Good morning. My name is Shawn and I will be your conference operator today. At this time, I would like to welcome everyone to the Sun Life Financial Third Quarter 2016 Financial Results Conference Call. 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]. I will now turn the conference over Greg Dilworth, Vice President, Investor Relations, please go ahead sir.

Thank you, Shawn and good morning everyone. Welcome to Sun Life Financial’s earnings conference call for the third quarter of 2016. 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 third quarter results by Dean Connor, President and Chief Executive Officer of Sun Life Financial. Following Dean’s remarks, Colm Freyne, Executive Vice President and Chief Financial Officer will present the third quarter financial results. 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 will now turn things over to Dean.

Thanks, Greg and good afternoon everyone. Turning to slide four, the Company reported strong results for the quarter, with underlying net income of $639 million up 21% from $528 million in the same period last year. Our underlying return on equity was 13.4%. For the first nine months of 2016, we’ve earned $1.8 billion in underlying earnings and generated an underlying ROE of 12.5%, which is in our target range of 12% to 14%. I’m also pleased to report a $0.015 increase in our common share dividend, bringing our quarterly dividend to $0.42 per share, this together with the increase announced in the first quarter represents a total increase of 8% in the common share dividend this year. This increase reflects our business momentum, commitment to returning capital to shareholders and confidence in the execution of our four pillar strategy. The strategy is that characterized by our balanced and diversified business model and the benefits of it were on full display this quarter. Underlying earnings were up across all of our businesses over the prior year, expect the profit was up 11% with a healthy mix of both organic growth as well as lift from our recent acquisitions. Top line growth was also strong with insurance sales up 25% and wealth sales higher by 28% over the same period last year. Total assets under management ended the quarter at $908 billion. Turning to slide five, I’ll cover a few key highlights for the quarter. Sun Life Canada delivered a strong third quarter, both top line and bottom line. Individual insurance sales grew to over 100 million of new annual premium and Canadian individual wealth sales of Sun Life manufactured wealth products were up 17% year-over-year for the quarter and up 36% for the first nine months of 2016, from strong…

Thank you, Dean and good morning everyone. Turning to slide seven, we take a look at some of the financial results for the third quarter of 2016. Our operating net income for the quarter was $750 million, up from $478 million in the third quarter a year ago. Underlying net income, which excludes the net impact of market factors and assumption changes, amounted to $639 million. Our underlying return on equity was 13.4%. Third quarter adjusted premiums and deposits were $41 billion and assets under management ended the quarter at $908 billion. We maintained a strong capital position, ending the quarter with a minimum continuing capital and surplus requirements ratio for Sun Life Insurance Company of Canada of 221%. The MCCSR ratio for the holding company Sun Life Financial Inc. was also strong at 247%. The higher ratio at the SLF level largely reflects the excess cash level of $1.8 billion held by SLF Inc. Our leverage ratio of 25.6% increased from 23.5% in the prior quarter driven primarily from $1 billion of subordinated debt issued by SLF Inc. in the quarter, proceeds from the subordinated debt issuance may include investments in subsidiaries and the repayment of existing indebtedness. During the third quarter the office [ph] of the Superintendent of financial institutions released its final capital guideline for Life Insurance Capital Adequacy test that will replace the current MCCSR framework beginning in 2018. We are currently evaluating the new guideline and assessing the impact across our businesses. As a reminder as we have noted, that the LICAP [ph] guideline is not expect to increase the amount of capital in the industry compared to the current framework, but rather to better align risk exposures of various businesses with capital requirements. We will provide more detail on these changes and their impact…

Thank you, Colm. To hope 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 Shawn to please call the participants for questions.

[Operator Instructions] And your first question comes from the line of John Aiken with Barclays. Your line is now open.

Good morning Colm. Thank you very much for the disclosure around the impact of the URR. When we take a look at the reserve release that we got on the investment assumptions this quarter was - it was a very strong release. From my standpoint would have made a lot of sense to take a charge against the URR. Is the fact that you didn’t take a charge this quarter, I mean do you think there is not necessarily a strong possibility that there is going to be a change in ruling or the fact the matter is do you think there is all the probability but you don’t know how to quantify it?

Yeah I think there is a strong possibility of the change in 2017, but when we deal with these type of changes, it is an interactive process with the standards boards, so the industry works with the board and would make sure that all factors in considerations are brought to bear, we saw that when the ultimate reinvestment grade methodology was revised a couple of years ago. So we would rather participate in that and be proactive in that. I think our disclosure gives you a very good sense of the amount that would arise, should a 10 basis point decline, be the result that prevails. I think there is some evidence that it might be at around that level, but with more work to be done. But maybe to give a little bit more context, I’d ask Kevin Morris, if he has anything to add to that.

Yes good morning, this is Kevin Morris. I did want to highlight that DSP has not promulgated changes to the URR. We see this really as an event next year in 2017. Also the size of the impact and as Colm mentioned that 75 million loss or a 10 basis point decline is not particularly made for a balance sheet. We understand that we will get plenty of notice when ESP does made changes and if any other required next year we will take them at that time.

Great, thanks for the color guys.

And your next question comes from the line of Gabriel Dechaine from Canaccord. Your line is now open.

Good morning, you talked about the yield enhancement in the UK and quantified that a bit from the positioning in some inflation protected bonds. It looks like you had a similar type of yield enhancement gain in the U.S. offshore business, when you only disclose the operating profits there, so I can really tell what the underlying revenue of our business, but is there I mean element of frothiness in that number that you can quantify?

Yeah Gabriel and its Colm here. So I think the way we think about this is that the investing gains number is quite large this quarter and $29 million of that $56 million after tax related to a very specific scenario in the UK business where we required some inflation linked skills to offset an adverse scenario on the liability side where there was some exposure to inflation. So we said well that’s really not a very normal part of our investment gain lines or we break that out and of course the UK is a runoff business for us and we want to ensure that you have a good sense of sustainability around that business, the earnings in the UK, the run rate hasn’t changed as result of this transaction. So, if you take that out, you left with $27 million that is at the high end of the range we have talked about for investing gains, previously what we said, think of a number in that $10 million to $20 million level and on fairness we have done well against investing gains over some period of time now and we continue to every quarter we look at this quite closely to say how do we feel about that going forward. And we would still continue to offer that kind of an indication that $10 million to $20 million is a number we feel we can continue to generate in the current environment. So that’s a bit of longer that answer. But if I take the $27 million that’s is left over after I adjust for the UK piece, I’d say that breaks out between the mainly between Canada and the U.S. and the impact on international is not a big portion of the portion that relates to the U.S. So that's not a driver of the international results for this quarter.

And so if there was any before the yield enhance may only through the operating number but the offshore business look like a big [Indiscernible]?

Yeah the international business is noisy this quarter. When you look at it on an operating basis, because of the assumption changes and management actions that took place this quarter. And if you strip out all of those and as Kevin has mentioned or as we've mentioned the net $254 million after-tax was spread across the number of items. But the underlying results of the international business were solid in the quarter. We had some reduced new business stream that was a contributor but otherwise there is not a big change in the underlying business there.

Okay. And just sticking maybe I'll follow up. I actually want to ask you about MFS. The tax rate is MFS it’s around 35%, 36% in your financial. There is no adjustment in corporate or anything like that that would lower it when you roll it all in at a consolidated level that's what you're actually paying taxes at MFS correct?

That's right there is no offsetting amounts in corporate.

Are you fairly excited about a possible incorporate tax reduction following this Trump win grown up 15% could be huge? Sorry I can't resist.

Gabriel, I’ll comment generally on tax rates. So I mean clearly U.S. tax rates, proper tax rates are high relative to international tax rates. And tax rates internationally including the other major jurisdictions we operate in. So a reduced tax rate clearly would be beneficial and all that developments.

Okay. Great thanks.

And your next question comes from the line of Meny Grauman with Cormark. Your line is now open.

Hi good morning. Just had a question on the net interest impact going from a pretax loss of $6 million to a gain of $18 million after-tax. I am just wondering if you could explain what's driving that swing to the positive after-tax.

Yeah so Meny when we show these numbers pre and post-tax because we didn’t operate in different jurisdictions where you can have a loss in a high tax jurisdictions and a gain in a low tax jurisdictions. When you consolidate numbers you can often and then we often see that in our presentations that the numbers split from a pretax loss to a post-tax gain. So it's nothing other than the operation of the pre and post-tax numbers in different jurisdictions where there are offsetting amounts.

Okay. And then if I could just ask a question about the goodwill impairment testing, you flag it for Q4. But I don't think you provide much better way of sort of any indication of which way it's going to land. I'm wondering if there is more you can add beyond what appears in the press release.

Yeah you're right. We do flag at every third quarter, because it is an annual test that is performed in the fourth quarter each year, we flagged it simply as a matter of practice just to provide that. But there is nothing and you can see from our business results, there are none of our businesses that are under pressured. So the fact of flagging it is not giving you some kind of heads up. But there is some particular challenge there it's just simply matter of good practice.

Thank you very much.

Your next question comes from the line of Steve Theriault, of Dundee Capital Markets. Your line is now open.

Hi thanks good morning everyone. Maybe I'll start just with a couple of clarification questions on the assumption changes if I could. So the first one on the investment related assumption or credit - credit spreads and swap spreads. Do I understand that right that what I interpret that as you're assuming that through the cycle corporate spreads are wider and swap spreads are lower. And the other component was the assumption on that some to change on the reduction of provisions for investment risk. Is that related to the C1 risk in required capital as I understand it, maybe a little color on that one as well?

Yeah this is Kevin Morris, on the first one on credit spreads, yeah, you have that direction right. So we're assuming that credit spreads are marginally wider for our reinvestments that’s favorable. And on swap spreads we’re net sellers of swaps in the future. So the narrowing of spreads actually benefits us in the valuation and so you’re right in the direction of that is positive as well. Related to the investment provision that was related to a review of the power of it and there is - as a result of the mutualization [ph] structure on the part closed account which we reviewed the interest provision in this quarter, we did some testing for the strength of that we released a bit of that, the results of that mutualization structure that income goes to the shareholders.

Okay I may follow up in the later. And then for Kevin, strained on Asia profitability the ROE has been somewhere between range bound and a little bit higher in the last couple of years and I guess as I look at it a little bit higher, what geographies have been helping on profitability and then maybe more importantly what is the next lag higher look like? I mean to get to double-digit ROE within that division as a contingent on that a particular country that needs to be kicking harder, is it sales generally, is it something else. Just a bit of an outlook in guidance that you can, that would be helpful.

Okay. Hi Steve. I think there is a couple of factors here right, so we have been investing in the business and those investments have been driving growth and overall our goal is to achieve scale in all seven of the markets, five of the seven are profitable and clearly the profitable ones are the ones that are driving the ROE. In the case of the - for example, Vietnam, right Vietnam is new business for us, it’s a Greenfield business, so it throws our losses in the early stages. So those types of businesses overtime as we achieve scale, we’ll start to drive profit and we’ll start to drive ROE. So the goal is to continue to focus on profitable new business on B&B [ph], on growing to expected profit. We saw expected profit grow by 16% in the quarter, we dropped our new business strain by $7 million Canadian and overtime that growth in earnings from profitable sales growth from growing to B&B will drive the ROE up. We are looking at the capital we have in each of the countries and making sure we understand where that side and how do we get dividends back up into Canada which will also help the ROE over the longer term.

That helps. But if we think out to 2017 and as you get closer as you’re working through your next year plan, is it more likely that ROE stays pretty stable and there’s continued investment or is there some gearing in some of those geographies that take it higher? Appreciating it’s going to go higher in the long term, but can you give us a little bit of extra visibility just on the near term?

Yeah I think you’re going to see the sort of kind of growth you’ve seen in the last few years where the earnings will grow a little faster than the ROE because we’re making the investments and but we’ll be driving towards over the medium term heading towards the double-digit number for ROE.

That’s helpful. Thanks so much.

Your next question comes from the line of Sumit Malhotra with Deutsche Bank. Your line is now open.

Thanks good morning. First question is likely for Colm and it’s looking at your experience line, under your underlying earnings. I know you take out the market related factors here but we’ve seen this line quite consistently positive over the last year and it seems almost exclusively be driven by your investment experience. I guess my question is on geography of earnings. At what stage or what - how do you think through the process of we’ve had consistent gains in this regard relative to what assumptions have been. What has to happen for this to become something that’s included more in the expected profit line, do you have enough of a history that can occur or is there more to it than the way I am phrasing it here?

No I think it’s a very fair question and it is something we look at, to the expect that we would have significant ongoing investing gains from a very reliable source, we would certainly consider moving a portion of that into the expected profits and indeed we have done so in the past, so we would never rule that out. The investment gain line does really cover quite a bit what comes through in that line. And given the management of the balance sheet in a low interest rate environment, where we’ve had some over the past year or two, some unusual fluctuations that have allowed us to capture some benefits like a real economic benefits we've floated through this investment gain line. But I think as we work forward, we certainly will keep looking at that rate closely to see if there is any other portion that might be adjusted for. But at this exact moment we're not considering a methodology change of the type you're talking about. I'm letting to Kevin Morris to see if he had additional comments.

Yeah to answer that, the investing activity comes from the number of up sources a number related to trading activity where Sun Life has particular expertise especially in non-marketable fixed income securities. We also endeavor to try and find value by revising and improving ALM and investment strategies. And this type of tactical market opportunity is going to be, it's going to fluctuate quite a bit as market opportunities are rising quarter-to-quarter. But we're going to continue to try and add value as it goes.

And just to be clear you give us the slide this other notable items and experience. And the investment activity, I'm kind a looking back at my numbers here and it's been consistently positive or consistently again going back to 2013. So am I right to think about this, that you have a base level of gains that's included in your expected profit assumption and this line is essentially telling us how much better or worse you did relative to that expectation. Is that simplistically the right way to think about it?

Yeah I think that's right. And maybe I'll come back to what Colm motioned earlier about this quarter we did have about half of that related to the UK which we consider more of a one-time where we took an action to hedge the inflation risk there. So if you back that piece out it's more in the 30 neighborhood and that's more in line with what we’ve seen historically. But it has been running hard for quite a while.

Okay last question is going to be on the U.S. And it's for maybe for Dean. Expected profit line took a solid jump up in Q3 and it wasn't exactly clear to me whether it was the ongoing benefits or the integration of the Assurant acquisition that's driving that. I guess my question specifically for that business, is where you think margins can go. You've given us some pretty specific numbers on what the accretion from this deal could be. But when it comes to tracking progress of margins, where is this business right now on a margins basis, where do you think it can go and is it an expense only story or is there some leverage you think you have on the top-line that get this margin improvements sort of moving.

Well the Assurant business came over to us in good condition and is so far performing at or better than our expectations. So you're seeing some of the impact of that incrementally this year and in the most recent quarter. The way we think about margins for the group business in the aggregate is that the future potential for this business you should think about is a 5% after-tax margin. We have different parts of the business performing in different places at the moment. As you know we're still in the process of performance improvement for the Legacy Sun Life Group Life and disability business, making progress there. The Assurant business is in good condition as I said. So I think when we put all these pieces together that's a reasonable way of thinking about the future margins.

And 5% after-tax is the total group objective and I'll calculate this myself, but if you can help me where do you think, where you're right now on your measure?

We're below that at the moment primarily, because of the performance improvement that we're implementing in the legacy Sun Life Group business.

Alright. I'll follow up with you later. Thanks for your time.

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

Yeah thanks very much. Question with respect to MFS and the margins here at 38% and up nicely quarter-over-quarter. If we had equity markets kind a go up 8% annually going forward. Where do you think these margins could play out?

Hey good morning this is Mike Roberge. Yeah I think I mean clearly if you were to get a significant market lift that you're going to see that fall to the bottom line. But I think our view as you look across the industry and in a more normal environment, or a more normal equity returns, there will continue to be pressure, I think you’re going to continue to see pressure from passive, both in terms of flows, but relative to relative pricing in the industry, we’re going to be dealing with the deal well fiduciary issue, which I think will have some negative impact on industry margins and so I think industry margins are going to be somewhat challenged over the next couple of years until we end up in a more normal environment. And so I think - as we think about the industry we don’t think there is a significant uplift in margins in the industry, net of some big consistent move up in the marketplace.

So you had enough lift in the margins quarter-over-quarter, was there anything that was driving that I mean about 4% but what would have been more particular in terms of driving those margins in that?

Yeah. We had ANA - yeah, average net assets up, we held expenses relatively flat in the quarter, so you got some operating leverage, but again expenses quarter-to-quarter can fluctuate some and so again I think it's within a tolerance of what we would expect that you could see quarter-to-quarter.

So again, should we’ll be looking at something that’s probably in this range for next-year or perhaps slightly lower? In the range which you had in the third quarter perhaps slightly lower?

Yeah. I think, we’ve got it over the last couple of quarters that we thought there was going to be pressure and again I do this relative with the industry, we’re seeing margins in the industry compressed, I mean, it’s due to along the pressure we’ve talked about, de-risking the move to passive pricing. Now we’re being faced with some additional regulatory pressures. I think, you’re going to see margins in the industry continue to be somewhat pressured. And I think, you should expect that same, those same pressures to have some impact on us as well.

Okay. Thanks for that. And then one other question, with respect to policyholder experience losses. Traditionally, these things have been were good positive in 2015 and in the first quarter of 2016, but we saw them hurting earnings by $0.03 in the second quarter and $0.04 and once again we had some U.S. it’s you can point to U.S. group and Canadian group and U.S. stop loss now for the second quarter. Is there anything we should read into this and what you’re trying to do to improve this stuff going forward? Any color, that will be great?

So Tom, it’s Colm here. So I think by policyholder you mean the aggregation of mortality morbidity lapse.

Correct. Yeah.

Goes to pure policy what we think when we think of that.

Mortality, morbidity in lapse, yeah, I am not working expense into that thing.

Yeah. Yeah. Okay. So on the mortality side, we had a negative this quarter $23 million nothing in particular to be concerned about there from our perceptive, it was spread across Canada, the U.S., UK international and we have had some strong performance in international and we’ve talked about that previously we’ve said it’s unlikely to continue with that level and indeed we have some claims this quarter. So it did not continue at the previous level. So nothing in particular there morbidity was a net one, so it was really nonevent, we did up some in the other category which was a positive this quarter. So really positives, negatives, we didn’t really see anything that we were concerned about from a sustainability perspective. And frankly as we go through our Q3 assumption changes, we’ve had a pretty good look at all these areas as a part of that exercise, so I wouldn’t read anything unduly into the quarter other than the fact that’s these items can be round on quarter-to-quarter.

What’s that other category?

Other category is where we can’t neatly fit it into any of the other categories, that sounds a little self-evident.

Either they die or they are disabled or the lapse?

So it’s often a refinement of a marvel, it can be something that we look at it in the quarter and so while maybe in some cases it may not actually relate as much to the current quarter and of that $23 million there is about $10 million of that, that I would say was really a true up in respect of the international business, that’s bonus the quarter, but really we would say that was not so much a part of the current quarter in terms [Indiscernible].

And the other 13 was a model refinement?

Various it’s a number of items Tom, it’s a big complex valuation world and there is a lots of pieces that fall into this, but not major significance in there.

And then one last quick one, the tax rates been running at the top and year-to-date, why is that? And how should we be looking at the tax rates versus your 18 to 22 tax range?

Yeah. The tax rates run at high end when we have strong earnings particularly in the United States and MFS and higher tax jurisdiction than our Canadian tax jurisdiction, so we have seen that particularly this quarter and year-to-date. So we feel fairly good about the where we’re out on the tax front, we continue to work through various tax items, we don’t see any particular concerns, ,whether it’s us being at the top end of that range and we’ve holding to that range has been a good indicator of what we should be able to manage too.

So, with synergies from Assurant and growth in MFS were drivers have were the predominant drivers of earnings growth going forward, it is safe to say that the tax rate would move more towards the top end of that going forward?

Yeah, I think we’d hope to holdup within that top end but yes, you could see it being at that top end.

Okay. Thanks very much.

Your next question comes from the line of Paul Holden with CIBC. Your line is now open.

Thank you, good morning. First question is related to MFS and change in asset mix overtime and specifically referring to mutual fund mix versus the manage product mix. How should we think about profitability on the mutual fund AUM versus managed product, AUM as a sort of 2 to 1 for the same amount of AUM?

No, I think we look at it profitability terms, the fees if you look at the all-in fee that you charge in retail is little bit higher but the cost associate with that there’s more infrastructure associated with that. So, on a net basis, when we look across U.S. retail or non-U.S. retail business and our institutional business, the profitability on that is actually very similar across all three of those channels.

Okay. Got it. And then question specific to U.S. group and I guess a legacy some nice business in particular, maybe an update on expected reprising to be done Jan 1, 2017 still confident you’ll get the expected reprising complete?

Where we are on that, as you know we’ve been going through the reprising process and the performance improvement plan for about two years now and as of this point we’ve reprised approximately 75% of the business and we would expect to reprise the remainder of it partly on January 1 and then throughout the balance of 2017. So, we’ve been making good progress on that, we’ve generally been getting the rates that we’ve been seeking. We’ve also continue to have the phenomena of the business that chooses to laps is business that’s performing at significantly higher loss ratios, it's been the business that we’ve been retaining. So, that’s contributing to the improvement as well. And we have also been achieving some gains as plan through expense management and through investments and better claims management.

Okay. Good, that’s all the questions I had. Thank you.

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

Hi, good morning and I guess for you Dean. U.S. stop loss had unfavorable experience again this quarter. I was wondering if you can quantify what the impact was this quarter relative to what the impact was last quarter. And can you remind me just in terms of actions and I think it’s related to the same items that happen last quarter but maybe you can update me. And then just talk a bit of some of the actions that you are doing to try to rectify this?

Sure Doug, and I can give you some directional information on that. Our stop loss morbidity results in the third quarter were improved versus the second quarter but still below our long-term expectations for that business. Although we probably, we had a very strong first quarter as well. We’re seeing the same underlying trends as we talked about last quarter, no significant difference there and we really breaking into two categories. There is clearly an element of volatility for the prior two years 2014, 2015, we saw our experience actually run better than our targeted pricing loss ratio by about one standard deviation and so far this year we’re seeing that loss ratio run about one standard deviation higher than the targeted loss ratio. So, we believe some of that is clearly just a natural of inflow of volatility in the business. But there are some underlying factors, there are some business cohorts that we’re performing poorly and we have seen a significant increase this year in pharmacy expenses particularly specialty pharmacy expense. So, we did take some pricing action to reflect those two elements. We began to implement those pricing actions with August 1 effective date business and because the entire block of business renews annually we’ll be able to complete that repricing relatively quickly, for example as of January 1 we estimate that we’ll have repriced about 78% of the business to these new levels so and we just started that in August. So a fairly rapid cycle there where we’re able to adjust.

Great. And how do you - I mean how do you quantify what the drain was? Or what the hedged earnings was from the unfavorable?

Yes I mean it’s varying quarter by quarter or obviously year-to-date below what our expectations were for that, but I'm sure we’re ready to give that level of detail specifically on stop loss.

Okay that’s fair. And then just I guess with the election there is a view that maybe the Obama Care gets repelled or what happened, is there any implications for your business positive or negative from changes that could transpire?

Yeah we’ve been watching that very closely and we think the impact on our business would be fairly minor. The affordable character or Obama Care does not directly affect our business because the product that we offer are not offered through the public exchanges. But obviously as it impact of the overall healthcare system in the U.S. it has indirect impacts on our business. So there could decent downstream disruption there. I would point out that any action requires the agreement of Congress and without a 60 vote super majority in the Senate, action is likely to take quite a bit of time and require some by-part as in consensus. I would also point out that the direction that Congress and President Elect are indicating combined with there was a referendum in Colorado on single payer or so-called Canadian style healthcare that was rejected. Overall the theme is that the current private system will benefits of the United States is being supportive and we expect we’ll continue to be a robust system.

Okay great. And then if I can sneak one other in, just on the notable items. Colm the $24 million expense overrun, I mean I go back last 15 quarters and I think it’s been around $24 million and I know you’ve call it out as a notable item, but is this I guess why would you think it’s a notable item, if it has been recurring? Just some color on that would be helpful.

Yeah, no I think it’s an area that we obviously spend a lot of time on in managing our overall expenses and again the alternative is to of course reflect all of the types of items in the expected profits and we would do so to the extent that we saw this is big part of our sustainable run rate expense experience. So when we look at that $24 million there’s clearly a couple of items that we see as being somewhat one-off in nature, there is a component of that it relates to the outperformance of the Sun Life share price relative to peers and that’s part of our long-term incentive plan. So that something that can happen, we would hope it happens regularly I guess, so in terms of our performance, but it’s not something that we would say that’s part of an expected profit item. So it appears to the expense experience. We have also got some lower reliable in respect of the wealth sales in Canada, SLGI related sales are doing very well, but some of the non-SLGI non-Sun Life front sales are lower and so there’s an expense item in respect of that. If it were to persist and continue on for a longer period start we would consider moving some of that to expected profit and that’s what we’ve done in the past. But we feel comfortable that these are items that are either somewhat one-off or will reverse in a reasonable timeframe and that’s why they’re not reflected in the expected profit.

Okay thank you very much.

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

Hi there thanks. Question on your, the change in the NFI or non-fixed income asset assumption. Just wonder I guess you took a charge to change the assumptions, so just wondered if you can give us more color on what you did?

Sure, this is Kevin. So I think the non-fixed income forward-looking assumption, as I am sure you can appreciate it’s a very challenging task. It’s an area where there is a particularly high degree of judgment in setting the actual assumptions. So we started, as we look at the historical experience and there is a lot of that on both equity and real estate side and that history sets the cap based on where we need to set our assumptions. Then we also took a look at forward-looking expectations both from internally from our investment team and externally. And we're looking at again very long-term assumption setting here. So in the context of a very low growth economic environment and the interest rates, we decided that some strengthening was needed. Now we're not disclosing the details, where we landed on the specific assumptions. But we do have more daylight between kind of where that cap is and where we set ourselves that we feel quite good where we are now.

Do you decide, I was looking for at and I think do you guys disclose sensitivity on changes in those assumptions, like what is unit of change you mean in terms of earnings?

Yeah we have additional disclosure in our annual report, I don't have that at my fingertips. We'll get back you on that.

Alright, I will find it, no worry. Alright thanks. The question I had just as a follow-up was, you had a gain on the credit and swap spreads and then a charge on the non-fixed income assets and that led basically to roughly 130 gain. I mean where those - how big were the gross changes, I mean were those two big gross changes that got you to 133 or they pretty mild?

Yeah I think you want to think about them as both pretty big but not enormous right. So the strengthening that we took on the non-fixed income was big, but it would be high-double digits in the millions not over $100 million. So it was significant but not enormous.

Okay. And then Den your popular person today. Wondered if you could just have noticed strain in the United States is quite low and has generally been following over the last four quarters both absolutely in relation to volume sales. Can you talk about what's driving that and how sustainable it is?

In the most recent quarter the biggest contributor was actually in our International Life business. And specifically we had a single very large sale that had good characteristics and new business gain. So that's really what's driving that there. Overall obviously as we factor in some of the newer products and the mix of products that we're selling for example stop loss and now dental with the Assurant transaction overtime that's also helping that metric as well.

Okay. And are we I don't want to ask you for guidance. But if you're - sorry pardon me. Your international wealth sales, if they stay strong will like will they continue to be at a level that blunts your strain in that business.

I'm guessing you're referring to the International Life sale. We stopped selling the international wealth business last December. But overall we've got the International Life business price such that it creates a new business gains. And we've also made some adjustments to our product portfolio. We continue to expand that product portfolio to improve that metric as well going forward. So yes we're optimistic that will be a positive.

Great. Thanks, that's I had.

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

Good morning. Probably for Colm or whomever. It's been a lot of how do you think about the behavioral impacts of rising the rates but that's clearly what people are thinking about these days. Could you just maybe search your memory for what if any could play out in terms of the policy or the behavior reserving generally if we see a bit of a short to long-term rates not a gradual increase, but a more blunt one?

So I think it's a good question and certainly as we look at rates and some of the volatility we've seen. I think people will be focusing on rates a little more closely. I'm going to ask Kevin Morris to say a word on that?

Yeah I think for the topics that comes to mind immediately would be products where we have guarantee that guarantee the book value of investment type products when rates are going up. So as a policyholder it could be incentive to take their money when the value is diminishing of the assets on our books. And we have on price, very robust dynamic hedging programs to mitigate that risk.

And presumably have reserves in place as well?

That’s right.

And so, should can we assume and if we do get a spike in rates so this is a been a properly accounted for through reserving energy or is that really just to so which way we’ll thinking at this point.

Yeah I think one of the careful around what the specific scenario is and how we play out, you know I would say we do have good provisions, we have strong hedging programs and we’re confident that we don’t have big exposure to that.

Okay, and how about on new business, is there anything you point to a new business that just sales of insurance or wealth products that you think could be impacted positively or negatively?

Mario, its Dean. I’ll just comment that there is been a lot time since we talked about this scenario. But I think generally speaking we’re well positioned, U.S. is both [Indiscernible] and offsets I think we’re really well positioned for the offence side of that trade, so think about defined benefit buyers, there’s a lots of pension plans that we’re definitely love to get rid of this big liability of their balance sheet. And, so we would see more demand, we would see more demand for life annuities, we would see some of the life insurance products like UL [ph] and other products see more demand grow for those. I think you’d see as well in our asset management businesses, you know I think MSF has done a great job, for example talking to brokers and clients about the positioning and fixed income assets if rates go back up because there is been this such a persisted mindset that rates can only go down. So I think MSF has done a great job and is well positioned fixed-income product . [Indiscernible] to serve clients in that market. So I think we’re actually well positioned to benefit from rising rate environment.

Okay. And then just one sort of final related question. The disclosure is pretty good and we’re all familiar with the in quarter effects of changes in rates. But it’s a lot harder to think about what the longer term impact on core earnings would be. Colm perhaps, could you just refresh our memory kind of where we would be - where that would actually play out and if you could take us through that from a sources of earnings perspective?

Yeah, so I think the disclosure with respect to the sharp increases and decreases is much more valuation of the liabilities and then if you think about the impacts going forward, it’s not captured in that would be impacts on new business strain and Dean mentioned certain products will illustrate a lot better with slightly higher rates they don’t not be a lot higher and we have seen that. So we could see improved business strain particularly in Canada. We could see higher earnings on surplus as we reinvest assets in our surplus accounts, going to see higher returns there and I think another area that has a big impact can be [Indiscernible] and Canada is quite pro-cyclical. So that freeze up some additional capital that capital can be deployed. So I think there is a number I mean this is why we generally would like to see a gently rising rate environment it’s quite conducive to our industry to a certain point and I think we are well positioned as Dean said.

And identify this there are earnings on surplus you refer to. Can you give us a some of the duration of that book, so we can now when we might actually [Indiscernible].

On a gradual basis. We have run it.

Mario that duration on surplus is about over. So rising in that environment you would assume it’s not all in fixed income, but you would have a 4% decrease for per 100 basis points.

Sorry 4% decrease, what?

Per 100 basis point rising rates.

Sorry 4% decrease in what it will?

In Surplus mark-to-market value.

Oh, I see, but getting some benefit later from the reinvesting in power yielding securities.

Yeah, so might be just. I think he was answering slightly different question. So in terms of the run rate impact, we would see it [Indiscernible] because of the duration as Randy [ph] says it’s not that long we’re not going to see, it’s not going be a big impact but it’s really a more of the aggregation of a lot of impacts across the book that’s that beneficial to us.

Okay. Thanks for the time.

There are no further questions at this time. I’ll turn the conference back to Greg Dilworth, for closing remarks.