Table of contents

040509

Section 01Of Optimism and the Filipinos

Section 02The Financial Literacy Paradox

172332

Section 03Of Priorities and Preparations

Section 04Towards the Brighter Side

About the companySun Life Financial - Philippines

Introduction

2 | SOLAR FLARe

EDITORIAL BOARD: Mylene Lopa

Joub Miradora

Mariquit Lintag

CREATIVE CONSULTANT: Don Peji

MANAGING EDITOR: Jerik Gonzales

ILLUSTRATION,

DESIGN, AND LAYOUT: Lex Murillo

WRITER: Reyna Tabbada

CONTRIBUTOR: Aila Marie Peñaflor

RESEARCH PARTNER: GfK Custom Research Pte. Ltd.

SOLAR FLARe 2013Sun Life of Canada Philippines, Inc.

Rooted in Sun Life Financial’s belief in ‘action powered by insight,’ Sun Life has been

conducting a periodic and proprietary personal finance research called Study of Lifestyles,

Attitudes, and Relationships (SOLAR). For five years, SOLAR has allowed us to gain a better

understanding of Filipinos’ attitudes and behavior when it comes to financial matters.

And for 2013, SOLAR paid special attention to the financial literacy and behavior of

Filipinos. Its findings are presented in a report called FLARe, which stands for Financial

Literacy Advocacy Report. It looked into their knowledge of basic financial concepts,

their financial worries and aspirations, including their attitudes and outlook toward life

insurance.

The report showed us many interesting insights. For instance, Filipinos seem confident in

their knowledge of money matters but, in fact, lack knowledge of basic financial concepts

and how to properly prepare for their future needs. These findings strengthened Sun Life’s

resolve to continue, expand and enhance its financial literacy campaign. As we present

the relevant data to the Insurance Commission, we are expressing our desire for both the

government and the private sector to join hands and take action towards helping Filipinos

face a bigger and brighter future.

Message from the President and CEO

RIZA MANTARING

Sun Life Financial has been conducting a Study of Lifestyles, Attitudes, and Relationships (SOLAR) for the last five years. This research provides pertinent information about the ever-changing customer landscape, especially as it relates to personal finance.

For 2013, SOLAR added a special section on financial literacy with the following objectives:

1. Measure the level of awareness and knowledge of basic financial concepts and products and the capacity to apply such concepts (e.g. inflation, interest) 2. Identify trends in financial behavior3. Identify attitudes and outlook towards life insurance

Accomplished during the first quarter, SOLAR has a sample size of 1,100 respondents from North Luzon, South Luzon, the National Capital Region, Visayas, and Mindanao.

Respondents for this year’s SOLAR were males and females, from 23-55 years old, from ABC households*. Their status may be: single / married without kids / married with kids / married with parents as dependents / married with kids and parents as dependents / single parents with dependents.

They must also be the decision-makers for purchase of financial products, and could be owners or non-owners of life insurance policies.

For its sampling design, SOLAR used multi-stage sampling for C2 households while implementing purposive sampling for ABC1 households.

For its study design, respondents underwent face-to-face interviews and a 16-question basic financial literacy quiz. The average length of the interview was around 90 minutes. The format of the quiz was a mix of multiple choice and matching type. It was graded based on the percentage of correct answers versus the 16 questions.

IntroductionRespondents demographic profile

AGE23 - 3536 - 4546 - 55

SEC*

ABC1C2

MARITAL STATUSSINGLE WITHOUTDEPENDENTSSINGLE WITH DEPENDENTSSINGLE PARENTSWITH DEPENDENTSMARRIED WITHOUT DEPENDENTSMARRIED WITHDEPENDENTS

WORKING STATUS

WORKINGOWNS BUSINESSFREELANCERNOT WORKING

LIFE INSURANCE OWNERSHIP

OWNERSNON-OWNERS

30 % 41 %

29 %

54 %

8 %

38 %

72 %6 %

12 %

6 %

4 %

32 % 36 %

16 %

7 %

84 %

25 %

Above PhP100,000 - Metro ManilaAbove PhP 70,000 - outside Metro ManilaPhP50,001 to PhP100,000PhP30,001 to PhP50,0004 | SOLAR FLARe

AB:

C1:C2:

*Socioeconomic Class Monthly Household Income

OF OPTIMISMAND THE FILIPINOS1

Section 01

OF OPTIMISM AND THE FILIPINOS

Filipinos carry the trademark of being an optimistic race.

In the Study of Lifestyles, Attitudes, and Relationships (SOLAR), this optimism shows in their outlook on the economy and their personal finances. When asked how they expect their financial situation to change in the next three to five years, 87% expressed positive feelings. Filipinos are actually looking forward to a more prosperous future.

How Optimistic is the Filipino?(% of respondents who expressed positive feelings on financial situation)

A YEAR AGO CURRENT A YEAR FROM NOW THREE TO FIVE YEARS FROM NOW

20112013

76 %

66 %

46 %49 %

67 %

83 %87 % 87 %

6 | SOLAR FLARe

Optimism about one’s financial situation is a probable outcome of the robust fiscal growth. The Philippines is moving up, at a time when other countries are reeling from weak economies, political backlash and widespread unemployment.

Clearly, Filipinos have a lot to look forward to. But how this translates to reality is the question. And this must be asked: can their optimism translate to a better life?

Very positive Quite positive

Average

43 %

28 %

22 %

5 %

1 %

How has it changed compared to a year ago?

A closer look on how optimistic the Filipinos are today

44 %

29 %

20 %

6 %

How do you feel about your financial situation today?

45 %

38 %

16 %

1 %

How do you expect your financial situation to change in the next year?

60 %

27 %

12 %

How do you expect your financial situation to change in the next three to five years?

Not very positive

Not positive at all

SOLAR FLARe | 7

WHAT KEEPS “JUAN” UP AT NIGHT?Juan dela Cruz may be optimistic, but personal worries such as health and his children’s education keep him from a good night’s sleep. What other things is he worried about?

THE FINANCIALLITERACY PARADOX2

Section 02

THE FINANCIAL LITERACY PARADOX

According to the World Bank, financial literacy encompasses “concepts ranging from financial awareness and knowledge, including financial products, institutions, and concepts; financial skills, such as the ability to calculate compound interest payments; and financial capability more generally, in terms of money management and financial planning. In practice, however, these notions frequently overlap1.” It empowers individuals with “the capability to navigate a complex array of financial products and to make sound financial decisions2.”

According to the same World Bank report, financial literacy and the need for financial planning have been highlighted by the recent financial crisis and the shift of retirement planning from public sector to individuals3.

This need is also true in the Philippines, which is why major financial services companies now banner their own financial literacy campaigns. This is a big improvement from only four years ago when the first sustainable and multimedia financial literacy advocacy called It’s Time! was launched by Sun Life Philippines and was just gaining ground.

1 “Financial Literacy Around the World”, The World Bank, June 2012

2 & 3 ibid.

10 | SOLAR FLARe

As financial education becomes more available,

how are Filipinos faring inmanaging their finances?

Section 02

THE FINANCIALLITERACY PARADOX

When it comes to money matters, 20% claim to be an expert. Some even go to the extent as to consider themselves specialists. Since their self-assessment could be highly subjective, SOLAR administered a basic financial literacy quiz to validate their claims. Here is where the paradox lies. While many claim to be experts and specialists in money matters, only 8% scored above 80% in the quiz.

Expert

Between novice and expert

Novice

When it comes to money matters, I consider myself...

46 %

20 %

34 %

Sample questions from financial literacy quiz:

Which of the following statements is false about infl ation?A. Higher infl ation means higher prices of consumer goods

B. Purchasing power is lower if infl ation is high

C. As infl ation rises, every peso will buy a fewer amount of goods.

D. None of the above

E. All of the above

Financial literacy ratings and scoresSelf perception on financial literacy level

Which of the following can be considered an investment?A. Stocks

B. Taxes

C. Revenue

D. All of the above

E. None of the above

A. P 2.00

B. P 20.00

C. P 2,000.00

D. P 20,000.00

If a savings account has an annual interest rate of 2%, how much will a P 100,000.00 deposit earn after a year?

12 | SOLAR FLARe

54 % 46 %

23 % 77 %

Answers to sample questions

Which of the following statements is false about infl ation?D. None of the above

Which of the following can be considered an investment?B. Stocks

Note: No one got a score of 91 and above

2 % 8 %

13 %

17 %

9 %

21 %

17 %

8 %8 %7 %

81 - 90

71 - 80

61 - 70

51 - 60

41 - 50

31 - 40

21 - 30

11 - 20

0 - 10

Respondents’ Quiz Scores

Correct answerWrong answer

INVESTMENT

ANNUAL INTEREST RATE

CREDIT CARD

ASSET

LIFE INSURANCE

REAL ESTATE

DEBT

SAVINGS ACCOUNT

CURRENT ACCOUNT

PRE-NEED PLAN

STOCKS

LOAN

MUTUAL FUND

INFLATION

HEALTHY BUDGET

BOND

78 % 22 %

77 % 23 %

76 % 24 %

75 % 25 %

73 % 27 %

67 % 33 %

66 % 34 %

51 % 49 %

47 % 53 %

45 % 55 %

43 % 57 %

41 % 59 %

27 % 73 %

26 % 74 %

Score Per Financial Concept

C. P 2,000.00

If a savings account has an annual interest rate of 2%, how much will a P 100,000.00 deposit earn after a year?

SOLAR FLARe | 13

Section 02

THE FINANCIALLITERACY PARADOX

In fact, when respondents are asked how they defi ne fi nancial security, the top answer is “having enough bank savings.” Putting one’s savings in a bank account remains prevalent, and such an approach reveals how Filipinos prepare, or “under-prepare”, for tomorrow. One’s money is intact in a bank account, but with so little growth, or even negative real growth, that there is doubt if it can ensure one’s fi nancial security.

14 | SOLAR FLARe

Filipinos must be encouraged to learn the basics of proper financial planning and explore a wider array of financial instruments to help them achieve their goals and aspirations.

As the tagline of Sun Life’s “It’s Time!” advocacy says, “know your needs,be informed, take action.”

THE TYPICAL ONE-MONTH BUDGETWhen Juan dela Cruz opens his wallet, where does he put his hard-earned money? After spending on life’s basic necessities – food, rent, utilities – he allots 6% to his bank account, which can be surmised as savings. And perhaps after five years, his insurance policy may get a 1% share of the budget.

OF PRIORITIESAND PREPARATIONS3

Section 03

OF PRIORITIESAND PREPARATIONS

When asked about what they would prioritize spending money on for the next two years, life insurance figures in the list along with educational plans and health insurance. But opening a business is mentioned most frequently and ranks highest in priority.

Top 10 priorities based on numbers of mentions Incidence of being ranked first

Open a business

Lot

Life insurance

Education plan

Car / Vehicle

Gadgets

Health insurance

House renovation / Maintenance

House / Condominiums

Durables / Appliances

51 %

45 %

39 %

39 %

37 %

37 %

37 %

35 %

27 %

27 %

15 %

12 %

11 %

15 %

5%

8 %

1 %

4%

6 %

6 %

Financial Priorities of Filipinos

With your current financial capability, what are the things that you may want to prioritize buying within the next 2 years? Please select from the list. You can also name other things that are not included in this list.

18 | SOLAR FLARe

With priorities that span from accumulating assets to family-related items, SOLAR showed that Filipinos may not be aware of other financial instruments that can help them achieve their priorities and prepare for future events. Only 2 out of 10 would use insurance to prepare for future events, less than 1 out of 10 would use investments, and 8 out of 10 would still rely on bank savings for these needs.

Drilling further, among those who have insured themselves, 31% actually use their policy to accomplish their goals. The rest still holds the traditional, even outdated, view that one has to die first before being able to enjoy the benefits of life insurance.

How are Filipinos preparing for anticipated life events?

Bank savings

Put up a business

Get life insurance

100 %

0 %

50 %

How are you preparing for anticipated life events in the next five years?

Investment

Savings at home

Others

79 %

34 %

19 %

8 %4 % 2 %

SOLAR FLARe | 19

CAN “JUAN” AFFORD THE FUTURE?Sadly, Filipinos are often clueless about the state of their money. Their preoccupation about other matters and lack of financial literacy put them at risk of not being ready for the future.

TOWARDS THEBRIGHTER SIDE4

Section 04

TOWARDS THEBRIGHTER SIDE

In the Philippines, life insurance penetration is only at 1.14% of the Gross Domestic Product (GDP)*. According to the 2011 Insurance Commission Annual Report, life insurance coverage - counting individually bought and group insurance provided by employers – reached only 18.29% of the population.

When compared to other Asia Pacific countries, the Filipino’s life insurance outlook becomes even bleaker. It is lagging behind fellow Southeast Asia nations like Malaysia and Indonesia. When compared to Western countries, the Philippines still lags behind the United States and Europe. Taiwan boasts of a high life insurance penetration at 13.9% of GDP.

But, things are looking up. The notion of life insurance being useful only when one is dead is slowly changing as more and more Filipinos are realizing its living benefits.

There is now a growing trend of people who consider life insurance as essential. Filipinos are also becoming more discerning, seeking as much information about life insurance before purchase.

However, education is still very much a need. Filipinos must be taught about financial instruments beyond ATMs and bank accounts. As they are enlightened about insurance, investment, and other financial instruments, they would be more empowered and able to see the fulfillment of their goals.

*2012 insurance penetration computed using GDP as stated in NSCB (10,568,405,000,000)and Premium Income as stated in IC’s 4th Quarter Statistical Report - 2012 (120,301,000,000)

24 | SOLAR FLARe

Such momentum must be seized by the life insurance sector, imploring companies to make information more available and accessible to the public. With education and proper counsel, the capacity of Filipinos to manage their finances would improve, making them more confident to get financial instruments like life insurance.

For Sun Life and its fellow insurers, they must always strive to serve the customer while allowing their enterprise to stay relevant in an ever-changing economy.

For Filipinos and their families, life insurance must be recognized as an important part of their journey towards financial security. So, as the benefits of life insurance become more established, the future of Filipinos can become much brighter.

Attitudes Toward Life Insurance

I find out everything I possibly can about a life insurance company before considering buying a policy from them

I expect to have easy, immediate access to customer care representative, agent, or online-facility of my life insurer

Aside from talking to an agent / financial advisor, I do my own research when getting a life insurance

Everyone must have a life insurance

Having a life insurance is one of the smartest things to do

I would never buy a life insurance without talking to a company personnel by phone or face-to-face

I prefer to purchase life insurance through a bank / bank insurance agent

I prefer to purchase life insurance through a life insurance agent

I am willing to go with smaller or newer life insurance companies to get better returns / benefits

I am willing to go with smaller or newer life insurance companies if I can get better rates / price / premium

I don’t need a life insurance yet at this point in my life

All life insurance company are alike

AgreesNeutral

Disagrees

88 % 9 % 3%

79 % 17 % 4%

77 % 15 % 8 %

74 % 18 % 7 %

71 % 23 % 6 %

70 % 19 % 11 %

64 % 27 % 9 %

61 % 28 % 11 %

49 % 26 % 25 %

42 % 30 % 28 %

33 % 31 % 36 %

27 % 37 % 37 %

SOLAR FLARe | 25

Traditional

Group

Variable

SUN LIFE FINANCIAL

Sun Life Financial (SLF) is an international leader in protection and wealth management with key operations

in Canada, US, UK, Hong Kong, Japan, Indonesia, India, China, Vietnam, Malaysia, the Philippines, and

Bermuda. As of December 31, 2012, the Sun Life Financial group of companies had total assets under

management of CDN$532 billion.

Using the ticker symbol “SLF,” Sun Life Financial Inc. trades on the Toronto (TSX). New York Stock (NYSE)

and Philippine Stock Exchanges.

In the Philippines, Sun Life Financial is in the business of life insurance, mutual funds, pension and education

plans, represented by the following three entities:

Sun Life of Canada (Philippines), Inc. (SLOCPI) which pioneered life insurance in the Philippines in 1895;

Sun Life Asset Management Company Inc. (SLAMCI) which manages the mutual funds business; and Sun Life

Financial Plans, Inc. (SLFPI) which administers the company’s pension and educational plans.

Today, Sun Life in the Philippines is one of the largest and most trusted insurers in the country with over

a million group and individual life policyholders and is boosted by the strength and stability of Sun Life

Financial shares in the Philippine Stock Exchange. Sun Life Philippines’ focus is on helping Filipinos achieve

lifetime financial security by gaining insight into its customers’ lives and providing them with the products

and services that meet their needs.

32 | SOLAR FLARe