Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q4 2018 Earnings Presentation
29 slides from Sun Life Financial's earnings presentation, February 2019
Slide 1: Building sustainable shareholder value
Building sustainable shareholder value Fourth Quarter, 2018 Life’s brighter under the sun
Slide 2: Business Overview
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 2
Slide 3: Business Overview
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 3
Slide 4: The World of Sun Life Financial
Q4 THE WORLD OF SUN LIFE FINANCIAL 2018 SUN LIFE FINANCIAL A $27 billion1 leading international financial services organization… operating through a balanced and diversified model… focused on creating shareholder value now and in the future 1 Market capitalization (C$), as of December 31, 2018 Life’
Slide 5: The Sun Life Story
Q4 THE SUN LIFE STORY 2018 SUN LIFE FINANCIAL We have four strong pillars that can each compete, win and grow in their respective sectors and which leverage each other Bound together by a strong balance sheet and risk culture, including no direct U.S. Variable Annuity or Long-Term Care Building on m
Slide 6: Continuing the Journey
Q4 CONTINUING THE JOURNEY 2018 SUN LIFE FINANCIAL Our ambition is to be ONE OF THE BEST insurance and asset management companies globally Each pillar Top Quartile Top Quartile viewed as one of Disproportionate Client Total Shareholder the best in its Share of Top Talent Experience Return markets Lif
Slide 7: Ambition to be One of the Best Insurance and Asset Management Companies
Q4 AMBITION TO BE “ONE OF THE BEST” INSURANCE AND ASSET MANAGEMENT COMPANIES 2018 IN THE WORLD SUN LIFE FINANCIAL A growth strategy focused on high ROE and strong capital generation through leading positions in attractive markets globally A Leader in Insurance and A Leader in U.S. Group CAN Wealth S
Slide 8: Delivering Value to Shareholders
Q4 DELIVERING VALUE TO SHAREHOLDERS 2018 TOTAL SHAREHOLDER RETURN SUN LIFE FINANCIAL NET INCOME1 FIVE YEARS AS OF (C$ MILLIONS) DECEMBER 31, 2018 (ANNUALIZED RETURN) CAGR 9%* SLF Inc. 2,947 2,485 2,546 2,522 2,335 TSX 2,185 2,305 2,149 Global Lifecos U.S. Lifecos Canadian Lifecos 2015 2016 2017 2018
Slide 9: Balanced and Diversified Business
Q4 BALANCED AND DIVERSIFIED BUSINESS 2018 SUN LIFE FINANCIAL BUSINESS DIVERSIFICATION GEOGRAPHIC DIVERSIFICATION 2018 UNDERLYING NET INCOME1* 2018 UNDERLYING NET INCOME1* RUN-OFF SLF U.K. 12% 5% ASSET SLF U.S. MANAGEMENT 16% SLF CANADA 29% 33% GROUP INSURANCE 19% SLF ASIA 17% WEALTH 12% INDIVIDUAL S
Slide 10: Business Group Performance
Q4 BUSINESS GROUP PERFORMANCE 2018 SUN LIFE FINANCIAL REPORTED NET INCOME(LOSS) UNDERLYING NET INCOME1 (C$ MILLIONS) (C$ MILLIONS) Impact of currency increased reported net income by $18M Impact of currency increased underlying net income by $16M 245 232 226 227 244 172 140 121 111 118 121 125 95 96
Slide 11: SLF Canada: Growing Earnings Power
Q4 SLF CANADA: GROWING EARNINGS POWER Q4’18 and 2018 HIGHLIGHTS ASSETS UNDER UNDERLYING NET INCOME1 Achieved underlying net income exceeding $1B and MANAGEMENT1 (C$ MILLIONS) reaching leadership position in most markets (C$ MILLIONS) Launched Lumino Health, the first-of-its-kind digital health n
Slide 12: SLF Asset Management: Well Positioned for Growth
Q4 SLF ASSET MANAGEMENT: WELL POSITIONED FOR GROWTH Q4’18 and 2018 HIGHLIGHTS UNDERLYING NET INCOME1 (C$ MILLIONS) Announced an agreement to merge our North American real estate investment manager, Bentall Kennedy, with GreenOak Real Estate and take a majority stake in the combined entity2 Stron
Slide 13: SLF U.S.: Execution on Key Initiatives
Q4 SLF U.S.: EXECUTION ON KEY INITIATIVES Q4’18 & 2018 HIGHLIGHTS UNDERLYING NET INCOME1 AFTER-TAX Reached a milestone for total Group Benefits sales (US$ MILLIONS) PROFIT MARGIN FOR at US$1.0 billion for the first time, an increase of G R O U P B E N E F I T S 1,2 16% over 2017 Created Fullscop
Slide 14: SLF Asia: Distribution Excellence in Higher Growth Markets
Q4 SLF ASIA: DISTRIBUTION EXCELLENCE IN HIGHER GROWTH MARKETS UNDERLYING NET INCOME1 Q4’18 & 2018 HIGHLIGHTS (C$ MILLIONS) Completed a strategic investment in Bowtie Life Insurance Company Ltd., the first virtual insurer in Hong Kong approved under the Fast Track process2 Bancassurance sales in
Slide 15: SLF Asia: Market Presence
Q4 SLF ASIA: MARKET PRESENCE Presence in seven high growth markets, including Asia’s two largest economies – India & China. Access to Singapore & Dubai through International High Net Worth business 17% China Hong Kong Vietnam Total Company Underlying Philippines Net Income1 from Asia* India Malaysia
Slide 16: Capital Management
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 16
Slide 17: Overview of LICAT Capital Framework
Q4 OVERVIEW OF LICAT CAPITAL FRAMEWORK 2018 SUN LIFE FINANCIAL TOTAL RATIO Available Capital + Surplus Allowance Base Solvency Buffer TOTAL RATIO (SLF Inc.) = 144% AVAILABLE CAPITAL SURPLUS ALLOWANCE + BASE SOLVENCY BUFFER ELIGIBLE DEPOSITS • Similar to MCCSR • Sum of aggregate capital required for:
Slide 18: Capital Generation Provides Good Capital Flexibility
Q4 CAPITAL GENERATION PROVIDES GOOD CAPITAL FLEXIBILITY 2018 SUN LIFE FINANCIAL Target Dividend M&A Opportunities Share buybacks Funding Organic Growth Payout ratio of 40-50% Strong Capital Generation Capital Flexibility • Capital deployment priorities unchanged • Target minimum cash at the holding
Slide 19: Financial Flexibility Under Capital Model
Q4 FINANCIAL FLEXIBILITY UNDER CAPITAL MODEL 2018 SUN LIFE FINANCIAL LICAT 144% $2.5 billion cash at Leverage 21.2% holding company SLF Leverage Capacity SLF - External Capital Securities Outstanding First Call to 25/30%: ~$1.4/$3.6B Subordinated Debt Coupon Balance Date SLF T2B (Series 2007-1) 5.40
Slide 20: Strong Operating and Financial Leverage
Q4 STRONG OPERATING AND FINANCIAL LEVERAGE 2018 SUN LIFE FINANCIAL Operating Leverage Debt (C$ millions) Q4 2018 Debt supporting reserve financing Operating Senior Debt 599 Leverage Bilateral Senior Financing 1 2,066 Total Operating Leverage Debt 2,665 Capital (C$ millions) Q4 2018 Tier 2 Subordinat
Slide 21: Capital Framework Comparison - Metrics
Q4 CAPITAL FRAMEWORK COMPARISON - METRICS 2018 SUN LIFE FINANCIAL Capital Metrics and MCCSR LICAT Targets Available Capital Available Capital + Surplus Allowance (SA) + Eligible Deposits (ED) Total Ratio Required Capital Base Solvency Buffer Tier 1 Available Capital Tier 1 Available Capital + 70% x
Slide 22: Capital Framework Comparison – Available Capital
Q4 CAPITAL FRAMEWORK COMPARISON – AVAILABLE CAPITAL 2018 SUN LIFE FINANCIAL Available Capital MCCSR LICAT Valuation Basis: Invested Assets Generally market value Generally market value Valuation Basis: Accounting Assets and IFRS IFRS Liabilities Valuation Basis: Actuarial Liabilities CALM CALM Goodw
Slide 23: Capital Framework Comparison – Required Capital
Q4 CAPITAL FRAMEWORK COMPARISON – REQUIRED CAPITAL 2018 Required Capital MCCSR LICAT SUN LIFE FINANCIAL Conditional tail expectation of CTE(99), calibrated on a Calibration of target requirements Not specified 1-year horizon including a terminal provision Factor based where factors Credit Risk Facto
Slide 24: Asset Portfolio
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 24
Slide 25: High Quality, Well Diversified Investment Portfolio
Q4 HIGH QUALITY, WELL DIVERSIFIED INVESTMENT PORTFOLIO 2018 SUN LIFE FINANCIAL INVESTED ASSETS DEBT SECURITIES COMPETITIVE Cash, cash BY RATING ADVANTAGES Investment Other1 equivalents and Properties 6% short-term BB and Equity 5% securities 6% Lower, 1% AAA, 21% Leading non-public portfolio Secur
Slide 26: Sustainability
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 26
Slide 27: Sustainability Principles and Highlights
Q4 SUSTAINABILITY PRINCIPLES AND HIGHLIGHTS 2018 SUSTAINABILITY HIGHLIGHTS* SUN LIFE FINANCIAL SUSTAINABILITY PRINCIPLES * Based on Sun Life’s 2017 Sustainability Report Life’s brighter under the sun 27
Slide 28: Use of Non-IFRS Financial Measures
In this presentation, Sun Life Financial Inc., (“SLF Inc.”) its subsidiaries and, where applicable, its joint ventures and associates are referred to as “we”, “us”, “our” and the “Company” and Sun Life Assurance Company of Canada is referred to as “SLA”. Use of Non-IFRS Financial Measures We report
Slide 29: Forward-Looking Statements
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 l