Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sun Life Financial first quarter 2010 results conference call. At this time all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, Thursday, May 6, 2010, at 10:00 a.m. Eastern time. I would now like to turn the conference over to Mr. Phil Mallock, Vice President Investor Relations. Please go ahead, sir.

Thank you, Theodora, and good morning everyone. Welcome to Sun Life Financial's first quarter 2010 earnings conference call. Our earnings released 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 first quarter operating results by Don Stewart, Chief Executive Officer of Sun Life Financial. Following those remarks, Colm Freyne, Executive Vice President and Chief Financial Officer, will present the first quarter financial results. Following Colm, Steve Peacher, Executive Vice President and Chief Investment Officer of Sun Life Financial, will provide investments overview for the quarter. We will then follow with a question and answer session. Members of management are also available to answer your questions on today's calls, including Jon Boscia, President Sun Life Financial, Dean Connor, Chief Operating Officer, Sun Life Financial, and Rob Manning, Chairman and CEO MFS investment management. Turning to Slide 2, I draw your attention to the cautionary language of regarding the use of non-GAAP financial measures and forward-looking statements which form a part of this morning's remarks. This Slide reviews the reasons why forward-looking statements could be rendered inaccurate by subsequent events. And with that, I'll now turn things over to Don.

Thank you, Phil, and good morning, everyone. Yesterday Sun Life announced results for the first quarter of 2010. The company reported net income attributable to common shareholders of $409 million for the quarter, a significant improvement over the substantial loss reported one year ago. Return on equity was 10.5%. The board of directors of Sun Life has approved a quarterly shareholder dividend of $0.36 per common share, maintaining the same level as the previous quarter. Results this quarter were generated from continuing execution of our business priorities and also reflect improvements in the economic environment. It is important to note that although the financial results have advanced from last year, there is still work to be done and we remain focused on delivering sustainable earnings growth. I will speak to several highlights from the quarter. Looking at our top line growth on Slide 5, total premiums and deposits growth was up 23% over the prior year on a constant currency basis. We continue to benefit from broad distribution capability, superior fund performance at MFS, and strong net sales in our U.S. variable annuity business. Mutual fund deposits increased 76% on positive retail flows at MFS. Managed fund sales, which represent institutional sales at MFS and McClain Button, grew by 14% over the same period last year. Life and health was up 6%, and other wealth declined by 8%, primarily on lower sales of fixed annuity products in the United States. Looking at our Canadian operations on Slide 6, sales of individual life and health insurance increased 30% over the prior period one year ago, with increases in both career and wholesale channels. We continue to execute on our strategy of shifting to a more profitable sales mix as exemplified by term life sales, which rose 43% in the quarter. In…

Net income of $409 million in the first quarter demonstrates a solid start to 2010. Earnings benefitted from the improved economic environment including positive equity markets and improving credit conditions, as well as a number of other factors such as realized investment gains. Turning to Slide 11, we have provided a reconciliation of first quarter net income of $409 million to what we consider to be an estimated adjusted earnings from operations. Equity markets contributed $23 million above the baseline expectation as markets continued their recovery in the first quarter. Assumption changes and other net-positive experiences contributed $27 million this quarter. This contribution was made up of a number of items, including positive impacts from interest rates, security gains and asset liability rebalancing, partially offset by negative impacts such as credit losses and expenses. Credit experience was much more favorable in the first quarter relative to the same period a year ago. With a reduction in the severity of downgrades and impairments of structured investments and an offset from the reserve established for such credit losses over the past 18 months. As such, credit losses were not a material factor in our reported earnings this quarter. In 2009, we completed an extensive review of our structured investment portfolio, including reviewing detailed cash flow projections and future loss estimates provided by an independent party. Based on this review, we believe that we are adequately provisioned barring any significant changes to the macroeconomic environment. It is important to note that this reconciliation from reported net income to adjusted earnings from operations is based upon attribution of market and other impacts in the quarter and that adjusted earnings from operations is a [non-gap??] measure. The assumptions and methodology for estimated 2010 adjusted earnings from operations as described in detail in the Q1 earnings…

Turning to Slide 16, I would like to provide an update on our invested asset portfolio. Sun Life’s portfolio is well diversified by geography, asset class, industry sector and issuer. The asset base is very high quality as we do not invest in below-investment grade bonds by policy. As of the first quarter of 2010, 96% of the bond portfolio is investment grade. Our self-originated commercial mortgage portfolio is diversified across 4,000 loans, and the weighted average loan-to-value ratio for the portfolio is in the 60% range based on our most recent valuations. We have gone to great lengths to ensure that our real estate valuations are as current as possible, including hundreds of off-cycle property visits and an increased number of third-party appraisals were necessary. It is worth noting that over half of our commercial mortgage portfolio is in Canada, a market that has held up much better than the United States. The level of growth’s unrealized losses declined significantly in the first quarter to $2.1 billion from the $2.8 billion reported in the fourth quarter as credit spreads continue to narrow. Impairments during the quarter were down meaningfully from the fourth quarter. We experienced lower impairment charges on public bonds and, importantly, our loss estimates on the securitized assets stabilized in the first quarter after increasing throughout 2009. Credit experience in privates continues to be good. We did see elevated impairment in commercial mortgages in the United States relative to historical experience. But this was largely offset by the release of a portion of the sectoral mortgage provision taken in the fourth quarter. The financial impact of downgrades was also significantly lower in the first quarter versus the fourth quarter. While the overall amount of downgrades did not decline versus the fourth quarter, we did see fewer downgrades…

In completing our formal remarks this morning, I will highlight again the impressive momentum our business has continued to deliver; 23% growth in premiums and deposits across the enterprise, 16% grown in assets under management and significant sales growth in Canada, the United States and China. These results demonstrate the success of our strategy to capitalize on growth opportunities in all of our markets. We continue to build on our broad distribution reach and relationships with millions of customers by providing innovative products and services that help our customers reach their financial goals with confidence. With that, I will turn the call over to Phil for the question-and-answer period.

Thanks, Don. Before we open the call to questions, I would ask each of our participants to limit themselves to 1 or 2 concise questions and then to re-queue with any additional or follow-up questions. We will make every effort to take all of your questions during the allotted time this morning. With that, I will now ask Theodora to please pull the participants for their questions.

(Operator instructions) Your first question comes from Steve Theriault - Bank of America Merrill Lynch.

Thanks very much. First question for Colm or for Steve. Could you quantify for us the reserve release that netted against the gross credit losses in the quarter? I do not think I actually saw the absolute number anywhere.

Yes, Steve, it’s Colm here. Let me spend a moment just setting the theme with respect to credit for the quarter. As we have highlighted, the net impact of credit for the quarter was a fairly nominal amount. The amount, $6 million, was the amount that came through in the quarter. But the way I would think of this is that if we break it into its component parts, on the mortgage side we had specific provisions of $9 million. And as Steve mentioned, and he'll comment further on this, the general allowance that we had established at the end of the year was drawn down to offset that because the general was set up in contemplation of such losses. More importantly on the structured investments, this is a large complex portfolio as we've talked about previously. And the level of allowances in reserves credit the fault reserves that we'd established at the end of the year was sufficient in our view that the amount that would otherwise have come through in the quarter as a result of downgrades on specific CUSIPs and as a result of cash flow testing on the individual securities, was not recorded in the quarter. And that amount would have been approximately $50 million. So if you think of it by virtue of the fact that we had a $6 million charge. We had $9 million for specific mortgages that we offset with the general allowance. And there was approximately $50 million made up of downgrades and impairments with respect to structured investments that would otherwise have come through on a net of tax basis. Were it not for the fact that we were satisfied with the level of overall fault provisions in the reserves based on our lifetime estimated losses for these securities, you can see that the amount grossed up would have been some $65 million.

And just to clarify from your remarks, you mentioned earlier that you think you're adequately provisioned from a credit standpoint. I'm cautious here, but should we take that to mean that credit losses should trend towards de minimus for the year even if we see more downgrades, particularly of non-investment grade debt?

Rob, I'd like to just make an introductory remark on that and then turn it over to Steve. But I think the short answer would be, no we should not anticipate that it would be de minimus on every quarter going forward. The specifics this quarter resulted in that result, but I think Steve might comment more on the overall portfolio.

Yes. To break it up a bit, I think that on securitized assets the key factor is our lifetime loss estimates on the securitized assets. And as mentioned, while those lifetime loss estimates on the securitized assets increase throughout 2009 that estimate did not increase in the first quarter. And we have a reasonable expectation that that lifetime estimate won't increase over the course of the year, though of course it's subject to many macroeconomic factors that we can't predict. If you look at the other components of the asset base, we did see meaningful decline in impairments related to public bonds. But I expect the market to continue to face some challenges, so I wouldn't expect zero problems in that area going forward during the year. We continue to have very good credit experience in Canadian mortgages and privates, and I would expect that to continue. But I wouldn't say that we would have no credit problems there. And on the U.S. mortgage, obviously there continue to be headwinds. And I think that impairments will continue to run at elevated levels versus historical experience on the U.S. mortgage side. So I'll just repeat that we do expect to see much better experience in 2010 than in 2009. I would not expect that to trend to zero.

If I might, one more quick one. How much excess capital would Sun Life possess at quarter end? And more specifically, is there any contingent capital at the holding company, or is excess capital really to be reverse engineered at the Sulfur 200 MCCSR at the OpCo level?

So let me attempt the answer on that. I'm not sure I fully appreciate its question on the reverse engineering. But with respect to the holding company, the excess above 200% translates into $900 million of capital. And importantly, there is $700 million of cash available at the holding company level.

Your next question comes from Robert Sedran – CBIC. Robert Sedran – CBIC: Actually, I just want to follow up on that capital question. Colm, can you explain why if there's that level of excess, or cash, sitting at the holding company why you would have taken it out of Canada and dividend it down?

I think that question, Rob, suggests that we're not somehow comfortable with the ending position with respect to the capital as Sun Life Assurance Company of Canada. And at 210% MCC at our level, we believe that that is a strong level of capital and we are very comfortable with that. The capital and the cash that we manage is managed on the accrual basis so we would draw down from Sun Life Assurance or from Sun Life Financial, the holding company level, depending on the circumstances. But we do believe that the closing position at 210% MCCSR for SLA is a very satisfactory position. Robert Sedran – CBIC: Would you have required [Austria] approval to transfer capital our of Sun Life Assurance, or is that as long as you're short of keeping it internal somewhere they don't care as much?

Well the capital requirements are fully in accordance with the requirements of the regulator. And there is full transparency with respect to the capital positions at the company. Robert Sedran – CBIC: And one last one I guess, just to follow up. So forgetting for a moment that 210 MCCSR, if we were to assume just at the holding company level, did I hear you correctly in suggesting that you have $900 million in available capital at the holding company level that could be downstreamed to either U.S. or Canada?

Yes, that $900 million represents the excess above 200% MCCSR ratio. Robert Sedran – CBIC: So that's only Sun Life Assurance Canada, or is that the entire –

Sun Life Financial, the excess above a 200% MCCSR ratio for Sun Life Financial is $900 million. Robert Sedran – CBIC: So you're speaking about a consolidated capital ratio there.

That's right, at a consolidated level.

Your next question comes from Thomas MacKinnon – BMO Capital. Thomas MacKinnon – BMO Capital: Just a follow up on this capital thing. That's a consolidated MCCSR, and that's $900 million above the 200% MCCSR, is that correct?

That's correct, Tom. So if you do the arithmetic on it there's actually $500 million of that $900 million would reside in SLA, because that's the amount that's over 200% there. Am I correct in that –

Yes, when you do the calculations for SLA, the 210% MCCSR, the excess above 200% is $500 million. Thomas MacKinnon – BMO Capital: So this $700 million in cash at the holding company level, there's obviously some liabilities at the holding company level. So I'd say if there's $900, it's comprised of $500 million at SLA and another $400 million sitting in the hold co, is that a correct way of describing this amount over 200%? No, I think I'd sort of bring you back to how it's structured. So that when we do the SLA MCCSR we're consolidating the various portions of SLA and we compute the capital ratio and we provide you with the detail there of the excess over 200% while it's published at 210%. SLF of course holds the operations that are outside of Sun Life Assurance, such as MFS and Sun Life U.S., [Maclane]. And when we do a computation of the MCCSR at that level we come to an amount, as I've indicated, where there's $900 million excess and there's cash available at SLF. Thomas MacKinnon – BMO Capital: So it's not necessarily additive years.

No, we're really looking at 2 consolidations. Thomas MacKinnon – BMO Capital: Now that $900 million, that includes as if you would have run the U.S. subsidiary on an MCCSR basis as well, is that correct?

That's right. That's calculating the U.S. on an MCCSR basis. Thomas MacKinnon – BMO Capital: Is there any from the U.S. above 200% on an MCCSR basis? Because obviously we should negate to the extent that U.S. would be above 200% because you've always had to throw money into it anyways.

The characterization of throwing money – Thomas MacKinnon – BMO Capital: I didn't mean it in that context. But you want to maintain it on an RBC level, not on an MCC –

Yes, we do publish the RBC and it's at a very solid level at 362. And as you know, we have funded the U.S. in order to maintain that level. Thomas MacKinnon – BMO Capital: But this $900 million, does it include any impact of the U.S. being over a 200% MCCSR, or are you able to –

No, I haven't deconstructed that and I do not have that available. Thomas MacKinnon – BMO Capital: And what would this $900 million number be if we did everything at a 220 instead of a 200 MCCSR?

That's not a number I have available either. Thomas MacKinnon – BMO Capital: Well, just given the context, the 200 in new capital requirements could be a 220. I think that's something that we'd be interesting in –

I think you make a point really around the increasing capital requirements. And I think, as we all know, there are a number of initiatives that are under way particularly in Canada with respect to segregated funds. Where there's a possibility, and perhaps a likelihood, of an increased capital requirement. We are fully engaged in those discussions with the regulator, and more to come on that story. Thomas MacKinnon – BMO Capital: And then just to follow up quickly with Steve. You said you feel with respect to your securitized portfolio you don't feel there to be any kind of significant increase in 2010. Now, there's continued to be slippage in the investment grade portion of this portfolio. So what happens if the investment grade percentage was 90% in the third quarter, then 88% in the fourth quarter, then 86% in the first quarter of this year? If it falls to 80% by the end of the year are you still comfortable with your statement?

I would say that we're basing our estimates on lifetime losses based on a detailed analysis by security level. We feel that looking at ratings is really probably not the best way to judge lifetime loss estimates. And it's really based on a much more granular forecast of security level expected experience. And so to the extent that we see more downgrades, our goal is to have a loss estimate that incorporates potential future downgrades. So the ratings are not really the driver of our loss. We need a more detailed analysis. Thomas MacKinnon – BMO Capital: You set up a sectoral provision for U.S. commercial mortgages. You mentioned headwinds going forward. Now, you've already released some of that that you just set up 90 days ago. Can you walk us through your thinking there?

Well, the sectoral provision was set up in the fourth quarter with the expectation that the U.S. commercial mortgage market would continue to be under stress in 2010. And in fact we have seen that. So I think the fact that part of a sectoral provision was released in 2010 is consistent with the reason it was set up in the first place. If you look at the U.S. commercial mortgage market, it's interesting right now because we continue to see in the marketplace increases in vacancy rates and pressure on leasing rates, and therefore pressure on net operating income at property levels across the marketplace. However, there seems to be a fair amount of money coming into the real estate markets. So it may be that valuations have started to bottom, but there's still pressure on property level cash flows.

Your next question comes from Michael Goldberg – Desjardins Securities. Michael Goldberg – Desjardins Securities: I still want to clarify the numbers that you talked about on the gross amount of impact of downgrades and impairments, and the reserve release. So if I've got it correct, there was a $9 million specific provision against mortgages, and there's $50 million reliefs of sectoral reserve on, is that commercial properties?

No Michael, let me try to clarify that. So with respect to the $9 million on the – Michael Goldberg – Desjardins Securities: Would it be helpful if you had this in the slide presentation, by the way?

Yes. I understand that this is a little complex to go through. So let me spend a moment on it again. The $9 million with respect to the commercial mortgages is in respect to specifics. And we drew down the general allowance that we established last quarter in respect of that item. So there was no net impact to the income statement for that. With respect to the other items, it's a little bit more complicated in the sense that the amount that we were advising you of was the amount that we would have recorded were it not for the fact that we were satisfied with the overall level of reserves at the end of the fourth quarter, in respect of structured investments. And those amounts would have amounted to some $50 million. If we were to go back a year ago where there was a lot less certainty, when we had a lot less visibility into these investments and the economic situation was unfolding very rapidly, and had we been on that basis a year ago we would have reported some $50 million that we did not take this quarter. So that's the better way to think of it. Rather than saying we drew down the reserves, is we did not increase the reserves by the $50 million that otherwise we would have increased it. Michael Goldberg – Desjardins Securities: And so to put it another way, if you hadn't had that reserve there against the structured credit then you would have had a $56 million reserve this quarter. Is that correct?

We would have had a $56 million when you add the $50 million and the $6 million that we did report, together with the $9 million on the mortgages had we not established the general allowance for mortgages, which brings you back to the $65 million I mentioned. Michael Goldberg – Desjardins Securities: Now separately, you mentioned that there's several items included in the $27 million assumption changes and other items. Can we get a little more granularity on those items? Are any of them more than $10 million?

Let me just give you quick overview of that. So when we look at the $27 million – Michael Goldberg – Desjardins Securities: If we can take down numbers also.

I would first suggest to you Michael the amounts are not significant. There are a number of pluses and minuses. One way to look at it is to compare the $27 million to the amount for assumption changes. In the source of earnings there is a $28 million pre-tax, which largely accounts for the $27 million in the adjusting items; the assumption changes and other. Then there are other pluses and minuses with respect to some of the items that you would expect to see, both from an experience perspective and from an adjustment perspective as we bring you back to the level of earnings that we advised of Q3 of last year was basically our earnings power. Michael Goldberg – Desjardins Securities : Are any of the of the offsetting items $10 million or more?

A number of them would be in that range, but there are no significant large items that I think we need to discuss. Michael Goldberg – Desjardins Securities : I suggest that you break those out to avoid these questions in the future.

I will certainly look at our disclosure surrounding these items, Michael, to make sure that we are providing the required level of detailed disclosure. Michael Goldberg – Desjardins Securities : That would be appreciated. Also, Steve, you noted that you still have 4% non-investment grade bond holdings. This has been an issue for Sun Life ever since you acquired [Key Port] a number of years ago. Should we be looking in the future for you to wait for these bonds to mature or as markets improve should we be expecting that you will be selling down these bonds holdings?

I think it really depends on a… It’s a bond-by-bond analysis in terms of where there is value relative to the underlying credit profile. So we feel like overall the quality assets are very high, 4% as the percentage of the volume portfolio. Obviously we would like to be lower, but it is a fairly low number. We want to make sure that we are making a good economic decisions as we look at the market. I would expect to the extent that the market continues to improve, there is a likelihood that we might make future sales, but we are at a level that we think we can judge each situation individually based upon the underlying value and the price that we get for the bond. Michael Goldberg – Desjardins Securities : So unbalanced, what does that mean? Does it mean that you are more likely to hold to maturity or sell?

I think it depends if we can get the value that we think is appropriate. What I would say another way is that if we have securities that may be trading at a discount, but we are highly confident in our ability to recover par, then we would be less likely to sell of course. It strictly depends on the value we can receive in the marketplace relative to what we think the securities will recover over time. Michael Goldberg – Desjardins Securities : Okay. I have one last question for Don. Don, are you managing the company with the objective to maximize operating profit or to maximize total profit?

I think that is a distinction, Michael, that might not be a major driver in the sense that we endeavor to manage the company to deliver the shareholder results that we set out in our M D & A and also to run a good business. Michael Goldberg – Desjardins Securities : I’m not sure that I understand your answer.

We manage the company, as I have said, to achieve the objectives that we set out in some specificity in our M D & A and we are also endeavoring at all points to improve the quality of our business.

The next question comes from Colin Devine - CITI

I have a couple questions. First I think on the capital you can probably save us all a lot of time on this call if just as in the U.S. you published the numerator and the denominator for the emphasis here on our numbers. Then we can all do the math ourselves and come up with what we think is excess capital based on target and 200 SSR ratios. Moving beyond that though, for Don, looking at the dividends I want to revisit this again. When we look at the payout ratio today and that now you have to contribute capital down into the U.S. How much long can Sun continue at its current earnings level and maintain the dividends where we are right now? That question was in respect to the U.S. and the negative spreads there. Maybe your company is the only one that I have seen this for, but I haven’t come across any others that still have negatives spread. When can we expect that to return positive? Can you discuss what your target pricing is on that for us? Lastly, there is really no talk on M & A. It really doesn’t sound like there is a whole lot of excess capital, even if there is a 200 [inaudible] as far as the number. Is M & A really off the table right now for you?

Colin, let me endeavor to address the first and third of your questions. Specifically on the dividends, I have been responding to this question for some double-digit number of quarters now. In fact in this particular quarter, re-coverage of the dividends is roughly in line with historical norms where when we were buying back shares plus paying a dividend, we were roughly at the 50% level. The Board of Directors at Sun Life, set the capital position of the company and whether the dividend should be paid, at whichever level each quarter. They were making a decision this particular quarter at $0.36. So my answer isn’t fundamentally different from what it’s been for the last number of quarters. Colin Devine – CITI: Okay. The rating downgrade from S & P is not a factor in that? You are not under pressure for the rating agencies to address this?

We are reasonably confident in our position on capital overall. That includes our relationships with the various rating agencies. So let me move on to your third question so that someone can come back and answer the second question. Your third question on M & A is there continues to be, as there usually is, significant activity in the market behind things. Obviously there are a couple of very prominent M & A transactions going on right now and are underway. I won’t comment on the specifics of these, but they are clearly indicative of activity in the market place at the high end. We are, as always, have a number of changes and opportunities in the inventory. We look at each one-by-one. We are more driven, as we have said in the past, by fit and size, but we are in the deal stream. We are active and our silence is merely indicative by the fact that these are confidential, still underway situations. Of course as you very well know, there is a high-rate of attrition between activity and result in the M & A field. So on to the second part of your question and Keith, I believe, will answer that.

This is Keith Gubbay. Yes, I would say that the imported number includes the fact of credit losses and impairments, but not include the release of reserves. So the credit losses are still being assessed in that number. Colin Devine – CITI: Given that this was a quarter of unusually low credit losses, is it fair to say then that the number is likely to get somewhat worse before it gets better?

Yes. Steve spoke as to the credit environment and the uncertainty of that environment. I think we will continue to see credit losses come through unstructured and there may be other areas where we have credit losses. The reserve releases are just not reported in that line, so the earnings affect is a little different than is implied by the net spread number.

Your next question comes from Doug Young – TD Newcrest Doug Young – TD Newcrest: Just, I guess there has been discussion on the commercial mortgage portfolio. I know in the U.S. there has been discussion in NEIC of changing commercial mortgages and not the capital charge for that. I know it is still pending. Have you done any work in terms of if that was adopted what the impact on your RVC could be?

Don here. It is a little bit early for us to be able to comment on that. We are certainly very much reviewing the developments and we will come back to that later in the year. Doug Young – TD Newcrest: Don, I guess maybe big picture. If we take a look at this quarter and we see that credit remains benign as similar credit that we have seen this quarter. I mean is Q1 really indicative of what we should expect in terms of earning power from Sun Life?

I won’t divulge you, Doug, with the various caviats that are going on in the economic environment, which obviously remains highly volatile and highly uncertain; particularly in the Euro zone. Given an environment for the rest of the year that resembles what we saw in the first quarter, then I think we would expect that the various numbers that we’ve quoted in the rather lengthy title of adjusted earnings with various other qualifications that I won’t repeat. It is broadly representative of our views for 2010 as a whole. Doug Young – TD Newcrest: That is where I am trying to go is that this wasn’t a lot of additional positive items that we can’t get out of the that we don’t see that was positively impacting. That is not the case essentially.

I think we’ve had a pretty detailed and granular discussion on some of the specifics around credit and there was not any major items. This was a relatively straightforward quarter, if there is such a thing, recognizing the complexities over all of our business. Doug Young – TD Newcrest: Just lastly, your interest rate sensitivity did change again in quarter. I am just looking for any comments as to why that would be.

It’s Mike Stramaglia. Early in the presentation Colm referred to the extensive review of the structured investment portfolio that management undertook during the quarter. As part of that initiative, we also reviewed the way that structured investments were being modeled for purposes of determining the sensitivities that you referred to. Given the nature of those assets, there is obviously a complex set of interactions between interest rates, pre-payment fees, future credit, net income, etc. They are obviously a lot more complex than modeling interest rates sensitivities on regular coupon paying bonds. As a result of that review, we enhanced our methodologies for determining those sensitivities and the Q1 results reflect those changes. We think they provide a more appropriate reflection of the company’s interest rates sensitivities for net income. You can see the end result is that the interest rate sensitivity to a return of what I would call a more “normal” signature. You know where we do see the losses and the down interest rate environment and then gains in the rising interest rate environment. It doesn’t reflect any fundamental repositioning or tactical trading in the portfolio. Doug Young – TD Newcrest: Okay, so this is essentially what we should be expecting? This isn’t something that goes on every quarter in terms of review. This is something unusual?

I think yes. Giving the complexity and impact of the structure investment portfolio. It is not something that you would expect every quarter.

The next question is from Eric Berg – Barclays Capital Eric Berg – Barclays Capital: My first question relates to the establishing of the specific provisions for real estate. When you did that, and concurrently took down your sectoral provision, is that essentially because that is how the accounting is supposed to work? Namely a generic omnibus provision is initially established and then is replaced with no earnings impact when the specific provision is established? In other words one replaces the other. Is that how the bookkeeping is supposed to work here?

It is Colm here. Let me comment on that. We do a very detailed review as Steve has mentioned with respect to the mortgages. At certain points we might determine that we need a sectoral allowance or a general allowance because we have not completed some of the specific reviews. So at the end of the fourth quarter, we were at a position that we thought that the level of uncertainty and the deterioration in the mortgage portfolio in the mortgage environment in the U.S. and that we would, in addition to the other specifics that we incurred on an ongoing basis, that we would set up the sectoral allowance, which we did. This quarter we drew it down. There is still three quarters or so of the provision that is still available to us. Over the course of this year we will continue to conduct the specific reviews. If indeed we need to, we would consider topping it up again. This is a quarter-by-quarter review. Eric Berg – Barclays Capital: I guess my question though is why would you be essentially signaling that things are getting better? It just seems to be contradictory that in one action you would be drawing down a reserve, booking income as a result, which would suggest that you were increasingly confident about the outlook for commercial real estate but concurrently established specific reserves. Those two move, taking down the general, increasing specifics seem to be at odds.

Let me process the comments here by saying that the amounts with respect to the mortgages was $9 million, so this was not a significant amount. Our ongoing review of the mortgage portfolio, I think I would ask Steve to comment on that and his views happening in the broader environment.

Well, one comment I would make in terms of the process we went through is that in the fourth quarter we looked at -- in light of the environment, we looked at the portion of the portfolio where we couldn't identify specific provisions, but which based on loan-to-values and debt-service-coverage ratios, we thought that some portion of might have an issue going forward. And it was really looking at that pool that led to the establishment of the sectorial provision. And then as we got into the specifics of this quarter, some of the loans in that pool we actually were able to identify with specificity that there were going to be problems. So, in other words, the loans where we identified the specific provisions were part of the broader pool that we looked at when we established the sectorial provision. So I think it did make sense to offset those specific provisions with the sectorial provision that was established in light of the likelihood of stress continuing 2010. And we continue to believe that the impairments that we identify will run at elevated levels over the course of the year, just given the environment. And we tried to anticipate as much of that as we could in the fourth quarter with that provision. Eric Berg – Barclays Capital: Okay. My second and final question relates to the minimum continuing capital and surplus requirement discussion that we've had. In the U.S., of course, the equivalent of the RBC is sort of uniquely an insurance company concept. It has nothing to do with holding companies. It has nothing to do with affiliated entities. I sort of have a two-pronged question. What is the relevance, if any, of the MCCSR to Sun Life U.S., which I believe is a Massachusetts company. Wouldn't it be governed uniquely by RBC, or is the MCCSR relevant? And this concept of a consolidated MCCSR ratio covering sort of all sorts of things that have nothing to do with insurance is not something that exists in the U.S. Can you explain this consolidated concept, because again, in the U.S., the equivalent RBC refers uniquely to insurance companies.

Thanks, Derrick. I think that you make a couple of very good observations there. And I think with respect to the first item, I would say that the RBC ratio is the key ratio for Sun Life U.S. Eric Berg – Barclays Capital: Okay.

No question about that. And then with respect to the consolidation, what we attempt to do there is to consider all of the operations of Sun Life Financial, the holding company, in accordance with a MCCSR framework, although I agree with you that the framework itself doesn't lend itself to operations that are other than insurance operations. We do consolidate everything in order to arrive at a consolidated MCCSR ratio, which we do track and monitor, and we've had a discussion around that earlier in the call. And that is a framework that we have here in Canada. We do provide that information to our regulator here in Canada. So that's the framework, and that's how we operate. It is not identical, as you say, to the situation in the U.S. Eric Berg – Barclays Capital: And this consolidated ratio is relevant to your calculation, is the critical driver of your calculation of excess capital?

It's certainly a ratio that we track and monitor and we do provide you with that information, correct.

The next question comes from Darko Mihelic with Cormark Securities.

Just a question on the movement of -- or I guess employing the excess liquidity. So if we get to $8 billion by midyear, my question is: Could we think of that as saying, okay, there's about $2 billion being deployed at, I don't know, maybe a 3% annualized rate higher than what you're at now, where would that flow in the income statement? My suspicion is it would be surplus capital -- earning on surplus and a little bit of experience gains. But can you walk me through how this affects the income statement for Sun Life?

Yes. Broadly speaking, you are correct that the amount of the excess, to the extent that it's not backing insurance liabilities, will flow through in surplus. And to the extent that it is backing insurance liabilities, to the extent that we have not invested the funds in a particular quarter, that comes through as lower investment experience in the quarter. And indeed, we did have some of that result this quarter.

And is $8 billion the right number? I mean, I notice in the past, with almost a similar size balance sheet, you were as low as $6 billion. So could we expect that as things quote/unquote normalize that you could even push that lower?

Yes. I think the overall requirements around liquidity, obviously people have recalibrated some of their views around that in light of the last couple of years, but I think there is a possibility perhaps to drop it a bit below $8 billion. We do have a maturity that comes due in July, so that will also draw down on the liquidity.

And last question, with respect to MFS, 30% operating margin. In the past it's been higher. My suspicion is that it's mixed, but is there anything that you are doing to increase your margin as AUM rises, or is this purely a mixed issue in this -- is there really nothing going on at MFS that suggests that we should look forward to a higher operating margin?

This is Rob Manning. I think in terms of the margin, all asset managers going forward are likely to have a lower peak margin than in the past. And part of that is the infrastructure requirements and the regulatory requirements in both the retail and the institutional business. And particularly the fact that B shares -- which at some point maybe I could have a cup of coffee with anybody who's interested -- sort of change the economics of a retail mutual fund business. But we do think that trough-to-peak margins are going to be lower, but still in the mid thirties is something that we would target. For MFS, institutional margins tend to be slightly lower than retail. So one of the things to think about in terms of mix is both international assets coming in, which are higher margin, and retail, particularly offshore, which are higher margin than our institutional business. So it will evolve. It's lumpy. It moves around quite a bit, but I think the statement of peak asset manager multiples actually earnings coming down from a margin point of view is a good way to think about it.

Your next question comes from Mario Mendonca with Genuity Capital.

Question for Steve Peacher. Your discussion around the structured products and the MD&A -- perhaps not the MD&A, but your press release, you refer to low levels of subordination on some of these structured products. And I suppose the crisis process of some of these products are kind of an all or nothing. Is there anything you can offer us to give us confidence that you're not sort of close to that line, the all-or-nothing line, on the CMBS and the nonagency MBS? Or maybe perhaps what's the level of subordination?

Well, I don't have a figure that would give an overall level of subordination across either of those portfolios. It varies greatly, security by security. So we have some securities where the subordination is multiples of what it might be in other securities. And to reiterate how we look at the analysis, we go security by security, we model out the underlying -- the potential losses on the underlying collateral pool, and then we run that through the cash flow hierarchy of the specific security and apply that to whatever subordination exists. And also the other relevant factor is the thickness of the tranche that we happen to own in a given security. Those two factors will determine how sensitive the potential loss is to a change in the key factors that drive the expectations of collateral performance. So I don't have an overall number. It varies greatly by security.

Perhaps you could talk then about the key factors that go into the model and drive those expectations.

Yes. Some of the key macro economic factors -- well, there are both macro economic factors and then there are specific factors relevant to a specific security. So macro economic factors would be unemployment rates and home price declines. And more specific factors would relate to the -- obviously, the subordination in a given transaction, as well as the geographic dispersion of the mortgages in the collateral pool. On the commercial mortgage back side, it would very much be relevant -- what would very much be a driver would be the specific properties underlying the collateral pool, because that can be much lumpier than a residential mortgage bank.

So if we take the two macro factors that we can all look at, unemployment and housing price declines, what sort of delta from where we are now would we need to see before we breach that line?

Well, I don't know if I have a specific quantity in answer to that question, but what I can tell you is that we've tried to make pretty conservative assumptions. So we've assumed that unemployment stays at current levels for an extended period, and we've assumed that home prices, for instance, actually have some deterioration from year-end levels. So I think we've tried to build in conservative assumptions on those two key drivers.

So further --

Further home price declines across the U.S. from year-end levels, year-end year-end '09 levels.

Thank you.

Theodora, this is Phil Mallock. I think we're out of time for today's call. I would like to thank all of the participants on today's call and note if there are any additional questions, we will be available after the call. And should you wish to listen to the rebroadcast, it will be available on our website later this afternoon. With that, I will say thank you and good day.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.