The information in this document is based on the unaudited interim financial results of Sun Life Financial Inc. (“SLF Inc.”) for the period ended December 31, 2023. SLF Inc., its subsidiaries and, where applicable, its joint ventures and associates are collectively referred to as “the Company”, “Sun Life”, “we”, “our”, and “us”. We manage our operations and report our financial results in five business segments: Asset Management, Canada, United States (“U.S.”), Asia, and Corporate. Reported net income (loss) refers to Common shareholders’ net income (loss) determined in accordance with IFRS. Unless otherwise noted, all amounts are in Canadian dollars. Amounts in this document may be impacted by rounding. On January 1, 2023 we adopted IFRS 17 Insurance Contracts (“IFRS 17”), which replaces IFRS 4 Insurance Contracts, and IFRS 9 Financial Instruments (“IFRS 9”), which replaces IAS 39 Financial Instruments: Recognition and Measurement (collectively, “the new standards”). The nature and effects of the key changes to our critical accounting policies and estimated impacts from the adoption of the new standards are summarized in section N – Accounting and Control Matters in our MD&A for the period ended December 31, 2023 (“2023 Annual MD&A”).
TORONTO, Feb. 7, 2024 /PRNewswire/ – Sun Life Financial Inc. (TSX:SLF) (NYSE:SLF) announced its results for the fourth quarter and full year ended December 31, 2023.
Underlying net income(1) of $983 million increased $91 million or 10% from Q4’22(2) (full year – $3,728 million increased $359 million or 11% from 2022(2)); underlying ROE(1) was 18.4% (full year – 17.8%).
Wealth & asset management underlying net income(1): $439 million, up $27 million or 7% (full year – $1,726 million, up $53 million or 3%).
Group – Health & Protection underlying net income(1): $365 million, up $44 million or 14% (full year – $1,313 million, up $350 million or 36%).
Individual – Protection underlying net income(1): $284 million, up $53 million or 23% (full year – $1,137 million, up $137 million or 14%).
Corporate expenses & other(1): $(105) million net loss, an increase of $33 million in net loss or 46% (full year – $(448) million net loss, an increase of $181 million in net loss or 68%).
Reported net income of $749 million decreased $416 million or 36% from Q4’22(2) (full year – $3,086 million increased $215 million or 7% from 2022(2); reported ROE(1) was 14.0% (full year – 14.7%).
“Sun Life closed 2023 with a strong fourth quarter driven by exceptional sales for individual protection, as well as good momentum in our group health and protection businesses, reflecting the value and trust Clients place on Sun Life’s solutions,” said Kevin Strain, President and CEO of Sun Life. “Despite a challenging market, our Asset Management pillar delivered solid underlying earnings led by record earnings at SLC Management and steady margins at MFS.”
“We continue to provide Clients with access to quality care through digital innovation and partnerships to support their health journey. In Canada, we completed our acquisition of Dialogue Health Technologies and made an investment in Pillway, a virtual pharmacy.”
_____________
(1)
Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the 2023 Annual MD&A.
(2)
2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading “Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9” in section A – How We Report Our Results in this document.
Financial and Operational Highlights – Fourth Quarter and Full Year 2023
Quarterly results
Year-to-date
Profitability
Q4’23
Q4’22(2)
2023
2022(2)
Underlying net income ($ millions)(1)
983
892
3,728
3,369
Reported net income – Common shareholders ($ millions)
749
1,165
3,086
2,871
Underlying EPS ($)(1)(3)
1.68
1.52
6.36
5.75
Reported EPS ($)(3)
1.28
1.98
5.26
4.89
Underlying return on equity (“ROE”)(1)
18.4 %
17.7 %
17.8 %
17.0 %
Reported ROE(1)
14.0 %
23.2 %
14.7 %
14.5 %
Growth
Q4’23
Q4’22(2)
2023
2022(2)
Wealth sales & asset management gross flows ($ millions)(1)(4)
45,750
43,269
173,820
198,650
Group – Health & Protection sales ($ millions)(1)(5)
1,459
1,345
2,942
2,554
Individual – Protection sales ($ millions)(1)
707
498
2,491
1,767
Assets under management (“AUM”) ($ billions)(1)
1,400
1,319
1,400
1,319
New business Contractual Service Margin (“CSM”) ($ millions)(1)
381
253
1,253
762
Financial Strength
Q4’23
As at
January 1,
2023(7)
LICAT ratios (at period end)(6)(7)
Sun Life Financial Inc.
149 %
142 %
Sun Life Assurance(8)
141 %
139 %
Financial leverage ratio (at period end)(1)(9)
21.5 %
23.7 %
(1)
Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the 2023 Annual MD&A.
(2)
2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading “Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9” in section A – How We Report Our Results in this document.
(3)
All earnings per share (“EPS”) measures refer to fully diluted EPS, unless otherwise stated.
(4)
Effective January 1, 2023, Canada wealth sales & asset management gross flows have been updated to exclude retained sales. Prior period amounts have been updated to reflect this change.
(5)
Prior period amounts related to U.S. Dental sales have been restated to reflect new information.
(6)
Life Insurance Capital Adequacy Test (“LICAT”) ratio. Our LICAT ratios are calculated in accordance with the OSFI-mandated guideline.
(7)
OSFI’s 2023 LICAT Guideline, effective January 1, 2023, specifies that available capital for LICAT purposes includes the Contractual Service Margin. Prior period restatement and resubmissions are not mandated. Pro-forma January 1, 2023 LICAT ratios are disclosed to illustrate transition impact. These pro-forma calculations will not be formally submitted to OSFI. Refer to section G – Financial Strength in the 2023 Annual MD&A.
(8)
Sun Life Assurance Company of Canada (“Sun Life Assurance”) is SLF Inc.’s principal operating life insurance subsidiary.
(9)
Effective January 1, 2023, the calculation for the financial leverage ratio was updated to include the CSM balance (net of taxes) in the denominator. The CSM (net of taxes) was $9.6 billion as at December 31, 2023 (January 1, 2023 – $8.7 billion).
Financial and Operational Highlights – Quarterly Comparison (Q4’23 vs. Q4’22)
($ millions)
Q4’23
Underlying net income by business type(1)(2):
Sun Life
Asset
Management
Canada
U.S.
Asia
Corporate
Wealth & asset management
439
331
92
—
16
—
Group – Health & Protection
365
—
159
206
—
—
Individual – Protection
284
—
99
47
138
—
Corporate expenses & other
(105)
—
—
—
(11)
(94)
Underlying net income(1)
983
331
350
253
143
(94)
Reported net income – Common shareholders
749
297
348
101
44
(41)
Change in underlying net income (% year-over-year)
10 %
2 %
32 %
10 %
6 %
nm(3)
Change in reported net income (% year-over-year)
(36) %
(7) %
(23) %
(50) %
(52) %
nm(3)
Wealth sales & asset management gross flows(1)(4)
45,750
38,322
5,424
—
2,004
—
Group – Health & Protection sales(1)
1,459
—
174
1,269
16
—
Individual – Protection sales(1)
707
—
171
—
536
—
Change in wealth sales & asset management gross flows
(% year-over-year)
6 %
3 %
32 %
—
12 %
—
Change in group sales (% year-over-year)
8 %
—
63 %
4 %
(6) %
—
Change in individual sales (% year-over-year)
42 %
—
23 %
—
49 %
—
(1)
Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the 2023 Annual MD&A.
(2)
For more information about the business types in Sun Life’s business groups, see section A – How We Report Our Results in the 2023 Annual MD&A.
(3)
Not meaningful.
(4)
Effective January 1, 2023, Canada wealth sales & asset management gross flows have been updated to exclude retained sales. Prior period amounts have been updated to reflect this change.
Underlying net income(1) of $983 million increased $91 million or 10% from prior year, driven by:
Wealth & asset management(1) up $27 million: Higher Asset Management fee-related earnings and higher investment income driven by volume growth and an increase in yields.
Group – Health & Protection(1) up $44 million: Business premium growth in the U.S. and Canada, improved disability experience in Canada, and higher investment contributions in the U.S., partially offset by lower results in U.S. Dental.
Individual – Protection(1) up $53 million: Business growth reflecting good sales momentum in Asia, and higher investment contributions in Canada, partially offset by lower earnings due to the sale of Sun Life UK(2).
Corporate expenses & other(1) $(33) million increase in net loss driven by higher operating expenses reflecting business growth and continued investments in the business, partially offset by a lower effective tax rate.
Higher earnings on surplus primarily driven by higher net interest income and lower realized losses.
Reported net income of $749 million decreased $416 million or 36%, driven by:
Unfavourable market-related impacts primarily reflecting interest rates and real estate experience(3);
The prior year impact of the Canada Tax Rate Change(4); and
Fair value changes in management’s ownership of MFS(5) shares; partially offset by
The increase in underlying net income;
The impact of the Bermuda Corporate Income Tax Change(6); and
Lower DentaQuest integration costs.
Underlying ROE was 18.4% and reported ROE was 14.0% (Q4’22 – 17.7% and 23.2%, respectively). SLF Inc. ended the quarter with a LICAT ratio of 149%.
______________
(1)
Refer to section C – Profitability in this document for more information on notable items attributable to reported and underlying net income items and the Non-IFRS Financial Measures in this document for a reconciliation between reported net income and underlying net income. For more information about the business types in Sun Life’s operating segments/business groups, see section A – How We Report Our Results in the 2023 Annual MD&A.
(2)
On April 3, 2023 we completed the sale of SLF of Canada UK Limited to Phoenix Group Holdings plc (“the sale of Sun Life UK”). For additional information, refer to Note 3 of our 2023 Annual Consolidated Financial Statements.
(3)
Real estate experience reflects the difference between the actual value of real estate investments compared to management’s longer-term expected returns supporting insurance contract liabilities (“real estate experience”).
(4)
On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurers’ taxable income in excess of $100 million was enacted in Canada (“Canada Tax Rate Change”). This legislation applied retroactively to the Federal Budget date of April 7, 2022. As a result, total Company reported net income increased by $141 million in Q4’22 reflected in Other adjustments.
(5)
MFS Investment Management (“MFS”).
(6)
Bermuda recognized a deferred tax asset of $51 million in Q4’23 (“Bermuda Corporate Income Tax Change”). Refer to Note 19 in the 2023 Annual Consolidated Financial Statements for more information.
Business Group Highlights
In 2023, Sun Life was certified as a Great Place to Work® in Canada, the U.S., Vietnam, the Philippines, Indonesia, Malaysia, India, and Ireland. In addition, SLC Management was also named 2023 Best Places to Work in Money Management for the fourth year in a row by Pensions & Investments(1). This recognition reflects our inclusive culture and commitment to our people. Sun Life fosters a positive work environment where we provide resources and flexibility to support mental, physical and professional well-being, and where diversity is valued.
Asset Management: A global leader in both public and alternative asset classes through MFS and SLC Management
Asset Management underlying net income of $331 million increased $7 million or 2% from prior year, driven by:
MFS down $15 million (down US$11 million): Higher expenses offset by higher fee income from average net assets (“ANA”). The MFS pre-tax net operating profit margin(2) was 39.4% for Q4’23, compared to 39.5% in the prior year.
SLC Management up $22 million: The increase in underlying net income was driven by higher fee-related earnings and higher net seed investment income. Fee-related earnings(2) increased 26% driven by higher AUM, reflecting strong capital raising and deployment across the platform and the AAM acquisition(3). Fee-related earnings margin(2) was 24% for Q4’23, consistent with the prior year.
Reported net income of $297 million decreased $24 million or 7% from prior year, largely reflecting fair value changes in management’s ownership of MFS shares.
Asset Management ended Q4’23 with $1,016 billion of AUM, consisting of $793 billion (US$599 billion) in MFS and $223 billion in SLC Management. Total Asset Management net outflows of $11.4 billion in Q4’23 reflected MFS net outflows of $15.3 billion (US$11.2 billion) partially offset by SLC Management net inflows of $3.9 billion.
During the year, MFS became the 9th largest fund group(4) for the U.S. retail mutual fund industry based on AUM.
SLC Management continued its growth trajectory closing the year with $177 billion in fee earning AUM, up 8% from prior year, and won the 2023 CIO’s Industry Innovation Awards for Private Credit.
Canada: A leader in health, wealth, and insurance
Canada underlying net income of $350 million increased $85 million or 32% from prior year, reflecting:
Wealth & asset management up $20 million: Increase in investment income driven by higher volume and yields.
Group – Health & Protection up $57 million: Business premium growth and improved disability experience reflecting higher margins, lower claims volumes, and shorter claims durations.
Individual – Protection up $8 million: Higher investment contributions partially offset by unfavourable mortality experience.
Higher earnings on surplus, primarily driven by realized gains in the current year.
Reported net income of $348 million decreased $105 million or 23% from prior year, driven by market-related impacts primarily from interest rates and real estate experience, and the prior year impact of the Canada Tax Rate Change(5), partially offset by ACMA(6) impacts and the increase in underlying net income.
Canada’s sales(7):
Wealth sales & asset management gross flows of $5 billion were up 32%, driven by higher Individual Wealth sales, primarily from mutual funds, and higher defined benefit sales in Group Retirement Services (“GRS”).
Group – Health & Protection sales of $174 million were up 63%, driven by higher large case sales.
Individual – Protection sales of $171 million were up 23%, driven by higher participating whole life insurance sales.
We continue to focus on strengthening and expanding our health business to help Clients live healthier lives. During the quarter we completed the acquisition of Dialogue Health Technologies Inc., Canada’s premier virtual health care and wellness platform providing affordable on-demand access to quality care. Further, we finalized a contract with the Government of Canada to be the administrator of the Canadian Dental Care Plan, which will provide access to dental care for up to nine million additional Canadians in need. We also completed a minority investment in Simpill Health Group Inc., operating as Pillway, a virtual pharmacy offering the ability to consult a knowledgeable pharmacist by chat or phone call and direct delivery of medication in Canada, expanding upon our digital health services and offerings, including the Q2’23 launch of the Lumino Health™ Pharmacy app.
We continue to expand our distribution capabilities through the creation of a securities investment dealer, Sun Life Canada Securities Inc. (“SLCSI”). We received approval from the Canadian Investment Regulatory Organization in the fourth quarter, and expect an operational launch in 2024. Our expanded offerings in SLCSI will broaden access to wealth solutions to help Clients achieve lifetime financial security.
__________________
(1)
Pensions & Investments, a global news source of money management.
(2)
Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the 2023 Annual MD&A.
(3)
On February 1, 2023, we completed the acquisition of a majority stake interest in Advisors Asset Management, Inc. (“the AAM acquisition”), a leading independent U.S. retail distribution firm, with the option to acquire the remaining interest starting in 2028.
(4)
Based on ISS Market Intelligence Simfund.
(5)
On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurer’s taxable income in excess of $100 million was enacted in Canada (“Canada Tax Rate Change”). This legislation applied retroactively to the Federal Budget date of April 7, 2022. As a result, Canada reported net income increased by $90 million in Q4’22, reflected in Other adjustments.
(6)
Assumption changes and management actions (“ACMA”).
(7)
Compared to the prior year.
U.S.: A leader in health and benefits
U.S. underlying net income of US$187 million increased US$14 million or 8% ($253 million increased $23 million or 10%) from prior year, driven by:
Group – Health & Protection down US$7 million: Lower Dental results reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, partially offset by higher Group Benefits results. In Group Benefits, strong revenue growth, higher net investment results and favourable mortality experience was partially offset by less favourable morbidity experience.
Individual – Protection up US$21 million: The inclusion of the UK payout annuity business(1) and improved mortality experience.
Reported net income of US$77 million decreased US$74 million or 49% ($101 million decreased $101 million or 50%) from prior year, driven by ACMA impacts, and market-related impacts largely from interest rates and real estate experience, partially offset by lower DentaQuest integration costs and the increase in underlying net income.
U.S. group sales of US$932 million were up US$33 million or 4% ($1,269 million, up $48 million or 4%), driven by higher medical stop-loss and commercial dental sales, partially offset by lower employee benefits sales and lower large case sales in Dental.
We continue to advance our strategy of helping more people get access to the health care and coverage they need. In the fourth quarter, the states of Iowa and Arkansas awarded DentaQuest Medicaid dental benefits contracts, supporting our mission to provide access to dental care for families and children in underserved communities. The Dental business has recorded more than US$650 million in sales since closing the DentaQuest acquisition on June 1, 2022, and has approximately 36 million members as of January 1, 2024.
In Health and Risk Solutions, we continue to differentiate our medical stop-loss offering with solutions that increase access to health care and improve clinical outcomes for members, while protecting against high-cost claims for employers. We recently announced a partnership with in-home, tech-enabled medical care provider Somatus to provide one-on-one support to our members with chronic kidney disease and congestive heart failure, two common high-cost conditions. We also announced a partnership with Virtual MeTM(2) to provide our Health Navigator product through their telehealth services that cater to business clients, as well as individuals who are underinsured or uninsured.
Asia: A regional leader focused on fast-growing markets
Asia underlying net income of $143 million increased $8 million or 6% from prior year, driven by:
Individual – Protection up $20 million: Business growth reflecting good sales momentum, partially offset by lower earnings on surplus.
Regional office expenses & other $(12) million increased net loss primarily reflecting continued pan Asia investments in the business.
Reported net income of $44 million decreased $48 million or 52% from prior year, driven by ACMA impacts, partially offset by the impact of the Bermuda Corporate Income Tax Change(3).
Asia’s sales(4):
Individual sales of $536 million were up 49%, primarily driven by higher sales in Hong Kong reflecting increased demand as pandemic-related travel restrictions were lifted in early 2023, and in International reflecting continued demand for our products, partially offset by lower sales in Vietnam reflecting market conditions, and China.
Wealth sales & asset management gross flows of $2 billion were up 12%, primarily driven by higher mutual fund sales in India, partially offset by lower money market fund sales in the Philippines.
New business CSM of $223 million in Q4’23 was up from $122 million in the prior year, primarily driven by sales in Hong Kong and High-Net-Worth.
We are dedicated to helping Clients achieve lifetime financial security by expanding product offerings to meet their evolving needs. In Singapore, we launched a new index universal life product(5), providing High-Net-Worth Clients a dynamic balance between long-term protection and growth, with the flexibility to customize premium payments and allocations among investment options to meet their goals. This new product has been well received by the market, contributing to Singapore’s Q4’23 strong sales growth.
Our diversified mix of high-performing, quality-focused distribution channels, including our new bancassurance partnership with Dah Sing Bank, contributed to record sales and increased market position for Sun Life Hong Kong.
_____________
(1)
On April 3, 2023, we completed the sale of SLF of Canada UK Limited to Phoenix Group Holdings plc (“the sale of Sun Life UK”). Under the agreement, we will retain our economic interest in the payout annuities business through a reinsurance treaty, which, effective Q2’23 is recorded in In-force Management within the U.S. business group. For additional information, refer to Note 3 of our 2023 Annual Consolidated Financial Statements.
(2)
Virtual MeTM provides a suite of telehealth services delivering quality health care directly to patients in need.
(3)
Bermuda recognized a deferred tax asset of $51 million in Q4’23 (“Bermuda Corporate Income Tax Change”). Refer to Note 19 in the 2023 Annual Consolidated Financial Statements for more information.
(4)
Compared to the prior year.
(5)
SunBrilliance Indexed Universal Life.
Corporate
Corporate underlying net loss was $94 million compared to underlying net loss of $62 million in the prior year, driven by the sale of Sun Life UK(1) and higher operating expenses, partially offset by a lower effective tax rate.
Reported net loss was $41 million compared to reported net income of $97 million in the prior year, reflecting the impacts from the sale of Sun Life UK (1), the prior year impact of tax-related matters(2), and the change in underlying net loss.
________________
(1)
On April 3, 2023 we completed the sale of SLF of Canada UK Limited to Phoenix Group Holdings plc (“the sale of Sun Life UK”). Under the agreement, we will retain our economic interest in the payout annuities business through a reinsurance treaty, which, effective Q2’23, is recorded in In-force Management within the U.S. business group. For additional information, refer to Note 3 of our 2023 Annual Consolidated Financial Statements. The prior year included market-related impacts from Sun Life UK in reported net income.
(2)
Tax related matters include tax-exempt investment income in reported net income in both years and the impact of the Canada Tax Rate Change. On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurer’s taxable income in excess of $100 million was enacted in Canada (“Canada Tax Rate Change”). This legislation applied retroactively to the Federal Budget date of April 7, 2022. As a result, Corporate reported net income increased by $51 million in Q4’22, reflected in Other adjustments.
Table of Contents
A
How We Report Our Results
8
B
Financial Summary
9
C
Profitability
10
D
Growth
13
E
Contractual Service Margin
15
F
Financial Strength
17
G
Performance by Business Segment
19
1. Asset Management
20
2. Canada
22
3. U.S.
23
4. Asia
24
5. Corporate
25
H
Non-IFRS Financial Measures
26
I
Forward-looking Statements
32
About Sun Life
Sun Life is a leading international financial services organization providing asset management, wealth, insurance and health solutions to individual and institutional Clients. Sun Life has operations in a number of markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam, Malaysia and Bermuda. As of December 31, 2023, Sun Life had total assets under management of $1.40 trillion. For more information, please visit www.sunlife.com.
Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock exchanges under the ticker symbol SLF.
A. How We Report Our Results
Sun Life Financial Inc., its subsidiaries and, where applicable, its joint ventures and associates are collectively referred to as “the Company”, “Sun Life”, “we”, “our”, and “us”. We manage our operations and report our financial results in five business segments: Asset Management, Canada, U.S., Asia, and Corporate. Information concerning these segments is included in our annual and interim consolidated financial statements and accompanying notes (“Annual Consolidated Financial Statements” and “Interim Consolidated Financial Statements”, respectively, and “Consolidated Financial Statements” collectively) and interim and annual management’s discussion and analysis (“MD&A”). We prepare our unaudited Interim Consolidated Financial Statements using International Financial Reporting Standards (“IFRS”), the accounting requirements of the Office of the Superintendent of Financial Institutions (“OSFI”). Reported net income (loss) refers to Common shareholders’ net income (loss) determined in accordance with IFRS.
On January 1, 2023 we adopted IFRS 17 Insurance Contracts (“IFRS 17”), which replaces IFRS 4 Insurance Contracts. IFRS 17 establishes the principles for the recognition, measurement, presentation, and disclosure of insurance contracts. On January 1, 2023, we also adopted IFRS 9 Financial Instruments (“IFRS 9”), which replaces IAS 39 Financial Instruments: Recognition and Measurement. The nature and effects of the key changes in our critical accounting policies and estimated impacts from the adoption of the new standards are summarized in section N – Accounting and Control Matters – 2 – Changes in Accounting Policies in our 2023 Annual MD&A. For more information including the measurement and classification of opening balances, refer to Note 2 of our 2023 Annual Consolidated Financial Statements.
Unless otherwise noted, all amounts are in Canadian dollars. Amounts in this document are impacted by rounding.
Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9
2022 results have been restated for the adoption of IFRS 17 and the related IFRS 9 classification overlay (“the new standards”). The restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. The majority of the actions taken to re-balance asset portfolios and transition asset-liability management execution to an IFRS 17 basis occurred in Q1’23. Accordingly, analysis based on 2022 comparative results may not necessarily be indicative of future trends, and should be interpreted with this context. Using sensitivities to analyze the outlook for market risk and related impacts (e.g., interest rate sensitivities) will be more representative starting with the sensitivities disclosed for Q1’23 and onward in section K – Risk Management in the 2023 Annual MD&A and section I – Risk Management in each quarter’s respective interim MD&A document. Certain 2022 restated results and 2023 interim results in the Drivers of Earnings and CSM Movement Analysis were refined to more accurately reflect how management views the business.
1. 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 results from period to period. These non-IFRS financial measures do not have any standardized meaning and may not be comparable with similar measures used by other companies. For certain non-IFRS financial measures, there are no directly comparable amounts under IFRS. These non-IFRS financial measures should not be viewed in isolation from or as alternatives to measures of financial performance determined in accordance with IFRS. Additional information concerning non-IFRS financial measures and, if applicable, reconciliations to the closest IFRS measures are available in section H – Non-IFRS Financial Measures in this document, section M – Non-IFRS Financial Measures in our 2023 Annual MD&A, and the Supplementary Financial Information package on www.sunlife.com under Investors – Financial results and reports.
2. Forward-looking Statements
Certain statements in this document are 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 legislation. Additional information concerning forward-looking statements and important risk factors that could cause our assumptions, estimates, expectations and projections to be inaccurate and our actual results or events to differ materially from those expressed in or implied by such forward-looking statements can be found in section I – Forward-looking Statements in this document.
3. Additional Information
Additional information about SLF Inc. can be found in the Consolidated Financial Statements, the Annual and Interim MD&A and SLF Inc.’s Annual Information Form (“AIF”) for the year ended December 31, 2023. These documents are filed with securities regulators in Canada and are available at www.sedarplus.ca. SLF Inc.’s Annual Consolidated Financial Statements, Annual MD&A and AIF are filed with the United States Securities and Exchange Commission (“SEC”) in SLF Inc.’s annual report on Form 40-F and SLF Inc.’s Interim MD&A and Interim Consolidated Financial Statements are furnished to the SEC on Form 6-Ks and are available at www.sec.gov.
B. Financial Summary
($ millions, unless otherwise noted)
Quarterly results
Year-to-date
Profitability
Q4’23
Q3’23
Q4’22(1)
2023
2022(1)
Net income (loss)
Underlying net income (loss)(2)
983
930
892
3,728
3,369
Reported net income (loss) – Common shareholders
749
871
1,165
3,086
2,871
Diluted earnings per share (“EPS”) ($)
Underlying EPS (diluted)(2)
1.68
1.59
1.52
6.36
5.75
Reported EPS (diluted)
1.28
1.48
1.98
5.26
4.89
Return on equity (“ROE”) (%)
Underlying ROE(2)
18.4 %
17.7 %
17.7 %
17.8 %
17.0 %
Reported ROE(2)
14.0 %
16.6 %
23.2 %
14.7 %
14.5 %
Growth
Q4’23
Q3’23
Q4’22(1)
2023
2022(1)
Sales
Wealth sales & asset management gross flows(2)(3)
45,750
39,324
43,269
173,820
198,650
Group – Health & Protection sales(2)(4)
1,459
374
1,345
2,942
2,554
Individual – Protection sales(2)
707
669
498
2,491
1,767
Total AUM ($ billions)(2)
1,399.6
1,340.1
1,318.6
1,399.6
1,318.6
New business Contractual Service Margin (“CSM”)(2)
381
370
253
1,253
762
Financial Strength
Q4’23
Q3’23
As at
January 1,
2023(5)
LICAT ratios(5)
Sun Life Financial Inc.
149 %
147 %
142 %
Sun Life Assurance(6)
141 %
138 %
139 %
Financial leverage ratio(2)(7)
21.5 %
21.8 %
23.7 %
Book value per common share ($)
36.51
35.91
34.60
Weighted average common shares outstanding for basic EPS (millions)
584
586
586
Closing common shares outstanding (millions)
585
584
586
(1)
2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading “Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9” in section A – How We Report Our Results in this document.
(2)
Represents a non-IFRS financial measure. For more details, see section H – Non-IFRS Financial Measures in this document.
(3)
Effective January 1, 2023, Canada wealth sales & asset management gross flows have been updated to exclude retained sales. Prior period amounts have been updated to reflect this change.
(4)
Prior period amounts related to U.S. Dental sales have been restated to reflect new information.
(5)
OSFI’s 2023 LICAT Guideline, effective January 1, 2023, specifies that available capital for LICAT purposes includes the Contractual Service Margin. Prior period restatement and resubmissions are not mandated. Pro-forma January 1, 2023 LICAT ratios are disclosed to illustrate transition impact. These pro-forma calculations will not be formally submitted to OSFI.
(6)
Sun Life Assurance Company of Canada (“Sun Life Assurance”) is SLF Inc.’s principal operating life insurance subsidiary.
(7)
Effective January 1, 2023, the calculation for the financial leverage ratio was updated to include the CSM balance (net of taxes) in the denominator. The CSM (net of taxes) was $9.6 billion as at December 31, 2023 (September 30, 2023 – $9.3 billion; January 1, 2023 – $8.7 billion).
C. Profitability
The following table reconciles our Common shareholders’ net income (“reported net income”) and underlying net income. All factors discussed in this document that impact underlying net income are also applicable to reported net income. Certain adjustments and notable items also impact the CSM, such as mortality experience and assumption changes; see section E – Contractual Service Margin in this document for more information.
Quarterly results
($ millions, after-tax)
Q4’23
Q3’23
Q4’22(1)
Underlying net income by business type(2):
Wealth & asset management
439
457
412
Group – Health & Protection
365
285
321
Individual – Protection
284
297
231
Corporate expenses & other
(105)
(109)
(72)
Underlying net income(2)
983
930
892
Add:
Market-related impacts(1)
(193)
23
224
Assumption changes and management actions (“ACMA”)
(1)
35
12
Other adjustments
(40)
(117)
37
Reported net income – Common shareholders
749
871
1,165
Underlying ROE(2)
18.4 %
17.7 %
17.7 %
Reported ROE(2)
14.0 %
16.6 %
23.2 %
Notable items attributable to reported and underlying net income(2):
Mortality