Good afternoon. My name is Tiffani, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Sun Life Financial Second Quarter 2015 Financial Results Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Greg Dilworth, Vice President of Investor Relations, you may begin your conference.

Thank you, Tiffani, and good afternoon everyone. Welcome to Sun Life Financial's Earnings Conference Call for the Second 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 second quarter results by Dean Connor, President and 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. Steve Peacher, Executive Vice President and Chief Financial Officer and President of Sun Life Investment Management will also be on the call this morning to provide an update on Sun Life’s Asset Management Pillar. 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 two, 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 now turn things over to Dean.

Thanks, Greg, and good morning everyone. Turning to slide four, the company reported strong underlying net income of $615 million of 23% from the same period last year and an underlying return on equity of 13.9%. Our expected profit was up 15% from broad growth across our businesses and our result this quarter benefited from improved mortality and morbidity experience relative to the second quarter of 2014. Wealth sales in the second quarter were $31.9 billion, up 25% over the prior year from higher sales in individual wealth and group retirement services in Canada, from mutual fund in India and the mandatory provident fund in Hong Kong, from higher retail mutual fund sales at MFS and from the inclusion of Ryan Labs in our sales results. Insurance sales were $427 million of new annualized premium up 8% over the prior year period, driven by growth in both individual and group benefits products in SLF Canada and strong growth in insurance sales from our agency channels in Asia. During the quarter we completed the acquisitions of Ryan Labs and announced the acquisition of Bentall Kennedy and Prime Advisors. In just 18 months, these three acquisitions plus our start-up in Canada have created Sun Life Investment Management, and investment manager with over $50 billion of assets under management. At this level of AUM, Sun Life Investment Management is well placed to meet growing client demand for real estate, alternative yield strategies and liability driven investing. All of these newly acquired businesses along with MFS and our general account investment team report to Steve Peacher, and Steve will spend a few minutes prior to the Q&A portion of this morning’s call to discuss our asset management pillar in more detail. Turning to slide five, our earnings are well diversified across our businesses both…

Thank you, Dean and good morning everyone. Turning to slide eight, we take a look at some of the financial results from the second quarter of 2015. As Dean noted, we had a strong top line and bottom line performance across all of our businesses this quarter. Our operating net income for the quarter was $731 million, up from $488 million in the second quarter last year. Underlying net income which excludes the net impact of market factors and assumption changes, amounted to $615 million driven by strong earnings in SLF Canada and MSF, continued progress in our group business in SLF U.S. and a significant increase in underlying earnings in SLF Asia. Our underlying return on equity was 13.9% for the quarter, an improvement of 100 basis points over the same period last year. Second quarter adjusted premiums and deposits were up 12% over the prior year to $33.7 billion. And assets under management ended the quarter at $808 billion. We maintained a strong capital position ending the quarter with the minimum continuing capital and surplus requirements ratio for Sun Life Assurance Company of Canada of 223% and the cash level of $1.7 billion at the holding company SLF Inc. We continued to focus on the prudent deployment of our excess capital. We’ve repurchased $2.2 million common share during the quarter. We also announced the acquisitions of Bentall Kennedy and Prime Advisors during the quarter as we expand our asset management pillar. Turning to slide nine, the net impact of market factors increased earnings in the quarter by $97 million after tax. While the impact of assumption changes and management actions increased net income by $19 million after tax. A favorable net impact of market factors was primarily due to higher interest rates in Canada and the U.S. Losses…

Thank you, Colm, and good morning everyone. Turning to slide 14, when we established Sun Life Investment Management last year, our goal was to add a new dimension to our asset management pillar by sending the same core investment capabilities that we’ve used to manage Sun Life’s general account to other institutional investors. In particular, we set out to offer customized liability driven investment strategies and alternative yield strategies to institutional investors across North America. Over the past 18 months, through both organic growth and acquisitions, we’ve established Sun Life Investment Management as a third-party asset manager with over $50 billion of assets under management and hundreds of institutional clients. Just over year ago, Sun Life Investment Management Inc. launched a series of alternative yield strategies for Canadian defined benefit pension plans. We’re extremely pleased with the response to date and in the second quarter we got it almost $500 million of new commitments to these funds. And these commitments will be funded over coming quarters as we source the individual investments. In April this year, we closed on the acquisition of Ryan Labs, a tenured institutional fixed income manager in the U.S. with outstanding investment performance and a particular expertise and liability driven investing. Ryan Labs had gross flows of over $500 million in the second quarter. Prime Advisors which closed on July 31, is and therefore addition to Sun Life Investment Management. As it focuses on customized fixed income strategies for insurance companies that outsources the management of assets. And Bentall Kennedy provides a premier platform in real estate investment management in both Canada and the U.S. with assets under management of $28 billion. The Bentall Kennedy transaction is expected to close in the third quarter. We’ll be disclosing more detailed financial information on these businesses on a combined basis in coming quarters. Turning to slide 15, MFS and Sun Life Investment Management together comprised our asset management pillar in North America, and we believe the two businesses complement each other well. MFS is a well established manager of retail and institutional products and focuses its investment activity in the public markets. Sun Life Investment Management is centered on customized fixed income solutions for institutional investors and alternative yield oriented assets in private markets. The combination of MFS and Sun Life Investment Management positions the company to benefit from the growth in traditional asset management as well as trends toward liability driven investing and alternative asset classes. And with that, I’ll turn it back over to Greg before moving to the Q&A portion of the call.

Great, thank you Steve. To help ensure that 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 Tiffani to please poll the participants for questions.

[Operator Instructions]

Tiffani, are we polling the participants for questions?

[Operator Instructions] Your first question comes from the line of Humphrey Lee.

Good morning, and I thank you for taking my call. I want to ask about your appetite in M&A. Given some of the recent transactions you’ve done, do you still have any bandwidth for further acquisitions, specifically since there are lot of insurance related activities here in the U.S., how do you think about group insurance M&A market in the U.S.? And then on the flip side, would you consider divesting any kind of non-core or subscale business given the increase interest in the U.S.?

Humphrey, it’s Dean. Thank you for your questions. As we said before, we continue to turn the soil over on acquisition opportunities in all four of our pillars and that would include the U.S. group market. Some investors had lowered their long-term ROE expectations and I’m thinking of some pension funds and notable acquisitions by Japanese buyers but we have not lowered our long-term ROE expectations and you recall that earlier this year, we stated our medium term financial objectives to include a 12% to 14% ROE. So as we evaluate acquisition opportunities, they do have to be on strategy and obviously they have to clear the hurdle in terms of expected ROE over the life time of the business. And certainly the acquisitions you’ve seen us do the acquisition in Malaysia two years ago and all three of our asset management acquisitions as Steve talked about, have met these criteria. So, I won’t comment specifically on the U.S. group market beyond that. Coming back to your opening question, do we have the bandwidth, we certain do, as Colm said, we’re in a fortunate position of having excess capital at the [indiscernible] and well capitalized in SOA. Would we consider divestitures, again I won’t comment on any specific parts of our business but we continue to look at all parts of the business and how do convey and create the most value for shareholders. And you’ve seen us divest as well in terms of our VA business in the United States, but I would say to you today we’re happy with the mix of businesses we’ve got, and we’re looking to add.

Okay, thanks. And then switching gear to MFS, we continue to see good retail flows in MFS but management fund flows continue being weak. You said some of the reasons have related to kind of your actions and customer rebalancing and industry trend. When do you expect to see an inflection point related to the management flows, and can you talk about the progress that you have made in terms of product introduction to your management fund platform?

Yeah, that’s a good question. We’re working pretty hard specifically on the blended research product that we previous mentioned on the call which we’ve talked about in the past. All of those strategies in there are close to Canada and have very strong track records, significantly ahead of the benchmarks of which they’re measured. And we sell that against mostly passive strategies in the market place and in the sales time because of unique product is much longer but we – last year I think we did about 300 meetings with institutions and consultants and we’re going to do about 1,350 meetings this year. And I can tell you that we are in final as we speak but as I’ve mentioned in the past, it’s very, very difficult to predict when those RFPs will be converted into wins and it also depends very much on the investment environment, it’s been very challenging lately, you’ve had Greece and Puerto Rico and a lot of volatility in the market. So we’re working really hard at it and we are very, very confident that we’re going to be able to turn the corner at some point down the future but I can’t put my specific timeframe on it for you.

Okay. And then just one quickly follow-up on retail side. The five year performance kind of dip in the second quarter, I think 88% of your funds are in the top half that’s closer to 95% last quarter. Can you provide some color of kind of what happen there?

Yeah, this is Michael Roberge. I think if you look at the quarter-over-quarter with a slight reduction from low 90% to 88%, I think from our perspective if you can achieve 88% our performance relative to peers over a five year period of time that’s about as good as you’re going to do. And then over longer period of time like 10 years we’re up around a 100%. And so there was nothing meaningful in the quarter that would cause us any line.

Okay, thank you.

Your next question comes from the line of Tom MacKinnon with BMO Capital Markets. Your line is open.

Yeah, thanks very much. Good morning. Questions for Colm and then one follow-up. Colm, if we look at the impact of investment activity on insurance contract liabilities, trying to get a feel for a run rate, I think you had said several quarters ago that this was probably – you would benchmark us to about $10 million to $20 million per quarter and so what’s driving these gains you’re getting now and how sustainable are they and are you prepared to update the benchmark?

Yeah, thanks Tom. So, you’re right, a couple of years ago we talked about investing gain levels around a $10 million to $20 million level. We did point out at the time that does tend to fluctuate and of course, it really does impacts a lot on what’s happening on the sales side and the type of product mix that we’re bringing on. We have good capacity to invest and generate investing gains. So I would say that the $33 million that we saw this quarter, well it’s strong, it’s not out of line with what we’ve experienced in the past but I don’t think we’d step away from the sort of $10 million to $20 million level that we talked about previously as being indicative of a sustainable run rate levels. This quarter I would point out that within investing gains we did have a little bit in Asia related to some rebalancing as a result of ALM activity and that appeared in that line, and that was about $5 million but we feel pretty good about the investing gain capability that we have across the firm and so with those couple of additional comments, I think we’d stand by the type of guidance that we’ve given previously.

Okay. And maybe just as a follow-up I can ask about the high level of mortality and morbidity gains that you appear to get I think a lot were attributable to the Canadian group benefit market place. It may have actually been a swing from what you saw in the first quarter. Maybe Kevin is there to comment on that and sustainability of that.

Sure. Hi Tom, it’s Kevin speaking. So, yeah we saw really excellent mortality and morbidity in the group businesses – group business in Canada last quarter. I think probably what I would say to you is to look at two quarters combined as the best kind of indicator sort of a normalized and sustainable level. If they were down in the first quarter, above normal levels in Q2 but if you take them combined I think that’s representative of where we feel we are which is quite a healthy level. We’ve been investing lot in our disability business around claims management processes and footprint and focused repricing efforts and management of the block. And so we feel quite good of where we are right now.

So, are you anticipating – if I took the blend of the down in the first quarter and above normal level in the second quarter, does that mean that overall this should be generally zero or just modestly positive?

I think it’d be quite positive and I’d say the upside this quarter was half due to do volatility and half due to improved underlying profitability.

Okay. And if I could just squeeze one more in with Dan, the weakness in the voluntary sales in the U.S., this appears to be a bit of a trend here and they were particularly weak in the second quarter, just what’s going on there?

Sure Tom. Our sales overall in group benefits were down year-over-year in the comparable quarters and year-to-date and that of course, is due to the pricing actions that we’ve been taking so, not on expected. The component that is voluntary especially in the second quarter just due to the seasonality of sales patterns is a relatively small number. So I wouldn’t read too much into that alone other than it being reflective of the overall moderation in sales.

So you’re trying to moderate both voluntary sales and group benefit sales? Are you having pricing issues in both of them or is it just more of a seasonality thing in the voluntary?

The voluntary sales are really a component typically a bundled sales. So, often the employer sponsored in voluntary sales go together. So, the pricing actions that we take in have been across the board in both employer sponsored and voluntary products.

Okay, thanks.

Your next question comes from the line of Steve Theriault with Bank of America Merrill Lynch. Your line is open.

Thanks very much. First question for Colm, please, on the basis review. So, I think Colm, you made a similar statement last year when you reported your Q2 numbers. So just wondering, is it fair to assume you haven’t uncovered any large positive or negative items so far through the larger annual review? And at this point, the ultimately effect looks like it’s going to be relatively nominal or would you say there is still some material risk one way or the other on this front?

Yeah, so I’d start up by pointing out that the work is still underway, now it is August so you can imagine we’ve made good progress. We do choose our words carefully as we look at our disclosure at the time of year relative to the work. If we’re at a point where we had a large negative or a large positive to disclose based on everything we’ve done, we would be signaling that to you. So, the work really as I say is underway and it covers a lot of topics. We’ve clearly are looking at areas where we’ve had challenges from an experience perspective, so we’re taking a close look at that but of course, we also have management actions that we look at as well and they can turn out to be positive. So when we look at everything together we really don’t have a number to put in front of you and that’s based on good level of work done to date but a fair, but still yet to go.

Okay, I think that’s helpful. And maybe also for you Colm, on excess capital, so a $1.7 billion of whole cash I think that’s unchanged, you’ve got the pending completion of the Bentall Kennedy deal for $0.5 billion, but then when you hold co the MCCSR being higher than probably where it needs to be in some space on debt to total capital. Net of all that, what do you consider to be your excess capital position in that quarter end?

Yeah so, I think you’re right to pro forma in the proceeds that we’ll be paying out for Bentall Kennedy. And as we look at that we’d still be at above a $1 billion of cash at the hold co and we obviously have some excess cash at some life assurance company of Canada, if we were to take the – a larger dividend from SLA based on its strong level. So we still continue to be in a very good place and you’re absolutely right, with the leverage ratio of 22% we have capacity, we’ve talked before that we’d like to run normal times of 25%, we will be above or below that depending on circumstances. So, being well below at this point gives us additional capacity, so we’re well positioned if suitable opportunities were to arise.

But would you say a $1 billion of excess cash certainly under suits what you think you have in terms of excess cash?

Yeah, the excess at the holding company again pro forma, the Bentall Kennedy transaction would be below a $1 billion because we do like to keep about $500 million of excess at the holding company. Just to have a buffer against the normal requirements there to cover off interest payments and dividends etc at the hold co. But I think when you take account of the excess at SLA you think of the leverage capacity, the number you’re talking about is definitely reasonable.

Okay. And just if I could squeak in maybe a follow-up to Dan from Tom’s question. Looking at the in-force has traded water at $2.5 billion for a couple of years now, so how long until it starts setting higher, how much of that will be dependent on some of the stuff we’ve been talking about getting the book repriced and how much dependent on just the U.S. economy getting better?

Sure. With the pricing actions we’ve been putting through, we’re actually pleased with the fact that this is stable. Our mix has changed a course where selling more [indiscernible] in somewhat less of group business than we were before, so that’s balancing out nicely. In terms of the group pricing, we’re about 30% of the way through that in terms of the book of business, so we still have ways to go. We would expect that we’d be able to maintain the book of business as we complete that repricing and then growth gradually should resume as we get through that process.

And can you remind the – in terms of getting it mostly repriced it’s another year I believe is it?

Well, we’re about a year into the repricing at this point, so we probably have in the range of about a year and a half, in other words to get through another two January renewal cycles until we have the vast majority of the business repriced.

Okay, thanks very much for that.

Your next question comes from the line of Robert Sedran with CIBC. Your line is open.

Hi Dan, if I could just follow-up on that. I’m curious to know from a competitive market place perspective, you’ve been increasing price is the market been moving at all with you or is if, are you kind of off market and would you expect the market to move towards you at some point?

No, we’ve been moving with the market. They’re actually – we’ve actually seen a number of competitors taking similar actions over the past year or so. So this has turned out to be a favorable time for us to go through a repricing of the book.

Okay, and just the underlying earnings on display in that segment this quarter, it bounce quite nicely from the Q4 drop and I know there is some unusual stuff going through there. Colm, I wonder if you can or Dan for that matter can provide a little bit of a better sense of where that run rate kind of is at this point, removing some of the noise that’s in the numbers?

Yeah, I think you’re noting obviously the first two quarters have been quite a bit better for group benefits than where we were last year at this time, we’re up about $40 million in earnings year-to-date versus the same period last year. The first quarter we obviously had some a number of good things happening including some likely favorable volatility. We would think of the second quarter as more representative than the first quarter of the current status of the business.

Okay.

And Colm here with just one follow-up question, the comment is about the U.S. group segment and it’s totality we also did have a positive impact from credit in the quarter and that was from strong recoveries on structured securities and that was about $10 million and we wouldn’t expect that to reoccur on a regular basis, we might expect to see some further recoveries overtime but we wouldn’t bake that in on a regular basis.

Okay. The question was on both sides, I appreciate the added color. And just one last quick one for Steve Peacher, at the Sun Life Investment Management, there is Ryan, there is Bentall, there is Prime, there is SLGI. Are there any synergies between these businesses are they for standalone businesses that roll up into the same kind of pillar, I mean revenue or expense synergy?

Right. Well, thank you for the question. First just to clarify, SLGI, Sun Life Global Investments is really not part of Sun Life Investment Management, it’s part of the Canadian business. But if you look at the businesses under Sun Life Investment Management, now they’re actually four third-party businesses. There is the business we started in Canada a year ago Sun Life Investment Management Inc, now there is Ryan Labs, Prime Advisors and Bentall Kennedy. And they were very much assembled as a spectrum of capabilities that go together. So while they’ll maintain their independence, their independent brands. We do think there are – and we’re already seeing joint product development opportunities, cross marketing opportunities. I think it’s not so much an expense synergy story but it’s a revenue synergy story. So, we definitely think these aren’t disconnected, we think they’re connected, we think they go together and we think we’re going to be able to create growth because they’re aligned under Sun Life Investment Management.

Thank you.

Your next question comes from the line of Meny Grauman with Cormark Securities. Your line is open.

Hi, good morning. Just following up on that discussion with Sun Life Investment Management, you talk about the synergies, I’m wondering you’ve done a few acquisitions here with different capabilities. Is there something else a capability that’s kind of on your wish list that would fit in nicely here or would you say that you kind of have what you need in order to move forward? Is there something on the M&A wish list that is still missing from Sun Life Investment Management?

Well, I would say that we’ve been able to put together a lot in a short period of time. So we feel like now with the specter of capabilities in the level of AUM, we’ve got the core capabilities that we’re looking for across both liability during investing and a suite of alternative asset classes which can go together or can be separate. Overtime if there are opportunities to expand the menu of the alternative asset classes that we could offer I think the theme would be, the kind of things that would work for us. So alternative asset classes with the yield orientation, a high quality bent, if there are capabilities that we encounter overtime that would allow us to expand the menu, we might be interested. But I think our focus at this point – at this moment is to take these entities that we are just closing on and really were to create a coherent entity and then exploit some of the synergies that we think exist to accelerate growth.

Great, thanks for that. And then just second question on expected profit growth, quite strong for the company as a whole and you noted impacts and benefits currently, looking at candid specifically though down year-over-year and that’s been sort of sluggish over the last few quarters. I’m wondering if you could just explain what’s going on there?

Sure. Meny, it’s Kevin speaking. I’ll just note that it’s down just slightly sequentially about a $1 million quarter-over-quarter. The main story here is really investments in growing the business and particularly more recently digital, some minor impression from economics but mostly investments in growth. And I would say you’re already seeing some of the benefits of that and places like DB Solutions where a lot of that investments behind us and you saw $400 million of sales this quarter and showing up on a different one, the pricing gains one, some nice new business pricing gains. We would expect that, you’ll start to see contribution from investments like SLGI as it moves through breakeven early next year and continue to contribute the growing earnings in Canada. So I think this is all in line with what we’ve signaled as investments in what we see as big opportunities for our growth in Canada, and you’ll see a positive trajectory emerging early next year. I would also point you to sort of a total underlying earnings picture and strong – things like productivity gains coming through investment gains, new business gains were down a little bit over year-over-year still $17 million on the quarter, stronger LTD experience gains. So, all of that puts us in a position where underlying earnings are up year-over-year, they are actually just a head up tracking towards our Investor Day target which is $900 million for the year. So, I’m feeling good about kind of all of those pieces now they fit together and remain [indiscernible] them.

All right, thank you very much.

Tiffani, do we have next question?

Where is Tiffani?

Tiffani, do we have any more questions?

Your next question comes from the line of Gabriel Dechaine with Canaccord Genuity. Your line is open.

Thanks. Firstly, let’s go back to the U.S. group business, and Dan, I’d like to hear that you think this is a good run rate representative quarter but it seems to me like you might be understating things there, you’ve only gone through 30% of the repricing. And this is the first time, at least that I’ve noticed they talk about claims management and expense gains. So, it sounds like there is more than just the pricing that’s driven the big year-over-year improvement and earnings in that business. So maybe you can go through those other two items, whether the claims management and the expense gains that have helped this business? And if those are sources of additional growth and layer on top of that the rest of the repricing, we could see profits actually move quite a bit higher than the $22 million.

Well, you’re right that there is three components to this. Pricing is one of them and that’s the one that will take the longest simply because of the three year rates that are typical in this industry. As you’ve noted, we’ve also made investments in improved claims management and we’ve already seen quite a bit of the benefit of that already. Those investments have been in progress for over a year. And we’ve also been, as you noted taking expense actions and we’re probably quite a bit further along in those than we would be on the pricing, so we’re seeing a good deal of the benefit of that earlier in the process here. But overall, I think you’re right that we’re not yet at the full potential that this business has and we have ways to go.

Okay. So, thanks for that. I guess the claims management, is it safe to say that the prior years when the emphasis was on sales perhaps a bit more than it should have been, you aren’t doing a good of a job on claims management and now that you have addressed that, you probably could hope to see less volatility in group?

Well, the nature of group is inherently volatile, so I don’t think we can guarantee no volatility in the future, in fact I would probably expect that overtime. But we have made some meaningful investments in claims management adding some staff. In the past quarter we opened a model office for claim management, our new Sun Life Center for Healthy Work in Scarborough, Maine, in the Portland Maine area which is essentially the focal point for disability insurance in the U.S., so there was a lot of great talent available there. And we think we’ve taken the right actions to put us on a good course to do a really good job for our members helping them get back to work in the future.

Okay, and next – thanks for that. Next question is on Asia, a big growth, I mean 80% plus earnings growth underlying basis, it doesn’t look sustainable but nonetheless you’ve got excellent growth in that segment for several years now. So kudos on that, but it’s still a business that generates a sub 10% underlying ROE. I’m just wondering what you need to get that above the 10% mark, if long-term you expect it to be above the 12% to 14% target range for the consolidated company. How long it gets the – it takes to get there, I imagine scale is a big part of this progress overtime but what is that scale really mean, what do I have to look for in your numbers, does sales going a lot higher than they already are?

Gabriel, it’s Kevin Strain. And I think you see the combination of the good sales growth we’ve had in the past, focus on the persistency of the business, so building the in-force business. The fundamental of the B&B is also strong, you heard Dean talk about health and accident being up 29% and health and accident has the strong B&B. And it’s reflected in our expected profit, so the expected profit grew $20 million in the quarter which was up 37%. About half of that was concurrency and about half of that was from business growth. So there is definitely a currency tailwind in the Asian number that’s probably adding about $10 million of income for the quarter but what you need to do is watch us continue to build our distribution and our sales momentum. We’re seeing very strong growth in agency which Dean referred to. We’re also seeing very strong growth in our wealth businesses which also have good B&B and are building the expected profit. So I think this is broad based then our focus is on delivering that growth on a consistent basis, and so the number is – it’s a big jump in the quarter to the $70 million but it was $60 million last quarter and I think the focus is on making sure we continue to deliver the B&B and the expected profit growth.

Hey Gabriel, it’s Dean, if I could add one piece of that, which is when you look at the profitability of the product, they’re fundamentally profitable products such that when you layer them on top of the in-force and you think about Asia for us where the ratio of new sales to the in-force is higher than you would find in more mature markets like Canada, you do see a pattering of improving ROE overtime as the new products were rightly come into the in-force and lift it up. And certainly that’s what you’re seeing in this more recent period and that’s what we see when we look ahead.

Great. And you do expect Asia to be above the 12% to 14% target range or no?

That’s going to take a long time to build out your in-force and build out your scale and build your business. We’re focused on fundamentally improving the businesses in each of the countries, each and every quarter building the ROE on a very sustainable strong basis that’s based on the fundamentals. And I think if I had to point at one thing I’d look at the agency grow with it and Dean referred to this that we’ve had across the board and these are in Canadian dollars, so there is a currency lift to these. But the Philippians was up 72%, Hong Kong was up 14%, Vietnam was up 71%, Indonesia was up 54%, India was up 16% and [indiscernible] was up 48%, [indiscernible] China was 48%. So you can see the type of growth you can create when you get the model when you get the right people. And as Dean mentioned, these are fundamentally profitable businesses. So I think what you want to watch Gabriel is how we continue to grow with the focus on persistency and B&B which should come to in the expected profit.

Okay, thank you.

Your next question comes from the line of Peter Routledge with National Bank. Your line is open.

Just to follow-up on Gabriel’s question, in what countries in Asia are you over 12% ROE?

We’re not disclosing the earnings by country or the ROE by country at this point. So, the overall focus is to make sure we’re building the businesses. We’re seeing good momentum as I gave you across the board on the agency side and we’re seeing a lot of momentum in our NPS business which was up 20% in the quarter. Dean referred to India asset management business and we’ve had really strong performance in our equity fund and our fixed income funds there, and very good growth in that business. And the Philippians mutual fund business which is the number two mutual fund business also had solid growth on the wealth side. So, the factor is, bringing all of these together and focusing on growth of each of them but we’re not disclosing the earnings or the ROE by country.

I think the question around the question is, a skeptic might say this is just a Hong Kong franchise and the other franchises are not earning, and will someday but that’s going to be five plus years away. I mean how would you respond to that skeptics?

Well, the skeptic would be quite wrong because I think we’re seeing very good growth. Philippians is been a very strong performer for us. Colm mentioned Hong Kong, Hong Kong has been a strong performer, so the Hong Kong business has done well last year. The addition of Malaysia has been quite a profitable business for us. In the case of India, it’s always been profitable to us, it’s a profitable business to us and the growth they’re having in the wealth management business in particular is helping. And in fact in this quarter, every – and I can’t promise this in every quarter because we are making investments and there is a number of reasons but in this quarter every country made a profit for Asia.

Great, great. And just on India, you mentioned it, I think you own 49% of the investment management with 26% of the insurance companies Sun Life Birla, Birla Sun Life pardon me. If you went to 49% assuming you stayed within your ROIC guidance for acquisitions, how accretive would it be immediately if you went to 49% from 26%, I mean would that make a big difference or would it just be a browning error?

Well, it’s going to depend on the price we pay, if we buy that.

I’m saying, assuming – you stay at your – you stay within your disciplined acquisition ROIC targets that you’ve done quite well the last several years.

I don’t really want to talk about hypothetical on the call. I think we do like the India business, I mentioned that it’s profitable. We like the partner there, we know the business, we like the management team but when we have something to announce that we – if we do have something to announce on an acquisition you get that at that point in time.

Okay, fair enough. Thanks for taking my questions.

Your next question comes from the line of Sumit Malhotra with Scotia Capital. Your line is open.

Thanks, good morning. First question is for Colm or Larry. I understand that you probably don’t want to go too much into specific details but as far as the actuarial reviews concern for next quarter, Larry has talked in the past few quarters about the consistent negative labs experience that Sun Life has had. And when we think about the fact that that’s been discussed to something that likely is part of that review. Shouldn’t – am I wrong to say that that would be the dominant factor as far as the review is concerned and we’re likely setting up for a charge to come through here for the company, it didn’t seem like that was the way you were thinking about it?

Well, it is true that we do expect to strengthen in some areas in labs and policy holder behavior would be one to address the recent experience. However, as Colm mentioned, we are reviewing a number of assumptions across many businesses. And in particular, are considering some management actions. So there are some items that are leaning the other way. At this point the net impact isn’t clear.

Isn’t clear but just as in previous years I think we’ve had this discussions continuingly over Q2 and it ends up being relatively a non-event. Is that the way you would be leaning right now that you have some offsets to areas that are more clear to be strengthened?

There are some items going each way but because there are so many items in place we’re just not in a position to be able to give you guidance one way or another on the total at this point.

All right, thank you. I’ll move to my second question which is around the M&A theme and it maybe for Dean or for Kevin Strain. So firstly, on the wealth management side, so on the three acquisitions the company has undertaken in 2015, I believe there is only one where you had to disclose the purchase price immediately and as far as I know that’s the reflection of size. As you contemplate your acquisition appetite, is that fair to say that the Bentall Kennedy deal is representative of where you’d be willing to go on the high end or is crossing the billion dollar mark something that’s feasible for Sun Life?

Thanks, Sumit. We don’t – we haven’t really narrowed or limited the size of transactions. I guess three or four years ago, given our then current capital position and our then current risk position including our VA business we did talk in terms of smaller acquisitions. And since then as you know, we told the U.S. VA business significantly derisk the company, built a sizable capital position and have paid down a lot of debt. So, as Colm said earlier, we have a fair bit of financial flexibility. So, we haven’t limited ourselves in terms of size and we’re more interested in strategic fit, we’re more interested in businesses that when – under our ownership we can accelerate their growth. Coming back to Steve’s point around synergies, we’ve got some very exciting ideas that we’re working on with each of the three companies in Steve’s [indiscernible] in terms of how to grow them more quickly. And then over the partners of those companies are excited about that as well. So, that is – that’s our first strategic fit and ability to accelerate growth and of course, the second source is around the economics, particularly long-term ROE, the life time ROE from the business has to create value for shareholders.

And I’ll stop here. So the – at least the recent announcements have all been in the asset management space, it’s never been the easiest place to acquire but just going back to some of Kevin’s comments, where does the Asia opportunity look in terms of partnerships or distribution agreements for Sun Life, is that something that’s still on the radar or has this become even more organically centered in the near term?

Well Sumit, as I said earlier, we continue to turn the soil over in all four pillars and that would include Asia looking for opportunities. The nice thing is, we have very strong organic growth opportunities right in front of us. And so it gives us time and it gives us the ability to not reach for the pitch, in other words to swing at things and swing hard at things that we think will really make a difference to the business. There are opportunities all the time that we’re looking at in Asia and I expect that will be through for some time to come. Having said all that, none of it is easy right, because there is lot of capital in the world chasing lot of properties, so we continue to be disciplined around that.

Thanks for the time.

Your next question comes from the line of Doug Young with Desjardins Capital Markets. Your line is open.

Yeah, I’ll keep this quick, most of my questions have been asked and answered. So just one that I wanted to go back to you Colm and that’s the SLA MCCSR, I don’t think you’ve ever kind of put a pin point on what you think are reasonable into CSRs at the SLA level would be, but obviously as you mentioned you’ve derisked the company over the last little while. And so just wondering, what’s a reasonable level, do you still wanted to be above 200% to protect in case it’s market downturn, just wanted to get a better sense of that? Thank you.

Yeah, so I think you’re absolutely right. 200% is the level that we operate above and having a reasonable buffer above that in the event of interest rate movements, equity movements in the quarter is always very helpful. So I think if you think of somewhere in the 210% range its’ reasonable that we would want to be at that level, and 223% is obviously a strong level for the reasons we’ve talked about.

Great. Thank you very much.

Your next question comes from the line of Mario Mendonca with TD Securities. Your line is open.

Good morning. More of a sort of broad philosophical type question. For several years reviewing Sun Life’s experience gains and I’m referring more to policy holder experience gains, it was clear that there were mostly losses. And that seems to have turned the corner. And what I would appreciate hearing from you is whether I’ve characterize that correctly, and maybe perhaps why has it turned the corner, is it just all the management actions, is it stronger reserving practices, is it mix of business, if you could – maybe Colm, if you could address that broadly or Larry.

Well, I think it is – you’re right to characterize there is a little bit a philosophical question. It’s one that we clearly grapple with given the nature of our business and the assumptions that we have to make about events, and frankly Larry, in the economics over the last few years which have been quite challenging in the low rate environment. I would point out that one aspect of the charges you’ve seen is that they are magnified by a low rate environment. When you reflect everything that is out for low rates, the amounts that you see coming through the experience are larger and some of the new assumption changes. But I think management activity is very important point, we’ve talked about that a fair bit both Kevin and Dan talked about the ongoing investing to really manage our businesses which has been in place for a while. The policy holder behavior, we’ve talked about before and Larry commented on that is an area where he is taking a hard look. That is the topper one in the sense that to gain economics of being factors we think about – the economic environment is been the factor as we think about that one. And so I think all of the above, Mario, you’ve really touched on the types of things that drive it. I think we’d be very cautious as the management team to say that it’s behind us. I think this is the essence of insurance and protection businesses that we have to manage all of these items extremely carefully. We do make a lot of assumptions about how the future will unfold and the one thing we do know is that it rarely unfolds as we expect.

And then more specific with respect to expense experience, each Q4 that’s been a bit of – it’s been high and then somewhat disappointing, particularly in Q4 2014. What has the dynamic do you think to address that, essentially building in the higher expenses into the reserving and therefore expect the profit so that we don’t see that sort of experience loss in Q4?

Well I think a couple of things. I mean first of all for sure, we really do watch the expenses carefully and you’re right that we’ve had spikes in the fourth quarter, I don’t think we’re unique in that regard but they’ve been higher than we would like to see and we have taken actions to make sure that we’ve got all of the pieces in place to manage that quarterly process as tightly as we can. But I think the broader topic around expense management with large is really the key, again philosophical question, now we’re very focused on that and perhaps Dean would like to say a few words about that.

Yeah, thanks Colm. I think you’ve heard us speak about the brighter way which is our lean Six Sigma program that we launched around two years ago. And you would see and Colm took you through the expense experience year-to-date, you’d see that controllable expenses i.e., setting aside the volume related expenses and adjusting for currency and so on, we’re essentially flat versus the prior year. We’re very pleased with that because what it means is we are generating productivity gains through the brighter way that we are reinvesting in growth. And Dan talked about expense management in the U.S. but I would say to you that all of our businesses and our corporate functions I think are doing a fine job, embracing the brighter way. People are lined up to do these brighter way projects, these continues improvement projects in their parts of their business, we have more demand that we have ability to actually get to them. And so it’s been a very important part of the change in culture here that has legs and it’s not a kind of a one quarter or a one year expense cutting exercise, it’s really being infused into the way we work. So we’re pleased with that Mario, and stay tuned for more that to come.

Would it be fair to say that in Q4 we’re still going to see expense experience losses just perhaps not as large as they’ve been in the past?

Yeah, I think just a couple of points there. I mean clearly the fourth quarter does tend to have a bit of seasonality around it. There are one or two items frankly that are difficult to budget for, I think in Q4 of last year we had some incentive compensation amount that we’re very much related to the final outcome for the year and you cannot approve and advance of actually seeing those outcomes and some of those awards were also market base. So again, it wasn’t just what was happening within our shop, it was also what was happening more broadly. So we take all that into account, so I won’t promise you a certain level but you can be sure that we’re very focused on it.

Thank you.

Tiffani, it’s Greg Dilworth. We have time for one more question before we end today’s call.

Your last question comes from the line of Dan Bergman with UBS. Your line is open.

Hi, good morning. Maybe following up on an earlier question. U.S. debt levels have been due lately, it seems like it’s like we do to your pricing action, your benefit and pressure from low rates in the international sub segment. Any topic you can give around the overall outlook for U.S. sales and whether you feel we started to see a positive inflection, and if not when that might occur?

Sure, thanks Dan. You’ve correctly pointed out that we’ve definitely seen some moderation in sales in the group benefits business and that’s related to our pricing actions. As we head into the second half of the year that’s typically the most active part of the year as we make sales for January 1. And we are seeing increased activity right now in the business. So we’re optimistic that we’ll start to see some improvement in our sales results as we head into the second half of the year. I would say, a similar commentary for the international business, we’ve been seeing sequential quarter-over-quarter increases in sales there and there is some continued momentum there, particularly as we turn on new distributor relationships.

That’s great, thank you. And then finally, maybe switching gears, is there any update you can provide on the ongoing elevated, especially drug claims in Canada? Any color on how much that impacted earnings this quarter and updated thoughts on how soon this source of pressure may abate would be helpful. Thank you.

Sure, it’s Kevin Dougherty. Well, we see it as group continue to headwind with at least in the short-term probably impacted earnings range of about $9 million. There is a lot of quick action that we are taking, that’s underway including kind of repricing this exposure. We’ve put in sort of enhanced reviews of new drugs coming on the markets and our process is around that, and prior authorizations for plan numbers to use them. Some of it we all kind of mitigated over time as drugs like to have see drugs kind of work their way through the population and that’ll play its way out overtime. We’re scoring a number of longer term kind of structural strategies, agreements with manufactures, special agreements with pharmacies as well around markups and pricing. And indeed the industry is getting together on a lot of these issues to make sure that we’re kind of well positioned for the future. So I think it’s a combination of all these things. I think it’s hard to give you any specific guidance but we’re working hard on it and we expect it’ll under control over the next few quarters.

Great. That’s very helpful, thank you.

I’d like to thank all of our participants on the call today. 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. Thank you and have a good day.

This concludes today’s conference call. You may now disconnect.