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Sun Life Reports Fourth Quarter and Full Year 2019 Results

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, 2019 . 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: Canada , United States ("U.S."), Asset Management, Asia , and Corporate. Unless otherwise noted, all amounts are in Canadian dollars.



Sun Life Financial Inc. (CNW Group/Sun Life Financial Inc.)

TORONTO , Feb. 12, 2020 /PRNewswire/ - Sun Life Financial Inc. (TSX: SLF) (NYSE: SLF) today announced its results for the fourth quarter ended December 31, 2019. Fourth quarter reported net income was $719 million and underlying net income (1) was $792 million .



Quarterly results

Full Year



Q4'19


Q4'18


2019


2018

Profitability




Reported net income ($ millions)

719


580


2,618


2,522


Underlying net income ($ millions) (1)

792


718


3,057


2,947








Reported EPS ($) (2)

1.22


0.96


4.40


4.14


Underlying EPS ($) (1)(2)

1.34


1.19


5.16


4.86








Reported return on equity ("ROE") (1)

13.6%


10.9%


12.3%


12.1%


Underlying ROE (1)

15.0%


13.6%


14.3%


14.2%

Growth




Insurance sales ($ millions) (1)

1,402


1,314


3,524


3,189


Wealth sales ($ millions) (1)

44,872


36,241


158,992


136,702


Value of new business ("VNB") ($ millions) (1)

337


310


1,206


1,154


Assets under management ("AUM") ($ billions) (1)

1,099.3


951.1


1,099.3


951.1

Financial Strength




LICAT ratios (3) (at period end)






Sun Life Financial Inc.

143%


144%





Sun Life Assurance (4)

130%


131%











Financial leverage ratio (1) (at period end)

21.2%


21.2%












"In 2019, we exceeded $3 billion of underlying net income and achieved underlying EPS of $5.16 , underlying return on equity of 14.3% and dividend growth of 10%," said Dean Connor , President and CEO of Sun Life.

"We completed our acquisition of a majority stake in BentallGreenOak and announced our intention to acquire a majority stake in InfraRed Capital Partners, broadening SLC Management's suite of alternative investment solutions within global real estate and infrastructure equity markets," added Connor. "We also continued to make steady progress on distribution in Asia with two new bancassurance agreements in Vietnam and Indonesia , and now have mobile apps in all seven of our local markets, giving our Clients increased access to products and solutions. The strength of our investment capabilities is highlighted by the achievement of a key milestone, surpassing $1 trillion in assets under management in 2019."

__________

(1)

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

(2)

All earnings per share ("EPS") measures refer to fully diluted EPS, unless otherwise stated.

(3)

For further information on the Life Insurance Capital Adequacy Test ("LICAT"), see section E - Financial Strength in this document.

(4)

Sun Life Assurance Company of Canada ("Sun Life Assurance") is SLF Inc.'s principal operating life insurance subsidiary.



Financial and Operational Highlights - Quarterly Comparison (Q4 2019 vs. Q4 2018)

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

($ millions, unless otherwise noted)



Reported

net income(loss)

Underlying

net income(loss) (1)

Insurance

sales (1)

Wealth

sales (1)


Q4'19

Q4'18

change

Q4'19

Q4'18

change

Q4'19

Q4'18

change

Q4'19

Q4'18

change

Canada (3)

275

96

186%

264

245

8%

228

219

4%

5,905

4,883

21%

U.S. (3)

131

118

11%

137

121

13%

813

844

(4)%

Asset Management (3)

228

244

(7)%

281

227

24%

36,847

29,423

25%

Asia (3)

136

125

9%

143

140

2%

361

251

44%

2,120

1,935

10%

Corporate (3)

(51)

(3)

nm (2)

(33)

(15)

nm (2)

Total

719

580

24%

792

718

10%

1,402

1,314

7%

44,872

36,241

24%



(1)

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

(2)

Not meaningful.

(3)

Prior to the second quarter of 2019, these business segments were referred to as Sun Life Financial Canada, Sun Life Financial U.S., Sun Life Financial Asset Management, Sun Life Financial Asia, and Corporate, respectively, in our interim and annual MD&A.



Reported net income was $719 million in the fourth quarter of 2019, an increase of $139 million or 24% compared to the same period in 2018, driven by favourable market-related impacts, primarily from equity markets, partially offset by higher fair value adjustments on MFS's (1) share-based payment awards (2) , unfavourable assumption changes and management actions ("ACMA") (2) impacts and higher acquisition, integration and restructuring costs (2) . Underlying net income was $792 million , an increase of $74 million or 10%, driven by business growth, tax benefits in Corporate and favourable credit experience, partially offset by unfavourable morbidity experience in Canada and unfavourable expense experience, predominantly resulting from higher incentive compensation costs reported in Corporate.

Our reported ROE was 13.6% in the fourth quarter of 2019. Underlying ROE was 15.0%, compared to 13.6% in the fourth quarter of 2018, reflecting higher underlying net income. Total shareholders' equity remained flat as increases from earnings were offset by the impact of our acquisition of a majority stake in BentallGreenOak ("BGO acquisition") on common shareholders' equity, dividend distributions and share repurchases. SLF Inc. and its wholly-owned holding companies ended the quarter with $2.3 billion in cash and other liquid assets.

A leader in insurance and wealth solutions in our Canadian Home Market

Canada's reported net income was $275 million in the fourth quarter of 2019, an increase of $179 million compared to the same period in 2018, driven by favourable market-related impacts, predominantly from equity markets, and less unfavourable ACMA. Underlying net income was $264 million , an increase of $19 million or 8%, driven by business growth, higher investing activity, favourable credit experience, higher available-for-sale ("AFS") gains and favourable mortality experience, partially offset by unfavourable morbidity experience in Group Benefits ("GB") and a mortgage impairment.

Canada insurance sales were $228 million in the fourth quarter of 2019, an increase of $9 million or 4% compared to the same period in 2018, driven by increased individual life insurance sales. Canada wealth sales were $5.9 billion in the fourth quarter of 2019, an increase of $1.0 billion or 21% compared to the same period in 2018, driven by Group Retirement Services ("GRS") from large case sales, as described below, and Individual Wealth.

In the quarter, GRS sales grew 19% over prior year driven by strong Defined Benefit Solutions sales of $1.5 billion as we continue to shape the market by bringing customized and innovative solutions to companies to assist them in de-risking their pension plans.  In Individual Insurance & Wealth, AUM for SLGI (3) of $29 billion grew 27% from the prior year, driven by strong performance of the flagship Granite Managed Solutions products, where 98%, 100% and 84% of SLGI Granite Managed Portfolio retail assets exceeded their peer medians for five-, three- and one-year performance, respectively (4) .

__________

(1)

MFS Investment Management ("MFS").

(2)

Represents an adjustment made to arrive at a non-IFRS financial measure. See section J - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment.

(3)

Sun Life Global Investments ("SLGI").

(4)

Based on the Funds' Series F returns against their respective Canadian Investment Funds Standards Committee ("CIFSC") peer group.



A leader in U.S. group benefits

U.S.'s reported net income was $131 million , an increase of $13 million or 11% in the fourth quarter of 2019 compared to the same period in 2018. Market-related impacts, ACMA and integration costs were in line with the same period last year. Underlying net income was $137 million, an increase of $16 million or 13%, driven by favourable morbidity experience and higher AFS gains, partially offset by unfavourable mortality experience in In-force Management. The after-tax profit margin for Group Benefits (1) was 7.3% as of the fourth quarter of 2019, compared to 6.7% as of the fourth quarter of 2018.

U.S. Group Benefits sales were US$616 million in the fourth quarter of 2019, a decrease of US$23 million or 4% compared to the same period in 2018, reflecting lower large case employee benefits sales. U.S. Group Benefits full year 2019 sales of over one billion U.S. dollars ( US$1,043 million ) reached a new high, up 4% compared to 2018, driven by growth in medical stop-loss. Medical stop-loss business-in-force increased to US$1.9 billion , an increase of 17% compared to 2018, advancing our leadership position as the largest independent medical stop-loss provider.

We completed the major milestones of our integration of the employee benefits business acquired in 2016, which includes reaching our full target of US$100 million in pre-tax run-rate synergies on schedule. We also surpassed 10,000 employees on the Sun Life + Maxwell Health platform, which was launched earlier in 2019, enabling more families to make better choices for insurance protection that fills financial gaps.

A leader in Global Asset Management

Asset Management's reported net income was $228 million, a decrease of $16 million or 7% in the fourth quarter of 2019 compared to the same period in 2018, reflecting higher fair value adjustments on MFS's share-based payment awards. Underlying net income was $281 million, an increase of $54 million or 24%, driven by higher average net assets ("ANA") in MFS and higher income in SLC Management from the BGO acquisition that closed in 2019. Pre-tax net operating profit margin ratio for MFS (1) for the fourth quarter of 2019 was 40%, compared to 38% in the same period in 2018.

Asset Management ended the fourth quarter with $768.8 billion in AUM, consisting of $684.8 billion ( US$527 .4 billion) in MFS and $84.0 billion in SLC Management. MFS reported net outflows of $1.5 billion ( US$1 .2 billion) and SLC Management reported net inflows of $0 .6 billion in the fourth quarter of 2019. Despite an overall industry trend of net retail outflows, MFS achieved U.S. retail net inflows for the fourth consecutive quarter, demonstrating the continued strength of MFS's performance and brand presence.

In the fourth quarter of 2019, 93%, 93% and 98% of MFS's U.S. retail mutual fund assets ranked in the top half of their Lipper categories based on ten-, five- and three-year performance.

On December 17, 2019 , we entered into an agreement with InfraRed Capital Partners ("InfraRed"), a global infrastructure and real estate investment manager, to purchase 80% of the company and the ability to acquire the remaining interest in the future. As a leader in global infrastructure investing, including renewable energy, InfraRed will further broaden SLC Management's suite of alternative investment solutions, and this transaction also creates the opportunity for InfraRed to access North American investors through our distribution networks.

A leader in Asia through distribution excellence in higher growth markets

Asia's reported net income was $136 million in the fourth quarter of 2019, an increase of $11 million or 9% compared to the same period in 2018, driven by favourable market-related impacts, predominantly from equity markets, largely offset by unfavourable ACMA impacts. Underlying net income was $143 million, an increase of $3 million or 2%, driven by business growth, favourable lapse and other policyholder behaviour experience and lower new business strain, partially offset by unfavourable joint venture experience and other investment-related experience.

Asia insurance sales were $361 million , an increase of $110 million or 44% in the fourth quarter of 2019 compared to the same period in 2018, driven by growth in all local insurance markets and in International. Asia wealth sales were $2.1 billion , an increase of $185 million or 10%, driven by money market sales in the Philippines and growth in the pension business in Hong Kong , largely offset by lower mutual fund sales in India .

We continue to execute on our growth strategies as demonstrated through the following activities in the fourth quarter of 2019:

  • In Vietnam , we signed a 15-year bancassurance partnership with Tien Phong Commercial Bank, a digital leader in Vietnamese banking.
  • In Indonesia , we became the preferred partner to Nobu National Bank by signing an expanded distribution agreement.
  • We commenced sales of Sun Life's sharia-based products via our exclusive bancassurance partnership with Bank Muamalat Indonesia, a pioneer in the Islamic banking industry.
  • As a further testament to our financial strength, Sun Life Hong Kong Ltd. has been assigned "AA-" long-term issuer credit and financial strength ratings by S&P Global Ratings, with a stable outlook, which will help us further support our highnetworth capabilities.
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