Sun Life Financial Inc.
("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: Canada, United States ("U.S."), Asset Management, Asia,
and Corporate. The information in this document is based on the
unaudited interim financial results of SLF Inc. for the period
ended September 30, 2023 and should be read in conjunction
with the interim management's discussion and analysis ("MD&A")
and our unaudited interim consolidated financial statements and
accompanying notes ("Interim Consolidated Financial Statements")
for the period ended September 30, 2023, prepared in
accordance with International Financial Reporting Standards
("IFRS"). We report certain financial information using non-IFRS
financial measures. For more details, refer to the Non-IFRS
Financial Measures section in this document. Additional information relating to SLF Inc. is
available on www.sunlife.com under Investors – Financial results and
reports, on the SEDAR+ website at
www.sedarplus.ca, and on the U.S.
Securities and Exchange Commission's website at
www.sec.gov. 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 L - Changes
in Accounting Policies in our MD&A for the period ended
September 30, 2023 ("Q3'23 MD&A").
|
TORONTO, Nov. 13,
2023 /CNW/ - Sun Life Financial Inc. (TSX:
SLF) (NYSE: SLF) announced its results for the third quarter ended
September 30, 2023.
- Underlying net income(1) of $930 million decreased $19
million or 2% from Q3'22(2); underlying
ROE(1) was 17.7%.
- Wealth & asset management underlying net
income(1): $457
million, up $38 million or
9%.
- Group - Health & Protection underlying net
income(1): $285
million, up $4 million or
1%.
- Individual - Protection underlying net
income(1): $297
million, down $8 million or
3%.
- Corporate expenses & other(1):
$(109) million net loss, increase in
net loss of $(53) million or
95%.
- Reported net income of $871
million increased $760 million
from Q3'22(2); reported ROE(1) was
16.6%.
- Increase to common share dividend from $0.75 to $0.78 per
share.
"Sun Life delivered good results and we continue to benefit from
our diversified business mix with strong net income in Canada, growth in SLC Management fee-related
earnings and good growth in Asia,"
said Kevin Strain, President and CEO
of Sun Life.
"We completed our acquisition of Dialogue, Canada's leading virtual health and wellness
provider that gives access to quality, high-touch care. In
Asia, we increased our investment
in Bowtie, Hong Kong's first
virtual insurer. Since the beginning of our partnership five years
ago, Bowtie has grown in digital distribution, sales and increased
market share. In the U.S., we've extended our Teledentistry.com
partnership to DentaQuest, which will provide approximately 3.5
million people across 20 states access to oral and dental care. SLC
Management's strategic relationship with Scotiabank Global Wealth
Management to provide private asset solutions in the Canadian
market will help to meet the growing demand for alternative
investments."
|
|
Quarterly
results
|
Year-to-date
|
Profitability
|
Q3'23
|
Q3'22(2)
|
2023
|
2022(2)
|
|
Underlying net income
($ millions)(1)
|
930
|
949
|
2,745
|
2,477
|
|
Reported net income -
Common shareholders ($ millions)
|
871
|
111
|
2,337
|
1,706
|
|
Underlying EPS
($)(1)(3)
|
1.59
|
1.62
|
4.68
|
4.23
|
|
Reported EPS
($)(3)
|
1.48
|
0.19
|
3.97
|
2.91
|
|
Underlying return on
equity ("ROE")(1)
|
17.7 %
|
19.4 %
|
17.6 %
|
17.1 %
|
|
Reported
ROE(1)
|
16.6 %
|
2.3 %
|
14.9 %
|
11.8 %
|
Growth
|
Q3'23
|
Q3'22(2)
|
2023
|
2022(2)
|
|
Wealth sales &
asset management gross flows ($
millions)(1)(4)
|
39,324
|
42,146
|
128,070
|
155,381
|
|
Group - Health &
Protection sales ($ millions)(1)
|
374
|
499
|
1,573
|
1,209
|
|
Individual - Protection
sales ($ millions)(1)
|
669
|
444
|
1,784
|
1,269
|
|
Assets under management
("AUM") ($ billions)(1)
|
1,340
|
1,269
|
1,340
|
1,269
|
|
New business
Contractual Service Margin ("CSM") ($
millions)(1)
|
370
|
177
|
872
|
509
|
|
|
|
|
|
|
Financial
Strength
|
Q3'23
|
As at
January 1,
2023(5)
|
|
|
|
LICAT ratios (at period
end)(5)
|
|
|
|
|
|
Sun Life Financial
Inc.
|
147 %
|
142 %
|
|
|
|
Sun Life
Assurance(6)
|
138 %
|
139 %
|
|
|
|
Financial leverage
ratio (at period end)(2)(7)
|
21.8 %
|
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 Q3'23
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, IFRS 17 and IFRS 9. For more details, see the
heading "Note to Readers: 2022 Restated Results on Adoption of IFRS
17 and IFRS 9" 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)
|
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 F - Financial Strength
in the Q3'23 MD&A.
|
(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 $9.3 billion as at September 30,
2023 (January 1, 2023 - $8.7 billion).
|
Financial and Operational Highlights - Quarterly Comparison
(Q3'23 vs. Q3'22)
($ millions)
|
Q3'23
|
Underlying net
income by business type(1)(2):
|
Sun
Life
|
Asset
Management
|
Canada
|
U.S.
|
Asia
|
Corporate
|
Wealth & asset
management
|
457
|
330
|
116
|
—
|
11
|
—
|
Group - Health &
Protection
|
285
|
—
|
136
|
149
|
—
|
—
|
Individual -
Protection
|
297
|
—
|
86
|
36
|
175
|
—
|
Corporate expenses
& other
|
(109)
|
—
|
—
|
—
|
(20)
|
(89)
|
Underlying net
income(1)
|
930
|
330
|
338
|
185
|
166
|
(89)
|
Reported net income
- Common shareholders
|
871
|
268
|
365
|
132
|
211
|
(105)
|
Change in underlying
net income (% year-over-year)
|
(2) %
|
11 %
|
15 %
|
(19) %
|
8 %
|
nm(3)
|
Change in reported net
income (% year-over-year)
|
nm(3)
|
23 %
|
nm(3)
|
6 %
|
nm(3)
|
nm(3)
|
Wealth sales &
asset management gross flows(1)(4)
|
39,324
|
34,266
|
3,395
|
—
|
1,663
|
—
|
Group - Health &
Protection sales(1)
|
374
|
—
|
119
|
239
|
16
|
—
|
Individual -
Protection sales(1)
|
669
|
—
|
148
|
—
|
521
|
—
|
Change in wealth sales
& asset management gross flows
(%
year-over-year)
|
(7) %
|
(6) %
|
7 %
|
—
|
(34) %
|
—
|
Change in group sales
(% year-over-year)
|
(25) %
|
—
|
4 %
|
(35) %
|
(16) %
|
—
|
Change in individual
sales (% year-over-year)
|
51 %
|
—
|
24 %
|
—
|
60 %
|
—
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see the Non-IFRS Financial
Measures section in this document and in the Q3'23
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 Q3'23 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 $930 million decreased $19
million or 2% from prior year, driven by:
- Wealth & asset management(1) up
$38 million: Higher investment income
driven by volume growth and an increase in yields, and higher Asset
Management fee-related earnings.
- Group - Health & Protection(1) up
$4 million: Strong revenue growth
across all U.S. businesses and better disability experience in
Canada, largely offset by health
and protection experience in the U.S., and lower fee-related
earnings in Canada.
- Individual - Protection(1) down $8 million: Lower earnings due to the sale of Sun
Life UK(2), and lower net investment results in the
U.S., partially offset by business growth reflecting good sales
momentum during the past year in Asia.
- Corporate expenses & other(1)
$(53) million increase in net loss
includes higher debt financing costs.
- Higher expenses across business types were driven by volume
growth, continued investments in the business, and higher incentive
compensation.
- Favourable foreign currency translation led to an increase of
$16 million.
Reported net income of $871
million increased $760
million, driven by:
- Favourable market-related impacts primarily reflecting interest
rates partially offset by real estate
experience(3);
- A $170 million charge related to
the sale of Sun Life UK(2) and a higher increase in SLC
Management's acquisition-related liabilities(4) in the
prior year; and
- ACMA(5) impacts; partially offset by
- Fair value changes in management's ownership of
MFS(6) shares.
___________
|
(1)
|
Refer to section C -
Profitability in the Q3'23 MD&A for more information on notable
items attributable to reported & 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 Q3'23 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"). In Q3'22, we recognized
an impairment charge of $170 million pertaining to the attributed
goodwill that was not expected to be recovered through the sale.
For additional information, refer to Note 3 of our Interim
Consolidated Financial Statements for the period ended September
30, 2023.
|
(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)
|
Reflects the changes in
estimated future payments for acquisition-related contingent
considerations and options to purchase remaining ownership
interests of SLC Management affiliates.
|
(5)
|
Assumption changes and
management actions ("ACMA").
|
(6)
|
MFS Investment
Management ("MFS").
|
Asset Management: A global leader in both public and
alternative asset classes through MFS and SLC Management
Asset Management underlying net income of $330 million increased $32
million or 11% from prior year, driven by:
- MFS up $4 million (down
US$5 million): Higher average net
assets ("ANA"), an increase in net investment income, favourable
foreign exchange translation and higher variable compensation
expenses. The MFS pre-tax net operating profit
margin(1) was 41% for Q3'23, consistent with the prior
year.
- SLC Management up $28
million: Fee-related earnings(1) increased 17%
driven by higher AUM, reflecting strong capital raising and
deployment across the platform and the AAM
acquisition(2). Fee-related earnings
margin(1) for Q3'23 of 24% was consistent with the prior
year. The increase in underlying net income was driven by the
higher fee-related earnings, a favourable tax rate(3),
and higher retention expenses in the prior year that did not
repeat.
Reported net income of $268
million increased $50 million
or 23% from prior year, driven by a lower increase in SLC
Management's acquisition-related liabilities(4) compared
to the prior year and an increase in underlying net income,
partially offset by fair value changes in management's ownership of
MFS shares.
Foreign exchange translation led to an increase of
$7 million in underlying net income and reported net
income.
Asset Management ended Q3'23 with $974
billion of AUM, consisting of $755 billion
(US$556 billion) in MFS and
$219 billion in SLC Management. Total
Asset Management net outflows of $9.1
billion in Q3'23 reflected MFS net outflows of $12.5 billion (US$9.3
billion) partially offset by SLC Management net inflows of
$3.4 billion.
MFS maintained good momentum in growing the defined contribution
business. On a year-to-date basis, defined contribution gross sales
are up 14% compared to prior year due to strong placement on
consultant, advisor and recordkeeping platforms' select lists,
driving approximately US$3 billion in
net inflows, despite challenging market conditions.
In October, SLC Management entered into a strategic partnership
with Scotiabank to distribute alternative investment capabilities
to the Canadian retail market through Scotia Global Wealth
Management. This will allow SLC Management to extend alternative
investment capabilities to new Clients and expands the roster of
investment solutions Scotiabank can offer the Canadian wealth
management market. This strategic partnership, coupled with the
recent acquisition of Advisors Asset Management, Inc. ("AAM"),
positions SLC Management to meet the growing demand for alternative
assets among High-Net-Worth ("HNW") investors. AAM also announced
it will distribute Crescent Private BDC, a non-traded closed-end
fund launched by Crescent Capital Group LP. This is the second
collaboration between AAM and other SLC Management affiliates since
its acquisition in Q1, highlighting the strategic benefit of adding
this distribution channel.
Canada: A leader in health,
wealth, and insurance
Canada underlying net income of
$338 million increased $45 million or 15% from prior year,
reflecting:
- Wealth & asset management up $14 million: Increase in investment income driven
by higher volume and yields.
- Group - Health & Protection up $34 million: Improved disability experience
reflecting higher margins and shorter claims durations, partially
offset by lower fee-related earnings.
- Individual - Protection down $3
million: In line with prior year.
- Higher expenses across all businesses were driven by volume
growth, continued investments in the business, and higher incentive
compensation.
Reported net income of $365
million increased $309 million
from prior year, driven by more favourable market-related impacts
primarily from interest rates, ACMA impacts, and the increase in
underlying net income, partially offset by real estate
experience.
Canada's
sales(5):
- Wealth sales & asset management gross flows of $3 billion were up 7%, driven by higher
Individual Wealth sales, primarily from mutual funds, partially
offset by lower defined contribution sales in Group Retirement
Services ("GRS").
- Group - Health & Protection sales of $119 million were up 4%, reflecting higher health
sales.
- Individual - Protection sales of $148
million were up 24%, reflecting higher participating whole
life insurance sales.
We continue to execute on our strategy of helping Clients access
the care they need to prevent and mitigate health risks and live
healthier lives. In Q3, Sun Life was selected to move forward in
the final stages of contract negotiations with the Government of
Canada to be the administrator of
the Canadian Dental Care Plan ("CDCP"), which will provide access
to dental care for Canadians in need. Through the CDCP, up to nine
million additional Canadians will have access to dental care.
________
|
(1)
|
Represents a non-IFRS
financial measure. For more details, see the Non-IFRS Financial
Measures section in this document and in the Q3'23
MD&A.
|
(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.
|
(3)
|
Underlying net income
includes favourable adjustments related to tax filings.
|
(4)
|
Reflects the changes in
estimated future payments for acquisition-related contingent
considerations and options to purchase remaining ownership
interests of SLC Management affiliates.
|
(5)
|
Compared to the prior
year.
|
In support of our focus on inclusive workplace benefits, we are
making it easier for plan members to understand and access
culturally relevant covered health expenses under the standard
Personal Spending Accounts ("PSA"). For example, we created a new
Indigenous Health category which outlines and creates awareness
that Sun Life provides coverage for traditional medicines, fees and
supplies for Indigenous ceremonies, and more under the PSA. We
also expanded our partnership with Spirit North, a national
charitable organization, committing $1
million in funding over three years, to deliver physical
health programs and address health inequities in underserved
Indigenous communities.
U.S.: A leader in health and benefits
U.S. underlying net income of US$140
million decreased US$33
million or 19% ($185
million decreased $42 million or
19%) from prior year, driven by:
- Group - Health & Protection down US$24 million: Lower Dental results as strong
revenue growth was more than offset by the impact of Medicaid
redeterminations following the end of the Public Health Emergency
and investments in the Advantage Dental+ business. In Group
Benefits, strong revenue growth was largely offset by less
favourable morbidity experience.
- Individual - Protection down US$9
million: The inclusion of the UK payout annuity
business(1) was more than offset by lower net investment
results.
Reported net income of US$105
million increased US$9 million
or 9% ($132 million increased
$7 million or 6%) from prior year, driven by market-related
impacts largely from interest rates, offset by the decrease in
underlying net income and ACMA impacts.
Foreign exchange translation led to an increase of
$5 million and $4 million in underlying net income and
reported net income, respectively.
U.S. group sales(2) of US$179 million were down
US$102 million or 36% ($239 million, down
$127 million or 35%), reflecting lower large case Medicaid
sales in Dental, partially offset by higher commercial dental
sales.
As a leader in health and benefits, we are helping Clients get
access to the right care at the right time to live healthier lives.
In Q3, we established a new preferred partnership with OptiMed, a
U.S. national health care organization, to make specialty drugs
more accessible and affordable for our stop-loss members. The new
program will improve how specialty drugs are administered for
members who need them, often in their own home, while also managing
rising health care costs. Also, in employee benefits, we
launched an enhanced disability product suite specially designed
for healthcare professionals, providing them with income
replacement coverage that meets their specific needs.
We extended our partnership with
Teledentistry.com to include DentaQuest members. The
service offers members 24/7 virtual access to dental providers,
making it easier to get dental care and advice digitally. It is
expected to be available to Medicaid and commercial dental plan
members in 20 states by the end of 2023, increasing access to oral
health care for approximately 3.5 million members in those
states.
Asia: A regional
leader focused on fast-growing markets
Asia underlying net income of
$166 million increased $13 million or 8% from prior year, driven by:
- Wealth & asset management down $8 million: Lower earnings in the Philippines.
- Individual - Protection up $39
million: Business growth reflecting good sales momentum
during the past year. Experience in the quarter included favourable
mortality from lower claims volumes, largely offset by higher
expense experience.
- Regional office expenses & other $(18) million increased net loss primarily
reflecting higher incentive compensation.
Reported net income of $211
million compared to nil reported net income in the prior
year, driven by ACMA impacts, and favourable market-related
impacts largely from interest rates partially offset by real estate
experience.
Foreign exchange translation led to an increase of
$3 million and $5 million in underlying net income and
reported net income, respectively.
Asia's sales(2):
- Wealth sales & asset management gross flows of $2 billion were down 34%, primarily reflecting
lower money market fund sales in the
Philippines.
- Individual sales of $521 million
were up 60%, driven by higher sales in Hong Kong reflecting increased demand as
pandemic-related travel restrictions were lifted in early 2023, and
in International reflecting large case sales, partially offset by
lower sales in Vietnam reflecting
market conditions.
New business CSM of $238 million
in Q3'23, compared to $79 million in
the prior year, was primarily driven by sales in Hong Kong and High-Net-Worth.
We continue to execute on our growth strategy through strategic
partnerships and investments. We launched our 15-year
exclusive bancassurance partnership with Dah Sing Bank in
Hong Kong with strong sales. We
also increased our strategic investment in Bowtie Life Insurance
Company Limited, Hong Kong's first
virtual insurer with a leading market share of approximately
30%(3) in Hong Kong's
direct sales channel.
________
|
(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 Interim Consolidated Financial
Statements for the period ended September 30, 2023.
|
(2)
|
Compared to the prior
year.
|
(3)
|
According to Insurance
Authority's Provisional Statistics for Long Term Business
2021-2023, Bowtie ranked first in number of new individual paid
policies through direct channel in Hong Kong.
|
Demonstrating our focus on adopting prudent financial practices
that protect our Clients while strengthening our risk management
capabilities, Sun Life Hong Kong received approval from the Hong
Kong Insurance Authority for the early adoption of the Risk-Based
Capital ("RBC") regime, effective end of June 2023. Sun Life Hong Kong is among the few
insurers in Hong Kong that has
transitioned to the RBC regime earlier than scheduled, reflecting
our risk management capabilities and financial strength.
Corporate
Corporate underlying net loss was $89
million compared to underlying net loss of $22 million in the prior year, driven by the sale
of Sun Life UK(1), higher operating expenses including
incentive compensation, an increase in debt financing costs,
partially offset by higher investment income from surplus
assets.
Reported net loss was $105 million
compared to reported net loss of $288
million in the prior year, driven by the impacts from the
sale of Sun Life UK(2) , partially offset by 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.
|
(2)
|
In Q3'22, we recognized
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. For additional information, refer to Note 3 of our
Interim Consolidated Financial Statements for the period ended
September 30, 2023. Also, the prior year included market-related
losses from Sun Life UK.
|
Earnings Conference Call
The Company's Q3'23 financial results will be reviewed at a
conference call on Tuesday, November 14, 2023, 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 Q3'24 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
|
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 I -
Risk Management in each quarter's respective 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. As these
results are not audited, or have not yet been audited, they may
still be subject to change.
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
Q3'23 MD&A under the heading N - Non-IFRS Financial Measures
and the Supplementary Financial Information packages that are
available on www.sunlife.com under Investors – Financial
results and reports.
1. 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 N - Non-IFRS Financial Measures - 2 - Underlying Net Income
and Underlying EPS in the Q3'23 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)
|
Q3'23
|
Q3'22(1)
|
2023
|
2022(1)
|
Underlying net
income
|
930
|
949
|
2,745
|
2,477
|
|
Market-related
impacts(1)
|
|
|
|
|
|
|
Equity market
impacts
|
(21)
|
(36)
|
(21)
|
(165)
|
|
|
Interest rate
impacts(2)
|
127
|
(338)
|
39
|
(223)
|
|
|
Impacts of changes in
the fair value of investment properties (real estate
experience)
|
(83)
|
13
|
(279)
|
143
|
|
Add:
|
Market-related
impacts
|
23
|
(361)
|
(261)
|
(245)
|
|
Add:
|
Assumption changes and
management actions
|
35
|
(131)
|
37
|
(180)
|
|
|
Other
adjustments
|
|
|
|
|
|
|
|
Management's ownership
of MFS shares
|
7
|
37
|
23
|
88
|
|
|
|
Acquisition,
integration and restructuring(3)(4)(5)(6)(7)
|
(89)
|
(312)
|
(113)
|
(406)
|
|
|
|
Intangible asset
amortization
|
(35)
|
(23)
|
(94)
|
(56)
|
|
|
|
Other(8)
|
—
|
(48)
|
—
|
28
|
|
Add:
|
Total of other
adjustments
|
(117)
|
(346)
|
(184)
|
(346)
|
Reported net income -
Common shareholders
|
871
|
111
|
2,337
|
1,706
|
Underlying EPS
(diluted) ($)
|
1.59
|
1.62
|
4.68
|
4.23
|
|
Add:
|
Market-related impacts
($)
|
0.04
|
(0.62)
|
(0.44)
|
(0.42)
|
|
|
Assumption changes and
management actions ($)
|
0.06
|
(0.22)
|
0.06
|
(0.31)
|
|
|
Management's ownership
of MFS shares ($)
|
0.01
|
0.06
|
0.04
|
0.15
|
|
|
Acquisition,
integration and restructuring ($)
|
(0.16)
|
(0.53)
|
(0.20)
|
(0.70)
|
|
|
Intangible asset
amortization ($)
|
(0.06)
|
(0.04)
|
(0.17)
|
(0.10)
|
|
|
Other ($)
|
—
|
(0.08)
|
—
|
0.05
|
|
|
Impact of convertible
securities on diluted EPS ($)
|
—
|
—
|
—
|
0.01
|
Reported EPS (diluted)
($)
|
1.48
|
0.19
|
3.97
|
2.91
|
(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, IFRS 17 and IFRS 9. For more details, see the
heading "Note to Readers: 2022 Restated Results on Adoption of IFRS
17 and IFRS 9" 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 $21 million
in Q3'23 and $62 million for the first nine months of 2023
(Q3'22 - $15 million; the first nine months of 2022 -
$47 million).
|
(4)
|
Q3'23 reflects the
changes in estimated future payments for acquisition-related
contingent considerations and options to purchase remaining
ownership interests of SLC Management affiliates of $42 million
(Q3'22 - $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
$48 million in Q3'22 reflecting the resolution of a matter related
to reinsurance pricing for our U.S. In-force Management business,
and Q2'22 reflects a gain on the sale-leaseback of the
Wellesley office in the U.S.
|
The following table shows the pre-tax amount of underlying
net income adjustments:
|
Quarterly
results
|
Year-to-date
|
($ millions)
|
Q3'23
|
Q3'22(1)
|
2023
|
2022(1)
|
Underlying net income
(after-tax)
|
930
|
949
|
2,745
|
2,477
|
Underlying net income
adjustments (pre-tax):
|
|
|
|
|
Add:
Market-related
impacts(1)
|
107
|
(400)
|
(290)
|
54
|
Assumption changes and management
actions(2)
|
41
|
(153)
|
47
|
(213)
|
Other adjustments
|
(156)
|
(385)
|
(255)
|
(385)
|
Total underlying net income adjustments
(pre-tax)
|
(8)
|
(938)
|
(498)
|
(544)
|
Add:
Taxes related to underlying net income
adjustments
|
(51)
|
100
|
90
|
(227)
|
Reported net income -
Common shareholders (after-tax)
|
871
|
111
|
2,337
|
1,706
|
(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, IFRS 17 and IFRS 9. For more details, see the
heading "Note to Readers: 2022 Restated Results on Adoption of IFRS
17 and IFRS 9" 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. In contrast,
Note 7.B.iv of the Consolidated Financial Statements for the
period ended September 30, 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.
|
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.
2. Additional Non-IFRS Financial Measures
Management
also uses the following non-IFRS financial measures, and a full
listing is available in section N - Non-IFRS Financial Measures in
the Q3'23 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 D - Growth - 2 - Assets
Under Management and N - Non-IFRS Financial Measures in the Q3'23
MD&A.
|
Quarterly
results
|
($ millions)
|
Q3'23
|
Q3'22
|
Assets under
management
|
|
|
General fund
assets
|
193,858
|
198,181
|
Segregated
funds
|
119,988
|
118,564
|
Third-party
AUM(1)
|
1,063,075
|
991,349
|
Consolidation
adjustments(1)
|
(36,780)
|
(38,725)
|
Total assets under
management
|
1,340,141
|
1,269,369
|
(1) Represents a non-IFRS financial measure. For
more details, see section N - Non-IFRS Financial Measures in the
Q3'23 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 September 30,
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
|
533
|
423
|
Debt
securities(1)
|
1,310
|
1,408
|
Equity
securities(2)
|
102
|
102
|
Sub-total
|
1,945
|
1,933
|
Less: Loans related to
acquisitions (held at SLF Inc. and its wholly owned holding
companies)
|
(543)
|
(883)
|
Cash and other liquid
assets (held at SLF Inc. and its wholly owned holding
companies)
|
1,402
|
1,050
|
(1) Includes publicly traded bonds.
|
(2) Includes ETF Investments.
|
3. Reconciliations of Select Non-IFRS Financial
Measures
Underlying Net Income to Reported Net Income
Reconciliation - Pre-tax by Business Group
|
Q3'23
|
($ millions)
|
Asset
Management
|
Canada
|
U.S.
|
Asia
|
Corporate
|
Total
|
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)
on above items
|
22
|
(90)
|
9
|
2
|
6
|
(51)
|
Reported net income
(loss) - Common shareholders
|
268
|
365
|
132
|
211
|
(105)
|
871
|
|
Q3'22(1)
|
Underlying net income
(loss)
|
298
|
293
|
227
|
153
|
(22)
|
949
|
Add:
Market-related impacts (pre-tax)(1)
|
3
|
(206)
|
(13)
|
(107)
|
(77)
|
(400)
|
ACMA
(pre-tax)
|
—
|
(82)
|
(6)
|
(54)
|
(11)
|
(153)
|
Other adjustments
(pre-tax)
|
(95)
|
(6)
|
(112)
|
(2)
|
(170)
|
(385)
|
Tax expense (benefit)
on above items
|
12
|
57
|
29
|
10
|
(8)
|
100
|
Reported net income
(loss) - Common shareholders
|
218
|
56
|
125
|
—
|
(288)
|
111
|
(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, IFRS 17 and IFRS 9. For more details, see the
heading "Note to Readers: 2022 Restated Results on Adoption of IFRS
17 and IFRS 9" in this document.
|
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 benefits of our strategic
partnerships; (iii) relating to our contract negotiations with the
Government of Canada for
administration of the Canadian Dental Care Plan; (iv) relating to
our growth initiatives and other business objectives; (v) relating
to our targets and commitments; (vi) that are predictive in nature
or that depend upon or refer to future events or conditions; and
(vii) 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 Q3'23
MD&A under the headings C - Profitability - 5 - Income taxes, F
- Financial Strength and I - Risk Management and in SLF Inc.'s 2022
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 political 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.
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 September 30, 2023, Sun Life had total assets
under management of $1.34 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.
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SOURCE Sun Life Financial Inc.