Sun Life Reports Fourth Quarter and Full Year 2023 Results
- Underlying net income increased by 10% from Q4'22
- Wealth & asset management underlying net income was up 7%
- Group - Health & Protection underlying net income increased by 14%
- CEO Kevin Strain is optimistic about the company's performance
- Reported net income decreased by 36% from Q4'22
Insights
The financial results of Sun Life Financial Inc. reveal a mixed performance with a notable increase in underlying net income but a decline in reported net income for Q4 2023 compared to the same quarter in the previous year. The underlying net income growth signifies a robust operational performance, particularly in the Individual Protection and Group Health & Protection segments, which could be indicative of successful product offerings and market penetration. However, the decrease in reported net income suggests there may have been significant non-operational costs or adjustments, which could be a point of concern for investors assessing the company's profitability.
The reported Return on Equity (ROE) decrease in Q4 could be viewed negatively by investors, as it may reflect a lower efficiency in generating profits from shareholders' equity. However, the underlying ROE has increased, which might indicate that the core business remains strong. This dichotomy between reported and underlying figures underscores the importance of delving deeper into non-IFRS measures to understand the true health of the business.
The sales growth in the Individual Protection and Group Health & Protection segments is particularly noteworthy, signaling a strong demand for Sun Life's insurance products. This could be a result of strategic initiatives, such as the acquisition of Dialogue Health Technologies and investment in Pillway, which aim to enhance the company's digital and healthcare offerings. The increased sales in these segments align with broader industry trends towards digital health solutions, suggesting that Sun Life is effectively capitalizing on this shift.
Furthermore, the asset management business has shown resilience despite challenging market conditions, with SLC Management recording record earnings. This resilience could be appealing to investors looking for stability in the face of market volatility. The growth in wealth and asset management gross flows, albeit at a slower pace, indicates sustained client trust and product competitiveness.
The implementation of IFRS 17 and IFRS 9 standards at the beginning of 2023 represents a significant change in accounting practices for Sun Life, which may have implications for the comparability of financial results. These new standards could lead to volatility in reported earnings as the company adjusts its asset and liability portfolios. Investors and analysts should be mindful of these changes when comparing year-over-year results, as they may not be fully representative of the company's future earnings profile.
The increased financial leverage ratio and the changes to the Life Insurance Capital Adequacy Test (LICAT) ratios following the adoption of these standards could also affect investor perceptions of the company's financial stability. However, Sun Life's LICAT ratios remain well above the regulatory minimum, which may reassure stakeholders of the company's solvency and risk management capabilities.
The information in this document is based on the unaudited interim financial results of Sun Life Financial Inc. ("SLF Inc.") for the period ended December 31, 2023. SLF Inc., its subsidiaries and, where applicable, its joint ventures and associates are collectively referred to as "the Company", "Sun Life", "we", "our", and "us". We manage our operations and report our financial results in five business segments: Asset Management, |
- Underlying net income(1) of
$983 million $91 million 10% from Q4'22(2) (full year -$3,728 million $359 million 11% from 2022(2)); underlying ROE(1) was18.4% (full year -17.8% ).- Wealth & asset management underlying net income(1):
$439 million $27 million 7% (full year -$1,726 million $53 million 3% ). - Group - Health & Protection underlying net income(1):
$365 million $44 million 14% (full year -$1,313 million $350 million 36% ). - Individual - Protection underlying net income(1):
$284 million $53 million 23% (full year -$1,137 million $137 million 14% ). - Corporate expenses & other(1):
$(105) million $33 million 46% (full year -$(448) million $181 million 68% ).
- Wealth & asset management underlying net income(1):
- Reported net income of
$749 million $416 million 36% from Q4'22(2) (full year -$3,086 million $215 million 7% from 2022(2); reported ROE(1) was14.0% (full year -14.7% ).
"Sun Life closed 2023 with a strong fourth quarter driven by exceptional sales for individual protection, as well as good momentum in our group health and protection businesses, reflecting the value and trust Clients place on Sun Life's solutions," said Kevin Strain, President and CEO of Sun Life. "Despite a challenging market, our Asset Management pillar delivered solid underlying earnings led by record earnings at SLC Management and steady margins at MFS."
"We continue to provide Clients with access to quality care through digital innovation and partnerships to support their health journey. In
_____________ | |
(1) | Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the 2023 Annual MD&A. |
(2) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
Financial and Operational Highlights - Fourth Quarter and Full Year 2023
Quarterly results | Year-to-date | ||||
Profitability | Q4'23 | Q4'22(2) | 2023 | 2022(2) | |
Underlying net income ($ millions)(1) | 983 | 892 | 3,728 | 3,369 | |
Reported net income - Common shareholders ($ millions) | 749 | 1,165 | 3,086 | 2,871 | |
Underlying EPS ($)(1)(3) | 1.68 | 1.52 | 6.36 | 5.75 | |
Reported EPS ($)(3) | 1.28 | 1.98 | 5.26 | 4.89 | |
Underlying return on equity ("ROE")(1) | 18.4 % | 17.7 % | 17.8 % | 17.0 % | |
Reported ROE(1) | 14.0 % | 23.2 % | 14.7 % | 14.5 % | |
Growth | Q4'23 | Q4'22(2) | 2023 | 2022(2) | |
Wealth sales & asset management gross flows ($ millions)(1)(4) | 45,750 | 43,269 | 173,820 | 198,650 | |
Group - Health & Protection sales ($ millions)(1)(5) | 1,459 | 1,345 | 2,942 | 2,554 | |
Individual - Protection sales ($ millions)(1) | 707 | 498 | 2,491 | 1,767 | |
Assets under management ("AUM") ($ billions)(1) | 1,400 | 1,319 | 1,400 | 1,319 | |
New business Contractual Service Margin ("CSM") ($ millions)(1) | 381 | 253 | 1,253 | 762 | |
Financial Strength | Q4'23 | As at | |||
LICAT ratios (at period end)(6)(7) | |||||
Sun Life Financial Inc. | 149 % | 142 % | |||
Sun Life Assurance(8) | 141 % | 139 % | |||
Financial leverage ratio (at period end)(1)(9) | 21.5 % | 23.7 % | |||
(1) | Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the 2023 Annual MD&A. |
(2) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(3) | All earnings per share ("EPS") measures refer to fully diluted EPS, unless otherwise stated. |
(4) | Effective January 1, 2023, |
(5) | Prior period amounts related to |
(6) | Life Insurance Capital Adequacy Test ("LICAT") ratio. Our LICAT ratios are calculated in accordance with the OSFI-mandated guideline. |
(7) | OSFI's 2023 LICAT Guideline, effective January 1, 2023, specifies that available capital for LICAT purposes includes the Contractual Service Margin. Prior period restatement and resubmissions are not mandated. Pro-forma January 1, 2023 LICAT ratios are disclosed to illustrate transition impact. These pro-forma calculations will not be formally submitted to OSFI. Refer to section G - Financial Strength in the 2023 Annual MD&A. |
(8) | Sun Life Assurance Company of |
(9) | Effective January 1, 2023, the calculation for the financial leverage ratio was updated to include the CSM balance (net of taxes) in the denominator. The CSM (net of taxes) was |
Financial and Operational Highlights - Quarterly Comparison (Q4'23 vs. Q4'22)
($ millions) | Q4'23 | |||||
Underlying net income by business type(1)(2): | Sun Life | Asset | Canada | U.S. | Asia | Corporate |
Wealth & asset management | 439 | 331 | 92 | — | 16 | — |
Group - Health & Protection | 365 | — | 159 | 206 | — | — |
Individual - Protection | 284 | — | 99 | 47 | 138 | — |
Corporate expenses & other | (105) | — | — | — | (11) | (94) |
Underlying net income(1) | 983 | 331 | 350 | 253 | 143 | (94) |
Reported net income - Common shareholders | 749 | 297 | 348 | 101 | 44 | (41) |
Change in underlying net income (% year-over-year) | 10 % | 2 % | 32 % | 10 % | 6 % | nm(3) |
Change in reported net income (% year-over-year) | (36) % | (7) % | (23) % | (50) % | (52) % | nm(3) |
Wealth sales & asset management gross flows(1)(4) | 45,750 | 38,322 | 5,424 | — | 2,004 | — |
Group - Health & Protection sales(1) | 1,459 | — | 174 | 1,269 | 16 | — |
Individual - Protection sales(1) | 707 | — | 171 | — | 536 | — |
Change in wealth sales & asset management gross flows (% year-over-year) | 6 % | 3 % | 32 % | — | 12 % | — |
Change in group sales (% year-over-year) | 8 % | — | 63 % | 4 % | (6) % | — |
Change in individual sales (% year-over-year) | 42 % | — | 23 % | — | 49 % | — |
(1) | Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the 2023 Annual MD&A. |
(2) | For more information about the business types in Sun Life's business groups, see section A - How We Report Our Results in the 2023 Annual MD&A. |
(3) | Not meaningful. |
(4) | Effective January 1, 2023, |
Underlying net income(1) of
- Wealth & asset management(1) up
$27 - Group - Health & Protection(1) up
$44 U.S. andCanada , improved disability experience inCanada , and higher investment contributions in theU.S. , partially offset by lower results inU.S. Dental. - Individual - Protection(1) up
$53 Asia , and higher investment contributions inCanada , partially offset by lower earnings due to the sale of Sun LifeUK (2). - Corporate expenses & other(1)
$(33) million - Higher earnings on surplus primarily driven by higher net interest income and lower realized losses.
Reported net income of
- Unfavourable market-related impacts primarily reflecting interest rates and real estate experience(3);
- The prior year impact of the Canada Tax Rate Change(4); and
- Fair value changes in management's ownership of MFS(5) shares; partially offset by
- The increase in underlying net income;
- The impact of the Bermuda Corporate Income Tax Change(6); and
- Lower DentaQuest integration costs.
Underlying ROE was
______________ | |
(1) | Refer to section C - Profitability in this document for more information on notable items attributable to reported and underlying net income items and the Non-IFRS Financial Measures in this document for a reconciliation between reported net income and underlying net income. For more information about the business types in Sun Life's operating segments/business groups, see section A - How We Report Our Results in the 2023 Annual MD&A. |
(2) | On April 3, 2023 we completed the sale of SLF of Canada |
(3) | Real estate experience reflects the difference between the actual value of real estate investments compared to management's longer-term expected returns supporting insurance contract liabilities ("real estate experience"). |
(4) | On December 15, 2022, legislation implementing an additional surtax of |
(5) | MFS Investment Management ("MFS"). |
(6) | |
Business Group Highlights
In 2023, Sun Life was certified as a Great Place to Work® in
Asset Management: A global leader in both public and alternative asset classes through MFS and SLC Management
Asset Management underlying net income of
- MFS down
$15 million US million): Higher expenses offset by higher fee income from average net assets ("ANA"). The MFS pre-tax net operating profit margin(2) was$11 39.4% for Q4'23, compared to39.5% in the prior year. - SLC Management up
$22 26% driven by higher AUM, reflecting strong capital raising and deployment across the platform and the AAM acquisition(3). Fee-related earnings margin(2) was24% for Q4'23, consistent with the prior year.
Reported net income of
Asset Management ended Q4'23 with
During the year, MFS became the 9th largest fund group(4) for the
SLC Management continued its growth trajectory closing the year with
- Wealth & asset management up
$20 - Group - Health & Protection up
$57 - Individual - Protection up
$8 - Higher earnings on surplus, primarily driven by realized gains in the current year.
Reported net income of
- Wealth sales & asset management gross flows of
$5 billion 32% , driven by higher Individual Wealth sales, primarily from mutual funds, and higher defined benefit sales in Group Retirement Services ("GRS"). - Group - Health & Protection sales of
$174 million 63% , driven by higher large case sales. - Individual - Protection sales of
$171 million 23% , driven by higher participating whole life insurance sales.
We continue to focus on strengthening and expanding our health business to help Clients live healthier lives. During the quarter we completed the acquisition of Dialogue Health Technologies Inc.,
We continue to expand our distribution capabilities through the creation of a securities investment dealer, Sun Life Canada Securities Inc. ("SLCSI"). We received approval from the Canadian Investment Regulatory Organization in the fourth quarter, and expect an operational launch in 2024. Our expanded offerings in SLCSI will broaden access to wealth solutions to help Clients achieve lifetime financial security.
__________________ | |
(1) | Pensions & Investments, a global news source of money management. |
(2) | Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the 2023 Annual MD&A. |
(3) | On February 1, 2023, we completed the acquisition of a majority stake interest in Advisors Asset Management, Inc. ("the AAM acquisition"), a leading independent |
(4) | Based on ISS Market Intelligence Simfund. |
(5) | On December 15, 2022, legislation implementing an additional surtax of |
(6) | Assumption changes and management actions ("ACMA"). |
(7) | Compared to the prior year. |
- Group - Health & Protection down
US million: Lower Dental results reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, partially offset by higher Group Benefits results. In Group Benefits, strong revenue growth, higher net investment results and favourable mortality experience was partially offset by less favourable morbidity experience.$7 - Individual - Protection up
US million: The inclusion of the$21 UK payout annuity business(1) and improved mortality experience.
Reported net income of
We continue to advance our strategy of helping more people get access to the health care and coverage they need. In the fourth quarter, the states of
In Health and Risk Solutions, we continue to differentiate our medical stop-loss offering with solutions that increase access to health care and improve clinical outcomes for members, while protecting against high-cost claims for employers. We recently announced a partnership with in-home, tech-enabled medical care provider Somatus to provide one-on-one support to our members with chronic kidney disease and congestive heart failure, two common high-cost conditions. We also announced a partnership with Virtual MeTM(2) to provide our Health Navigator product through their telehealth services that cater to business clients, as well as individuals who are underinsured or uninsured.
- Individual - Protection up
$20 - Regional office expenses & other
$(12) million Asia investments in the business.
Reported net income of
- Individual sales of
$536 million 49% , primarily driven by higher sales inHong Kong reflecting increased demand as pandemic-related travel restrictions were lifted in early 2023, and in International reflecting continued demand for our products, partially offset by lower sales inVietnam reflecting market conditions, andChina . - Wealth sales & asset management gross flows of
$2 billion 12% , primarily driven by higher mutual fund sales inIndia , partially offset by lower money market fund sales inthe Philippines .
New business CSM of
We are dedicated to helping Clients achieve lifetime financial security by expanding product offerings to meet their evolving needs. In
Our diversified mix of high-performing, quality-focused distribution channels, including our new bancassurance partnership with Dah Sing Bank, contributed to record sales and increased market position for Sun Life Hong Kong.
_____________ | |
(1) | On April 3, 2023, we completed the sale of SLF of Canada |
(2) | Virtual MeTM provides a suite of telehealth services delivering quality health care directly to patients in need. |
(3) | |
(4) | Compared to the prior year. |
(5) | SunBrilliance Indexed Universal Life. |
Corporate
Corporate underlying net loss was
Reported net loss was
________________ | |
(1) | On April 3, 2023 we completed the sale of SLF of Canada |
(2) | Tax related matters include tax-exempt investment income in reported net income in both years and the impact of the Canada Tax Rate Change. On December 15, 2022, legislation implementing an additional surtax of |
Table of Contents | ||||||||||||||||||||||||||
A | How We Report Our Results | 8 | ||||||||||||||||||||||||
B | Financial Summary | 9 | ||||||||||||||||||||||||
C | Profitability | 10 | ||||||||||||||||||||||||
D | Growth | 13 | ||||||||||||||||||||||||
E | Contractual Service Margin | 15 | ||||||||||||||||||||||||
F | Financial Strength | 17 | ||||||||||||||||||||||||
G | Performance by Business Segment | 19 | ||||||||||||||||||||||||
1. Asset Management | 20 | |||||||||||||||||||||||||
2. | 22 | |||||||||||||||||||||||||
3. | 23 | |||||||||||||||||||||||||
4. | 24 | |||||||||||||||||||||||||
5. Corporate | 25 | |||||||||||||||||||||||||
H | Non-IFRS Financial Measures | 26 | ||||||||||||||||||||||||
I | Forward-looking Statements | 32 | ||||||||||||||||||||||||
About Sun Life
Sun Life is a leading international financial services organization providing asset management, wealth, insurance and health solutions to individual and institutional Clients. Sun Life has operations in a number of markets worldwide, including
Sun Life Financial Inc. trades on the
A. How We Report Our Results
Sun Life Financial Inc., its subsidiaries and, where applicable, its joint ventures and associates are collectively referred to as "the Company", "Sun Life", "we", "our", and "us". We manage our operations and report our financial results in five business segments: Asset Management,
On January 1, 2023 we adopted IFRS 17 Insurance Contracts ("IFRS 17"), which replaces IFRS 4 Insurance Contracts. IFRS 17 establishes the principles for the recognition, measurement, presentation, and disclosure of insurance contracts. On January 1, 2023, we also adopted IFRS 9 Financial Instruments ("IFRS 9"), which replaces IAS 39 Financial Instruments: Recognition and Measurement. The nature and effects of the key changes in our critical accounting policies and estimated impacts from the adoption of the new standards are summarized in section N - Accounting and Control Matters - 2 - Changes in Accounting Policies in our 2023 Annual MD&A. For more information including the measurement and classification of opening balances, refer to Note 2 of our 2023 Annual Consolidated Financial Statements.
Unless otherwise noted, all amounts are in Canadian dollars. Amounts in this document are impacted by rounding.
Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9
2022 results have been restated for the adoption of IFRS 17 and the related IFRS 9 classification overlay ("the new standards"). The restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. The majority of the actions taken to re-balance asset portfolios and transition asset-liability management execution to an IFRS 17 basis occurred in Q1'23. Accordingly, analysis based on 2022 comparative results may not necessarily be indicative of future trends, and should be interpreted with this context. Using sensitivities to analyze the outlook for market risk and related impacts (e.g., interest rate sensitivities) will be more representative starting with the sensitivities disclosed for Q1'23 and onward in section K - Risk Management in the 2023 Annual MD&A and section I - Risk Management in each quarter's respective interim MD&A document. Certain 2022 restated results and 2023 interim results in the Drivers of Earnings and CSM Movement Analysis were refined to more accurately reflect how management views the business.
1. Use of Non-IFRS Financial Measures
We report certain financial information using non-IFRS financial measures, as we believe that these measures provide information that is useful to investors in understanding our performance and facilitate a comparison of our quarterly and full year results from period to period. These non-IFRS financial measures do not have any standardized meaning and may not be comparable with similar measures used by other companies. For certain non-IFRS financial measures, there are no directly comparable amounts under IFRS. These non-IFRS financial measures should not be viewed in isolation from or as alternatives to measures of financial performance determined in accordance with IFRS. Additional information concerning non-IFRS financial measures and, if applicable, reconciliations to the closest IFRS measures are available in section H - Non-IFRS Financial Measures in this document, section M - Non-IFRS Financial Measures in our 2023 Annual MD&A, and the Supplementary Financial Information package on www.sunlife.com under Investors - Financial results and reports.
2. Forward-looking Statements
Certain statements in this document are forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Additional information concerning forward-looking statements and important risk factors that could cause our assumptions, estimates, expectations and projections to be inaccurate and our actual results or events to differ materially from those expressed in or implied by such forward-looking statements can be found in section I - Forward-looking Statements in this document.
3. Additional Information
Additional information about SLF Inc. can be found in the Consolidated Financial Statements, the Annual and Interim MD&A and SLF Inc.'s Annual Information Form ("AIF") for the year ended December 31, 2023. These documents are filed with securities regulators in
B. Financial Summary
($ millions, unless otherwise noted) | Quarterly results | Year-to-date | ||||
Profitability | Q4'23 | Q3'23 | Q4'22(1) | 2023 | 2022(1) | |
Net income (loss) | ||||||
Underlying net income (loss)(2) | 983 | 930 | 892 | 3,728 | 3,369 | |
Reported net income (loss) - Common shareholders | 749 | 871 | 1,165 | 3,086 | 2,871 | |
Diluted earnings per share ("EPS") ($) | ||||||
Underlying EPS (diluted)(2) | 1.68 | 1.59 | 1.52 | 6.36 | 5.75 | |
Reported EPS (diluted) | 1.28 | 1.48 | 1.98 | 5.26 | 4.89 | |
Return on equity ("ROE") (%) | ||||||
Underlying ROE(2) | 18.4 % | 17.7 % | 17.7 % | 17.8 % | 17.0 % | |
Reported ROE(2) | 14.0 % | 16.6 % | 23.2 % | 14.7 % | 14.5 % | |
Growth | Q4'23 | Q3'23 | Q4'22(1) | 2023 | 2022(1) | |
Sales | ||||||
Wealth sales & asset management gross flows(2)(3) | 45,750 | 39,324 | 43,269 | 173,820 | 198,650 | |
Group - Health & Protection sales(2)(4) | 1,459 | 374 | 1,345 | 2,942 | 2,554 | |
Individual - Protection sales(2) | 707 | 669 | 498 | 2,491 | 1,767 | |
Total AUM ($ billions)(2) | 1,399.6 | 1,340.1 | 1,318.6 | 1,399.6 | 1,318.6 | |
New business Contractual Service Margin ("CSM")(2) | 381 | 370 | 253 | 1,253 | 762 | |
Financial Strength | Q4'23 | Q3'23 | As at | |||
LICAT ratios(5) | ||||||
Sun Life Financial Inc. | 149 % | 147 % | 142 % | |||
Sun Life Assurance(6) | 141 % | 138 % | 139 % | |||
Financial leverage ratio(2)(7) | 21.5 % | 21.8 % | 23.7 % | |||
Book value per common share ($) | 36.51 | 35.91 | 34.60 | |||
Weighted average common shares outstanding for basic EPS (millions) | 584 | 586 | 586 | |||
Closing common shares outstanding (millions) | 585 | 584 | 586 | |||
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. |
(3) | Effective January 1, 2023, |
(4) | Prior period amounts related to |
(5) | OSFI's 2023 LICAT Guideline, effective January 1, 2023, specifies that available capital for LICAT purposes includes the Contractual Service Margin. Prior period restatement and resubmissions are not mandated. Pro-forma January 1, 2023 LICAT ratios are disclosed to illustrate transition impact. These pro-forma calculations will not be formally submitted to OSFI. |
(6) | Sun Life Assurance Company of |
(7) | Effective January 1, 2023, the calculation for the financial leverage ratio was updated to include the CSM balance (net of taxes) in the denominator. The CSM (net of taxes) was |
C. Profitability
The following table reconciles our Common shareholders' net income ("reported net income") and underlying net income. All factors discussed in this document that impact underlying net income are also applicable to reported net income. Certain adjustments and notable items also impact the CSM, such as mortality experience and assumption changes; see section E - Contractual Service Margin in this document for more information.
Quarterly results | ||||
($ millions, after-tax) | Q4'23 | Q3'23 | Q4'22(1) | |
Underlying net income by business type(2): | ||||
Wealth & asset management | 439 | 457 | 412 | |
Group - Health & Protection | 365 | 285 | 321 | |
Individual - Protection | 284 | 297 | 231 | |
Corporate expenses & other | (105) | (109) | (72) | |
Underlying net income(2) | 983 | 930 | 892 | |
Add: | Market-related impacts(1) | (193) | 23 | 224 |
Assumption changes and management actions ("ACMA") | (1) | 35 | 12 | |
Other adjustments | (40) | (117) | 37 | |
Reported net income - Common shareholders | 749 | 871 | 1,165 | |
Underlying ROE(2) | 18.4 % | 17.7 % | 17.7 % | |
Reported ROE(2) | 14.0 % | 16.6 % | 23.2 % | |
Notable items attributable to reported and underlying net income(2): | ||||
Mortality | (5) | 18 | (43) | |
Morbidity | 91 | 79 | 110 | |
Lapse and other policyholder behaviour ("policyholder behaviour") | (11) | (3) | (1) | |
Expenses | (26) | (34) | (4) | |
Credit(3) | (18) | (7) | (11) | |
Other(4) | (2) | 5 | 17 | |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. For more information about business types in Sun Life's business groups, see section A - How We Report Our Results in the 2023 Annual MD&A. |
(3) | Credit includes rating changes on assets measured at Fair value through profit or loss ("FVTPL"), and the Expected credit loss ("ECL") impact for assets measured at Fair value through other comprehensive income ("FVOCI"). |
(4) | Other notable items are recorded in Net Insurance Service Result and Net Investment Result in the Drivers of Earnings analysis. For more details, see section H - Non-IFRS Financial Measures in this document. |
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net income(1) of
- Wealth & asset management(1) up
$27 million - Group - Health & Protection(1) up
$44 million U.S. andCanada , improved disability experience inCanada , and higher investment contributions in theU.S. , partially offset by lower results inU.S. Dental. - Individual - Protection(1) up
$53 million Asia , and higher investment contributions inCanada , partially offset by lower earnings due to the sale of Sun LifeUK (2). - Corporate expenses & other(1)
$(33) million - Higher earnings on surplus primarily driven by higher net interest income and lower realized losses.
Reported net income of
- Unfavourable market-related impacts primarily reflecting interest rates and real estate experience;
- The prior year impact of the Canada Tax Rate Change(3); and
- Fair value changes in management's ownership of MFS shares; partially offset by
- The increase in underlying net income;
- The impact of the Bermuda Corporate Income Tax Change(4); and
- Lower DentaQuest integration costs.
Foreign exchange translation led to an increase of
Underlying ROE was
1. Market-related impacts
Market-related impacts represent the difference between actual versus expected market movements(5). Market-related impacts resulted in a decrease of
2. Assumption changes and management actions
The net impact of assumption changes and management actions was a decrease of
3. Other adjustments
Other adjustments decreased reported net income
4. Experience-related items
In the fourth quarter of 2023, notable experience items included:
- Favourable morbidity experience largely in
Canada andU.S. medical stop-loss; - Unfavourable expense experience largely in
U.S. Dental,Canada , andAsia ; and - Unfavourable credit experience that impacted
Canada results.
______________ | |
(1) | Refer to section H - Non-IFRS Financial Measures in this document for a reconciliation between reported net income and underlying net income. |
(2) | On April 3, 2023 we completed the sale of SLF of Canada |
(3) | On December 15, 2022, legislation implementing an additional surtax of |
(4) | Refer to the heading "Income taxes" in this section for more information. |
(5) | Except for risk free rates which are based on current rates, expected market movements are based on our medium-term outlook which is reviewed annually. |
5. Income taxes
The statutory tax rate is impacted by various items, such as lower taxes on income subject to tax in foreign jurisdictions, tax-exempt investment income, and other sustainable tax benefits.
The Q4'23 effective income tax rate (recovery)(1) on underlying net income and reported net income was
6. Impacts of foreign exchange translation
Foreign exchange translation led to an increase of
______________ | |
(1) | Our effective income tax rate on reported net income is calculated using Total income (loss) before income taxes, as detailed in Note 19 in our 2023 Annual Consolidated Financial Statements. Our effective income tax rate on underlying net income is calculated using pre-tax underlying net income, as detailed in section H - Non-IFRS Financial Measures in this document, and the associated income tax expense. |
D. Growth
1. Sales and Gross Flows
Quarterly results | |||
($ millions) | Q4'23 | Q3'23 | Q4'22 |
Wealth sales & asset management gross flows by business segment(1) | |||
Asset Management gross flows | 38,322 | 34,266 | 37,380 |
5,424 | 3,395 | 4,099 | |
2,004 | 1,663 | 1,790 | |
Total wealth sales & asset management gross flows(1) | 45,750 | 39,324 | 43,269 |
Group - Health & Protection sales by business segment(1) | |||
174 | 119 | 107 | |
1,269 | 239 | 1,221 | |
16 | 16 | 17 | |
Total group sales(1) | 1,459 | 374 | 1,345 |
Individual - Protection sales by business segment(1) | |||
171 | 148 | 139 | |
536 | 521 | 359 | |
Total individual sales(1) | 707 | 669 | 498 |
CSM - Impact of new insurance business ("New business CSM")(1) | 381 | 370 | 253 |
(1) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. |
(2) | Effective January 1, 2023, |
(3) | In underlying net income by business type, Group businesses in |
Total wealth sales & asset management gross flows increased
- Asset Management gross flows increased
$0.8 billion 2% (1), reflecting higher gross flows in SLC Management, partially offset by lower gross flows in MFS. Canada wealth sales & asset management gross flows increased$1.3 billion 32% , driven by higher Individual Wealth sales, primarily from mutual funds, and higher defined benefit sales in Group Retirement Services ("GRS").Asia wealth sales & asset management gross flows increased$0.2 billion 12% (1), primarily driven by higher mutual fund sales inIndia , partially offset by lower money market fund sales inthe Philippines .
Total group health & protection sales increased
Canada group sales increased$67 million 63% , driven by higher large case sales.U.S. group sales increased$44 million 4% (1), driven by higher medical stop-loss and commercial dental sales, partially offset by lower employee benefits sales and lower large case sales in Dental.
Total individual protection sales increased
Canada individual sales increased$32 million 23% , driven by higher participating whole life insurance sales.Asia individual sales increased$175 million 49% (1), primarily driven by higher sales inHong Kong reflecting increased demand as pandemic-related travel restrictions were lifted in early 2023, and in International reflecting continued demand for our products, partially offset by lower sales inVietnam reflecting market conditions, andChina .
New business CSM represents growth derived from sales activity in the period. The impact of new insurance business drove a
___________ | |
(1) | This change excludes the impacts of foreign exchange translation. For more information about these non-IFRS financial measures, see section H - Non-IFRS Financial Measures in this document. |
2. Assets Under Management
AUM consists of general funds, the investments for segregated fund holders ("segregated funds") and third-party assets managed by the Company. Third-party AUM is comprised of institutional and managed funds, as well as other AUM related to our joint ventures.
Quarterly results | |||||
($ millions) | Q4'23 | Q3'23 | Q2'23 | Q1'23 | Q4'22 |
Assets under management(1) | |||||
General fund assets | 204,789 | 193,858 | 196,575 | 201,792 | 198,316 |
Segregated funds | 128,452 | 119,988 | 123,366 | 131,033 | 125,292 |
Third-party assets under management(1) | |||||
Retail | 567,657 | 544,946 | 557,093 | 543,847 | 527,617 |
Institutional, managed funds and other | 537,424 | 518,129 | 527,344 | 528,897 | 507,673 |
Total third-party AUM(1) | 1,105,081 | 1,063,075 | 1,084,437 | 1,072,744 | 1,035,290 |
Consolidation adjustments | (38,717) | (36,780) | (37,536) | (41,947) | (40,337) |
Total assets under management(1) | 1,399,605 | 1,340,141 | 1,366,842 | 1,363,622 | 1,318,561 |
(1) | Represents a non-IFRS financial measure. See section H - Non-IFRS Financial Measures in this document. |
AUM increased
(i) favourable market movements on the value of segregated, retail, institutional and managed funds of
(ii) an increase in AUM of general fund assets of
(iii) an increase of
(iv) net outflows from segregated funds and third-party AUM of
(v) a decrease of
(vi) Client distributions of
Segregated fund and third-party AUM net outflows of
Quarterly results | |||||
($ billions) | Q4'23 | Q3'23 | Q2'23 | Q1'23 | Q4'22 |
Net flows for Segregated fund and Third-party AUM: | |||||
MFS | (15.3) | (12.5) | (5.3) | (5.8) | (16.1) |
SLC Management | 3.9 | 3.4 | 2.0 | 3.2 | 3.5 |
— | (1.4) | 1.1 | (0.2) | (0.1) | |
Total net flows for Segregated fund and Third-party AUM | (11.4) | (10.5) | (2.2) | (2.8) | (12.7) |
Third-Party AUM increased by
(i) favourable market movements of
(ii) other business activities of
(iii) an increase of
(iv) net outflows of
(v) foreign exchange translation of
(vi) Client distributions of
__________ | |
(1) | The acquisition of a majority stake in Advisors Asset Management, Inc. ("AAM acquisition"). For additional information, refer to Note 3 in our 2023 Annual Consolidated Financial Statements. |
E. Contractual Service Margin
Contractual Service Margin represents a source of stored value for future insurance profits and qualifies as available capital for LICAT purposes. CSM is a component of insurance contract liabilities. The following table shows the change in CSM including its recognition into net income in the period, as well as the growth from new insurance sales activity.
For the full year ended | For the full year ended | |
($ millions) | December 31, 2023 | December 31, 2022 |
Beginning of Period | 10,865 | 9,797 |
Impact of new insurance business(1) | 1,253 | 762 |
Expected movements from asset returns & locked-in rates(1) | 560 | 362 |
Insurance experience gains/losses(1) | 67 | 89 |
CSM recognized for services provided | (919) | (861) |
Organic CSM Movement(1) | 961 | 352 |
Impact of markets & other(1) | (38) | 37 |
Impact of change in assumptions(1) | 364 | 431 |
Currency impact | (104) | 248 |
Disposition(2) | (262) | — |
Total CSM Movement | 921 | 1,068 |
Contractual Service Margin, End of Period | 11,786 | 10,865 |
(1) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. |
(2) | Relates to the sale of Sun Life |
Total CSM ended Q4'23 at
- Organic CSM movement was driven by the impact of new insurance business, reflecting strong individual protection sales in
Asia andCanada . - Favourable insurance experience occurred in
Canada andAsia . - Unfavourable markets and other impacts driven by interest rates.
- Impact of change in assumptions include favourable net mortality and net favourable model refinements.
- A
$262 million UK .
Assumption Changes and Management Actions by Type
The impact on CSM of ACMA is attributable to insurance contracts and related impacts under the general measurement approach ("GMA") and variable fee approach ("VFA"). For insurance contracts measured under the GMA, the impacts flow through the CSM at locked-in discount rates. For insurance contracts measured under the VFA, the impact flows through the CSM at current discount rates.The following table sets out the impacts of ACMA on our reported net income and CSM for the three months ended December 31, 2023.
For the three months ended December 31, 2023 | |||
($ millions) | Reported net income | Deferred in CSM | Comments |
Mortality/morbidity | (8) | 13 | Minor updates to reflect mortality/morbidity experience. |
Policyholder behaviour | 14 | (23) | Minor updates to reflect lapse and policyholder behaviour experience. |
Expense | (9) | 19 | Minor updates to reflect expense experience. |
Financial | 108 | 152 | Updates to various financial-related assumptions. |
Modelling enhancement and other | (106) | (85) | Various enhancements and methodology changes. The largest items were |
Total impact of change in assumptions | (1) | 76 | |
(1) | In this document, the reported net income impact of ACMA is shown in aggregate for Net insurance service result and Net investment result, and excludes amounts attributable to participating policyholders. |
(2) | CSM is shown on a pre-tax basis as it reflects the changes in our insurance contract liabilities, while reported net income is shown on a post-tax basis to reflect the impact on capital. |
(3) | In this document, the reported net income impact of ACMA and amount deferred in CSM include non-liability impacts related to ACMA of |
(4) | The impact of change in assumptions in the CSM rollforward of |
(5) | Total impact of change in assumptions represents a non-IFRS financial measure for amounts deferred in CSM. For more details, see section M - Non-IFRS Financial Measures in the 2023 Annual MD&A. |
F. Financial Strength
IFRS 17 and IFRS 9 | IFRS 4 and IAS 39(1) | |||||
($ millions, unless otherwise stated) | Q4'23 | Q3'23 | Q2'23 | Q1'23 | As at January 1, 2023(2) | Q4'22 |
LICAT ratio | ||||||
Sun Life Financial Inc.(1)(2) | 149 % | 147 % | 148 % | 148 % | 142 % | 130 % |
Sun Life Assurance(1)(2) | 141 % | 138 % | 139 % | 144 % | 139 % | 127 % |
Capital | ||||||
Subordinated debt | 6,178 | 6,177 | 6,679 | 6,677 | 6,676 | 6,676 |
Innovative capital instruments(3) | 200 | 200 | 200 | 200 | 200 | 200 |
Equity in the participating account | 457 | 397 | 354 | 303 | 268 | 1,837 |
Non-controlling interests | 161 | 147 | 138 | 133 | 90 | 90 |
Preferred shares and other equity instruments | 2,239 | 2,239 | 2,239 | 2,239 | 2,239 | 2,239 |
Common shareholders' equity(4) | 21,343 | 20,984 | 20,461 | 20,735 | 20,290 | 25,211 |
Contractual Service Margin(2)(5) | 11,786 | 11,452 | 11,258 | 11,243 | 10,865 | |
Total capital(1)(2) | 42,364 | 41,596 | 41,329 | 41,530 | 40,628 | 36,253 |
Financial leverage ratio(1)(5)(6) | 21.5 % | 21.8 % | 23.3 % | 23.2 % | 23.7 % | 25.1 % |
Dividend | ||||||
Underlying dividend payout ratio(1)(6) | 46 % | 47 % | 48 % | 47 % | 47 % | 43 % |
Dividends per common share ($) | 0.780 | 0.750 | 0.750 | 0.720 | 0.720 | 0.720 |
Book value per common share ($)(1) | 36.51 | 35.91 | 34.86 | 35.34 | 34.60 | 42.99 |
(1) | This measure has not been restated for periods in 2022 and earlier as IFRS 17 and IFRS 9 were not the accounting standards in effect, and therefore were not applicable to our capital management practices at the time. |
(2) | OSFI's 2023 LICAT Guideline, effective January 1, 2023, specifies that available capital for LICAT purposes includes the CSM, and as such total capital was also updated to include the CSM balance. Prior period restatement and resubmissions are not mandated. Pro-forma January 1, 2023 LICAT ratios are disclosed to illustrate transition impact. These pro-forma calculations will not be formally submitted to OSFI. |
(3) | Innovative capital instruments consist of Sun Life ExchangEable Capital Securities ("SLEECS"), see section J - Capital and Liquidity Management in the 2023 Annual MD&A. |
(4) | Common shareholders' equity is equal to Total shareholders' equity less Preferred shares and other equity instruments. |
(5) | Effective January 1, 2023, the calculation for the financial leverage ratio was updated to include the CSM balance (net of taxes) in the denominator. The CSM (net of taxes) was |
(6) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. |
1. Life Insurance Capital Adequacy Test
The Office of the Superintendent of Financial Institutions has developed the regulatory capital framework referred to as the Life Insurance Capital Adequacy Test for
SLF Inc. is a non-operating insurance company and is subject to the LICAT guideline. Sun Life Assurance, SLF Inc.'s principal operating life insurance subsidiary, is also subject to the LICAT guideline.
SLF Inc.'s LICAT ratio of
SLF Inc.'s LICAT ratio of
Sun Life Assurance's LICAT ratio of
The Sun Life Assurance LICAT ratios in both periods are well above OSFI's supervisory ratio of
_________ | |
(1) | Mergers & Acquisitions ("M&A"). |
2. Capital
On transition to the new standards, total capital of
Our total capital consists of subordinated debt and other capital instruments, CSM, equity in the participating account and total shareholders' equity which includes common shareholders' equity, preferred shares and other equity instruments, and non-controlling interests. As at December 31, 2023, our total capital was
Our capital and liquidity positions remain strong with a LICAT ratio of
Capital Transactions
On July 4, 2023, SLF Inc. issued
On September 19, 2023, SLF Inc. redeemed all of the outstanding
Normal Course Issuer Bids
On August 24, 2023, SLF inc. announced that OSFI and the Toronto Stock Exchange ("TSX") had approved its previously announced normal course issuer bid to purchase up to 17 million of its common shares (the "NCIB"). The NCIB commenced on August 29, 2023 and continues until August 28, 2024, such earlier date as SLF Inc. may determine, or such date as SLF Inc. completes its purchases of common shares pursuant to the NCIB. Purchases under the NCIB may be made through the facilities of the TSX, other Canadian stock exchanges and/or alternative Canadian trading platforms, at prevailing market rates. Subject to regulatory approval, purchases under the NCIB may also be made by way of private agreements or share repurchase programs under issuer bid exemption orders issued by securities regulatory authorities. Any purchases made under an exemption order issued by a securities regulatory authority will generally be at a discount to the prevailing market price. The actual number of common shares purchased under the NCIB, and the timing of such purchases (if any), will be determined by SLF Inc. Any common shares purchased by SLF Inc. pursuant to the NCIB will be cancelled or used in connection with certain equity settled incentive arrangements. The NCIB will provide the Company with the flexibility to acquire common shares in order to return capital to shareholders as part of its overall capital management strategy.
In 2023, SLF Inc. purchased approximately 2.8 million common shares at a total cost of
____________ | |
(1) | For additional information, refer to Note 3 in our 2023 Annual Consolidated Financial Statements. |
(2) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. |
(3) | SLF Inc. (the ultimate parent company) and its wholly-owned holding companies. |
G. Performance by Business Segment
Quarterly results | |||
($ millions) | Q4'23 | Q3'23 | Q4'22(1) |
Underlying net income (loss)(2) | |||
Asset Management | 331 | 330 | 324 |
350 | 338 | 265 | |
253 | 185 | 230 | |
143 | 166 | 135 | |
Corporate | (94) | (89) | (62) |
Total underlying net income (loss)(2) | 983 | 930 | 892 |
Reported net income (loss) - Common shareholders | |||
Asset Management | 297 | 268 | 321 |
348 | 365 | 453 | |
101 | 132 | 202 | |
44 | 211 | 92 | |
Corporate | (41) | (105) | 97 |
Total reported net income (loss) - Common shareholders | 749 | 871 | 1,165 |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. |
Information describing the business groups and their respective business units is included in our 2023 Annual MD&A. All factors discussed in this document that impact our underlying net income are also applicable to reported net income.
1. Asset Management
Quarterly results | ||||
Asset Management (C$ millions) | Q4'23 | Q3'23 | Q4'22 | |
Underlying net income(1) | 331 | 330 | 324 | |
Add: | Market-related impacts | (6) | (3) | (8) |
Management's ownership of MFS shares | (11) | 7 | 27 | |
Acquisition, integration and restructuring(2) | (12) | (58) | (26) | |
Intangible asset amortization | (5) | (8) | (3) | |
Other | — | — | 7 | |
Reported net income - Common shareholders | 297 | 268 | 321 | |
Assets under management (C$ billions)(1) | 1,015.9 | 974.2 | 952.0 | |
Gross flows (C$ billions)(1) | 38.3 | 34.3 | 37.4 | |
Net flows (C$ billions)(1) | (11.4) | (9.1) | (12.6) | |
MFS (C$ millions) | ||||
Underlying net income(1) | 261 | 277 | 276 | |
Add: | Management's ownership of MFS shares | (11) | 7 | 27 |
Reported net income - Common shareholders | 250 | 284 | 303 | |
Assets under management (C$ billions)(1) | 792.8 | 754.8 | 742.3 | |
Gross flows (C$ billions)(1) | 30.4 | 28.3 | 31.2 | |
Net flows (C$ billions)(1) | (15.3) | (12.5) | (16.1) | |
MFS (US$ millions) | ||||
Underlying net income(1) | 191 | 207 | 202 | |
Add: | Management's ownership of MFS shares | (8) | 5 | 21 |
Reported net income - Common shareholders | 183 | 212 | 223 | |
Pre-tax net operating margin for MFS(1) | 39 % | 41 % | 40 % | |
Average net assets (US$ billions)(1) | 566.6 | 581.6 | 540.5 | |
Assets under management (US$ billions)(1)(3) | 598.6 | 555.9 | 547.9 | |
Gross flows (US$ billions)(1) | 22.3 | 21.1 | 23.0 | |
Net flows (US$ billions)(1) | (11.2) | (9.3) | (11.9) | |
Asset appreciation (depreciation) (US$ billions) | 53.9 | (23.9) | 51.0 | |
SLC Management (C$ millions) | ||||
Underlying net income(1) | 70 | 53 | 48 | |
Add: | Market-related impacts | (6) | (3) | (8) |
Acquisition, integration and restructuring(2) | (12) | (58) | (26) | |
Intangible asset amortization | (5) | (8) | (3) | |
Other | — | — | 7 | |
Reported net income (loss) - Common shareholders | 47 | (16) | 18 | |
Fee-related earnings(1) | 92 | 68 | 73 | |
Pre-tax fee-related earnings margin(1)(4) | 24 % | 24 % | 24 % | |
Pre-tax net operating margin(1)(4) | 22 % | 20 % | 23 % | |
Assets under management (C$ billions)(1) | 223.1 | 219.5 | 209.6 | |
Gross flows - AUM (C$ billions)(1) | 8.0 | 6.0 | 6.1 | |
Net flows - AUM (C$ billions)(1) | 3.9 | 3.4 | 3.5 | |
Fee earning assets under management ("FE AUM") (C$ billions)(1) | 176.9 | 172.6 | 164.4 | |
Gross flows - FE AUM (C$ billions)(1) | 9.2 | 6.2 | 7.9 | |
Net flows - FE AUM (C$ billions)(1) | 5.6 | 4.1 | 5.8 | |
Assets under administration ("AUA") (C$ billions)(1) | 49.8 | 48.4 | — | |
Capital raising (C$ billions)(1) | 5.5 | 3.2 | 3.0 | |
Deployment (C$ billions)(1) | 7.3 | 4.8 | 6.9 | |
(1) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. |
(2) | Amounts relate to acquisition costs for our SLC Management affiliates, BentallGreenOak, InfraRed Capital Partners, Crescent Capital Group LP and Advisors Asset Management, Inc, which include the unwinding of the discount for Other financial liabilities of |
(3) | Monthly information on AUM is provided by MFS in its Corporate Fact Sheet, which can be found at www.mfs.com/CorpFact. The Corporate Fact Sheet also provides MFS' |
(4) | Based on a trailing 12-month basis. For more details, see section H - Non-IFRS Financial Measures in this document. |
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Asset Management underlying net income of
- MFS down
$15 million US million): Higher expenses offset by higher fee income from ANA. The MFS pre-tax net operating profit margin(1) was$11 39.4% for Q4'23, compared to39.5% in the prior year. - SLC Management up
$22 26% driven by higher AUM, reflecting strong capital raising and deployment across the platform and the AAM acquisition(2). Fee-related earnings margin(1) and pre-tax net operating profit margin(1) for Q4'23 were24% and22% , respectively (Q4'22 -24% and23% , respectively).
Asset Management reported net income of
Growth
2023 vs. 2022
Asset Management AUM of
- Net asset value changes of
$91.6 billion - AUM driven by the AAM acquisition of
$5.2 billion - Net outflows of
$26.4 billion - Client distributions of
$6.5 billion
MFS' AUM increased
- Increase in asset values from higher equity markets of
US , partially offset by net outflows of$79.5 billion US .$28.8 billion
In Q4'23,
SLC Management's AUM increased
- Net inflows of
$12.5 billion $5.2 billion $2.3 billion $6.5 billion - Net inflows were comprised of capital raising and Client contributions, totaling
$24.6 billion $12.2 billion
SLC Management's FE AUM increased
- Net inflows of
$14.2 billion $5.2 billion $0.2 billion $7.2 billion - Net inflows were comprised of capital deployment and Client contributions, totaling
$24.6 billion $10.4 billion
____________ | |
(1) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. |
(2) | On February 1, 2023, we completed the acquisition of a majority stake interest in Advisors Asset Management, Inc. ("the AAM acquisition"), a leading independent |
2.
Quarterly results | |||
($ millions) | Q4'23 | Q3'23 | Q4'22(1) |
Wealth & asset management(2) | 92 | 116 | 72 |
Group - Health & Protection(2) | 159 | 136 | 102 |
Individual - Protection(2) | 99 | 86 | 91 |
Underlying net income(2) | 350 | 338 | 265 |
Add: Market-related impacts(1) | (50) | 10 | 235 |
ACMA | 52 | 15 | (133) |
Acquisition, integration and restructuring | 3 | 5 | (1) |
Intangible asset amortization | (7) | (3) | (3) |
Other | — | — | 90 |
Reported net income - Common shareholders(1) | 348 | 365 | 453 |
Underlying ROE (%)(2) | 21.9 % | 22.2 % | 15.2 % |
Reported ROE (%)(2) | 21.8 % | 23.9 % | 25.9 % |
Wealth sales & asset management gross flows(2)(3) | 5,424 | 3,395 | 4,099 |
Group - Health & Protection sales(2) | 174 | 119 | 107 |
Individual - Protection sales(2) | 171 | 148 | 139 |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. For more information about business types in Sun Life's business groups, see section A - How We Report Our Results in the 2023 Annual MD&A. |
(3) | Effective January 1, 2023, |
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net income of
- Wealth & asset management up
$20 - Group - Health & Protection up
$57 - Individual - Protection up
$8 - Higher earnings on surplus, primarily driven by realized gains in the current year.
Reported net income of
Growth
Quarterly Comparison - Q4'23 vs. Q4'22
- Wealth sales & asset management gross flows of
$5.4 billion 32% , driven by higher Individual Wealth sales, primarily from mutual funds, and higher defined benefit sales in GRS. - Group - Health & Protection sales of
$174 million 63% , driven by higher large case sales. - Individual - Protection sales of
$171 million 23% , driven by higher participating whole life insurance sales.
___________ | |
(1) | On December 15, 2022, legislation implementing an additional surtax of |
3.
Quarterly results | |||
(US$ millions) | Q4'23 | Q3'23 | Q4'22(1) |
Group - Health & Protection(2) | 153 | 112 | 160 |
Individual - Protection(2)(3) | 34 | 28 | 13 |
Underlying net income(2) | 187 | 140 | 173 |
Add: Market-related impacts(1) | (33) | 30 | 11 |
ACMA | (40) | (26) | 42 |
Acquisition, integration and restructuring(4) | (19) | (23) | (43) |
Intangible asset amortization | (18) | (16) | (24) |
Other | — | — | (8) |
Reported net income - Common shareholders(1) | 77 | 105 | 151 |
Underlying ROE (%)(2) | 16.1 % | 12.2 % | 14.7 % |
Reported ROE (%)(2) | 6.7 % | 9.2 % | 12.7 % |
After-tax profit margin for Group Benefits (%)(2)(5) | 10.0 % | 9.9 % | 8.1 % |
Group - Health & Protection sales(2) | 932 | 179 | 899 |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. For more information about business types in Sun Life's business groups, see section A - How We Report Our Results in the 2023 Annual MD&A. |
(3) | Effective Q2'23, the |
(4) | Includes acquisition and integration costs associated with DentaQuest, acquired on June 1, 2022. |
(5) | Based on underlying net income, on a trailing four-quarter basis. For more details, see section H - Non-IFRS Financial Measures in this document. |
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net income of
- Group - Health & Protection down
US million: Lower Dental results reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, partially offset by higher Group Benefits results. In Group Benefits, strong revenue growth, higher net investment results and favourable mortality experience was partially offset by less favourable morbidity experience.$7 - Individual - Protection up
US : The inclusion of the$21 million UK payout annuity business(1) and improved mortality experience.
Reported net income of
Growth
Quarterly Comparison - Q4'23 vs. Q4'22
________________ | |
(1) | Effective Q2'23, the |
4.
Quarterly results | ||||
($ millions) | Q4'23 | Q3'23 | Q4'22(1) | |
Wealth & asset management(2) | 16 | 11 | 16 | |
Individual - Protection(2)(3) | 138 | 175 | 118 | |
Regional Office expenses & other(2) | (11) | (20) | 1 | |
Underlying net income (loss)(2) | 143 | 166 | 135 | |
Add: | Market-related impacts(1) | (142) | (4) | (129) |
ACMA | (1) | 56 | 71 | |
Acquisition, integration and restructuring | (5) | (5) | — | |
Intangible asset amortization | (2) | (2) | (2) | |
Other | 51 | — | 17 | |
Reported net income - Common shareholders(1) | 44 | 211 | 92 | |
Underlying ROE (%)(2) | 10.5 % | 12.2 % | 10.4 % | |
Reported ROE (%)(2) | 3.2 % | 15.5 % | 7.1 % | |
Wealth sales & asset management gross flows(2) | 2,004 | 1,663 | 1,790 | |
Individual - Protection sales(2) | 536 | 521 | 359 | |
Group - Health & Protection sales(2)(3) | 16 | 16 | 17 | |
New business CSM(2) | 223 | 238 | 122 | |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. For more information about business types in Sun Life's business groups, see section A - How We Report Our Results in the 2023 Annual MD&A. |
(3) | In underlying net income by business type, Group businesses in |
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net income of
- Individual - Protection up
$20 - Regional office expenses & other
$(12) million Asia investments in the business.
Reported net income of
Growth
Quarterly Comparison - Q4'23 vs. Q4'22
- Wealth sales & asset management gross flows of
$2.0 billion 12% (2), primarily driven by higher mutual fund sales inIndia , partially offset by lower money market fund sales inthe Philippines . - Individual sales of
$536 million 49% (2), primarily driven by higher sales inHong Kong reflecting increased demand as pandemic-related travel restrictions were lifted in early 2023, and in International reflecting continued demand for our products, partially offset by lower sales inVietnam reflecting market conditions, andChina .
New business CSM of
______________ | |
(1) | |
(2) | This change excludes the impacts of foreign exchange translation. For more information about these non-IFRS financial measures, see Section H - Non-IFRS Financial Measures in this document. |
5. Corporate
Quarterly results | |||
($ millions) | Q4'23 | Q3'23 | Q4'22(1) |
Individual - Protection(2)(3) | — | — | 11 |
Corporate expenses & other(2) | (94) | (89) | (73) |
Underlying net income (loss)(2) | (94) | (89) | (62) |
Add: Market-related impacts(1) | 53 | (16) | 108 |
ACMA | — | — | 17 |
Other | — | — | 34 |
Reported net income (loss) - Common shareholders(1) | (41) | (105) | 97 |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | Represents a non-IFRS financial measure. For more details, see section H - Non-IFRS Financial Measures in this document. For more information about business types in Sun Life's business groups, see section A - How We Report Our Results in the 2023 Annual MD&A. |
(3) | The |
Profitability
Quarterly Comparison - Q4'23 vs. Q4'22
Underlying net loss was
Reported net loss was
___________ | |
(1) | On April 3, 2023 we completed the sale of SLF of Canada |
(2) | Tax related matters include tax-exempt investment income in reported net income in both years and the impact of the Canada Tax Rate Change. On December 15, 2022, legislation implementing an additional surtax of |
H. 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 the 2023 Annual MD&A under the heading M - Non-IFRS Financial Measures and the Supplementary Financial Information packages that are available on www.sunlife.com under Investors – Financial results and reports.
1. Common Shareholders' View of Reported Net Income
The following table provides the reconciliation of the Drivers of Earnings ("DOE") analysis to the Statement of Operations total net income. The DOE analysis provides additional detail on the sources of earnings, primarily for protection and health businesses, and explains the actual results compared to the longer term expectations. The underlying DOE and reported DOE are both presented on a common shareholders' basis by removing the allocations to participating policyholders.
($ millions) | Q4'23 | |||||
Statement of Operations | Underlying | Non-underlying | Common Shareholders' | Adjustment for: | Reported (per IFRS) | |
Par(2) | Net(3) | |||||
Net insurance service result | 769 | — | 769 | 61 | (168) | 662 |
Net investment result | 427 | (415) | 12 | 25 | 224 | 261 |
ACMA(3) | 6 | 6 | — | (6) | ||
Fee income: | ||||||
Asset Management | 460 | (57) | 403 | (403) | ||
Other fee income | 66 | 3 | 69 | (5) | 2,001 | 2,065 |
Fee income | 2,065 | |||||
Other expenses | (489) | (92) | (581) | — | (1,620) | (2,201) |
Income before taxes | 1,233 | (555) | 678 | 81 | 28 | 787 |
Income tax (expense) benefit | (203) | 314 | 111 | (24) | — | 87 |
Total net income | 1,030 | (241) | 789 | 57 | 28 | 874 |
Allocated to Participating and NCI(4) | (27) | 7 | (20) | (57) | (28) | (105) |
Dividends and Distributions(5) | (20) | — | (20) | — | — | (20) |
Underlying net income(1) | 983 | |||||
Reported net income - Common shareholders | (234) | 749 | — | — | 749 | |
(1) | For a breakdown of non-underlying adjustments made to arrive at underlying net income as well as the underlying DOE analysis, see the heading "Underlying Net Income and Underlying EPS" below. |
(2) | Removes the components attributable to the participating policyholders. |
(3) | Certain amounts within the Drivers of Earnings are presented on a net basis to reflect how management views the business, compared to a gross basis in the Consolidated Financial Statements. For more details, refer to "Drivers of Earnings" in section 3 - Additional Non-IFRS Financial Measures in Section M - Non-IFRS Financial Measures in the 2023 Annual MD&A. For example, in this document, the reported net income impact of ACMA is shown in aggregate for Net insurance service result and Net investment result, and excludes amounts attributable to participating policyholders and includes non-liability impacts. In contrast, Note 10.B.v of the Consolidated Financial Statements for the period ended December 31, 2023 shows the net income impacts of method and assumption changes separately in Net insurance service result and Net investment result, and includes amounts attributable to participating policyholders. |
(4) | Allocated to equity in the participating account and attributable to non-controlling interests. |
(5) | Dividends on preferred shares and distributions on other equity instruments. |
($ millions) | Q3'23 | |||||
Statement of Operations | Underlying | Non-underlying | Common Shareholders' | Adjustment for: | Reported (per IFRS) | |
Par(2) | Net(3) | |||||
Net insurance service result | 740 | — | 740 | 30 | (58) | 712 |
Net investment result | 416 | 108 | 524 | 21 | 158 | 703 |
ACMA(3) | 41 | 41 | — | (41) | ||
Fee income: | ||||||
Asset Management | 437 | (92) | 345 | (345) | ||
Other fee income | 38 | 5 | 43 | (3) | 1,890 | 1,930 |
Fee income | 1,930 | |||||
Other expenses | (485) | (78) | (563) | — | (1,601) | (2,164) |
Income before taxes | 1,146 | (16) | 1,130 | 48 | 3 | 1,181 |
Income tax (expense) benefit | (182) | (51) | (233) | (11) | — | (244) |
Total net income | 964 | (67) | 897 | 37 | 3 | 937 |
Allocated to Participating and NCI(4) | (15) | 8 | (7) | (37) | (3) | (47) |
Dividends and Distributions(5) | (19) | — | (19) | — | — | (19) |
Underlying net income(1) | 930 | |||||
Reported net income - Common shareholders | (59) | 871 | — | — | 871 | |
Refer to the footnotes on the previous page |
($ millions) | Q4'22 | |||||
Statement of Operations | Underlying | Non-underlying | Common Shareholders' | Adjustment for: | Reported (per IFRS) | |
Par(2) | Net(3) | |||||
Net insurance service result | 726 | (14) | 712 | 27 | 12 | 751 |
Net investment result | 316 | 188 | 504 | (32) | 11 | 483 |
ACMA(3) | (26) | (26) | — | 26 | ||
Fee income: | ||||||
Asset Management | 429 | (10) | 419 | (419) | ||
Other fee income | 55 | — | 55 | — | 1,966 | 2,021 |
Fee income | 2,021 | |||||
Other expenses | (415) | (129) | (544) | — | (1,578) | (2,122) |
Income before taxes | 1,111 | 9 | 1,120 | (5) | 18 | 1,133 |
Income tax (expense) benefit | (187) | 261 | 74 | (10) | 1 | 65 |
Total net income | 924 | 270 | 1,194 | (15) | 19 | 1,198 |
Allocated to Participating and NCI(4) | (13) | 3 | (10) | 15 | (18) | (13) |
Dividends and Distributions(5) | (19) | — | (19) | — | (1) | (20) |
Underlying net income(1) | 892 | |||||
Reported net income - Common shareholders | 273 | 1,165 | — | — | 1,165 | |
Refer to the footnotes on the previous page |
2. Underlying Net Income and Underlying EPS
Underlying net income is a non-IFRS financial measure that assists in understanding Sun Life's business performance by making certain adjustments to IFRS income. Underlying net income, along with common shareholders' net income (Reported net income), is used as a basis for management planning, and is also a key measure in our employee incentive compensation programs. This measure reflects management's view of the underlying business performance of the company and long-term earnings potential. For example, due to the longer term nature of our individual protection businesses, market movements related to interest rates, equity markets and investment properties can have a significant impact on reported net income in the reporting period. However, these impacts are not necessarily realized, and may never be realized, if markets move in the opposite direction in subsequent periods or in the case of interest rates, the fixed income investment is held to maturity.
Underlying net income removes the impact of the following items from reported net income:
- Market-related impacts reflecting the after-tax difference in actual versus expected market movements;
- Assumptions changes and management actions;
- Other adjustments:
i) Management's ownership of MFS shares;
ii) Acquisition, integration, and restructuring;
iii) Intangible asset amortization;
iv) Other items that are unusual or exceptional in nature.
For additional information about the adjustments removed from reported net income to arrive at underlying net income, refer to section M - Non-IFRS Financial Measures - 2 - Underlying Net Income and Underlying EPS in the 2023 Annual MD&A.
The following table sets out the post-tax amounts that were excluded from our underlying net income (loss) and underlying EPS and provides a reconciliation to our reported net income and EPS based on IFRS.
Reconciliations of Select Net Income Measures | Quarterly results | Year-to-date | ||||
($ millions, after-tax) | Q4'23 | Q3'23 | Q4'22(1) | 2023 | 2022(1) | |
Underlying net income | 983 | 930 | 892 | 3,728 | 3,369 | |
Market-related impacts(1) | ||||||
Equity market impacts | 8 | (21) | 22 | (13) | (143) | |
Interest rate impacts(2) | (53) | 127 | 279 | (14) | 56 | |
Impacts of changes in the fair value of investment properties (real estate experience) | (148) | (83) | (77) | (427) | 66 | |
Add: | Market-related impacts | (193) | 23 | 224 | (454) | (21) |
Add: | Assumption changes and management actions | (1) | 35 | 12 | 36 | (168) |
Other adjustments | ||||||
Management's ownership of MFS shares | (11) | 7 | 27 | 12 | 115 | |
Acquisition, integration and restructuring(3)(4)(5)(6)(7) | (42) | (89) | (86) | (155) | (492) | |
Intangible asset amortization | (38) | (35) | (41) | (132) | (97) | |
Other(8)(9)(10)(11) | 51 | — | 137 | 51 | 165 | |
Add: | Total of other adjustments | (40) | (117) | 37 | (224) | (309) |
Reported net income - Common shareholders | 749 | 871 | 1,165 | 3,086 | 2,871 | |
Underlying EPS (diluted) ($) | 1.68 | 1.59 | 1.52 | 6.36 | 5.75 | |
Add: | Market-related impacts ($) | (0.33) | 0.04 | 0.38 | (0.78) | (0.04) |
Assumption changes and management actions ($) | — | 0.06 | 0.02 | 0.06 | (0.29) | |
Management's ownership of MFS shares ($) | (0.02) | 0.01 | 0.05 | 0.02 | 0.20 | |
Acquisition, integration and restructuring ($) | (0.07) | (0.16) | (0.15) | (0.26) | (0.86) | |
Intangible asset amortization ($) | (0.07) | (0.06) | (0.07) | (0.23) | (0.17) | |
Other ($) | 0.09 | — | 0.23 | 0.09 | 0.28 | |
Impact of convertible securities on diluted EPS ($) | — | — | — | — | 0.02 | |
Reported EPS (diluted) ($) | 1.28 | 1.48 | 1.98 | 5.26 | 4.89 | |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | Our results are sensitive to long term interest rates given the nature of our business and to non-parallel yield curve movements (for example flattening, inversion, steepening, etc.). |
(3) | Amounts relate to acquisition costs for our SLC Management affiliates, BentallGreenOak, InfraRed Capital Partners, Crescent Capital Group LP and Advisors Asset Management, Inc, which include the unwinding of the discount for Other financial liabilities of |
(4) | Reflects the changes in estimated future payments for acquisition-related contingent considerations and options to purchase remaining ownership interests of SLC Management affiliates of $nil in Q4'23 and |
(5) | Includes acquisition and integration costs associated with DentaQuest, acquired on June 1, 2022. |
(6) | Includes a |
(7) | Q3'22 reflects an impairment charge of |
(8) | Includes a charge of |
(9) | On December 15, 2022, legislation implementing an additional surtax of |
(10) | Q4'22 includes the unwinding of an internal reinsurance agreement. |
(11) |
The following table shows the pre-tax amount of underlying net income adjustments:
Quarterly results | Year-to-date | |||||
($ millions) | Q4'23 | Q3'23 | Q4'22(1) | 2023 | 2022(1) | |
Underlying net income (after-tax) | 983 | 930 | 892 | 3,728 | 3,369 | |
Underlying net income adjustments (pre-tax): | ||||||
Add: | Market-related impacts(1) | (436) | 107 | 179 | (726) | 233 |
Assumption changes and management actions(2) | 6 | 41 | (26) | 53 | (239) | |
Other adjustments | (118) | (156) | (141) | (373) | (526) | |
Total underlying net income adjustments (pre-tax) | (548) | (8) | 12 | (1,046) | (532) | |
Add: | Taxes related to underlying net income adjustments | 314 | (51) | 261 | 404 | 34 |
Reported net income - Common shareholders (after-tax) | 749 | 871 | 1,165 | 3,086 | 2,871 | |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | In this document, the reported net income impact of ACMA is shown in aggregate for Net insurance service result and Net investment result, and excludes amounts attributable to participating policyholders and includes non-liability impacts. In contrast, Note 10.B.v of the 2023 Annual Consolidated Financial Statements shows the net income impacts of method and assumption changes separately in Net insurance service result and Net investment result, and includes amounts attributable to participating policyholders. |
Taxes related to underlying net income adjustments may vary from the expected effective tax rate range reflecting the mix of business based on the Company's international operations and other tax-related adjustments.
3. Additional Non-IFRS Financial Measures
Management also uses the following non-IFRS financial measures, and a full listing is available in section M - Non-IFRS Financial Measures in the 2023 Annual MD&A.
Assets under management. AUM is a non-IFRS financial measure that indicates the size of our Company's assets across asset management, wealth, and insurance. There is no standardized financial measure under IFRS. In addition to the most directly comparable IFRS measures, which are the balance of General funds and Segregated funds on our Statements of Financial Position, AUM also includes Third-party AUM and Consolidation adjustments. Effective January 1, 2023, "Other AUM" was renamed to "Third Party AUM", and "Consolidation adjustments" is presented separately as consolidation adjustments apply to all components of total AUM. For additional information about Third-party AUM, refer to sections E - Growth - 2 - Assets Under Management and M - Non-IFRS Financial Measures in the 2023 Annual MD&A.
Quarterly results | ||
($ millions) | Q4'23 | Q4'22 |
Assets under management | ||
General fund assets | 204,789 | 198,316 |
Segregated funds | 128,452 | 125,292 |
Third-party AUM(1) | 1,105,081 | 1,035,290 |
Consolidation adjustments(1) | (38,717) | (40,337) |
Total assets under management | 1,399,605 | 1,318,561 |
(1) | Represents a non-IFRS financial measure. For more details, see section M - Non-IFRS Financial Measures in the 2023 Annual MD&A. |
Cash and other liquid assets. This measure is comprised of cash, cash equivalents, short-term investments, and publicly traded securities, net of loans related to acquisitions that are held at SLF Inc. (the ultimate parent company), and its wholly owned holding companies. This measure is a key consideration of available funds for capital re-deployment to support business growth.
($ millions) | As at December 31, | As at December 31, |
Cash and other liquid assets (held at SLF Inc. and its wholly owned holding companies): | ||
Cash, cash equivalents & short-term securities | 712 | 423 |
Debt securities(1) | 1,228 | 1,408 |
Equity securities(2) | 102 | 102 |
Sub-total | 2,042 | 1,933 |
Less: Loans related to acquisitions (held at SLF Inc. and its wholly owned holding companies) | (411) | (883) |
Cash and other liquid assets (held at SLF Inc. and its wholly owned holding companies) | 1,631 | 1,050 |
(1) | Includes publicly traded bonds. |
(2) | Includes ETF Investments. |
Fee-related earnings and Operating income are non-IFRS financial measures within SLC Management's Supplemental Income Statement, which enhances the comparability of SLC Management's results with publicly traded alternative asset managers. For more details, see our Supplementary Financial Information package for the quarter.
The following table provides a reconciliation from Fee-related earnings and Operating income to SLC Management's Fee income and Total expenses based on IFRS.
SLC Management | |||
($ millions) | Q4'23 | Q3'23 | Q4'22 |
Fee income (per IFRS) | 503 | 393 | 501 |
Less: Non-fee-related revenue adjustments(1)(2) | 181 | 94 | 235 |
Fee-related revenue | 322 | 299 | 266 |
Total expenses (per IFRS) | 440 | 450 | 454 |
Less: Non-fee-related expense adjustments(2)(3) | 210 | 219 | 261 |
Fee-related expenses | 230 | 231 | 193 |
Fee-related earnings | 92 | 68 | 73 |
Add: Investment income (loss) and performance fees(4) | 57 | 16 | 20 |
Add: Interest and other(5) | (39) | (20) | (21) |
Operating income | 110 | 64 | 72 |
(1) | Includes Interest and other - fee income, Investment income (loss) and performance fees - fee income, and Other - fee income. |
(2) | Excludes the income and related expenses for certain property management agreements to provide more accurate metrics on our fee-related business. |
(3) | Includes Interest and other, Placement fees - other, Amortization of intangibles, Acquisition, integration and restructuring, and Other - expenses. |
(4) | Investment income (loss) and performance fee in SLC Management's Supplemental Income Statement relates to the underlying results of our seed investments. As such, we have excluded non-underlying market-related impacts as well as the gains or losses of certain non-seed hedges that are reported under Net investment income (loss) under IFRS. The reconciliation is as follows (amounts have been adjusted for rounding): |
($ millions) | Q4'23 | Q3'23 | Q4'22 |
Net investment income (loss) (per IFRS) | 28 | 26 | 6 |
Less: Market-related impacts and Other - Investment income (loss) | 3 | 10 | (9) |
Add: Investment income (loss) and performance fees - fee income | 32 | — | 5 |
Investment income (loss) and performance fees | 57 | 16 | 20 |
(5) | Includes Interest and other reported under Fee income under IFRS, net of Interest and other reported under Total expenses under IFRS. |
Pre-tax net operating margin. This ratio is a measure of the profitability and there is no directly comparable IFRS measure. For MFS, this ratio is calculated by excluding management's ownership of MFS shares and certain commission expenses that are offsetting. These commission expenses are excluded in order to neutralize the impact these items have on the pre-tax net operating margin and have no impact on the profitability of MFS. For SLC Management, the ratio is calculated by dividing the total operating income by fee-related revenue plus investment Income (loss) and performance fees, and is based on the last twelve months.
The following table provides a reconciliation to calculate MFS' pre-tax net operating margin:
MFS | |||||
(US$ millions) | Q4'23 | Q3'23 | Q4'22 | 2023 | 2022 |
Revenue | |||||
Fee income (per IFRS) | 790 | 815 | 775 | 3,196 | 3,323 |
Less: Commissions | 97 | 100 | 99 | 395 | 433 |
Less: Other(1) | (13) | (13) | (13) | (53) | (53) |
Adjusted revenue | 706 | 728 | 689 | 2,854 | 2,943 |
Expenses | |||||
Expenses (per IFRS) | 570 | 553 | 514 | 2,244 | 2,162 |
Net investment (income)/loss (per IFRS) | (29) | (20) | (22) | (93) | (18) |
Less: Management's ownership of MFS shares (net of NCI)(2) | 18 | 6 | (10) | 34 | (45) |
Compensation-related equity plan adjustments | 10 | 5 | (1) | 16 | 7 |
Commissions | 97 | 100 | 99 | 395 | 433 |
Other(1) | (11) | (11) | (13) | (52) | (53) |
Adjusted expenses | 427 | 433 | 417 | 1,758 | 1,802 |
Pre-tax net operating margin | 39 % | 41 % | 40 % | 38 % | 39 % |
(1) | Other includes accounting basis differences, such as sub-advisory expenses and product allowances. |
(2) | Excluding non-controlling interest. For more information on Management's ownership of MFS shares, see the heading Underlying Net Income and Underlying EPS. |
4. Reconciliations of Select Non-IFRS Financial Measures
Underlying Net Income to Reported Net Income Reconciliation - Pre-tax by Business Group
Q4'23 | ||||||
($ millions) | Asset Management | Canada | U.S. | Corporate | Total | |
Underlying net income (loss) | 331 | 350 | 253 | 143 | (94) | 983 |
Add: Market-related impacts (pre-tax) | (11) | (223) | (60) | (142) | — | (436) |
ACMA (pre-tax) | — | 72 | (65) | (1) | — | 6 |
Other adjustments (pre-tax) | (39) | (6) | (65) | (8) | — | (118) |
Tax expense (benefit) | 16 | 155 | 38 | 52 | 53 | 314 |
Reported net income (loss) - Common shareholders | 297 | 348 | 101 | 44 | (41) | 749 |
Q3'23 | ||||||
Underlying net income (loss) | 330 | 338 | 185 | 166 | (89) | 930 |
Add: Market-related impacts (pre-tax) | (3) | 94 | 39 | (1) | (22) | 107 |
ACMA (pre-tax) | — | 20 | (30) | 51 | — | 41 |
Other adjustments (pre-tax) | (81) | 3 | (71) | (7) | — | (156) |
Tax expense (benefit) | 22 | (90) | 9 | 2 | 6 | (51) |
Reported net income (loss) - Common shareholders | 268 | 365 | 132 | 211 | (105) | 871 |
Q4'22(1) | ||||||
Underlying net income (loss) | 324 | 265 | 230 | 135 | (62) | 892 |
Add: Market-related impacts (pre-tax)(1) | (8) | 250 | 21 | (110) | 26 | 179 |
ACMA (pre-tax) | — | (185) | 71 | 71 | 17 | (26) |
Other adjustments (pre-tax) | 1 | (5) | (135) | 15 | (17) | (141) |
Tax expense (benefit) | 4 | 128 | 15 | (19) | 133 | 261 |
Reported net income (loss) - Common shareholders | 321 | 453 | 202 | 92 | 97 | 1,165 |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
Underlying Net Income to Reported Net Income Reconciliation - Pre-tax by Business Unit - Asset Management
Q4'23 | Q3'23 | Q4'22 | |||||
($ millions) | MFS | SLC Management | MFS | SLC Management | MFS | SLC Management | |
Underlying net income (loss) | 261 | 70 | 277 | 53 | 276 | 48 | |
Add: | Market-related impacts (pre-tax) | — | (11) | — | (3) | — | (8) |
Other adjustments (pre-tax) | (7) | (32) | 12 | (93) | 31 | (30) | |
Tax expense (benefit) | (4) | 20 | (5) | 27 | (4) | 8 | |
Reported net income (loss) - Common shareholders | 250 | 47 | 284 | (16) | 303 | 18 | |
Underlying Net Income to Reported Net Income Reconciliation - Pre-tax in
Q4'23 | Q3'23 | Q4'22(1) | ||||
(US$ millions) | MFS | MFS | MFS | |||
Underlying net income (loss) | 187 | 191 | 140 | 207 | 173 | 202 |
Add: Market-related impacts (pre-tax)(1) | (42) | — | 33 | — | 15 | — |
ACMA (pre-tax) | (49) | — | (22) | — | 53 | — |
Other adjustments (pre-tax) | (47) | (5) | (53) | 9 | (99) | 24 |
Tax expense (benefit) | 28 | (3) | 7 | (4) | 9 | (3) |
Reported net income (loss) - Common shareholders | 77 | 183 | 105 | 212 | 151 | 223 |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
Underlying Net Income to Reported Net Income Reconciliation -
The following table sets out the amounts that were excluded from our underlying net income (loss) for
(US$ millions) | Q4'23 | Q3'23 | Q2'23 | Q1'23 | Q4'22(1) | Q3'22(1) | Q2'22(1) | Q1'22(1) |
Underlying net income (loss) for | 138 | 96 | 116 | 128 | 119 | 101 | 87 | 49 |
Add: Market-related impacts (pre-tax)(1) | 14 | (10) | (6) | 4 | (1) | (24) | (10) | (14) |
ACMA (pre-tax) | (11) | 47 | — | — | 8 | (7) | — | — |
Other adjustments (pre-tax) | (9) | (6) | (6) | (5) | (5) | (4) | (6) | (6) |
Tax expense (benefit) | 1 | (6) | 2 | 1 | (2) | 8 | 4 | 5 |
Reported net income (loss) - Common shareholders(2) | 133 | 121 | 106 | 128 | 119 | 74 | 75 | 34 |
(1) | 2022 restated results may not be fully representative of our future earnings profile, as we were not managing our asset and liability portfolios under the new standards. See the heading "Note to Readers: 2022 Restated Results on Adoption of IFRS 17 and IFRS 9" in section A - How We Report Our Results in this document. |
(2) | Effective Q2'22, we began reporting on the performance and results of our Dental business unit, which represents our existing dental and vision business within Group Benefits together with DentaQuest, acquired on June 1, 2022. We have updated prior periods to reflect this change in presentation. |
I. 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 statements (i) relating to our strategies; (ii) relating to the expected operational launch of SLCSI in 2024; (iii) relating to the use of proceeds of our sustainability bond offering; (iv) relating to our normal course issuer bid (including, but not limited to, statements regarding future purchases of common shares under the NCIB); (vii) relating to our growth initiatives and other business objectives; (viii) that are predictive in nature or that depend upon or refer to future events or conditions; and (ix) that include words such as "achieve", "aim", "ambition", "anticipate", "aspiration", "assumption", "believe", "could", "estimate", "expect", "goal", "initiatives", "intend", "may", "objective", "outlook", "plan", "project", "seek", "should", "strategy", "strive", "target", "will", and similar expressions. 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, and remain subject to change.
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 the 2023 Annual MD&A under the headings D - Profitability - 5 - Income taxes, G - Financial Strength and K - Risk Management and in SLF Inc.'s 2023 AIF under the heading Risk Factors, and the factors detailed in SLF Inc.'s other filings with Canadian and
Important risk factors that could cause our assumptions and estimates, and expectations and projections to be inaccurate and our actual results or events to differ materially from those expressed in or implied by the forward-looking statements contained in this document, are set out below. The realization of our forward-looking statements essentially depends on our business performance which, in turn, is subject to many risks. Factors that could cause actual results to differ materially from expectations include, but are not limited to: market risks - related to the performance of equity markets; changes or volatility in interest rates or credit spreads or swap spreads; real estate investments; fluctuations in foreign currency exchange rates; and inflation; insurance risks - related to mortality experience, morbidity experience and longevity; policyholder behaviour; product design and pricing; the impact of higher-than-expected future expenses; and the availability, cost and effectiveness of reinsurance; credit risks - related to issuers of securities held in our investment portfolio, debtors, structured securities, reinsurers, counterparties, other financial institutions and other entities; business and strategic risks - related to global economic and geopolitical conditions; the design and implementation of business strategies; changes in distribution channels or Client behaviour including risks relating to market conduct by intermediaries and agents; the impact of competition; the performance of our investments and investment portfolios managed for Clients such as segregated and mutual funds; shifts in investing trends and Client preference towards products that differ from our investment products and strategies; changes in the legal or regulatory environment, including capital requirements and tax laws; the environment, environmental laws and regulations; operational risks - related to breaches or failure of information system security and privacy, including cyber-attacks; our ability to attract and retain employees; legal, regulatory compliance and market conduct, including the impact of regulatory inquiries and investigations; the execution and integration of mergers, acquisitions, strategic investments and divestitures; 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; liquidity risks - the possibility that we will not be able to fund all cash outflow commitments as they fall due; and other risks - changes to accounting standards in the jurisdictions in which we operate; risks associated with 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 tax matters, including estimates and judgements used in calculating taxes.
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 Q4'23 financial results will be reviewed at a conference call on Thursday, February 8, 2024, at 10:00 a.m. ET. Visit www.sunlife.com/QuarterlyReports 10 minutes prior to the start of the event to access the call through either the webcast or conference call options. 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 Q4'24 period end.
Media Relations Contact: | Investor Relations Contact: |
Krista Wilson | David Garg |
Director, Corporate Communications | Senior Vice-President, Capital Management and Investor Relations |
Tel: 226-751-2391 | Tel: 416-408-8649 |
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SOURCE Sun Life Financial Inc.
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