Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — BMO Fixed Income Conference 2018
25 slides from Sun Life Financial's conference presentation, Jun 14, 2018
Slide 1: BMO Fixed Income Conference
BM O Fixed Incom e Confer ence Marlene Van den Hoogen Treasurer and Head of Capital Planning June 14, 2018 Life’s brighter under the sun
Slide 2: Key Messages
KEY MESSAGES Four at-scale, competitive pillars with strong growth prospects Culture change 1 Organic investments hitting their stride Track record of disciplined capital allocation Our objective remains to become one of the best insurance and asset management 2 companies in the world • SUN LI
Slide 3: Business Overview
fi BUSINESS OVERVIEW Life Financial SUN LIFE FINANCIAL INC. Life’ brighter under the sun
Slide 4: Sun Life Financial in 2018
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: Strong Market Positions for All Four Pillars
STRONG MARKET POSITIONS FOR ALL FOUR PILLARS A Leader in Insurance and A Leader in U.S. Group Wealth Solutions in our Benefits Canadian home market • Providing products and services to over 6 million • One of the market leaders in group benefits Canadians • Providing insurance solutions to employers
Slide 6: Balanced and Diversified Business
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% MANAGEM
Slide 7: Delivering Value to Shareholders
DELIVERING VALUE TO SHAREHOLDERS TOTAL SHAREHOLDER RETURN NET INCOME (C$ MILLIONS) FIVE YEARS AS OF DECEMBER 31, 2017 (annualized return) CAGR 15%* 2,546 Sun Life 19% 2,485 2,305 2,335 2,185 2,149 Canadian Lifecos 16% 1,816 1,696 1,762 1,581 Canadian Banks 15% S & P 500 16% U.S. Lifecos 15% TSX 9% 2
Slide 8: Continuing the Journey
CONTINUING THE JOURNEY Each pillar Top Quartile Disproportionate viewed as one Top Quartile Client Share of Top of the best in TSR Experience Talent its markets Our ambition is to be ONE OF THE BEST insurance and asset management companies globally Life’s brighter under the sun 8
Slide 9: Client Is at the Centre of What We Do
CLIENT IS AT THE CENTRE OF WHAT WE DO A growth strategy focused on high ROE and strong capital generation through leading positions in attractive markets globally MEDIUM-TERM FINANCIAL OBJECTIVES 1 EPS growth: 8-10% -- Underlying ROE: 12-14% -- Dividend payout ratio: 40-50% Life’s brighter under the
Slide 10: Data and Digital in Action – Ella, Our Digital Benefits Coach
DATA AND DIGITAL IN ACTION – ELLA, OUR DIGITAL BENEFITS COACH Ella: o Is present at various touchpoints o Proactively helps plan members to take action by providing relevant and personalized tips o Uses intelligence-based technology and analytics to recognize and adapt to each member Public website
Slide 11: Data and Digital in Action
DATA AND DIGITAL IN ACTION Life’s brighter under the sun 11
Slide 12: Capital Management
fi CAPITAL MANAGEMENT Life Financial SUN LIFE FINANCIAL INC. Life’ brighter under the sun
Slide 13: Managing Expectations of Stakeholders under LICAT
MANAGING EXPECTATIONS OF STAKEHOLDERS UNDER LICAT Stakeholder Metric Target LICAT Policyholders Capital Adequacy SLA & SLF Capital ratios > internal targets Local Capital ratios > internal targets Lower than expectations for current rating: Rating Agencies Leverage Ratio Maintain less than 30% Highe
Slide 14: Financial Flexibility under Capital Model
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 (S
Slide 15: Strongly Capitalized under New Capital Framework
STRONGLY CAPITALIZED UNDER NEW CAPITAL FRAMEWORK AVAILABLE CAPITAL SURPLUS ALLOWANCE + Similar to MCCSR but with some ELIGIBLE DEPOSITS additional adjustments and deductions to Provisions for adverse deviation Tier 1 capital for insurance and interest risks 139% at SLA BASE SOLVENCY BUFFER 105% of t
Slide 16: Lower Capital Requirements at Supervisory Target
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 $16
Slide 17: Improved Capital and Cash Position under LICAT
IMPROVED CAPITAL AND CASH POSITION UNDER LICAT LICAT Ratio Holdco Cash LICAT Ratio Sun Life Financial Sun Life Financial Sun Life Assurance 149% 139% Q1 ($ 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 ca
Slide 18: Interest Rate & Equity Market Sensitivities
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 point
Slide 19: Continuing to Exceed Expectations of Rating Agencies
CONTINUING TO EXCEED EXPECTATIONS OF RATING AGENCIES FINANCIAL LEVERAGE FIXED CHARGE (EBIT) FINANCIAL STRENGTH RATIO1 COVERAGE1 RATINGS 11.8 11.0 10.2 Sun Life Assurance 9.1 Q1’18 25.2% Company of Canada 8.0 Standard & Poor’s AA-2 23.6% 23.6% Moody’s Aa3 22.1% 22.2% A.M. Best A+ DBRS AA(low) 2014 20
Slide 20: Continued Capital Generation Provides Good Capital Flexibility
CONTINUED 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 $500 million
Slide 21: Appendix
APPENDIX Life Financial SUN LIFE FINANCIAL INC. Life's brighter under the sun
Slide 22: Capital Continues to Qualify under LICAT
CAPITAL CONTINUES TO QUALIFY UNDER LICAT Operating Leverage Debt (C$ 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 (In
Slide 23: High Quality, Well Diversified Investment Portfolio
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% originat
Slide 24: 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 25: 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
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