TORONTO, Feb. 10, 2016 /PRNewswire/ - Sun Life Financial
Inc. (TSX: SLF) (NYSE: SLF)
The information contained in this document concerning the fourth
quarter of 2015 is based on the audited annual and unaudited
interim financial results of Sun Life Financial Inc. ("SLF Inc.")
for the period ended December 31,
2015. SLF Inc. and its subsidiaries are collectively
referred to as "the Company", "Sun Life Financial", "we", "our",
and "us", and also includes, where applicable, our joint ventures
and associates. Unless otherwise noted, all amounts are in Canadian
dollars.
Fourth Quarter 2015 Financial Highlights
- Operating net income(1) of $598 million or $0.98 per share(1), compared to
$511 million or $0.83 per share in the fourth quarter of 2014.
Reported net income of $536 million
or $0.87 per share, compared to
$502 million or $0.81 per share in the same period last year
-
- Underlying net income(1) of $646 million or $1.05 per share(1) in the fourth
quarter of 2015, compared to $360
million or $0.59 per share in
the fourth quarter of 2014
- Operating return on equity(1) ("ROE") of 12.7% and
underlying ROE(1) of 13.8% in the fourth quarter of
2015, compared to operating ROE and underlying ROE of 12.6% and
8.8% in the same period last year, respectively
- Quarterly dividend declared of $0.39 per share
- Minimum Continuing Capital and Surplus Requirements ratio for
Sun Life Assurance Company of Canada of 240%
- Global assets under management ("AUM") of $891 billion
2015 Annual Financial Highlights
- Operating net income of $2,253
million or $3.68 per share,
compared to $1,920 million or
$3.13 per share in 2014. Reported net
income of $2,185 million or
$3.55 per share, compared to
$1,762 million or $2.86 per share in 2014
-
- Underlying net income of $2,305
million or $3.76 per share in
2015, compared to $1,816 million or
$2.96 per share in 2014
- Operating ROE of 12.6% and underlying ROE of 12.8% in 2015,
compared to operating ROE and underlying ROE of 12.2% and 11.6% in
2014, respectively
- Dividends declared in the year of $1.51 per share
"Our strong fourth quarter capped off a successful year of
growth and momentum for Sun Life," said Dean Connor, President and Chief Executive
Officer, Sun Life Financial. "In 2015, we achieved underlying net
income of $2.3 billion, surpassing
our 2015 financial objective of $1.85
billion and ended the year with assets under management of
$891 billion. We increased our
quarterly common share dividend by 8% while maintaining a strong
capital position. We also announced six transactions, committing
$2.4 billion in capital in building
our asset management businesses, adding capabilities and scale in
our U.S. operations and strengthening our presence in Asia."
"The benefits of Sun Life's four pillar strategy, diversified
business mix, and de-risking actions were evident in 2015. The drop
in commodity prices, the TSX decline and lower interest rates
created headwinds for SLF Canada. However, the resulting
devaluation of the Canadian dollar increased income generated from
our business outside of Canada, which also benefited from
relatively stronger economic growth," said Dean Connor.
"In 2015, our clients received approximately $14 billion in claims and benefits payments. Our
clients need us now more than ever, and we will continue to find
new and innovative ways to provide them with the right products and
solutions to achieve lifetime financial security."
__________
(1) |
Operating net income (loss), operating earnings (loss) per
share, operating ROE, underlying net income (loss), underlying
earnings (loss) per share, and underlying ROE are not based on
International Financial Reporting Standards. All earnings per share
("EPS") measures refer to fully diluted EPS, unless otherwise
stated. See Use of Non-IFRS Financial Measures and Reconciliation
of Non-IFRS Financial Measures. |
|
|
"Our Canadian operations executed well. We grew our Wealth
business with the successful launch of our new segregated fund, Sun
Life Guaranteed Investment Funds, and grew SLGI mutual fund sales
by 28%," Connor said. "We ended the year with over 4,100 people in
our Career Sales Force. Both Group Benefits and Group Retirement
Services extended their #1 positions in the Canadian market through
continuing innovation, strong client services and strong
sales."
"In the U.S., we made excellent progress this year in improving
the profitability of our group life and disability business, and we
continue to be a leader in medical stop-loss insurance where we
reported a 12% increase in business in-force year over year," said
Connor. "Our acquisition of Assurant, Inc.'s U.S. Employee Benefits
business is expected to close by the end of the first quarter of
2016, and this will add both scale and new capabilities to drive
growth in our U.S. pillar."
"MFS maintained its focus on client service and continued its
strong investment performance," said Connor. "MFS ended the year
with assets under management of US$413
billion and maintained margins of 40% for the year. We
expanded our asset management pillar by acquiring Bentall Kennedy,
Prime Advisors and Ryan Labs in
2015, which together with Sun Life Investment Management Inc.,
generated net sales of $1.5 billion
in the year."
"SLF Asia had a strong year, finishing with underlying net
income of $252 million and increased
insurance and wealth sales for 2015," said Connor. "We also
announced agreements to increase our joint venture ownership in PVI
Sun Life in Vietnam and Birla Sun
Life Insurance in India, in line
with our Asia strategy."
Reported net income was $536
million in the fourth quarter of 2015, compared to reported
net income of $502 million in the
fourth quarter of 2014. The following table sets out our operating
net income and underlying net income for the fourth quarter of 2015
and 2014.
($ millions, after-tax) |
Q4'15 |
|
Q4'14 |
Operating net income |
598 |
|
511 |
|
Market related impacts |
(36) |
|
(21) |
|
Assumption changes and management actions |
(12) |
|
172 |
Underlying net income |
646 |
|
360 |
|
|
|
|
The Board of Directors of SLF Inc. today declared a quarterly
shareholder dividend of $0.39 per
common share.
Operational Highlights
Our strategy is focused on four key pillars of growth. We detail
our continued progress against these pillars below.
Fourth Quarter Highlights
Leader in financial protection and wealth solutions in our
Canadian home market
Sales in our Canadian business units continued to grow in the final
quarter of 2015. In Individual Insurance & Wealth, wealth sales
grew by 13% over the same quarter in 2014 driven by Sun Life Global
Investments (Canada) Inc. ("SLGI") mutual fund sales. Our new
segregated fund product, Sun Life Guaranteed Investment Funds,
produced sales of $125 million in the
fourth quarter leading to a 57% increase in segregated fund sales
over the same period in the prior year. Insurance sales grew by 14%
compared to the fourth quarter of 2014, largely driven by
participating insurance and term and personal health insurance.
SLGI reported retail sales of $383
million, up from $204 million
in the same period of the prior year. In addition, SLGI received
the Morningstar Award for "Best Pooled Fund of Fund Series" for the
Granite Target Date Series funds.
Group Retirement Services ("GRS") had total sales of
$2.2 billion, compared to
$3.0 billion in the fourth quarter of
2014 which included a single large retained case. GRS total sales
were driven by strong Defined Benefit Solutions ("DBS") sales of
$898 million, where we continued to
innovate in the defined benefit space with a $530 million annuity transaction. GRS total sales
also included pension rollover sales of $687
million in the fourth quarter of 2015, up from $481 million in the fourth quarter of 2014.
Our Group Benefits ("GB") business had sales of $78 million in the fourth quarter, compared to
$209 million in the prior year due to
a significant large case win in the fourth quarter of 2014. As a
result of overall growth in net sales, business in-force of
$9.1 billion was up 6% in the year
compared to 2014.
Premier global asset manager, anchored by MFS
MFS Investment Management ("MFS") had AUM of US$413 billion as at December 31, 2015, compared to US$404 billion as at September 30, 2015. Gross sales were US$16.5 billion in the fourth quarter of 2015
while net outflows were US$4.7
billion, primarily due to institutional client net
outflows.
MFS's long-term retail fund performance remained strong with
75%, 87% and 97% of MFS's mutual fund assets ranked in the top half
of their Lipper categories based on three-, five- and ten-year
performance, respectively, as of December
31, 2015.
Sun Life Investment Management ("SLIM") completed its first full
quarter following the completion of the acquisitions made in 2015
with net sales of $454 million and
AUM of $58 billion.
Leader in U.S. group benefits and International high net
worth solutions
On September 9, 2015, we entered into
an agreement for the purchase of Assurant, Inc.'s U.S. Employee
Benefits business ("Assurant EB"). The transaction is expected to
close by the end of the first quarter of 2016, subject to
regulatory approvals and customary closing conditions.
In U.S. Group Benefits, our actions in expense management,
claims management and pricing continued to improve the results of
our U.S. life and disability business.
In December, we re-focused our International business on the
life insurance segment, where there is greater opportunity to
achieve stronger growth and profitability and where we will
continue to deliver a strong value proposition to our customers. At
the same time, the International wealth business was closed to new
sales.
Growing Asia through
distribution excellence in higher growth markets
In the fourth quarter of 2015, we announced increased investments
in our joint ventures in Vietnam
and India. On January 7, 2016, we increased our ownership in
our Vietnam joint venture, PVI Sun
Life Insurance Company Limited ("PVI Sun Life"), from 49% to 75%.
In December 2015, we announced an
agreement to increase our ownership interest in Birla Sun Life
Insurance Company Limited ("BSLI") from 26% to 49%. The BSLI
transaction is expected to be completed by the end of the first
quarter of 2016, subject to regulatory approvals and customary
closing conditions.
In SLF Asia, we had individual insurance sales of $147 million in the fourth quarter of 2015 which
reflected growth in Hong Kong,
Indonesia, India and Malaysia over the fourth quarter of 2014,
offset by lower sales in the
Philippines which had exceptional sales in the fourth
quarter of 2014. Overall, wealth sales slowed during the quarter
across the region, reflecting uncertain market conditions.
Sun Life of Canada (Philippines), Inc. was awarded the "2015 Life
Insurance Company of the Year Award" in the Asia Insurance Industry
Awards. Through this award, we see recognition of our customer
focus and progress on our Most Respected Agency initiative, an
important strategy supporting our Asia growth pillar.
Annual Highlights
Leader in financial protection and wealth solutions in our
Canadian home market
- During 2015, we continued to build our wealth businesses. GRS
continued to be ranked #1 in market share(1), with a
very strong year in defined contribution sales. In addition,
Defined Benefit Solutions ("DBS") achieved sales of $6.6 billion driven by a $5 billion ground-breaking large case longevity
insurance agreement and an innovative annuity transaction of
$530 million. Client Solutions
pension rollover sales were also strong at $2.2 billion, increasing by 40% from 2014. In the
individual wealth market, we launched our new segregated fund
product, Sun Life Guaranteed Investment Funds, with sales of
$259 million for the year. SLGI
completed its fifth full year of operation, and continued to offer
top performing funds, with 15 of the 17 mutual funds with five-year
performance records exceeding the peer median(2).
__________
(1) |
As measured by Benefits Canada magazine's 2015 CAP
Suppliers Report, based on June 30, 2015 assets under
administration, and released in December 2015. |
(2) |
Morningstar performance statistics as at December 31,
2015. |
|
|
- Individual Insurance & Wealth retained its first place
position in the fixed annuities and critical illness markets at
30.6% and 30.5%, respectively(1). Sales of insurance
products grew 16% year-over-year while wealth sales were up 13%,
driven by the Career Sales Force, which increased for the eighth
consecutive year, and strong third-party channel sales
activity.
- GB maintained its leadership position as the top group life and
health benefits provider in Canada
for the sixth consecutive year, based on overall
revenue(2).
- Client Solutions, supporting all of our businesses, announced
the development of Digital Benefits Assistant, an innovative
technology-based capability that will proactively engage group plan
members, deliver personalized and relevant interactions across
multiple channels, and further support plan members in their goal
of well-being and financial security.
- During 2015, we made enhancements to our Group Plan member
mobile app, including the launch of an Android app, to complement
our iPhone app, and claims submission capabilities that leverage
smartphone image capture. These investments have contributed to a
60% year-over-year increase in our app user traffic.
- SLF Canada achieved platinum certification from Excellence
Canada, the highest certification level, recognizing Canada's best
run corporations across six categories: leadership, strategy,
customer experience, people engagement, process management and
partners.
- For the seventh year in a row, Canadians have voted Sun Life
Financial as the "Most Trusted Life Insurance Company", part of the
Reader's Digest's Trusted Brand™ awards program.
Premier global asset manager, anchored by MFS
- In 2015, we completed the acquisitions of the Bentall Kennedy
group of companies ("Bentall Kennedy"), Prime Advisors, Inc.
("Prime Advisors"), and Ryan Labs Asset Management Inc. ("Ryan
Labs"). These acquisitions build out our strategy to expand our
capabilities in customized fixed income solutions and alternative
asset classes in SLIM, now part of our asset management
pillar.
- SLF Asset Management's AUM were $630
billion as at December 31,
2015 compared to $501 billion
as at December 31, 2014, which
reflects our acquisitions in SLIM and currency impacts from the
weakening Canadian dollar, partially offset by outflows in MFS and
market depreciation.
- MFS's gross sales were US$75.8
billion and net outflows were US$15.7
billion in 2015.
- SLIM's net sales were $1.5
billion and AUM were $58
billion as at December 31,
2015.
Leader in U.S. group benefits and International high net
worth solutions
- On September 9, 2015, we entered
into an agreement to acquire Assurant, Inc.'s U.S. Employee
Benefits business. The acquisition will increase scale in our life
and disability business, add a leading dental business with the
second largest dental provider network in the U.S., and accelerate
the development of our worksite voluntary business. The acquisition
also includes Disability Reinsurance Management Services, a
business that provides turnkey disability management capabilities
to third-party carriers. The transaction is expected to close by
the end of the first quarter of 2016, subject to regulatory
approvals and customary closing conditions.
- In U.S. Group Benefits, the expense, claims management and
pricing actions initiated in 2014 and continued throughout 2015
improved the profitability of our U.S. life and disability
business. Our U.S. medical stop-loss business continued to generate
strong, profitable growth in 2015, reflecting increased sales and
business in-force, and strong margins. Stop-loss results benefited
from our strong leadership position, enhanced underwriting tools
and expanded distribution.
- We continued to invest in our U.S. Group Benefits business in
2015, adding new capabilities to serve larger customers,
complementing our strength in the small and middle market segments.
We also increased our presence on private exchanges, and now
participate on nine exchanges.
- In International, we re-focused the business on the life
insurance segment, where there is greater opportunity to achieve
growth and profitability and where we will continue to deliver a
strong value proposition to our customers that aligns strategically
to our core competencies. At the same time, the International
wealth business was closed to new sales in December 2015.
__________
(1) |
LIMRA, for the nine months ended September 30,
2015. |
(2) |
Fraser Group, most recently published 2015 Group
Universe Report, based on revenue for the year ended December
31, 2014. |
|
|
Growing Asia through
distribution excellence in higher growth markets
- We are strengthening our presence in Asia through agreements to increase our joint
venture ownership in PVI Sun Life in Vietnam, which was completed on January 7, 2016, and BSLI in India, which is expected to close by the end
of the first quarter of 2016, to 75% and 49%, respectively.
- We celebrated 120 years of business as a leading life insurance
company in the Philippines.
According to figures released by the country's Insurance
Commission, our Philippines
operation has the leadership position among all life insurers in
the Philippines based on premium
income(1).
- In SLF Asia, sales from both individual insurance and wealth
have increased compared to 2014.
Recognition
- For the seventh consecutive year, SLF Inc. has been named among
the 2015 Global 100 Most Sustainable Corporations in the World (the
"Global 100"), announced during the World Economic Forum in
Davos, Switzerland. We are one of
nine Canadian companies across all sectors, and the top-ranked
North American insurance company to make the Global 100.
- Sun Life Financial was one of twelve Canadian companies
selected for the new Standard & Poor's Long Term Value Creation
Global Index. The new index, launched in January 2016, is comprised of approximately 250
stocks that have the potential to create long-term value based on
sustainability criteria and financial quality.
- The Globe and Mail's Board Games ranked Sun Life
Financial #1 with a score of 99 out of a possible 100 points in the
2015 annual rating of governance practices of Canadian Boards of
Directors compiled by the Report on Business.
How We Report Our Results
We manage our operations and report our financial results in five
business segments: Sun Life Financial Canada ("SLF Canada"), Sun
Life Financial United States ("SLF U.S."), Sun Life Financial Asset
Management ("SLF Asset Management", previously reported as MFS),
Sun Life Financial Asia ("SLF Asia"), and Corporate. Information
concerning these segments is included in our annual consolidated
financial statements and accompanying notes ("Annual Consolidated
Financial Statements"), which are prepared using International
Financial Reporting Standards ("IFRS").
In the third quarter of 2015, we renamed our MFS segment to SLF
Asset Management to reflect our acquisitions of Ryan Labs Asset
Management Inc. ("Ryan Labs"), Prime Advisors, Inc. ("Prime
Advisors"), and the Bentall Kennedy group of companies ("Bentall
Kennedy") in 2015. SLF Asset Management includes the operations of
MFS, our global asset management firm, and the operations of Sun
Life Investment Management ("SLIM"), our institutional investment
management business. The acquisitions of Ryan Labs, Prime Advisors and Bentall Kennedy
are included in SLIM.
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 as
alternatives to measures of financial performance determined in
accordance with IFRS. Additional information concerning these
non-IFRS financial measures and reconciliations to the closest IFRS
measures are included in our annual and interim management's
discussion and analysis ("MD&A") and the Supplementary
Financial Information packages that are available on
www.sunlife.com under Investors - Financial results & reports.
Reconciliations to IFRS measures are also available in this
document under the heading Reconciliation of Non-IFRS Financial
Measures.
__________
(1) |
Based on figures released in 2015 by the Insurance
Commission in the Philippines based on premium income in
2014. |
|
|
Operating net income (loss) and financial measures based on
operating net income (loss), including operating earnings per share
("EPS") or operating loss per share, and operating return on equity
("ROE"), are non-IFRS financial measures. Operating net income
(loss) excludes from reported net income the impact of the
following amounts that are not operational or ongoing in nature to
assist investors in understanding our business performance: (i)
certain hedges in SLF Canada that do not qualify for hedge
accounting; (ii) fair value adjustments on MFS's share-based
payment awards; (iii) acquisition, integration and restructuring
costs (including impacts related to acquiring and integrating
acquisitions, previously reported as restructuring and other
related costs(1)); (iv) goodwill and intangible asset
impairment charges; and (v) other items that are not operational or
ongoing in nature. In 2013, operating net income also excluded
impacts related to the sale of our U.S. Annuity
Business(2), consisting of the loss on sale, related
assumption changes and management actions, and related
restructuring costs. Operating EPS also excludes the dilutive
impact of convertible instruments.
Underlying net income (loss) and financial measures based on
underlying net income (loss), consisting of underlying EPS or
underlying loss per share, and underlying ROE, are non-IFRS
financial measures. Underlying net income (loss) removes from
operating net income (loss) the impact of the following items that
create volatility in our results under IFRS, and when removed
assist in explaining our results from period to period: (a) market
related impacts; (b) assumption changes and management actions; and
(c) other items that have not been treated as adjustments to
operating net income, and when removed assist in explaining our
results from period to period. Market related impacts include: (i)
the impact of changes in interest rates that differ from our best
estimate assumptions in the reporting period on investment returns
and the value of derivative instruments used in our hedging
programs, including changes in credit and swap spreads, and any
changes to the assumed fixed income reinvestment rates in
determining the actuarial liabilities; (ii) the impact of changes
in equity markets, net of hedging, above or below our best estimate
assumptions of approximately 2% growth per quarter in the reporting
period and of basis risk inherent in our hedging program for
products that provide benefit guarantees; and (iii) the impact of
changes in the fair value of real estate properties in the
reporting period. Additional information regarding these
adjustments is available in the footnotes to the table included
under the heading Q4 2015 vs. Q4 2014 and 2015 vs. 2014 in the
Financial Summary section in this document. Assumption changes
reflect the impact of revisions to the assumptions used in
determining our liabilities for insurance contracts and investment
contracts. The impact on our liabilities for insurance contracts
and investment contracts of actions taken by management in the
current reporting period, referred to as management actions
include, for example, changes in the prices of in-force products,
new or revised reinsurance on in-force business, or material
changes to investment policies for asset segments supporting our
liabilities. Underlying EPS also excludes the dilutive impact of
convertible instruments.
Other non-IFRS financial measures that we use include adjusted
revenue, administrative services only ("ASO") premium and
deposit equivalents, mutual fund assets and sales, managed fund
assets and sales, premiums and deposits, adjusted premiums and
deposits, assets under management ("AUM"), assets under
administration, and effective income tax rate on an operating net
income basis.
Unless indicated otherwise, all factors discussed in this
document that impact our results are applicable to reported net
income (loss), operating net income (loss) and underlying net
income (loss). Reported net income (loss) refers to Common
shareholders' net income (loss) determined in accordance with
IFRS.
All EPS measures in this document refer to fully diluted EPS,
unless otherwise stated.
Additional Information
Additional information about SLF Inc. can be found in our Annual
Consolidated Financial Statements, annual and interim MD&A and
Annual Information Form ("AIF"). These documents are filed with
securities regulators in Canada
and are available at www.sedar.com. 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&As
and interim consolidated financial statements and accompanying
notes are furnished to the SEC on Form 6-Ks and are available at
www.sec.gov.
__________
(1) |
Beginning in the third quarter of 2015, we renamed the
operating adjustment Acquisition, integration and restructuring
costs from Restructuring and other related costs to accommodate
acquisition and integration adjustments arising from our 2015
activities. |
(2) |
Effective August 1, 2013, we completed the sale of our
U.S. annuities business and certain of our U.S. life insurance
businesses (collectively, our "U.S. Annuity Business"). For
additional information, refer to our 2014 Annual Consolidated
Financial Statements and 2013 annual MD&A. |
Financial Summary
|
Quarterly
results |
|
Full year |
($ millions, unless otherwise
noted) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
2015 |
|
2014 |
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating net income (loss)(1) |
598 |
|
478 |
|
731 |
|
446 |
|
511 |
|
2,253 |
|
1,920 |
|
Reported net income (loss) |
536 |
|
482 |
|
726 |
|
441 |
|
502 |
|
2,185 |
|
1,762 |
|
Underlying net income (loss)(1) |
646 |
|
528 |
|
615 |
|
516 |
|
360 |
|
2,305 |
|
1,816 |
Diluted EPS ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating EPS (diluted)(1) |
0.98 |
|
0.78 |
|
1.19 |
|
0.73 |
|
0.83 |
|
3.68 |
|
3.13 |
|
Reported EPS (diluted) |
0.87 |
|
0.79 |
|
1.18 |
|
0.72 |
|
0.81 |
|
3.55 |
|
2.86 |
|
Underlying EPS (diluted)(1) |
1.05 |
|
0.86 |
|
1.00 |
|
0.84 |
|
0.59 |
|
3.76 |
|
2.96 |
Reported basic EPS ($) |
0.88 |
|
0.79 |
|
1.19 |
|
0.72 |
|
0.82 |
|
3.57 |
|
2.88 |
Avg. common shares outstanding
(millions) |
612 |
|
611 |
|
612 |
|
613 |
|
613 |
|
612 |
|
611 |
Closing common shares outstanding
(millions) |
612.3 |
|
611.2 |
|
610.6 |
|
611.2 |
|
613.1 |
|
612.3 |
|
613.1 |
Dividends per common share ($) |
0.39 |
|
0.38 |
|
0.38 |
|
0.36 |
|
0.36 |
|
1.51 |
|
1.44 |
MCCSR ratio(2) |
240
% |
|
229 % |
|
223 % |
|
216 % |
|
217 % |
|
240
% |
|
217 % |
Return on equity (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating ROE(1) |
12.7
% |
|
10.5 % |
|
16.5 % |
|
10.4 % |
|
12.6 % |
|
12.6
% |
|
12.2 % |
|
Underlying ROE(1) |
13.8
% |
|
11.6 % |
|
13.9 % |
|
12.1 % |
|
8.8 % |
|
12.8
% |
|
11.6 % |
Premiums and deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premium revenue |
3,551 |
|
2,114 |
|
2,523 |
|
2,207 |
|
2,701 |
|
10,395 |
|
9,996 |
|
Segregated fund deposits |
2,523 |
|
2,626 |
|
4,487 |
|
2,411 |
|
2,155 |
|
12,047 |
|
9,249 |
|
Mutual fund sales(1) |
17,598 |
|
16,902 |
|
19,927 |
|
22,124 |
|
17,071 |
|
76,551 |
|
66,619 |
|
Managed fund sales(1) |
8,327 |
|
7,507 |
|
7,002 |
|
8,243 |
|
7,988 |
|
31,079 |
|
29,868 |
|
ASO premium and deposit
equivalents(1) |
1,770 |
|
1,758 |
|
1,781 |
|
1,769 |
|
1,855 |
|
7,078 |
|
6,748 |
Total premiums and
deposits(1) |
33,769 |
|
30,907 |
|
35,720 |
|
36,754 |
|
31,770 |
|
137,150 |
|
122,480 |
Assets under management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General fund assets |
155,413 |
|
151,654 |
|
145,472 |
|
148,725 |
|
139,419 |
|
155,413 |
|
139,419 |
|
Segregated funds |
91,440 |
|
88,248 |
|
90,500 |
|
89,667 |
|
83,938 |
|
91,440 |
|
83,938 |
|
Mutual funds, managed funds and other
AUM(1) |
644,479 |
|
606,256 |
|
572,110 |
|
574,166 |
|
511,085 |
|
644,479 |
|
511,085 |
Total AUM(1) |
891,332 |
|
846,158 |
|
808,082 |
|
812,558 |
|
734,442 |
|
891,332 |
|
734,442 |
Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated debt and innovative capital
instruments(3) |
3,189 |
|
3,389 |
|
2,879 |
|
2,881 |
|
2,865 |
|
3,189 |
|
2,865 |
|
Participating policyholders' equity |
168 |
|
164 |
|
139 |
|
142 |
|
141 |
|
168 |
|
141 |
|
Total shareholders' equity |
21,250 |
|
20,609 |
|
19,997 |
|
19,761 |
|
18,731 |
|
21,250 |
|
18,731 |
Total capital |
24,607 |
|
24,162 |
|
23,015 |
|
22,784 |
|
21,737 |
|
24,607 |
|
21,737 |
(1) |
Represents a non-IFRS financial measure. See Use of
Non-IFRS Financial Measures and Reconciliation of Non-IFRS
Financial Measures. |
(2) |
Minimum Continuing Capital and Surplus Requirements
("MCCSR") ratio of Sun Life Assurance Company of Canada ("Sun Life
Assurance"). |
(3) |
Innovative capital instruments consist of Sun Life
ExchangEable Capital Securities and qualify as capital for Canadian
regulatory purposes. However, under IFRS they are reported as
Senior debentures in our Annual and interim Consolidated Financial
Statements. For additional information, see Capital and Liquidity
Management - Capital in our 2015 annual MD&A. |
Unless indicated otherwise, all factors discussed in this
document that impact our results are applicable to reported net
income (loss), operating net income (loss) and underlying net
income (loss). Reported net income (loss) refers to Common
shareholders' net income (loss) determined in accordance with
IFRS.
Q4 2015 vs. Q4 2014
Our reported net income was $536
million in the fourth quarter of 2015, compared to
$502 million in the fourth quarter of
2014. Operating net income was $598
million for the quarter ended December 31, 2015, compared to $511 million for the same period in the prior
year. Underlying net income was $646
million in the fourth quarter of 2015, compared to
$360 million in the fourth quarter of
2014.
Operating ROE and underlying ROE in the fourth quarter of 2015
were 12.7% and 13.8%, respectively, compared to 12.6% and 8.8% in
the fourth quarter of 2014, respectively.
The following table reconciles our net income measures and sets
out the impact that other notable items had on our net income in
the fourth quarter of 2015 and 2014.
|
Quarterly results |
($ millions, after-tax) |
Q4'15 |
Q4'14 |
Reported net income |
536 |
|
502 |
|
Certain hedges that do not qualify for
hedge accounting in SLF Canada |
10 |
|
(6) |
|
Fair value adjustments on MFS's
share-based payment awards |
(6) |
|
1 |
|
Acquisition, integration and
restructuring costs(1) |
(66) |
|
(4) |
Operating net
income(2) |
598 |
|
511 |
|
Equity market impact |
|
|
|
|
|
Impact from equity market changes |
(1) |
|
(8) |
|
|
Basis risk impact |
(3) |
|
(1) |
|
Equity market
impact(3) |
(4) |
|
(9) |
|
Interest rate impact |
|
|
|
|
|
Impact from interest rate changes |
(16) |
|
(53) |
|
|
Impact of credit spread movements |
(10) |
|
19 |
|
|
Impact of swap spread movements |
(9) |
|
13 |
|
Interest rate
impact(4) |
(35) |
|
(21) |
|
Increases (decreases) from changes in
the fair value of real estate |
3 |
|
9 |
|
Market related impacts |
(36) |
|
(21) |
|
Assumption changes and management
actions |
(12) |
|
172 |
Underlying net
income(2) |
646 |
|
360 |
|
|
|
Impact of other notable items on
our net income: |
|
|
|
Experience related
items(5) |
|
|
|
|
Impact of investment activity on
insurance contract liabilities |
73 |
|
35 |
|
Mortality |
7 |
|
(22) |
|
Morbidity |
12 |
|
(42) |
|
Credit |
18 |
|
5 |
|
Lapse and other policyholder
behaviour |
(4) |
|
(19) |
|
Expenses |
(44) |
|
(58) |
|
Other |
23 |
|
(14) |
(1) |
In the fourth quarter of 2015, Acquisition, integration
and restructuring costs consisted of $63 million related to the
closing of our wealth business in SLF U.S. International to new
sales, which included assumption changes and management actions of
$41 million to reflect assumption updates including the expense
strengthening associated with closing the business, and $3 million
related to our acquisitions and integrations of Bentall Kennedy,
Prime Advisors and Ryan Labs and our pending acquisition of
Assurant EB. In the fourth quarter of 2014, restructuring costs
consisted of transition costs of $4 million related to the sale of
our U.S. Annuity Business. |
(2) |
Represents a non-IFRS financial measure. See Use of
Non-IFRS Financial Measures and Reconciliation of Non-IFRS
Financial Measures. |
(3) |
Equity market impact consists primarily of the effect of
changes in equity markets during the period, net of hedging, that
differ from the best estimate assumptions used in the determination
of our insurance contract liabilities of approximately 2% growth
per quarter in equity markets. Equity market impact also includes
the income impact of the basis risk inherent in our hedging
program, which is the difference between the return on underlying
funds of products that provide benefit guarantees and the return on
the derivative assets used to hedge those benefit
guarantees. |
(4) |
Interest rate impact includes the effect of interest rate
changes on investment returns that differ from best estimate
assumptions, and on the value of derivative instruments used in our
hedging programs. Our exposure to interest rates varies by product
type, line of business and geography. Given the long-term nature of
our business, we have a higher degree of sensitivity in respect of
interest rates at long durations. Interest rate impact also
includes the income impact of changes in assumed fixed income
reinvestment rates and of credit and swap spread
movements. |
(5) |
Experience related items reflect the difference between
actual experience during the reporting period and best estimate
assumptions used in the determination of our insurance contract
liabilities. |
Our reported net income for the fourth quarter of 2015 and 2014
included items that we believe are not operational or ongoing in
nature and which are, therefore, excluded in our calculation of
operating net income. Operating net income for the fourth quarter
of 2015 and 2014 excluded the net impact of certain hedges that do
not qualify for hedge accounting in SLF Canada, fair value
adjustments on MFS's share-based payment awards, and acquisition,
integration and restructuring costs. The net impact of these items
reduced reported net income by $62
million in the fourth quarter of 2015, compared to a
reduction of $9 million in the fourth
quarter of 2014. In addition, our operating net income in the
fourth quarter of 2015 increased by $63
million as a result of the favourable impact of the
weakening Canadian dollar relative to the average exchange rates in
the fourth quarter of 2014.
Our underlying net income for the fourth quarter of 2015 and
2014 excludes market related impacts and assumption changes and
management actions. The net impact of market related impacts and
assumption changes and management actions reduced operating net
income by $48 million in the fourth
quarter of 2015, compared to an increase of $151 million in the fourth quarter of 2014.
Net income in the fourth quarter of 2015 also reflected
favourable impact from investment activity on insurance contract
liabilities largely in SLF Canada and SLF U.S., positive credit and
morbidity and mortality experience, and other experience items
including a change to post-retirement benefit liabilities in SLF
U.S. This was partially offset by unfavourable expense experience
including investment in growing our businesses.
Net income in the fourth quarter of 2014 also reflected
unfavourable impacts of mortality and morbidity, lapse and other
policyholder behaviour and expense experience, mainly
compensation-related and other seasonal costs, partially offset by
gains from investing activity on insurance contract
liabilities.
2015 vs. 2014
Our reported net income was $2,185
million for 2015, compared to $1,762
million in 2014. Operating net income was $2,253 million for 2015, compared to $1,920 million in 2014. Underlying net income was
$2,305 million, compared to
$1,816 million in 2014.
Operating ROE and underlying ROE for 2015 were 12.6% and 12.8%,
respectively, compared to 12.2% and 11.6% in 2014,
respectively.
The following table reconciles our net income measures and sets
out the impact that other notable items had on our net income in
2015 and 2014.
|
Full year |
($ millions, after-tax) |
2015 |
|
2014 |
Reported net income |
2,185 |
|
1,762 |
|
Certain hedges that do not qualify for hedge
accounting in SLF Canada |
21 |
|
(7) |
|
Fair value adjustments on MFS's share-based
payment awards |
(9) |
|
(125) |
|
Acquisition, integration and restructuring
costs(1) |
(80) |
|
(26) |
Operating net
income(2) |
2,253 |
|
1,920 |
|
Equity market impact(3) |
(128) |
|
44 |
|
Interest rate impact(4) |
65 |
|
(179) |
|
Increases (decreases) from changes in the fair
value of real estate |
20 |
|
12 |
|
Market related impacts |
(43) |
|
(123) |
|
Assumption changes and management actions |
(9) |
|
227 |
Underlying net
income(2) |
2,305 |
|
1,816 |
|
|
|
|
Impact of other notable items on
our net income: |
|
|
|
Experience related
items(5) |
|
|
|
|
Impact of investment activity on insurance
contract liabilities |
164 |
|
125 |
|
Mortality |
29 |
|
(38) |
|
Morbidity |
— |
|
(80) |
|
Credit |
72 |
|
48 |
|
Lapse and other policyholder behaviour |
(14) |
|
(44) |
|
Expenses |
(86) |
|
(100) |
|
Other |
2 |
|
8 |
Other items(6) |
— |
|
29 |
(1) |
In 2015, Acquisition, integration and
restructuring costs consisted of $63 million related to the closing
of our wealth business in SLF U.S. International to new sales,
which included assumption changes and management actions of $41
million to reflect assumption updates including the expense
strengthening associated with closing the business, and $17 million
related to our acquisitions and integrations of Bentall Kennedy,
Prime Advisors and Ryan Labs as well as our pending acquisition of
Assurant EB. In 2014, restructuring costs consisted of transition
costs of $26 million related to the sale of our U.S. Annuity
Business. |
(2) |
Represents a non-IFRS financial measure. See Use of
Non-IFRS Financial Measures and Reconciliation of Non-IFRS
Financial Measures. |
(3) |
Equity market impact consists primarily of the effect of
changes in equity markets during the period, net of hedging, that
differ from the best estimate assumptions used in the determination
of our insurance contract liabilities of approximately 2% growth
per quarter in equity markets. Equity market impact also includes
the income impact of the basis risk inherent in our hedging
program, which is the difference between the return on underlying
funds of products that provide benefit guarantees and the return on
the derivative assets used to hedge those benefit
guarantees. |
(4) |
Interest rate impact includes the
effect of interest rate changes on investment returns that differ
from best estimate assumptions, and on the value of derivative
instruments used in our hedging programs. Our exposure to interest
rates varies by product type, line of business and geography. Given
the long-term nature of our business, we have a higher degree of
sensitivity in respect of interest rates at long durations.
Interest rate impact also includes the income impact of changes in
assumed fixed income reinvestment rates and of credit and swap
spread movements. |
(5) |
Experience related items reflect the difference between
actual experience during the reporting period and best estimate
assumptions used in the determination of our insurance contract
liabilities. |
(6) |
In 2014, Other items included non-recurring tax benefits
pertaining to SLF U.K. and MFS. |
Our reported net income for 2015 and 2014 included items that we
believe are not operational or ongoing in nature and which are,
therefore, excluded in our calculation of operating net income.
Operating net income for 2015 and 2014 excluded the net impact of
certain hedges that do not qualify for hedge accounting in SLF
Canada, fair value adjustments on MFS's share-based payment awards,
and acquisition, integration and restructuring costs. The net
impact of these items reduced reported net income by $68 million in 2015, compared to a reduction of
$158 million in 2014. In addition,
our operating net income for the year ended December 31, 2015 increased by $200 million as a result of the favourable impact
of the weakening Canadian dollar relative to the average exchange
rates in 2014.
Our underlying net income for 2015 and 2014 adjusts for market
related impacts and assumption changes and management actions. The
net impact of market related impacts and assumption changes and
management actions reduced operating net income by $52 million in 2015, compared to an increase of
$104 million in the same period in
2014.
Net income in 2015 also reflected favourable impact from
investment activity on insurance contract liabilities, positive
credit and mortality experience, partially offset by unfavourable
expense experience including investment in growing our businesses
and lapse and other policyholder behaviour.
Net income in 2014 also reflected gains from investment activity
on insurance contract liabilities, favourable credit experience and
business growth. This was partially offset by unfavourable impacts
of mortality and morbidity, lapse and other policyholder behaviour
and expense experience.
Annual Goodwill and Intangibles Impairment Testing
The Company completed its annual goodwill and indefinite life
intangible asset impairment testing in the fourth quarter of 2015.
Impairment charges on intangible assets of $4 million were recognized in 2015. No impairment
charges were taken as a result of this testing in 2014.
Acquisitions
Our acquisitions during the fourth quarter of 2015 (and
subsequently in 2016 up to February 10,
2016) are as follows:
On January 7, 2016, we increased
our ownership interest in our joint venture insurance company in
Vietnam, PVI Sun Life Insurance
Company Limited, from 49% to 75% by acquiring from PVI Holdings an
additional 26% of the charter capital.
On December 2, 2015, we entered
into an agreement with Aditya Birla Nuvo Limited ("ABNL"), a part
of the Aditya Birla Group, to increase our ownership in Birla Sun
Life Insurance Company Limited ("BSLI") from 26% to 49%, the
maximum permitted under foreign ownership rules in India, for a consideration of approximately
$340 million. This transaction is
expected to close by the end of the first quarter of 2016, subject
to regulatory approvals and customary closing conditions.
Additional information concerning the acquisitions is provided
in Note 3 of our Annual Consolidated Financial Statements and our
AIF.
Impact of Foreign Exchange Rates
We have operations in many 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, and generate revenues and incur
expenses in local currencies in these jurisdictions, which are
translated to Canadian dollars. The majority of our exposure to
movements in foreign exchange rates is to the U.S. dollar.
Items impacting our Consolidated Statements of Operations, such
as Revenue, Benefits and expenses, and income, are translated to
Canadian dollars using average exchange rates for the respective
period. For items impacting our Consolidated Statements of
Financial Position, such as Assets and Liabilities, period end
rates are used for currency translation purposes. The following
table provides the most relevant foreign exchange rates over the
past five quarters and two years.
Exchange Rate |
|
Quarterly |
|
Full
year |
|
|
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
2015 |
|
2014 |
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollar |
|
1.335 |
|
1.307 |
|
1.229 |
|
1.240 |
|
1.136 |
|
1.278 |
|
1.104 |
|
U.K. Pounds |
|
2.025 |
|
2.025 |
|
1.882 |
|
1.878 |
|
1.797 |
|
1.953 |
|
1.818 |
Period end |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Dollar |
|
1.384 |
|
1.331 |
|
1.249 |
|
1.269 |
|
1.162 |
|
1.384 |
|
1.162 |
|
U.K. Pounds |
|
2.040 |
|
2.014 |
|
1.962 |
|
1.880 |
|
1.809 |
|
2.040 |
|
1.809 |
In general, our net income benefits from a weakening Canadian
dollar and is adversely affected by a strengthening Canadian dollar
as net income from the Company's international operations is
translated back to Canadian dollars. However, in a period of
losses, the weakening of the Canadian dollar has the effect of
increasing the losses. The relative impact of foreign exchange in
any given period is driven by the movement of foreign exchange
rates as well as the proportion of earnings generated in our
foreign operations. We generally express the impact of foreign
exchange on net income on a year-over-year basis.
During the fourth quarter of 2015, our operating net income
increased by $63 million as a result
of the favourable impact of the weakening Canadian dollar in the
fourth quarter of 2015 relative to the average exchange rates in
the fourth quarter of 2014. In addition, during 2015, our operating
net income increased by $200 million
as a result of the favourable impact of the weakening Canadian
dollar in 2015 relative to the average exchange rates in 2014.
Performance by Business Group
SLF Canada
SLF Canada is the Canadian market leader in a number of its
businesses, providing products and services to over six million
Canadians. Our distribution breadth, strong service culture,
technology leadership and brand recognition provide an excellent
platform for growth. SLF Canada has three main business units -
Individual Insurance & Wealth, Group Benefits ("GB") and Group
Retirement Services ("GRS") - which offer a full range of
protection, wealth accumulation, and income products and services
to employers, group members of company sponsored plans and
individuals in their communities across Canada.
|
Quarterly
results |
Full year |
($ millions) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
2015 |
|
2014 |
Underlying net income
(loss)(1) |
269 |
|
174 |
|
250 |
|
201 |
|
181 |
|
894 |
|
823 |
|
Market related impacts |
(56) |
|
(51) |
|
70 |
|
(69) |
|
(54) |
|
(106) |
|
(77) |
|
Assumption changes and management actions |
(13) |
|
14 |
|
11 |
|
3 |
|
(4) |
|
15 |
|
51 |
Operating net income
(loss)(1) |
200 |
|
137 |
|
331 |
|
135 |
|
123 |
|
803 |
|
797 |
|
Hedges that do not qualify for hedge
accounting |
10 |
|
(10) |
|
6 |
|
15 |
|
(6) |
|
21 |
|
(7) |
Reported net income (loss) |
210 |
|
127 |
|
337 |
|
150 |
|
117 |
|
824 |
|
790 |
Underlying ROE (%)(1) |
14.1 |
|
9.0 |
|
12.8 |
|
10.6 |
|
9.7 |
|
11.6 |
|
11.2 |
Operating ROE (%)(1) |
10.5 |
|
7.0 |
|
17.0 |
|
7.1 |
|
6.6 |
|
10.5 |
|
10.8 |
Operating net income (loss) by
business unit(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Insurance &
Wealth(1) |
78 |
|
42 |
|
178 |
|
38 |
|
80 |
|
336 |
|
384 |
|
Group Benefits(1) |
86 |
|
71 |
|
107 |
|
54 |
|
55 |
|
318 |
|
290 |
|
Group Retirement Services(1) |
36 |
|
24 |
|
46 |
|
43 |
|
(12) |
|
149 |
|
123 |
Total operating net income
(loss)(1) |
200 |
|
137 |
|
331 |
|
135 |
|
123 |
|
803 |
|
797 |
(1) |
Represents a non-IFRS financial measure. See Use of
Non-IFRS Financial Measures and Reconciliation of Non-IFRS
Financial Measures. |
|
|
Q4 2015 vs. Q4 2014
SLF Canada's reported net income was $210
million in the fourth quarter of 2015, compared to
$117 million in the fourth quarter of
2014. Operating net income was $200
million, compared to $123
million in the fourth quarter of 2014. Operating net income
in SLF Canada excludes the impact of certain hedges that do not
qualify for hedge accounting in 2015 and 2014, which is set out in
the table above.
Underlying net income in the fourth quarter of 2015 was
$269 million, compared to
$181 million in the fourth quarter of
2014. Underlying net income excludes from operating net income
market related impacts and assumption changes and management
actions, which are set out in the table above. The unfavourable
effect of market related impacts in the fourth quarter of 2015 was
primarily driven by interest rates and equity markets, compared to
the unfavourable effect in the fourth quarter of 2014, primarily
driven by interest rates.
Net income in the fourth quarter of 2015 also reflected gains
from investing activities on insurance contract liabilities in
Individual Insurance & Wealth, new business gains in GRS and
favourable disability experience in GB, partially offset by expense
experience including investment in growing our individual wealth
business.
Net income in the fourth quarter of 2014 also reflected gains
from investing activities on insurance contract liabilities in
Individual Insurance & Wealth and new business gains in GRS,
offset by unfavourable mortality and morbidity experience in GB and
unfavourable policyholder behaviour in Individual Insurance &
Wealth.
In the fourth quarter of 2015, Individual Insurance & Wealth
sales were up 14% in insurance and 13% in wealth compared to the
same period last year due to strong third-party participating
insurance sales, improved SLGI mutual fund sales and sales of our
new segregated fund, Sun Life Guaranteed Investment Funds. Sales of
SLGI retail mutual funds increased over the fourth quarter of 2014,
demonstrating continued strong sales growth and positive
momentum.
GB sales declined 63% compared to the fourth quarter of 2014 due
primarily to a significant large case sale last year. GRS new sales
of $1.3 billion improved $633 million driven by a large $530 million combined annuity buy-in transaction.
GRS retained sales in the quarter of $251
million were lower by $1.6
billion due to a single large retained case in the fourth
quarter of last year. Pension rollover sales of $687 million in the fourth quarter improved 43%
over the fourth quarter of 2014. Assets under administration for
GRS ended the quarter at $80.1
billion, an increase of 8% over 2014.
2015 vs. 2014
Reported net income was $824 million
in 2015, compared to $790 million in
2014. Operating net income was $803
million in 2015, compared to $797
million in 2014. Operating net income in SLF Canada excludes
the impact of certain hedges that do not qualify for hedge
accounting in 2015 and 2014, which is set out in the table
above.
Underlying net income was $894
million in 2015, compared to $823
million in 2014. Underlying net income in SLF Canada
excludes from operating net income market related impacts and
assumption changes and management actions, which are set out in the
table above. The unfavourable effect of market related impacts in
2015 was primarily driven by equity markets and interest rates,
compared to an unfavourable effect in 2014 primarily driven by
interest rates, partially offset by equity markets.
Net income in 2015 also reflected gains from investing activity
on insurance contract liabilities in Individual Insurance &
Wealth and new business gains primarily in GRS. These gains were
partially offset by expense experience including investment in
growing our individual wealth business, and, during the first half
of 2015, unfavourable policyholder behaviour in Individual
Insurance & Wealth. In our GB line of business, the
unfavourable impacts of high cost drug claims, though improving in
the second half of 2015, were more than offset by positive
disability experience.
Net income in 2014 also reflected new business gains in
Individual Insurance & Wealth and GRS and gains from investing
activities on insurance contract liabilities in Individual
Insurance & Wealth. These gains were partially offset by
unfavourable morbidity experience in GB and unfavourable
policyholder behaviour in Individual Insurance & Wealth.
SLF U.S.
SLF U.S. has three business units: Group Benefits, International
and In-force Management. Group Benefits provides protection
solutions to employers and employees including group life,
disability, medical stop-loss and dental insurance products, as
well as a suite of voluntary benefits products. International
serves high net worth clients in international markets, offering
individual life insurance products and serving a closed block of
wealth products(1). In-force Management includes certain
closed individual life insurance products, primarily universal life
and participating whole life insurance.
__________
(1) The International wealth business was closed to new sales
in December 2015.
|
Quarterly results |
|
Full
year |
(US$ millions) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
2015 |
|
2014 |
Underlying net income
(loss)(1) |
118 |
|
73 |
|
85 |
|
65 |
|
9 |
|
341 |
|
240 |
|
Market related impacts |
11 |
|
(16) |
|
23 |
|
8 |
|
16 |
|
26 |
|
(37) |
|
Assumption changes and management actions |
(8) |
|
(8) |
|
— |
|
(54) |
|
121 |
|
(70) |
|
102 |
Operating net income
(loss)(1) |
121 |
|
49 |
|
108 |
|
19 |
|
146 |
|
297 |
|
305 |
|
Acquisition, integration and restructuring
costs(2) |
(46) |
|
— |
|
— |
|
— |
|
— |
|
(46) |
|
— |
Reported net income (loss) |
75 |
|
49 |
|
108 |
|
19 |
|
146 |
|
251 |
|
305 |
Underlying ROE (%)(1) |
17.4 |
|
11.2 |
|
12.7 |
|
9.7 |
|
1.3 |
|
12.8 |
|
8.9 |
Operating ROE (%)(1) |
17.9 |
|
7.5 |
|
16.2 |
|
2.8 |
|
22.0 |
|
11.2 |
|
11.3 |
Operating net
income (loss) by business unit(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group Benefits(1) |
23 |
|
16 |
|
22 |
|
38 |
|
(64) |
|
99 |
|
(55) |
|
International(1) |
46 |
|
67 |
|
(1) |
|
2 |
|
78 |
|
114 |
|
161 |
|
In-force Management(1) |
52 |
|
(34) |
|
87 |
|
(21) |
|
132 |
|
84 |
|
199 |
Total operating net income
(loss)(1) |
121 |
|
49 |
|
108 |
|
19 |
|
146 |
|
297 |
|
305 |
(C$ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying net income
(loss)(1) |
158 |
|
97 |
|
105 |
|
81 |
|
13 |
|
441 |
|
266 |
Operating net income
(loss)(1) |
163 |
|
64 |
|
134 |
|
35 |
|
168 |
|
396 |
|
341 |
Reported net income (loss) |
100 |
|
64 |
|
134 |
|
35 |
|
168 |
|
333 |
|
341 |
(1) |
Represents a non-IFRS financial measure. See Use of
Non-IFRS Financial Measures and Reconciliation of Non-IFRS
Financial Measures. |
(2) |
In 2015, Acquisition, integration and restructuring costs
consisted of the impact of US$46 million related to the closing of
our wealth business in SLF U.S. International to new sales, which
included assumption changes and management actions of US$30 million
to reflect assumption updates including the expense strengthening
associated with closing the business. |
|
|
Q4 2015 vs. Q4 2014
SLF U.S.'s reported net income was C$100
million in the fourth quarter of 2015, compared to
C$168 million in the fourth quarter
of 2014. Operating net income was C$163
million, compared to C$168
million in the fourth quarter of 2014. Operating net income
in SLF U.S. excludes the impact of acquisition, integration and
restructuring costs which included assumption changes and
management actions related to the closing of our International
wealth business to new sales in 2015, which are set out in the
table above. Underlying net income was C$158
million, compared to C$13
million in the fourth quarter of 2014. The favourable impact
of the weakening Canadian dollar relative to average exchange rates
in the fourth quarter of 2014 increased operating net income by
$24 million.
SLF U.S.'s reported net income was US$75
million in the fourth quarter of 2015, compared to
US$146 million in the fourth quarter
of 2014. Operating net income was US$121
million in the fourth quarter of 2015, compared to
US$146 million in the fourth quarter
of 2014. Underlying net income was US$118
million in the fourth quarter of 2015, compared to
US$9 million in the fourth quarter of
2014. Underlying net income excludes from operating net income
market related impacts and assumption changes and management
actions, which are set out in the table above. The favourable
effects of market related impacts in the fourth quarter of 2015
were primarily driven by interest rate and equity market changes,
compared to a favourable effect in the fourth quarter of 2014,
primarily driven by the impact of credit spreads partially offset
by interest rate changes.
Net income in the fourth quarter of 2015 also reflected the
impact in Group Benefits related to pricing increases on new and
renewing business, expense actions, and continued investment in our
disability claim operations. Results also reflected the favourable
impact of investing activities on insurance contract liabilities,
favourable credit experience, net realized gains on the sale of
available-for-sale ("AFS") assets, favourable mortality experience
in International, and a change to post-retirement benefit
liabilities. These items were partially offset by unfavourable
group life claims experience.
Net income in the fourth quarter of 2014 also reflected
unfavourable underwriting experience in Group Benefits,
unfavourable mortality experience in In-force Management and
International, and unfavourable expense experience.
Sales in Group Benefits in the fourth quarter of 2015 decreased
9% compared to the prior year quarter. International life sales in
the fourth quarter increased $13
million compared to the fourth quarter of 2014.
2015 vs. 2014
SLF U.S.'s reported net income was C$333
million in 2015, compared to C$341
million in 2014. Operating net income was C$396 million in 2015, compared to C$341 million in 2014. Operating net income in
SLF U.S. excludes the impact of acquisition, integration and
restructuring costs which included assumption changes and
management actions related to the closing of our International
wealth business to new sales in 2015. Underlying net income was
C$441 million in 2015, compared to
C$266 million in 2014. The favourable
impact of the weakening Canadian dollar in 2015 relative to average
exchange rates in 2014 increased operating net income by
$54 million.
In U.S. dollars, SLF U.S.'s reported net income was US$251 million in 2015, compared to US$305 million in 2014. Operating net income was
US$297 million in 2015, compared to
US$305 million in 2014. Underlying
net income was US$341 million in
2015, compared to US$240 million in
2014. Underlying net income excludes from operating net income
market related impacts and assumption changes and management
actions, which are set out in the table above. The favourable
effect of market related impacts in 2015 was primarily driven by
credit spreads partially offset by equity market changes, compared
to an unfavourable impact in 2014 primarily driven by interest
rates.
Net income in 2015 also reflected the impact in Group Benefits
related to pricing increases on new and renewing business, expense
actions, and continued investment in our disability claim
operations. Results also reflected positive credit experience, net
realized gains on the sale of AFS assets, favourable tax items
related to prior years, the favourable impact of investing
activities on insurance contract liabilities, favourable mortality
experience in International, and a change to post-retirement
benefit liabilities. These items were partially offset by
unfavourable underwriting experience in Group Benefits and
unfavourable mortality and policyholder behaviour experience in
In-force Management.
Net income in 2014 also reflected the impact of unfavourable
mortality experience in group life and In-force Management,
unfavourable underwriting experience in our group disability
business and unfavourable expense experience, partially offset by
the impact of net realized gains on the sale of AFS assets,
favourable credit experience and positive investment activity.
SLF Asset Management
SLF Asset Management is our asset management segment composed of
MFS and SLIM.
MFS is a premier global asset management firm which offers a
comprehensive selection of products and services. Drawing on an
investment heritage that emphasizes collaboration and integrity,
MFS actively manages assets for retail and institutional investors
around the world through mutual and commingled funds, separately
managed accounts, institutional products and retirement
strategies.
SLIM is an institutional investment management business which
delivers customized fixed income solutions, including
liability-driven investing and a suite of alternative,
yield-oriented asset classes, including private fixed income, real
estate and commercial mortgages. SLIM consists of the businesses of
Bentall Kennedy, Prime Advisors, Ryan
Labs and SLIM Inc. that offer a comprehensive set of
capabilities to institutional investors.
|
Quarterly results |
|
Full year |
|
SLF Asset Management (C$
millions) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
2015 |
|
2014 |
|
Operating net income and underlying
net income(1) |
183 |
|
176 |
|
173 |
|
168 |
|
156 |
|
700 |
|
616 |
|
|
Fair value adjustments on MFS's share-based
payment awards |
(6) |
|
28 |
|
(11) |
|
(20) |
|
1 |
|
(9) |
|
(125) |
|
Reported net income (loss) |
177 |
|
204 |
|
162 |
|
148 |
|
157 |
|
691 |
|
491 |
|
Assets under management (C$
billions)(2) |
629.6 |
|
593.0 |
|
558.3 |
|
559.9 |
|
500.7 |
|
629.6 |
|
500.7 |
|
Gross sales (C$
billions)(2) |
24.2 |
|
22.7 |
|
25.3 |
|
28.2 |
|
23.3 |
|
100.5 |
|
91.1 |
|
Net sales (C$
billions)(2) |
(5.8) |
|
(11.2) |
|
(1.8) |
|
(0.2) |
|
(2.2) |
|
(19.0) |
|
1.2 |
|
|
|
|
|
|
|
|
|
MFS (C$ millions) |
|
|
|
|
|
|
|
Operating net income
(loss)(1) |
174 |
|
173 |
|
173 |
|
168 |
|
156 |
|
688 |
|
616 |
|
|
Fair value adjustments on MFS's share-based
payment awards |
(6) |
|
28 |
|
(11) |
|
(20) |
|
1 |
|
(9) |
|
(125) |
|
Reported net income (loss) |
168 |
|
201 |
|
162 |
|
148 |
|
157 |
|
679 |
|
491 |
|
Assets under management (C$
billions)(2) |
571.9 |
|
537.4 |
|
550.2 |
|
559.9 |
|
500.7 |
|
571.9 |
|
500.7 |
|
Gross sales (C$
billions)(2) |
22.0 |
|
21.5 |
|
24.7 |
|
28.2 |
|
23.3 |
|
96.5 |
|
91.1 |
|
Net sales (C$
billions)(2) |
(6.2) |
|
(11.8) |
|
(2.2) |
|
(0.2) |
|
(2.2) |
|
(20.5) |
|
1.2 |
|
(US$ millions) |
|
|
|
|
|
|
|
Operating net income
(loss)(1) |
131 |
|
133 |
|
141 |
|
135 |
|
137 |
|
540 |
|
557 |
|
|
Fair value adjustments on MFS's share-based
payment awards |
(5) |
|
21 |
|
(9) |
|
(16) |
|
— |
|
(9) |
|
(114) |
|
Reported net income (loss) |
126 |
|
154 |
|
132 |
|
119 |
|
137 |
|
531 |
|
443 |
|
Pre-tax operating profit margin
ratio(2) |
38% |
|
40% |
|
40% |
|
40% |
|
39% |
|
40% |
|
41% |
|
Average net assets (US$
billions)(2) |
420.2 |
|
429.5 |
|
450.3 |
|
436.4 |
|
427.3 |
|
434.0 |
|
425.5 |
|
Assets under management (US$
billions)(2)(3) |
413.2 |
|
403.7 |
|
440.5 |
|
441.4 |
|
431.0 |
|
413.2 |
|
431.0 |
|
Gross sales (US$
billions)(2) |
16.5 |
|
16.5 |
|
20.1 |
|
22.8 |
|
20.5 |
|
75.8 |
|
82.5 |
|
Net sales (US$
billions)(2) |
(4.7) |
|
(9.0) |
|
(1.8) |
|
(0.2) |
|
(1.9) |
|
(15.7) |
|
1.2 |
|
Asset appreciation (depreciation) (US$
billions) |
14.2 |
|
(27.8) |
|
0.9 |
|
10.6 |
|
8.1 |
|
(2.1) |
|
17.0 |
|
S&P 500 Index (daily average) |
2,057 |
|
2,027 |
|
2,102 |
|
2,064 |
|
2,012 |
|
2,061 |
|
1,926 |
|
MSCI EAFE Index (daily average) |
1,732 |
|
1,785 |
|
1,906 |
|
1,817 |
|
1,795 |
|
1,809 |
|
1,888 |
|
|
|
|
|
|
|
|
|
SLIM (C$ millions) |
|
|
|
|
|
|
|
Operating net income
(loss)(1) |
9 |
|
3 |
|
|
|
|
12 |
|
|
Reported net income (loss) |
9 |
|
3 |
|
|
|
|
12 |
|
|
Assets under management (C$
billions)(2)(4) |
57.8 |
|
55.6 |
|
8.1 |
|
|
|
57.8 |
|
|
Gross sales (C$
billions)(2)(4) |
2.2 |
|
1.2 |
|
0.6 |
|
|
|
4.0 |
|
|
Net sales (C$
billions)(2)(4) |
0.5 |
|
0.6 |
|
0.4 |
|
|
|
1.5 |
|
|
(1) |
Represents a non-IFRS financial measure that excludes fair
value adjustments on share-based payment awards at MFS. For SLF
Asset Management, operating net income is generally expected to be
equal to underlying net income. See Use of Non-IFRS Financial
Measures and Reconciliation of Non-IFRS Financial
Measures. |
(2) |
Pre-tax operating profit margin ratio, AUM, average net
assets and sales are non-IFRS financial measures. See
Reconciliation of Non-IFRS Financial Measures. |
(3) |
Monthly Information on AUM is provided by MFS in its
Corporate Fact Sheet, which can be found in the About MFS section
of its website at www.mfs.com/CorpFact. |
(4) |
Beginning in the third quarter of 2015, we are reporting
SLIM's AUM, gross sales and net sales in the SLF Asset Management
segment as described under the heading How we report our results.
In the second quarter of 2015, the AUM, gross sales and net sales
were previously included in the Corporate segment. |
|
|
Q4 2015 vs. Q4 2014
SLF Asset Management's reported net income was C$177 million in the fourth quarter of 2015,
compared to C$157 million in the
fourth quarter of 2014. SLF Asset Management had operating net
income and underlying net income of C$183
million in the fourth quarter of 2015, compared to
C$156 million in the fourth quarter
of 2014. Operating net income and underlying net income in SLF
Asset Management excludes the impact of fair value adjustments on
MFS's share-based payment awards, which is set out in the table
above. The favourable impact of the weakening Canadian dollar in
the fourth quarter of 2015 relative to average exchange rates in
the fourth quarter of 2014 increased operating net income by
$27 million.
SLF Asset Management's net income increased in the fourth
quarter of 2015 compared to the same period in 2014 primarily due
to the favourable impact of exchange rates.
In U.S. dollars, MFS's reported net income was US$126 million in the fourth quarter of 2015,
compared to US$137 million in the
fourth quarter of 2014. MFS's operating net income was US$131 million in the fourth quarter of 2015,
compared to US$137 million in the
fourth quarter of 2014. Operating net income in MFS excludes the
impact of fair value adjustments on share-based payment awards,
which is set out in the table above. MFS's operating net income in
U.S. dollars decreased in the fourth quarter of 2015 compared to
the same period in 2014, primarily due to lower average net assets.
MFS's pre-tax operating profit margin ratio was 38% in the fourth
quarter of 2015, down from 39% in the fourth quarter of 2014.
SLIM's reported net income and operating net income was
C$9 million in the fourth quarter of
2015. SLIM's net income in the fourth quarter of 2015 primarily
reflected the 2015 acquisitions in SLIM.
SLF Asset Management's AUM was C$629.6
billion as at December 31,
2015, compared to C$500.7
billion as at December 31,
2014. The increase in SLF Asset Management's AUM was
primarily due to the acquisitions in SLIM in the third quarter of
2015. MFS's AUM was US$413.2 billion
(C$571.9 billion) as at December 31, 2015, compared to US$431.0 billion (C$500.7
billion) as at December 31,
2014. The decrease of US$17.8
billion was primarily driven by gross sales of US$75.8 billion, more than offset by redemptions
of US$91.5 billion and asset
depreciation of US$2.1 billion.
Market volatility during the second half of 2015 contributed to a
decrease in gross sales across MFS's retail and institutional
product lines. In addition, some large institutional clients
rebalanced their investments leading to redemptions that were
larger than usual. These factors were the major drivers to MFS's
net outflows in the third and fourth quarters. MFS's investment
performance remains strong with 75%, 87% and 97% of MFS's retail
fund assets ranked in the top half of their Lipper categories based
on three-, five- and ten-year performance, respectively at
December 31, 2015. SLIM's AUM
was C$57.8 billion as at December 31, 2015.
2015 vs. 2014
SLF Asset Management's reported net income was C$691 million in 2015, compared to C$491 million to 2014. SLF Asset Management had
operating net income and underlying net income of C$700 million in 2015, compared to C$616 million in 2014. Operating net income and
underlying net income in SLF Asset Management excludes the impact
of fair value adjustments on MFS's share-based payment awards,
which is set out in the table above. The favourable impact of the
weakening Canadian dollar in 2015 relative to average exchange
rates in 2014 increased operating net income by $95 million.
MFS's reported net income for 2015 was US$531 million, compared to US$443 million for 2014. MFS's operating net
income was US$540 million in 2015,
compared to US$557 million in 2014.
MFS's operating net income in U.S. dollars for the year ended
December 31, 2015 decreased
compared to the same period in the prior year, primarily due to
compensation costs and continued investment in technological
infrastructure partially offset by higher average net assets.
SLIM's reported net income and operating net income for the year
ended December 31, 2015 was
C$12 million. SLIM's net income in
2015 primarily reflected the results of the 2015 acquisitions in
SLIM.
SLF Asia
SLF Asia operates through subsidiaries in the Philippines, Hong Kong, Indonesia and Vietnam(1) as well as through joint
ventures with local partners in the
Philippines, Indonesia,
Malaysia, China and India. We offer individual life insurance
products in all seven markets, and group benefits and/or pension
and retirement products in the
Philippines, China,
Hong Kong, India, Malaysia and Vietnam. We have also established asset
management companies either directly or through joint ventures and
associates in the Philippines,
China and India. We distribute these protection and
wealth products to middle- and upper-income individuals, groups and
affinity clients through multiple distribution channels.
__________
(1) We increased our ownership stake in PVI Sun Life in
Vietnam from 49% to 75% on
January 7, 2016.
|
Quarterly
results |
Full year |
($ millions) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
2015 |
|
2014 |
|
Underlying net income
(loss)(1) |
52 |
|
67 |
|
71 |
|
62 |
|
50 |
|
252 |
|
174 |
|
|
Market related impacts |
7 |
|
(17) |
|
19 |
|
10 |
|
(8) |
|
19 |
|
(12) |
|
|
Assumption changes and management actions |
14 |
|
27 |
|
3 |
|
(4 ) |
|
20 |
|
40 |
|
20 |
|
Operating net income
(loss)(1) |
73 |
|
77 |
|
93 |
|
68 |
|
62 |
|
311 |
|
182 |
|
Reported net income (loss) |
73 |
|
77 |
|
93 |
|
68 |
|
62 |
|
311 |
|
182 |
|
Underlying ROE (%)(1) |
5.6 |
|
7.8 |
|
8.4 |
|
7.7 |
|
6.8 |
|
7.4 |
|
6.5 |
|
Operating ROE (%)(1) |
8.0 |
|
9.1 |
|
11.0 |
|
8.6 |
|
8.4 |
|
9.2 |
|
6.8 |
|
(1) Represents a non-IFRS financial measure. See Use
of Non-IFRS Financial Measures and Reconciliation of Non-IFRS
Financial Measures.
Q4 2015 vs. Q4 2014
SLF Asia's reported net income and operating net income was
$73 million in the fourth quarter of
2015, compared to reported net income and operating net income of
$62 million in the fourth quarter of
2014. There were no operating net income adjustments in SLF Asia in
2015 or 2014. The favourable impact of the weakening Canadian
dollar in the fourth quarter of 2015 relative to average exchange
rates in the fourth quarter of 2014 increased operating net income
by $9 million.
Underlying net income was $52
million, compared to $50
million in the fourth quarter of 2014. Underlying net income
excludes from operating net income market related impacts and
assumption changes and management actions, which are set out in the
table above. The favourable effect of market related impacts in the
fourth quarter of 2015 were primarily driven by interest rate and
equity market changes, compared to the unfavourable effect in the
fourth quarter of 2014, primarily driven by interest rate and
equity market changes.
Net income in the fourth quarter of 2015 reflected business
growth partially offset by lower gains from the sale of AFS assets
compared to the fourth quarter of 2014.
Total individual life sales in the fourth quarter of 2015 were
up 11% from the fourth quarter of 2014, or down 1% excluding
currency impact. This reflects growth in Malaysia, Hong
Kong, Indonesia and
India, up 40%, 16%, 6% and 4%,
respectively, in local currency, offset by lower sales in
the Philippines, which had
exceptional sales in the fourth quarter of 2014, Vietnam and China. Sales increases were driven by growth
in our agency channel in Hong
Kong, Indonesia and
India, and in bancassurance sales
in Malaysia and Indonesia. SLF Asia wealth sales were
$1.7 billion, compared to
$2.2 billion in the fourth quarter of
2014, driven by decreased sales in China, India
and Hong Kong mainly due to market
volatility.
2015 vs. 2014
Reported net income and operating net income was $311 million in 2015, compared to reported net
income and operating net income of $182
million in 2014. There were no operating net income
adjustments in SLF Asia in 2015 or 2014. The favourable impact of
the weakening Canadian dollar in 2015 relative to average exchange
rates in 2014 increased operating net income by $35 million.
Underlying net income was $252
million, compared to $174
million in 2014. Underlying net income excludes from
operating net income market related impacts and assumption changes
and management actions, which are set out in the table above. The
favourable effect of market related impacts in 2015 was primarily
driven by interest rate and equity market changes, compared to an
unfavourable effect in 2014 primarily driven by interest rates
partially offset by equity market changes.
Net income in 2015 increased compared to 2014, primarily driven
by business growth.
Individual life insurance sales in 2015 were up 16% from 2014,
or increased by 4% excluding currency impact. Sales increased
across the region, except in China
and India, with agency sales
growth in the Philippines,
Indonesia and Vietnam of 16%, 23% and 85%, respectively,
measured in local currency. Sales in Malaysia were up 29%, driven by growth in the
bancassurance and telemarketing channels. Sales in Hong Kong were level with 2014. Wealth sales
increased from 2014, driven by increases in India and China.
Corporate
Corporate includes the results of SLF U.K. and Corporate Support.
Corporate Support includes our Run-off reinsurance business as well
as investment income, expenses, capital and other items that have
not been allocated to our other business segments. SLF U.K. has a
run-off block of business which has been closed to new business and
focuses on supporting existing customers.
|
Quarterly results |
Full year |
($ millions) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
2015 |
|
2014 |
|
Underlying net income
(loss)(1) |
(16) |
|
14 |
|
16 |
|
4 |
|
(40) |
|
18 |
|
(63) |
|
|
Market related impacts |
(2) |
|
9 |
|
(21) |
|
28 |
|
23 |
|
14 |
|
6 |
|
|
Assumption changes and management actions |
(3) |
|
1 |
|
5 |
|
8 |
|
19 |
|
11 |
|
41 |
|
Operating net income
(loss)(1) |
(21) |
|
24 |
|
— |
|
40 |
|
2 |
|
43 |
|
(16) |
|
|
Acquisition, integration and restructuring
costs(2) |
(3) |
|
(14) |
|
— |
|
— |
|
(4) |
|
(17) |
|
(26) |
|
Reported net income (loss) |
(24) |
|
10 |
|
— |
|
40 |
|
(2) |
|
26 |
|
(42) |
|
Operating net
income (loss) by business unit(1) |
|
|
|
|
|
|
|
|
SLF U.K.(1) |
22 |
|
70 |
|
37 |
|
71 |
|
65 |
|
200 |
|
174 |
|
|
Corporate Support(1) |
(43) |
|
(46) |
|
(37) |
|
(31) |
|
(63) |
|
(157) |
|
(190) |
|
Total operating net income
(loss)(1) |
(21) |
|
24 |
|
— |
|
40 |
|
2 |
|
43 |
|
(16) |
(1) |
Represents a non-IFRS financial measure. See Use of
Non-IFRS Financial Measures and Reconciliation of Non-IFRS
Financial Measures. |
(2) |
In 2015, Acquisition, integration and restructuring costs
primarily related to our acquisitions and integrations of Bentall
Kennedy, Prime Advisors and Ryan Labs and our pending acquisition
of Assurant EB. In 2014, restructuring costs consisted of
transition costs related to the sale of our U.S. Annuity
Business. |
|
|
Q4 2015 vs. Q4 2014
Corporate had reported net loss of $24
million in the fourth quarter of 2015, compared to reported
loss of $2 million in the fourth
quarter of 2014. Operating net loss was $21
million in the fourth quarter of 2015, compared to an
operating net income of $2 million in
the same period in the prior year. Operating net income (loss)
excludes acquisition, integration and restructuring costs in 2015
and 2014, which are set out in the table above. The favourable
impact of the weakening Canadian dollar in the fourth quarter of
2015 relative to average exchange rates in the fourth quarter of
2014 decreased operating net loss by $3
million.
Underlying net loss was $16
million, compared to underlying net loss of $40 million in the fourth quarter of 2014.
Underlying net income (loss) excludes from operating net income
(loss) market related impacts and assumption changes and management
actions, which are set out in the table above. The unfavourable
effect of market related impacts in the fourth quarter of 2015 were
primarily driven by equity markets partially offset by interest
rates, compared to the favourable effect in the fourth quarter of
2014, primarily driven by interest rates.
SLF U.K.'s operating net income was $22
million in the fourth quarter of 2015, compared to
$65 million in the fourth quarter of
2014. SLF U.K.'s net income in the fourth quarter of 2015 reflected
unfavourable equity markets and the impact of a tax rate change
partially offset by the impact of interest rates. Net income in the
fourth quarter of 2014 reflected the favourable impact of
assumption changes and management actions and market related
impacts.
Corporate Support had an operating net loss of $43 million in the fourth quarter of 2015,
compared to an operating net loss of $63
million in the fourth quarter of 2014. Net loss in the
fourth quarter of 2015 declined relative to the same period in
2014, primarily due to lower operating expenses.
2015 vs. 2014
The reported net income was $26
million in the Corporate segment in 2015, compared to a
reported net loss of $42 million in
2014. Operating net income was $43
million in 2015, compared to an operating net loss of
$16 million in 2014. Operating net
income (loss) excludes acquisition, integration and restructuring
costs in 2015 and 2014, which are set out in the table above. The
favourable impact of the weakening Canadian dollar in 2015 relative
to average exchange rates in 2014 increased operating net income by
$16 million.
Underlying net income was $18
million in 2015, compared to an underlying net loss of
$63 million in 2014. Underlying net
income (loss) excludes from operating net income (loss) market
related impacts and assumption changes and management actions,
which are set out in the table above. The favourable effect of
market related impacts in 2015 was primarily driven by interest
rates partially offset by equity markets, compared to a favourable
effect in 2014, primarily driven by interest rates and partially
offset by equity markets.
SLF U.K.'s operating net income was $200
million in 2015, compared to $174
million in 2014. Net income in 2015 reflected favourable
effect of interest rates, currency impacts, policyholder behaviour,
mortality experience, and assumption changes and management
actions, partially offset by equity markets. Net income in 2014
included favourable impact of assumption changes and management
actions and non-recurring tax-related items, partially offset by
other unfavourable experience items.
In Corporate Support, the operating net loss was $157 million in 2015, compared to an operating
net loss of $190 million in 2014. The
decrease in loss in 2015 relative to 2014 was due to lower
preferred share dividends, tax benefits, and lower expenses.
Additional Financial Disclosure
Revenue
|
Quarterly
results |
Full year |
($ millions) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
2015 |
|
2014 |
Premiums |
|
|
|
|
|
|
|
|
Gross |
5,163 |
|
3,835 |
|
4,103 |
|
3,723 |
|
4,023 |
|
16,824 |
|
15,499 |
|
Ceded |
(1,612) |
|
(1,721) |
|
(1,580) |
|
(1,516) |
|
(1,322) |
|
(6,429) |
|
(5,503) |
Net premium |
3,551 |
|
2,114 |
|
2,523 |
|
2,207 |
|
2,701 |
|
10,395 |
|
9,996 |
Net investment income |
|
|
|
|
|
|
|
|
Interest and other investment income |
1,327 |
|
1,362 |
|
1,320 |
|
1,279 |
|
1,258 |
|
5,288 |
|
4,941 |
|
Fair value and foreign currency changes on assets
and liabilities |
(788) |
|
(168) |
|
(3,500) |
|
2,495 |
|
2,196 |
|
(1,961) |
|
6,172 |
|
Net gains (losses) on available-for-sale
assets |
39 |
|
47 |
|
46 |
|
96 |
|
49 |
|
228 |
|
202 |
Fee income |
1,438 |
|
1,338 |
|
1,293 |
|
1,255 |
|
1,171 |
|
5,324 |
|
4,453 |
Total revenue |
5,567 |
|
4,693 |
|
1,682 |
|
7,332 |
|
7,375 |
|
19,274 |
|
25,764 |
Adjusted
revenue(1) |
7,030 |
|
5,668 |
|
6,113 |
|
5,783 |
|
6,333 |
|
24,332 |
|
24,157 |
(1) |
Adjusted revenue is a non-IFRS financial measure that
adjusts revenue for the impact of Constant Currency Adjustment, FV
Adjustment, and Reinsurance in SLF Canada's GB Operations
Adjustment as described in Use of Non-IFRS Financial Measures and
Reconciliation of Non-IFRS Financial Measures. |
Revenue was $5.6 billion in the
fourth quarter of 2015, compared to $7.4
billion in the fourth quarter of 2014. The decrease was
primarily driven by decreases in the fair value of fair value
through profit and loss ("FVTPL") assets, partially offset by
higher net premium revenue in SLF Canada and SLF Asia, favourable
currency impact from the weakening Canadian dollar, and higher fee
income in SLF Asset Management and SLF Canada. The currency impact
from the weakening of the Canadian dollar relative to average
exchange rates in the fourth quarter of 2014 increased revenue by
$393 million. Adjusted revenue was
$7.0 billion in the fourth quarter of
2015, compared to $6.3 billion in the
fourth quarter of 2014 primarily due to increased net premium
revenue in SLF Canada and SLF Asia, and higher fee income in SLF
Asset Management and SLF Canada.
Revenue of $19.3 billion in 2015
was down $6.5 billion from revenue of
$25.8 billion in 2014. The decrease
was primarily driven by decreases in the fair value of FVTPL assets
and lower net premium revenue in SLF U.S., partially offset by
favourable currency impact from the weakening Canadian dollar,
higher net premium revenue in SLF Canada and SLF Asia, and
increased fee income in SLF Asset Management and SLF Canada. The
weakening of the Canadian dollar relative to average exchange rates
in 2014 increased revenue by $1.4
billion. Adjusted revenue in 2015 was $24.3 billion, an increase of $0.1 billion from 2014. The increase in adjusted
revenue was primarily attributable to increased net premium revenue
in SLF Canada and SLF Asia, and higher fee income in SLF Asset
Management and SLF Canada, partially offset by lower net premium
revenue in SLF U.S primarily due to lower International sales.
Premiums and Deposits
|
Quarterly
results |
Full year |
($ millions) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
2015 |
|
2014 |
|
Net premium revenue |
3,551 |
|
2,114 |
|
2,523 |
|
2,207 |
|
2,701 |
|
10,395 |
|
9,996 |
|
Segregated fund deposits |
2,523 |
|
2,626 |
|
4,487 |
|
2,411 |
|
2,155 |
|
12,047 |
|
9,249 |
|
Mutual fund sales(1) |
17,598 |
|
16,902 |
|
19,927 |
|
22,124 |
|
17,071 |
|
76,551 |
|
66,619 |
|
Managed fund sales(1) |
8,327 |
|
7,507 |
|
7,002 |
|
8,243 |
|
7,988 |
|
31,079 |
|
29,868 |
|
ASO premium and deposit
equivalents(1) |
1,770 |
|
1,758 |
|
1,781 |
|
1,769 |
|
1,855 |
|
7,078 |
|
6,748 |
|
Total premiums and deposits(1) |
33,769 |
|
30,907 |
|
35,720 |
|
36,754 |
|
31,770 |
|
137,150 |
|
122,480 |
|
Total adjusted premiums and
deposits(1)(2) |
30,937 |
|
28,823 |
|
34,727 |
|
35,276 |
|
32,924 |
|
126,753 |
|
127,045 |
|
(1) |
Represents a non-IFRS financial measure. See Use of
Non-IFRS Financial Measures and Reconciliation of Non-IFRS
Financial Measures. |
(2) |
Adjusted premium and deposits is a non-IFRS financial
measure that excludes from premiums and deposits the impact of
Constant Currency Adjustment and Reinsurance in SLF Canada's GB
Operations Adjustment as described in Use of Non-IFRS Financial
Measures and Reconciliation of Non-IFRS Financial
Measures. |
|
|
Premiums and deposits were $33.8
billion for the quarter ended December 31, 2015, compared to $31.8 billion for the quarter ended December 31, 2014. The weakening of the
Canadian dollar relative to average exchange rates in the fourth
quarter of 2014 increased total premiums and deposits by
approximately $4.0 billion. Total
adjusted premiums and deposits in the fourth quarter of 2015 were
down $2.0 billion compared to the
same period last year. The decrease was mainly due to SLF Asset
Management, with lower fund sales in MFS partially offset by fund
sales in SLIM including the 2015 acquisitions, and increased net
premium revenue and segregated fund deposits in SLF Canada.
Premiums and deposits were $137.2
billion in 2015, compared to $122.5
billion in 2014, primarily attributable to $15.1 billion favourable currency impact from the
weakening Canadian dollar. Adjusted premiums and deposits of
$126.8 billion in 2015 decreased
$0.2 billion compared to 2014. The
decrease was largely driven by lower fund sales in MFS and
decreased net premium revenue in SLF U.S., partially offset by fund
sales in SLIM, increased net premium revenue and fund sales in SLF
Canada and SLF Asia, and higher segregated fund deposits in GRS in
SLF Canada.
Net premium revenue, which reflect gross premiums less amounts
ceded to reinsurers, were $3.6
billion in the fourth quarter of 2015, compared to
$2.7 billion in the fourth quarter of
2014. Net life, health and annuity premium revenues were
$10.4 billion for 2015, up
$0.4 billion from 2014. In both
cases, the increase was primarily attributable to favourable
currency impact from the weakening Canadian dollar, and increases
in SLF Canada and SLF Asia, partially offset by decreases in SLF
U.S.
Segregated fund deposits were $2.5
billion in the fourth quarter of 2015, compared to
$2.2 billion in the fourth quarter of
2014. Segregated fund deposits were $12.0
billion in 2015, compared to $9.2
billion in 2014. In both cases, the change mainly reflected
an increase in GRS in SLF Canada, and favourable currency impact
from the weakening Canadian dollar, partially offset by lower
deposits in SLF Asia.
Sales of mutual funds and managed funds were $25.9 billion in the fourth quarter of 2015, an
increase of $0.8 billion over the
fourth quarter of 2014, reflecting favourable currency impact from
the weakening Canadian dollar, fund sales in SLIM and SLF Canada,
partially offset by lower fund sales in MFS and SLF Asia. Mutual
and managed fund sales were $107.6
billion in 2015, compared to $96.5
billion in 2014, primarily driven by favourable currency
impact from the weakening Canadian dollar and fund sales in SLIM,
SLF Canada and SLF Asia, partially offset by lower fund sales in
MFS.
ASO premium and deposit equivalents of $1.8 billion in the fourth quarter of 2015 were
down $0.1 billion from the fourth
quarter of 2014, mainly reflecting decreases from GRS in SLF
Canada, partially offset by increases in GB in SLF Canada,
Hong Kong in SLF Asia and the
favourable currency impact from the weakening Canadian dollar. ASO
premium and deposit equivalents for 2015 increased $0.4 billion from 2014, primarily attributable to
increases from GB in SLF Canada, Hong
Kong in SLF Asia and the favourable currency impact from the
weakening Canadian dollar, partially offset by decreases from GRS
in SLF Canada.
Sales
In SLF Canada, life and health sales consist of sales of individual
insurance and group benefits products; wealth sales consist of
sales of individual wealth products and sales in GRS. In SLF U.S.,
life and health sales consist of sales by Group Benefits and
individual life sales by International; wealth sales consist of
investment product sales in International(1). In SLF
Asia, life and health sales consist of the individual and group
life and health sales from subsidiaries, joint ventures and
associates based on our proportionate equity interest in
the Philippines, Hong Kong, Indonesia, India, China,
Malaysia, and Vietnam(2); wealth sales consist of
Hong Kong wealth sales,
Philippines mutual fund sales,
wealth sales from the India and
China insurance companies, and
Birla Sun Life Asset Management Company's equity and fixed income
mutual fund sales based on our proportionate equity interest. SLF
Asset Management sales consist of gross sales (inflows) for retail
and institutional clients.
__________
(1) |
The International wealth business was closed to new sales in
December 2015. |
(2) |
We increased our ownership stake in PVI Sun Life in Vietnam
from 49% to 75% on January 7, 2016. |
($ millions) |
Q4'15 |
|
Q4'14 |
|
Life and health
sales(1) |
|
|
SLF Canada |
|
178 |
|
297 |
|
|
SLF U.S. |
|
427 |
|
381 |
|
|
SLF Asia |
|
162 |
|
138 |
|
Total life and health sales |
767 |
|
816 |
|
Wealth sales(1) |
|
|
SLF Canada |
|
3,585 |
|
4,213 |
|
|
SLF U.S. |
|
96 |
|
161 |
|
|
SLF Asia |
|
1,706 |
|
2,222 |
|
Total wealth sales
excluding SLF Asset Management |
5,387 |
|
6,596 |
|
|
SLF Asset Management
sales(1) |
24,247 |
|
23,294 |
|
Total wealth sales |
29,634 |
|
29,890 |
|
(1) |
Represents a non-IFRS financial measure. See Use of
Non-IFRS Financial Measures. |
Total Company life and health sales were $767 million in the fourth quarter of 2015,
compared to $816 million in the same
period last year.
- SLF Canada life and health sales were $178 million in the fourth quarter of 2015,
compared to $297 million in the
fourth quarter of 2014, primarily reflecting lower sales in GB,
partially offset by higher sales in the Individual insurance
business
- SLF U.S. life and health sales were $427
million in the fourth quarter of 2015, compared to
$381 million in the fourth quarter of
2014, largely due to favourable currency impact of $63 million from the weakening Canadian dollar
and higher sales in individual insurance in International,
partially offset by lower sales in Group Benefits
- SLF Asia life and health sales were $162
million in the fourth quarter of 2015, compared to
$138 million in the fourth quarter of
2014, mainly attributable to favourable currency impact of
$18 million from the weakening
Canadian dollar and sales growth in Hong
Kong, Indonesia,
China and Malaysia
Total Company wealth sales were $29.6
billion in the fourth quarter of 2015, compared to
$29.9 billion in the fourth quarter
of 2014.
- SLF Canada wealth sales were $3.6
billion in the fourth quarter of 2015, compared to
$4.2 billion in the fourth quarter of
2014, mainly reflecting lower retained sales in GRS, partially
offset by higher sales in the Individual wealth business
- SLF U.S. wealth sales were $96
million in the fourth quarter of 2015, compared to
$161 million in the fourth quarter of
2014, due to lower wealth product sales in International, partially
offset by favourable currency impact of $14
million from the weakening Canadian dollar
- SLF Asia wealth sales were $1.7
billion in the fourth quarter of 2015, compared to
$2.2 billion in the fourth quarter of
2014, driven by decreased fund sales in China, India
and Hong Kong, partially offset by
the favourable currency impact of $0.2
billion from the weakening Canadian dollar
- SLF Asset Management gross sales were $24.2 billion in the fourth quarter of 2015,
compared to $23.3 billion in the
fourth quarter of 2014, largely reflecting favourable currency
impact and the addition of Ryan
Labs, Prime Advisors and Bentall Kennedy, partially offset
by lower fund sales from MFS
Assets Under Management
AUM consist of general funds, segregated funds and other AUM. Other
AUM includes mutual funds and managed funds, which include
institutional and other third-party assets managed by the
Company.
AUM were $891.3 billion as at
December 31, 2015, compared to
AUM of $734.4 billion as at
December 31, 2014. The increase
in AUM of $156.9 billion between
December 31, 2015 and
December 31, 2014 resulted
primarily from:
(i) |
an increase of $111.3 billion from the favourable currency
impact of the weakening of the Canadian dollar against foreign
currencies compared to the prior period exchange rates; |
(ii) |
$52.3 billion increase from the acquisition of Ryan Labs, Prime
Advisors and Bentall Kennedy; and |
(iii) |
business growth and other of $8.4 billion; partially offset
by |
(iv) |
net outflows of mutual, managed and segregated funds of $12.2
billion; |
(v) |
a decrease of $2.0 billion from the change in value of FVTPL
assets and liabilities; and |
(vi) |
unfavourable market movements on the value of mutual funds,
managed funds and segregated funds of $0.9 billion. |
|
|
Changes in the Statements of Financial Position and in
Shareholders' Equity
Total general fund assets were $155.4
billion as at December 31,
2015, compared to $139.4
billion as at December 31,
2014. The increase in general fund assets from December 31, 2014 was primarily a result of
currency impact of the weakening Canadian dollar of $10.8 billion and business growth of $7.2 billion, partially offset by a $2.0 billion decrease from the change in value of
FVTPL assets and liabilities.
Insurance contract liabilities (excluding other policy
liabilities and assets) of $103.7
billion as at December 31,
2015 increased by $8.5 billion
compared to December 31, 2014,
mainly due to currency impact from the weakening Canadian dollar
and balances arising from new policies, partially offset by changes
in balances on in-force policies (which includes fair value changes
on FVTPL assets supporting insurance contract liabilities).
Shareholders' equity, including preferred share capital, was
$21.3 billion as at December 31, 2015, compared to $18.7 billion as at December 31, 2014. The $2.6 billion increase in shareholders' equity was
primarily due to:
(i) |
shareholders' net income of $2,285 million in 2015, before
preferred share dividends of $100 million; |
(ii) |
an increase of $1,645 million from the weakening of the
Canadian dollar relative to foreign currencies; and |
(iii) |
proceeds of $88 million from the issuance of common shares
through the Canadian dividend reinvestment and share purchase plan,
$34 million issued as consideration for business acquisition, $44
million from stock options exercised and $3 million from
stock-based compensation; partially offset by |
(iv) |
common share dividend payments of $918 million; |
(v) |
common share repurchases of $212 million; |
(vi) |
net change in AFS assets in other comprehensive income ("OCI")
of $298 million; and |
(vii) |
changes in liabilities for defined benefit plans in OCI of $49
million. |
|
|
Income Taxes
In the fourth quarter of 2015, on a reported basis we had an Income
tax expense of $180 million on Income
before taxes of $741 million, which
resulted in an effective income tax rate of 24.3%. This compares to
an Income tax expense of $124 million
on Income before taxes of $658
million and an effective income tax rate of 18.8% in the
fourth quarter of 2014.
On an operating basis(1), in the fourth quarter of
2015, we had an income tax expense of $190
million on our operating income of $826 million, representing an effective income
tax rate of 23.0%. This compares to an income tax expense of
$113 million on operating income
before taxes of $665 million and an
effective income tax rate of 17.0% in the fourth quarter of 2014.
The effective tax rate calculated on an operating basis excludes
amounts attributable to participating policyholders and
non-operating items.
The provincial corporate tax rate increased in Alberta, Canada effective the second quarter
of 2015, and as a result, our statutory tax rate increased from
26.5% to 26.75% for 2015 and future years. Our statutory tax rate
is normally reduced by various tax benefits, such as lower taxes on
income subject to tax in foreign jurisdictions, a range of tax
exempt investment income and other sustainable tax benefits that
are expected to decrease our effective tax rate to a range of 18%
to 22%.
Our effective tax rate in the fourth quarter of 2015 was above
the expected range mainly due to the impact of a tax rate change in
the U.K., partially offset by adjustments with respect to prior
years and resolution of tax audits.
Our effective tax rate in the fourth quarter of 2014 was further
reduced due to favourable adjustments to taxes of prior years,
which were offset by an accrual of interest expense related to
taxes recorded in pre-tax income.
__________
(1) Our effective income tax rate on an operating net income
basis is calculated using operating net income and income tax
expense associated with operating net income.
Investments
We had total general fund invested assets of $138.0 billion as at December 31, 2015, compared to $125.2 billion as at December 31, 2014. The increase in general
fund invested assets of $12.8 billion
was primarily due to the currency impact of the weakening Canadian
dollar and operating activity partially offset by a decrease from
changes in fair value. Our general fund is primarily invested in
fixed income instruments, including debt securities and mortgages
and loans, with 85.5% of the general fund invested assets invested
in cash and fixed income investments. Equity securities and
investment properties represented 3.8% and 4.7% of the portfolio,
respectively and the remaining 6.0% of the portfolio consisted of
policy loans, derivative assets and other invested assets. Our
general fund invested assets are well diversified across investment
types, geographies and sectors.
The following table sets out the composition of our general fund
invested assets(1).
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
December 31, 2014 |
|
($ millions) |
|
Carrying
value |
|
% of total
carrying value |
|
Carrying
value |
|
% of total
carrying value |
|
Cash, cash equivalents and short-term
securities |
|
8,983 |
|
6.5 % |
|
6,818 |
|
5.4 % |
|
Debt securities - FVTPL |
|
56,785 |
|
41.2 % |
|
53,127 |
|
42.4 % |
|
Debt securities - AFS |
|
13,111 |
|
9.5 % |
|
13,087 |
|
10.5 % |
|
Equity securities - FVTPL |
|
4,426 |
|
3.2 % |
|
4,357 |
|
3.5 % |
|
Equity securities - AFS |
|
887 |
|
0.6 % |
|
866 |
|
0.7 % |
|
Mortgages and loans |
|
39,103 |
|
28.3 % |
|
33,679 |
|
26.9 % |
|
Derivative assets |
|
1,866 |
|
1.4 % |
|
1,839 |
|
1.5 % |
|
Other invested assets |
|
3,111 |
|
2.3 % |
|
2,375 |
|
1.9 % |
|
Policy loans |
|
3,151 |
|
2.3 % |
|
2,895 |
|
2.3 % |
|
Investment properties |
|
6,540 |
|
4.7 % |
|
6,108 |
|
4.9 % |
|
Total invested assets |
|
137,963 |
|
100 % |
|
125,151 |
|
100 % |
|
(1) |
The invested asset values and ratios presented are based
on the carrying value of the respective asset categories. The
carrying values
for FVTPL and AFS invested assets are generally equal to their
fair values. For invested assets supporting insurance contracts, in
the event of
default, if the amounts recovered are insufficient to satisfy
the related insurance contract liability cash flows that the assets
are intended to
support, credit exposure may be greater than the carrying
value of the assets. |
|
|
Sector Exposure
Our general fund invested assets are well diversified across
investment types, geographies and sectors.
As at December 31, 2015, our
exposure to the energy sector for debt securities and corporate
loans was $5.6 billion, of which 93%
was rated investment grade ($5.5
billion, of which 98% was rated investment grade as at
December 31, 2014). Approximately 45%
of our energy sector exposure was invested in pipeline, storage and
transportation entities, approximately 15% was invested in
integrated oil and gas entities, and the remaining exposure was
invested in companies involved in exploration and production,
refining and drilling and servicing, which included approximately
7% in drilling and oil field services.
Our mortgage and real estate portfolio includes office,
industrial, retail, and multi-family buildings occupied by tenants
in diversified industries. Our most significant property exposure
to the oil and gas sector was located in Alberta, which represented approximately 8% of
our mortgage portfolio and approximately 21% of our real estate
portfolio. Within our Alberta
portfolio, there has been no significant change in exposure to
energy sector tenants and there have been no material indications
of stress such as arrears, mortgage defaults and tenant
insolvencies. However, as the period of weak energy prices
continues, market fundamentals within the province are
deteriorating, resulting in rising vacancy levels and lower rental
rates, which should they continue, may lead to further reductions
in valuations particularly in the office sector. We continue to
closely monitor the impact of these market changes in the energy
sector on the real estate and mortgage portfolios.
As at December 31, 2015, our
exposure to the metals and mining sub-sector consists of debt
securities and was $0.8 billion, of
which 97% is investment grade and is diversified by several
different commodity types. The metals and mining sub-sector is
included in the Materials line of the Debt Securities by Issuer and
Industry Sector table included in the Debt Securities section of
our 2015 annual MD&A.
Debt Securities
Our debt securities portfolio is actively managed through a regular
program of purchases and sales aimed at optimizing yield, quality
and liquidity, while ensuring that it remains well diversified and
duration-matched to insurance contract liabilities. As at
December 31, 2015, we held
$69.9 billion of debt securities,
representing 50.7% of our total invested assets, compared to
$66.2 billion representing 52.9% as
at December 31, 2014. Debt securities
with a credit rating of "A" or higher represented 67.9% of the
total debt securities as at December 31, 2015, consistent with
December 31, 2014. Debt
securities with a credit rating of "BBB" or higher represented
96.9% of total debt securities as at December 31, 2015, compared to 97.3% as at
December 31, 2014.
Corporate debt securities not issued or guaranteed by sovereign,
regional and municipal governments represented 66.0% of our total
debt securities as at December 31,
2015, compared to 66.7% as at December 31, 2014. Total government issued
or guaranteed debt securities as at December 31, 2015 were $23.8 billion, compared to $22.1 billion as at December 31, 2014. With the exception of
certain countries where we have business operations, including
Canada, the United States, the
United Kingdom and the Philippines, our exposure to debt
securities from any single country did not exceed 1% of total
invested assets on our Consolidated Statements of Financial
Position as at December 31,
2015.
The carrying value of debt securities of governments and
financial institutions by geographic location is presented in the
following table.
Debt Securities of Governments and Financial Institutions by
Geography
|
|
|
|
|
|
|
|
|
|
|
December 31,
2015 |
|
|
|
December 31,
2014 |
|
($ millions) |
Government issued or
guaranteed |
|
Financials |
|
|
Government issued or
guaranteed |
|
Financials |
|
Canada |
15,411 |
|
1,826 |
|
|
14,650 |
|
2,391 |
|
United States |
1,702 |
|
6,046 |
|
|
1,590 |
|
5,992 |
|
United Kingdom |
2,561 |
|
1,937 |
|
|
2,484 |
|
1,992 |
|
Philippines |
2,745 |
|
42 |
|
|
2,575 |
|
17 |
|
Eurozone(1) |
237 |
|
828 |
|
|
171 |
|
762 |
|
Other |
1,111 |
|
1,577 |
|
|
611 |
|
1,390 |
|
Total |
23,767 |
|
12,256 |
|
|
22,081 |
|
12,544 |
|
|
|
|
|
|
|
|
|
(1) |
Our investments in Eurozone countries primarily included
the Netherlands, Spain, Germany and France. We did not have any
direct
exposure to Greece. Of our exposure to Eurozone countries,
99.1% was rated investment grade and 77.4% had a credit rating of
"A" or higher. |
|
|
Our gross unrealized losses as at December 31, 2015 for FVTPL and AFS debt
securities were $1.1 billion and
$0.22 billion, respectively, compared
with $0.22 billion and $0.04 billion, respectively, as at December 31, 2014. The increase in gross
unrealized losses was largely due to the impact of rising interest
rates, including credit spreads, primarily in the U.S.
Our debt securities as at December 31, 2015 included $12.3 billion invested in the financial sector,
representing approximately 17.5% of our total debt securities, or
8.9% of our total invested assets. This compares to $12.5 billion, or 18.9% of the total debt
security portfolio, or 10.0% of our total invested assets as at
December 31, 2014.
Our debt securities as at December 31, 2015 included $4.9 billion of asset-backed securities reported
at fair value, representing 7.1% of our total debt securities, or
3.6% of our total invested assets. This compares to $4.4 billion representing 6.7% of total debt
securities or 3.6% of our total invested assets as at December 31, 2014.
Mortgages and Loans
Mortgages and loans disclosures in this section are presented at
their carrying value on our Consolidated Statements of Financial
Position. As at December 31,
2015, we had a total of $39.1
billion in mortgages and loans, representing 28.3% of our
total invested assets, compared to $33.7
billion representing 26.9% as at December 31, 2014. Our mortgage portfolio
consisted almost entirely of first mortgages, and our corporate
loan portfolio consisted of private placement assets.
The carrying value of mortgages and loans by geographic location
is presented in the following table.(1)
Mortgages and Loans by Geography
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015 |
|
December 31, 2014 |
|
($ millions) |
Mortgages |
|
Loans |
|
Total |
|
Mortgages |
|
Loans |
|
Total |
|
Canada |
8,067 |
|
13,271 |
|
21,338 |
|
7,847 |
|
12,308 |
|
20,155 |
|
United States |
6,725 |
|
7,442 |
|
14,167 |
|
5,563 |
|
5,196 |
|
10,759 |
|
United Kingdom |
— |
|
886 |
|
886 |
|
1 |
|
776 |
|
777 |
|
Other |
— |
|
2,712 |
|
2,712 |
|
— |
|
1,988 |
|
1,988 |
|
Total |
14,792 |
|
24,311 |
|
39,103 |
|
13,411 |
|
20,268 |
|
33,679 |
|
(1) |
The geographic location for mortgages is based on the
location of the property and for loans it is
based on the country of the creditor's parent. |
|
|
As at December 31, 2015, we
held $14.8 billion of mortgages,
compared to $13.4 billion as at
December 31, 2014. Our mortgage
portfolio consists entirely of commercial mortgages, including
retail, office, multi-family, industrial and land properties. As at
December 31, 2015, 24.8% of our
commercial mortgage portfolio consisted of multi-family residential
mortgages. Our uninsured commercial portfolio had a weighted
average loan-to-value ratio of approximately 55% as at December 31, 2015, compared to approximately 54%
as at December 31, 2014. While we
generally require a maximum loan-to-value ratio of 75% at issuance,
we may invest in mortgages with a higher loan-to-value ratio in
Canada if the mortgage is insured.
The estimated weighted average debt service coverage for our
uninsured commercial portfolio is 1.73 times. Of the loans in the
Canadian commercial mortgage portfolio, 31.0% were insured by the
Canada Mortgage and Housing Corporation.
As at December 31, 2015, we
held $24.3 billion of corporate
loans, compared to $20.3 billion as
at December 31, 2014. In the
current low interest rate environment, our strategy is to continue
to focus our efforts on the origination of new private placement
assets. Private placement assets provide diversification by type of
loan, industry segment and borrower credit quality. The loan
portfolio consists of senior secured and unsecured loans to large-
and mid-market sized corporate borrowers, securitized lease/loan
obligations secured by a variety of assets, and project finance
loans in sectors such as power and infrastructure.
The carrying value and allowance for mortgages and loans past
due or impaired is presented in the following table.
Mortgages and Loans Past Due or Impaired
|
December 31, 2015 |
|
Gross carrying value |
|
|
|
Allowance for losses |
($ millions) |
Mortgages |
|
Loans |
|
Total |
|
|
Mortgages |
|
|
Loans |
|
Total |
|
Not past due |
14,690 |
|
24,279 |
|
38,969 |
|
|
— |
|
|
— |
|
— |
|
Past due: |
|
|
|
|
|
|
|
|
|
Past due less than 90 days |
7 |
|
32 |
|
39 |
|
|
— |
|
|
— |
|
— |
|
|
Past due 90 days or more |
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
Impaired |
137 |
|
7 |
|
144 |
|
|
42 |
|
(1) |
7 |
|
49 |
|
Total(1) |
14,834 |
|
24,318 |
|
39,152 |
|
|
42 |
|
|
7 |
|
49 |
|
|
December 31, 2014 |
|
|
Gross carrying value |
|
|
Allowance for losses |
|
($ millions) |
Mortgages |
|
Loans |
|
Total |
|
|
Mortgages |
|
|
Loans |
|
Total |
|
Not past due |
13,316 |
|
20,248 |
|
33,564 |
|
|
— |
|
|
— |
|
— |
|
Past due: |
|
|
|
|
|
|
|
|
|
Past due less than 90 days |
14 |
|
— |
|
14 |
|
|
— |
|
|
— |
|
— |
|
|
Past due 90 days or more |
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
Impaired |
118 |
|
36 |
|
154 |
|
|
37 |
|
(1) |
16 |
|
53 |
|
Total(1) |
13,448 |
|
20,284 |
|
33,732 |
|
|
37 |
|
|
16 |
|
53 |
|
(1) |
Includes $21 million of sectoral provisions as at
December 31, 2015 and $18 million of sectoral provisions as at
December 31, 2014. |
|
|
Our impaired mortgages and loans, net of allowance for losses,
were $95 million as at December 31, 2015, compared to $101 million as at December 31, 2014. The majority of impaired
mortgages are in the United
States.
Asset Default Provision
We make provisions for possible future credit events in the
determination of our insurance contract liabilities. The amount of
the provision for asset default included in insurance contract
liabilities is based on possible reductions in future investment
yields that vary by factors such as type of asset, asset credit
quality (rating), duration and country of origin. To the extent
that an asset is written off, or disposed of, any amounts that were
set aside in our insurance contract liabilities for possible future
asset defaults in respect of that asset are released.
Our asset default provision reflects the provision relating to
future credit events for fixed income assets currently held by the
Company that support our insurance contract liabilities. Our asset
default provision as at December 31,
2015 was $2,077 million
compared to $1,916 million as at
December 31, 2014. The increase
of $161 million was primarily due to
the weakening of the Canadian dollar and increases in the provision
for assets purchased net of dispositions, partially offset by the
release of provisions on fixed income assets supporting our
insurance contract liabilities.
Derivative Financial Instruments
The values associated with our derivative instruments are presented
in the following table. Notional amounts serve as the basis for
payments calculated under derivatives contracts and are not
exchanged.
Derivative Instruments
|
|
|
|
|
|
($ millions) |
December 31, 2015 |
|
December 31, 2014 |
|
Net fair value |
(1,512) |
|
236 |
|
Total notional amount |
57,845 |
|
48,211 |
|
Credit equivalent amount |
607 |
|
738 |
|
Risk-weighted credit equivalent amount |
7 |
|
7 |
|
|
|
|
The total notional amount of our derivatives increased to
$57.8 billion as at December 31, 2015 from $48.2 billion as at December 31, 2014. The increase in the total
notional amount was primarily due to an increase of $5.9 billion in interest rate contracts for
duration matching activities and an increase of $0.9 billion in currency contracts hedging
foreign currency assets. The notional amount of derivatives
increased a further $2.0 billion due
to the conversion of foreign currency notional balances into
Canadian dollars.
The net fair value of derivatives was a net liability of
$1,512 million as at December 31, 2015 compared to a net asset of
$236 million as at December 31, 2014. The decrease in net fair
value was due primarily to the impact of the weakening of the
Canadian dollar against the U.S. dollar on foreign exchange
contracts.
Capital Management
Our total capital consists of subordinated debt and other capital,
participating policyholders' equity and total shareholders' equity
which includes common shareholders' equity and preferred
shareholders' equity. As at December 31, 2015, our total capital was
$24.6 billion, up from $21.7 billion as at December 31, 2014. The increase in total
capital was primarily the result of common shareholders' net income
of $2,185 million, other
comprehensive income of $1,295
million, and the issuance of $500
million of subordinated debentures, partially offset by the
$830 million of dividends on common
shares (net of the Canadian dividend reinvestment and share
purchase plan), $212 million of
common share purchases under our normal course issuer bid, and
redemption of US$150 million of
subordinated debentures.
The legal entity, SLF Inc. (the ultimate parent company), and
its wholly owned holding companies had $990
million in cash and other liquid assets as at December 31, 2015 ($1,827 million as at December 31, 2014). The decrease in cash and
liquid assets in 2015 was primarily attributable to the
acquisitions during 2015, including the purchase of $1,250 million of Sun Life Assurance preferred
shares in connection with the funding of the pending acquisition of
Assurant EB, as well as other operating and financing activities.
Liquid assets as noted above, include cash and cash equivalents,
short-term investments, and publicly traded securities.
On June 30, 2015, 6.0 million
Class A Non-Cumulative 5-Year Rate Reset Preferred Shares Series 8R
of SLF Inc. ("Series 8R Shares") were converted into Class A
Non-Cumulative Floating Rate Preferred Shares Series 9QR of SLF
Inc. ("Series 9QR Shares") through a shareholder option, on a
one-for-one basis. After the conversion, 5.2 million Series 8R
Shares and 6.0 million Series 9QR Shares were outstanding. For
additional information, refer to Note 16 in our Annual Consolidated
Financial Statements.
On September 25, 2015, SLF Inc.
issued $500 million principal amount
of Series 2015-1 Subordinated Unsecured 2.60% Fixed/Floating
Debentures due 2025. The net proceeds will be used to partially
fund the acquisition of Assurant EB and may also be used for
general corporate purposes.
On November 23, 2015, SLF Inc.
redeemed all of the outstanding $600
million principal amount of Series A Senior Unsecured
4.80% Fixed/Floating Debentures ("the Series A Senior Debentures")
due 2035 in accordance with the terms of the Series A Senior
Debentures.
On December 15, 2015, the
US$150 million principal amount of
Subordinated Unsecured 7.25% Debentures due 2015 issued by
Sun Canada Financial Company matured
and was repaid.
On November 10, 2014, SLF Inc.
launched a normal course issuer bid under which it was authorized
to purchase up to 9 million common shares between November 10, 2014 and November 9, 2015, and subsequently the normal
course issuer bid was not renewed. During 2015, SLF Inc. purchased
and cancelled 5.3 million common shares at a total cost of
$212 million. During the fourth
quarter of 2014, SLF Inc. repurchased and cancelled approximately 1
million common shares at a total cost of $39
million under this share repurchase program.
Dividends payable to participants in the Canadian Dividend
Reinvestment and Share Purchase Plan are used to purchase common
shares either from treasury or in the open market, at our
discretion. Commencing with the dividends payable on March 31, 2016 and until further notice, common
shares purchased under the Plan will be purchased on the open
market.
Sun Life Assurance's MCCSR ratio was 240% as at December 31, 2015, which includes the issuance of
$1,250 million of preferred shares by
Sun Life Assurance to SLF Inc. in connection with the funding of
the pending acquisition of Assurant EB, compared to 217% as at
December 31, 2014. Excluding this
impact, the increase in the MCCSR ratio over the period primarily
results from earnings net of dividends to SLF Inc., partially
offset by capital used to support new business and the impact of a
partial recapture of a reinsurance arrangement.
Risk Management
We have established a Risk Management Framework to assist in
identifying, measuring, managing, monitoring and reporting of
risks. The Risk Management Framework covers all risks and these
have been grouped into six major categories: credit, market,
insurance, business and strategic, operational and liquidity
risks.
Through our enterprise risk management processes, we oversee the
various risk factors identified in the Risk Management Framework
and provide reports to senior management and to the Board
Committees at least quarterly. Our enterprise risk management
processes and risk factors are described in our annual MD&A and
AIF.
When referring to segregated funds in this section, it is
inclusive of segregated fund guarantees, variable annuities and
investment products and includes Run-off reinsurance in our
Corporate business segment.
Market Risk Sensitivities
Our earnings are affected by the determination of policyholder
obligations under our annuity and insurance contracts. These
amounts are determined using internal valuation models and are
recorded in our Annual Consolidated Financial Statements, primarily
as Insurance contract liabilities. The determination of these
obligations requires management to make assumptions about the
future level of equity market performance, interest rates, credit
and swap spreads and other factors over the life of our products.
Differences between our actual experience and our best estimate
assumptions are reflected in our Annual Consolidated Financial
Statements. Refer to the section Additional Cautionary Language and
Key Assumptions Related to Sensitivities for important additional
information regarding these estimates.
The market value of our investments in fixed income and equity
securities fluctuates based on movements in interest rates and
equity markets. The market value of fixed income assets designated
as AFS that are held primarily in our surplus segment increases
(decreases) with declining (rising) interest rates. The market
value of equities designated as AFS and held primarily in our
surplus segment increases (decreases) with rising (declining)
equity markets. Changes in the market value of AFS assets flow
through OCI and are only recognized in net income when realized
upon sale, or when considered impaired. The amount of realized
gains (losses) recorded in net income in any period is equal to the
unrealized gains (losses) or OCI position at the start of the
period plus the change in market value during the current period up
to the point of sale for those securities that were sold during the
period. The sale or impairment of AFS assets held in surplus can
therefore have the effect of modifying our net income
sensitivity.
We realized $39 million (pre-tax)
in net gains on the sale of AFS assets during the fourth quarter of
2015 and $228 million (pre-tax) in
2015 ($49 million pre-tax in the
fourth quarter of 2014 and $202
million pre-tax in 2014). The net unrealized gains or OCI
position on AFS fixed income and equity assets were $53 million and $197
million, respectively, after-tax as at December 31, 2015 ($340
million and $208 million,
respectively, after-tax as at December 31,
2014).
The following table sets out the estimated immediate impact on,
or sensitivity of our net income, our OCI, and Sun Life Assurance's
MCCSR ratio to certain instantaneous changes in interest rates and
equity market prices as at December 31,
2015 and December 31,
2014.
Interest Rate and Equity Market Sensitivities
As at December 31,
2015(1)
($ millions, unless otherwise noted) |
|
|
|
|
|
|
Interest rate
sensitivity(2)(6) |
100 basis point
decrease
|
|
50 basis point
decrease |
|
50 basis point
increase |
|
100 basis point
increase |
|
Potential impact on net
income(3)(6) |
$ |
|
(300) |
|
$ |
|
(100) |
|
$ |
|
50 |
|
$ |
|
50 |
|
Potential impact on OCI |
$ |
|
500 |
|
$ |
|
250 |
|
$ |
|
(250) |
|
$ |
|
(500) |
|
Potential impact on MCCSR(4) |
10% points
decrease |
|
4% points
decrease |
|
4% points
increase |
|
7% points
increase |
Equity markets
sensitivity(5) |
25% decrease |
|
10% decrease |
|
10% increase |
|
25% increase |
|
Potential impact on net income(3) |
$ |
|
(350) |
|
$ |
|
(100) |
|
$ |
|
100 |
|
$ |
|
300 |
|
Potential impact on OCI |
$ |
|
(150) |
|
$ |
|
(50) |
|
$ |
|
50 |
|
$ |
|
150 |
|
Potential impact on MCCSR(4) |
4% points
decrease |
|
1% points
decrease |
|
2% points
increase |
|
4% points
increase |
|
|
|
|
|
|
|
|
As at December 31,
2014(1)
($ millions, unless otherwise noted) |
|
|
|
|
|
|
Interest rate
sensitivity(2)(6) |
100 basis point
decrease |
|
50 basis point
decrease |
|
50 basis point
increase |
|
100 basis point
increase |
|
Potential impact on net
income(3)(6) |
$ |
|
(400) |
|
$ |
|
(100) |
|
$ |
|
50 |
|
$ |
|
100 |
|
Potential impact on OCI |
$ |
|
500 |
|
$ |
|
250 |
|
$ |
|
(250) |
|
$ |
|
(500) |
|
Potential impact on MCCSR(4) |
12% points
decrease |
|
|
5% points
decrease |
|
|
4% points
increase |
|
|
8% points
increase |
Equity markets
sensitivity(5) |
25% decrease |
|
10% decrease |
|
10% increase |
|
25% increase |
|
Potential impact on net income(3) |
$ |
|
(250) |
|
$ |
|
(50) |
|
$ |
|
50 |
|
$ |
|
150 |
|
Potential impact on OCI |
$ |
|
(150) |
|
$ |
|
(50) |
|
$ |
|
50 |
|
$ |
|
150 |
|
Potential impact on MCCSR(4) |
5% points
decrease |
|
1% points
decrease |
|
1% points
increase |
|
1% points
increase |
(1) |
Net income and OCI sensitivities have been
rounded to the nearest $50 million. The sensitivities exclude the
market impacts on the income from our joint ventures and
associates, which we account for on an equity basis. |
(2) |
Interest rate sensitivities assume a parallel
shift in assumed interest rates across the entire yield curve as at
December 31, 2015 and December 31, 2014. Variations in realized
yields based on factors such as different terms to maturity and
geographies may result in realized sensitivities being
significantly different from those illustrated above. Sensitivities
include the impact of re-balancing interest rate hedges for dynamic
hedging programs at 10 basis point intervals (for 50 basis point
changes in interest rates) and at 20 basis point intervals (for 100
basis point changes in interest rates). |
(3) |
The market risk sensitivities include the
estimated mitigation impact of our hedging programs in effect as at
December 31, 2015 and December 31, 2014, and include new business
added and product changes implemented prior to such
dates. |
(4) |
The MCCSR sensitivities illustrate the impact
on Sun Life Assurance as at December 31, 2015 and December 31,
2014. This excludes the impact on assets and liabilities that are
in SLF Inc. but not included in Sun Life Assurance. MCCSR
sensitivities as at December 31, 2014 reflect the impact of IAS 19
Employee Benefits and its phase-in impact on available
capital. |
(5) |
Represents the respective change across all
equity markets as at December 31, 2015 and December 31, 2014.
Assumes that actual equity exposures consistently and precisely
track the broader equity markets. Since in actual practice
equity-related exposures generally differ from broad market indices
(due to the impact of active management, basis risk and other
factors), realized sensitivities may differ significantly from
those illustrated above. Sensitivities include the impact of
re-balancing equity hedges for dynamic hedging programs at 2%
intervals (for 10% changes in equity markets) and at 5% intervals
(for 25% changes in equity markets). |
(6) |
The majority of interest rate sensitivity,
after hedging, is attributed to individual insurance products. We
also have interest rate sensitivity, after hedging, from our fixed
annuity and segregated funds products. |
|
|
Our net income sensitivities to interest rates and equity
markets have changed since December 31,
2014. This is primarily as a result of changes in
measurement of sensitivities related to assumption changes and
management actions.
Credit Spread and Swap Spread Sensitivities
We have estimated the immediate impact or sensitivity of our
shareholder net income attributable to certain instantaneous
changes in credit and swap spreads. The credit spread sensitivities
reflect the impact of changes in credit spreads on our asset and
liability valuations (including non-sovereign fixed income assets,
provincial governments, corporate bonds and other fixed income
assets). The swap spread sensitivities reflect the impact of
changes in swap spreads on swap-based derivative positions and
liability valuations.
Credit Spread Sensitivities ($ millions, after-tax)
Net income sensitivity(1)(2) |
|
|
|
50 basis point decrease |
50 basis point
increase |
December 31, 2015 |
|
|
|
$ |
|
(100) |
$ |
75 |
December 31, 2014 |
|
|
|
$ |
|
(100) |
$ |
125 |
(1) |
Sensitivities have been rounded
to the nearest $25 million. |
(2) |
In most instances, credit
spreads are assumed to revert to long-term insurance contract
liability assumptions generally over a five-year period. |
|
|
Swap Spread Sensitivities ($ millions, after-tax)
Net income sensitivity(1) |
|
|
|
20 basis point
decrease |
20 basis point
increase |
December 31, 2015 |
|
|
|
$ |
50 |
$ |
(50) |
December 31, 2014 |
|
|
|
$ |
75 |
$ |
(75) |
(1) |
Sensitivities have been rounded to the nearest $25
million. |
|
|
The credit and swap spread sensitivities assume a parallel shift
in the indicated spreads across the entire term structure.
Variations in realized spread changes based on different terms to
maturity, geographies, asset classes and derivative types,
underlying interest rate movements, and ratings may result in
realized sensitivities being significantly different from those
provided above. The credit spread sensitivity estimates exclude any
credit spread impact that may arise in connection with asset
positions held in segregated funds. Spread sensitivities are
provided for the consolidated entity and may not be proportional
across all reporting segments. Refer to the section Additional
Cautionary Language and Key Assumptions Related to Sensitivities
for important additional information regarding these estimates.
General Account Insurance and Annuity Products
Most of our expected sensitivity to changes in interest rates and
about two-thirds of our expected sensitivity to changes in equity
markets are derived from our general account insurance and annuity
products. We have implemented market risk management strategies to
mitigate a portion of the market risk related to our general
account insurance and annuity products.
Individual insurance products include universal life and other
long-term life and health insurance products. Major sources of
market risk exposure for individual insurance products include the
reinvestment risk related to future premiums on regular premium
policies, asset reinvestment risk on both regular premium and
single premium policies and the guaranteed cost of insurance.
Interest rate risk for individual insurance products is typically
managed on a duration basis, within tolerance ranges set out in the
applicable investment policy or guidelines. Targets and limits are
established so that the level of residual exposure is commensurate
with our risk appetite. Exposures are monitored frequently, and
assets are re-balanced as necessary to maintain compliance within
policy limits using a combination of assets and derivative
instruments. A portion of the longer-term cash flows are backed
with equities and real estate.
For participating insurance products and other insurance
products with adjustability features, the investment strategy
objective is to provide a total rate of return given a constant
risk profile over the long term.
Fixed annuity products generally provide the policyholder with a
guaranteed investment return or crediting rate. Interest rate risk
for these products is typically managed on a duration basis, within
tolerance ranges set out in the applicable investment guidelines.
Targets and limits are established such that the level of residual
exposure is commensurate with our risk appetite. Exposures are
monitored frequently, and are re-balanced as necessary to maintain
compliance within prescribed tolerances using a combination of
fixed income assets and derivative instruments.
Certain insurance and annuity products contain minimum interest
rate guarantees. Market risk management strategies are implemented
to limit potential financial loss due to reductions in asset earned
rates relative to contract guarantees. These typically involve the
use of hedging strategies utilizing interest rate derivatives such
as interest rate floors, swaps and swaptions.
Certain insurance and annuity products contain features which
allow the policyholders to surrender their policy at book value.
Market risk management strategies are implemented to limit the
potential financial loss due to changes in interest rate levels and
policyholder behaviour. These typically involve the use of hedging
strategies such as dynamic option replication and the purchase of
interest rate swaptions.
Certain products have guaranteed minimum annuitization rates.
Market risk management strategies are implemented to limit the
potential financial loss and typically involve the use of fixed
income assets, interest rate swaps and swaptions.
Segregated Fund Guarantees
Approximately one-third of our equity market sensitivity and a
small amount of interest rate risk sensitivity as at December 31, 2015 are derived from segregated
fund products. These products provide benefit guarantees, which are
linked to underlying fund performance and may be triggered upon
death, maturity, withdrawal or annuitization. The cost of providing
these guarantees is uncertain and depends upon a number of factors
including general capital market conditions, our hedging
strategies, policyholder behaviour and mortality experience, each
of which may result in negative impacts on net income and
capital.
The following table provides information with respect to the
guarantees provided for our segregated fund products.
December 31, 2015 |
|
($ millions) |
Fund value |
Amount at
Risk(1) |
Value of
guarantees(2) |
Insurance contract
liabilities(3) |
|
SLF Canada |
12,304 |
424 |
11,109 |
575 |
|
SLF U.S. |
5,400 |
509 |
5,789 |
275 |
|
Run-off reinsurance(4) |
2,950 |
569 |
2,129 |
570 |
|
Total |
20,654 |
1,502 |
19,027 |
1,420 |
|
|
|
|
|
|
|
December 31, 2014 |
|
($ millions) |
Fund value |
Amount at
Risk(1) |
Value of
guarantees(2) |
Insurance contract
liabilities(3) |
|
SLF Canada |
13,039 |
217 |
11,202 |
273 |
|
SLF U.S. |
5,194 |
259 |
5,236 |
96 |
|
Run-off reinsurance(4) |
2,800 |
501 |
1,999 |
526 |
|
Total |
21,033 |
977 |
18,437 |
895 |
|
(1) |
The Amount at Risk represents the excess of the value of
the guarantees over fund values on all policies where the value of
the guarantees exceeds the fund value. The Amount at Risk is not
currently payable as the guarantees are only payable upon death,
maturity, withdrawal or annuitization if fund values remain below
guaranteed values. |
(2) |
For guaranteed lifetime withdrawal benefits, the value of
guarantees is calculated as the present value of the maximum future
withdrawals assuming market conditions remain unchanged from
current levels. For all other benefits, the value of guarantees is
determined assuming 100% of the claims are made at the valuation
date. |
(3) |
The insurance contract liabilities represent management's
provision for future costs associated with these guarantees and
include a provision for adverse deviation in accordance with
Canadian actuarial standards of practice. |
(4) |
The Run-off reinsurance business includes risks assumed
through reinsurance of variable annuity products issued by various
North American insurance companies between 1997 and 2001. This line
of business is part of a closed block of reinsurance, which is
included in the Corporate segment. |
|
|
The movement of the items in the table above from December 31, 2014 to December 31, 2015 was primarily as a result
of the following factors:
(i) |
the total fund values decreased due to the natural run-off of
the block net of new sales and unfavourable equity market
movements, partially offset by the weakening of the Canadian dollar
against the U.S. dollar; |
(ii) |
the amount at risk increased primarily due to unfavourable
equity market movements and the weakening of the Canadian
dollar; |
(iii) |
the total value of guarantees increased due to the weakening of
the Canadian dollar, partially offset by the natural run-off of the
block net of new sales; and |
(iv) |
the total insurance contract liabilities increased due to lower
interest rates, unfavourable equity movements and the weakening of
the Canadian dollar. |
|
|
Segregated Fund Hedging
Our hedging programs use derivative instruments to mitigate the
interest and equity related exposure of our segregated fund
contracts. As at December 31, 2015,
over 90% of our segregated fund contracts, as measured by
associated fund values, were included in a hedging program. While a
large percentage of contracts are included in the hedging program,
not all of our market risk exposure related to these contracts is
hedged. For those segregated fund contracts included in the hedging
program, we generally hedge the value of expected future net claims
costs and associated margins.
The following table illustrates the impact of our hedging
program related to our sensitivity to a 50 basis point and 100
basis point decrease in interest rates and a 10% and 25% decrease
in equity markets for segregated fund contracts as at December 31, 2015 and December 31, 2014.
Impact of Segregated Fund Hedging
December 31,
2015 |
($ millions) |
Changes in interest rates(3) |
Changes in equity markets(4) |
Net income
sensitivity(1)(2) |
50 basis point
decrease |
100 basis point
decrease |
10% decrease |
25% decrease |
Before hedging |
(200) |
(450) |
(200) |
(600) |
Hedging impact |
200 |
500 |
150 |
500 |
Net of hedging |
— |
50 |
(50) |
(100) |
|
|
|
|
|
December 31, 2014 |
($ millions) |
Changes in interest
rates(3) |
Changes in equity
markets(4) |
Net income
sensitivity(1)(2) |
50 basis point
decrease |
100 basis point
decrease |
10% decrease |
25% decrease |
Before hedging |
(200) |
(400) |
(150) |
(500) |
Hedging impact |
200 |
400 |
150 |
400 |
Net of hedging |
— |
— |
— |
(100) |
(1) |
Net income sensitivities have been rounded to the nearest
$50 million. |
(2) |
Since the fair value of benefits being hedged will
generally differ from the financial statement value (due to
different valuation methods and the inclusion of valuation margins
in respect of financial statement values), this will result in
residual volatility to interest rate and equity market shocks in
reported income and capital. The general availability and cost of
these hedging instruments may be adversely impacted by a number of
factors, including volatile and declining equity and interest rate
market conditions. |
(3) |
Represents a parallel shift in assumed interest rates
across the entire yield curve as at December 31, 2015 and
December 31, 2014. Variations in realized yields based on
factors such as different terms to maturity and geographies may
result in realized sensitivities being significantly different from
those illustrated above. Sensitivities include the impact of
re-balancing interest rate hedges for dynamic hedging programs at
10 basis point intervals (for 50 basis point changes in interest
rates) and at 20 basis point intervals (for 100 basis point
changes in interest rates). |
(4) |
Represents the change across all equity markets as at
December 31, 2015 and December 31, 2014. Assumes that
actual equity exposures consistently and precisely track the
broader equity markets. Since in actual practice, equity-related
exposures generally differ from broad market indices (due to the
impact of active management, basis risk and other factors),
realized sensitivities may differ significantly from those
illustrated above. Sensitivities include the impact of re-balancing
equity hedges for dynamic hedging programs at 2% intervals (for 10%
changes in equity markets) and at 5% intervals (for 25% changes in
equity markets). |
|
|
Real Estate Risk
Real estate risk is the potential for financial loss arising from
fluctuations in the value of, or future cash flows from, our
investments in real estate. We are exposed to real estate risk
arising from fluctuations in the value of, or future cash flows on,
real estate classified as investment properties. We may experience
financial losses resulting from the direct ownership of real estate
investments or indirectly through fixed income investments secured
by real estate property, leasehold interests, ground rents, and
purchase and leaseback transactions. Real estate price risk may
arise from external market conditions, inadequate property
analysis, inadequate insurance coverage, inappropriate real estate
appraisals or from environmental risk exposures. We hold direct
real estate investments that support general account liabilities
and surplus, and fluctuations in value will impact our
profitability and financial position. A material and sustained
increase in interest rates may lead to deterioration in North
American real estate values. An instantaneous 10% decrease in the
value of our direct real estate investments as at December 31, 2015 would decrease net income by
approximately $175 million
($150 million decrease as at
December 31, 2014). Conversely, an
instantaneous 10% increase in the value of our direct real estate
investments as at December 31, 2015
would increase net income by approximately $175 million ($150
million increase as at December 31,
2014).
Additional Cautionary Language and Key Assumptions Related to
Sensitivities
Our market risk sensitivities are measures of our estimated change
in net income and OCI for changes in interest rates and equity
market price levels described above, based on interest rates,
equity market prices and business mix in place as at the respective
calculation dates. These sensitivities are calculated independently
for each risk factor, generally assuming that all other risk
variables stay constant. The sensitivities do not take into account
indirect effects such as potential impacts on goodwill impairment
or valuation allowances on deferred tax assets. The sensitivities
are provided for the consolidated entity and may not be
proportional across all reporting segments. Actual results can
differ materially from these estimates for a variety of reasons,
including differences in the pattern or distribution of the market
shocks, the interaction between these risk factors, model error, or
changes in other assumptions such as business mix, effective tax
rates, policyholder behaviour, currency exchange rates and other
market variables relative to those underlying the calculation of
these sensitivities. The extent to which actual results may differ
from the indicative ranges will generally increase with larger
capital market movements. Our sensitivities as at December 31, 2014 have been included for
comparative purposes only.
We have also provided measures of our net income sensitivity to
instantaneous changes in credit spreads, swap spreads, real estate
price levels and capital sensitivities to changes in interest rates
and equity price levels. The real estate sensitivities are non-IFRS
financial measures. For additional information, see Use of Non-IFRS
Financial Measures. The cautionary language which appears in this
section is also applicable to the credit spread, swap spread, real
estate and MCCSR ratio sensitivities. In particular, these
sensitivities are based on interest rates, credit and swap spreads,
equity market and real estate price levels as at the respective
calculation dates and assume that all other risk variables remain
constant. Changes in interest rates, credit and swap spreads,
equity market and real estate prices in excess of the ranges
illustrated may result in other-than-proportionate impacts.
As these market risk sensitivities reflect an instantaneous
impact on net income, OCI and Sun Life Assurance's MCCSR ratio,
they do not include impacts over time such as the effect on fee
income in our asset management businesses.
The sensitivities reflect the composition of our assets and
liabilities as at December 31, 2015
and December 31, 2014,
respectively. Changes in these positions due to new sales or
maturities, asset purchases/sales or other management actions could
result in material changes to these reported sensitivities. In
particular, these sensitivities reflect the expected impact of
hedging activities based on the hedge programs in place as at the
December 31 calculation dates. The
actual impact of these hedging activities can differ materially
from that assumed in the determination of these indicative
sensitivities due to ongoing hedge re-balancing activities, changes
in the scale or scope of hedging activities, changes in the cost or
general availability of hedging instruments, basis risk (i.e., the
risk that hedges do not exactly replicate the underlying portfolio
experience), model risk and other operational risks in the ongoing
management of the hedge programs or the potential failure of hedge
counterparties to perform in accordance with expectations.
The sensitivities are based on methods and assumptions in effect
as at December 31, 2015 and
December 31, 2014, as applicable.
Changes in the regulatory environment, accounting or actuarial
valuation methods, models, or assumptions after those dates could
result in material changes to these reported sensitivities. Changes
in interest rates and equity market prices in excess of the ranges
illustrated may result in other than proportionate impacts.
Our hedging programs may themselves expose us to other risks,
including basis risk (i.e., the risk that hedges do not exactly
replicate the underlying portfolio experience), derivative
counterparty credit risk, and increased levels of liquidity risk,
model risk and other operational risks. These factors may adversely
impact the net effectiveness, costs, and financial viability of
maintaining these hedging programs and therefore adversely impact
our profitability and financial position. While our hedging
programs are intended to mitigate these effects (e.g., hedge
counterparty credit risk is managed by maintaining broad
diversification, dealing primarily with highly rated
counterparties, and transacting through International Swaps and
Derivatives Association agreements that generally include
applicable credit support annexes), residual risk, potential
reported earnings and capital volatility remain.
For the reasons outlined above, our sensitivities should only be
viewed as directional estimates of the underlying sensitivities of
each factor under these specialized assumptions, and should not be
viewed as predictors of our future net income, OCI, and capital
sensitivities. Given the nature of these calculations, we cannot
provide assurance that actual impact will be consistent with the
estimates provided.
Information related to market risk sensitivities and guarantees
related to segregated fund products should be read in conjunction
with the information contained in the sections in the annual
MD&A under the headings Outlook and Critical Accounting
Policies and Estimates. Additional information on market risk can
be found in Note 6 of our 2015 Annual Consolidated Financial
Statements and the Risk Factors section in our AIF.
Reconciliation of Non-IFRS Financial Measures
Additional information on the use of non-IFRS measures, including
the definition of operating net income (loss) and underlying net
income (loss), is available in this document under the heading Use
of Non-IFRS Financial Measures.
The following table sets out the amounts that were excluded from
our operating net income (loss), underlying net income (loss),
operating EPS and underlying EPS, and provides a reconciliation to
our reported net income (loss) and EPS based on IFRS.
Reconciliations of Select Net Income Measures
|
Quarterly results |
($ millions, unless otherwise noted) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
Reported net income |
536 |
|
482 |
|
726 |
|
441 |
|
502 |
|
Certain hedges in SLF Canada that do not qualify
for hedge accounting |
10 |
|
(10) |
|
6 |
|
15 |
|
(6) |
|
Fair value adjustments on MFS's share-based
payment awards |
(6) |
|
28 |
|
(11) |
|
(20) |
|
1 |
|
Acquisition, integration and restructuring
costs(1) |
(66) |
|
(14) |
|
— |
|
— |
|
(4) |
|
Operating net income (loss) |
598 |
|
478 |
|
731 |
|
446 |
|
511 |
|
Market related impacts |
(36) |
|
(82) |
|
97 |
|
(22) |
|
(21) |
|
Assumption changes and management actions |
(12) |
|
32 |
|
19 |
|
(48) |
|
172 |
|
Underlying net income (loss) |
646 |
|
528 |
|
615 |
|
516 |
|
360 |
|
Reported EPS (diluted) ($) |
0.87 |
|
0.79 |
|
1.18 |
|
0.72 |
|
0.81 |
|
Certain hedges in SLF Canada that do not qualify
for hedge accounting ($) |
0.02 |
|
(0.02) |
|
0.01 |
|
0.02 |
|
(0.01) |
|
Fair value adjustments on MFS's share-based
payment awards ($) |
(0.01) |
|
0.05 |
|
(0.02) |
|
(0.03) |
|
— |
|
Acquisition, integration and restructuring costs
($) |
(0.11) |
|
(0.02) |
|
— |
|
— |
|
(0.01) |
|
Impact of convertible securities on diluted EPS
($) |
(0.01) |
|
— |
|
— |
|
— |
|
— |
|
Operating EPS (diluted) ($) |
0.98 |
|
0.78 |
|
1.19 |
|
0.73 |
|
0.83 |
|
Market related impacts ($) |
(0.05) |
|
(0.13) |
|
0.16 |
|
(0.03) |
|
(0.04) |
|
Assumption changes and management actions ($) |
(0.02) |
|
0.05 |
|
0.03 |
|
(0.08) |
|
0.28 |
|
Underlying EPS (diluted) ($) |
1.05 |
|
0.86 |
|
1.00 |
|
0.84 |
|
0.59 |
|
(1) |
Beginning in the third quarter
of 2015, we renamed the operating adjustment Acquisition,
integration and restructuring costs from Restructuring and
other related costs to accommodate acquisition and integration
adjustments arising from our 2015 activities. |
|
|
Management also uses the following non-IFRS financial
measures:
Return on equity. IFRS does not prescribe the calculation
of ROE and therefore a comparable measure under IFRS is not
available. To determine operating ROE and underlying ROE, operating
net income (loss) and underlying net income (loss) are divided by
the total weighted average common shareholders' equity for the
period, respectively.
Adjusted revenue. This measure excludes from revenue the
impact of: (i) exchange rate fluctuations, from the translation of
functional currencies to the Canadian dollar, for comparisons
("Constant Currency Adjustment"); (ii) Fair value and foreign
currency changes on assets and liabilities ("FV Adjustment"); and
(iii) reinsurance for the insured business in SLF Canada's GB
operations ("Reinsurance in SLF Canada's GB Operations
Adjustment"). Adjusted revenue is an alternative measure of revenue
that provides greater comparability across reporting periods.
|
Quarterly results |
($ millions) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
Revenues |
5,567 |
|
4,693 |
|
1,682 |
|
7,332 |
|
7,375 |
|
|
Constant Currency Adjustment |
496 |
|
372 |
|
218 |
|
239 |
|
— |
|
|
FV Adjustment |
(788) |
|
(168) |
|
(3,500) |
|
2,495 |
|
2,196 |
|
|
Reinsurance in SLF Canada's GB Operations
Adjustment |
(1,171) |
|
(1,179) |
|
(1,149) |
|
(1,185) |
|
(1,154) |
|
Adjusted revenue |
7,030 |
|
5,668 |
|
6,113 |
|
5,783 |
|
6,333 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted premiums and deposits. This measure adjusts
premiums and deposits for the impact of: (i) the Constant Currency
Adjustment and (ii) the Reinsurance in SLF Canada's GB Operations
Adjustment. Adjusted premiums and deposits is an alternative
measure of premiums and deposits that provides greater
comparability across reporting periods.
|
Quarterly results |
($ millions) |
Q4'15 |
|
Q3'15 |
|
Q2'15 |
|
Q1'15 |
|
Q4'14 |
|
Premiums and deposits |
33,769 |
|
30,907 |
|
35,720 |
|
36,754 |
|
31,770 |
|
|
Constant Currency Adjustment |
4,003 |
|
3,263 |
|
2,142 |
|
2,663 |
|
— |
|
|
Reinsurance in SLF Canada's GB Operations
Adjustment |
(1,171) |
|
(1,179) |
|
(1,149) |
|
(1,185) |
|
(1,154) |
|
Adjusted premiums and deposits |
30,937 |
|
28,823 |
|
34,727 |
|
35,276 |
|
32,924 |
|
|
|
|
|
|
|
|
|
|
|
|
MFS pre-tax operating profit margin ratio. This ratio is
a measure of the underlying profitability of MFS, which excludes
the impact of fair value adjustments on MFS's share-based payment
awards, investment income, and certain commission expenses that are
offsetting. These amounts are excluded in order to neutralize the
impact these items have on the pre-tax operating profit margin
ratio and have no impact on the underlying profitability of
MFS.
Impact of foreign exchange. Several financial measures
are presented on a constant currency adjusted basis to exclude the
impact of foreign exchange rate fluctuations. These measures are
calculated using the average or period end foreign exchange rates,
as appropriate, in effect at the date of the comparative
period.
Real estate market sensitivities. Real estate market
sensitivities are non-IFRS financial measures, for which there are
no directly comparable measures under IFRS so it is not possible to
provide a reconciliation of these amounts to the most directly
comparable IFRS measures.
Other. Management also uses the following non-IFRS
financial measures for which there are no comparable financial
measures in IFRS: (i) ASO premium and deposit equivalents, mutual
fund sales, managed fund sales, life and health sales, and total
premiums and deposits; (ii) AUM, mutual fund assets, managed fund
assets, other AUM and assets under administration; (iii) the value
of new business, which is used to measure the estimated lifetime
profitability of new sales and is based on actuarial calculations;
and (iv) assumption changes and management actions, which is a
component of our sources of earnings disclosure. Sources of
earnings is an alternative presentation of our Consolidated
Statements of Operations that identifies and quantifies various
sources of income. The Company is required to disclose its sources
of earnings by its principal regulator, the Office of the
Superintendent of Financial Institutions.
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 legislation. Forward-looking statements
contained in this document include (i) statements relating to the
anticipated source of funding for the acquisition of Assurant EB
and the timing of receipt of regulatory approvals and closing for
that transaction, (ii) statements relating to our growth
strategies,(iii) statements relating to productivity and expense
initiatives, growth initiatives and other business objectives, (iv)
statements that are predictive in nature or that depend upon or
refer to future events or conditions, and (v) statements that
include words such as "aim", "anticipate", "assumption", "believe",
"could", "estimate", "expect", "goal", "initiatives", "intend",
"may", "objective", "outlook", "plan", "project", "seek", "should",
"strategy", "strive", "target", "will" and similar expressions are
forward-looking statements. Forward-looking statements include the
information concerning our possible or assumed future results of
operations. These statements represent our current expectations,
estimates and projections regarding future events and are not
historical facts. Forward-looking statements are not a guarantee of
future performance and involve risks and uncertainties that are
difficult to predict. Future results and shareholder value may
differ materially from those expressed in these forward-looking
statements due to, among other factors, the matters set out in this
document under the headings Capital Management and Risk Management,
and in SLF Inc.'s most recent AIF under the heading Risk Factors,
and the factors detailed in SLF Inc.'s other filings with Canadian
and U.S. securities regulators, which are available for review at
www.sedar.com and www.sec.gov.
Factors that could cause actual results to differ materially
from expectations include, but are not limited to: credit risks
- related to issuers of securities held in our investment
portfolio, debtors, structured securities, reinsurers,
counterparties, other financial institutions and other entities;
market risks - related to the performance of equity markets;
changes or volatility in interest rates or credit spreads or swap
spreads; real estate investments; and fluctuations in foreign
currency exchange rates; insurance risks - related to
mortality, morbidity, longevity and policyholder behaviour; product
design and pricing; the impact of higher-than-expected future
expenses; and the availability, cost and effectiveness of
reinsurance; business and strategic risks - related to
global economic and political conditions; changes in distribution
channels or customer behaviour including risks relating to market
conduct by intermediaries and agents; changes in the competitive,
legal or regulatory environment, including capital requirements and
tax laws; tax matters, including estimates and judgments used in
calculating taxes; the design and implementation of business
strategies; the performance of our investments and investment
portfolios managed for clients such as segregated and mutual funds;
our international operations, including our joint ventures; market
conditions that affect our capital position or ability to raise
capital; downgrades in financial strength or credit ratings; and
the impact of mergers, acquisitions and divestitures;
operational risks - related to breaches or failure of
information system security and privacy, including cyber-attacks;
our ability to attract and retain employees; the execution and
integration of mergers, acquisitions and divestitures; legal,
regulatory compliance and market conduct, including the impact of
regulatory inquiries and investigations; our information technology
infrastructure; a failure of information systems and
Internet-enabled technology; dependence on third-party
relationships, including outsourcing arrangements; business
continuity; model errors; information management; the environment,
environmental laws and regulations and third-party policies; and
liquidity risks - the possibility that we will not be able
to fund all cash outflow commitments as they fall due.
The following risk factors are related to our pending
acquisition of Assurant EB and could have a material adverse effect
on our financial results: (i) ability to complete the transaction
as planned, including the separation and integration of the
transferred business; (ii) failure of the parties to obtain
necessary consents and approvals required under the definitive
agreement or to otherwise satisfy the conditions to the completion
of the transaction in a timely manner, or at all; (iii) our ability
to realize the financial and strategic benefits of the transaction;
(iv) failure to effectively or efficiently restructure and
reorganize our U.S. employee benefits business after the
transaction has closed; and (v) the impact of the dedication of our
resources to the completion of the transaction and integration of
the business and the effect the transaction may have on our
continuing operations in the U.S. These risks all could have an
impact on our business relationships (including with future and
prospective employees, customers, distributors and partners) and
could have a material adverse effect on our current and future
operations, financial conditions and prospects.
The Company does not undertake any obligation to update or
revise its forward-looking statements to reflect events or
circumstances after the date of this document or to reflect the
occurrence of unanticipated events, except as required by law.
Earnings Conference Call
The Company's fourth quarter 2015 financial results will be
reviewed at a conference call on Thursday,
February 11, 2016, at 10:00 a.m.
ET. To listen to the call via live audio webcast and to view
the presentation slides, as well as related information, please
visit www.sunlife.com and click on the link to Q4 results from the
"Investors" section on the home page 10 minutes prior to the start
of the call. Individuals participating in the call in a listen-only
mode are encouraged to connect via our webcast. Following the call,
the webcast and presentation will be archived and made available on
the Company's website, www.sunlife.com, until the Q4 2016 period
end. The conference call can also be accessed by phone by dialing
647-788-4901 (International) or 1-877-201-0168 (Toll-free
North America).
Consolidated Statements of Operations
|
|
|
|
|
For the three months
ended (1) |
|
For the twelve months
ended(2) |
(in millions of
Canadian dollars except for per share amounts) |
December
31,
2015 |
|
December 31,
2014 |
|
|
December
31,
2015 |
|
December 31,
2014 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
Premiums |
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
$ |
5,163 |
|
|
$ |
4,023 |
|
|
|
$ |
16,824 |
|
|
$ |
15,499 |
|
|
|
Less: Ceded |
|
1,612 |
|
|
1,322 |
|
|
|
6,429 |
|
|
5,503 |
|
|
Net premiums |
|
3,551 |
|
|
2,701 |
|
|
|
10,395 |
|
|
9,996 |
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss): |
|
|
|
|
|
|
|
|
|
|
|
Interest and other investment income |
|
1,327 |
|
|
1,258 |
|
|
|
5,288 |
|
|
4,941 |
|
|
|
Fair value and foreign currency changes on assets
and liabilities |
|
(788) |
|
|
2,196 |
|
|
|
(1,961) |
|
|
6,172 |
|
|
|
Net gains (losses) on available-for-sale
assets |
|
39 |
|
|
49 |
|
|
|
228 |
|
|
202 |
|
|
Net investment income (loss) |
|
578 |
|
|
3,503 |
|
|
|
3,555 |
|
|
11,315 |
|
|
Fee income |
|
1,438 |
|
|
1,171 |
|
|
|
5,324 |
|
|
4,453 |
|
Total revenue |
|
5,567 |
|
|
7,375 |
|
|
|
19,274 |
|
|
25,764 |
|
|
|
|
|
|
|
|
|
|
|
Benefits and expenses |
|
|
|
|
|
|
|
|
|
|
Gross claims and benefits paid |
|
3,679 |
|
|
3,397 |
|
|
|
14,086 |
|
|
12,816 |
|
|
Increase (decrease) in insurance
contract liabilities |
|
669 |
|
|
2,660 |
|
|
|
1,261 |
|
|
8,920 |
|
|
Decrease (increase) in reinsurance
assets |
|
(125) |
|
|
193 |
|
|
|
(505) |
|
|
13 |
|
|
Increase (decrease) in investment
contract liabilities |
|
10 |
|
|
11 |
|
|
|
(29) |
|
|
70 |
|
|
Reinsurance expenses (recoveries) |
|
(1,508) |
|
|
(1,378) |
|
|
|
(6,146) |
|
|
(5,411) |
|
|
Commissions |
|
566 |
|
|
500 |
|
|
|
2,100 |
|
|
1,889 |
|
|
Net transfer to (from) segregated
funds |
|
(3) |
|
|
(19) |
|
|
|
(43) |
|
|
(30) |
|
|
Operating expenses |
|
1,383 |
|
|
1,191 |
|
|
|
5,037 |
|
|
4,537 |
|
|
Premium taxes |
|
75 |
|
|
68 |
|
|
|
292 |
|
|
251 |
|
|
Interest expense |
|
80 |
|
|
94 |
|
|
|
322 |
|
|
336 |
|
Total benefits and
expenses |
|
4,826 |
|
|
6,717 |
|
|
|
16,375 |
|
|
23,391 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
741 |
|
|
658 |
|
|
|
2,899 |
|
|
2,373 |
|
Less: Income tax expense
(benefit) |
|
180 |
|
|
124 |
|
|
|
599 |
|
|
491 |
|
Total net income (loss) |
|
561 |
|
|
534 |
|
|
|
2,300 |
|
|
1,882 |
|
Less: Net income (loss) attributable
to participating policyholders |
|
1 |
|
|
6 |
|
|
|
15 |
|
|
9 |
|
Shareholders' net income
(loss) |
|
560 |
|
|
528 |
|
|
|
2,285 |
|
|
1,873 |
|
Less: Preferred shareholders'
dividends |
|
24 |
|
|
26 |
|
|
|
100 |
|
|
111 |
|
Common shareholders' net income
(loss) |
|
536 |
|
|
502 |
|
|
|
2,185 |
|
|
1,762 |
|
|
Earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.88 |
|
|
$ |
0.82 |
|
|
|
$ |
3.57 |
|
|
$ |
2.88 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.87 |
|
|
$ |
0.81 |
|
|
|
$ |
3.55 |
|
|
$ |
2.86 |
|
(1) |
Quarterly numbers are unaudited. |
(2) |
Derived from the audited Annual Consolidated Financial
Statements. |
|
|
Consolidated Statements of Financial Position
|
|
As at |
(in millions of Canadian
dollars)(1) |
December 31,
2015 |
|
December 31, 2014 |
|
Assets |
|
|
|
|
|
Cash, cash equivalents and short-term
securities |
|
$ |
8,983 |
|
|
$ |
6,818 |
|
|
Debt securities |
|
69,896 |
|
|
66,214 |
|
|
Equity securities |
|
5,313 |
|
|
5,223 |
|
|
Mortgages and loans |
|
39,103 |
|
|
33,679 |
|
|
Derivative assets |
|
1,866 |
|
|
1,839 |
|
|
Other invested assets |
|
3,111 |
|
|
2,375 |
|
|
Policy loans |
|
3,151 |
|
|
2,895 |
|
|
Investment properties |
|
6,540 |
|
|
6,108 |
|
|
Invested assets |
|
137,963 |
|
|
125,151 |
|
|
Other assets |
|
3,931 |
|
|
3,429 |
|
|
Reinsurance assets |
|
5,386 |
|
|
4,042 |
|
|
Deferred tax assets |
|
1,372 |
|
|
1,230 |
|
|
Property and equipment |
|
636 |
|
|
555 |
|
|
Intangible assets |
|
1,479 |
|
|
895 |
|
|
Goodwill |
|
4,646 |
|
|
4,117 |
|
|
Total general fund assets |
|
155,413 |
|
|
139,419 |
|
|
Investments for account of segregated fund
holders |
|
91,440 |
|
|
83,938 |
|
|
Total assets |
|
$ |
246,853 |
|
|
$ |
223,357 |
|
|
|
|
|
|
Liabilities and equity |
|
|
|
|
Liabilities |
|
|
|
|
|
Insurance contract liabilities |
|
$ |
110,227 |
|
|
$ |
101,228 |
|
|
Investment contract liabilities |
|
2,913 |
|
|
2,819 |
|
|
Derivative liabilities |
|
3,378 |
|
|
1,603 |
|
|
Deferred tax liabilities |
|
405 |
|
|
155 |
|
|
Other liabilities |
|
12,332 |
|
|
9,725 |
|
|
Senior debentures |
|
2,248 |
|
|
2,849 |
|
|
Subordinated debt |
|
2,492 |
|
|
2,168 |
|
|
Total general fund liabilities |
|
133,995 |
|
|
120,547 |
|
|
Insurance contracts for account of segregated fund
holders |
|
83,670 |
|
|
76,736 |
|
|
Investment contracts for account of segregated
fund holders |
|
7,770 |
|
|
7,202 |
|
|
Total liabilities |
|
$ |
225,435 |
|
|
$ |
204,485 |
|
|
|
|
|
|
Equity |
|
|
|
|
|
Issued share capital and contributed surplus |
|
$ |
10,900 |
|
|
$ |
10,805 |
|
|
Retained earnings and accumulated other
comprehensive income |
|
10,518 |
|
|
8,067 |
|
|
Total equity |
|
$ |
21,418 |
|
|
$ |
18,872 |
|
|
Total liabilities and equity |
|
$ |
246,853 |
|
|
$ |
223,357 |
|
(1) |
Derived from the audited Annual Consolidated Financial
Statements. |
|
|
About Sun Life Financial
Sun Life Financial is a leading international financial services
organization providing a diverse range of protection and wealth
products and services to individuals and corporate customers. Sun
Life Financial 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, 2015, the Sun Life Financial
group of companies had total assets under management of
$891 billion. 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.
SOURCE Sun Life Financial Inc.