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Sun Life Financial Reports Third Quarter 2017 Results

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The information in this document is based on the unaudited interim financial results of Sun Life Financial Inc. for the period ended September 30, 2017. Sun Life Financial Inc., its subsidiaries and, where applicable, its joint ventures and associates are collectively referred to as "the Company", "Sun Life Financial", "we", "our", and "us". Unless otherwise noted, all amounts are in Canadian dollars. Beginning in the first quarter of 2017, we stopped reporting operating net income and its related measures, operating earnings per share ("EPS") and operating return on equity ("ROE"). The adjustments previously used to derive operating net income will continue to be used to derive underlying net income.

TORONTO, Nov. 8, 2017 /CNW/ - Sun Life Financial Inc. (TSX: SLF) (NYSE: SLF) today announced its results for the third quarter ended September 30, 2017. Third quarter reported net income was $817 million and underlying net income(1) was $643 million.


Quarterly results

Year-to-date


Q3'17

Q3'16

2017

2016

Reported net income ($ millions)

817

737

1,942

1,757

Underlying net income(1) ($ millions)

643

639

1,905

1,775






Reported EPS(2) ($)

1.32

1.20

3.16

2.85

Underlying EPS(1)(2) ($)

1.05

1.04

3.10

2.89






Reported ROE(1)

16.2%

15.4%

12.8%

12.4%

Underlying ROE(1)

12.7%

13.4%

12.6%

12.5%

 

  • Minimum Continuing Capital and Surplus Requirements ("MCCSR") ratio for Sun Life Assurance Company of Canada of 232%. The MCCSR ratio for Sun Life Financial Inc. was 252%, which includes cash and other liquid assets of $1.5 billion for Sun Life Financial Inc. and its wholly-owned holding companies(3)
  • Life and health sales(1) were $599 million in the third quarter of 2017, compared to $661 million in the same period last year. Wealth sales(1) were $35.8 billion in the third quarter of 2017, compared to $35.2 billion in the third quarter of 2016
  • Global assets under management of $934 billion compared to $903 billion as at December 31, 2016
  • An increase in the common share dividend declared of $0.02 per share, to $0.455 per share for the quarter

"Our third quarter was defined by strong earnings and good progress in all of our four business pillars," said Dean Connor, President & CEO, Sun Life Financial. "We are also pleased to announce an increase in our common share dividend by 2 cents. During the year, we've increased our dividend by 8%, a signal of our continued growth prospects, strong capital position, and commitment to meeting our medium-term financial objectives."

"This quarter showcased many examples of how we're bringing our Client-driven strategy to life," said Connor. "In Canada, Clients can now buy life insurance online in just minutes with Sun Life GO; and, we introduced Ella, an interactive digital coach that helps Clients maximize their benefits and pension plans," Connor added. "In the U.S., we enhanced our online capabilities to improve the benefit enrollment experience for plan members, and in Asia, we improved our new Client onboarding process."

__________________

(1)

Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document.

(2)

All EPS measures refer to fully diluted EPS, unless otherwise stated.

(3)

For additional information, see section E - Financial Strength in this document.

 

Financial and Operational Highlights

Our strategy is focused on four key pillars of growth, where we aim to be a leader in the markets in which we operate. We detail our continued progress in these pillars below.

($ millions, unless otherwise noted)

Q3'17

Q3'16


SLF
Canada

SLF U.S.

SLF Asset
Management

SLF Asia

Corporate

Total

Total

Reported net income

340

195

185

93

4

817

737

Underlying net income(1)

222

161

204

90

(34)

643

639

Life & health sales(1)

217

219

163

599

661

Wealth sales(1)

3,609

28,610

3,607

35,826

35,161

(1) Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document.

 

A Leader in Insurance and Wealth Solutions in our Canadian home market

SLF Canada's reported net income was $340 million in the quarter, compared to $184 million in the same period last year, reflecting favourable market related impacts largely driven by interest rates and assumption changes and management actions. Underlying net income was $222 million, compared to $226 million in the same period last year, reflecting unfavourable morbidity experience partially offset by new business gains.

We had strong growth in sales in our group businesses, with Group Benefits sales of $130 million, up 23% and Group Retirement Services sales of $2.3 billion, up 53% from the third quarter of 2016. Following a strong first six months of the year, individual insurance sales moderated to $87 million, 15% below the same period a year ago. Individual wealth sales grew 5% year over year to $1.3 billion.

During the quarter, SLGI(1) announced the acquisition of Excel Funds Management Inc., a Canadian firm that specializes in the emerging markets asset class, that will add approximately $700 million in AUM. This acquisition complements SLGI's product offerings, and will support growth in our wealth businesses. The acquisition is expected to close by early 2018.

Advancement of our digital capabilities continued during the third quarter, including the launch of "Ella", a new interactive digital coach for our Clients. Ella is designed to enable Clients to achieve sustainable financial security and live healthier lives by getting the full value from their benefits and pension plans. We also launched an online insurance application process, Sun Life GO, which gives Canadians the flexibility to meet health and financial needs with convenient access to insurance coverage.

A Leader in U.S. Group Benefits and International high net worth solutions

SLF U.S.'s reported net income was $195 million, down 20% in local currency from the same quarter prior year, reflecting less favourable market related impacts primarily driven by interest rates and assumption changes and management actions. Underlying net income was $161 million, up 25% in local currency compared to the same quarter last year, reflecting improved underwriting experience in Group Benefits, as our pricing actions, investments in claims management and expense initiatives continue to improve profitability.

Group Benefit sales for the year were down 8% in local currency reflecting pricing discipline throughout the year, including in the quarter. In addition, sales in the quarter reflected fewer large case sales, and we achieved sales growth in the small-case and medium-case markets. International life sales are comparable to the same quarter last year, maintaining a leadership position in this market.

We made enhancements to our Group Benefits enrollment platform to provide new functionality, including the ability to enroll newly hired employees online and digital capabilities to enable a quicker more Client friendly enrollment experience in preparation for the fourth quarter, which is the largest sales and enrollment quarter of the year. In October, we launched the new Sun Life Dental NetworkSM, the largest in the U.S. with approximately 125,000 unique providers(2), marking another milestone in the integration of the acquired Group Benefits business. We also announced a new stop-loss distribution partnership with Pareto Captive Services to expand options for the growing U.S. self-insured health plan market.

_____________________

(1)

Sun Life Global Investments (Canada) Inc.

(2)

Based on September, 2017 data from the Ignition Group.

 

A Leader in global Asset Management

SLF Asset Management's reported net income was $185 million and underlying net income was $204 million in the third quarter of 2017, reflecting a growth of 2% and 9% compared to the same period last year, respectively, and an increase in MFS's pre-tax operating profit margin ratio(1) to 41%, primarily driven by higher average net assets and favourable impacts from expenses and investment income.

SLF Asset Management ended the third quarter with $648 billion in assets under management consisting of $591 billion (US$474 billion) from MFS Investment Management ("MFS") and $57 billion from Sun Life Investment Management ("SLIM"). MFS net outflows of US$2.7 billion in the quarter were partially offset by SLIM net inflows of $1.5 billion

MFS long-term retail fund performance remained strong with 84%, 82% and 95% of MFS's U.S. retail mutual fund assets ranked in the top half of their Lipper categories based on three-, five-, and ten-year performance, respectively, as of September 30, 2017.

A Leader in Asia through Distribution Excellence in Higher Growth Markets

SLF Asia's reported net income was $93 million, compared to $92 million in the third quarter of 2016, reflecting growth in underlying net income offset by unfavourable market related impacts primarily driven by interest rates. Underlying net income was $90 million, compared to $80 million in the third quarter of 2016, reflecting continued growth in fee income business and higher level of gains from investments.

SLF Asia life and health sales were in line with the same quarter of the prior year, with growth across most markets offset by lower sales in Hong Kong and the impact of the movement of the Canadian dollar. Strong wealth sales in Asia of $3.6 billion were up 50% over the prior year, driven by continued growth in India and Philippines mutual funds.

During the quarter, Sun Life Financial Indonesia launched a waqf(2) feature for Syariah life insurance products that enables Clients to plan for their financial future while helping them observe their religious beliefs and doing charity. Sun Life Financial Indonesia is the first life insurance company to offer this innovative solution in accordance with the National Sharia Council of the Indonesian Ulama Council and Indonesia Waqf Board.

About Sun Life Financial

Sun Life Financial is a leading international financial services organization providing a diverse range of insurance, wealth and asset management solutions to individuals and corporate Clients. Sun Life Financial has operations in a number of markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam, Malaysia and Bermuda. As of September 30, 2017, Sun Life Financial had total assets under management of $934 billion. For more information please visit www.sunlife.com.

Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock exchanges under the ticker symbol SLF.

____________________

(1)

Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document.

(2)

An endowment made by a Muslim to a religious, educational, or charitable cause.

 

A. How We Report Our Results

Sun Life Financial Inc. ("SLF Inc."), its subsidiaries and, where applicable, its joint ventures and associates are collectively referred to as "the Company", "Sun Life Financial", "we", "our", and "us". We manage our operations and report our financial results in five business segments: Sun Life Financial Canada ("SLF Canada"), Sun Life Financial United States ("SLF U.S."), Sun Life Financial Asset Management ("SLF Asset Management"), Sun Life Financial Asia ("SLF Asia"), and Corporate. Information concerning these segments is included in our annual and interim consolidated financial statements and accompanying notes ("Annual Consolidated Financial Statements" and "Interim Consolidated Financial Statements", respectively) and annual management's discussion and analysis ("MD&A"). We prepare our unaudited Interim Consolidated Financial Statements using International Financial Reporting Standards ("IFRS"), and in accordance with the International Accounting Standard ("IAS") 34 Interim Financial Reporting. Reported net income (loss) refers to Common shareholders' net income (loss) determined in accordance with IFRS.

The information in this document is in Canadian dollars unless otherwise noted.

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 as alternatives to measures of financial performance determined in accordance with IFRS. Additional information concerning these non-IFRS financial measures and reconciliations to the closest IFRS measures are available in section M - Non-IFRS Financial Measures in this document. Non-IFRS Financial Measures and reconciliations are also included in our annual and interim MD&A and the Supplementary Financial Information packages that are available on www.sunlife.com under Investors – Financial results & 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 N - Forward-looking Statements in this document.

3. Additional Information
Additional information about SLF Inc. can be found in our Annual and Interim Consolidated Financial Statements, annual and interim MD&A and Annual Information Form ("AIF"). These documents are filed with securities regulators in Canada and are available at www.sedar.com. SLF Inc.'s Annual Consolidated Financial Statements, annual MD&A and AIF are filed with the United States Securities and Exchange Commission ("SEC") in SLF Inc.'s annual report on Form 40-F and SLF Inc.'s interim MD&As and Interim Consolidated Financial Statements are furnished to the SEC on Form 6-Ks and are available at www.sec.gov.

B. Financial Summary



Quarterly results

Year-to-date

($ millions, unless otherwise noted)

Q3'17

Q2'17

Q3'16

2017

2016

Profitability

Net income (loss)







Reported net income (loss)

817

574

737

1,942

1,757


Underlying net income (loss)(1)

643

689

639

1,905

1,775

Diluted Earnings per share ("EPS") ($)







Reported EPS (diluted)

1.32

0.93

1.20

3.16

2.85


Underlying EPS (diluted)(1)

1.05

1.12

1.04

3.10

2.89

Reported basic EPS ($)

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