Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q1 2020 Earnings Presentation
40 slides from Sun Life Financial's earnings presentation, May 2020
Slide 1: Q1 2020 Building Sustainable Shareholder Value
Q1 2020 Building Sustainable Shareholder Value
Slide 2: Business overview
Business overview Update in light of COVID-19 Business group results & highlights Capital management Asset portfolio Sustainability 2
Slide 3: A $26.5 billion leading global financial services organization
A $26.51 billion leading global financial services organization Offices in 125,900 advisors 40,600 Employees 27 markets 2 2 2 Operating through a balanced and diversified model and focused on creating shareholder value now and in the future S U N L I F E • Q 1 2 0 2 0 1 Market capitalization in C$ a
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
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-year total shareholder return 1 Progress on medium-term objectives March 31, 2020 Sun Life 6.9% Medium-term objective Q1 2020 TSX 0.9% Underlying ROE2 12-14% 14.2% Canadian lifecos 0.0% Underlying EPS growth2 8-10% 9% Global lifecos (1.2)% Dividend pay
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 telco micro-products • Predictive models for advisor recruiting and • Lumino Health in Canada Client retention in
Slide 8: Showcasing a balanced and diversified business
Showcasing a balanced and diversified business Business diversification Geographic diversification Q1 2020 underlying net income 1,2 Q1 2020 underlying net income 1,2 Run-off UK 13% Asset 6% Asia Canada Management 18% 29% 28% Wealth 13% U.S. Group Individual 19% Asset Insurance Insurance Management
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 overview
Business overview Update in light of COVID-19 Business group results & highlights Capital management Asset portfolio Sustainability 10
Slide 11: Supporting our employees, Clients, and communities through COVID-19
Supporting our employees, Clients, and communities through COVID-19 Employees and Advisors Clients Communities • 95% of employees globally working • Strong service continuity • Donated more than $2 million globally from home to help support efforts focused on health • Longer grace periods for premiu
Slide 12: Business group results & highlights
Business overview Update in light of COVID-19 Business group results & highlights Capital management Asset portfolio Sustainability 12
Slide 13: Business group performance
Business group performance Reported net income ($ millions) Underlying net income 1 ($ millions) Impact of currency increased reported net income by $7M Impact of currency increased underlying net income by $7M 256 242 239 237 227 237 219 164 161 150 155 124 122 100 80 CORP CORP CAN U.S. AM ASIA CAN
Slide 14: Canada is a growth market for Sun Life
Canada is a growth market for Sun Life Q1’20 highlights Underlying net income 1 • Assisting those experiencing financial hardship during the ($ millions) 1,036 1,012 1,031 949 COVID-19 pandemic by extending the option to defer their premiums for a period of time • Rolled out virtual health care serv
Slide 15: Shaping the industry and capitalizing on opportunities in Canada
Shaping the industry and capitalizing on opportunities in Canada Shaping the market through innovation Optimizing our business through financial and digital discipline and focused prioritization to drive • Introduction of Lumino virtual healthcare capabilities strong earnings growth including primar
Slide 16: Deepening Client relationships in U.S. Group Benefits
Deepening Client relationships in U.S. Group Benefits Q1’20 highlights Underlying net income 1 • Expanded options to help members who have been temporarily laid off (US$ millions) 396 399 408 keep their benefits coverage, added coverage for COVID-19 to our 289 critical illness policies, provided ext
Slide 17: Growing through U.S. market opportunities
Growing through U.S. market opportunities Employee benefits Stop-loss 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 education and experience employers moving in this direction5 Growing life insuranc
Slide 18: Positioned in Asia's largest and fastest growing markets
Positioned in Asia’s largest and fastest growing markets Q1’20 highlights Underlying net income 1 • Stepped up support to help our Clients impacted by COVID-19 in a variety ($ millions) 550 583 523 of ways, including extending coverage to include more hospitals and 461 clinics, extending benefit lim
Slide 19: 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 insurance2 • Top 10 in insurance among foreign • 2nd largest MPF based on net sales for 9 years in a row JVs6 inflows, 3rd based on AUM1,10 • 2nd
Slide 20: Expanding asset management capabilities
Expanding asset management capabilities Q1’20 highlights • MFS donated personal protective equipment to Boston area hospitals, as well as Underlying net income 1 ($ millions) 1,004 1,019 significant funds to COVID-19 related causes globally, through both direct giving and 925 812 employee matching p
Slide 21: MFS: diversification of assets under management
MFS: diversification of assets under management1 Asset class mix Investor type US$, as at March 31, 2020 US$, as at March 31, 2020 Non-U.S. Balanced Retail 5% 6% Fixed Insurance Income Non-U.S. 10% 15% Equity 41% US$436.4 U.S. Retail 51% billion AUM U.S. Equity Institutional 39% 33% S U N L I F E •
Slide 22: SLC Management: diversification of assets under management
SLC Management: diversification of assets under management1 Asset class mix Investor type $, as at March 31, 2020 $, as at March 31, 2020 Real Estate Endowment/ Private Fixed Debt foundation Income 3% 1% 5% Insurance companies 24% Pension $89.4 Funds 45% Real Estate billion AUM2 Equity Public Fixed
Slide 23: Capital management
Business overview Update in light of COVID-19 Business group results & highlights Capital management Asset portfolio Sustainability 23
Slide 24: Capital generation provides good capital flexibility
Capital generation provides good capital flexibility Capital deployment priorities • Capital deployment priorities Funding Target dividend unchanged organic payout ratio of growth 40-50%1 • Target minimum cash at the holding company of $500 million2 M&A opportunities Share • Capital generation equal
Slide 25: Strong capital position with significant deployment potential
Strong capital position with significant deployment potential1 Capital deployment potential Deployment opportunities ($ billions, at March 31, 2020) Type Considerations Cash2 Additional $1.9 Organic Making further investments in building out new business financial leverage investments models and adv
Slide 26: Financial flexibility under capital model
Financial flexibility under capital model SLF Capital metric LICAT 143% SLF Financial leverage ratio 20.7% Leverage capacity to 25%/30% ~$1.7B/$3.9B Cash and other liquid assets1 $2.4B SLA SLA - External Capital Securities Subordi nated D ebt Co1.4>Dn Outstand in g Bal an ce Fi rs t Ca ll D at e Ass
Slide 27: Strong operating and financial leverage
Strong operating and financial leverage Q1 2020 operating Debt supporting reserve financing leverage debt Senior debt 300 ($ millions) Bilateral senior financing1 1,967 Total operating leverage debt 2,267 Q1 2020 capital Subordinated debt 3,539 Tier 2 ($ millions) SLEECS (innovative tier 1 securitie
Slide 28: LICAT capital framework
Total ratio Total ratio LICAT capital framework (SLF Inc.) (SLA Inc.) 143% 130% 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 Update in light of COVID-19 Business group results & highlights Capital management Asset portfolio Sustainability 29
Slide 30: High quality, well-diversified investment portfolio
High quality, well-diversified investment portfolio Debt securities by credit rating As of March 31, 2020 • Considerable de-risking of the Investment profile BB and lower portfolio in recent years to As of March 31, 2020 1% prepare for an economic BBB 24% AAA slowdown 22% • 97% of fixed income rated
Slide 31: Highlighted exposures – debt securities and loans
Highlighted exposures – debt securities and loans Oil & Gas Aviation, Hotels, • 97% investment grade Exposure Oil & Gas Restaurants & Real Estate1 • 60% in pipelines, storage or transport March 31, 2020 Leisure ($ millions) Value % Value % Value % AA - A 1,611 35% 2,068 64% 1,397 57% Aviation, Hotel
Slide 32: Sustainability
Business overview Update in light of COVID-19 Business group results & highlights Capital management Asset portfolio Sustainability 32
Slide 33: Strong commitment to sustainability
Strong commitment to sustainability Awards & Recognition Sustainable Financial Healthier INVESTING SECURITY LIVES $19.3B $360M $31M invested in of in-plan deposits committed to sustainable real estate driven by 18.6M digital diabetes globally and infrastructure nudges from Ella since 2012 First life
Slide 34: Appendix
Appendix 34
Slide 35: Market movements and impacts in the quarter
Market movements and impacts in the quarter YTD MTD Equity Market Impacts Market Movements March 31, 2020 April 30, 2020 ($millions, after-tax) Q1 2020 S&P/ TSX (21.6)% +10.5% Equity market movement and volatility (303) S&P 500 (20.0)% +12.7% Basis risk (57) CA 10 - year (101) bps (15) bps Total (36
Slide 36: Market sensitivities
Market sensitivities Change in Interest Rates 5 As at March 31, 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 Change in Equity Markets 1 Potential impact on net income3,6,7 $(100) $50
Slide 37: Reconciliation of Select Net Income Measures
In this presentation, Sun Life Financial Inc. (“SLF” or “SLF Inc.”), its subsidiaries and, where applicable, its joint ventures 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 M
Slide 38: 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 39: Peer Groups included in TSR chart and source information
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 & P
Slide 40: 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 1 2 0 2 0 40