Slide 1: Building sustainable shareholder value
Building sustainable shareholder value Second Quarter, 2018 Life’s brighter under the sun
Slide 2: Overview
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 2
Slide 3: Business overview
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 3
Slide 4: Sun Life Financial in 2018
Q2 SUN LIFE FINANCIAL IN 2018 2018 SUN LIFE FINANCIAL A $32 billion1 leading international financial services organization… operating through a balanced and diversified model… focused on creating shareholder value now and in the future 1 Market capitalization (C$), as of June 30, 2018 Life’s brighte
Slide 5: The Sun Life Story
Q2 THE SUN LIFE STORY 2018 SUN LIFE FINANCIAL We have 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 direct U.S. Variable Annuity or Long-Term Care Building on m
Slide 6: Continuing the Journey
Q2 CONTINUING THE JOURNEY 2018 SUN LIFE FINANCIAL Our ambition is to be ONE OF THE BEST insurance and asset management companies globally Each pillar Top Quartile Disproportionate Top Quartile viewed as one of Client Share of Top Talent Total Shareholder the best in its Experience Return markets Lif
Slide 7: Ambition to be one of the best insurance and asset management companies
Q2 AMBITION TO BE “ONE OF THE BEST” INSURANCE AND ASSET MANAGEMENT COMPANIES 2018 IN THE WORLD SUN LIFE FINANCIAL A growth strategy focused on high ROE and strong capital generation through leading positions in attractive markets globally A Leader in Insurance and A Leader in U.S. Group CAN Wealth S
Slide 8: Delivering Value to Shareholders
Q2 DELIVERING VALUE TO SHAREHOLDERS 2018 SUN LIFE FINANCIAL NET INCOME TOTAL SHAREHOLDER RETURN (C$ MILLIONS) FIVE YEARS AS OF JUNE 30, 2018 (ANNUALIZED RETURN) CAGR 6%* 2,783 Sun Life Inc. 2,485 2,546 2,335 2,399 2,305 Canadian Lifecos 2,185 2,149 Canadian Banks S & P 500 U.S. Lifecos TSX 2015 2016
Slide 9: Balanced and Diversified Business
Q2 BALANCED AND DIVERSIFIED BUSINESS 2018 SUN LIFE FINANCIAL BUSINESS DIVERSIFICATION GEOGRAPHIC DIVERSIFICATION Q2’18 UNDERLYING NET INCOME2 Q2’18 UNDERLYING NET INCOME2* RUN-OFF SLF U.K. 12% ASSET 6% MANAGEMENT SLF U.S. 28% SLF CANADA 16% 31% GROUP INSURANCE 24% SLF ASIA WEALTH 19% 9% INDIVIDUAL S
Slide 10: Business Group Performance
Q2 BUSINESS GROUP PERFORMANCE 2018 SUN LIFE FINANCIAL REPORTED NET INCOME UNDERLYING NET INCOME1 (C$ MILLIONS) (C$ MILLIONS) Impact of currency reduced reported net income by $21M Impact of currency reduced underlying net income by $22M 266 245 356 216 199 262 145 214 125 123 185 183 101 133 105 CAN
Slide 11: SLF Canada: Growing Earnings Power
Q2 SLF CANADA: GROWING EARNINGS POWER Q2’18 HIGHLIGHTS ASSETS UNDER UNDERLYING NET INCOME1 MANAGEMENT1 (C$ MILLIONS) (C$ MILLIONS) Insurance sales1 were up 16% driven by strong sales in both Individual Insurance and Group Benefits Group Retirement Services achieved a milestone $100 billion asset
Slide 12: SLF Asset Management: Well Positioned for Growth
Q2 SLF ASSET MANAGEMENT: WELL POSITIONED FOR GROWTH UNDERLYING NET INCOME1 Q2’18 HIGHLIGHTS (C$ MILLIONS) 81%, 80% and 90% of MFS's retail fund assets ranked in the top half of their Lipper categories based on three-, five-, and ten-year performance, respectively 700 699 812 2015 2016 2017 877 LTM
Slide 13: SLF U.S.: Execution on Key Initiatives
Q2 SLF U.S.: EXECUTION ON KEY INITIATIVES Q2’18 HIGHLIGHTS UNDERLYING NET INCOME1 AFTER-TAX PROFIT MARGIN FOR (US$ MILLIONS) GROUP BENEFITS2 Continued improvement of after-tax profit margin for Group Benefits of 6.5%1,2 Acquisition of Maxwell Health in the U.S., an innovative insurtech company t
Slide 14: SLF Asia: Distribution Excellence in Higher Growth Markets
Q2 SLF ASIA: DISTRIBUTION EXCELLENCE IN HIGHER GROWTH MARKETS UNDERLYING NET INCOME1 Q2’18 HIGHLIGHTS (C$ MILLIONS) Strong individual insurance sales1 in Asia, up 33% over prior year on a constant currency basis Sales in our Mandatory Provident Fund (“MPF”) business in Hong Kong increased by 64%
Slide 15: SLF Asia: Market Presence
Q2 SLF ASIA: MARKET PRESENCE Presence in seven high growth markets, including Asia’s two largest economies – India & China. Access to Singapore & Dubai through International HNW business 18% China Hong Kong Vietnam Total Company Underlying Net Income from Asia* Philippines India Malaysia Indonesia *
Slide 16: Capital Management
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 16
Slide 17: Overview of LICAT Capital Framework
Q2 OVERVIEW OF LICAT CAPITAL FRAMEWORK 2018 SUN LIFE FINANCIAL TOTAL RATIO Available Capital + Surplus Allowance Base Solvency Buffer TOTAL RATIO (Sun Life Financial)= 149% AVAILABLE CAPITAL SURPLUS ALLOWANCE + BASE SOLVENCY BUFFER ELIGIBLE DEPOSITS • Similar to MCCSR • Sum of aggregate capital requ
Slide 18: Capital Generation Provides Good Capital Flexibility
Q2 CAPITAL GENERATION PROVIDES GOOD CAPITAL FLEXIBILITY 2018 SUN LIFE FINANCIAL Dividend Payout ratio M&A Opportunities Share buybacks Funding Organic Growth of 40-50% Strong Capital Generation Capital Flexibility • Capital deployment priorities unchanged • Target minimum cash at the holding company
Slide 19: Financial Flexibility Under Capital Model
Q2 FINANCIAL FLEXIBILITY UNDER CAPITAL MODEL 2018 SUN LIFE FINANCIAL LICAT 149% $2.6 billion cash at Leverage 21.8% holding company SLF Leverage Capacity SLF - External Capital Securities Outstanding First Call to 25/30%: ~$1.2/$3.2B Subordinated Debt Coupon Balance Date SLF T2B (Series 2007-1) 5.40
Slide 20: Strong Operating and Financial Leverage
Q2 STRONG OPERATING AND FINANCIAL LEVERAGE 2018 SUN LIFE FINANCIAL Operating Leverage Debt (C$ millions) Q2 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) Q2 2018 Tier 2 Subordina
Slide 21: Capital Framework Comparison - Metrics
Q2 CAPITAL FRAMEWORK COMPARISON - METRICS 2018 SUN LIFE FINANCIAL Capital Metrics and MCCSR LICAT Targets Available Capital Available Capital + Surplus Allowance (SA) + Eligible Deposits (ED) Total Ratio Required Capital Base Solvency Buffer Tier 1 Available Capital Tier 1 Available Capital + 70% x
Slide 22: Capital Framework Comparison – Available Capital
Q2 CAPITAL FRAMEWORK COMPARISON – AVAILABLE CAPITAL 2018 SUN LIFE FINANCIAL Available Capital MCCSR LICAT Valuation Basis: Invested Assets Generally market value Generally market value Valuation Basis: Accounting Assets and IFRS IFRS Liabilities Valuation Basis: Actuarial Liabilities CALM CALM Goodw
Slide 23: Capital Framework Comparison – Required Capital
Q2 CAPITAL FRAMEWORK COMPARISON – REQUIRED CAPITAL 2018 Required Capital MCCSR LICAT SUN LIFE FINANCIAL Conditional tail expectation of CTE(99), calibrated on a Calibration of target requirements Not specified 1-year horizon including a terminal provision Factor based where factors Credit Risk Facto
Slide 24: Asset Portfolio
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 24
Slide 25: High Quality, Well Diversified Investment Portfolio
Q2 HIGH QUALITY, WELL DIVERSIFIED INVESTMENT PORTFOLIO 2018 SUN LIFE FINANCIAL INVESTED ASSETS DEBT SECURITIES COMPETITIVE Policy Cash and Cash BY RATING ADVANTAGES Investment Loans and Equivalents Properties Other 6% BB and 5% 6% Lower, 1% AAA, 20% Leading non-public portfolio Equities 4% with si
Slide 26: Sustainability
CAPITAL MANAGEMENT SUSTAINABILTY BUSINESS ASSET PORTFOLIO OVERVIEW Life’s brighter under the sun 26
Slide 27: Sustainability Principles and Highlights
Q2 SUSTAINABILITY PRINCIPLES AND HIGHLIGHTS 2018 SUN LIFE FINANCIAL 2017 SUSTAINABILITY HIGHLIGHTS SUSTAINABILITY PRINCIPLES Life’s brighter under the sun 27
Slide 28: Use of Non-IFRS Financial Measures
In this presentation, Sun Life Financial Inc. (“SLF Inc.” or “SLF”) and its subsidiaries and, where applicable, its joint ventures and associates are referred to as “we”, “us”, “our” and the “Company” and Sun Life Assurance Company of Canada is referred to as “Sun Life Assurance” and “SLA”. Use of N
Slide 29: 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