Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q2 2022 Earnings Presentation
37 slides from Sun Life Financial's earnings presentation, August 2022
Slide 1: Q2 2022 Building Sustainable Shareholder Value
Q2 2022 Building Sustainable Shareholder Value
Slide 2: Agenda
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 Offices in 27 markets 50,000 Employees1 118,400 Advisors 1 Balanced and diversified business model Wealth & Asset Management Group & Shorter Duration Insurance Traditional Insurance $1.26 trillion AUM 2,3 $35 billion market cap 3 As of December 31, 20
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 in attractive global markets • S
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 return2 Performance against medium-term objectives June 3 0, 20 22 Sun Life 9.0% Medium-term objective Q2 2022 5-years ending 2021 3 Canadian Banks 9.3% Underlying ROE1,4 1 4 .9% 1 4 .2% 1 6 %+ TSX 7.6% Traditional Asset Underly
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: Second quarter business group performance
Second quarter business group performance Reported net income ($ millions) Underlying net income1 ($ millions) Impact of currency translation increased reported net income by $16M 1 Impact of currency translation increased underlying net income by $12M 1 +34% (60)% +36% (8)% (13)% +19% (7)% (3)% Con
Slide 11: Expanding asset management capabilities
Expanding asset management capabilities Q2’22 highlights Underlying net income1 ($ millions) 1,346 1,340 • Q2 pre-tax net operating profit margin ratio1 for MFS of 36%; pre-tax fee-related earnings margin1 1,128 1,004 for SLC Management of 23% • Asset Management net inflows of $0.3B1, including net
Slide 12: MFS: creating value through active investment mandates
MFS: creating value through active investment mandates A sset class mix Investor type US$, as at June 30, 2022 US$, as at June 30, 2022 Non-U.S. Balanced Retail 5% 5% Fixed Insurance Income 9% 13% U.S. Equity 43% US$553 U.S. Retail 54% billion AUM1 Non-U.S. Institutional Equity 32% 39% S U N L I F E
Slide 13: SLC Management: strong capabilities in alternative investments
SLC Management: strong capabilities in alternative investments A sset class mix Investor type $, as at June 30, 2022 $, as at June 30, 2022 Real Estate Cash and Endowment/ Debt Other Foundation 4% 1% 2% Infrastructure 8% Insurance Companies Public Fixed 24% Income Private Fixed Income 29% $194 Pensi
Slide 14: Canada is a growth market for Sun Life
Canada is a growth market for Sun Life Q2’22 highlights Underlying net income1 ($ millions) • Underlying net income1 growth of 19% year-over-year 1,198 1,131 1,073 • 6 4% of life policies processed without the need for lab tests, powered by predictive data used 1,012 in accelerated underwriting • SL
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 Q2’22 highlights U.S. Underlying net income 1 (US$ millions) • Second quarter underlying net income1 improved meaningfully, reflecting strong 399 425 413 358 performance from Group Benefits and one month contribution from DentaQuest • On June 1,
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 Healthcare market is $4.1T1 and most U.S. employees are covered by a self-insured plan 2 ✓ Acquired DentaQuest6, the second largest dental provider in the
Slide 18: Positioned in Asia's largest and fastest growing markets
Positioned in Asia’s largest and fastest growing markets Q2’22 highlights Underlying net income1 • Insurance sales1 grew double digits in most markets, as pandemic restrictions eased ($ millions) 586 • Wealth net sales1 remained positive but were lower driven by market sentiment affecting 579 575 fi
Slide 19: Capturing growth opportunities in Asia
Capturing growth opportunities in Asia Local Markets International Hubs Philippines Vietnam International • #1 ranked insurance • 6 t h in insurance sales1,6 • Leverages the high-net-worth c ompany based on total opportunities in Asia to offer Clients and • 4 t h in bancassurance insurance sales1,7
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 C apital 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 milli
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% $200 30-Jun-32 Capital model provides financial flexibility SLF Inc. — External Capital Securities Subordinated Debt Coupon Principa
Slide 23: Capital flexibility & deployment opportunities
Capital flexibility & deployment opportunities C apital flexibility D eployment opportunities (as at June 3 0 , 2 0 2 2) Capital metrics SLF Inc. Type Considerations Organic Making further investments in building out new business models LICAT1 128% investments and advancing our leading digital capab
Slide 24: Leverage ratio and financial strength ratings
Leverage ratio and financial strength ratings Q 2 2022 capital ($ millions) Subordinated debt 6,427 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 • Highly diversified with the D e b t secu rit ies by cred it r ating I nvestment profile A s of June 30, 2022 largest non-government As June 3 0, 2022 related exposure at 0.4% of BBB- BB and lower total fixed income BBB 3% 1% 13% • 97% of fixed in
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 • $1B of insurance coverage a nd • $42.7M committed to • $65B1sustainable investment • DE&I focus and progress: 35% women in $556M of wealth products diabetes
Slide 30: Appendix
Appendix ROKR % BERS , SR ai SRF SH KX ORR metas KS OY RR " Sy
Slide 31: Market movements and impacts in the quarter
Market movements and impacts in the quarter C hange in I nterest Rates 5 Mar ket Movements Q2 ’22 Q2’21 Eq u ity Market Impacts Q2 ’22 Q2’21 ($millions, post-tax) S&P/ TSX (13.8)% +7.8% Equity market movement and volatility (169) 95 S&P 500 (16.4)% +8.2% Basis risk 10 4 CA 10 - year +82 bps (17) bps
Slide 32: Market sensitivities
Market sensitivities C hange in I nterest Rates 5 As at June 30, 2022 As at December 31, 2021 5 0 b asis point 5 0 b asis point 50 basis point 50 basis point ($ millions, unless otherwise noted) d e crease i n crease decrease increase C hange 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 resul ts from pe
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 2 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 slide 19
From slide 19 2 Insurance Commission of the Philippines, based on Q4 2021 year-to-date total premium income for Sun Life of Canada (Philippines) 3 Philippine Investment Funds Association, based on March 2022 ending assets under management 4 Indonesia Life Insurance Association, based on Q1 2022 year
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 2 2 0 2 2 37