Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q1 2018 Earnings Presentation
32 slides from Sun Life Financial's earnings presentation, 2018
Slide 1: Building Sustainable Shareholder Value
BUILDING SUSTAINABLE SHAREHOLDER VALUE First Quarter, 2018 Life’s brighter under the sun
Slide 2: Agenda: LICAT, Business Overview, Sustainability, Asset Portfolio
LICAT SUSTAINABILTY OVERVIEW BUSINESS ASSET OVERVIEW PORTFOLIO Life’s brighter under the sun 2
Slide 3: Business Overview
LICAT SUSTAINABILTY OVERVIEW BUSINESS ASSET OVERVIEW PORTFOLIO Life’s brighter under the sun 3
Slide 4: Sun Life Financial in 2018
Q1 SUN LIFE FINANCIAL IN 2018 A $32 billion1 leading, international financial services provider… operating through a balanced and diversified model… focused on creating shareholder value now and in the future 1 Market capitalization (C$), as of March 31, 2018 Life’s brighter under the sun 4
Slide 5: The Sun Life Story
Q1 THE SUN LIFE STORY 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 momentum created by past
Slide 6: Setting a Bold New Objective
Q1 SETTING A BOLD NEW OBJECTIVE Our ambition is to be ONE OF THE BEST insurance and asset management companies globally Each pillar Top Quartile Disproportionate viewed as one Top Quartile Client Share of Top of the best in TSR Experience Talent its markets Life’s brighter under the sun 6
Slide 7: Medium-Term Financial Objectives
Q1 AMBITION TO BE “ONE OF THE BEST” INSURANCE AND ASSET MANAGEMENT COMPANIES IN THE WORLD A growth strategy focused on high ROE and strong capital generation through leading positions in attractive markets globally A Leader in Insurance and Wealth Solutions A Leader in U.S. Group in our Canadian Ben
Slide 8: Delivering Value to Shareholders
Q1 DELIVERING VALUE TO SHAREHOLDERS TOTAL SHAREHOLDER RETURN NET INCOME (C$ MILLIONS) FIVE YEARS AS OF MARCH 31, 2018 (ANNUALIZED RETURN) CAGR 6%* 2,743 2,546 Sun Life 2,485 2,335 2,305 2,267 2,185 2,149 Canadian Lifecos Canadian Banks S & P 500 U.S. Lifecos TSX 2015 2016 2017 LTM** Q1'18 Reported N
Slide 9: Balanced and Diversified Business
Q1 BALANCED AND DIVERSIFIED BUSINESS BUSINESS GEOGRAPHIC DIVERSIFICATION DIVERSIFICATION Q1’18 UNDERLYING NET INCOME1 Q1’18 UNDERLYING NET INCOME1* RUN-OFF SLF UK 15% 6% ASSET MANAGEMENT SLF US 29% 16% SLF CANADA 35% GROUP INSURANCE 15% SLF ASIA 15% WEALTH INDIVIDUAL 12% INSURANCE SLF ASSET 29% MANA
Slide 10: Business Group Performance
Q1 BUSINESS GROUP PERFORMANCE REPORTED NET INCOME UNDERLYING NET INCOME1 (C$ MILLIONS) (C$ MILLIONS) Impact of currency reduced reported net income by $19M Impact of currency reduced underlying net income by $19M 295 229 231 266 183 249 210 171 129 128 133 97 96 85 59 25 CAN US AM ASIA CAN US AM ASI
Slide 11: SLF Canada: Growing Earnings Power
Q1 SLF CANADA: GROWING EARNINGS POWER Q1’18 HIGHLIGHTS ASSETS UNDER UNDERLYING NET Retail sales of Sun Life Global Investments (“SLGI”) MANAGEMENT1 INCOME1 (C$ MILLIONS) (C$ MILLIONS) mutual funds were up 29%; SLGI assets under management of almost $22 billion Group Benefits business in-force of
Slide 12: Sun Life Asset Management: Well Positioned for Growth
SUN LIFE ASSET MANAGEMENT: WELL POSITIONED FOR GROWTH SUN LIFE ASSET MANAGEMENT UNDERLYING NET INCOME1 Q1’18 HIGHLIGHTS (C$ MILLIONS) MFS ranked #2 in Barron’s 2017 Fund Family Rankings based on ten-year performance MFS pre-tax net operating margin improved to 38% from 36% in the prior year 700
Slide 13: SLF U.S.: Execution on Key Initiatives
Q1 SLF U.S.: EXECUTION ON KEY INITIATIVES AFTER-TAX Q1’18 HIGHLIGHTS UNDERLYING NET PROFIT MARGIN FOR INCOME1 (US$ MILLIONS) SLF U.S. GROUP Group Benefits after-tax profit margin of 5.6%1,2 BENEFITS2 Group business in-force grew to US$3.9 billion, including a 20% increase in stop-loss year-over-
Slide 14: SLF Asia: Distribution Excellence in Higher Growth Markets
Q1 SLF ASIA: DISTRIBUTION EXCELLENCE IN HIGHER GROWTH MARKETS SUN LIFE FINANCIAL ASIA UNDERLYING NET INCOME1 (C$ MILLIONS) Q1’18 HIGHLIGHTS Individual insurance sales up 18% compared to the first quarter of 2017 In the 2018 MPF Awards, SLF Asia’s Rainbow MPF2 plan was ranked highest by MPF Ratin
Slide 15: LICAT Overview
LICAT SUSTAINABILTY OVERVIEW BUSINESS ASSET OVERVIEW PORTFOLIO Life’s brighter under the sun 15
Slide 16: Improved Capital and Cash Position under LICAT
Q1 IMPROVED CAPITAL AND CASH POSITION UNDER LICAT LICAT Ratio Holdco Cash LICAT Ratio Sun Life Financial Sun Life Financial Sun Life Assurance 149% 139% Q1 ($ billions) 2018 $(1.2) Q1’18 Pro-forma LICAT Ratio: 132% Holdco cash (SLF) $1.7 Post Q1 cash movement from SLA $1.2 to SLF Q1 Pro-forma holdco
Slide 17: Overview of New Capital Framework
Q1 OVERVIEW OF NEW CAPITAL FRAMEWORK TOTAL TOTAL RATIO RATIO Available Capital + Surplus Allowance Base Solvency Buffer TOTAL RATIO (Sun Life Assurance)= 139% AVAILABLE CAPITAL SURPLUS ALLOWANCE BASE SOLVENCY + ELIGIBLE DEPOSITS BUFFER • Similar to MCCSR • Sum of aggregate capital required • Essenti
Slide 18: Overview of New Capital Framework: Components
Q1 OVERVIEW OF NEW CAPITAL FRAMEWORK TOTAL TOTAL RATIO RATIO Available Capital + Surplus Allowance Base Solvency Buffer TOTAL RATIO (Sun Life Assurance)= 139% AVAILABLE CAPITAL SURPLUS ALLOWANCE BASE SOLVENCY ($ billions) + ELIGIBLE DEPOSITS BUFFER ($ billions) ($ billions) Retained Earnings/Surplus
Slide 19: Lower Capital Requirements at Supervisory Target
Q1 LOWER CAPITAL REQUIREMENTS AT SUPERVISORY TARGET Frees up $1.2 billion in cash to Sun Life Financial (holdco) MCCSR LICAT Q4 2017 Q1 2018 ($ billions) ($ billions) Sun Life Assurance Company of Canada $25.4 ($ billions) MCCSR LICAT MCCSR/LICAT Q4 2017 Q1 2018 7.1 Available Capital(1) $16.0 $25.4
Slide 20: Interest Rate & Equity Market Sensitivities
Q1 INTEREST RATE & EQUITY MARKET SENSITIVITIES Sun Life Assurance Company of Canada Potential Impact on Market Sensitivities(1) LICAT Ratio Q1 2018 Equity Markets 10% increase 0.5 points 10% decrease (0.5) points Interest Rates 50 basis point increase (4) points 50 basis point decrease 3 points 1 po
Slide 21: Capital Generation Provides Good Capital Flexibility
Q1 CAPITAL GENERATION PROVIDES GOOD CAPITAL FLEXIBILITY Dividend Payout ratio Share buybacks Funding Organic Growth M&A Opportunities of 40-50% Strong Capital Generation Capital Flexibility • Capital deployment priorities unchanged • Target minimum cash at the holding company of $500 million • Capit
Slide 22: Financial Flexibility under Capital Model
Q1 FINANCIAL FLEXIBILITY UNDER CAPITAL MODEL LICAT 149% $1.7 billion cash at Leverage 22.2% Holding Company SLF Leverage Capacity SLF - External Capital Securities Outstanding First Call to 25/30%: ~$1.0/$3.0B Subordinated Debt Coupon Balance Date SLF T2B (Series 2007-1) 5.40% $398 29-May-37 SLF T2B
Slide 23: Strong Operating and Financial Leverage
Q1 STRONG OPERATING AND FINANCIAL LEVERAGE Operating Leverage Debt (C$ millions) Q1 2018 Debt supporting reserve financing Operating Senior Debt 599 Leverage Bilateral Senior Financing 1 1,905 Total Operating Leverage Debt $2,504 Capital (C$ millions) Q1 2018 Tier 2 Subordinated Debt $3,037 SLEECS (
Slide 24: Capital Framework Comparison - Metrics
Q1 CAPITAL FRAMEWORK COMPARISON - METRICS 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 (SA + ED) Tier 1 Ratio (
Slide 25: Capital Framework Comparison - Available Capital
Q1 CAPITAL FRAMEWORK COMPARISON – AVAILABLE CAPITAL 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 Goodwill Deducted Deducted In
Slide 26: Capital Framework Comparison - Required Capital
Q1 CAPITAL FRAMEWORK COMPARISON – REQUIRED CAPITAL Required Capital MCCSR LICAT Conditional tail expectation of CTE(99), calibrated Calibration of target requirements Not specified on a 1-year horizon including a terminal provision Factor based where factors Credit Risk Factor based vary by rating a
Slide 27: Asset Portfolio
LICAT SUSTAINABILTY OVERVIEW BUSINESS ASSET OVERVIEW PORTFOLIO Life’s brighter under the sun 27
Slide 28: High Quality, Well Diversified Investment Portfolio
Q1 HIGH QUALITY, WELL DIVERSIFIED INVESTMENT PORTFOLIO INVESTED ASSETS DEBT SECURITIES BY COMPETITIVE RATING ADVANTAGES Policy Cash and Leading non-public Loans and Cash BB and Investment Other Equivalents Lower, Properties 6% 5% 1% 5% Equities AAA, 19% portfolio with significant 4% BBB, 26% origi
Slide 29: Sustainability Overview
LICAT SUSTAINABILTY OVERVIEW BUSINESS ASSET OVERVIEW PORTFOLIO Life’s brighter under the sun 29
Slide 30: Sustainability Principles and Highlights
Q1 SUSTAINABILITY PRINCIPLES AND HIGHLIGHTS 2017 SUSTAINABILITY HIGHLIGHTS SUSTAINABILITY PRINCIPLES Life’s brighter under the sun 30
Slide 31: Reconciliation of Net Income Measures
In this presentation, Sun Life Financial Inc. and its subsidiaries, joint ventures and associates are referred to as “we”, “us”, “our” and the “Company”. Use of Non-IFRS Financial Measures We report certain financial information using non-IFRS financial measures, as we believe that these measure pro
Slide 32: 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