Sun Life Financial Inc. · TSX:SLF
Sun Life Financial — Q2 2020 Earnings Presentation
41 slides from Sun Life Financial's earnings presentation, August 2020
Slide 1: Building Sustainable Shareholder Value
Q2 2020 Building Sustainable Shareholder Value
Slide 2: Business overview & update
Business overview & update Business group results & highlights Capital management Asset portfolio Sustainability 2
Slide 3: A $29.2 billion leading global financial services organization
A $29.21 billion leading global financial services organization Offices in 40,600 27 1 25,900 Employees 2 2 Advisors 2 markets Operating through a balanced and diversified model and focused on creating shareholder value now and in the future Map current as of July 1, 2020 S U N L I F E • Q 2 2 0 2 0
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 globally
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-y ear total shareholder return 1 Progress on medium-term objectives June 30, 2020 Sun Life 7.6% Medium-term objective 5-Year3 TSX 4.4% Underlying ROE2 12-14% 13.3% Global lifecos 1.3% Underlying EPS growth2 8-10% 10.1% Canadian lifecos 0.1% Dividend pa
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 Business Group diversification Q2 2020 underlying net income 1 , 2 Q2 2020 underlying net income 1 , 2 Run-off UK 7% 5% Asset U.S. Management 14% Canada Wealth 31% 33% 15% Asia 17% Group Insurance Individual Asset 21% Insurance
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: Supporting our employees, Clients, and communities
Supporting our employees, Clients, and communities Employees and Advisors Clients Communities • Majority of North American • Ella, our digital coach, has • Signed commitments for the employees continue to work from home, proactively connected with Clients BlackNorth Initiative, to remove systemic an
Slide 11: Business group results & highlights
Business overview & update Business group results & highlights Capital management Asset portfolio Sustainability 11
Slide 12: Business group performance
Business group performance R eported net income ($ millions) Underly ing net income 1 ($ millions) Impact of currency increased reported net income by $17M Impact of currency increased underlying net income by $21M 229 281 223 259 243 245 148 118 134 126 147 117 144 94 123 110 CORP CORP CAN U.S. AM
Slide 13: Canada is a growth market for Sun Life
Canada is a growth market for Sun Life Q2’20 highlights • In plan wealth sales up 54% year-to-date, resulting $760 Underly ing net income 1 ($ millions) million additional deposits from digital nudges and outbound calls 1,069 1,036 1,012 949 • Executing on our sustainability commitment by launching
Slide 14: 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 • Introduction of Lumino virtual healthcare capabilities including • Engaged employees driven by attracti
Slide 15: Deepening Client relationships in U.S. Group Benefits
Deepening Client relationships in U.S. Group Benefits Q2’20 highlights Underly ing net income 1 (US$ millions) • Resilient sales supported by 22,000 active employees on our 396 399 417 Maxwell Health digital benefits platform; a 74% increase since 2019 289 • Temporarily waived the platform fee for e
Slide 16: Growing through U.S. market opportunities
Growing through U.S. market opportunities Employ ee 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 relevant education and experience employers moving in this direction5 Growing li
Slide 17: Positioned in Asia's largest and fastest growing markets
Positioned in Asia’s largest and fastest growing markets Q2’20 highlights • International Hubs sales increase 42% over prior year, with strong sales in Underly ing net income 1 ($ millions) both Hong Kong and International high net worth 550 580 523 461 • Accelerated digital development across Asia
Slide 18: Capturing growth opportunities in Asia
Number of advisors +10% Capturing growth opportunities in Asia year-over-year Local Markets International Hubs Philippines China Hong Kong • Ranked 1st in insurance • Top 10 in insurance among • 2nd largest MPF based on net sales1,2 for 9 years in a foreign JVs7 inflows, 3rd based on AUM1,11 row • N
Slide 19: Expanding asset management capabilities
Expanding asset management capabilities Q2’20 highlights Underly ing net income 1 ($ millions) • Net inflows of US$5.4B, with positive U.S. retail flows for the 6th consecutive 1,004 1,033 925 812 quarter • 86%, 88% and 80% of MFS's U.S. retail mutual fund assets ranked in the top half of their Lipp
Slide 20: MFS: diversification of assets under management
MFS: diversification of assets under management1 Asset class mix Investor ty pe US$, as at June 30, 2020 US$, as at June 30, 2020 Non-U.S. Balanced Retail 5% 6% Fixed Insurance Income Non-U.S. 10% 14% Equity 41% US$509 U.S. Retail 52% billion AUM1 Institutional U.S. Equity 32% 40% S U N L I F E • Q
Slide 21: SLC Management: diversification of assets under management
SLC Management: diversification of assets under management1 Asset class mix Investor ty pe $, as at June 30, 2020 $, as at June 30, 2020 Real Estate Endowment/ Private Fixed Debt foundation Income 3% 1% 5% Insurance companies 24% Pension $89 Funds 44% Real Estate billion AUM1,2 Equity Public Fixed T
Slide 22: Capital management
Business overview & update Business group results & highlights Capital management Asset portfolio Sustainability 22
Slide 23: Capital generation provides good capital flexibility
Capital generation provides good capital flexibility Capital deploy ment priorities • Capital deployment priorities Funding Target dividend unchanged organic payout ratio of growth 40-50% 1 • Target minimum cash at the holding company of $500 million2 M&A opportunities Share • Capital generation equ
Slide 24: Strong capital position with significant deployment potential
Strong capital position with significant deployment potential 1 Capital deploy ment potential Deploy ment opportunities ($ billions, at June 30, 2020) Type Considerations Additional Cash2 financial leverage Organic Making further investments in building out new business $3.0 investments models and a
Slide 25: Capital model provides financial flexibility
Capital model provides financial flexibility SLF Capital metric LICAT 146% SLF Financial leverage ratio 23.2% Leverage capacity to 25%/30% ~$0.7B/$2.9B Cash and other liquid assets $3.5B SLA SLA - External Capital Securities Outsta nd in g First C all Asset Management SLF - External Capital Securiti
Slide 26: Strong operating and financial leverage
Strong operating and financial leverage Q2 2020 operating Debt supporting reserve financing leverage debt Senior debt 300 ($ millions) Bilateral senior financing1 1,967 Total operating leverage debt 2,267 Q2 2020 capital Subordinated debt 4,534 Tier 2 ($ millions) SLEECS (innovative tier 1 securitie
Slide 27: LICAT capital framework
Total ratio Total ratio LICAT capital framework (SLF Inc.) (SLA Inc.) 146% 126% 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 28: Asset portfolio
Business overview & update Business group results & highlights Capital management Asset portfolio Sustainability 28
Slide 29: High quality, well-diversified investment portfolio
High quality, well-diversified investment portfolio Investment profile Debt secur ities by cr edit r ating A s of J une 30, 2020 BBB- BB and lower • Highly diversified with the BBB 2% 1% largest non-government 10% related exposure at 0.4% of AAA total fixed income 19% Debt securities BBB+ • 97% of f
Slide 30: Active repositioning of our portfolio to prepare for a downturn
Active repositioning of our portfolio to prepare for a downturn Private Fixed Income Public Debt Securities Commercial Mortgage Commercial Real Estate (Corporate Loans) Loans 3% 1% 4% 10% 2% Reduction Reduction 15% 14% in exposure in retail 10% 76% to Alberta exposure A 80% BBB 33% 39% 18% 15% Avera
Slide 31: Highlighted exposures – debt securities and loans
Highlighted exposures – debt securities and loans Hotels, Oil & Gas Exposure Oil & Gas Transportation Restaurants & Real Estate1,2 • 95% investment grade June 30, 2020 (Auto & Aviation) • 59% in pipelines, storage or transport Leisure ($ millions) • 14% in private loans Value % Value % Value % Value
Slide 32: Mortgages and investment property exposures
Mortgages and investment property exposures Mor tgages by ty pe and geogr aphy 1 Mor tgages by ty pe and r ating 1 , 5 As of June 30, 2020 As of June 30, 2020 3 Multi-family Multi-family ($millions) Office Industrial Retail residential Other Total % of Total ($millions) Office Industrial3 Retail res
Slide 33: Sustainability
Business overview & update Business group results & highlights Capital management Asset portfolio Sustainability 33
Slide 34: Strong commitment to sustainability
Strong commitment to sustainability Awards & Recognition Sustainable Financial Healthier INVESTING SECURITY LIVES $19.3B $360M $31M invested in of in-plan deposits committed to sustainable real estate driven by 18.6M digital diabetes globally and infrastructure nudges from Ella since 2012 First life
Slide 35: Appendix
Appendix 35
Slide 36: Market movements and impacts in the quarter
Market movements and impacts in the quarter Equity Market Impacts Q2 2020 Q1 2020 ($millions, after-tax) Market Movements QTD YTD Equity market movement and volatility 105 (303) June 30, 2020 June 30, 2020 S&P/ TSX 16.0% (9.1)% Basis risk (46) (57) S&P 500 20.0% (4.0)% Total 59 (360) CA 10 - year (1
Slide 37: Market sensitivities
Market sensitivities Change in Inter est R ates 5 As at June 30, 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 Mar k ets 1 Potential impact on net income2,3,7 $(100) $
Slide 38: 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 39: 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 40: 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 41: 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 2 2 0 2 0 41