Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q3 2022 Earnings Presentation
37 slides from Sun Life Financial's earnings presentation, November 2022
Slide 1: Q3 2022 Building Sustainable Shareholder Value
Q3 2022 Building Sustainable Shareholder Value
Slide 2: Business overview
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 2
Slide 3: A leading global financial services organization
A leading global financial services organization 50,000 Employees Offices in 27 markets 118,400 Advisors 1 Balanced and diversified business model Wealth & Asset Management Group & Shorter Duration Insurance Traditional Insurance $1.27 trillion AUM 2,3 $32 billion market cap 3 1 As of December 31, 2
Slide 4: The Sun Life story
The Sun Life story • A diversified business model, with four well-positioned business groups, focused on creating value and positively impacting our Clients, employees and shareholders • Portfolio of businesses that have strong growth prospects and capital generation opportunities in attractive glob
Slide 5: Executing on our ambition to be one of the best asset management and insurance companies
Executing on our ambition to be one Our Purpose: Help Clients achieve lifetime financial security and live healthier lives of the best asset management and insurance companies globally Four Pillar Strategy Key Priorities A global leader in both public and AM alternative asset classes through MFS 1 T
Slide 6: Consistently delivering value to shareholders
Consistently delivering value to shareholders 5-year total shareholder return 1 Performance against medium-term objectives September 30, 2022 Sun Life 6.0% Medium-term objective Q3 2022 5-years ending 20212 Canadian Banks 7.9% Underlying ROE3,4 15.5% 14.2% 16%+ TSX 6.6% Underlying EPS growth3,4 Cana
Slide 7: Digital Leadership
Digital Leadership Thinking and acting like a digital company DIGITAL EXPERIENCES Amazing Client, employee, advisor, and partner experiences DIGITAL CAPABILITIES Enable our experiences and improve our digital maturity DIGITAL WAYS OF WORKING Empowering our people to support our digital journey Stron
Slide 8: Leveraging global trends
Leveraging global trends Individual and employer attention on physical Digital acceleration and mental health Demographic shifts in developed markets Adoption of digital health technologies Increased economic, market and geopolitical Growth of alternative asset classes volatility Gig economy and shi
Slide 9: Business group results & highlights
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 9
Slide 10: Third quarter business group performance
Third quarter business group performance Reported net income ($ millions) Underlying net income1 ($ millions) Impact of currency translation increased reported net income by $24M1 Impact of currency translation increased underlying net income by $10M1 (29)% (47)% +104% (57)% (19)% +3% +96% +21% Cons
Slide 11: Expanding asset management capabilities
Expanding asset management capabilities Q3’22 highlights Underlying net income1 ($ millions) 1,346 1,273 • Q3 pre-tax net operating profit margin ratio1 for MFS of 41%; pre-tax fee-related 1,128 1,004 earnings margin1 for SLC Management of 24% • Announced intention to acquire a 51% stake2 in Advisor
Slide 12: MFS: creating value through active investment mandates
MFS: creating value through active investment mandates Asset class mix Investor type US$, as at September 30, 2022 US$, as at September 30, 2022 Non-U.S. Balanced Retail 5% 5% Fixed Insurance Income 9% 13% U.S. Equity 44% US$509 U.S. Retail 54% billion AUM1 Non-U.S. Institutional Equity 32% 38% S U
Slide 13: SLC Management: strong capabilities in alternative investments
SLC Management: strong capabilities in alternative investments Asset class mix Investor type $, as at September 30, 2022 $, as at September 30, 2022 Real Estate Cash and Endowment/ Debt Other Foundation 4% 1% 2% Infrastructure Insurance 8% Companies Public Fixed 24% Income $208 28% Pension Private F
Slide 14: Canada is a growth market for Sun Life
Canada is a growth market for Sun Life Q3’22 highlights Underlying net income1 ($ millions) • Insurance sales1 were up 28% year-over-year, driven by large case group benefits 1,208 1,131 sales in Sun Life Health and higher individual participating whole life insurance sales 1,012 1,073 • Introduced
Slide 15: Shaping the industry and capitalizing on opportunities in Canada
Shaping the industry and capitalizing on opportunities in Canada • Capturing growing decumulation opportunity and seeking to be the retirement income provider of choice, by leveraging our worksite advantage Shaping the market as a leader in • Expanding our role in health and well-being, including in
Slide 16: Deepening Client relationships in U.S. Group Benefits
Deepening Client relationships in U.S. Group Benefits Q3’22 highlights U.S. Underlying net income1 (US$ millions) • Underlying net income1 of US$166 million, up 89% over prior year driven by 399 425 413 436 strong Group Benefits performance and contribution from DentaQuest • Strong sales results ref
Slide 17: Key trends and opportunities in the U.S.
Key trends and opportunities in the U.S. Improving health outcomes and costs Increasing access to healthcare and making things easier for Clients Medicaid program and Medicare expansion bills (including • Acquired DentaQuest6, the second largest dental provider in the U.S. dental) could positively i
Slide 18: Positioned in Asia's largest and fastest growing markets
Positioned in Asia’s largest and fastest growing markets Q3’22 highlights Underlying net income1 • Underlying net income1 of $175M up 23% y/y2, reflecting improved COVID-19 ($ millions) mortality, investing gains, and more favourable experience in China and India 605 579 586 • Insurance sales1 grew
Slide 19: Capturing growth opportunities in Asia
Capturing growth opportunities in Asia Local Markets International Hubs Philippines Vietnam International • #1 ranked insurance • 6th in insurance sales1,6 • Leverages the high-net-worth company based on total opportunities in Asia to offer Clients and premiums1,2 • 4th in bancassurance insurance sa
Slide 20: Capital management
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 20
Slide 21: Capital generation provides good capital flexibility
Capital generation provides good capital flexibility Capital deployment priorities: Funding organic Target underlying M&A opportunities growth dividend payout ratio and strategic Share buybacks of 40-50%1,2 investments Target minimum cash and other liquid assets at the holding company of $500 millio
Slide 22: Capital model provides financial flexibility
SLA - External Capital Securities Coupon Principal, $M Par Call Date CLI Series 2 Sub Debenture 6.30% $150 15-May-28 Innovative Tier 1 Securities SLEECS Series B 7.09% $200 30-Jun-32 Capital Capital model model provides financial flexibility provides financial flexibility SLF Inc. — External Capital
Slide 23: Capital flexibility & deployment opportunities
Capital flexibility & deployment opportunities Capital flexibility Deployment opportunities (as at September 30, 2022) Capital metrics SLF Inc. Type Considerations Organic Making further investments in building out new business models LICAT2 129% investments and advancing our leading digital capabil
Slide 24: Leverage ratio and financial strength ratings
Leverage ratio and financial strength ratings Q3 2022 capital ($ millions) Subordinated debt1 7,075 Tier 2 Innovative capital instruments (SLEECS) 200 Tier 1 Sun Life Assurance Company of Equity Canada Financial Strength Ratings Preferred shareholders’ equity and other equity 2,239 A.M. Best A+ inst
Slide 25: Asset portfolio
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 25
Slide 26: High quality, well-diversified investment portfolio
High quality, well-diversified investment portfolio Debt securities by credit rating • Highly diversified with the Investment profile As of September 30, 2022 largest non-government As of September 30, 2022 BB and lower BBB- related exposure at 0.4% of BBB 3% 1% total fixed income 13% AAA • 97% of f
Slide 27: Sustainability
Business overview Business group results & highlights Capital management Asset portfolio Sustainability 27
Slide 28: Our sustainability plan brings our Purpose to life
Our sustainability plan brings our Purpose to life Focused on areas of expertise where we can have the most positive impact: Financial Security Healthier Lives Sustainable Investing • Provide innovative financial • Offer products and tools to help Clients and • Manage capital with sustainability emb
Slide 29: Strong sustainability achievements and recognition
Strong sustainability achievements and recognition Financial Security Healthier Lives Sustainable Investing Trusted and Responsible Business 2 • $1.4M positive financial actions • $42.7M committed to diabetes • $65B sustainable investment AUM ; • DE&I focus and progress: 35% taken by Clients in Cana
Slide 30: Appendix
Appendix 30
Slide 31: Market movements and impacts in the quarter
Market movements and impacts in the quarter Change in Interest Rates 5 Market Movements Q3’22 Q3’21 Equity Market Impacts Q3’22 Q3’21 ($millions, post-tax) S&P/ TSX (2.2)% (0.5)% Equity market movement and volatility (53) 19 S&P 500 (5.3)% +0.2% Basis risk 5 5 CA 10 - year (5) bps +12 bps Total (48)
Slide 32: Market sensitivities
Market sensitivities Change in Interest Rates 5 As at September 30, 2022 As at December 31, 2021 50 basis point 50 basis point 50 basis point 50 basis point ($ millions, unless otherwise noted) decrease increase decrease increase Change in Equity Markets 1 Potential impact on net income2,3,6 $- $- $
Slide 33: Use of Non-IFRS Financial Measures
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 per
Slide 34: 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
Slide 35: Footnotes from slide 6
From slide 6 1 Source: Bloomberg; Canadian Lifecos – Manulife Financial Corporation, Great-West Life, and 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, and Ping An
Slide 36: Footnotes from slides 18 and 19
From slide 18 2 Constant currency Q3 2022 vs Q3 2021 3 This is based on market conditions as of April 12, 2022 and comparison among other savings plans for new Composite and Long Term Businesses as defined by the Insurance Authority in the Register of Authorized Insurers 4 Last twelve months ending
Slide 37: Sun Life Investor Relations
Sun Life Investor Relations Yaniv Bitton Vice-President, Head of Investor Relations & Capital Markets 416-979-6496 yaniv.bitton@sunlife.com Paul Poon Assistant Vice President, Investor Relations 416-305-3389 paul.poon@sunlife.com S U N L I F E • Q 3 2 0 2 2 37