The information in this
document is based on the unaudited interim financial results of Sun
Life Financial Inc. ("SLF Inc.") for the period ended
December 31, 2023. SLF Inc., its subsidiaries and, where
applicable, its joint ventures and associates are collectively
referred to as "the Company", "Sun Life", "we", "our", and "us". We
manage our operations and report our financial results in five
business segments: Asset Management, Canada, United States
("U.S."), Asia, and Corporate. Reported net income (loss) refers to
Common shareholders' net income (loss) determined in accordance
with IFRS. Unless otherwise noted, all amounts are in Canadian
dollars. Amounts in this document may be impacted by rounding. On
January 1, 2023 we adopted IFRS 17 Insurance Contracts ("IFRS 17"),
which replaces IFRS 4 Insurance Contracts, and IFRS 9 Financial
Instruments ("IFRS 9"), which replaces IAS 39 Financial
Instruments: Recognition and Measurement (collectively, "the new
standards"). The nature and effects of the key changes to our
critical accounting policies and estimated impacts from the
adoption of the new standards are summarized in section N -
Accounting and Control Matters in our MD&A for the period ended
December 31, 2023 ("2023 Annual MD&A").
|
TORONTO, Feb. 7, 2024
/CNW/ - Sun Life Financial Inc. (TSX: SLF) (NYSE: SLF)
announced its results for the fourth quarter and full year ended
December 31, 2023.
- Underlying net income(1) of $983 million increased $91
million or 10% from Q4'22(2) (full year -
$3,728 million increased $359 million or 11% from 2022(2));
underlying ROE(1) was 18.4% (full year - 17.8%).
- Wealth & asset management underlying net
income(1): $439
million, up $27 million or 7%
(full year - $1,726 million, up
$53 million or 3%).
- Group - Health & Protection underlying net
income(1): $365
million, up $44 million or 14%
(full year - $1,313 million, up
$350 million or 36%).
- Individual - Protection underlying net
income(1): $284
million, up $53 million or 23%
(full year - $1,137 million, up
$137 million or 14%).
- Corporate expenses & other(1):
$(105) million net loss, an increase
of $33 million in net loss or 46%
(full year - $(448) million net loss,
an increase of $181 million in net
loss or 68%).
- Reported net income of $749
million decreased $416 million
or 36% from Q4'22(2) (full year - $3,086 million increased $215 million or 7% from 2022(2);
reported ROE(1) was 14.0% (full year - 14.7%).
"Sun Life closed 2023 with a strong fourth quarter driven by
exceptional sales for individual protection, as well as good
momentum in our group health and protection businesses, reflecting
the value and trust Clients place on Sun Life's solutions," said
Kevin Strain, President and CEO of
Sun Life. "Despite a challenging market, our Asset Management
pillar delivered solid underlying earnings led by record earnings
at SLC Management and steady margins at MFS."
"We continue to provide Clients with access to quality care
through digital innovation and partnerships to support their health
journey. In Canada, we completed
our acquisition of Dialogue Health Technologies and made an
investment in Pillway, a virtual pharmacy."
_____________
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see the Non-IFRS Financial
Measures section in this document and in the 2023 Annual
MD&A.
|
(2)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
Financial and Operational Highlights - Fourth Quarter and
Full Year 2023
|
|
Quarterly
results
|
Year-to-date
|
Profitability
|
Q4'23
|
Q4'22(2)
|
2023
|
2022(2)
|
|
Underlying net income
($ millions)(1)
|
983
|
892
|
3,728
|
3,369
|
|
Reported net income -
Common shareholders ($ millions)
|
749
|
1,165
|
3,086
|
2,871
|
|
Underlying EPS
($)(1)(3)
|
1.68
|
1.52
|
6.36
|
5.75
|
|
Reported EPS
($)(3)
|
1.28
|
1.98
|
5.26
|
4.89
|
|
Underlying return on
equity ("ROE")(1)
|
18.4 %
|
17.7 %
|
17.8 %
|
17.0 %
|
|
Reported
ROE(1)
|
14.0 %
|
23.2 %
|
14.7 %
|
14.5 %
|
Growth
|
Q4'23
|
Q4'22(2)
|
2023
|
2022(2)
|
|
Wealth sales &
asset management gross flows ($
millions)(1)(4)
|
45,750
|
43,269
|
173,820
|
198,650
|
|
Group - Health &
Protection sales ($ millions)(1)(5)
|
1,459
|
1,345
|
2,942
|
2,554
|
|
Individual - Protection
sales ($ millions)(1)
|
707
|
498
|
2,491
|
1,767
|
|
Assets under management
("AUM") ($ billions)(1)
|
1,400
|
1,319
|
1,400
|
1,319
|
|
New business
Contractual Service Margin ("CSM") ($
millions)(1)
|
381
|
253
|
1,253
|
762
|
|
|
|
|
|
|
Financial
Strength
|
Q4'23
|
As at
January 1,
2023(7)
|
|
|
|
LICAT ratios (at period
end)(6)(7)
|
|
|
|
|
|
Sun Life Financial
Inc.
|
149 %
|
142 %
|
|
|
|
Sun Life
Assurance(8)
|
141 %
|
139 %
|
|
|
|
Financial leverage
ratio (at period end)(1)(9)
|
21.5 %
|
23.7 %
|
|
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see the Non-IFRS Financial
Measures section in this document and in the 2023 Annual
MD&A.
|
(2)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(3)
|
All earnings per share
("EPS") measures refer to fully diluted EPS, unless otherwise
stated.
|
(4)
|
Effective January 1,
2023, Canada wealth sales & asset management gross flows have
been updated to exclude retained sales. Prior period amounts have
been updated to reflect this change.
|
(5)
|
Prior period amounts
related to U.S. Dental sales have been restated to reflect new
information.
|
(6)
|
Life Insurance Capital
Adequacy Test ("LICAT") ratio. Our LICAT ratios are calculated in
accordance with the OSFI-mandated guideline.
|
(7)
|
OSFI's 2023 LICAT
Guideline, effective January 1, 2023, specifies that available
capital for LICAT purposes includes the Contractual Service Margin.
Prior period restatement and resubmissions are not mandated.
Pro-forma January 1, 2023 LICAT ratios are disclosed to illustrate
transition impact. These pro-forma calculations will not be
formally submitted to OSFI. Refer to section G - Financial
Strength in the 2023 Annual MD&A.
|
(8)
|
Sun Life Assurance
Company of Canada ("Sun Life Assurance") is SLF Inc.'s principal
operating life insurance subsidiary.
|
(9)
|
Effective January 1,
2023, the calculation for the financial leverage ratio was updated
to include the CSM balance (net of taxes) in the denominator. The
CSM (net of taxes) was $9.6 billion as at December 31,
2023 (January 1, 2023 - $8.7 billion).
|
Financial and Operational Highlights - Quarterly Comparison
(Q4'23 vs. Q4'22)
($
millions)
|
Q4'23
|
Underlying net
income by business type(1)(2):
|
Sun
Life
|
Asset
Management
|
Canada
|
U.S.
|
Asia
|
Corporate
|
Wealth & asset
management
|
439
|
331
|
92
|
—
|
16
|
—
|
Group - Health &
Protection
|
365
|
—
|
159
|
206
|
—
|
—
|
Individual -
Protection
|
284
|
—
|
99
|
47
|
138
|
—
|
Corporate expenses
& other
|
(105)
|
—
|
—
|
—
|
(11)
|
(94)
|
Underlying net
income(1)
|
983
|
331
|
350
|
253
|
143
|
(94)
|
Reported net income
- Common shareholders
|
749
|
297
|
348
|
101
|
44
|
(41)
|
Change in underlying
net income (% year-over-year)
|
10 %
|
2 %
|
32 %
|
10 %
|
6 %
|
nm(3)
|
Change in reported net
income (% year-over-year)
|
(36) %
|
(7) %
|
(23) %
|
(50) %
|
(52) %
|
nm(3)
|
Wealth sales &
asset management gross flows(1)(4)
|
45,750
|
38,322
|
5,424
|
—
|
2,004
|
—
|
Group - Health &
Protection sales(1)
|
1,459
|
—
|
174
|
1,269
|
16
|
—
|
Individual -
Protection sales(1)
|
707
|
—
|
171
|
—
|
536
|
—
|
Change in wealth sales
& asset management gross flows
(%
year-over-year)
|
6 %
|
3 %
|
32 %
|
—
|
12 %
|
—
|
Change in group sales
(% year-over-year)
|
8 %
|
—
|
63 %
|
4 %
|
(6) %
|
—
|
Change in individual
sales (% year-over-year)
|
42 %
|
—
|
23 %
|
—
|
49 %
|
—
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see the Non-IFRS Financial
Measures section in this document and in the 2023 Annual
MD&A.
|
(2)
|
For more information
about the business types in Sun Life's business groups, see section
A - How We Report Our Results in the 2023 Annual
MD&A.
|
(3)
|
Not
meaningful.
|
(4)
|
Effective January 1,
2023, Canada wealth sales & asset management gross flows have
been updated to exclude retained sales. Prior period amounts have
been updated to reflect this change.
|
Underlying net income(1) of $983 million increased $91
million or 10% from prior year, driven by:
- Wealth & asset management(1) up
$27 million: Higher Asset Management
fee-related earnings and higher investment income driven by volume
growth and an increase in yields.
- Group - Health & Protection(1) up
$44 million: Business premium growth
in the U.S. and Canada, improved
disability experience in Canada,
and higher investment contributions in the U.S., partially offset
by lower results in U.S. Dental.
- Individual - Protection(1) up $53 million: Business growth reflecting good
sales momentum in Asia, and higher
investment contributions in Canada, partially offset by lower earnings due
to the sale of Sun Life UK(2).
- Corporate expenses & other(1)
$(33) million increase in net loss
driven by higher operating expenses reflecting business growth and
continued investments in the business, partially offset by a lower
effective tax rate.
- Higher earnings on surplus primarily driven by higher net
interest income and lower realized losses.
Reported net income of $749
million decreased $416 million
or 36%, driven by:
- Unfavourable market-related impacts primarily reflecting
interest rates and real estate experience(3);
- The prior year impact of the Canada Tax Rate
Change(4); and
- Fair value changes in management's ownership of
MFS(5) shares; partially offset by
- The increase in underlying net income;
- The impact of the Bermuda Corporate Income Tax
Change(6); and
- Lower DentaQuest integration costs.
Underlying ROE was 18.4% and reported ROE was 14.0% (Q4'22 -
17.7% and 23.2%, respectively). SLF Inc. ended the quarter with a
LICAT ratio of 149%.
______________
|
(1)
|
Refer to section C
- Profitability in this document for more information on notable
items attributable to reported and underlying net income items and
the Non-IFRS Financial Measures in this document for a
reconciliation between reported net income and underlying net
income. For more information about the business types in Sun Life's
operating segments/business groups, see section A - How We Report
Our Results in the 2023 Annual MD&A.
|
(2)
|
On April 3, 2023 we
completed the sale of SLF of Canada UK Limited to Phoenix Group
Holdings plc ("the sale of Sun Life UK"). For additional
information, refer to Note 3 of our 2023 Annual Consolidated
Financial Statements.
|
(3)
|
Real estate experience
reflects the difference between the actual value of real estate
investments compared to management's longer-term expected returns
supporting insurance contract liabilities ("real estate
experience").
|
(4)
|
On December 15, 2022,
legislation implementing an additional surtax of 1.5% applicable to
banks and life insurers' taxable income in excess of $100 million
was enacted in Canada ("Canada Tax Rate Change"). This legislation
applied retroactively to the Federal Budget date of April 7, 2022.
As a result, total Company reported net income increased by $141
million in Q4'22 reflected in Other adjustments.
|
(5)
|
MFS Investment
Management ("MFS").
|
(6)
|
Bermuda recognized a
deferred tax asset of $51 million in Q4'23 ("Bermuda Corporate
Income Tax Change"). Refer to Note 19 in the 2023 Annual
Consolidated Financial Statements for more information.
|
Business Group Highlights
In 2023, Sun Life was certified as a Great Place to Work® in
Canada, the U.S., Vietnam, the
Philippines, Indonesia,
Malaysia, India, and Ireland. In addition, SLC Management was also
named 2023 Best Places to Work in Money Management for the fourth
year in a row by Pensions & Investments(1). This
recognition reflects our inclusive culture and commitment to our
people. Sun Life fosters a positive work environment where we
provide resources and flexibility to support mental, physical and
professional well-being, and where diversity is valued.
Asset Management: A global leader in both public and
alternative asset classes through MFS and SLC Management
Asset Management underlying net income of $331 million increased $7
million or 2% from prior year, driven by:
- MFS down $15 million (down
US$11 million): Higher expenses
offset by higher fee income from average net assets ("ANA"). The
MFS pre-tax net operating profit margin(2) was 39.4% for
Q4'23, compared to 39.5% in the prior year.
- SLC Management up $22
million: The increase in underlying net income was driven by
higher fee-related earnings and higher net seed investment income.
Fee-related earnings(2) increased 26% driven by higher
AUM, reflecting strong capital raising and deployment across the
platform and the AAM acquisition(3). Fee-related
earnings margin(2) was 24% for Q4'23, consistent with
the prior year.
Reported net income of $297
million decreased $24 million
or 7% from prior year, largely reflecting fair value changes in
management's ownership of MFS shares.
Asset Management ended Q4'23 with $1,016
billion of AUM, consisting of $793 billion
(US$599 billion) in MFS and
$223 billion in SLC Management. Total
Asset Management net outflows of $11.4
billion in Q4'23 reflected MFS net outflows of $15.3 billion (US$11.2
billion) partially offset by SLC Management net inflows of
$3.9 billion.
During the year, MFS became the 9th largest fund
group(4) for the U.S. retail mutual fund industry based
on AUM.
SLC Management continued its growth trajectory closing the year
with $177 billion in fee earning AUM,
up 8% from prior year, and won the 2023 CIO's Industry Innovation
Awards for Private Credit.
Canada: A leader in health,
wealth, and insurance
Canada underlying net income of
$350 million increased $85 million or 32% from prior year,
reflecting:
- Wealth & asset management up $20 million: Increase in investment income driven
by higher volume and yields.
- Group - Health & Protection up $57 million: Business premium growth and improved
disability experience reflecting higher margins, lower claims
volumes, and shorter claims durations.
- Individual - Protection up $8
million: Higher investment contributions partially offset by
unfavourable mortality experience.
- Higher earnings on surplus, primarily driven by realized gains
in the current year.
Reported net income of $348
million decreased $105 million
or 23% from prior year, driven by market-related impacts primarily
from interest rates and real estate experience, and the prior year
impact of the Canada Tax Rate Change(5), partially
offset by ACMA(6) impacts and the increase in underlying
net income.
Canada's
sales(7):
- Wealth sales & asset management gross flows of $5 billion were up 32%, driven by higher
Individual Wealth sales, primarily from mutual funds, and higher
defined benefit sales in Group Retirement Services ("GRS").
- Group - Health & Protection sales of $174 million were up 63%, driven by higher large
case sales.
- Individual - Protection sales of $171
million were up 23%, driven by higher participating whole
life insurance sales.
We continue to focus on strengthening and expanding our health
business to help Clients live healthier lives. During the quarter
we completed the acquisition of Dialogue Health Technologies Inc.,
Canada's premier virtual health
care and wellness platform providing affordable on-demand access to
quality care. Further, we finalized a contract with the Government
of Canada to be the administrator
of the Canadian Dental Care Plan, which will provide access to
dental care for up to nine million additional Canadians in need. We
also completed a minority investment in Simpill Health Group Inc.,
operating as Pillway, a virtual pharmacy offering the ability to
consult a knowledgeable pharmacist by chat or phone call and direct
delivery of medication in Canada,
expanding upon our digital health services and offerings, including
the Q2'23 launch of the Lumino Health™ Pharmacy app.
We continue to expand our distribution capabilities through the
creation of a securities investment dealer, Sun Life Canada
Securities Inc. ("SLCSI"). We received approval from the Canadian
Investment Regulatory Organization in the fourth quarter, and
expect an operational launch in 2024. Our expanded offerings in
SLCSI will broaden access to wealth solutions to help Clients
achieve lifetime financial security.
__________________
|
(1)
|
Pensions &
Investments, a global news source of money management.
|
(2)
|
Represents a non-IFRS
financial measure. For more details, see the Non-IFRS Financial
Measures section in this document and in the 2023 Annual
MD&A.
|
(3)
|
On February 1, 2023, we
completed the acquisition of a majority stake interest in Advisors
Asset Management, Inc. ("the AAM acquisition"), a leading
independent U.S. retail distribution firm, with the option to
acquire the remaining interest starting in 2028.
|
(4)
|
Based on ISS Market
Intelligence Simfund.
|
(5)
|
On December 15, 2022,
legislation implementing an additional surtax of 1.5% applicable to
banks and life insurer's taxable income in excess of $100 million
was enacted in Canada ("Canada Tax Rate Change"). This legislation
applied retroactively to the Federal Budget date of April 7, 2022.
As a result, Canada reported net income increased by $90 million in
Q4'22, reflected in Other adjustments.
|
(6)
|
Assumption changes and
management actions ("ACMA").
|
(7)
|
Compared to the prior
year.
|
U.S.: A leader in health and benefits
U.S. underlying net income of US$187
million increased US$14
million or 8% ($253
million increased $23 million or
10%) from prior year, driven by:
- Group - Health & Protection down US$7 million: Lower Dental results reflecting the
impact of Medicaid redeterminations following the end of the Public
Health Emergency, partially offset by higher Group Benefits
results. In Group Benefits, strong revenue growth, higher net
investment results and favourable mortality experience was
partially offset by less favourable morbidity experience.
- Individual - Protection up US$21
million: The inclusion of the UK payout annuity
business(1) and improved mortality experience.
Reported net income of US$77
million decreased US$74
million or 49% ($101 million
decreased $101 million or 50%) from prior year, driven by ACMA
impacts, and market-related impacts largely from interest rates and
real estate experience, partially offset by lower DentaQuest
integration costs and the increase in underlying net income.
U.S. group sales of US$932 million were up
US$33 million or 4% ($1,269 million, up $48 million or 4%),
driven by higher medical stop-loss and commercial dental sales,
partially offset by lower employee benefits sales and lower large
case sales in Dental.
We continue to advance our strategy of helping more people get
access to the health care and coverage they need. In the
fourth quarter, the states of Iowa
and Arkansas awarded DentaQuest
Medicaid dental benefits contracts, supporting our mission to
provide access to dental care for families and children in
underserved communities. The Dental business has recorded more than
US$650 million in sales since closing
the DentaQuest acquisition on June 1,
2022, and has approximately 36 million members as of
January 1, 2024.
In Health and Risk Solutions, we continue to differentiate our
medical stop-loss offering with solutions that increase access to
health care and improve clinical outcomes for members, while
protecting against high-cost claims for employers. We recently
announced a partnership with in-home, tech-enabled medical care
provider Somatus to provide one-on-one support to our members with
chronic kidney disease and congestive heart failure, two common
high-cost conditions. We also announced a partnership with Virtual
MeTM(2) to provide our Health Navigator product through
their telehealth services that cater to business clients, as well
as individuals who are underinsured or uninsured.
Asia: A regional
leader focused on fast-growing markets
Asia underlying net income of
$143 million increased $8 million or 6% from prior year, driven by:
- Individual - Protection up $20
million: Business growth reflecting good sales momentum,
partially offset by lower earnings on surplus.
- Regional office expenses & other $(12) million increased net loss primarily
reflecting continued pan Asia
investments in the business.
Reported net income of $44 million
decreased $48 million or 52% from
prior year, driven by ACMA impacts, partially offset by the
impact of the Bermuda Corporate Income Tax
Change(3).
Asia's sales(4):
- Individual sales of $536 million
were up 49%, primarily driven by higher sales in Hong Kong reflecting increased demand as
pandemic-related travel restrictions were lifted in early 2023, and
in International reflecting continued demand for our products,
partially offset by lower sales in Vietnam reflecting market conditions, and
China.
- Wealth sales & asset management gross flows of $2 billion were up 12%, primarily driven by
higher mutual fund sales in India,
partially offset by lower money market fund sales in the Philippines.
New business CSM of $223 million
in Q4'23 was up from $122 million in
the prior year, primarily driven by sales in Hong Kong and High-Net-Worth.
We are dedicated to helping Clients achieve lifetime financial
security by expanding product offerings to meet their evolving
needs. In Singapore, we launched a
new index universal life product(5), providing
High-Net-Worth Clients a dynamic balance between long-term
protection and growth, with the flexibility to customize premium
payments and allocations among investment options to meet their
goals. This new product has been well received by the market,
contributing to Singapore's Q4'23
strong sales growth.
Our diversified mix of high-performing, quality-focused
distribution channels, including our new bancassurance partnership
with Dah Sing Bank, contributed to record sales and increased
market position for Sun Life Hong Kong.
_____________
|
(1)
|
On April 3, 2023, we
completed the sale of SLF of Canada UK Limited to Phoenix Group
Holdings plc ("the sale of Sun Life UK"). Under the agreement, we
will retain our economic interest in the payout annuities business
through a reinsurance treaty, which, effective Q2'23 is recorded in
In-force Management within the U.S. business group. For additional
information, refer to Note 3 of our 2023 Annual Consolidated
Financial Statements.
|
(2)
|
Virtual MeTM
provides a suite of telehealth services delivering quality health
care directly to patients in need.
|
(3)
|
Bermuda recognized a
deferred tax asset of $51 million in Q4'23 ("Bermuda Corporate
Income Tax Change"). Refer to Note 19 in the 2023 Annual
Consolidated Financial Statements for more
information.
|
(4)
|
Compared to the prior
year.
|
(5)
|
SunBrilliance Indexed
Universal Life.
|
Corporate
Corporate underlying net loss was $94
million compared to underlying net loss of $62 million in the prior year, driven by the sale
of Sun Life UK(1) and higher operating expenses,
partially offset by a lower effective tax rate.
Reported net loss was $41 million
compared to reported net income of $97
million in the prior year, reflecting the impacts from the
sale of Sun Life UK (1), the prior year impact of
tax-related matters(2), and the change in underlying net
loss.
________________
|
(1)
|
On April 3, 2023 we
completed the sale of SLF of Canada UK Limited to Phoenix Group
Holdings plc ("the sale of Sun Life UK"). Under the agreement, we
will retain our economic interest in the payout annuities business
through a reinsurance treaty, which, effective Q2'23, is recorded
in In-force Management within the U.S. business group. For
additional information, refer to Note 3 of our 2023 Annual
Consolidated Financial Statements. The prior year included
market-related impacts from Sun Life UK in reported net
income.
|
(2)
|
Tax related matters
include tax-exempt investment income in reported net income in both
years and the impact of the Canada Tax Rate Change. On December 15,
2022, legislation implementing an additional surtax of 1.5%
applicable to banks and life insurer's taxable income in excess of
$100 million was enacted in Canada ("Canada Tax Rate Change"). This
legislation applied retroactively to the Federal Budget date of
April 7, 2022. As a result, Corporate reported net income increased
by $51 million in Q4'22, reflected in Other adjustments.
|
Table of
Contents
|
A
|
How We Report Our
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
B
|
Financial
Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
C
|
Profitability
|
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10
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D
|
Growth
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13
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E
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Contractual Service
Margin
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15
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F
|
Financial
Strength
|
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17
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G
|
Performance by Business
Segment
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19
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1. Asset
Management
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20
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2. Canada
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22
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3. U.S.
|
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23
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|
4. Asia
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24
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5. Corporate
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25
|
H
|
Non-IFRS Financial
Measures
|
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26
|
I
|
Forward-looking
Statements
|
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32
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About Sun Life
Sun Life is a leading international financial services
organization providing asset management, wealth, insurance and
health solutions to individual and institutional Clients. Sun Life
has operations in a number of markets worldwide, including
Canada, the United States, the United Kingdom, Ireland, Hong
Kong, the Philippines,
Japan, Indonesia, India, China,
Australia, Singapore, Vietnam, Malaysia and Bermuda. As of December 31, 2023, Sun
Life had total assets under management of $1.40 trillion. For more information, please
visit www.sunlife.com.
Sun Life Financial Inc. trades on the Toronto (TSX), New
York (NYSE) and Philippine (PSE) stock exchanges under the
ticker symbol SLF.
A. How We Report Our Results
Sun Life Financial Inc., its subsidiaries and, where applicable,
its joint ventures and associates are collectively referred to as
"the Company", "Sun Life", "we", "our", and "us". We manage our
operations and report our financial results in five business
segments: Asset Management, Canada, U.S., Asia, and Corporate. Information concerning
these segments is included in our annual and interim consolidated
financial statements and accompanying notes ("Annual Consolidated
Financial Statements" and "Interim Consolidated Financial
Statements", respectively, and "Consolidated Financial Statements"
collectively) and interim and annual management's discussion and
analysis ("MD&A"). We prepare our unaudited Interim
Consolidated Financial Statements using International Financial
Reporting Standards ("IFRS"), the accounting requirements of the
Office of the Superintendent of Financial Institutions
("OSFI"). Reported net income (loss) refers to Common
shareholders' net income (loss) determined in accordance with
IFRS.
On January 1, 2023 we adopted IFRS
17 Insurance Contracts ("IFRS 17"), which replaces IFRS 4
Insurance Contracts. IFRS 17 establishes the principles for
the recognition, measurement, presentation, and disclosure of
insurance contracts. On January 1,
2023, we also adopted IFRS 9 Financial Instruments
("IFRS 9"), which replaces IAS 39 Financial Instruments:
Recognition and Measurement. The nature and effects of the key
changes in our critical accounting policies and estimated impacts
from the adoption of the new standards are summarized in section N
- Accounting and Control Matters - 2 - Changes in Accounting
Policies in our 2023 Annual MD&A. For more information
including the measurement and classification of opening balances,
refer to Note 2 of our 2023 Annual Consolidated Financial
Statements.
Unless otherwise noted, all amounts are in Canadian dollars.
Amounts in this document are impacted by rounding.
Note to Readers: 2022 Restated Results on Adoption of IFRS 17
and IFRS 9
2022 results have been restated for the adoption of IFRS 17 and
the related IFRS 9 classification overlay ("the new standards").
The restated results may not be fully representative of our future
earnings profile, as we were not managing our asset and liability
portfolios under the new standards. The majority of the actions
taken to re-balance asset portfolios and transition asset-liability
management execution to an IFRS 17 basis occurred in Q1'23.
Accordingly, analysis based on 2022 comparative results may not
necessarily be indicative of future trends, and should be
interpreted with this context. Using sensitivities to analyze the
outlook for market risk and related impacts (e.g., interest rate
sensitivities) will be more representative starting with the
sensitivities disclosed for Q1'23 and onward in section K -
Risk Management in the 2023 Annual MD&A and section I -
Risk Management in each quarter's respective interim MD&A
document. Certain 2022 restated results and 2023 interim results in
the Drivers of Earnings and CSM Movement Analysis were refined to
more accurately reflect how management views the business.
1. Use of Non-IFRS Financial Measures
We report certain financial information using non-IFRS financial
measures, as we believe that these measures provide information
that is useful to investors in understanding our performance and
facilitate a comparison of our quarterly and full year results from
period to period. These non-IFRS financial measures do not have any
standardized meaning and may not be comparable with similar
measures used by other companies. For certain non-IFRS financial
measures, there are no directly comparable amounts under IFRS.
These non-IFRS financial measures should not be viewed in isolation
from or as alternatives to measures of financial performance
determined in accordance with IFRS. Additional information
concerning non-IFRS financial measures and, if applicable,
reconciliations to the closest IFRS measures are available in
section H - Non-IFRS Financial Measures in this document, section M
- Non-IFRS Financial Measures in our 2023 Annual MD&A, and the
Supplementary Financial Information package on www.sunlife.com
under Investors - Financial results and reports.
2. Forward-looking Statements
Certain statements in this document are forward-looking
statements within the meaning of certain securities laws, including
the "safe harbour" provisions of the United States Private
Securities Litigation Reform Act of 1995 and applicable Canadian
securities legislation. Additional information concerning
forward-looking statements and important risk factors that could
cause our assumptions, estimates, expectations and projections to
be inaccurate and our actual results or events to differ materially
from those expressed in or implied by such forward-looking
statements can be found in section I - Forward-looking Statements
in this document.
3. Additional Information
Additional information about SLF Inc. can be found in the
Consolidated Financial Statements, the Annual and Interim MD&A
and SLF Inc.'s Annual Information Form ("AIF") for the year ended
December 31, 2023. These documents
are filed with securities regulators in Canada and are available at www.sedarplus.ca.
SLF Inc.'s Annual Consolidated Financial Statements, Annual
MD&A and AIF are filed with the United States Securities and
Exchange Commission ("SEC") in SLF Inc.'s annual report on Form
40-F and SLF Inc.'s Interim MD&A and Interim Consolidated
Financial Statements are furnished to the SEC on Form 6-Ks and are
available at www.sec.gov.
B. Financial Summary
($ millions, unless
otherwise noted)
|
Quarterly
results
|
Year-to-date
|
Profitability
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
2023
|
2022(1)
|
|
Net income
(loss)
|
|
|
|
|
|
|
Underlying net income
(loss)(2)
|
983
|
930
|
892
|
3,728
|
3,369
|
|
Reported net income
(loss) - Common shareholders
|
749
|
871
|
1,165
|
3,086
|
2,871
|
|
Diluted earnings per
share ("EPS") ($)
|
|
|
|
|
|
|
Underlying EPS
(diluted)(2)
|
1.68
|
1.59
|
1.52
|
6.36
|
5.75
|
|
Reported EPS
(diluted)
|
1.28
|
1.48
|
1.98
|
5.26
|
4.89
|
|
Return on equity
("ROE") (%)
|
|
|
|
|
|
|
Underlying
ROE(2)
|
18.4 %
|
17.7 %
|
17.7 %
|
17.8 %
|
17.0 %
|
|
Reported
ROE(2)
|
14.0 %
|
16.6 %
|
23.2 %
|
14.7 %
|
14.5 %
|
|
|
|
|
|
|
|
Growth
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
2023
|
2022(1)
|
|
Sales
|
|
|
|
|
|
|
Wealth sales &
asset management gross flows(2)(3)
|
45,750
|
39,324
|
43,269
|
173,820
|
198,650
|
|
Group - Health &
Protection sales(2)(4)
|
1,459
|
374
|
1,345
|
2,942
|
2,554
|
|
Individual -
Protection sales(2)
|
707
|
669
|
498
|
2,491
|
1,767
|
|
Total AUM ($
billions)(2)
|
1,399.6
|
1,340.1
|
1,318.6
|
1,399.6
|
1,318.6
|
|
New business
Contractual Service Margin ("CSM")(2)
|
381
|
370
|
253
|
1,253
|
762
|
|
|
|
|
|
|
|
Financial
Strength
|
Q4'23
|
Q3'23
|
As at
January 1,
2023(5)
|
|
|
|
LICAT
ratios(5)
|
|
|
|
|
|
|
Sun Life Financial
Inc.
|
149 %
|
147 %
|
142 %
|
|
|
|
Sun Life
Assurance(6)
|
141 %
|
138 %
|
139 %
|
|
|
|
Financial leverage
ratio(2)(7)
|
21.5 %
|
21.8 %
|
23.7 %
|
|
|
|
Book value per
common share ($)
|
36.51
|
35.91
|
34.60
|
|
|
|
Weighted average common
shares outstanding for basic EPS (millions)
|
584
|
586
|
586
|
|
|
|
Closing common shares
outstanding (millions)
|
585
|
584
|
586
|
|
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document.
|
(3)
|
Effective January 1,
2023, Canada wealth sales & asset management gross flows have
been updated to exclude retained sales. Prior period amounts have
been updated to reflect this change.
|
(4)
|
Prior period amounts
related to U.S. Dental sales have been restated to reflect new
information.
|
(5)
|
OSFI's 2023 LICAT
Guideline, effective January 1, 2023, specifies that available
capital for LICAT purposes includes the Contractual Service Margin.
Prior period restatement and resubmissions are not mandated.
Pro-forma January 1, 2023 LICAT ratios are disclosed to illustrate
transition impact. These pro-forma calculations will not be
formally submitted to OSFI.
|
(6)
|
Sun Life Assurance
Company of Canada ("Sun Life Assurance") is SLF Inc.'s principal
operating life insurance subsidiary.
|
(7)
|
Effective January 1,
2023, the calculation for the financial leverage ratio was updated
to include the CSM balance (net of taxes) in the denominator. The
CSM (net of taxes) was $9.6 billion as at December 31, 2023
(September 30, 2023 - $9.3 billion; January 1, 2023 -
$8.7 billion).
|
C. Profitability
The following table reconciles our Common shareholders' net
income ("reported net income") and underlying net income. All
factors discussed in this document that impact underlying net
income are also applicable to reported net income. Certain
adjustments and notable items also impact the CSM, such as
mortality experience and assumption changes; see section E -
Contractual Service Margin in this document for more
information.
|
Quarterly
results
|
($ millions,
after-tax)
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
Underlying net
income by business type(2):
|
|
|
|
Wealth & asset
management
|
439
|
457
|
412
|
Group - Health &
Protection
|
365
|
285
|
321
|
Individual -
Protection
|
284
|
297
|
231
|
Corporate expenses
& other
|
(105)
|
(109)
|
(72)
|
Underlying net
income(2)
|
983
|
930
|
892
|
Add:
|
Market-related
impacts(1)
|
(193)
|
23
|
224
|
|
Assumption changes and
management actions ("ACMA")
|
(1)
|
35
|
12
|
|
Other
adjustments
|
(40)
|
(117)
|
37
|
Reported net income
- Common shareholders
|
749
|
871
|
1,165
|
Underlying
ROE(2)
|
18.4 %
|
17.7 %
|
17.7 %
|
Reported
ROE(2)
|
14.0 %
|
16.6 %
|
23.2 %
|
Notable items
attributable to reported and underlying net
income(2):
|
|
|
|
Mortality
|
(5)
|
18
|
(43)
|
Morbidity
|
91
|
79
|
110
|
Lapse and other
policyholder behaviour ("policyholder behaviour")
|
(11)
|
(3)
|
(1)
|
Expenses
|
(26)
|
(34)
|
(4)
|
Credit(3)
|
(18)
|
(7)
|
(11)
|
Other(4)
|
(2)
|
5
|
17
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document. For more information about
business types in Sun Life's business groups, see section A - How
We Report Our Results in the 2023 Annual MD&A.
|
(3)
|
Credit includes rating
changes on assets measured at Fair value through profit or loss
("FVTPL"), and the Expected credit loss ("ECL") impact for assets
measured at Fair value through other comprehensive income
("FVOCI").
|
(4)
|
Other notable items are
recorded in Net Insurance Service Result and Net Investment Result
in the Drivers of Earnings analysis. For more details, see section
H - Non-IFRS Financial Measures in this document.
|
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net income(1) of $983 million increased $91 million or 10%, driven by:
- Wealth & asset management(1) up
$27 million: Higher Asset
Management fee-related earnings and higher investment income driven
by volume growth and an increase in yields.
- Group - Health & Protection(1) up
$44 million: Business premium
growth in the U.S. and Canada,
improved disability experience in Canada, and higher investment contributions in
the U.S., partially offset by lower results in U.S. Dental.
- Individual - Protection(1) up $53 million: Business growth reflecting
good sales momentum in Asia, and
higher investment contributions in Canada, partially offset by lower earnings due
to the sale of Sun Life UK(2).
- Corporate expenses & other(1)
$(33) million increase in net loss
driven by higher operating expenses reflecting business growth and
continued investments in the business, partially offset by a lower
effective tax rate.
- Higher earnings on surplus primarily driven by higher net
interest income and lower realized losses.
Reported net income of $749
million decreased $416 million
or 36%, driven by:
- Unfavourable market-related impacts primarily reflecting
interest rates and real estate experience;
- The prior year impact of the Canada Tax Rate
Change(3); and
- Fair value changes in management's ownership of MFS shares;
partially offset by
- The increase in underlying net income;
- The impact of the Bermuda Corporate Income Tax
Change(4); and
- Lower DentaQuest integration costs.
Foreign exchange translation led to an increase of
$2 million and $3 million in underlying net income and
reported net income, respectively.
Underlying ROE was 18.4% and reported ROE was 14.0% (Q4'22 -
17.7% and 23.2%, respectively).
1. Market-related
impacts
Market-related impacts represent the difference between actual
versus expected market movements(5). Market-related
impacts resulted in a decrease of $193
million to reported net income, driven by real estate
experience and interest rate impacts.
2. Assumption changes
and management actions
The net impact of assumption changes and management actions was
a decrease of $1 million to reported
net income and includes methods and assumptions changes on
insurance contracts as well as related impacts. These included
favourable impacts from financial-related assumptions offset
largely by refinements to Sun Life Health in Canada. For additional details refer to
"Assumption Changes and Management Actions by Type" in section E -
Contractual Service Margin in this document.
3. Other
adjustments
Other adjustments decreased reported net income $40 million, reflecting DentaQuest integration
costs and amortization of acquired intangible assets, SLC
Management acquisition-related costs, and fair value changes in
management's ownership of MFS shares, partially offset by the
impact from the Bermuda Corporate Income Tax
Change(4).
4. Experience-related
items
In the fourth quarter of 2023, notable experience items
included:
- Favourable morbidity experience largely in Canada and U.S. medical stop-loss;
- Unfavourable expense experience largely in U.S. Dental,
Canada, and Asia; and
- Unfavourable credit experience that impacted Canada results.
______________
|
(1)
|
Refer to section H -
Non-IFRS Financial Measures in this document for a reconciliation
between reported net income and underlying net income.
|
(2)
|
On April 3, 2023 we
completed the sale of SLF of Canada UK Limited to Phoenix Group
Holdings plc ("the sale of Sun Life UK"). For additional
information, refer to Note 3 of our 2023 Annual Consolidated
Financial Statements.
|
(3)
|
On December 15, 2022,
legislation implementing an additional surtax of 1.5% applicable to
banks and life insurers' taxable income in excess of $100 million
was enacted in Canada ("Canada Tax Rate Change"). This legislation
applied retroactively to the Federal Budget date of April 7, 2022.
As a result, total Company reported net income increased by $141
million in Q4'22 reflected in Other adjustments.
|
(4)
|
Refer to the heading
"Income taxes" in this section for more information.
|
(5)
|
Except for risk free
rates which are based on current rates, expected market movements
are based on our medium-term outlook which is reviewed
annually.
|
5. Income taxes
The statutory tax rate is impacted by various items, such as
lower taxes on income subject to tax in foreign jurisdictions,
tax-exempt investment income, and other sustainable tax
benefits.
Bermuda recognized a deferred
tax asset of $51 million in Q4'23.
Refer to Note 19 in the 2023 Annual Consolidated Financial
Statements for more information.
The Q4'23 effective income tax rate (recovery)(1) on
underlying net income and reported net income was 16.5% and (11.1)%
respectively. Our reported effective tax rate for the quarter
represents a tax recovery. Declining interest rates led to higher
tax-exempt investment income. We also recorded a $51 million tax recovery from establishing an
economic transition deferred tax asset permitted under the new
Bermuda Corporate Income Tax regime. These adjustments recorded in
Q4'23 resulted in a net tax recovery.
6. Impacts of foreign exchange
translation
Foreign exchange translation led to an increase of
$2 million and $3 million in underlying net income and
reported net income, respectively.
______________
|
(1)
|
Our effective income
tax rate on reported net income is calculated using Total income
(loss) before income taxes, as detailed in Note 19 in our 2023
Annual Consolidated Financial Statements. Our effective income tax
rate on underlying net income is calculated using pre-tax
underlying net income, as detailed in section H - Non-IFRS
Financial Measures in this document, and the associated income tax
expense.
|
D. Growth
1. Sales and Gross Flows
|
Quarterly
results
|
($ millions)
|
Q4'23
|
Q3'23
|
Q4'22
|
Wealth sales
& asset management gross flows by business
segment(1)
|
|
|
|
Asset Management gross
flows
|
38,322
|
34,266
|
37,380
|
Canada wealth sales
& asset management gross flows(2)
|
5,424
|
3,395
|
4,099
|
Asia wealth sales
& asset management gross flows
|
2,004
|
1,663
|
1,790
|
Total wealth sales
& asset management gross flows(1)
|
45,750
|
39,324
|
43,269
|
Group - Health &
Protection sales by business
segment(1)
|
|
|
|
Canada
|
174
|
119
|
107
|
U.S.
|
1,269
|
239
|
1,221
|
Asia(3)
|
16
|
16
|
17
|
Total group
sales(1)
|
1,459
|
374
|
1,345
|
Individual -
Protection sales by business
segment(1)
|
|
|
|
Canada
|
171
|
148
|
139
|
Asia
|
536
|
521
|
359
|
Total individual
sales(1)
|
707
|
669
|
498
|
CSM - Impact of new
insurance business ("New business CSM")(1)
|
381
|
370
|
253
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document.
|
(2)
|
Effective January 1,
2023, Canada wealth sales & asset management gross flows have
been updated to exclude retained sales. Prior period amounts have
been updated to reflect this change.
|
(3)
|
In underlying net
income by business type, Group businesses in Asia have been
included with Individual – Protection. For more information
about business types in Sun Life's business groups, see section A -
How We Report Our Results in the 2023 Annual MD&A.
|
Total wealth sales & asset management gross flows increased
$2.5 billion or 6% year-over-year
($2.4 billion(1) or
6%(1), excluding foreign exchange translation).
- Asset Management gross flows increased $0.8 billion(1) or 2%(1),
reflecting higher gross flows in SLC Management, partially offset
by lower gross flows in MFS.
- Canada wealth sales &
asset management gross flows increased $1.3
billion or 32%, driven by higher Individual Wealth sales,
primarily from mutual funds, and higher defined benefit sales in
Group Retirement Services ("GRS").
- Asia wealth sales & asset
management gross flows increased $0.2
billion(1) or 12%(1), primarily driven
by higher mutual fund sales in India, partially offset by lower money market
fund sales in the
Philippines.
Total group health & protection sales increased $114 million or 8% from prior year ($110 million(1) or 8%(1),
excluding foreign exchange translation).
- Canada group sales increased
$67 million or 63%, driven by higher
large case sales.
- U.S. group sales increased $44
million(1) or 4%(1), driven by higher
medical stop-loss and commercial dental sales, partially offset by
lower employee benefits sales and lower large case sales in
Dental.
Total individual protection sales increased $209 million or 42% from prior year ($207 million(1) or 42%(1),
excluding foreign exchange translation).
- Canada individual sales
increased $32 million or 23%, driven
by higher participating whole life insurance sales.
- Asia individual sales
increased $175 million(1)
or 49%(1), primarily driven by higher sales in
Hong Kong reflecting increased
demand as pandemic-related travel restrictions were lifted in early
2023, and in International reflecting continued demand for our
products, partially offset by lower sales in Vietnam reflecting market conditions, and
China.
New business CSM represents growth derived from sales activity
in the period. The impact of new insurance business drove a
$381 million increase in CSM,
compared to $253 million in the prior
year, driven by higher individual protection sales in Asia in Hong
Kong and High-Net-Worth, and Canada.
___________
|
(1)
|
This change excludes
the impacts of foreign exchange translation. For more information
about these non-IFRS financial measures, see section H - Non-IFRS
Financial Measures in this document.
|
2. Assets Under Management
AUM consists of general funds, the investments for segregated
fund holders ("segregated funds") and third-party assets managed by
the Company. Third-party AUM is comprised of institutional and
managed funds, as well as other AUM related to our joint
ventures.
|
Quarterly
results
|
($ millions)
|
Q4'23
|
Q3'23
|
Q2'23
|
Q1'23
|
Q4'22
|
Assets under
management(1)
|
|
|
|
|
|
General fund
assets
|
204,789
|
193,858
|
196,575
|
201,792
|
198,316
|
Segregated
funds
|
128,452
|
119,988
|
123,366
|
131,033
|
125,292
|
Third-party assets
under management(1)
|
|
|
|
|
|
Retail
|
567,657
|
544,946
|
557,093
|
543,847
|
527,617
|
Institutional, managed
funds and other
|
537,424
|
518,129
|
527,344
|
528,897
|
507,673
|
Total third-party
AUM(1)
|
1,105,081
|
1,063,075
|
1,084,437
|
1,072,744
|
1,035,290
|
Consolidation
adjustments
|
(38,717)
|
(36,780)
|
(37,536)
|
(41,947)
|
(40,337)
|
Total assets under
management(1)
|
1,399,605
|
1,340,141
|
1,366,842
|
1,363,622
|
1,318,561
|
(1)
|
Represents a non-IFRS
financial measure. See section H - Non-IFRS Financial Measures in
this document.
|
AUM increased $81.0 billion or 6%
from December 31, 2022, primarily
driven by:
(i) favourable market
movements on the value of segregated, retail, institutional and
managed funds of $126.9 billion;
(ii) an increase in AUM of general fund
assets of $6.5 billion primarily due
to net fair value growth from declining interest rates; and
(iii) an increase of $5.2
billion from AUM primarily driven by the AAM
acquisition(1); partially offset by
(iv) net outflows from segregated funds and
third-party AUM of $26.9 billion;
(v) a decrease of $24.4 billion from foreign exchange translation
(excluding the impacts of general fund assets); and
(vi) Client distributions of $6.5 billion.
Segregated fund and third-party AUM net outflows of $11.4 billion during the quarter were comprised
of:
|
Quarterly
results
|
($ billions)
|
Q4'23
|
Q3'23
|
Q2'23
|
Q1'23
|
Q4'22
|
Net flows for
Segregated fund and Third-party AUM:
|
|
|
|
|
|
MFS
|
(15.3)
|
(12.5)
|
(5.3)
|
(5.8)
|
(16.1)
|
SLC
Management
|
3.9
|
3.4
|
2.0
|
3.2
|
3.5
|
Canada, Asia and
other
|
—
|
(1.4)
|
1.1
|
(0.2)
|
(0.1)
|
Total net flows for
Segregated fund and Third-party AUM
|
(11.4)
|
(10.5)
|
(2.2)
|
(2.8)
|
(12.7)
|
Third-Party AUM increased by $69.8
billion or 7% from December 31, 2022, primarily driven
by:
(i) favourable market
movements of $113.9 billion;
(ii) other business activities of
$9.3 billion; and
(iii) an increase of $5.2
billion from AUM primarily driven by the AAM
acquisition(1); partially offset by
(iv) net outflows of $27.0
billion;
(v) foreign exchange translation of
$25.1 billion; and
(vi) Client distributions of $6.5 billion.
__________
|
(1)
|
The acquisition of a
majority stake in Advisors Asset Management, Inc. ("AAM
acquisition"). For additional information, refer to Note 3 in our
2023 Annual Consolidated Financial Statements.
|
E. Contractual Service Margin
Contractual Service Margin represents a source of stored value
for future insurance profits and qualifies as available capital for
LICAT purposes. CSM is a component of insurance contract
liabilities. The following table shows the change in CSM including
its recognition into net income in the period, as well as the
growth from new insurance sales activity.
|
For the full year
ended
|
For the full year
ended
|
($ millions)
|
December 31,
2023
|
December 31,
2022
|
Beginning of
Period
|
10,865
|
9,797
|
Impact of new
insurance business(1)
|
1,253
|
762
|
Expected movements
from asset returns & locked-in rates(1)
|
560
|
362
|
Insurance experience
gains/losses(1)
|
67
|
89
|
CSM recognized for
services provided
|
(919)
|
(861)
|
Organic CSM
Movement(1)
|
961
|
352
|
Impact of markets
& other(1)
|
(38)
|
37
|
Impact of change in
assumptions(1)
|
364
|
431
|
Currency
impact
|
(104)
|
248
|
Disposition(2)
|
(262)
|
—
|
Total CSM
Movement
|
921
|
1,068
|
Contractual Service
Margin, End of Period
|
11,786
|
10,865
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document.
|
(2)
|
Relates to the sale of
Sun Life UK. For additional information, refer to Note 3 in
our 2023 Annual Consolidated Financial Statements.
|
Total CSM ended Q4'23 at $11.8
billion, an increase of $0.9
billion or 8% from December 31, 2022:
- Organic CSM movement was driven by the impact of new insurance
business, reflecting strong individual protection sales in
Asia and Canada.
- Favourable insurance experience occurred in Canada and Asia.
- Unfavourable markets and other impacts driven by interest
rates.
- Impact of change in assumptions include favourable net
mortality and net favourable model refinements.
- A $262 million reduction to the
CSM balance from the sale of Sun Life UK.
Assumption Changes and Management Actions by Type
The impact on CSM of ACMA is attributable to insurance contracts
and related impacts under the general measurement approach ("GMA")
and variable fee approach ("VFA"). For insurance contracts measured
under the GMA, the impacts flow through the CSM at locked-in
discount rates. For insurance contracts measured under the VFA, the
impact flows through the CSM at current discount rates.The
following table sets out the impacts of ACMA on our reported net
income and CSM for the three months ended December 31, 2023.
For the three months
ended December 31, 2023
|
|
|
($ millions)
|
Reported net
income
impacts (Post-
tax)(1)(2)(3)
|
Deferred in CSM
(Pre-tax)(2)(3)(4)(5)
|
Comments
|
Mortality/morbidity
|
(8)
|
13
|
Minor updates to
reflect mortality/morbidity experience.
|
Policyholder
behaviour
|
14
|
(23)
|
Minor updates to
reflect lapse and policyholder behaviour experience.
|
Expense
|
(9)
|
19
|
Minor updates to
reflect expense experience.
|
Financial
|
108
|
152
|
Updates to various
financial-related assumptions.
|
Modelling enhancement
and other
|
(106)
|
(85)
|
Various enhancements
and methodology changes. The largest items were
unfavourable refinements to Sun Life Health in Canada and to
reinsurance
and other provisions in Hong Kong in Asia.
|
Total impact of change
in assumptions
|
(1)
|
76
|
|
(1)
|
In this document, the
reported net income impact of ACMA is shown in aggregate for Net
insurance service result and Net investment result, and excludes
amounts attributable to participating policyholders.
|
(2)
|
CSM is shown on a
pre-tax basis as it reflects the changes in our insurance contract
liabilities, while reported net income is shown on a post-tax basis
to reflect the impact on capital.
|
(3)
|
In this document, the
reported net income impact of ACMA and amount deferred in CSM
include non-liability impacts related to ACMA of $38 million and
($46) million, respectively, for the three months ended December
31, 2023.
|
(4)
|
The impact of change in
assumptions in the CSM rollforward of $364 million is comprised of
$47 million for the three months ended March 31, 2023 from various
small enhancements, $284 million for the three months ended June
30, 2023 which included a contract modification resulting in a
change in the fulfilment cash flows offset by CSM within insurance
contract liabilities, $(43) million for the three months ended
September 30, 2023 reflecting various updates and enhancements, and
$76 million for the three months ended December 31, 2023, as
referenced in the table above.
|
(5)
|
Total impact of change
in assumptions represents a non-IFRS financial measure for amounts
deferred in CSM. For more details, see section M - Non-IFRS
Financial Measures in the 2023 Annual MD&A.
|
F. Financial Strength
|
IFRS 17 and IFRS
9
|
IFRS 4 and
IAS
39(1)
|
($ millions, unless
otherwise stated)
|
Q4'23
|
Q3'23
|
Q2'23
|
Q1'23
|
As at
January 1,
2023(2)
|
Q4'22
|
LICAT
ratio
|
|
|
|
|
|
|
Sun Life Financial
Inc.(1)(2)
|
149 %
|
147 %
|
148 %
|
148 %
|
142 %
|
130 %
|
Sun Life
Assurance(1)(2)
|
141 %
|
138 %
|
139 %
|
144 %
|
139 %
|
127 %
|
Capital
|
|
|
|
|
|
|
Subordinated
debt
|
6,178
|
6,177
|
6,679
|
6,677
|
6,676
|
6,676
|
Innovative capital
instruments(3)
|
200
|
200
|
200
|
200
|
200
|
200
|
Equity in the
participating account
|
457
|
397
|
354
|
303
|
268
|
1,837
|
Non-controlling
interests
|
161
|
147
|
138
|
133
|
90
|
90
|
Preferred shares and
other equity instruments
|
2,239
|
2,239
|
2,239
|
2,239
|
2,239
|
2,239
|
Common shareholders'
equity(4)
|
21,343
|
20,984
|
20,461
|
20,735
|
20,290
|
25,211
|
Contractual Service
Margin(2)(5)
|
11,786
|
11,452
|
11,258
|
11,243
|
10,865
|
|
Total
capital(1)(2)
|
42,364
|
41,596
|
41,329
|
41,530
|
40,628
|
36,253
|
Financial leverage
ratio(1)(5)(6)
|
21.5 %
|
21.8 %
|
23.3 %
|
23.2 %
|
23.7 %
|
25.1 %
|
Dividend
|
|
|
|
|
|
|
Underlying dividend
payout ratio(1)(6)
|
46 %
|
47 %
|
48 %
|
47 %
|
47 %
|
43 %
|
Dividends per common
share ($)
|
0.780
|
0.750
|
0.750
|
0.720
|
0.720
|
0.720
|
Book value per common
share ($)(1)
|
36.51
|
35.91
|
34.86
|
35.34
|
34.60
|
42.99
|
(1)
|
This measure has not
been restated for periods in 2022 and earlier as IFRS 17 and IFRS 9
were not the accounting standards in effect, and therefore were not
applicable to our capital management practices at the
time.
|
(2)
|
OSFI's 2023 LICAT
Guideline, effective January 1, 2023, specifies that available
capital for LICAT purposes includes the CSM, and as such total
capital was also updated to include the CSM balance. Prior period
restatement and resubmissions are not mandated. Pro-forma January
1, 2023 LICAT ratios are disclosed to illustrate transition impact.
These pro-forma calculations will not be formally submitted to
OSFI.
|
(3)
|
Innovative capital
instruments consist of Sun Life ExchangEable Capital Securities
("SLEECS"), see section J - Capital and Liquidity Management in the
2023 Annual MD&A.
|
(4)
|
Common shareholders'
equity is equal to Total shareholders' equity less Preferred shares
and other equity instruments.
|
(5)
|
Effective January 1,
2023, the calculation for the financial leverage ratio was updated
to include the CSM balance (net of taxes) in the denominator. The
CSM (net of taxes) was $9.6 billion as at December 31, 2023
(September 30, 2023 -$9.3 billion; June 30, 2023 - $9.1
billion; March 31, 2023 - $9.0 billion; January 1, 2023 -
$8.7 billion).
|
(6)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document.
|
1. Life Insurance Capital Adequacy Test
The Office of the Superintendent of Financial Institutions has
developed the regulatory capital framework referred to as the Life
Insurance Capital Adequacy Test for Canada. LICAT measures the capital adequacy of
an insurer using a risk-based approach and includes elements that
contribute to financial strength through periods when an insurer is
under stress as well as elements that contribute to policyholder
and creditor protection wind-up.
SLF Inc. is a non-operating insurance company and is subject to
the LICAT guideline. Sun Life Assurance, SLF Inc.'s principal
operating life insurance subsidiary, is also subject to the LICAT
guideline.
SLF Inc.'s LICAT ratio of 142% and Sun Life Assurance's LICAT
ratio of 139% as at January 1, 2023
increased 12 percentage points compared to December 31, 2022, from the transition to IFRS
17. The largest driver of change was the reduction in the LICAT
base solvency buffer ("BSB") scalar from 1.05 to 1.0 which
contributed seven percentage points.
SLF Inc.'s LICAT ratio of 149% as at December 31, 2023
increased seven percentage points compared to January 1, 2023,
driven by reported net income, capital optimization and market
movements, partially offset by shareholder dividend payments,
subordinated debt redemption, M&A(1) activity, and
share buybacks.
Sun Life Assurance's LICAT ratio of 141% as at December 31,
2023 increased two percentage points compared to January 1,
2023, driven by reported net income, capital optimization, and
market movements, largely offset by dividend payments to SLF Inc.
and M&A activity.
The Sun Life Assurance LICAT ratios in both periods are well
above OSFI's supervisory ratio of 100% and regulatory minimum ratio
of 90%.
_________
|
(1)
|
Mergers &
Acquisitions ("M&A").
|
2. Capital
On transition to the new standards, total capital of
$40.6 billion as at
January 1, 2023 increased $4.4
billion compared to December 31, 2022 driven by the
establishment of the CSM, which includes transfers from Common
shareholders' equity and equity in the participating account to the
CSM.
Our total capital consists of subordinated debt and other
capital instruments, CSM, equity in the participating account and
total shareholders' equity which includes common shareholders'
equity, preferred shares and other equity instruments, and
non-controlling interests. As at December 31, 2023, our total
capital was $42.4 billion, an
increase of $1.7 billion compared to
January 1, 2023. The increase to total capital included
reported net income of $3,086
million, an increase of $921
million in CSM, the issuance of $500
million principal amount of Series 2023-1 Subordinated
Unsecured 5.50% Fixed/Floating Debentures, which is detailed below,
and net unrealized gains on FVOCI assets of $485 million. This was partially offset by the
payment of $1,762 million of
dividends on common shares of SLF Inc. ("common shares"), the
redemption of $1 billion principal
amount of Series 2016-2 Subordinated Unsecured 3.05% Fixed/Floating
Debentures, which is detailed below, the unfavourable impacts of
foreign exchange translation of $344
million included in other comprehensive income (loss)
("OCI"), a decrease of $186 million
from the repurchase and cancellation of common shares, and the
impact related to the acquisition of AAM of $156 million(1).
Our capital and liquidity positions remain strong with a LICAT
ratio of 149% at SLF Inc., a financial leverage ratio of
21.5%(2) and $1.6 billion in cash and other liquid
assets(2) as at December 31, 2023 in SLF
Inc.(3) (December 31, 2022 - $1.1 billion).
Capital Transactions
On July 4, 2023, SLF Inc. issued
$500 million principal amount of
Series 2023-1 Subordinated Unsecured 5.50% Fixed/Floating
Debentures due 2035. Sun Life intends to use an amount equal to the
net proceeds from the offering to finance or refinance, in whole or
in part, eligible assets as defined in our Sustainability Bond
Framework.
On September 19, 2023, SLF Inc.
redeemed all of the outstanding $1
billion principal amount of Series 2016-2 Subordinated
Unsecured 3.05% Fixed/Floating Debentures, in accordance with the
redemption terms attached to such debentures. The redemptions were
funded from existing cash and liquid assets in SLF Inc.
Normal Course Issuer Bids
On August 24, 2023, SLF inc.
announced that OSFI and the Toronto Stock Exchange ("TSX") had
approved its previously announced normal course issuer bid to
purchase up to 17 million of its common shares (the "NCIB"). The
NCIB commenced on August 29, 2023 and
continues until August 28, 2024, such
earlier date as SLF Inc. may determine, or such date as SLF Inc.
completes its purchases of common shares pursuant to the NCIB.
Purchases under the NCIB may be made through the facilities of the
TSX, other Canadian stock exchanges and/or alternative Canadian
trading platforms, at prevailing market rates. Subject to
regulatory approval, purchases under the NCIB may also be made by
way of private agreements or share repurchase programs under issuer
bid exemption orders issued by securities regulatory authorities.
Any purchases made under an exemption order issued by a securities
regulatory authority will generally be at a discount to the
prevailing market price. The actual number of common shares
purchased under the NCIB, and the timing of such purchases (if
any), will be determined by SLF Inc. Any common shares purchased by
SLF Inc. pursuant to the NCIB will be cancelled or used in
connection with certain equity settled incentive arrangements. The
NCIB will provide the Company with the flexibility to acquire
common shares in order to return capital to shareholders as part of
its overall capital management strategy.
In 2023, SLF Inc. purchased approximately 2.8 million common
shares at a total cost of $186
million pursuant to the NCIB. All of the common shares
purchased under SLF Inc.'s NCIB were subsequently cancelled. There
were no common shares purchased during the fourth quarter of
2023.
____________
|
(1)
|
For additional
information, refer to Note 3 in our 2023 Annual Consolidated
Financial Statements.
|
(2)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document.
|
(3)
|
SLF Inc. (the ultimate
parent company) and its wholly-owned holding companies.
|
G. Performance by Business Segment
|
Quarterly
results
|
($ millions)
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
Underlying net
income (loss)(2)
|
|
|
|
Asset
Management
|
331
|
330
|
324
|
Canada
|
350
|
338
|
265
|
U.S.
|
253
|
185
|
230
|
Asia
|
143
|
166
|
135
|
Corporate
|
(94)
|
(89)
|
(62)
|
Total underlying net
income (loss)(2)
|
983
|
930
|
892
|
Reported net income
(loss) - Common shareholders
|
|
|
|
Asset
Management
|
297
|
268
|
321
|
Canada
|
348
|
365
|
453
|
U.S.
|
101
|
132
|
202
|
Asia
|
44
|
211
|
92
|
Corporate
|
(41)
|
(105)
|
97
|
Total reported net
income (loss) - Common shareholders
|
749
|
871
|
1,165
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document.
|
Information describing the business groups and their respective
business units is included in our 2023 Annual MD&A. All factors
discussed in this document that impact our underlying net income
are also applicable to reported net income.
1. Asset Management
|
Quarterly
results
|
Asset Management (C$
millions)
|
Q4'23
|
Q3'23
|
Q4'22
|
Underlying net
income(1)
|
331
|
330
|
324
|
Add:
|
Market-related
impacts
|
(6)
|
(3)
|
(8)
|
|
Management's ownership
of MFS shares
|
(11)
|
7
|
27
|
|
Acquisition,
integration and restructuring(2)
|
(12)
|
(58)
|
(26)
|
|
Intangible asset
amortization
|
(5)
|
(8)
|
(3)
|
|
Other
|
—
|
—
|
7
|
Reported net income -
Common shareholders
|
297
|
268
|
321
|
Assets under management
(C$ billions)(1)
|
1,015.9
|
974.2
|
952.0
|
Gross flows (C$
billions)(1)
|
38.3
|
34.3
|
37.4
|
Net flows (C$
billions)(1)
|
(11.4)
|
(9.1)
|
(12.6)
|
MFS (C$
millions)
|
|
|
|
Underlying net
income(1)
|
261
|
277
|
276
|
Add:
|
Management's ownership
of MFS shares
|
(11)
|
7
|
27
|
Reported net income -
Common shareholders
|
250
|
284
|
303
|
Assets under management
(C$ billions)(1)
|
792.8
|
754.8
|
742.3
|
Gross flows (C$
billions)(1)
|
30.4
|
28.3
|
31.2
|
Net flows (C$
billions)(1)
|
(15.3)
|
(12.5)
|
(16.1)
|
MFS (US$
millions)
|
|
|
|
Underlying net
income(1)
|
191
|
207
|
202
|
Add:
|
Management's ownership
of MFS shares
|
(8)
|
5
|
21
|
Reported net income -
Common shareholders
|
183
|
212
|
223
|
Pre-tax net operating
margin for MFS(1)
|
39 %
|
41 %
|
40 %
|
Average net assets (US$
billions)(1)
|
566.6
|
581.6
|
540.5
|
Assets under management
(US$ billions)(1)(3)
|
598.6
|
555.9
|
547.9
|
Gross flows (US$
billions)(1)
|
22.3
|
21.1
|
23.0
|
Net flows (US$
billions)(1)
|
(11.2)
|
(9.3)
|
(11.9)
|
Asset appreciation
(depreciation) (US$ billions)
|
53.9
|
(23.9)
|
51.0
|
SLC Management (C$
millions)
|
|
|
|
Underlying net
income(1)
|
70
|
53
|
48
|
Add:
|
Market-related
impacts
|
(6)
|
(3)
|
(8)
|
|
Acquisition,
integration and restructuring(2)
|
(12)
|
(58)
|
(26)
|
|
Intangible asset
amortization
|
(5)
|
(8)
|
(3)
|
|
Other
|
—
|
—
|
7
|
Reported net income
(loss) - Common shareholders
|
47
|
(16)
|
18
|
Fee-related
earnings(1)
|
92
|
68
|
73
|
Pre-tax fee-related
earnings margin(1)(4)
|
24 %
|
24 %
|
24 %
|
Pre-tax net operating
margin(1)(4)
|
22 %
|
20 %
|
23 %
|
Assets under management
(C$ billions)(1)
|
223.1
|
219.5
|
209.6
|
Gross flows - AUM (C$
billions)(1)
|
8.0
|
6.0
|
6.1
|
Net flows - AUM (C$
billions)(1)
|
3.9
|
3.4
|
3.5
|
Fee earning assets
under management ("FE AUM") (C$ billions)(1)
|
176.9
|
172.6
|
164.4
|
Gross flows - FE AUM
(C$ billions)(1)
|
9.2
|
6.2
|
7.9
|
Net flows - FE AUM (C$
billions)(1)
|
5.6
|
4.1
|
5.8
|
Assets under
administration ("AUA") (C$ billions)(1)
|
49.8
|
48.4
|
—
|
Capital raising (C$
billions)(1)
|
5.5
|
3.2
|
3.0
|
Deployment (C$
billions)(1)
|
7.3
|
4.8
|
6.9
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document.
|
(2)
|
Amounts relate to
acquisition costs for our SLC Management affiliates,
BentallGreenOak, InfraRed Capital Partners, Crescent Capital Group
LP and Advisors Asset Management, Inc, which include the unwinding
of the discount for Other financial liabilities
of $24 million in Q4'23 (Q3'23 - $21 million; Q4'22
- $17 million).
|
(3)
|
Monthly information on
AUM is provided by MFS in its Corporate Fact Sheet, which can be
found at www.mfs.com/CorpFact. The Corporate Fact Sheet also
provides MFS' U.S. GAAP assets and liabilities as at December 31,
2023.
|
(4)
|
Based on a trailing
12-month basis. For more details, see section H - Non-IFRS
Financial Measures in this document.
|
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Asset Management underlying net income of $331 million increased $7
million or 2% driven by:
- MFS down $15 million (down
US$11 million): Higher expenses
offset by higher fee income from ANA. The MFS pre-tax net operating
profit margin(1) was 39.4% for Q4'23, compared to 39.5%
in the prior year.
- SLC Management up $22
million: The increase in underlying net income was driven by
higher fee-related earnings and higher net seed investment income.
Fee-related earnings(1) increased 26% driven by higher
AUM, reflecting strong capital raising and deployment across the
platform and the AAM acquisition(2). Fee-related
earnings margin(1) and pre-tax net operating profit
margin(1) for Q4'23 were 24% and 22%, respectively
(Q4'22 - 24% and 23%, respectively).
Asset Management reported net income of $297 million decreased $24
million or 7%, largely reflecting fair value changes in
management's ownership of MFS shares.
Growth
2023 vs. 2022
Asset Management AUM of $1,015.9
billion increased $63.9
billion or 7% from December 31,
2022 driven by:
- Net asset value changes of $91.6
billion; and
- AUM driven by the AAM acquisition of $5.2 billion; partially offset by
- Net outflows of $26.4 billion;
and
- Client distributions of $6.5
billion.
MFS' AUM increased US$50.7 billion
or 9% from December 31, 2022, driven
by:
- Increase in asset values from higher equity markets of
US$79.5 billion, partially offset by
net outflows of US$28.8 billion.
In Q4'23, 97%, 95%, and 30% of MFS' U.S. retail mutual fund
assets ranked in the top half of their Morningstar categories based
on ten-, five- and three-year performance, respectively.
SLC Management's AUM increased $13.5
billion or 6% from December 31,
2022 driven by:
- Net inflows of $12.5 billion, the
AAM acquisition of $5.2 billion, and
asset value changes of $2.3 billion,
partially offset by Client distributions of $6.5 billion.
- Net inflows were comprised of capital raising and Client
contributions, totaling $24.6
billion, partially offset by outflows of $12.2 billion.
SLC Management's FE AUM increased $12.4
billion or 8% from December 31,
2022, driven by:
- Net inflows of $14.2 billion, the
AAM acquisition of $5.2 billion, and
asset value changes of $0.2 billion,
partially offset by Client distributions of $7.2 billion.
- Net inflows were comprised of capital deployment and Client
contributions, totaling $24.6
billion, partially offset by outflows of $10.4 billion.
____________
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document.
|
(2)
|
On February 1, 2023, we
completed the acquisition of a majority stake interest in Advisors
Asset Management, Inc. ("the AAM acquisition"), a leading
independent U.S. retail distribution firm, with the option to
acquire the remaining interest starting in 2028.
|
|
|
2. Canada
|
Quarterly
results
|
($ millions)
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
Wealth & asset
management(2)
|
92
|
116
|
72
|
Group - Health &
Protection(2)
|
159
|
136
|
102
|
Individual -
Protection(2)
|
99
|
86
|
91
|
Underlying net
income(2)
|
350
|
338
|
265
|
Add: Market-related
impacts(1)
|
(50)
|
10
|
235
|
ACMA
|
52
|
15
|
(133)
|
Acquisition,
integration and restructuring
|
3
|
5
|
(1)
|
Intangible
asset amortization
|
(7)
|
(3)
|
(3)
|
Other
|
—
|
—
|
90
|
Reported net income
- Common shareholders(1)
|
348
|
365
|
453
|
Underlying ROE
(%)(2)
|
21.9 %
|
22.2 %
|
15.2 %
|
Reported ROE
(%)(2)
|
21.8 %
|
23.9 %
|
25.9 %
|
Wealth sales &
asset management gross flows(2)(3)
|
5,424
|
3,395
|
4,099
|
Group - Health &
Protection sales(2)
|
174
|
119
|
107
|
Individual - Protection
sales(2)
|
171
|
148
|
139
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document. For more information about
business types in Sun Life's business groups, see section A - How
We Report Our Results in the 2023 Annual MD&A.
|
(3)
|
Effective January 1,
2023, Canada wealth sales & asset management gross flows have
been updated to exclude retained sales. Prior period amounts have
been updated to reflect this change.
|
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net income of $350
million increased $85 million
or 32%, reflecting:
- Wealth & asset management up $20 million: Increase in investment income driven
by higher volume and yields.
- Group - Health & Protection up $57 million: Business premium growth and improved
disability experience reflecting higher margins, lower claims
volumes, and shorter claims durations.
- Individual - Protection up $8
million: Higher investment contributions partially offset by
unfavourable mortality experience.
- Higher earnings on surplus, primarily driven by realized gains
in the current year.
Reported net income of $348
million decreased $105 million
or 23%, driven by market-related impacts primarily from interest
rates and real estate experience, and the prior year impact of the
Canada Tax Rate Change(1), partially offset by ACMA
impacts and the increase in underlying net income.
Growth
Quarterly Comparison - Q4'23 vs. Q4'22
Canada's sales included:
- Wealth sales & asset management gross flows of $5.4 billion were up 32%, driven by higher
Individual Wealth sales, primarily from mutual funds, and higher
defined benefit sales in GRS.
- Group - Health & Protection sales of $174 million were up 63%, driven by higher large
case sales.
- Individual - Protection sales of $171
million were up 23%, driven by higher participating whole
life insurance sales.
___________
|
(1)
|
On December 15, 2022,
legislation implementing an additional surtax of 1.5% applicable to
banks and life insurer's taxable income in excess of $100 million
was enacted in Canada ("Canada Tax Rate Change"). This legislation
applied retroactively to the Federal Budget date of April 7, 2022.
As a result, Canada reported net income increased by $90 million in
Q4'22, reflected in Other adjustments.
|
3. U.S.
|
Quarterly
results
|
(US$
millions)
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
Group - Health &
Protection(2)
|
153
|
112
|
160
|
Individual -
Protection(2)(3)
|
34
|
28
|
13
|
Underlying net
income(2)
|
187
|
140
|
173
|
Add: Market-related
impacts(1)
|
(33)
|
30
|
11
|
ACMA
|
(40)
|
(26)
|
42
|
Acquisition,
integration and restructuring(4)
|
(19)
|
(23)
|
(43)
|
Intangible asset
amortization
|
(18)
|
(16)
|
(24)
|
Other
|
—
|
—
|
(8)
|
Reported net income
- Common shareholders(1)
|
77
|
105
|
151
|
Underlying ROE
(%)(2)
|
16.1 %
|
12.2 %
|
14.7 %
|
Reported ROE
(%)(2)
|
6.7 %
|
9.2 %
|
12.7 %
|
After-tax profit margin
for Group Benefits (%)(2)(5)
|
10.0 %
|
9.9 %
|
8.1 %
|
Group - Health &
Protection sales(2)
|
932
|
179
|
899
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document. For more information about
business types in Sun Life's business groups, see section A - How
We Report Our Results in the 2023 Annual MD&A.
|
(3)
|
Effective Q2'23, the UK
payout annuities run-off business was moved from the Corporate
business segment to the U.S. business segment upon the sale of Sun
Life UK. For additional information, refer to Note 3 of our 2023
Annual Consolidated Financial Statements. Also, effective Q3'23 the
run-off reinsurance business was moved from the Corporate business
segment to the U.S. business segment.
|
(4)
|
Includes acquisition
and integration costs associated with DentaQuest, acquired on June
1, 2022.
|
(5)
|
Based on underlying net
income, on a trailing four-quarter basis. For more details, see
section H - Non-IFRS Financial Measures in this
document.
|
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net income of US$187
million increased US$14
million or 8%, driven by:
- Group - Health & Protection down US$7 million: Lower Dental results reflecting the
impact of Medicaid redeterminations following the end of the Public
Health Emergency, partially offset by higher Group Benefits
results. In Group Benefits, strong revenue growth, higher net
investment results and favourable mortality experience was
partially offset by less favourable morbidity experience.
- Individual - Protection up US$21
million: The inclusion of the UK payout annuity
business(1) and improved mortality experience.
Reported net income of US$77
million decreased US$74
million or 49%, driven by ACMA impacts, and market-related
impacts largely from interest rates and real estate experience,
partially offset by lower DentaQuest integration costs and the
increase in underlying net income.
Growth
Quarterly Comparison - Q4'23 vs. Q4'22
U.S. group sales of US$932 million
were up US$33 million or 4% driven by
higher medical stop-loss and commercial dental sales, partially
offset by lower employee benefits sales and lower large case sales
in Dental.
________________
|
(1)
|
Effective Q2'23, the UK
payout annuities run-off business was moved from the Corporate
business segment to the U.S. business segment upon the sale Sun
Life UK. For additional information, refer to Note 3 of our 2023
Annual Consolidated Financial Statements.
|
4. Asia
|
Quarterly
results
|
($ millions)
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
Wealth & asset
management(2)
|
16
|
11
|
16
|
Individual -
Protection(2)(3)
|
138
|
175
|
118
|
Regional Office
expenses & other(2)
|
(11)
|
(20)
|
1
|
Underlying net
income (loss)(2)
|
143
|
166
|
135
|
Add:
|
Market-related
impacts(1)
|
(142)
|
(4)
|
(129)
|
|
ACMA
|
(1)
|
56
|
71
|
|
Acquisition,
integration and restructuring
|
(5)
|
(5)
|
—
|
|
Intangible asset
amortization
|
(2)
|
(2)
|
(2)
|
|
Other
|
51
|
—
|
17
|
Reported net income
- Common shareholders(1)
|
44
|
211
|
92
|
Underlying ROE
(%)(2)
|
10.5 %
|
12.2 %
|
10.4 %
|
Reported ROE
(%)(2)
|
3.2 %
|
15.5 %
|
7.1 %
|
Wealth sales &
asset management gross flows(2)
|
2,004
|
1,663
|
1,790
|
Individual - Protection
sales(2)
|
536
|
521
|
359
|
Group - Health &
Protection sales(2)(3)
|
16
|
16
|
17
|
New business
CSM(2)
|
223
|
238
|
122
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document. For more information about
business types in Sun Life's business groups, see section A - How
We Report Our Results in the 2023 Annual MD&A.
|
(3)
|
In underlying net
income by business type, Group businesses in Asia have been
included with Individual – Protection.
|
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net income of $143
million increased $8 million
or 6%, driven by:
- Individual - Protection up $20
million: Business growth reflecting good sales momentum,
partially offset by lower earnings on surplus.
- Regional office expenses & other $(12) million increased net loss primarily
reflecting continued pan Asia
investments in the business.
Reported net income of $44 million
decreased $48 million or 52%, driven
by ACMA impacts, partially offset by the impact of the Bermuda
Corporate Income Tax Change(1).
Growth
Quarterly Comparison - Q4'23 vs. Q4'22
Asia's sales included:
- Wealth sales & asset management gross flows of $2.0 billion were up 12%(2), primarily
driven by higher mutual fund sales in India, partially offset by lower money market
fund sales in the
Philippines.
- Individual sales of $536 million
were up 49%(2), primarily driven by higher sales in
Hong Kong reflecting increased
demand as pandemic-related travel restrictions were lifted in early
2023, and in International reflecting continued demand for our
products, partially offset by lower sales in Vietnam reflecting market conditions, and
China.
New business CSM of $223 million,
was up from $122 million in the prior
year, primarily driven by sales in Hong
Kong and High-Net-Worth.
______________
|
(1)
|
Bermuda recognized a
deferred tax asset of $51 million in Q4'23 ("Bermuda Corporate
Income Tax Change"). Refer to Note 19 in the 2023 Annual
Consolidated Financial Statements for more information.
|
(2)
|
This change excludes
the impacts of foreign exchange translation. For more information
about these non-IFRS financial measures, see Section H - Non-IFRS
Financial Measures in this document.
|
5. Corporate
|
Quarterly
results
|
($ millions)
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
Individual -
Protection(2)(3)
|
—
|
—
|
11
|
Corporate expenses
& other(2)
|
(94)
|
(89)
|
(73)
|
Underlying net
income (loss)(2)
|
(94)
|
(89)
|
(62)
|
Add: Market-related
impacts(1)
|
53
|
(16)
|
108
|
ACMA
|
—
|
—
|
17
|
Other
|
—
|
—
|
34
|
Reported net income
(loss) - Common shareholders(1)
|
(41)
|
(105)
|
97
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
Represents a non-IFRS
financial measure. For more details, see section H - Non-IFRS
Financial Measures in this document. For more information about
business types in Sun Life's business groups, see section A - How
We Report Our Results in the 2023 Annual MD&A.
|
(3)
|
The UK annuities
run-off businesses in Corporate has been included with Individual –
Protection. Effective Q2'23, the UK annuities run-off business was
moved from the Corporate business segment to the U.S. business
segment upon the sale of Sun Life UK. For additional information,
refer to Note 3 of our 2023 Annual Consolidated Financial
Statements. Also, effective Q3'23 the run-off reinsurance business
was moved from the Corporate business segment to the U.S. business
segment.
|
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net loss was $94
million compared to underlying net loss of $62 million in the prior year, driven by the sale
of Sun Life UK(1) and higher operating expenses,
partially offset by a lower effective tax rate.
Reported net loss was $41 million
compared to reported net income of $97
million in the prior year, reflecting the impacts from the
sale of Sun Life UK (1), the prior year impact of
tax-related matters(2), and the change in underlying net
loss.
___________
|
(1)
|
On April 3, 2023 we
completed the sale of SLF of Canada UK Limited to Phoenix Group
Holdings plc ("the sale of Sun Life UK"). Under the agreement, we
will retain our economic interest in the payout annuities business
through a reinsurance treaty, which, effective Q2'23, is recorded
in In-force Management within the U.S. business group. For
additional information, refer to Note 3 of our 2023 Annual
Consolidated Financial Statements. The prior year included
market-related impacts from Sun Life UK in reported net
income.
|
(2)
|
Tax related matters
include tax-exempt investment income in reported net income in both
years and the impact of the Canada Tax Rate Change. On December 15,
2022, legislation implementing an additional surtax of 1.5%
applicable to banks and life insurer's taxable income in excess of
$100 million was enacted in Canada ("Canada Tax Rate Change"). This
legislation applied retroactively to the Federal Budget date of
April 7, 2022. As a result, Corporate reported net income increased
by $51 million in Q4'22,reflected in Other adjustments.
|
H. Non-IFRS Financial Measures
We report certain financial information using non-IFRS financial
measures, as we believe that these measures provide information
that is useful to investors in understanding our performance and
facilitate a comparison of our quarterly and full year results from
period to period. These non-IFRS financial measures do not have any
standardized meaning and may not be comparable with similar
measures used by other companies. For certain non-IFRS financial
measures, there are no directly comparable amounts under IFRS.
These non-IFRS financial measures should not be viewed in isolation
from or as alternatives to measures of financial performance
determined in accordance with IFRS. Additional information
concerning non-IFRS financial measures and, if applicable,
reconciliations to the closest IFRS measures are available in the
2023 Annual MD&A under the heading M - Non-IFRS Financial
Measures and the Supplementary Financial Information packages that
are available on www.sunlife.com under Investors – Financial
results and reports.
1. Common Shareholders' View of Reported Net Income
The following table provides the reconciliation of the Drivers
of Earnings ("DOE") analysis to the Statement of Operations total
net income. The DOE analysis provides additional detail on the
sources of earnings, primarily for protection and health
businesses, and explains the actual results compared to the longer
term expectations. The underlying DOE and reported DOE are both
presented on a common shareholders' basis by removing the
allocations to participating policyholders.
($ millions)
|
Q4'23
|
Statement of
Operations
|
Underlying
DOE(1)
|
Non-underlying
adjustments(1)
|
Common
Shareholders'
Reported DOE(2)(3)
|
Adjustment
for:
|
Reported
(per
IFRS)
|
Par(2)
|
Net(3)
|
Net insurance service
result
|
769
|
—
|
769
|
61
|
(168)
|
662
|
Net investment
result
|
427
|
(415)
|
12
|
25
|
224
|
261
|
ACMA(3)
|
|
6
|
6
|
—
|
(6)
|
|
Fee income:
|
|
|
|
|
|
|
Asset
Management
|
460
|
(57)
|
403
|
|
(403)
|
|
Other fee
income
|
66
|
3
|
69
|
(5)
|
2,001
|
2,065
|
Fee income
|
|
|
|
|
|
2,065
|
Other
expenses
|
(489)
|
(92)
|
(581)
|
—
|
(1,620)
|
(2,201)
|
Income before
taxes
|
1,233
|
(555)
|
678
|
81
|
28
|
787
|
Income tax (expense)
benefit
|
(203)
|
314
|
111
|
(24)
|
—
|
87
|
Total net
income
|
1,030
|
(241)
|
789
|
57
|
28
|
874
|
Allocated to
Participating and NCI(4)
|
(27)
|
7
|
(20)
|
(57)
|
(28)
|
(105)
|
Dividends and
Distributions(5)
|
(20)
|
—
|
(20)
|
—
|
—
|
(20)
|
Underlying net
income(1)
|
983
|
|
|
|
|
|
Reported net income
- Common shareholders
|
|
(234)
|
749
|
—
|
—
|
749
|
(1)
|
For a breakdown of
non-underlying adjustments made to arrive at underlying net income
as well as the underlying DOE analysis, see the heading "Underlying
Net Income and Underlying EPS" below.
|
(2)
|
Removes the components
attributable to the participating policyholders.
|
(3)
|
Certain amounts within
the Drivers of Earnings are presented on a net basis to reflect how
management views the business, compared to a gross basis in the
Consolidated Financial Statements. For more details, refer to
"Drivers of Earnings" in section 3 - Additional Non-IFRS Financial
Measures in Section M - Non-IFRS Financial Measures in the 2023
Annual MD&A. For example, in this document, the reported net
income impact of ACMA is shown in aggregate for Net insurance
service result and Net investment result, and excludes amounts
attributable to participating policyholders and includes
non-liability impacts. In contrast, Note 10.B.v of the
Consolidated Financial Statements for the period ended
December 31, 2023 shows the net income impacts of method and
assumption changes separately in Net insurance service result and
Net investment result, and includes amounts attributable to
participating policyholders.
|
(4)
|
Allocated to equity in
the participating account and attributable to non-controlling
interests.
|
(5)
|
Dividends on preferred
shares and distributions on other equity instruments.
|
($ millions)
|
Q3'23
|
Statement of
Operations
|
Underlying
DOE(1)
|
Non-underlying
adjustments(1)
|
Common
Shareholders'
Reported DOE(2)(3)
|
Adjustment
for:
|
Reported
(per IFRS)
|
Par(2)
|
Net(3)
|
Net insurance service
result
|
740
|
—
|
740
|
30
|
(58)
|
712
|
Net investment
result
|
416
|
108
|
524
|
21
|
158
|
703
|
ACMA(3)
|
|
41
|
41
|
—
|
(41)
|
|
Fee income:
|
|
|
|
|
|
|
Asset
Management
|
437
|
(92)
|
345
|
|
(345)
|
|
Other fee
income
|
38
|
5
|
43
|
(3)
|
1,890
|
1,930
|
Fee income
|
|
|
|
|
|
1,930
|
Other
expenses
|
(485)
|
(78)
|
(563)
|
—
|
(1,601)
|
(2,164)
|
Income before
taxes
|
1,146
|
(16)
|
1,130
|
48
|
3
|
1,181
|
Income tax (expense)
benefit
|
(182)
|
(51)
|
(233)
|
(11)
|
—
|
(244)
|
Total net
income
|
964
|
(67)
|
897
|
37
|
3
|
937
|
Allocated to
Participating and NCI(4)
|
(15)
|
8
|
(7)
|
(37)
|
(3)
|
(47)
|
Dividends and
Distributions(5)
|
(19)
|
—
|
(19)
|
—
|
—
|
(19)
|
Underlying net
income(1)
|
930
|
|
|
|
|
|
Reported net income
- Common shareholders
|
|
(59)
|
871
|
—
|
—
|
871
|
|
Refer to the footnotes
on the previous page
|
($ millions)
|
Q4'22
|
Statement of
Operations
|
Underlying
DOE(1)
|
Non-underlying
adjustments(1)
|
Common
Shareholders'
Reported DOE(2)(3)
|
Adjustment
for:
|
Reported
(per IFRS)
|
Par(2)
|
Net(3)
|
Net insurance service
result
|
726
|
(14)
|
712
|
27
|
12
|
751
|
Net investment
result
|
316
|
188
|
504
|
(32)
|
11
|
483
|
ACMA(3)
|
|
(26)
|
(26)
|
—
|
26
|
|
Fee income:
|
|
|
|
|
|
|
Asset
Management
|
429
|
(10)
|
419
|
|
(419)
|
|
Other fee
income
|
55
|
—
|
55
|
—
|
1,966
|
2,021
|
Fee income
|
|
|
|
|
|
2,021
|
Other
expenses
|
(415)
|
(129)
|
(544)
|
—
|
(1,578)
|
(2,122)
|
Income before
taxes
|
1,111
|
9
|
1,120
|
(5)
|
18
|
1,133
|
Income tax (expense)
benefit
|
(187)
|
261
|
74
|
(10)
|
1
|
65
|
Total net
income
|
924
|
270
|
1,194
|
(15)
|
19
|
1,198
|
Allocated to
Participating and NCI(4)
|
(13)
|
3
|
(10)
|
15
|
(18)
|
(13)
|
Dividends and
Distributions(5)
|
(19)
|
—
|
(19)
|
—
|
(1)
|
(20)
|
Underlying net
income(1)
|
892
|
|
|
|
|
|
Reported net income
- Common shareholders
|
|
273
|
1,165
|
—
|
—
|
1,165
|
Refer to the footnotes
on the previous page
|
2. Underlying Net Income and Underlying
EPS
Underlying net income is a non-IFRS financial measure that
assists in understanding Sun Life's business performance by making
certain adjustments to IFRS income. Underlying net income, along
with common shareholders' net income (Reported net income), is used
as a basis for management planning, and is also a key measure in
our employee incentive compensation programs. This measure reflects
management's view of the underlying business performance of the
company and long-term earnings potential. For example, due to the
longer term nature of our individual protection businesses, market
movements related to interest rates, equity markets and investment
properties can have a significant impact on reported net income in
the reporting period. However, these impacts are not necessarily
realized, and may never be realized, if markets move in the
opposite direction in subsequent periods or in the case of interest
rates, the fixed income investment is held to maturity.
Underlying net income removes the impact of the following items
from reported net income:
- Market-related impacts reflecting the after-tax difference in
actual versus expected market movements;
- Assumptions changes and management actions;
- Other adjustments:
i) Management's ownership of MFS
shares;
ii) Acquisition, integration, and restructuring;
iii) Intangible asset amortization;
iv) Other items that are unusual or exceptional in
nature.
For additional information about the adjustments removed from
reported net income to arrive at underlying net income, refer to
section M - Non-IFRS Financial Measures - 2 - Underlying Net Income
and Underlying EPS in the 2023 Annual MD&A.
The following table sets out the post-tax amounts that were
excluded from our underlying net income (loss) and underlying EPS
and provides a reconciliation to our reported net income and EPS
based on IFRS.
Reconciliations of
Select Net Income Measures
|
Quarterly
results
|
Year-to-date
|
($ millions,
after-tax)
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
2023
|
2022(1)
|
Underlying net
income
|
983
|
930
|
892
|
3,728
|
3,369
|
Market-related
impacts(1)
|
|
|
|
|
|
Equity market
impacts
|
8
|
(21)
|
22
|
(13)
|
(143)
|
Interest rate
impacts(2)
|
(53)
|
127
|
279
|
(14)
|
56
|
Impacts of changes in
the fair value of investment properties (real estate
experience)
|
(148)
|
(83)
|
(77)
|
(427)
|
66
|
Add:
|
Market-related
impacts
|
(193)
|
23
|
224
|
(454)
|
(21)
|
Add:
|
Assumption changes and
management actions
|
(1)
|
35
|
12
|
36
|
(168)
|
|
Other
adjustments
|
|
|
|
|
|
Management's ownership of MFS shares
|
(11)
|
7
|
27
|
12
|
115
|
Acquisition, integration and
restructuring(3)(4)(5)(6)(7)
|
(42)
|
(89)
|
(86)
|
(155)
|
(492)
|
Intangible asset amortization
|
(38)
|
(35)
|
(41)
|
(132)
|
(97)
|
Other(8)(9)(10)(11)
|
51
|
—
|
137
|
51
|
165
|
Add:
|
Total of other
adjustments
|
(40)
|
(117)
|
37
|
(224)
|
(309)
|
Reported net income -
Common shareholders
|
749
|
871
|
1,165
|
3,086
|
2,871
|
Underlying EPS
(diluted) ($)
|
1.68
|
1.59
|
1.52
|
6.36
|
5.75
|
Add:
|
Market-related impacts
($)
|
(0.33)
|
0.04
|
0.38
|
(0.78)
|
(0.04)
|
|
Assumption changes and
management actions ($)
|
—
|
0.06
|
0.02
|
0.06
|
(0.29)
|
|
Management's ownership
of MFS shares ($)
|
(0.02)
|
0.01
|
0.05
|
0.02
|
0.20
|
|
Acquisition,
integration and restructuring ($)
|
(0.07)
|
(0.16)
|
(0.15)
|
(0.26)
|
(0.86)
|
|
Intangible asset
amortization ($)
|
(0.07)
|
(0.06)
|
(0.07)
|
(0.23)
|
(0.17)
|
|
Other ($)
|
0.09
|
—
|
0.23
|
0.09
|
0.28
|
|
Impact of convertible
securities on diluted EPS ($)
|
—
|
—
|
—
|
—
|
0.02
|
Reported EPS (diluted)
($)
|
1.28
|
1.48
|
1.98
|
5.26
|
4.89
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
Our results are
sensitive to long term interest rates given the nature of our
business and to non-parallel yield curve movements (for example
flattening, inversion, steepening, etc.).
|
(3)
|
Amounts relate to
acquisition costs for our SLC Management affiliates,
BentallGreenOak, InfraRed Capital Partners, Crescent Capital Group
LP and Advisors Asset Management, Inc, which include the unwinding
of the discount for Other financial liabilities of $24 million
in Q4'23 and $86 million in 2023 (Q3'23 -
$21 million; Q4'22 - $17 million; 2022 -
$64 million).
|
(4)
|
Reflects the changes in
estimated future payments for acquisition-related contingent
considerations and options to purchase remaining ownership
interests of SLC Management affiliates of $nil in Q4'23 and $42
million in 2023 (Q3'23 - $42 million; Q4'22 - $nil; 2022 - $80
million).
|
(5)
|
Includes acquisition
and integration costs associated with DentaQuest, acquired on June
1, 2022.
|
(6)
|
Includes a $65 million
gain on the sale of the sponsored markets business in Canada in
Q1'23 and a $19 million gain on the sale of Sun Life UK in
Q2'23.
|
(7)
|
Q3'22 reflects an
impairment charge of $170 million pertaining to the attributed
goodwill that was not expected to be recovered through the sale of
Sun Life UK.
|
(8)
|
Includes a charge of
$48 million in Q3'22 reflecting the resolution of a matter related
to reinsurance pricing for our U.S. In-force Management business,
and Q2'22 reflects a gain on the sale-leaseback of the Wellesley
office in the U.S.
|
(9)
|
On December 15, 2022,
legislation implementing an additional surtax of 1.5% applicable to
banks and life insurer's taxable income in excess of $100 million
was enacted in Canada ("Canada Tax Rate Change"). This legislation
applied retroactively to the Federal Budget date of April 7, 2022.
As a result, total Company reported net income increased by $141
million in Q4'22, reflected in Other adjustments.
|
(10)
|
Q4'22 includes the
unwinding of an internal reinsurance agreement.
|
(11)
|
Bermuda recognized a
deferred tax asset of $51 million in Q4'23 ("Bermuda Corporate
Income Tax Change"). Refer to Note 19 in the 2023 Annual
Consolidated Financial Statements for more information.
|
The following table shows the pre-tax amount of underlying net
income adjustments:
|
Quarterly
results
|
Year-to-date
|
($ millions)
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
2023
|
2022(1)
|
Underlying net income
(after-tax)
|
983
|
930
|
892
|
3,728
|
3,369
|
Underlying net income
adjustments (pre-tax):
|
|
|
|
|
|
Add:
|
Market-related
impacts(1)
|
(436)
|
107
|
179
|
(726)
|
233
|
|
Assumption changes and
management actions(2)
|
6
|
41
|
(26)
|
53
|
(239)
|
|
Other
adjustments
|
(118)
|
(156)
|
(141)
|
(373)
|
(526)
|
|
Total underlying net
income adjustments (pre-tax)
|
(548)
|
(8)
|
12
|
(1,046)
|
(532)
|
Add:
|
Taxes related to
underlying net income adjustments
|
314
|
(51)
|
261
|
404
|
34
|
Reported net income -
Common shareholders (after-tax)
|
749
|
871
|
1,165
|
3,086
|
2,871
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
In this document, the
reported net income impact of ACMA is shown in aggregate for Net
insurance service result and Net investment result, and excludes
amounts attributable to participating policyholders and includes
non-liability impacts. In contrast, Note 10.B.v of the 2023
Annual Consolidated Financial Statements shows the net income
impacts of method and assumption changes separately in Net
insurance service result and Net investment result, and includes
amounts attributable to participating policyholders.
|
Taxes related to underlying net income adjustments may vary from
the expected effective tax rate range reflecting the mix of
business based on the Company's international operations and other
tax-related adjustments.
3. Additional Non-IFRS Financial Measures
Management also uses the following non-IFRS financial measures,
and a full listing is available in section M - Non-IFRS Financial
Measures in the 2023 Annual MD&A.
Assets under management. AUM is a non-IFRS financial
measure that indicates the size of our Company's assets across
asset management, wealth, and insurance. There is no standardized
financial measure under IFRS. In addition to the most directly
comparable IFRS measures, which are the balance of General funds
and Segregated funds on our Statements of Financial Position, AUM
also includes Third-party AUM and Consolidation adjustments.
Effective January 1, 2023, "Other
AUM" was renamed to "Third Party AUM", and "Consolidation
adjustments" is presented separately as consolidation adjustments
apply to all components of total AUM. For additional information
about Third-party AUM, refer to sections E - Growth - 2 - Assets
Under Management and M - Non-IFRS Financial Measures in the 2023
Annual MD&A.
|
Quarterly
results
|
($ millions)
|
Q4'23
|
Q4'22
|
Assets under
management
|
|
|
General fund
assets
|
204,789
|
198,316
|
Segregated
funds
|
128,452
|
125,292
|
Third-party
AUM(1)
|
1,105,081
|
1,035,290
|
Consolidation
adjustments(1)
|
(38,717)
|
(40,337)
|
Total assets under
management
|
1,399,605
|
1,318,561
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see section M - Non-IFRS
Financial Measures in the 2023
Annual MD&A.
|
Cash and other liquid assets. This measure is
comprised of cash, cash equivalents, short-term investments, and
publicly traded securities, net of loans related to acquisitions
that are held at SLF Inc. (the ultimate parent company), and its
wholly owned holding companies. This measure is a key consideration
of available funds for capital re-deployment to support business
growth.
($ millions)
|
As at December
31,
2023
|
As at December 31,
2022
|
Cash and other
liquid assets (held at SLF Inc. and its wholly owned holding
companies):
|
|
|
Cash, cash equivalents
& short-term securities
|
712
|
423
|
Debt
securities(1)
|
1,228
|
1,408
|
Equity
securities(2)
|
102
|
102
|
Sub-total
|
2,042
|
1,933
|
Less: Loans related to
acquisitions (held at SLF Inc. and its wholly owned holding
companies)
|
(411)
|
(883)
|
Cash and other liquid
assets (held at SLF Inc. and its wholly owned holding
companies)
|
1,631
|
1,050
|
(1)
|
Includes publicly
traded bonds.
|
(2)
|
Includes ETF
Investments.
|
Fee-related earnings and Operating income are
non-IFRS financial measures within SLC Management's Supplemental
Income Statement, which enhances the comparability of SLC
Management's results with publicly traded alternative asset
managers. For more details, see our Supplementary Financial
Information package for the quarter.
The following table provides a reconciliation from Fee-related
earnings and Operating income to SLC Management's Fee income and
Total expenses based on IFRS.
SLC
Management
|
|
|
|
($ millions)
|
Q4'23
|
Q3'23
|
Q4'22
|
Fee income (per
IFRS)
|
503
|
393
|
501
|
Less: Non-fee-related
revenue adjustments(1)(2)
|
181
|
94
|
235
|
Fee-related
revenue
|
322
|
299
|
266
|
Total expenses (per
IFRS)
|
440
|
450
|
454
|
Less: Non-fee-related
expense adjustments(2)(3)
|
210
|
219
|
261
|
Fee-related
expenses
|
230
|
231
|
193
|
Fee-related
earnings
|
92
|
68
|
73
|
Add: Investment income
(loss) and performance fees(4)
|
57
|
16
|
20
|
Add: Interest and
other(5)
|
(39)
|
(20)
|
(21)
|
Operating
income
|
110
|
64
|
72
|
(1)
|
Includes Interest and
other - fee income, Investment income (loss) and performance fees -
fee income, and Other - fee income.
|
(2)
|
Excludes the income and
related expenses for certain property management agreements to
provide more accurate metrics on our fee-related
business.
|
(3)
|
Includes Interest and
other, Placement fees - other, Amortization of intangibles,
Acquisition, integration and restructuring, and Other -
expenses.
|
(4)
|
Investment income
(loss) and performance fee in SLC Management's Supplemental Income
Statement relates to the underlying results of our seed
investments. As such, we have excluded non-underlying
market-related impacts as well as the gains or losses of certain
non-seed hedges that are reported under Net investment income
(loss) under IFRS. The reconciliation is as follows (amounts have
been adjusted for rounding):
|
($ millions)
|
Q4'23
|
Q3'23
|
Q4'22
|
Net investment income
(loss) (per IFRS)
|
28
|
26
|
6
|
Less: Market-related
impacts and Other - Investment income (loss)
|
3
|
10
|
(9)
|
Add: Investment income
(loss) and performance fees - fee income
|
32
|
—
|
5
|
Investment income
(loss) and performance fees
|
57
|
16
|
20
|
(5)
|
Includes Interest and
other reported under Fee income under IFRS, net of Interest and
other reported under Total expenses under IFRS.
|
Pre-tax net operating margin. This ratio is a
measure of the profitability and there is no directly comparable
IFRS measure. For MFS, this ratio is calculated by excluding
management's ownership of MFS shares and certain commission
expenses that are offsetting. These commission expenses are
excluded in order to neutralize the impact these items have on the
pre-tax net operating margin and have no impact on the
profitability of MFS. For SLC Management, the ratio is calculated
by dividing the total operating income by fee-related revenue plus
investment Income (loss) and performance fees, and is based on the
last twelve months.
The following table provides a reconciliation to calculate MFS'
pre-tax net operating margin:
MFS
|
|
|
|
|
|
(US$
millions)
|
Q4'23
|
Q3'23
|
Q4'22
|
2023
|
2022
|
Revenue
|
|
|
|
|
|
Fee income (per
IFRS)
|
790
|
815
|
775
|
3,196
|
3,323
|
Less:
Commissions
|
97
|
100
|
99
|
395
|
433
|
Less:
Other(1)
|
(13)
|
(13)
|
(13)
|
(53)
|
(53)
|
Adjusted
revenue
|
706
|
728
|
689
|
2,854
|
2,943
|
Expenses
|
|
|
|
|
|
Expenses (per
IFRS)
|
570
|
553
|
514
|
2,244
|
2,162
|
Net investment
(income)/loss (per IFRS)
|
(29)
|
(20)
|
(22)
|
(93)
|
(18)
|
Less: Management's
ownership of MFS shares (net of NCI)(2)
|
18
|
6
|
(10)
|
34
|
(45)
|
Compensation-related
equity plan adjustments
|
10
|
5
|
(1)
|
16
|
7
|
Commissions
|
97
|
100
|
99
|
395
|
433
|
Other(1)
|
(11)
|
(11)
|
(13)
|
(52)
|
(53)
|
Adjusted
expenses
|
427
|
433
|
417
|
1,758
|
1,802
|
Pre-tax net
operating margin
|
39 %
|
41 %
|
40 %
|
38 %
|
39 %
|
(1)
|
Other includes
accounting basis differences, such as sub-advisory expenses and
product allowances.
|
(2)
|
Excluding
non-controlling interest. For more information on Management's
ownership of MFS shares, see the heading Underlying Net Income and
Underlying EPS.
|
4. Reconciliations of Select Non-IFRS Financial
Measures
Underlying Net Income to Reported Net Income
Reconciliation - Pre-tax by Business Group
|
Q4'23
|
($ millions)
|
Asset
Management
|
Canada
|
U.S.
|
Asia
|
Corporate
|
Total
|
Underlying net income
(loss)
|
331
|
350
|
253
|
143
|
(94)
|
983
|
Add: Market-related
impacts (pre-tax)
|
(11)
|
(223)
|
(60)
|
(142)
|
—
|
(436)
|
ACMA
(pre-tax)
|
—
|
72
|
(65)
|
(1)
|
—
|
6
|
Other adjustments
(pre-tax)
|
(39)
|
(6)
|
(65)
|
(8)
|
—
|
(118)
|
Tax expense
(benefit)
|
16
|
155
|
38
|
52
|
53
|
314
|
Reported net income
(loss) - Common shareholders
|
297
|
348
|
101
|
44
|
(41)
|
749
|
|
Q3'23
|
Underlying net income
(loss)
|
330
|
338
|
185
|
166
|
(89)
|
930
|
Add: Market-related
impacts (pre-tax)
|
(3)
|
94
|
39
|
(1)
|
(22)
|
107
|
ACMA
(pre-tax)
|
—
|
20
|
(30)
|
51
|
—
|
41
|
Other adjustments
(pre-tax)
|
(81)
|
3
|
(71)
|
(7)
|
—
|
(156)
|
Tax expense
(benefit)
|
22
|
(90)
|
9
|
2
|
6
|
(51)
|
Reported net income
(loss) - Common shareholders
|
268
|
365
|
132
|
211
|
(105)
|
871
|
|
Q4'22(1)
|
Underlying net income
(loss)
|
324
|
265
|
230
|
135
|
(62)
|
892
|
Add: Market-related
impacts (pre-tax)(1)
|
(8)
|
250
|
21
|
(110)
|
26
|
179
|
ACMA
(pre-tax)
|
—
|
(185)
|
71
|
71
|
17
|
(26)
|
Other adjustments
(pre-tax)
|
1
|
(5)
|
(135)
|
15
|
(17)
|
(141)
|
Tax expense
(benefit)
|
4
|
128
|
15
|
(19)
|
133
|
261
|
Reported net income
(loss) - Common shareholders
|
321
|
453
|
202
|
92
|
97
|
1,165
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
Underlying Net Income to Reported Net Income Reconciliation -
Pre-tax by Business Unit - Asset Management
|
Q4'23
|
Q3'23
|
Q4'22
|
($ millions)
|
MFS
|
SLC
Management
|
MFS
|
SLC
Management
|
MFS
|
SLC
Management
|
Underlying net income
(loss)
|
261
|
70
|
277
|
53
|
276
|
48
|
Add:
|
Market-related impacts
(pre-tax)
|
—
|
(11)
|
—
|
(3)
|
—
|
(8)
|
|
Other adjustments
(pre-tax)
|
(7)
|
(32)
|
12
|
(93)
|
31
|
(30)
|
|
Tax expense
(benefit)
|
(4)
|
20
|
(5)
|
27
|
(4)
|
8
|
Reported net income
(loss) - Common shareholders
|
250
|
47
|
284
|
(16)
|
303
|
18
|
Underlying Net Income to Reported Net Income Reconciliation -
Pre-tax in U.S. dollars
|
Q4'23
|
Q3'23
|
Q4'22(1)
|
(US$
millions)
|
U.S.
|
MFS
|
U.S.
|
MFS
|
U.S.
|
MFS
|
Underlying net income
(loss)
|
187
|
191
|
140
|
207
|
173
|
202
|
Add: Market-related
impacts (pre-tax)(1)
|
(42)
|
—
|
33
|
—
|
15
|
—
|
ACMA
(pre-tax)
|
(49)
|
—
|
(22)
|
—
|
53
|
—
|
Other adjustments
(pre-tax)
|
(47)
|
(5)
|
(53)
|
9
|
(99)
|
24
|
Tax expense
(benefit)
|
28
|
(3)
|
7
|
(4)
|
9
|
(3)
|
Reported net income
(loss) - Common shareholders
|
77
|
183
|
105
|
212
|
151
|
223
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
Underlying Net Income to Reported Net Income Reconciliation -
U.S. Group Benefits - Pre-tax in U.S. dollars
The following table sets out the amounts that were excluded from
our underlying net income (loss) for U.S. Group Benefits, which is
used to calculate the trailing four-quarter after-tax profit margin
for U.S. Group Benefits.
(US$
millions)
|
Q4'23
|
Q3'23
|
Q2'23
|
Q1'23
|
Q4'22(1)
|
Q3'22(1)
|
Q2'22(1)
|
Q1'22(1)
|
Underlying net income
(loss) for U.S. Group Benefits(2)
|
138
|
96
|
116
|
128
|
119
|
101
|
87
|
49
|
Add: Market-related
impacts (pre-tax)(1)
|
14
|
(10)
|
(6)
|
4
|
(1)
|
(24)
|
(10)
|
(14)
|
ACMA
(pre-tax)
|
(11)
|
47
|
—
|
—
|
8
|
(7)
|
—
|
—
|
Other adjustments
(pre-tax)
|
(9)
|
(6)
|
(6)
|
(5)
|
(5)
|
(4)
|
(6)
|
(6)
|
Tax expense
(benefit)
|
1
|
(6)
|
2
|
1
|
(2)
|
8
|
4
|
5
|
Reported net income
(loss) - Common shareholders(2)
|
133
|
121
|
106
|
128
|
119
|
74
|
75
|
34
|
(1)
|
2022 restated results
may not be fully representative of our future earnings profile, as
we were not managing our asset and liability portfolios under the
new standards. See the heading "Note to Readers: 2022 Restated
Results on Adoption of IFRS 17 and IFRS 9" in section A - How We
Report Our Results in this document.
|
(2)
|
Effective Q2'22, we
began reporting on the performance and results of our Dental
business unit, which represents our existing dental and vision
business within Group Benefits together with DentaQuest, acquired
on June 1, 2022. We have updated prior periods to reflect this
change in presentation.
|
I. Forward-looking Statements
From time to time, the Company makes written or oral
forward-looking statements within the meaning of certain securities
laws, including the "safe harbour" provisions of the United States
Private Securities Litigation Reform Act of 1995 and applicable
Canadian securities legislation. Forward-looking statements
contained in this document include statements (i) relating to our
strategies; (ii) relating to the expected operational launch of
SLCSI in 2024; (iii) relating to the use of proceeds of our
sustainability bond offering; (iv) relating to our normal course
issuer bid (including, but not limited to, statements regarding
future purchases of common shares under the NCIB); (vii) relating
to our growth initiatives and other business objectives; (viii)
that are predictive in nature or that depend upon or refer to
future events or conditions; and (ix) that include words such as
"achieve", "aim", "ambition", "anticipate", "aspiration",
"assumption", "believe", "could", "estimate", "expect", "goal",
"initiatives", "intend", "may", "objective", "outlook", "plan",
"project", "seek", "should", "strategy", "strive", "target",
"will", and similar expressions. Forward-looking statements include
the information concerning our possible or assumed future results
of operations. These statements represent our current expectations,
estimates, and projections regarding future events and are not
historical facts, and remain subject to change.
Forward-looking statements are not a guarantee of future
performance and involve risks and uncertainties that are difficult
to predict. Future results and shareholder value may differ
materially from those expressed in these forward-looking statements
due to, among other factors, the matters set out in the 2023 Annual
MD&A under the headings D - Profitability - 5 - Income taxes, G
- Financial Strength and K - Risk Management and in SLF Inc.'s 2023
AIF under the heading Risk Factors, and the factors detailed in SLF
Inc.'s other filings with Canadian and U.S. securities regulators,
which are available for review at www.sedarplus.ca and www.sec.gov,
respectively.
Important risk factors that could cause our assumptions and
estimates, and expectations and projections to be inaccurate and
our actual results or events to differ materially from those
expressed in or implied by the forward-looking statements contained
in this document, are set out below. The realization of our
forward-looking statements essentially depends on our business
performance which, in turn, is subject to many risks. Factors that
could cause actual results to differ materially from expectations
include, but are not limited to: market risks -
related to the performance of equity markets; changes or volatility
in interest rates or credit spreads or swap spreads; real estate
investments; fluctuations in foreign currency exchange rates; and
inflation; insurance risks - related to mortality
experience, morbidity experience and longevity; policyholder
behaviour; product design and pricing; the impact of
higher-than-expected future expenses; and the availability, cost
and effectiveness of reinsurance; credit risks - related to
issuers of securities held in our investment portfolio, debtors,
structured securities, reinsurers, counterparties, other financial
institutions and other entities; business and strategic
risks - related to global economic and geopolitical conditions;
the design and implementation of business strategies; changes in
distribution channels or Client behaviour including risks relating
to market conduct by intermediaries and agents; the impact of
competition; the performance of our investments and investment
portfolios managed for Clients such as segregated and mutual funds;
shifts in investing trends and Client preference towards products
that differ from our investment products and strategies; changes in
the legal or regulatory environment, including capital requirements
and tax laws; the environment, environmental laws and regulations;
operational risks - related to breaches or failure of
information system security and privacy, including cyber-attacks;
our ability to attract and retain employees; legal, regulatory
compliance and market conduct, including the impact of regulatory
inquiries and investigations; the execution and integration of
mergers, acquisitions, strategic investments and divestitures; our
information technology infrastructure; a failure of information
systems and Internet-enabled technology; dependence on third-party
relationships, including outsourcing arrangements; business
continuity; model errors; information management; liquidity
risks - the possibility that we will not be able to fund all
cash outflow commitments as they fall due; and other risks -
changes to accounting standards in the jurisdictions in which we
operate; risks associated with our international operations,
including our joint ventures; market conditions that affect our
capital position or ability to raise capital; downgrades in
financial strength or credit ratings; and tax matters, including
estimates and judgements used in calculating taxes.
The Company does not undertake any obligation to update or
revise its forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the
occurrence of unanticipated events, except as required by law.
Earnings Conference Call
The Company's Q4'23 financial results will be reviewed at a
conference call on Thursday, February 8, 2024, at
10:00 a.m. ET. Visit www.sunlife.com/QuarterlyReports 10
minutes prior to the start of the event to access the call through
either the webcast or conference call options. Individuals
participating in the call in a listen-only mode are encouraged to
connect via our webcast. Following the call, the webcast and
presentation will be archived and made available on the Company's
website, www.sunlife.com, until the Q4'24 period end.
Media Relations
Contact:
|
Investor Relations
Contact:
|
Krista
Wilson
|
David Garg
|
Director, Corporate
Communications
|
Senior Vice-President,
Capital Management and Investor Relations
|
Tel:
226-751-2391
|
Tel:
416-408-8649
|
krista.wilson@sunlife.com
|
david.garg@sunlife.com
|
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SOURCE Sun Life Financial Inc.