Exhibit (c)(2)
PRESENTATION TO
LIBERTY FINANCIAL COMPANIES, INC. BOARD OF DIRECTORS
MAY 2, 2001
1
DISCUSSION OUTLINE
- Review of Annuities Segment Transaction
- Asset Management
- Next Steps
REVIEW OF ANNUITIES
SEGMENT TRANSACTION
2
ANNUITIES SEGMENT TRANSACTION
- Sun Life will acquire Annuities segment for $1.702 billion
- Based on an equity value of $1.702 billion, this implies multiples of:
2000A Net Operating Income 13.4x
2001P(1) Net Operating Income 12.1x
12/31/00 Book Value (ex. FAS 115) 1.32x
(1) Based on management projections.
3
SUMMARY VALUATION ANALYSIS - ANNUITIES SEGMENT
OVERALL VALUATION ANALYSIS SUGGESTS AN EQUITY REFERENCE RANGE OF
$1.5 BILLION - $2.0 BILLION
($ in millions)
- ------------------------------------------------------------------------------------------
Comparable Company Valuation
Without Control Premium $1,250 - $1,450
With Control Premium 1,550 - 1,850
Comparable Acquisitions Valuation 1,400 - 2,000
M&R Actuarial Analysis(1) 1,500 - 2,000
- ------------------------------------------------------------------------------------------
EQUITY REFERENCE RANGE $1,500 - $2,000
- ------------------------------------------------------------------------------------------
SUN LIFE'S EQUITY VALUE PROPOSAL $1,702
- ------------------------------------------------------------------------------------------
(1) Actuarial appraisal prepared by Milliman & Robertson, Inc.
4
COMPARABLE PUBLIC COMPANIES ANALYSIS
METHODOLOGY
- Analyzed Equity Value to Net Operating Income and Book Value for
companies with similar business to Annuities segment
- Applied relevant multiples to segment's historical and projected
data to estimate unaffected price range for the Segment
- Added representative control premium
5
COMPARABLE PUBLIC COMPANIES SUMMARY
COMPARABLE PUBLIC COMPANIES VALUATION ANALYSIS SUGGESTS AN EQUITY VALUE RANGE
OF $1.55 BILLION TO $1.85 BILLION.
ANNUITIES SEGMENT
($ in millions)
COMPANY DATA RELEVANT MULTIPLE RANGE IMPLIED EQUITY
VALUE RANGE
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2000A Net Operating Income $127 9.6x - 11.1x $1,217 - $1,407
2001P(1) Net Operating Income 140 8.5 - 11.1 1,187 - 1,550
12/31/00 Book Value (excl. FAS 115) 1,286 1.11 - 1.64 1,428 - 2,109
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INDICATED EQUITY REFERENCE RANGE $1,250 - $1,450
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INDICATED VALUE WITH CONTROL PREMIUM 15% $1,438 - $1,668
25% 1,563 - 1,813
35% 1,688 - 1,958
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EQUITY REFERENCE RANGE WITH CONTROL PREMIUM $1,550 - $1,850
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(1) Based on management projections.
6
COMPARABLE PUBLIC COMPANIES ANALYSIS
EQUITY VALUE TO:
MARKET -----------------------------------------------------------------
CAP. (MM) `00 EPS `01E EPS BOOK VALUE(1)
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American Annuity Group $ 721 9.6x 8.5x 1.16x
American General 20,141 16.8 15.1 2.58
AmerUs 939 11.2 10.3 1.11
Lincoln National 8,706 12.4 12.3 1.75
Nationwide Financial 5,270 11.7 11.1 1.95
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High 16.8x 15.1x 2.58x
Mean 12.3 11.4 1.71
Median 11.7 11.1 1.75
Low 9.6 8.5 1.11
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(1) Excluding FAS 115.
7
COMPARABLE ACQUISITIONS ANALYSIS
METHODOLOGY
- Analyzed comparable acquisitions of businesses in the annuities
and life industries of more than $1 billion
- Calculated aggregate transaction value and implied multiples of
selected financial data
- Applied relevant multiples to segment's historical data to
estimate an implied acquisition price range for the segment
8
COMPARABLE ACQUISITIONS VALUATION
COMPARABLE ACQUISITIONS VALUATION ANALYSIS SUGGESTS A VALUE RANGE OF $1.4
BILLION TO $2.0 BILLION.
ANNUITIES SEGMENT
($ in millions)
COMPANY RELEVANT IMPLIED EQUITY
DATA MULTIPLE RANGE VALUE RANGE
- ------------------------------------------------------------------------------------------------------------------------------------
2000A Net Operating Income $127 10.1x - 18.0x $1,280 - $2,281
12/31/00 Book Value (ex. FAS 115) 1,286 1.10 - 1.70 1,415 - 2,186
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INDICATED EQUITY REFERENCE RANGE $1,400 - $2,000
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9
COMPARABLE ANNUITY ACQUISITIONS (MORE THAN $1 BILLION)
($ in millions)
----------------------------------
EQUITY VALUE TO:
TRANSACTION ----------------------------------
BUYER TARGET DATE VALUE BV NOI
- ------------------------------------------------------------------------------------------------------------------------------
General Electric Capital First Colony Corporation Aug-96 $2,037 1.40x 14.0x
Aegon NV Providian Corp. Dec-96 6,026 1.10 10.1
ING Group Equitable of Iowa Jul-97 2,600 2.60 18.8
Lincoln National Cigna (Annuity Business) Jul-97 1,400 3.00 19.0
American General Western National Sep-97 2,253 1.97 18.2
American International Group SunAmerica Inc. Aug-98 19,674 6.51 34.6
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High 6.51x 34.6 x
Mean 2.76 19.1
Median 2.28 18.5
Low 1.10 10.1
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10
COMPARABLE LIFE ACQUISITIONS (MORE THAN $1 BILLION)
EQUITY VALUE TO:
TRANSACTION ----------------------------
BUYER TARGET DATE VALUE BV NOI
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Aegon NV Transamerica Corp. Feb-99 $10,800 1.70x 21.5x
Allstate American Heritage Life Jul-99 1,145 3.95 28.9
Metropolitan Life Insurance Co. GenAmerica Corp. Aug-99 1,541 0.92 10.6
ING Groep NV ReliaStar Financial Corp Apr-00 6,145 2.34 20.0
Hartford Financial Services Fortis Financial Group Jan-01 1,320 2.50 22.7
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High 3.95x 28.9x
Mean 2.28 20.7
Median 2.34 21.5
Low 0.92 10.6
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COMPOSITE STATISTICS
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High 6.51x 34.6x
Mean 2.54 19.8
Median 2.34 19.0
Low 0.92 10.1
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11
M&R ACTUARIAL APPRAISAL SUMMARY
ACTUARIAL APPRAISAL VALUATION ANALYSIS SUGGESTS A VALUE RANGE OF $1.5 BILLION
TO $2.0 BILLION
ANNUITIES SEGMENT
(DOLLARS IN MILLIONS)
IMPLIED EQUITY
VALUE RANGE
- ------------------------------------------------------------------------------------------------------
M&R Appraisal at September 30, 2000 $1,526 - $2,397
M&R Estimate as of June 30, 2001 1,687 - 2,644
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REFERENCE RANGE $1,500 - $2,000
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- ------------------------------------------------------------------------------------------------------
12
M&R ACTUARIAL APPRAISAL OF KEYPORT LIFE INSURANCE COMPANY
SUMMARY OF ACTUARIAL APPRAISAL - ESTIMATES OF VALUE
($ in millions)
DISCOUNT RATE
--------------------------------------------------------
COMPONENT OF VALUE 9.0% 11.0% 13.0%
- ------------------------------------------------------------------------------------ ------------------ -----------------
Adjusted Statutory Book Value as of Sept. 30, 2000 $987.8 $987.8 $987.8
ESTIMATED VALUE AS OF SEPTEMBER 30, 2000:
INFORCE BUSINESS
After-Tax Existing Business 829.5 755.7 693.8
Cost of Capital (200% RBC) (136.6) (189.6) (234.9)
---------- ----------- ----------------
Subtotal After Cost of Capital 692.9 566.1 458.9
FUTURE BUSINESS
After-Tax Future Business 1,007.2 710.1 494.4
Cost of Capital (200% RBC) (290.7) (367.1) (415.0)
---------- ----------- ----------------
Subtotal After Cost of Capital 716.5 343.0 79.4
Total Value In-force and Future Business $2,397.3 $1,896.9 $1,526.2
ESTIMATED VALUE AS OF JUNE 30, 2001:
Total Value In-force and Future Business
After-Tax $2,644.0 $2,094.0 $1,686.8
- ------------------------------------------------------------------------------------------------------------------------
SOURCE: Milliman & Robertson, Inc.
13
ANNUITIES SEGMENT TRANSACTION
OTHER MAJOR TERMS:
- 338 (h) (10) Election
- Assumption of all material liabilities associated with the business
- Includes Special Retention and Severance Plan for segment's employees
- Excludes restricted stock and stock option liabilities
- Transition Services Agreement to be entered into by Liberty Financial
- Break-up fee of 5% (approximately $85 million)
14
CSFB'S OPINION
SUN LIFE'S PURCHASE PRICE FOR THE ANNUITIES SEGMENT IS FAIR, AS OF THE
DATE HEREOF, TO LIBERTY FINANCIAL COMPANIES FROM A FINANCIAL POINT OF VIEW
ASSET MANAGEMENT
15
ASSET MANAGEMENT BUSINESS
- - Withdrawal of First Union has resulted in no immediate acquiror for Asset
Management business
- - CSFB believes that a successful remarketing of the business can be
accomplished
- Certain potential asset management acquirors were occupied with other
activities in late 2000
- Certain potential asset management acquirors may have been skeptical
that a separate sale of the asset management business would be possible
- - CSFB has had contact with 61 potential buyers:
- 26 U.S. and Canadian Institutions
- 28 European
- 7 Rest of world
- - Given Asset Management Q1 results, expected value is likely to be lower
than First Union's proposal
16
SALE OF ASSET MANAGEMENT BUSINESS
- - Results in Q1 are 30% below management plan
- - $7.9BN reduction to AUM in Q4 2000 and Q1 2001 from market action
REVISED
($ in millions) 2001P Q1 2001 PRELIMINARY
2000A(1) AT 9/30/00 Q1 2001A ANNUALIZED 2001P
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Revenues $383.9 $460.8 $105.6 $422.4 $416 - $433
Operating Expenses(2) (261.3) (297.3) (76.6) (306.4) (295)
EBITDA 79.7 122.1 17.0 68.0 73 - 90
AUM $51.8BN $60.9BN $48.9 BN NA NA
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(1) Includes Wanger for 3 months
(2) Excludes amortization of deferred distribution costs and
depreciation expense.
Source: LFC Management
NEXT STEPS
17
NEXT STEPS
- - Continue marketing Asset Management business
- - Determine final buyer for Asset Management business
- - Depending upon transaction structures, assess disposition of proceeds
to common stockholders and bondholders
- - Close transactions