Q1 2024 Shareholders' Report
Q1
2024
Shareholders' Report
For the period ended
CANADIAN RESIDENTS PARTICIPATING IN THE SHARE ACCOUNT
Shareholders holding shares in the Canadian Share Account can sell their shares for
Sun Life Reports First Quarter 2024 Results
- Underlying net income(1) of
$875 million decreased$20 million or 2% from Q1'23; underlying ROE(1) was 16.0%. -
- Wealth & asset management underlying net income(1):
$408 million , down$3 million or 1%. - Group - Health & Protection underlying net income(1):
$280 million , down$23 million or 8%. - Individual - Protection underlying net income(1):
$278 million , down$13 million or 4%. - Corporate expenses & other(1):
$(91) million net loss, improved$19 million or 17%.
- Wealth & asset management underlying net income(1):
- Reported net income of
$818 million increased$12 million or 1% from Q1'23; reported ROE(1) was 15.0%. - Assets under management ("AUM")(1) of
$1,470 billion increased$106 billion or 8% from Q1'23. - Increase to common share dividend from
$0.78 to$0.81 per share.
"In the first quarter, we delivered on our Client Impact strategy by advancing our asset management and insurance businesses with strong growth in insurance sales, CSM and AUM," said
Financial and Operational Highlights
Quarterly results
Profitability |
Q1'24 |
Q1'23 |
Underlying net income ($ millions)(1) |
875 |
895 |
Reported net income - Common shareholders ($ millions) |
818 |
806 |
Underlying EPS ($)(1)(2) |
1.50 |
1.52 |
Reported EPS ($)(2) |
1.40 |
1.37 |
Underlying retuon equity ("ROE")(1) |
16.0% |
17.3% |
Reported ROE(1) |
15.0% |
15.6% |
Growth |
Q1'24 |
Q1'23 |
Wealth sales & asset management gross flows ($ millions)(1) |
46,898 |
46,349 |
Group - Health & Protection sales ($ millions)(1)(3) |
528 |
509 |
Individual - Protection sales ($ millions)(1) |
757 |
511 |
Assets under management ("AUM") ($ billions)(1) |
1,470 |
1,364 |
New business Contractual Service Margin ("CSM") ($ millions)(1) |
347 |
232 |
Financial Strength |
Q1'24 |
Q1'23 |
LICAT ratios (at period end)(4) |
||
|
148% |
148% |
Sun Life Assurance(5) |
142% |
144% |
Financial leverage ratio (at period end)(1)(6) |
21.1% |
23.2% |
- Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the Q1'24 MD&A.
- All earnings per share ("EPS") measures refer to fully diluted EPS, unless otherwise stated.
- Prior period amounts related to
U.S. Dental sales have been restated to reflect new information. - Life Insurance Capital Adequacy Test ("LICAT") ratio. Our LICAT ratios are calculated in accordance with the OSFI-mandated guideline, Life Insurance Capital Adequacy Test.
Sun Life Assurance Company of Canada ("Sun Life Assurance") isSLF Inc.'s principal operating life insurance subsidiary.- The calculation for the financial leverage ratio includes the CSM balance (net of taxes) in the denominator. The CSM (net of taxes) was
$9.9 billion as atMarch 31, 2024 (March 31, 2023 -$9.0 billion ).
EARNINGS NEWS RELEASE |
|
Financial and Operational Highlights - Quarterly Comparison (Q1'24 vs. Q1'23)
($ millions) |
Q1'24 |
|||||
Underlying net income by business type(1)(2): |
Sun Life |
Asset |
|
|
|
Corporate |
Management |
||||||
Wealth & asset management |
408 |
282 |
109 |
- |
17 |
- |
Group - Health & Protection |
280 |
- |
114 |
166 |
- |
- |
Individual - Protection |
278 |
- |
87 |
23 |
168 |
- |
Corporate expenses & other |
(91) |
- |
- |
- |
(8) |
(83) |
Underlying net income(1) |
875 |
282 |
310 |
189 |
177 |
(83) |
Reported net income - Common shareholders |
818 |
284 |
290 |
97 |
235 |
(88) |
Change in underlying net income (% year-over-year) |
(2)% |
nm(3) |
(2)% |
(20)% |
26% |
nm(3) |
Change in reported net income (% year-over-year) |
1% |
12% |
(12)% |
(42)% |
75% |
nm(3) |
Wealth sales & asset management gross flows(1) |
46,898 |
40,718 |
4,079 |
- |
2,101 |
- |
Group - Health & Protection sales(1) |
528 |
- |
311 |
191 |
26 |
- |
Individual - Protection sales(1) |
757 |
- |
130 |
- |
627 |
- |
Change in wealth sales & asset management gross flows |
1% |
nm(3) |
32% |
- |
(14)% |
- |
(% year-over-year) |
||||||
Change in group sales (% year-over-year) |
4% |
- |
114% |
(44)% |
4% |
- |
Change in individual sales (% year-over-year) |
48% |
- |
(4)% |
- |
67% |
- |
- Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the Q1'24 MD&A.
- For more information about the business types in Sun Life's business groups, see section A - How We Report Our Results in the Q1'24 MD&A.
- Not meaningful.
Underlying net income(1) of
- Wealth & asset management(1) down
$3 million: Higher fee income offset by higher expenses in Asset Management, as well as lower net seed investment income in SLC Management. - Group - Health & Protection(1) down
$23 million: Less favourable morbidity experience inU.S. medical stop-loss and lower results inU.S. Dental primarily reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, partially offset by strong revenue growth inU.S. Group Benefits, and business growth and improved disability experience inCanada . - Individual - Protection(1) down
$13 million: Lower earnings due to the sale of Sun LifeUK (2) partially offset by business growth inAsia . - Corporate expenses & other(1)
$19 million decrease in net loss driven by lower financing costs.
Reported net income of
- Gains on partial sale of ABSLAMC(3) and the early termination of a distribution agreement in Asset Management; largely offset by
- The prior year gain on sale of the sponsored markets business in
Canada (4); - Fair value changes in management's ownership of MFS(5) shares; and
- The decrease in underlying net income.
- Unfavourable real estate experience(6) was mostly offset by favourable interest rate impacts.
Underlying ROE was 16.0% and reported ROE was 15.0% (Q1'23 - 17.3% and 15.6%, respectively).
- Refer to section C - Profitability in the Q1'24 MD&A for more information on notable items attributable to reported and underlying net income items and the Non-IFRS Financial Measures in this document for a reconciliation between reported net income and underlying net income. For more information about the business types in Sun Life's operating segments/business groups, see section A - How We Report Our Results in the Q1'24 MD&A.
- On
April 3, 2023 we completed the sale ofSLF of Canada UK Limited toPhoenix Group Holdings plc ("the sale of Sun LifeUK "). For additional information, refer to Note 3 of our 2023 Annual Consolidated Financial Statements. - To meet regulatory obligations, on
March 21, 2024 , we completed the sale of 6.3% of our ownership interest inAditya Birla Sun Life AMC Limited ("partial sale of ABSLAMC"), generating a gain of$84 million . As a result of the transaction, our ownership interest in ABSLAMC was reduced from 36.5% to 30.2% for gross proceeds of$136 million . - On
February 1, 2023 , we completed the sale of the sponsored markets business from Sun Life Assurance, a wholly owned subsidiary ofSLF Inc. , toCanadian Premier Life Insurance Company (re-branded to Securian Canada) ("sale of the sponsored markets business"). MFS Investment Management ("MFS").- Real estate experience reflects the difference between the actual value of real estate investments compared to management's longer-term expected returns supporting insurance contract liabilities ("real estate experience").
2 |
|
EARNINGS NEWS RELEASE |
Business Group Highlights
Asset Management: A global leader in both public and alternative asset classes through MFS and SLC Management
Asset Management underlying net income of
- MFS in line with prior year (up
US$1 million): Higher fee income from average net assets ("ANA") mostly offset by higher expenses, which include fair value changes in management's participation in MFS shares. The MFS pre-tax net operating profit margin(1) improved to 37.2% for Q1'24 from 36.8% in the prior year due to higher ANA. - SLC Management in line with prior year: Higher-fee related earnings offset by lower net seed investment income. Fee-related earnings(1) increased 1% driven by higher AUM, reflecting capital raising and deployment across the platform, offset by higher expenses. Fee-related earnings margin(1) was 23.9% for Q1'24, compared to 24.3% in the prior year.
Reported net income of
Asset Management ended Q1'24 with
During the first quarter, MFS celebrated its centennial anniversary. With a purpose of creating long-term value responsibly, MFS has been driven by a conviction to always do what's best for Clients, staying true to its active investment approach, core values and collaborative culture.
Our Asset Management businesses advanced their sustainable investing objectives with BentallGreenOak ("BGO") completing
- Wealth & asset management down
$5 million: Includes lower earnings on surplus. - Group - Health & Protection up
$19 million: Business growth and improved disability experience reflecting lower claims volumes. - Individual - Protection down
$20 million: Unfavourable mortality experience in the quarter. - Lower earnings on surplus across all businesses primarily reflecting lower realized gains.
Reported net income of
- Wealth sales & asset management gross flows of
$4 billion were up 32%, driven by higher mutual fund sales in Individual Wealth and higher defined benefit solution and defined contribution sales in Group Retirement Services ("GRS"). - Group - Health & Protection sales of
$311 million were up 114%, driven by higher large case sales. - Individual - Protection sales of
$130 million were down 4%, reflecting lower participating whole life insurance sales.
We remain committed to developing targeted solutions for Clients living with chronic conditions such as diabetes to improve their insurability and health outcomes. In Q1, we launched our Diabetes Care Program, a free service for plan members as part of Lumino HealthTM Pharmacy, an online pharmacy app. The Diabetes Support Team, consisting of pharmacists, physicians, and registered dieticians, provides proactive support, coaching, and education. The personalized plans, support and advice help plan members to manage their diabetes.
In Q1, defined benefit solutions ("DBS") hit a milestone reaching
- Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the Q1'24 MD&A.
Shell Windenergy Inc. is a subsidiary ofShell plc that develops and operates wind farms.Savion Equity LLC is a subsidiary ofShell plc that specializes in developing solar power and energy storage projects.- Compared to the prior year.
Life Insurance Marketing and Research Association ("LIMRA") market share as of Q4'23, on a year-to-date basis.
EARNINGS NEWS RELEASE |
|
- Group - Health & Protection down
US$30 million: Lower Dental results primarily reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, and lower Group Benefits results primarily reflecting less favourable morbidity experience in medical stop-loss as utilization normalizes partially offset by strong revenue growth and favourable disability experience. - Individual - Protection down
US$5 million: The inclusion of theUK payout annuity business(1) was offset by unfavourable credit experience in the quarter.
Reported net income of
We continue to expand our capabilities and advance our strategy to help our members access the health care and coverage they need. In Employee Benefits, we are now offering Health Navigator, powered by PinnacleCare, to the large employer group benefits market. This personal health care navigation and advisory service helps members get the right medical diagnoses, doctors and treatments for their specific needs and helps improve health and productivity outcomes for employers.
We are also leveraging our expertise on leave, absence management, and return-to-work services to offer
- Wealth & asset management up
$2 million . - Individual - Protection up
$38 million: Good sales momentum and in-force business growth, higher earnings on surplus, and favourable mortality experience in the quarter, partially offset by higher expenses reflecting volume growth and continued investments in the business. - Regional office expenses & other
$(4) million increased net loss from higher expenses.
Reported net income of
- Individual sales of
$627 million were up 67%, primarily driven by higher sales inHong Kong reflecting expanded distribution capabilities, partially offset by lower sales inChina ,Vietnam andIndia reflecting industry and market conditions. - Wealth sales & asset management gross flows of
$2 billion were down 14%, reflecting lower money market fund sales inthe Philippines , lowerMandatory Provident Fund ("MPF") sales inHong Kong , and lower sales inIndia primarily from fixed income funds.
New business CSM of
We are committed to delivering shareholder value, including building and realizing value through strategic investments. To meet regulatory obligations, in March, we sold 6.3% of our ownership interest in
We continue to build on our Purpose to help Clients achieve lifetime financial security and live healthier lives. Our focus on making a difference in the lives of our Clients was recognized by our Platinum award(3) for the most trusted brand in the life insurance industry in
Corporate
Corporate underlying net loss was
Reported net loss was
- On
April 3, 2023 , we completed the sale ofSLF of Canada UK Limited toPhoenix Group Holdings plc ("the sale of Sun LifeUK "). Under the agreement, we will retain our economic interest in the payout annuities business through a reinsurance treaty, which, effective Q2'23 is recorded in In-force Management within theU.S. business group. For additional information, refer to Note 3 of our 2023 Annual Consolidated Financial Statements. Prior year results include market-related gains from Sun LifeUK in reported net income within the Corporate business group. - Compared to the prior year.
- Trusted Brand Awards.
4 |
|
EARNINGS NEWS RELEASE |
Management's Discussion and Analysis
For the period ended
Dated
Table of Contents |
||
A. |
How We Report Our Results |
|
B. |
Financial Summary |
|
C. |
Profitability |
9 |
D. |
Growth |
11 |
E. |
Contractual Service Margin |
13 |
F. |
Financial Strength |
14 |
G. |
Performance by Business Segment |
16 |
1. Asset Management |
17 |
|
2. |
19 |
|
3. |
20 |
|
4. |
21 |
|
5. Corporate |
22 |
|
H. |
Investments |
23 |
I. |
Risk Management |
26 |
J. |
Additional Financial Disclosure |
32 |
K. |
Legal and Regulatory Proceedings |
36 |
L. |
Changes in Accounting Policies |
36 |
M. |
Internal Control Over Financial Reporting |
36 |
N. |
Non-IFRSFinancial Measures |
37 |
O. |
Forward-lookingStatements |
46 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
About Sun Life
Sun Life is a leading international financial services organization providing asset management, wealth, insurance and health solutions to individual and institutional Clients. Sun Life has operations in a number of markets worldwide, including
A. How We Report Our Results
Unless otherwise noted, all amounts are in Canadian dollars. Amounts in this document may be impacted by rounding. Certain 2023 results in the Drivers of Earnings and CSM Movement Analysis were refined to more accurately reflect how the business is managed.
Underlying net income by Business Types
Sun Life has a diversified mix of businesses and our earnings by business type supports the analysis of our results:
- Wealth & asset management: Sun Life's wealth & asset management businesses generate fee income and/or spread on investment products.
- Group - Health & Protection: Group businesses provide health and protection benefits to employer and government plan members. The products generally have shorter-term coverage periods, and more frequent repricing. The revenues are driven by premiums for coverage provided as well as fee-based earnings (i.e., Administrative Services Only plans, and dental fees).
- Individual - Protection: Generally, individual protection businesses have a longer-term profitability profile and are more sensitive to experience trends. The premiums include a margin for providing protection and are invested to eaa retuover the expected amounts required to fulfill insurance liabilities.
The following provides an overview of the business types in Sun Life's business segments/business groups:
6 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
1. Use of Non-IFRS Financial Measures
We report certain financial information using non-IFRS financial measures, as we believe that these measures provide information that is useful to investors in understanding our performance and facilitate a comparison of our quarterly and full year results from period to period. These non-IFRS financial measures do not have any standardized meaning and may not be comparable with similar measures used by other companies. For certain non-IFRS financial measures, there are no directly comparable amounts under IFRS. These non-IFRS financial measures should not be viewed in isolation from or as alternatives to measures of financial performance determined in accordance with IFRS. Additional information concerning non-IFRS financial measures and, if applicable, reconciliations to the closest IFRS measures are available in section N - Non-IFRS Financial Measures in this document and the Supplementary Financial Information package on www.sunlife.comunder Investors - Financial results and reports.
2. Forward-looking Statements
Certain statements in this document are forward-looking statements within the meaning of certain securities laws, including the
"safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Additional information concerning forward-looking statements and important risk factors that could cause our assumptions, estimates, expectations and projections to be inaccurate and our actual results or events to differ materially from those expressed in or implied by such forward-looking statements can be found in section O - Forward-looking Statements in this document.
3. Additional Information
Additional information about
MANAGEMENT'S DISCUSSION AND ANALYSIS |
|
B. Financial Summary
($ millions, unless otherwise noted) |
Quarterly results |
||
Profitability |
Q1'24 |
Q4'23 |
Q1'23 |
Net income (loss) |
|||
Underlying net income (loss)(1) |
875 |
983 |
895 |
Reported net income (loss) - Common shareholders |
818 |
749 |
806 |
Diluted earnings per share ("EPS") ($) |
|||
Underlying EPS (diluted)(1) |
1.50 |
1.68 |
1.52 |
Reported EPS (diluted) |
1.40 |
1.28 |
1.37 |
Retuon equity ("ROE") (%) |
|||
Underlying ROE(1) |
16.0% |
18.4% |
17.3% |
Reported ROE(1) |
15.0% |
14.0% |
15.6% |
Growth |
Q1'24 |
Q4'23 |
Q1'23 |
Sales |
|||
Wealth sales & asset management gross flows(1) |
46,898 |
45,750 |
46,349 |
Group - Health & Protection sales(1)(2) |
528 |
1,459 |
509 |
Individual - Protection sales(1) |
757 |
707 |
511 |
Total AUM ($ billions)(1) |
1,470.1 |
1,399.6 |
1,363.6 |
New business Contractual Service Margin ("CSM")(1) |
347 |
381 |
232 |
Financial Strength |
Q1'24 |
Q4'23 |
Q1'23 |
LICAT ratios(3) |
|||
|
148% |
149% |
148% |
Sun Life Assurance(4) |
142% |
141% |
144% |
Financial leverage ratio(1)(5) |
21.1% |
21.5% |
23.2% |
Book value per common share ($) |
37.41 |
36.51 |
35.34 |
Weighted average common shares outstanding for basic EPS (millions) |
584 |
584 |
587 |
Closing common shares outstanding (millions) |
583 |
585 |
587 |
- Represents a non-IFRS financial measure. For more details, see section N - Non-IFRS Financial Measures in this document.
- Prior period amounts related to
U.S. Dental sales have been restated to reflect new information. - Life Insurance Capital Adequacy Test ("LICAT") ratio. Our LICAT ratios are calculated in accordance with the OSFI-mandated guideline, Life Insurance Capital Adequacy Test.
- Sun Life Assurance is
SLF Inc.'s principal operating life insurance subsidiary. - The calculation for the financial leverage ratio includes the CSM balance (net of taxes) in the denominator. The CSM (net of taxes) was
$9.9 billion as atMarch 31, 2024 (December 31, 2023 -$9.6 billion ;March 31, 2023 -$9.0 billion ).
8 |
MANAGEMENT'S DISCUSSION AND ANALYSIS |
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