision to close the international wealth business to new sales.

We do not expect that closing this business to new sales will have a significant impact on our future results. We will continue to generate earnings from managing our in-force block of international wealth business, as it runs off over the next several years, while at the same time growing our international life business. Underlying net income, which excludes the net impact of market factors and assumption changes, was up significantly to CAD646 million. Our underlying return on equity was 13.8% for the quarter. Fourth-quarter adjusted premiums and deposits were CAD30.9 billion.

Assets under management were CAD891 billion, an increase of 5% from the third quarter. We maintained a strong capital position, ending the year with a minimum continuing capital and surplus requirements ratio for Sun Life Assurance Company of Canada, of 240%. Excluding the impact of CAD1.25 billion of preferred shares issued by Sun Life Assurance to Sun Life Financial Inc, in connection with the acquisition of Assurant employee benefits business, and a partial recapture of a reinsurance agreement in our Canadian group benefits business, the MCCSR ratio was largely unchanged from the third quarter. And we closed the quarter with a cash level of CAD1 billion at the holding Company, SLF Inc.

Turning to slide 9, we had solid growth in underlying earnings across all of our businesses. We benefit from diversification, in terms of the businesses we manage, as well as the geographic regions in which we operate. In the current environment, and with over 50% of our earnings generated outside of Canada, this geographic diversification is generating benefits from currency translation. In SLF Canada, underlying earnings reflect favorable investing activity, favorable disability experience in group benefits, and gains from new business in group retirement services.

Throughout 2015, we made investments to grow our wealth business and enhance our group disability capabilities. In SLF US, underlying earnings also benefited from favorable investing activity, and improved claims experience in our group business. Credit experience was positive again this quarter, and we benefited from a one time adjustment related to modifications to our US post-retirement benefits plan. Sun Life Asset Management, which includes the results of MFS and Sun Life Investment Management, had a strong quarter. At MFS, operating margins remained solid at 38%, despite lower average net assets.

Sun Life investment management generated net income of CAD9 million. In Asia, underlying earnings results maintained their momentum, reflecting business growth across a number of markets, most notably in the Philippines and in Hong Kong. Turning next to slide 10, we provide details on our sources of earnings presentation. Expected profit of CAD680 million increased by CAD83 million from the same period a year ago.

Excluding the impact of currency and the results of SLF asset management, expected profit was up 1%, as business growth in Asia, and our stop loss business in the United States, was offset by lower levels of expected profit in Canada. New business strain was CAD30 million for the quarter. The improvement of CAD13 million over the same period a year ago was driven by pricing gains in group retirement services' defined benefits solutions business. We believe that our expected range for new business strain of CAD40 million to CAD50 million per quarter remains appropriate, but experience will fluctuate, as we saw this quarter.

Experience gains of CAD84 million for the quarter reflect favorable investing activity, positive experience in credit, mortality and morbidity, and retiree benefit plan changes in the US. Investing gains of CAD73 million were particularly strong, reflecting higher levels of tactical trading activity and ongoing portfolio repositioning. Offsetting some of these gains were the unfavorable impact of market factors and expense experience from higher seasonal costs, including compensation expenses related to long term incentive accruals, as a result of strong relative performance of Sun Life.

We continue to manage operating expenses tightly, achieving a balance between organic growth and productivity improvements. Lapse in policyholder behavior experienced in the quarter was largely in line with expectations, following Management actions and assumption changes made in the third quarter of 2015. Further details on the impacts of market factors and other experience items have been provided in the appendix. Assumption changes and management actions resulted in the strengthening of reserves by CAD20 million.

Earnings on surplus of CAD112 million were CAD8 million higher than the fourth quarter a year ago, and benefited from higher investment income, along with currency translation gains. Income taxes of CAD190 million represent an effective tax rate of 23% on operating net income, which is just above our expected range of 18% to 22%. On a year-to-date basis, the effective tax rate is 20.7%, and at the midpoint of our target range. A higher rate in the fourth quarter includes the impact of a change in the tax rate in our UK operations.

On an underlying earnings basis, and adjusting for the impact of all notable items, the effective tax rate for this quarter was 21.5%, and in line with our expectations. Slide 11 shows sales results across our insurance and our wealth businesses. Sales for the fourth quarter, on a Canadian dollar basis, include some notable movements due to currency. On a constant currency basis, our total insurance sales were down 16%. A sales growth of individual life and health products in Canada, and international life, were more than offset by declines in US group from our repricing actions, and strong sales in the fourth quarter of last year in the Canadian group business.

Total wealth sales of CAD29.6 billion were lower by 13%, on a constant currency basis, primarily as a result of lower sales of mutual and managed funds at MFS and in Asia. Turning next to slide 12, we present a breakdown of the change in our year-to-date operating expenses over the prior year. Overall operating expenses for 2015 were CAD5 billion, up by CAD500 million, or 11%, over the prior-year period. Excluding the impact of currency and MFS, expenses were CAD3.1 billion, an increase of CAD150 million, or 5%. Total year-to-date volume-related expenses, which are directly driven by sales and asset levels, increased by CAD86 million over the prior year.

The net impact of inflation and investments in growth, net of productivity gains and one-time items, increased operating expenses by CAD64 million, or 2%, compared to a year ago. Drop-up, we achieved strong results for the quarter and for the full year in 2015. We continued to grow our earnings, while navigating a challenging environment for equity markets and a continued backdrop of low interest rates. At the same time, we're investing in our businesses to generate future growth for our shareholders.

And as we look to 2016, we expect market volatility to continue, but remain confident in the resilience of our operations and the diversification that our balanced business model offers. And with that, I will turn the call over to Steve, to speak to energy exposure in our investment portfolio.

Thank you, Colm, and good morning. Turning to slide 14, I'll spend a few moments on the topic of our energy exposure. The energy sector has been drawing a lot of interest, as oil prices have hit multi-year lows. As a large financial institution with a diversified investment portfolio, we have investments across all major sectors, including energy. Our total debt securities and corporate loans exposure to energy is CAD5.6 billion, which accounts for 4% of our total invested assets. The assets we hold are of high quality, with 93% being rated investment grade, as at December 31, 2015.

Our largest energy sub-sector exposure in our portfolio is pipelines, at 44%. Pipelines facilitate the transportation of crude oil, natural gas and refined petroleum products from the producer to the end user, and the majority of our exposure is with a few of the largest pipeline operators. These pipelines make their money by charging set fees for transporting energy products from one place to another and then storing them. Most of their profits are insulated from oil and gas prices. These pipeline operators tend to be heavily regulated, and have stable cash flows from long term contracts.

We do have exposure to other energy sub-sectors, such as exploration and production, and drilling and servicing, that are more directly impacted by the price of oil. However, these firms make up a smaller percentage of our portfolio. We have actively managed our energy holdings. And last year, we reduced our exposure to issuers that we deemed to have heightened credit risk. We will continue to assess our portfolio and the market, looking for opportunities to further reduce risks as appropriate, while also looking for attractive opportunities created by the recent market turmoil.

Our stress tests continue to indicate that our biggest risk is that of issuers falling to below investment grade, or moving down within the investment grade category. Although we do anticipate that some investment grade holdings will be downgraded, we believe these companies have the financial flexibility to weather a period of sustained low prices. Our real estate and commercial mortgage holdings in Alberta are approximately CAD1.4 billion and CAD1.2 billion, respectively. The region continues to see real estate and economic fundamentals deteriorate.

However, our portfolio remains solid. There have been no material increases in receivables. Our vacancy levels remain similar to last quarter. No mortgages are in default, and construction loans are being paid. While we have not experienced a meaningful decline in the value of our Alberta real estate portfolio to date, a prolonged economic downturn in the region would likely lead to weaker prices for commercial real estate.

To conclude, while we may experience further credit downgrades in coming quarters, we have a manageable exposure to energy that we constantly risk manage. And with that, I'll turn the call over to Greg, before the Q&A portion of the call.

Thank you, Steve. To help ensure all of our participants have an opportunity to ask questions on today's call, I would ask each of you to please limit yourself to one or two questions, and then to re-queue with any additional questions. With that, I'll now ask Chris to please poll the participants for questions.

Certainly.

(Operator Instructions)

The first question is from Steve Theriault with Bank of America Merrill Lynch. Your line is open

Thanks very much, good morning, everyone. So if I could start with MFS, Mike, a question on expenses. I noted your expense line is actually down slightly in 2015. So can you talk a bit about the sustainability of that type of expense control, looking ahead to this year? And you've talked about, in the past, some necessary expenses like a new order entry system, and I think some compliance systems. Are you thinking of slowing these expenditures in the current environment? Or is it still full steam ahead, with what you'd probably call necessary spend, over time?

Good morning, Steve. This is Mike. Yes. As we think about expenses, later in the year, some of that was tech spend, which we had budgeted for, which did not get made in 2015. As we look into 2016, obviously, with the market environment as it is currently, we're being very careful on controllable expenses. At the same time, investing in some of the larger and longer term infrastructure projects, as you mentioned.

We are certainly sensitive to the market environment, and what that means for margins, but we've also got clients we're managing money on behalf of, over the long term. So we think about investing in the business that way, as well. So I would say those things that are controllable, we're being very careful with. Those thing that are very long lasting, we are going to continue to invest in the business.

Is it realistic to think you can keep that flat? Or does it drift higher, necessarily, in term of just absolute spend? Or can you contain the discretionary expenses sufficiently?

Yes, if you think about some of the expenses that do flex. There are expenses that do flex as revenues come down. So some of our asset-based fees with our distributors, clearly, compensation is a line item that will flex down, given the environment that we're in. But we're not providing any guidance on expenditures. We'll see what it looks like, as the year goes on.

We've had a couple of instances, over the last couple of years, where we've gotten a market correction, and the market has bounced back. And so you don't want to over-react to a slight down-tick in the marketplace. Having said that, we're obviously going to be sensitive to the P&L if we do, in fact, continue to see pressure in the market.

Okay. And then just quickly on profitability, you've been pretty clear with your target of a margin in the high 30%s to 40% range. This is the first quarter we've seen it dip below 40%, I think, in a year or so. So can we still hold you to that target, in this challenging environment? Or is there a chance of some slippage, with AUM likely coming down again in Q1? And who knows what is in store for the rest of the year?

Yes. The guidance that we have put out there, and Rob's reiterated over a number of quarters, in a normal environment, we think that we can hold high 30%s to 40% margin. I would caution people that we don't think this is a normal market, where you've seen a pretty significant correction in the marketplace. If you look at other asset managers in the fourth quarter, you began to see it. You're going to see it in the first quarter is, you are going to see margin contraction in the industry, as the markets come down. And so we're not providing margin guidance at this point in time, given what's going on in the marketplace. But you should expect industry margins and asset management to contract some, given the environment that we're in.

Okay. That's fair. If I could ask for -- I'm not sure -- Colm, Steve or Larry. The impact from investment activities was a big driver again this quarter. We've now seen a couple quarters of meaningful contribution, after it being pretty nominal or even negative, the last couple years. I know I raised this last quarter, but can I get some more detail? Are you taking advantage of the shape of the yield curve or the swap curve? Or are you selling treasury-like securities to buy privates? Really, what I'd like to know, is there a pipeline here of gains? Or is there any intention here to continue to migrate the portfolio, and generate gains here more consistently? Which could provide positive surprises, looking out next year?

Steve, it's Colm here. Yes, so I think you're right to call out the absolute level of investing gains this quarter, at CAD73 million. It was on the high side, certainly, relative to prior quarters, over the last couple of years. And I think, if you look back over prior quarters, you've seen us in the CAD30 million range, on a number of occasions, and we think that's a more sustainable level. Now we've given in the past, we've talked about investing gains in the CAD10 million to CAD20 million level, so I wouldn't move away from that at this point. But we have tended to beat that in recent quarters, and at CAD70 million, that's definitely a larger contribution.

In terms of the reasons for that, there were a number of reasons, across a variety of areas. I would think you're right to think of it as being partly tactical. For example, taking advantage of some of the movements in interest rate swaps, and maintaining our hedging strategies, but moving into different instruments, would be an example of that, with some duration lengthening, as well, that we availed of. So a number of areas.

I wouldn't call out any one particular one as being the big driver. But we'd certainly caution you that -- not to expect a level of that magnitude, on a recurring basis, but to expect some ongoing level of contribution from this important source of earnings.

Okay, that's helpful. Thanks very much.

The next question is from Meny Grauman with Cormark Securities. Your line is open.

Hi. I just wanted to ask about the buyback, no activity this quarter. I'm wondering what your views are, in terms of -- your views on the buyback are in light of the valuation of the shares? And just how you think about the buyback, especially during times like this, where the shares are under pressure?

Meny, it's Colm here. So the buyback, the normal course issuer bid, did come to an end in November, and we did not renew. As you know, we have a number of transactions that we're in the midst of closing on, most importantly, the Assurant transaction. So we are continuing to deploy capital, just not into share buybacks at this point in time.

Now, we do intend, over the course of 2016 to settle shares that are offered under the dividend reinvestment plan, to settle that through open market purchases. So you can think of that as a form of utilization of our cash and capital. We'll come back to the topic of buybacks at a later point, but at this stage, we're not in the market. We don't have a normal course issuer bid in train.

Thanks for that, and then if I could just ask a follow-up question, on credit. You went into detail on the exposure to energy in Alberta. I'm wondering, when you look at credit and how it's unfolding, is there anything unusual that puzzles you? Given all the stresses that we're seeing in Alberta, in particular? Or do you view this as just a normal -- the timing as being normal, and more of a wait and see approach?

Maybe I could jump in, and then I'll turn it over to Steve. In terms of the experiences on the credit, the CAD18 million, that was quite consistent with the run rate level that we saw over the course of the year. So again, the types of things that we're contributing in prior quarters, many we're contributing again this quarter. But if you take a look forward into 2016, obviously, Steve will be in a place to comment on that.

Yes. The last few years, as we all know, have been very benign years in the credit markets. And with such a big drop in energy prices and commodity prices, you're now seeing stress among some of the largest issuers, and you're seeing rating actions. I think the rating agencies are going to continue to be -- will be -- aggressive, in term of lowering their commodity assumption, and factoring that into ratings. And so I don't know if -- so we've clearly seen a very large drop in energy prices. You see big moves in certain commodities, from time to time, so I'm not sure that's unusual.

But I think it -- the impact that we're -- that the market will feel, in terms of downgrades, for instance, in the investment grade space, or stress in the Alberta real estate markets, is really going to be a function not of where oil is trading today, but where it trades a year or two years, three years from now. If we get, as some out there are projecting, a bounce-back in oil to the CAD50, CAD60, CAD70 level, over the next year or two, I think a lot of this -- a lot of the concern in the market will reverse. So I really think it's going to be about the time frame for decline in prices. And I think, the impact of that will play out, over the course of the next couple years.

So just to clarify, if one assumes that oil prices stay where they are, then if you look out for 2016, would you say that you don't expect too much stress in 2016? It's -- the pain would be felt largely farther out?

I expect that if we continue to see energy prices at the same level, at the end of 2016, that we're seeing today, I expect to see more downgrades across the market. So -- and I think, as I mentioned in my remarks, I think that's where we would be most at risk. We start -- our portfolio starts in from a very strong position. The vast majority of our bond holdings in the space are investment grade rated.

If you look at our mortgage portfolio and real estate portfolio, we've got a very solid mortgage portfolio in Alberta. We've got very strong real estate holdings. I think on the real estate front, that will clearly lag. So I wouldn't expect to see dramatic impacts there, over the course of this year, if energy prices don't improve. I think that would play out over the next two to three years. What I do think we would see, over the course of this year, are credit downgrades.

Thanks for that.

The next question is from Humphrey Lee with Dowling & Partners. Your line is open.

Good morning, and thank you for taking my question. Just a follow-up to Steve, regarding your energy portfolio. How does a one-notch downgrade of your energy portfolio affect your MCCSR ratio?

I don't have an exact number to give you. But we have, as we have looked at our stress testing, and looked at potential downgrade scenarios, I would say that the impact on our capital ratios, from across the board, one letter downgrade across all of our energy holdings, would not have a meaningful impact on our MCCSR ratio. Colm may want to comment further, but we have looked at that, and we think it's very manageable.

No, I would agree, Steve. A downgrade of that order would not be a significant impact on the published MCCSRs.

Got it. And then maybe a question for Dan. In the US for voluntary benefit sales, they were down roughly 23% year over year, even though your decreasing group and health sales were less unfavorable. Any color on what's going on there, for your voluntary benefits? Is there some pending -- some impact from the pending acquisition of Assurant employee benefits?

Sure, Humphrey. The real issue there is that in the first category, life and health, that also includes our stop loss business, and we've had very strong sales there. Sales there are actually up year over year, and that has counterbalanced any decrease in group sales. The voluntary category is exclusively a group life and disability category. So you see some decline there. And we've seen that pattern, really, throughout the year, as we took a more rigorous approach on pricing over the past 18 months. So there's no impact that's related to the Assurant acquisition, or other factors.

Got it. Any kind of update or color, in terms of integration with Assurant, when the deal closes in the first quarter?

Sure. We've had teams working very closely together, to plan out the details of the integration, and that's going quite well. We're pleased with the progress. We also have obtained 9 of 13 regulatory approvals so far, and are working through the last few approvals, and are optimistic that we should be able to close within the next 30 to 60 days.

Got it. Thank you.

The next question is from Robert Sedran with CIBC Capital Markets. Your line is open.

Hi. Good morning. I just wanted to come back to the credit issue for a moment, and really come at it from a procedural perspective. You've been booking experience gains for the past many quarters. Is there anything procedurally that might allow you to, rather than run the gain through earnings, to build your reserves? Or is it based exclusively on ratings actions, either internal or external, on what you're holding? Can you layer in conservativism, just because you've been having good credit experience?

Steve, perhaps I'll take the first part of that question around the accounting, and maybe you could speak to the piece around the conservativism of approaches. I think from an accounting perspective, we follow the methodologies that are well laid out in our materials. So it's not a question of setting something aside without taking an action. You have to take commensurate action. And we have been taking action, to deal with particular credits that we may not be as comfortable with. So that would be coming through, and you'd see that, therefore, in the credit experience, it would be a net number reflective of actions that we've taken.

If we were to take more actions, obviously, that net number would be a reduced number. And so that's what I would say, from the accounting perspective. We haven't taken any kind of a general provision against this, and the circumstances don't warrant that at this stage.

I would just add that, from an investment perspective, as we look at these holdings, and we assess the market, and we try to take -- and we do our stress testing, we try to take an appropriately conservative approach. And so we're trying to be conservative when we think about the outlook for energy prices, try to be conservative when we think about how that may impact certain issuers, or impact real estate markets, for instance, in Alberta. So I guess I would just emphasize that we try to look through a conservative lens, as we analyze our portfolio in this area.

Okay. Thank you and I just -- I'm not sure if it's a quick question, but a question on Asia. And specifically, first, can you confirm -- or tell us whether there are any meaningful sales in Hong Kong coming out of mainland China, first off? And then just generally, because we're hearing so much about Asia these days, can you talk about the operating environment that you're seeing?

Hi, it's Kevin, Rob, and I'll give some color to that. Specific to Hong Kong, we're actually one of the smaller companies, in terms of percentage of sales that come from the mainland Chinese market. The industry is running close to 30%, and we're running closer to 10%. I do think that will have an impact, with some of the new regulatory rules coming out of China. We don't see that impacting us too greatly. And in the quarter, our sales were up 16% in Hong Kong, on the local currency. And we're seeing our agency grow there, and we still see lots of opportunity in the broker channel, and our pension business continues to do quite well.

There's no doubt that you're going to see the industry slowing down in Asia, for a variety of reasons: market volatility and some economic slowdown. I think that we're still going to see growth overall. And if you looked at our quarter, Dean had mentioned earlier, our sales were up 11%. But in constant currency, Hong Kong, as I said, was up 16%. Indonesia was up 6%. Malaysia was up 40%. India was up 4%, with the agency sales in India up an encouraging 20%.

The Philippines was off a little bit, and that's after a really strong run for the year. And I expect the Philippines will come back in line next year, and [we'll seal] some good growth. Our China sales were down, and that's primarily a refocusing on B&B, the higher B&B products. And so net B&B for Asia was up 29% in the quarter, and our health and accident sales were up 49%. So I see some slowing occurring. I especially see some slowing from an industry perspective, but I think we have a lot of good initiatives.

In particular, we're seeing really strong agency growth. We saw agency growth in Hong Kong, Indonesia, China and Vietnam. And if we continue to execute on that, we should still continue to see strong growth for our business, but I do think there's some head winds there. And in particular, as we head into 2016, and so you saw some of that really strong growth in the first half of the year slow down a little bit for Asia in the second half. But in addition to the growth we've had, we've been investing back into the business, investing into distribution and investing into digital. And that should also have a positive impact next year.

Thank you.

The next question is from Gabriel Dechaine with Canaccord Genuity. Your line is open.

I have a quick one, and then one on the Alberta stuff. The quick one is, you put your offshore -- or VA business into runoff. I'm wondering if that's going to have any noticeable impact on your earnings? Whether that was generating gains on sales, or anything like that? And how much of that is going to be offset by the reinsurance recapture, which is in the group business in Canada, I believe?

Yes. So, Gabriel, it's Colm here. I'll just take the second part of that question, and turn it over to Dan on the international wealth discussion. So on the group business in Canada, yes, you're correct. That is where we did recapture. And there will be a benefit from that recapture in 2016, because obviously, we've taken back some risk, and we've put up some additional capital. And we are not disclosing the amount of the benefit from recapturing, but it will contribute in 2016. And it will -- the question you had about the earnings contribution, we're not expecting it to be a significant impact on earnings, from the wealth business. So I don't think it's right to think of that one item offsetting the other, but I'll turn over to Dan for more discussion on that.

Sure. Yes. The closure of the international wealth business to new sales will have a minimal impact, if any, on our earnings. That was a relatively small portion of the total business. Most of the business is driven by the life business, which is where we're really going to be reemphasizing and growing. We also will continue to manage the wealth business as an in-force block, so the earnings would wind down very slowly. And we would expect any reduction in earnings there to be more than offset by the growth that we're anticipating in the life portion of the business.

Okay. The life portion of the business is where sales would come off, and you weren't getting as much new business gains as you were before. That was the bigger story, I guess, in that business, right?

In the life business this year, we have seen some lower sales. That's primarily due to the competitive environment, and some aggressive crediting interest rates, by competition. We are introducing a new product shortly, which we think will substantially help our sales trajectory in that business. So we think this has been somewhat of a temporary phenomenon. We're very optimistic about the sales prospects, going forward.

Okay. Then my next question is for Steve, about -- more on the real estate and commercial mortgage side. The real estate, you're proportionately quite a bit bigger than some of your peers. And your comments in the MD&A are that, if vacancy rates increase and rents go down, over time, you're going to maybe have to take some negative mark-to-market adjustments on that real estate portfolio. Is that really a two to three year time frame? Because we've already seen vacancy rates almost double in the past two years in Calgary, and square foot rental rates go down 25% or so. Can you paint a picture of what needs to happen before you'd actually take a noticeable mark-to-market on that portfolio?

Gabriel, we value our properties on a quarterly basis. We do. We have an external -- an internal process and an external process, and so there's a detailed evaluation of every property, where we look at our rent rolls. We look at the tenants we have in our specific properties. We look at the probability that tenants will or won't renew. We look at the rates which we think they'll renew. We look at market rates, at each valuation point in time. We look at market cap rates for comparable buildings.

And so, all of those variables are looked at in a very specific way to each property. And so when we're looking at overall market trends, we're also looking at what's very relevant for each particular property. And some of those variables will move -- some could move very quickly. Some will move more slowly, in terms of where -- depending on the rent roll, for example, for a given property. So another factor that I think we'll see in Alberta is that a lot of the larger, more investment grade real estate is in very strong hands. It's in the hands of pension funds, in the hands of insurance companies. I don't think you'll see a lot of turnover.

I don't think these are institutions that will be selling assets at stress prices. I think these are institutions that can ride through cyclical fluctuations in the provincial economy. And so you're certainly, I think, going to see, if this persists, increases in cap rates. But I don't think you're going to see distressed -- meaningful distressed sales that would then filter into the valuation of other properties. So as we monitor the market, as we see vacancy rates continue to increase, and we apply those to our properties, it could certainly have an impact on our valuations over time.

But it's not an overnight impact. I think it's going to play out over a number of quarters. And I guess what I'm emphasizing is that we really take a very detailed view, property by property.

And how would you describe the makeup of the portfolio? Is it the Class A office, predominantly? Or how much of it is construction? And then on the mortgage side, a similar kind of description? I guess 31% of it's, across Canada, insured by CMHC. Is that similar, for the Alberta-specific stuff?

I don't have, at my fingertips, the specific percentage of CMHC-insured mortgages within Alberta, but I would expect that it's consistent to our proportion across Canada. And generally, across our real estate and mortgage portfolio, we're very -- we're diversified and evenly -- fairly evenly split across the three main property types of office, retail and industrial. And we're tending to own and lease against the stronger properties across the region. So I think it's a very balanced portfolio, a very diversified portfolio. And certainly, our direct real estate holdings are in higher quality real estate.

Okay. Thank you.

The next question is from Peter Routledge with National Bank Financial. Your line is open.

Yes. A couple follow-ups, just for Dan, on pulling out of the international wealth. We've seen other companies struggle with regulatory, and you know your customer risks, so just to confirm that none of that drove that decision?

That was a strategic decision, purely. We really looked at both the life and the wealth business. The wealth business, as I said, was relatively small, and we had pretty small scale there. And to grow that business, we would need to continue to invest in global distribution, against a backdrop of much bigger firms, and a very wide variety of investment choices that people have.

In the life business, we have a unique value proposition, a relatively small number of competitors, and a very different distribution channel and footprint there. So this was really a strategic decision to emphasize the area where we have core capabilities, which is the life business, and not to build out a big worldwide distribution footprint for wealth.

How complex are the products in your life business?

They're similar to life products that we sell elsewhere. They're mostly universal life products. But we do have some specialized expertise in dealing with high net worth and offshore structures for these products, which gives us a significant market advantage.

But you're not worried about regulatory issues in that space?

Regulatory issues are always important in both the life and the wealth business, or any business that we're in. And we're very attentive to those, and we have invested significantly in resources to support that. In the life business, though, we're quite confident that we're very able to meet those needs, and really across our entire international business.

All right. Thanks. Just quickly, either for Colm or Steve, just back to the real estate issue in Alberta. I think on page 35 of your press release, you've got a sensitivity where you get a 10% decrease in your real estate investments, decreases net income by CAD175 million. So is that -- assuming it's 10% down and flat, is that CAD175 million one time, or is it year over year over year?

Yes. So that's the sensitivity that we always disclosed. So it's the impact in the current year, or the one-time change, if you had that all come through in one time. It's -- as, of course, it's very unlikely to happen in that way. It's a bit of a stylized presentation, but Larry, you might want to comment.

Yes, that's right. That's assuming lower returns every year, but present valuing the full impact one time.

Okay, okay. And how close are we to that?

How close are we to a 10% decline in real estate values?

Yes.

I don't think we're on the precipice of that, and it's a very hard question to answer. Because implicit in that question is, what is going to be the outlook? Not only the level, but also the outlook for energy, 12 months from now, or 18 months from now.

Let's say we're still at CAD30 in 18 months. Are we at a 10% decline?

It's much too precise for me to comment on. I think that if we're at CAD30 a year from now, and the outlook is that we're going to be at CAD30 12 months -- at the end of 2017, I expect the real estate values will be down. And whether they'll be down in a particular portfolio by 10%, less or more will, of course, depend on the specific properties in that portfolio. Said another way, if we have a multi-year period, where oil prices for three plus years are projected to be at current levels, I think you're going to see -- you're certainly going to see an impact on commercial real estate values across Alberta.

Peter, just to add a little point around that, of course, the very low interest rates that we're seeing have obviously provided support to real estate values. And in fact, over the course of the year, we've seen mark-to-market gains on real estate. So just in broad terms, across the portfolio. So there is an obvious offset there.

Yes. And so different geographies might get the benefit of low rates, where other geographies might (multiple speakers).

That's more of the comment about the overall diversified portfolio, but again, that's an obvious driver of value.

That's a fair point. Thank you.

The next question is from Dan Bergman with UBS. Your line is open.

Hi, good morning. Starting with MFS, I wanted to see if there was any update or additional color you can provide, on the impact of the recent market weakness on the outlook for MFS flows? Whether for the first quarter or just more broadly? How much does this delay the [infected] inflexion? And big picture, given investment performance remains quite strong, any updated thoughts around how long it might take until this translates into improved flows? Thanks.

Yes, Dan, good morning. First, I would say, we've talked a lot about the institutional business, where we've closed product we're transitioning to additional products here at MFS. That's ongoing, and you did see flows improve, Q3 to Q4. We talked about some of the outside flows in Q3 that were not performance-related. So the institutional business continues to look similar to the way that it's looked the last couple of quarters.

The challenge, really, for industry flows in the back half of the year, starting in August, with the volatility around the devaluation of the Chinese currency is, we've seen the retail business come under some pressure. And if you look at last year, mutual funds last year were in outflows of CAD50 billion last year. And so the industry -- and most of that was in the back half. The industry was in outflows. If you take Vanguard, who did CAD150 million net positive last year, think about the active business in retail being out CAD200 billion last year.

We were actually net in last year, so our position in the industry is very strong, in that we picked up share. We were positive, in an environment where most firms were negative organic last year. So as we look into 2016, our view is, given the volatility that we're in today, we would expect you're going to continue to see outflows in the business. That is true in January. We saw that in January. Our guess is, that will continue to be true the balance of the year, if we continue to see volatility.

Again, what we would say, our position in the industry, we think, is strong, given the relative performance. And so all we can do is try and outperform the industry in what we think will be a challenging backdrop.

Very helpful color, thank you. Maybe switching gears, I was hoping you could also provide some color on the results for the January renewal season in the US group market, just in terms of sales volumes, pricing, competition. And maybe, also, any updated thoughts on how your price increases are being received by clients? Thanks.

Sure. We've been pleased with the results we've been getting, really, throughout all of 2015 on our renewal actions, as well as new business pricing. Now, on the sales side, sales have clearly moderated, although they're still at robust levels. And that was something we did quite deliberately with our pricing strategy. On the renewal side, we've generally been getting the increases that we've been looking for.

We also have an important phenomenon that the business we are lapsing has a significantly higher loss ratio than the business we are retaining. So that's another tailwind for us, in improving the overall health of the block. From a competitive standpoint, we're seeing a pretty rational market right now. There's always strong competition in the US group benefits market, but I would characterize it as pretty balanced at the moment. And so we are generally able to get the increases that we've been looking for.

Great. Thanks so much, and thanks for taking my question.

The next question is from Doug Young with Desjardins Capital. Your line is open.

First question, just for Dean. You've made a lot of tough decisions, over the many years, about getting out of certain businesses and refocusing. And -- but I look across at the UK operation, and we've seen earnings come down. We've seen tougher regulatory capital requirements. Is there a reason why you would retain this business? It's obviously in runoff. And if so, why retain it?

Doug, a couple of comments on the UK. First of all, you're right to point out the earnings in the fourth quarter. But overall, when you stand back and look at the year, and you look at the past several years, the UK has done a very nice job for us, and they continue to do an excellent job for clients, running the business very effectively. It's been a very slow glide path, as the business declines. We still have over 700,000 clients in the UK that we serve, and serve them very profitably. So it's a profitable business.

We got through Solvency II successfully, did not have a big impact on our capital ratios in the UK. And so that aspect, of the regulatory change you described, really was really not a big impacted. So the UK has been a source of strong income and strong cash flow [and since] that formed part of the overall cash generation picture of Sun Life. Having said that, it's not part of our four pillar strategy, as you know. And you could think of it as an option for us, for the future, but we have no plans, at this red hot moment, to change what we've got there.

Okay. Thanks for the color. And then just Dan, you closed the US international Wealth Management business. You took some reserves to, I guess, properly build in assumptions around [lapsation] and expenses. I guess my question is, what could go wrong, or a bump in the night, in this business, now that it's in run-off? Anything concerns you?

I think we have made certain assumptions about the rate as which business will run off, and it obviously could run off either faster, or perhaps slower, than those assumptions. So we are working hard to make sure that the distributors we've worked with historically will keep that business with us. And we think there are some good opportunities to do that. We think we also have taken the right reserve actions to mitigate any expense concerns, as the size of the block gets smaller. So I would say we're reasonably comfortable that we've put the business into a good position for a run-off block.

And what would those lapsation assumptions that you've built in be?

We think it will take in the general range of 7 to 10 years, as just a directional idea, for the business to run off. There could obviously be some customers that would stay considerably longer than that, but this will be a multi-year process.

Okay. Great. Thank you.

The next question is from Tom MacKinnon with BMO Capital Markets. Your line is open.

Yes. Thanks very much. Maybe a question for Dean. I believe you guy had talked about an 8% to 10% medium-term objective for underlying earnings growth, or underlying EPS growth? And given this backdrop that we started the year off here with, I assume you've probably done some stress testing, as to what things would look like in the -- what this growth would look like in the medium-term, if interest rates came off 30 or 40 basis points?

I assume this 8% to 10% assumed rates would be flat. And I also assume this 8% to 10% assumed equity markets would go up about 8% a year. So how should we look at this -- I know it's a medium-term objective, but how should we look at it, if, say, equity markets really didn't improve over the next couple of years, and the interest rate environment really didn't move from where it is now? What impact -- if that was the backdrop, what would your -- what would that 8% to 10% objective look like now?

Tom, we're not going to -- we give a lot of stress test data on impacts of interest rates and equity markets and swap curves, and so on, in our disclosures. We're not going to, at this --

Yes, but those aren't related to underlying earning. Those are just reserve hits. So I'm just really more concerned with the underlying earnings.

We're not going to add yet another stress sensitivity, but I think it's a fair question. I can't give you -- we won't put out there specific numbers. But clearly, if equity markets stay flat from here on out, and if interest rates fell, those would be headwinds, vis-a-vis our -- against our 8% to 10% medium-term growth objective. Having said that, relative to most insurance companies and investment managers, we think we're in pretty good shape. We've got a premier asset manager in MFS, whose returns for clients tend to thrive in these volatile markets. We've de-risked significantly.

We have no VA or long term care in the United States, compared to our -- especially compared to our North American competitors, and a much smaller portion of our earnings are tied to interest rates than before. US economy is growing. Asia may be slowing, but it's still growing much faster than economies in North America. And as we talked earlier, we've got a balanced and diversified business mix that's stood up very well in 2015. And I'd remind you that 2015 was not exactly a walk in the park, with the TSX down 11%. And more of our business is group business, which is, as you know, less volatile.

And then I would add that we've created options for growth. You think of Sun Life investment management, wealth business in Canada, Sun Life global investments, defined benefit solutions, US group benefits Assurant in Asia, and a lower exposure to energy than North American peers. So I would say, over the medium-term, we're optimistic about our business. We're driving hard to connect and convert all these options into growth. One last thing I would say is that, I would say that our clients need us more than ever.

The things that are driving inflation low are aging populations, seniors aren't spending as much, technology, globalization, the shift of work to lower cost markets. These very drivers are actually things that benefit our business. You think of the growth in Asia, and you think about demand for insurance in wealth sales among older clients. So we've got a strong balance sheet. We've de-risked. We've got growth options. It allows us to play both a strong offense and a strong defense.

So a long-winded answer to say, I'm not going to actually give you a specific sensitivity in the medium-term objectives. But I hope what it conveys is a sense of optimism about our future over the medium-term, notwithstanding volatility.

Okay. Thanks for that. And just as a quick followup, Colm, if I walk through the whole co-capital, I'm sure at about CAD500 million. Was there something going on there? And if we work through the MCCSR after the Assurant acquisition is paid, which will likely come out of SLA, I'm in the low CAD220 million-ish range. Do you have any kind of target that you would be able to share with us, for SLA's MCCSR? Thanks.

Yes, so let me take it in the order. So on the SLF side, I think you said capital, but I think the way I think of that is cash at the hold co.

Yes, pardon me, hold co cash.

Yes, so we started the quarter with CAD1.75 billion, and then we moved CAD1.25 billion down to SLA, as I mentioned in my remarks. We obviously pay a dividend, and pay our interest expense out of SLF, and that's offset by the dividends we receive from Sun Life Assurance and from MFS in the quarter. And we also repaid the sub-debt that came due in the quarter that was $150 million, so CAD200 million. So you're right. There's a gap there of about CAD500 million, and that was a short term financing that we put in place in the quarter.

And it -- sorry, just -- yes, in the quarter, and it will be repaid over the course of 2016. And that's how you get to the CAD0.99 billion, approximately CAD1 billion cash, at the end of the quarter. And if you recall, when we said that how we would be financing Assurant, we said that it would be approximately 60% of the [seeing] commission would be financed through sub-debt, and we did CAD500 million previously. So there's a bit more to come. And we obviously have some flexibility around the timing on that.

And when you mention the Sun Life Assurance MCCSR ratio, it's at CAD240 million. And when we pay the seeding commission to close on the transaction, that will come down to approximately the CAD220 million range, which will be reflective of the transaction and the capital requirements. So I think that's the number you should be thinking of, around pro forma CAD220 million at Sun Life Assurance, after we close on the traction.

And where do you feel comfortable with some sort of target there, just CAD210 million, CAD215 million-ish range?

Yes, so CAD220 million is obviously very comfortable. CAD200 million and above is --obviously, we want to be above CAD200 million, so CAD210 million, CAD215 million, is a very good place to be. CAD220 million, a very strong place.

Okay. Thanks for that.

The final question is from Mario Mendonca with TD Securities. Your line is open.

Good morning. First, a question, just going back to Asia. The regulatory changes, or potential regulatory changes, that relates to moving capital out of the country, China specifically, people have discussed it in the context of insurance. But can you see any Wealth Management impact, specifically Wealth Management sales for Sun Life, and how that could be impacted by changes?

Mario, it's Kevin. I think in term of our Wealth Management business, I don't see it having a significant impact. If you look at where our businesses are, our Hong Kong business is an MPF business. Our Philippines business is a retail mutual fund business. In India, we have a cash management business/a business that relates to retail and mutual funds, and some institutional investment.

And then in China, we have an insurance asset management company that, in effect, is doing some -- a couple of different sort of things. It's doing asset management for insurance companies, and it's doing what they would call channel business, which sits in between banks. So it's not going to be directly impacted by the regulatory changes related to cash flows leaving the company. So I don't see it having a big impact on our wealth businesses.

Okay. Now, a different type of question. Just looking at where rates are, we are clearly headed into some unprecedented territory, especially in Canada. We didn't see rates this low even during the crisis, or in 2011 and 2012, when rates really got low. So what I'm trying to understand for myself is -- and hopefully you've done some of this work already -- is there anything that happens, from a policyholder behavior perspective?

And I should be clear. I'm not just referring to things like lapsation? I'm just talking generally, including sales patterns, what people buy, what they don't buy. Have you started thinking about what that could mean to the Company?

Yes. I think -- it's Colm here. So really, a two-part question. And it's interesting, a year ago, as we saw rates at the start of the year last year also start off in some pretty rocky territory, we were thinking about this exact issue. And there's a little bit of recovery, but not much, over the year, but back to, as you say, very low rates. I do think we see a shift in consumer preferences, and maybe Kevin would want to say a few words about that.

Hi, Mario. It's Kevin Dougherty speaking. So we would see things like, for example, there's been a decline in demand for some of our guaranteed products. Having said that, with market volatility, it may well come back. But through the year, we saw some of that. So a decline in payout annuity sales, at least as to where we would like them to be, and guaranteed funds. Products like par look particularly good in times like this, and you'd be familiar with the dividends in our par products, and they look particularly attractive in these times, And that's an opportunity to really open up new relationships and new customers.

And so while there's some falloff in demand for guaranteed products, the right kind of fund products do attract a lot of interest. And so our managed solutions like our granite funds, have done extremely well, even as interest rates have fallen, and even as Canadian markets have fallen. And so you see all of these things. And so at the end of the day, as Dean said, times are challenging for average Canadians, and they need a lot of help, and they need a lot of advice. And we've got a lot of powerful tools to help them with these challenges. And so at the core, the demand side of our business remains quite strong.

And is there any risk that lapse behavior could change in a material way?

Certainly, there's two forces. So one being the contracts that policyholders have continue to be of high value to them. So that would tend to work toward hold your contract. But on the other hand, people need cash, that could work the other way. So at this point, we have some experience in the low interest rate environment, and I would say I'm still confident that our assumptions are good where they are. But as you said, the longer it goes, we'll continue to stay on top of any trends that might develop.

And then finally, the sensitivity to declining rates. We all know that those sensitivities are not linear, and I think you've provided some sense for us on how the sensitivity accelerates as rates decline. But again, we're seeing some unprecedented low rates. Is there anything you can offer? Is there some level here, of long term rates in, say, Canada or the US, where the sensitivity provided needs to really be revisited, because it will change so much?

It's Claude Accum here. What you should look at is that most of our interest rate exposure is actually out to quite long rates. So I don't think one-year rates are stretching towards zero. I think a lot of these interest rate contracts are 10 and 20 years longer, particularly the annuity contracts. So they're quite far away from the zero boundary, and quite far away from that expansion in the sensitivity.

Okay. But the Canadian tenures might even -- might sink below 100 basis points any day now, if it hasn't already this morning. Doesn't that have some kind of near term effect, as well?

We're invested longer than even a 10 year on the products that are particularly sensitive. A lot of it would be the long life products, and so the exposure is out beyond 10 years.

Okay, thanks.

Showing no further questions at this time, I'll turn the call back over to Mr. Dilworth for any closing remarks.

Thank you, Chris. I would like to thank all of our participants today. If there are any additional questions, we'll be available after the call. Should you wish to listen to the rebroadcast, it will be available on our website later this afternoon. Thank you very much, and have a great day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.