Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q3 2020 Earnings Presentation
42 slides from Sun Life Financial's earnings presentation, November 2020
Slide 1: Building Sustainable Shareholder Value
Q3 2020 Building Sustainable Shareholder Value
Slide 2: Business overview
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 2
Slide 3: A $31.7 billion leading global financial services organization
A $31.7 billion leading global financial services organization1 Offices in 40,600 27 1 25,900 Employees 2 2 Advisors 2 markets Operating through a balanced and diversified model and focused on creating shareholder value now and in the future 1 Market capitalization (C$) and map as at September 30, 2
Slide 4: The Sun Life story
The Sun Life story • A diversified business model, with 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 U.S. Variable Annuity or U.S. Long-Term Care • Digital t
Slide 5: Executing on our ambition to be one of the best insurance and asset management companies globally
Executing on our ambition to be one of the best insurance and asset management companies globally A Leader in Insurance and A Leader in U.S. Wealth Solutions in our CAN US Group Benefits Canadian Home Market A Leader in Asia A Leader in Global AM ASIA through Distribution Asset Management Excellence
Slide 6: Consistently delivering value to shareholders
Consistently delivering value to shareholders 5- y ear total sharehol der return 1 Progress on m edi um-term obj ectiv es September 30, 2020 8.7% Medium-term o bjective 5- Year3 Sun Life 7.1% Underlying ROE 2 TSX 12-14% 13.2% G lo bal lifecos 3.4% Underlying EPS growth2 8-10% 10.2% Canadian lifecos
Slide 7: Digital transformation deeply embedded throughout the organization
Digital transformation deeply embedded throughout the organization Build new digital models Use digital to be personal, predictive, and proactive • Asia direct business models, including affordable digital products • Predictive models for advisor recruiting and through online marketplace Lazada Clie
Slide 8: Balanced and diversified business
Balanced and diversified business Busi ness ty pe di v ersi fication Busi ness Group di v ersi fication Q3 2020 underlying net income 1,2 Q3 2020 underlying net income 1,2 Run-off UK 6% U.S. 3% Asset 15% Asset Wealth Management 11% 32% Management 32% Asia 18% Group Individual Insurance Canada Insura
Slide 9: Leveraging global trends
Leveraging global trends • Demographic shifts: changing population including the aging of Baby Boomers and growth of Millennials • Digital transformation: digital, data and analytics changing Client behaviours and expectations • Downloading of responsibility: increasing shift in responsibility from
Slide 10: Business group results & highlights
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 10
Slide 11: Business group performance
Business group performance R eported net i ncome ($ millions) Underl y ing net i ncome 1 ($ millions) I m pa ct of cur r ency incr ea s ed r epor t ed net incom e by $ 1 1 M I m pa ct of cur r ency incr ea s ed under lying net incom e by $ 9 M 387 293 294 268 253 251 251 221 236 223 170 164 135 136
Slide 12: Canada is a growth market for Sun Life
Canada is a growth market for Sun Life Q3’20 highlights Underl y ing net i ncome 1 • In Defined Benefit Solutions, our pension risk transfer business, we ($ m illions) 1,036 1,094 completed a $1.1 billion payout annuity sale1; the largest single 949 1,012 day annuity transaction by an insurer in Can
Slide 13: Shaping the industry and capitalizing on opportunities in Canada
Shaping the industry and capitalizing on opportunities in Canada Shaping the market through innovative Delivering quality performance through financial advancements and digital capabilities discipline and putting the Client at the centre • Lumino vir tual healthcar e capabilities including primary c
Slide 14: Deepening Client relationships in U.S. Group Benefits
Deepening Client relationships in U.S. Group Benefits Q3’20 highlights Underl y ing net i ncome 1 (US$ m illions) • Added three stop-loss offerings for self-funded employers that provide 396 399 417 protection from the risks of COVID-19 289 • Renewed our market -leading partnership with The MGIS Com
Slide 15: Growing through U.S. market opportunities
Growing through U.S. market opportunities Em pl oy ee benef its Stop- l oss Employees responsible for more 61%4 of U.S. employees are covered by a health and benefits costs but lack self-insured plan with a trend of smaller relevant education and experience employers moving in this direction5 Growin
Slide 16: Positioned in Asia's largest and fastest growing markets
Positioned in Asia’s largest and fastest growing markets Q3’20 highlights Underl y ing net i ncome 1 • Rolled out Remote Online Medical Exam ("ROME") in the ($ m illions) 606 550 Philippines, where accredited health professionals perform online 461 523 medical examinations for prospective Sun Life C
Slide 17: Capturing growth opportunities in Asia
Number of advisors +16% Capturing growth opportunities in Asia year-over-year Local Markets International Hubs Philippines China Hong Kong • Ranked 1st in insurance • 8th in insurance among foreign • 2nd largest MPF provider based sales1,2 for 9 years in a JVs7 on net inflows, 3rd based on row AUM1,
Slide 18: Expanding asset management capabilities
Expanding asset management capabilities Highlights Underl y ing net i ncome 1 • At the beginning of the quarter, completed the acquisition of the majority stake in ($ m illions) 1,076 1,004 925 InfraRed Capital Partners, a global infrastructure and real estate investment manager 812 • On October 21,
Slide 19: MFS: diversification of assets under management
MFS: diversification of assets under management1 A sset cl ass mi x I nv estor ty pe US$, as at September 30, 2020 US$, as at September 30, 2020 Non-U.S. Balanced Retail Fixed 4% 6% Insurance Income 10% 13% Non-U.S. Equity 42% US$548 U.S. Retail 52% billion AUM1 Institutional U.S. Equity 32% 41% S U
Slide 20: SLC Management: diversification of assets under management
SLC Management: diversification of assets under management1 A sset cl ass mi x I nv estor ty pe $, as at September 30, 2020 $, as at September 30, 2020 Cash and Private Fixed Endowment/ Other Income foundation 4% 4% Infrastructure 2% Insurance 12% companies 21% Public Fixed Real Estate Income Debt $
Slide 21: Crescent Capital Group
Local presence in four markets 180+ employees across four offices: Los Angeles (headquarters), Boston, Below Investment Grade New York and London Corporate Credit Mix 2 Crescent Global Investor Base Capital Over 600+ client relationships: • North America - 73% 1 32% US$28B Private Markets Group • As
Slide 22: Continuing to build a global footprint, competitive set of private strategies
Continuing to build a global footprint, competitive set of private strategies, and meaningful third-party AUM to meet Client needs SLC Management’s Third-Party Assets AUM Growth for SLC Management’s Third-Party Assets 1,2,3 (pro-forma) 1,2,3 (C$ billions) (C$ billions) $145 SLC Fixed Income $39 $84
Slide 23: Capital management
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 23
Slide 24: Capital generation provides good capital flexibility
Capital generation provides good capital flexibility Capi tal depl oyment pri orities • Capital deployment priorities Funding Target dividend organic payout ratio of unchanged growth 40-50%1 • Target minimum cash at the holding company of $500 million2 M&A opportunities Share • Capital generation eq
Slide 25: Strong capital position with significant deployment potential
Strong capital position with significant deployment potential1 Capi tal depl oyment potential Depl oyment opportunities ($ billions, a t Sept ember 30, 2020 2) Cash3 Type Considerations $1.9 Additional Organic Making further investments in building out new business financial leverage investments mod
Slide 26: Capital model provides financial flexibility
Capital model provides financial flexibility SLF Capital metric LICAT 144% SLF Financial lever age r atio 1 21.5% Lever age capacity to 25%/30% ~$1.4B/$3.6B Cash and other liquid assets $2.4B SLA SLA - External Capital Securities Outsta nd in g First C all Asset Management SLF - External Capital Sec
Slide 27: Strong operating and financial leverage
Strong operating and financial leverage Q3 2020 operating Debt supporting reserve financing l ev erage debt 1 Senior debt 300 ($ m illions) To tal o perating leverage debt 300 Q3 2020 capital Subordinated debt 4,035 Tier 2 ($ m illions) SLEECS (innovative tier 1 securities) 200 Tier 1 Preferred shar
Slide 28: LICAT capital framework
Total ratio Total ratio LICAT capital framework (SLF Inc.) (SLA Inc.) 144% 127% Available capital Surplus allowance + eligible deposits + • Similar to MCCSR • Essentially the provisions for adverse deviation • Retained earnings / common and preferred (PfADs) for non-economic risks equity continue to
Slide 29: Asset portfolio
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 29
Slide 30: High quality, well-diversified investment portfolio
High quality, well-diversified investment portfolio D ebt s ecu r i t i es by cr edi t r a t i n g I nv e s t m e nt p r ofi l e As o f S e pt em ber 30, 2020 • Highly diversified with the As o f Sept ember 30, 2020 BBB- BB and lower largest non-government BBB 2% 1% related exposure at 0.4% 10% of t
Slide 31: Active repositioning of our portfolio to prepare for a downturn
Active repositioning of our portfolio to prepare for a downturn Private Fixed Income Commercial Mortgage Public Debt Securities Commercial Real Estate (Corporate Loans) Loans 3% 1% 4% 10% 2% Reduction Reduction 15% 14% in exposure in retail 10% 75% to Alberta exposure BBB A 38% 80% 33% 18% 15% Avera
Slide 32: Highlighted exposures – debt securities and loans
Highlighted exposures – debt securities and loans Hotels, Oil & Gas Oil & Gas Transportation Real Estate1,2 • 96% investment grade Exposure Restaurants (Auto & Aviation) • 59% in pipelines, storage or transport September 30, 2020 & Leisure ($ millions) • 14% in private loans Value % Value % Value %
Slide 33: Mortgages and investment property exposures
Mortgages and investment property exposures M o r t gages b y t y p e an d geo graphy 1 M o r t gages b y t y p e an d r at in g 1,5 As o f S e pt em ber 3 0 , 2020 As o f S e pt em ber 3 0 , 2020 3 Multi-family Multi-family ($millions) Office Industrial Retail residential Other Total % of Total ($m
Slide 34: Sustainability
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 34
Slide 35: Strong commitment to sustainability
Strong commitment to sustainability Awards & Recognition Sustainable Financial Healthier INVESTING SECURITY LIVES $19.3B $360M $31M invested in of in-plan deposits committed to sustainable real estate driven by 18.6M digital diabetes globally and infrastructure nudges from Ella since 2012 Group Reti
Slide 36: Appendix
Appendix 36
Slide 37: Market movements and impacts in the quarter
Market movements and impacts in the quarter QTD Y TD Equity Market Impacts Q3’20 Q2’20 Q1’20 Market Movements September 30, September 30, ($millions, after-tax) 2020 2020 Equity market movement and 42 105 (303) S&P/ TSX +3.9% (5.5)% volatility S&P 500 +8.5% +4.1% Basis risk 8 (46) (57) CA 10 - year
Slide 38: Market sensitivities
Market sensitivities C h a ng e i n I n t er est R a t es 5 As at September 30, 2020 As at December 31, 2019 50 basis point 50 basis point 50 basis point 50 basis point ($ millions, unless otherwise noted) decrease increase decrease increase C h a ng e i n Equ i ty M a r kets 1 Potential impact on n
Slide 39: Reconciliation of Select Net Income Measures
In this presentation, Sun Life Financial Inc. (“SLF” or “SLF Inc.”), its subsidiaries and, where applicable, its joint ventur es and associates are referred to as “we”, “us”, “our”, “Sun Life” and the “Company”. Sun Life Assurance Company of Canada is referred to as “SLA”. Use of Non-IFRS Financial
Slide 40: Forward-Looking Statements
Forw ard-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
Slide 41: Peer Groups included in TSR chart
Peer Groups included in TSR chart for slide 6 Canadian Lifecos – Manulife Financial Corporation, Great-West Life & Industrial Alliance Global Lifecos – AXA SA, Prudential PLC, Allianz SE, Aviva PLC, Assicurazioni Generali SpA, AIA Group Ltd., China Life Insurance Co. Ltd, Great Eastern Holdings & Pi
Slide 42: Sun Life Investor Relations
Sun Life Investor Relations Leigh Chalmers Senior Vice-President, Head of Investor Relations and Capital Management 647-256-8201 leigh.chalmers@sunlife.com Yaniv Bitton Vice-President, Investor Relations 416-979-6496 yaniv.bitton@sunlife.com S U N L I F E • Q 3 2 0 2 0 42