Table of Contents | ||
A. | How We Report Our Results | |
B. | Financial Summary | |
C. | Profitability | |
D. | Growth | |
E. | Financial Strength | |
F. | Performance by Business Group | |
1. | Canada | |
2. | U.S | |
3. | Asset Management | |
4. | Asia | |
5. | Corporate | |
G. | Investments | |
H. | Risk Management | |
I. | Additional Financial Disclosure | |
J. | Legal and Regulatory Matters | |
K. | Changes in Accounting Policies | |
L. | Internal Control Over Financial Reporting | |
M. | Non-IFRS Financial Measures | |
N. | Forward-looking Statements |
A. How We Report Our Results |
B. Financial Summary |
Quarterly results | |||||||
($ millions, unless otherwise noted) | Q1'20 | Q4'19 | Q1'19 | ||||
Profitability | |||||||
Net income (loss) | |||||||
Reported net income (loss) | 391 | 719 | 623 | ||||
Underlying net income (loss)(1) | 770 | 792 | 717 | ||||
Diluted earnings per share ("EPS") ($) | |||||||
Reported EPS (diluted) | 0.67 | 1.22 | 1.04 | ||||
Underlying EPS (diluted)(1) | 1.31 | 1.34 | 1.20 | ||||
Reported basic EPS ($) | 0.67 | 1.22 | 1.04 | ||||
Return on equity ("ROE") (%) | |||||||
Reported ROE(1) | 7.2 | % | 13.6 | % | 11.5 | % | |
Underlying ROE(1) | 14.2 | % | 15.0 | % | 13.3 | % | |
Growth | |||||||
Sales | |||||||
Insurance sales(1) | 776 | 1,402 | 780 | ||||
Wealth sales(1) | 59,904 | 44,872 | 35,993 | ||||
Value of new business ("VNB")(1) | 380 | 337 | 382 | ||||
Premiums and deposits | |||||||
Net premium revenue | 5,146 | 6,639 | 4,370 | ||||
Segregated fund deposits | 3,277 | 3,517 | 3,064 | ||||
Mutual fund sales(1) | 38,089 | 27,177 | 23,664 | ||||
Managed fund sales(1) | 16,878 | 12,347 | 9,976 | ||||
ASO premium and deposit equivalents(1)(2) | 1,811 | 1,715 | 1,707 | ||||
Total premiums and deposits(1) | 65,201 | 51,395 | 42,781 | ||||
Assets under management | |||||||
General fund assets | 188,366 | 180,229 | 172,348 | ||||
Segregated funds | 102,824 | 116,973 | 110,011 | ||||
Mutual funds, managed funds and other AUM(1) | 732,130 | 802,145 | 729,026 | ||||
Total AUM(1) | 1,023,320 | 1,099,347 | 1,011,385 | ||||
Financial Strength | |||||||
LICAT ratios(3) | |||||||
Sun Life Financial Inc. | 143 | % | 143 | % | 145 | % | |
Sun Life Assurance(4) | 130 | % | 130 | % | 132 | % | |
Financial leverage ratio(1) | 20.7 | % | 21.2 | % | 21.1 | % | |
Dividend | |||||||
Dividend payout ratio(1) | 42 | % | 41 | % | 42 | % | |
Dividends per common share ($) | 0.550 | 0.550 | 0.500 | ||||
Capital | |||||||
Subordinated debt and innovative capital instruments(5) | 3,739 | 3,738 | 3,739 | ||||
Participating policyholders’ equity and non-controlling interests | 1,090 | 1,110 | 930 | ||||
Total shareholders’ equity | 24,178 | 23,398 | 23,782 | ||||
Total capital | 29,007 | 28,246 | 28,451 | ||||
Average common shares outstanding (millions) | 587 | 588 | 597 | ||||
Closing common shares outstanding (millions) | 585 | 588 | 595 |
(1) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
(2) | Administrative Services Only ("ASO"). |
(3) | Life Insurance Capital Adequacy Test ("LICAT") ratio. |
(4) | Sun Life Assurance Company of Canada ("Sun Life Assurance") is SLF Inc.'s principal operating life insurance subsidiary. |
(5) | Innovative capital instruments consist of Sun Life ExchangEable Capital Securities ("SLEECS") which qualify as regulatory capital. However, under IFRS, they are reported as Senior debentures in the Consolidated Financial Statements. For additional information, see section I - Capital and Liquidity Management - 1 - Capital in our 2019 annual MD&A. |
C. Profitability |
Quarterly results | ||||||
($ millions, after-tax) | Q1'20 | Q4'19 | Q1'19 | |||
Reported net income | 391 | 719 | 623 | |||
Less: Market-related impacts(1) | (293 | ) | 18 | (69 | ) | |
Assumption changes and management actions(1) | (53 | ) | (15 | ) | (11 | ) |
Other adjustments(1) | (33 | ) | (76 | ) | (14 | ) |
Underlying net income(2) | 770 | 792 | 717 | |||
Reported ROE(2) | 7.2 | % | 13.6 | % | 11.5 | % |
Underlying ROE(2) | 14.2 | % | 15.0 | % | 13.3 | % |
Impacts of other notable items on reported and underlying net income | ||||||
Experience-related items(3) | ||||||
Impacts of investment activity on insurance contract liabilities ("investing activity") | 130 | 34 | 61 | |||
Credit | (15 | ) | 47 | (29 | ) | |
Mortality | (4 | ) | (3 | ) | 15 | |
Morbidity | 9 | (47 | ) | 25 | ||
Lapse and other policyholder behaviour | (14 | ) | (6 | ) | (8 | ) |
Expenses | (11 | ) | (45 | ) | 11 | |
Other experience | (39 | ) | (6 | ) | (18 | ) |
(1) | Represents an adjustment made to arrive at a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment. |
(2) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
(3) | Experience-related items reflect the difference between actual experience during the reporting period and best estimate assumptions used in the determination of our insurance contract liabilities. |
1. | Market-related impacts |
(1) | MFS Investment Management ("MFS"). |
(2) | Our acquisition of a majority stake in BentallGreenOak ("BGO acquisition") that closed in 2019. On acquisition, total equity was reduced by $860 million, primarily driven by the establishment of financial liabilities associated with the anticipated increase of our future ownership in BentallGreenOak. |
2. | Assumption changes and management actions |
3. | Other adjustments |
4. | Experience-related items |
• | Higher investing activity in Canada and the U.S.; |
• | Our credit experience is as follows: |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Changes in ratings | (39 | ) | 1 | (53 | ) | |
Impairments, net of recoveries | (1 | ) | 20 | — | ||
Release of best estimate credit | 25 | 26 | 24 | |||
Credit Experience | (15 | ) | 47 | (29 | ) |
• | Unfavourable mortality experience, predominantly in the U.S.; |
• | Less favourable morbidity experience, which was less favourable in the U.S. and unfavourable in Canada; |
• | Unfavourable expense experience in Canada and in Corporate; and |
• | Unfavourable other experience in Asia from joint ventures and in Corporate from various smaller items. |
5. | Income taxes |
6. | Impacts of foreign exchange translation |
(1) | Our intention to acquire a majority stake in InfraRed Capital Partners ("pending InfraRed transaction"). |
(2) | Our effective income tax rate on underlying net income is calculated using underlying net income and income tax expense associated with underlying net income, which excludes amounts attributable to participating policyholders. |
D. Growth |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Insurance sales by business group(1) | ||||||
Canada | 295 | 228 | 362 | |||
U.S. | 163 | 813 | 160 | |||
Asia | 318 | 361 | 258 | |||
Total insurance sales(1) | 776 | 1,402 | 780 | |||
Wealth sales by business group(1) | ||||||
Canada | 5,629 | 5,905 | 2,825 | |||
Asia | 2,321 | 2,120 | 1,881 | |||
Total wealth sales excluding Asset Management(1) | 7,950 | 8,025 | 4,706 | |||
Asset Management sales(1) | 51,954 | 36,847 | 31,287 | |||
Total wealth sales(1) | 59,904 | 44,872 | 35,993 | |||
Value of New Business(1) | 380 | 337 | 382 |
(1) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
• | Canada insurance sales decreased by 19%, reflecting lower sales in Group Benefits ("GB") and Individual Insurance. |
• | U.S. insurance sales increased by 2%, excluding the favourable impacts of foreign exchange translation of $1 million, driven by increased employee benefits sales, largely offset by lower medical stop-loss sales. |
• | Asia insurance sales increased by 22%, excluding the favourable impacts of foreign exchange translation of $2 million, driven by Hong Kong, International and the Philippines, partially offset by lower sales in India. |
• | Canada wealth sales increased by 99%, driven by Group Retirement Services ("GRS") and Individual Wealth. |
• | Asia wealth sales increased by 22%, excluding the favourable impacts of foreign exchange translation of $30 million, driven by money market sales in the Philippines and the pension business in Hong Kong, partially offset by lower mutual fund sales in India due to weak market sentiments. |
• | Asset Management sales increased by 65%, excluding the favourable impacts of foreign exchange translation of $461 million, driven by higher mutual and managed fund sales in MFS. |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Net premium revenue | 5,146 | 6,639 | 4,370 | |||
Segregated fund deposits | 3,277 | 3,517 | 3,064 | |||
Mutual fund sales(1) | 38,089 | 27,177 | 23,664 | |||
Managed fund sales(1) | 16,878 | 12,347 | 9,976 | |||
ASO premium and deposit equivalents(1) | 1,811 | 1,715 | 1,707 | |||
Total premiums and deposits(1) | 65,201 | 51,395 | 42,781 | |||
Total adjusted premiums and deposits(1)(2) | 64,829 | 51,800 | 42,924 |
(1) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
(2) | Adjusted premiums and deposits is a non-IFRS financial measure that excludes from premiums and deposits the impacts of Constant Currency Adjustment and Reinsurance in Canada's GB Operations Adjustment as described in section M - Non-IFRS Financial Measures in this document. |
Quarterly results | ||||||||||
($ millions) | Q1'20 | Q4'19 | Q3'19 | Q2'19 | Q1'19 | |||||
Assets under management(1) | ||||||||||
General fund assets | 188,366 | 180,229 | 180,206 | 174,325 | 172,348 | |||||
Segregated funds | 102,824 | 116,973 | 112,806 | 111,684 | 110,011 | |||||
Mutual funds, managed funds and other AUM(1) | 732,130 | 802,145 | 769,920 | 738,767 | 729,026 | |||||
Total AUM(1) | 1,023,320 | 1,099,347 | 1,062,932 | 1,024,776 | 1,011,385 |
(1) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
(i) | a decrease from unfavourable market movements on the value of mutual funds, managed funds and segregated funds of $142.0 billion; |
(ii) | net outflows from mutual, managed and segregated funds of $0.5 billion; partially offset by |
(iii) | an increase of $57.5 billion from the impacts of foreign exchange translation (excluding the impacts from general fund assets); |
(iv) | an increase in AUM of general fund assets of $8.1 billion; and |
(v) | an increase from other business activities of $0.9 billion. |
E. Financial Strength |
Quarterly results | ||||||||||
Q1'20 | Q4'19 | Q3'19 | Q2'19 | Q1'19 | ||||||
LICAT ratio | ||||||||||
Sun Life Financial Inc. | 143 | % | 143 | % | 146 | % | 144 | % | 145 | % |
Sun Life Assurance | 130 | % | 130 | % | 133 | % | 133 | % | 132 | % |
Financial leverage ratio(1) | 20.7 | % | 21.2 | % | 22.8 | % | 20.4 | % | 21.1 | % |
Dividend | ||||||||||
Dividend payout ratio(1) | 42 | % | 41 | % | 38 | % | 42 | % | 42 | % |
Dividends per common share ($) | 0.550 | 0.550 | 0.525 | 0.525 | 0.500 | |||||
Capital | ||||||||||
Subordinated debt and innovative capital instruments(2) | 3,739 | 3,738 | 4,238 | 3,491 | 3,739 | |||||
Participating policyholders’ equity and non-controlling interests | 1,090 | 1,110 | 1,045 | 974 | 930 | |||||
Preferred shareholders' equity | 2,257 | 2,257 | 2,257 | 2,257 | 2,257 | |||||
Common shareholders’ equity | 21,921 | 21,141 | 20,896 | 21,427 | 21,525 | |||||
Total capital | 29,007 | 28,246 | 28,436 | 28,149 | 28,451 |
(1) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
(2) | Innovative capital instruments consist of Sun Life ExchangEable Capital Securities and qualify as regulatory capital. However, under IFRS, they are reported as Senior debentures in our Consolidated Financial Statements. For additional information, see section I - Capital and Liquidity Management - 1 - Capital in our 2019 annual MD&A. |
F. Performance by Business Group |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Reported net income (loss) | ||||||
Canada | (42 | ) | 275 | 237 | ||
U.S. | 164 | 131 | 124 | |||
Asset Management | 239 | 228 | 219 | |||
Asia | 100 | 136 | 80 | |||
Corporate | (70 | ) | (51 | ) | (37 | ) |
Total reported net income (loss) | 391 | 719 | 623 | |||
Underlying net income (loss)(1) | ||||||
Canada | 256 | 264 | 237 | |||
U.S. | 161 | 137 | 150 | |||
Asset Management | 242 | 281 | 227 | |||
Asia | 155 | 143 | 122 | |||
Corporate | (44 | ) | (33 | ) | (19 | ) |
Total underlying net income (loss)(1) | 770 | 792 | 717 |
(1) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
(1) | Other liquid assets include cash equivalents, short-term investments, and publicly traded securities. |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Individual Insurance & Wealth | (144 | ) | 147 | 106 | ||
Group Benefits | 63 | 40 | 74 | |||
Group Retirement Services | 39 | 88 | 57 | |||
Reported net income (loss) | (42 | ) | 275 | 237 | ||
Less: Market-related impacts(1) | (275 | ) | 6 | (1 | ) | |
Assumption changes and management actions(1) | (22 | ) | (1 | ) | — | |
Other adjustments(1)(2) | (1 | ) | 6 | 1 | ||
Underlying net income (loss)(3) | 256 | 264 | 237 | |||
Reported ROE (%)(3) | (2.4 | )% | 15.5 | % | 13.5 | % |
Underlying ROE (%)(3) | 14.3 | % | 14.9 | % | 13.5 | % |
Insurance sales(3) | 295 | 228 | 362 | |||
Wealth sales(3) | 5,629 | 5,905 | 2,825 |
(1) | Represents an adjustment to arrive at a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment. |
(2) | Mainly comprised of certain hedges in Canada that do not qualify for hedge accounting and acquisition, integration and restructuring costs. For further information, see section M - Non-IFRS Financial Measures in this document. |
(3) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
Quarterly results | ||||||
(US$ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Group Benefits | 78 | 64 | 86 | |||
In-force Management | 46 | 35 | 7 | |||
Reported net income (loss) | 124 | 99 | 93 | |||
Less: Market-related impacts(1) | 21 | — | (11 | ) | ||
Assumption changes and management actions(1) | (17 | ) | (2 | ) | (2 | ) |
Acquisition, integration and restructuring(1) | (1 | ) | (3 | ) | (6 | ) |
Underlying net income (loss)(2) | 121 | 104 | 112 | |||
Reported ROE (%)(2) | 17.5 | % | 14.8 | % | 13.6 | % |
Underlying ROE (%)(2) | 17.1 | % | 15.5 | % | 16.3 | % |
After-tax profit margin for Group Benefits (%)(2)(3) | 6.8 | % | 7.3 | % | 7.9 | % |
Insurance sales(2) | 122 | 616 | 120 | |||
(C$ millions) | ||||||
Reported net income (loss) | 164 | 131 | 124 | |||
Underlying net income (loss)(2) | 161 | 137 | 150 |
(1) | Represents an adjustment made to arrive at a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment. |
(2) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
(3) | Based on underlying net income, on a trailing four-quarter basis, and which is described in section M - Non-IFRS Financial Measures in this document. |
Quarterly results | ||||||
Asset Management (C$ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Reported net income | 239 | 228 | 219 | |||
Less: Fair value adjustments on MFS's share-based payment awards(1) | 10 | (37 | ) | (8 | ) | |
Acquisition, integration and restructuring(1) | (13 | ) | (16 | ) | — | |
Underlying net income(2) | 242 | 281 | 227 | |||
Assets under management (C$ billions)(2) | 702.9 | 768.8 | 698.4 | |||
Gross sales (C$ billions)(2) | 51.9 | 36.8 | 31.3 | |||
Net sales (C$ billions)(2) | 0.4 | (0.9 | ) | (6.5 | ) | |
MFS (C$ millions) | ||||||
Reported net income | 240 | 229 | 215 | |||
Less: Fair value adjustments on MFS's share-based payment awards(1) | 10 | (37 | ) | (8 | ) | |
Underlying net income(2) | 230 | 266 | 223 | |||
Assets under management (C$ billions)(2) | 613.5 | 684.8 | 631.1 | |||
Gross sales (C$ billions)(2) | 49.7 | 34.0 | 29.0 | |||
Net sales (C$ billions)(2) | 2.4 | (1.5 | ) | (7.8 | ) | |
MFS (US$ millions) | ||||||
Reported net income | 180 | 173 | 162 | |||
Less: Fair value adjustments on MFS's share-based payment awards(1) | 8 | (28 | ) | (6 | ) | |
Underlying net income(2) | 172 | 201 | 168 | |||
Pre-tax net operating profit margin ratio(2) | 36 | % | 40 | % | 38 | % |
Average net assets (US$ billions)(2) | 504.5 | 507.2 | 456.7 | |||
Assets under management (US$ billions)(2)(3) | 436.4 | 527.4 | 472.9 | |||
Gross sales (US$ billions)(2) | 37.1 | 25.8 | 21.8 | |||
Net sales (US$ billions)(2) | 1.8 | (1.2 | ) | (5.9 | ) | |
Asset appreciation (depreciation) (US$ billions) | (92.8 | ) | 33.4 | 50.4 | ||
S&P 500 Index (daily average) | 3,068 | 3,089 | 2,720 | |||
MSCI EAFE Index (daily average) | 1,865 | 1,961 | 1,833 | |||
SLC Management (C$ millions) | ||||||
Reported net income | (1 | ) | (1 | ) | 4 | |
Less: Acquisition, integration and restructuring(1) | (13 | ) | (16 | ) | — | |
Underlying net income(2) | 12 | 15 | 4 | |||
Assets under management (C$ billions)(2) | 89.4 | 84.0 | 67.3 | |||
Gross sales (C$ billions)(2) | 2.2 | 2.8 | 2.3 | |||
Net sales (C$ billions)(2) | (2.0 | ) | 0.6 | 1.3 |
(1) | Represents an adjustment made to arrive at a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment. |
(2) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
(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's U.S. GAAP assets and liabilities as at March 31, 2020. |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Local Markets(1)(2) | 65 | 68 | 64 | |||
International Hubs(1)(2) | 35 | 68 | 16 | |||
Reported net income (loss) | 100 | 136 | 80 | |||
Less: Market-related impacts(3) | (47 | ) | 5 | (42 | ) | |
Assumption changes and management actions(3) | (9 | ) | (11 | ) | — | |
Acquisition, integration and restructuring(3) | 1 | (1 | ) | — | ||
Underlying net income (loss)(4) | 155 | 143 | 122 | |||
Reported ROE (%)(4) | 7.3 | % | 9.8 | % | 6.0 | % |
Underlying ROE (%)(4) | 11.2 | % | 10.2 | % | 9.1 | % |
Insurance sales(4) | 318 | 361 | 258 | |||
Wealth sales(4) | 2,321 | 2,120 | 1,881 |
(1) | Prior to the first quarter of 2020, these business units were referred to as Insurance and Wealth, and International, respectively, in our interim and annual MD&A. Effective the first quarter of 2020, Insurance and Wealth was renamed to Local Markets and we combined our International business and Hong Kong business into a new management structure called “International Hubs”. We have updated prior period amounts to reflect this change in presentation. |
(2) | Local Markets is comprised of Philippines, Indonesia, India, China, Malaysia and Vietnam. International Hubs is comprised of International and Hong Kong. |
(3) | Represents an adjustment made to arrive at a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment. |
(4) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
UK | 51 | 32 | 29 | |||
Corporate Support | (121 | ) | (83 | ) | (66 | ) |
Reported net income (loss) | (70 | ) | (51 | ) | (37 | ) |
Less: Market-related impacts(1) | 1 | 7 | (9 | ) | ||
Assumption changes and management actions(1) | 1 | — | (9 | ) | ||
Acquisition, integration and restructuring(1) | (28 | ) | (25 | ) | — | |
Underlying net income (loss)(2) | (44 | ) | (33 | ) | (19 | ) |
(1) | Represents an adjustment made to arrive at a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment. |
(2) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
G. Investments |
March 31, 2020 | December 31, 2019 | |||||||||
($ millions) | Carrying value | % of total carrying value | Carrying value | % of total carrying value | ||||||
Cash, cash equivalents and short-term securities | 9,548 | 6 | % | 9,575 | 6 | % | ||||
Debt securities | 84,599 | 50 | % | 81,606 | 50 | % | ||||
Equity securities | 4,605 | 3 | % | 4,787 | 3 | % | ||||
Mortgages and loans | 50,253 | 30 | % | 48,222 | 30 | % | ||||
Derivative assets | 3,128 | 2 | % | 1,548 | 1 | % | ||||
Other invested assets | 5,795 | 3 | % | 5,357 | 3 | % | ||||
Policy loans | 3,324 | 2 | % | 3,218 | 2 | % | ||||
Investment properties | 7,359 | 4 | % | 7,306 | 5 | % | ||||
Total invested assets | 168,611 | 100 | % | 161,619 | 100 | % |
(1) | The values and ratios presented are based on the carrying value of the respective asset categories. Generally, the carrying values for invested assets are equal to their fair values; however our mortgages and loans are generally carried at amortized cost. For invested assets supporting insurance contracts, in the event of default, if the amounts recovered are insufficient to satisfy the related insurance contract liability cash flows that the assets are intended to support, credit exposure may be greater than the carrying value of the assets. |
March 31, 2020 | December 31, 2019 | |||||||||||||||
($ millions) | FVTPL debt securities | AFS debt securities | Total | % of Total | FVTPL debt securities | AFS debt securities | Total | % of Total | ||||||||
Debt securities | ||||||||||||||||
Canada | 28,920 | 5,099 | 34,019 | 40 | % | 28,221 | 5,031 | 33,252 | 41 | % | ||||||
United States | 26,000 | 5,779 | 31,779 | 38 | % | 24,224 | 5,822 | 30,046 | 37 | % | ||||||
Europe | 8,719 | 1,237 | 9,956 | 12 | % | 8,827 | 1,178 | 10,005 | 12 | % | ||||||
Asia | 4,550 | 652 | 5,202 | 6 | % | 4,074 | 573 | 4,647 | 6 | % | ||||||
Other | 2,525 | 1,118 | 3,643 | 4 | % | 2,548 | 1,108 | 3,656 | 4 | % | ||||||
Total debt securities | 70,714 | 13,885 | 84,599 | 100 | % | 67,894 | 13,712 | 81,606 | 100 | % |
(1) | The credit risk ratings were established in accordance with the process described in our annual MD&A under the heading Risk Categories - Credit Risk Management Governance and Control. |
(2) | The indirect exposure from mortgages and real estate includes real estate holdings and uninsured mortgages in Alberta and Texas. |
March 31, 2020 | December 31, 2019 | |||||||||||
($ millions) | FVTPL debt securities | AFS debt securities | Total | FVTPL debt securities | AFS debt securities | Total | ||||||
Debt securities issued or guaranteed by: | ||||||||||||
Canadian federal government | 3,833 | 2,593 | 6,426 | 3,890 | 2,556 | 6,446 | ||||||
Canadian provincial and municipal government | 14,679 | 1,177 | 15,856 | 13,826 | 1,139 | 14,965 | ||||||
U.S. government and agency | 2,092 | 981 | 3,073 | 1,748 | 1,363 | 3,111 | ||||||
Other foreign government | 5,329 | 790 | 6,119 | 5,181 | 736 | 5,917 | ||||||
Total government issued or guaranteed debt securities | 25,933 | 5,541 | 31,474 | 24,645 | 5,794 | 30,439 | ||||||
Corporate debt securities by industry sector:(1) | ||||||||||||
Financials | 9,721 | 1,602 | 11,323 | 9,341 | 1,585 | 10,926 | ||||||
Utilities | 6,805 | 601 | 7,406 | 6,693 | 565 | 7,258 | ||||||
Industrials | 5,042 | 691 | 5,733 | 4,800 | 629 | 5,429 | ||||||
Energy | 3,593 | 378 | 3,971 | 3,867 | 365 | 4,232 | ||||||
Communication services | 3,275 | 520 | 3,795 | 3,075 | 471 | 3,546 | ||||||
Real estate | 2,397 | 399 | 2,796 | 2,595 | 368 | 2,963 | ||||||
Health care | 2,037 | 246 | 2,283 | 1,886 | 236 | 2,122 | ||||||
Consumer staples | 1,782 | 234 | 2,016 | 1,703 | 221 | 1,924 | ||||||
Consumer discretionary | 1,324 | 280 | 1,604 | 1,268 | 219 | 1,487 | ||||||
Information technology | 1,335 | 238 | 1,573 | 1,122 | 213 | 1,335 | ||||||
Materials | 1,350 | 200 | 1,550 | 1,331 | 212 | 1,543 | ||||||
Total corporate debt securities | 38,661 | 5,389 | 44,050 | 37,681 | 5,084 | 42,765 | ||||||
Asset-backed securities | 6,120 | 2,955 | 9,075 | 5,568 | 2,834 | 8,402 | ||||||
Total debt securities | 70,714 | 13,885 | 84,599 | 67,894 | 13,712 | 81,606 |
(1) | Our grouping of debt securities by sector is based on the Global Industry Classification Standard and S&P Dow Jones Indices. |
March 31, 2020 | December 31, 2019 | |||||||||||
($ millions) | FVTPL debt securities | AFS debt securities | Total | FVTPL debt securities | AFS debt securities | Total | ||||||
Debt securities by credit rating: | ||||||||||||
AAA | 11,865 | 6,472 | 18,337 | 11,097 | 6,630 | 17,727 | ||||||
AA | 11,100 | 1,658 | 12,758 | 10,503 | 1,670 | 12,173 | ||||||
A | 28,526 | 3,253 | 31,779 | 27,341 | 3,037 | 30,378 | ||||||
BBB | 18,281 | 2,360 | 20,641 | 18,339 | 2,248 | 20,587 | ||||||
BB and lower | 942 | 142 | 1,084 | 614 | 127 | 741 | ||||||
Total debt securities | 70,714 | 13,885 | 84,599 | 67,894 | 13,712 | 81,606 |
March 31, 2020 | December 31, 2019 | ||||||||||||
($ millions) | Mortgages | Loans | Total | Mortgages | Loans | Total | |||||||
Canada | 9,207 | 13,225 | 22,432 | 9,310 | 13,249 | 22,559 | |||||||
United States | 7,410 | 13,301 | 20,711 | 6,915 | 11,994 | 18,909 | |||||||
Europe | — | 4,852 | 4,852 | — | 4,561 | 4,561 | |||||||
Asia | — | 386 | 386 | — | 352 | 352 | |||||||
Other | — | 1,872 | 1,872 | — | 1,841 | 1,841 | |||||||
Total | 16,617 | 33,636 | 50,253 | 16,225 | 31,997 | 48,222 | |||||||
% of Total Invested Assets | 10 | % | 20 | % | 30 | % | 10 | % | 20 | % | 30 | % |
(1) | The geographic location for mortgages is based on the location of the property and for loans it is based on the country of the creditor's parent. |
($ millions) | March 31, 2020 | December 31, 2019 | ||
Mortgages by credit rating: | ||||
Insured | 4,028 | 3,966 | ||
AAA | 1 | 1 | ||
AA | 2,115 | 2,087 | ||
A | 5,788 | 5,481 | ||
BBB | 3,959 | 3,943 | ||
BB and lower | 657 | 670 | ||
Impaired | 69 | 77 | ||
Total mortgages | 16,617 | 16,225 |
($ millions) | March 31, 2020 | December 31, 2019 | ||
Loans by credit rating: | ||||
AAA | 238 | 224 | ||
AA | 5,279 | 5,044 | ||
A | 13,096 | 12,516 | ||
BBB | 13,458 | 12,920 | ||
BB and lower | 1,471 | 1,207 | ||
Impaired | 94 | 86 | ||
Total loans | 33,636 | 31,997 |
March 31, 2020 | |||||||||||||
Gross carrying value | Allowance for losses | ||||||||||||
($ millions) | Mortgages | Loans | Total | Mortgages | Loans | Total | |||||||
Not past due | 16,548 | 33,542 | 50,090 | — | — | — | |||||||
Past due: | |||||||||||||
Past due less than 90 days | — | — | — | — | — | — | |||||||
Past due 90 days or more | — | — | — | — | — | — | |||||||
Impaired | 139 | 144 | 283 | 70 | 50 | 120 | |||||||
Total | 16,687 | 33,686 | 50,373 | 70 | 50 | 120 | |||||||
December 31, 2019 | |||||||||||||
Gross carrying value | Allowance for losses | ||||||||||||
($ millions) | Mortgages | Loans | Total | Mortgages | Loans | Total | |||||||
Not past due | 16,148 | 31,911 | 48,059 | — | — | — | |||||||
Past due: | |||||||||||||
Past due less than 90 days | — | — | — | — | — | — | |||||||
Past due 90 days or more | — | — | — | — | — | — | |||||||
Impaired | 147 | 133 | 280 | 70 | 47 | 117 | |||||||
Total | 16,295 | 32,044 | 48,339 | 70 | 47 | 117 |
($ millions) | March 31, 2020 | December 31, 2019 | |||
Net fair value asset (liability) | (1,381 | ) | (492 | ) | |
Total notional amount | 69,829 | 62,131 | |||
Credit equivalent amount(1) | 870 | 796 | |||
Risk-weighted credit equivalent amount(1) | 17 | 17 |
(1) | Amounts presented are net of collateral received. |
H. Risk Management |
The shaded text and tables in this section H represent our disclosure on market risks in accordance with IFRS 7 Financial Instruments - Disclosures and is an integral part of our unaudited Interim Consolidated Financial Statements for the quarter ended March 31, 2020. The shading in this section does not imply that these disclosures are of any greater importance than non-shaded tables and text, and the Risk Management disclosure should be read in its entirety. |
The Company has established a Risk Management Framework to assist in identifying, measuring, managing, monitoring and reporting risks. The Risk Management Framework covers all risks and these have been grouped into six major categories: market, insurance, credit, business and strategic, operational and liquidity risks. The impact of the COVID-19 pandemic is resulting in the potential for simultaneous adverse impacts across all six major risk categories, though the time horizon and magnitude of these impacts is uncertain at this time. For additional information, refer to section H - Risk Management - 8 - Risks relating to the COVID-19 Pandemic. |
Through our enterprise risk management processes, we oversee the various risk factors identified in the Risk Management Framework and provide reports to senior management and to the Board Committees at least quarterly. Our enterprise risk management processes and risk factors are described in our annual MD&A and AIF. |
When referring to segregated funds in this section, it is inclusive of segregated fund guarantees, variable annuities and investment products and includes Run-off reinsurance in Corporate. |
1. Market Risk Sensitivities |
Our net income(1) is affected by the determination of policyholder obligations under our annuity and insurance contracts. These amounts are determined using internal valuation models and are recorded in our Consolidated Financial Statements, primarily as Insurance contract liabilities. The determination of these obligations requires management to make assumptions about the future level of equity market performance, interest rates, credit and swap spreads and other factors over the life of our products. Differences between our actual experience and our best estimate assumptions are reflected in our Consolidated Financial Statements. Refer to Additional Cautionary Language and Key Assumptions Related to Sensitivities in this section for important additional information regarding these estimates. |
(1) Net income in section H - Risk Management in this document refers to common shareholders' net income. |
As at March 31, 2020 | |||||||||||||||
($ millions, unless otherwise noted) | |||||||||||||||
Change in Equity Markets(1) | 25% decrease | 10% decrease | 10% increase | 25% increase | |||||||||||
Potential impact on net income(2)(3) | $ | (350 | ) | $ | (150 | ) | $ | 100 | $ | 250 | |||||
Potential impact on OCI(3) | $ | (50 | ) | $ | — | $ | — | $ | 50 | ||||||
Potential impact on LICAT(2)(4) | 1.5% point decrease | 0.5% point decrease | 0.0% point increase | 0.0% point increase | |||||||||||
As at December 31, 2019 | |||||||||||||||
($ millions, unless otherwise noted) | |||||||||||||||
Change in Equity Markets(1) | 25% decrease | 10% decrease | 10% increase | 25% increase | |||||||||||
Potential impact on net income(2)(3) | $ | (350 | ) | $ | (150 | ) | $ | 100 | $ | 250 | |||||
Potential impact on OCI(3) | $ | (50 | ) | $ | (50 | ) | $ | 50 | $ | 50 | |||||
Potential impact on LICAT(2)(4) | 0.5% point decrease | 0.0% point decrease | 0.0% point increase | 0.0% point increase | |||||||||||
(1) Represents the respective change across all equity markets as at March 31, 2020 and December 31, 2019. Assumes that actual equity exposures consistently and precisely track the broader equity markets. Sensitivities include the impact of re-balancing equity hedges for dynamic hedging programs at 2% intervals (for 10% changes in equity markets) and at 5% intervals (for 25% changes in equity markets). | |||||||||||||||
(2) The market risk sensitivities include the estimated mitigation impact of our hedging programs in effect as at March 31, 2020 and December 31, 2019, and include new business added and product changes implemented prior to such dates. | |||||||||||||||
(3) Net income and OCI sensitivities have been rounded to the nearest $50 million. The sensitivities exclude the market impacts on the income from our joint ventures and associates, which we account for on an equity basis. | |||||||||||||||
(4) The LICAT sensitivities illustrate the impact on Sun Life Assurance as at March 31, 2020 and December 31, 2019. LICAT ratios are rounded to the nearest 0.5%. |
($ millions, unless otherwise noted) | As at March 31, 2020 | As at December 31, 2019 | |||||||||||||
Change in Interest Rates(1) | 50 basis point decrease | 50 basis point increase | 50 basis point decrease | 50 basis point increase | |||||||||||
Potential impact on net income(2)(3)(4) | $ | (100 | ) | $ | 50 | $ | (150 | ) | $ | 50 | |||||
Potential impact on OCI(3) | $ | 300 | $ | (250 | ) | $ | 250 | $ | (250 | ) | |||||
Potential impact on LICAT(2)(5) | 2.0% point increase | 4.0% point decrease | 2.0% point increase | 3.0% point decrease | |||||||||||
(1) Interest rate sensitivities assume a parallel shift in assumed interest rates across the entire yield curve as at March 31, 2020 and December 31, 2019 with no change to the Actuarial Standards Board ("ASB") promulgated Ultimate Reinvestment Rate ("URR"). Variations in realized yields based on factors such as different terms to maturity and geographies may result in realized sensitivities being significantly different from those illustrated above. Sensitivities include the impact of re-balancing interest rate hedges for dynamic hedging programs at 10 basis point intervals (for 50 basis point changes in interest rates). | |||||||||||||||
(2) The market risk sensitivities include the estimated mitigation impact of our hedging programs in effect as at March 31, 2020 and December 31, 2019, and include new business added and product changes implemented prior to such dates. | |||||||||||||||
(3) Net income and OCI sensitivities have been rounded to the nearest $50 million. The sensitivities exclude the market impacts on the income from our joint ventures and associates, which we account for on an equity basis. | |||||||||||||||
(4) The majority of interest rate sensitivity, after hedging, is attributed to individual insurance products. We also have interest rate sensitivity, after hedging, from our fixed annuity and segregated funds products. | |||||||||||||||
(5) The LICAT sensitivities illustrate the impact on Sun Life Assurance as at March 31, 2020 and December 31, 2019. LICAT ratios are rounded to the nearest 0.5%. |
2. Credit Spread and Swap Spread Sensitivities | ||||
The credit spread sensitivities reflect the impact of changes in credit spreads on our asset and liability valuations (including non-sovereign fixed income assets, provincial governments, corporate bonds, and other fixed income assets). The swap spread sensitivities reflect the impact of changes in swap spreads on swap-based derivative positions and liability valuations. |
($ millions, unless otherwise noted) | As at March 31, 2020 | As at December 31, 2019 | ||||||||||
Change in Credit Spreads(1) | 50 basis point decrease | 50 basis point increase | 50 basis point decrease | 50 basis point increase | ||||||||
Potential impact on net income(2) | $ | (50 | ) | $ | 50 | $ | (75 | ) | $ | 50 | ||
Potential impact on LICAT(3) | 0.5% point increase | 1.0% point decrease | 0.0% point increase | 0.5% point decrease | ||||||||
(1) In most instances, credit spreads are assumed to revert to long-term insurance contract liability assumptions generally over a five-year period. | ||||||||||||
(2) Sensitivities have been rounded to the nearest $25 million. | ||||||||||||
(3) The LICAT sensitivities illustrate the impact on Sun Life Assurance as at March 31, 2020 and December 31, 2019. LICAT ratios are rounded to the nearest 0.5%. |
($ millions, unless otherwise noted) | As at March 31, 2020 | As at December 31, 2019 | ||||||||||
Change in Swap Spreads | 20 basis point decrease | 20 basis point increase | 20 basis point decrease | 20 basis point increase | ||||||||
Potential impact on net income(1) | $ | 50 | $ | (50 | ) | $ | 50 | $ | (50 | ) | ||
(1) Sensitivities have been rounded to the nearest $25 million. |
The credit and swap spread sensitivities assume a parallel shift in the indicated spreads across the entire term structure. Variations in realized spread changes based on different terms to maturity, geographies, asset classes and derivative types, underlying interest rate movements, and ratings may result in realized sensitivities being significantly different from those provided above. The credit spread sensitivity estimates exclude any credit spread impact that may arise in connection with asset positions held in segregated funds. Spread sensitivities are provided for the consolidated entity and may not be proportional across all reporting segments. Refer to Additional Cautionary Language and Key Assumptions Related to Sensitivities in this section for important additional information regarding these estimates. |
As at March 31, 2020 | ||||||||
($ millions) | Fund value | Amount at Risk(1) | Value of guarantees(2) | Insurance contract liabilities(3) | ||||
Canada | 10,496 | 1,297 | 10,823 | 1,238 | ||||
Asia | 2,066 | 443 | 2,446 | 218 | ||||
Corporate(4) | 2,059 | 284 | 1,129 | 302 | ||||
Total | 14,621 | 2,024 | 14,398 | 1,758 | ||||
As at December 31, 2019 | ||||||||
($ millions) | Fund value | Amount at Risk(1) | Value of guarantees(2) | Insurance contract liabilities(3) | ||||
Canada | 12,131 | 362 | 10,678 | 505 | ||||
Asia | 2,337 | 212 | 2,380 | 99 | ||||
Corporate(4) | 2,302 | 207 | 1,063 | 228 | ||||
Total | 16,770 | 781 | 14,121 | 832 |
(1) | The Amount at Risk represents the excess of the value of the guarantees over fund values on all policies where the value of the guarantees exceeds the fund value. The Amount at Risk is not currently payable as the guarantees are only payable upon death, maturity, withdrawal or annuitization if fund values remain below guaranteed values. |
(2) | For guaranteed lifetime withdrawal benefits, the value of guarantees is calculated as the present value of the maximum future withdrawals assuming market conditions remain unchanged from current levels. For all other benefits, the value of guarantees is determined assuming 100% of the claims are made at the valuation date. |
(3) | The insurance contract liabilities represent management's provision for future costs associated with these guarantees and include a provision for adverse deviation in accordance with Canadian actuarial standards of practice. |
(4) | Corporate includes Run-off reinsurance, a closed block of reinsurance. The Run-off reinsurance business includes risks assumed through reinsurance of variable annuity products issued by various North American insurance companies between 1997 and 2001. |
(i) | the total fund values decreased due to a decrease in equity markets, which was partially offset by the weakening of the Canadian dollar against the U.S. dollar; |
(ii) | the total amount at risk increased due to a decrease in equity markets; |
(iii) | the total value of guarantees increased due to the weakening of the Canadian dollar against the U.S. dollar, which was partially offset by net redemptions from products closed to new business; and |
(iv) | the total insurance contract liabilities increased due to a decrease in equity markets and lower interest rates. |
March 31, 2020 | ||||||
($ millions) | Changes in interest rates(3) | Changes in equity markets(4) | ||||
Net income sensitivity(1)(2) | 50 basis point decrease | 10% decrease | 25% decrease | |||
Before hedging | (250 | ) | (200 | ) | (550 | ) |
Hedging impact | 250 | 150 | 450 | |||
Net of hedging | — | (50 | ) | (100 | ) | |
December 31, 2019 | ||||||
($ millions) | Changes in interest rates(3) | Changes in equity markets(4) | ||||
Net income sensitivity(1)(2) | 50 basis point decrease | 10% decrease | 25% decrease | |||
Before hedging | (150 | ) | (150 | ) | (400 | ) |
Hedging impact | 150 | 100 | 300 | |||
Net of hedging | — | (50 | ) | (100 | ) |
(1) | Net income sensitivities have been rounded to the nearest $50 million. |
(2) | Since the fair value of benefits being hedged will generally differ from the financial statement value (due to different valuation methods and the inclusion of valuation margins in respect of financial statement values), this will result in residual volatility to interest rate and equity market shocks in net income and capital. The general availability and cost of these hedging instruments may be adversely impacted by a number of factors, including volatile and declining equity and interest rate market conditions. |
(3) | Represents a parallel shift in assumed interest rates across the entire yield curve as at March 31, 2020 and December 31, 2019, with no change to the ASB promulgated URR. Variations in realized yields based on factors such as different terms to maturity and geographies may result in realized sensitivities being significantly different from those illustrated above. Sensitivities include the impact of re-balancing interest rate hedges for dynamic hedging programs at 10 basis point intervals (for 50 basis point changes in interest rates). |
(4) | Represents the change across all equity markets as at March 31, 2020 and December 31, 2019. Assumes that actual equity exposures consistently and precisely track the broader equity markets. Sensitivities include the impact of re-balancing equity hedges for dynamic hedging programs at 2% intervals (for 10% changes in equity markets) and at 5% intervals (for 25% changes in equity markets). |
(1) | Net income sensitivities have been rounded to the nearest $25 million. |
7. Additional Cautionary Language and Key Assumptions Related to Sensitivities |
Our market risk sensitivities are measures of our estimated change in net income and OCI for changes in interest rates and equity market price levels described above, based on interest rates, equity market prices and business mix in place as at the respective calculation dates. These sensitivities are calculated independently for each risk factor, generally assuming that all other risk variables stay constant. The sensitivities do not take into account indirect effects such as potential impacts on goodwill impairment or valuation allowances on deferred tax assets. The sensitivities are provided for the consolidated entity and may not be proportional across all reporting segments. Actual results can differ materially from these estimates for a variety of reasons, including differences in the pattern or distribution of the market shocks, the interaction between these risk factors, model error, or changes in other assumptions such as business mix, effective tax rates, policyholder behaviour, currency exchange rates and other market variables relative to those underlying the calculation of these sensitivities. The extent to which actual results may differ from the indicative ranges will generally increase with larger capital market movements. Our sensitivities as at December 31, 2019 have been included for comparative purposes only. |
The sensitivities reflect the composition of our assets and liabilities as at March 31, 2020 and December 31, 2019, respectively. Changes in these positions due to new sales or maturities, asset purchases/sales, or other management actions could result in material changes to these reported sensitivities. In particular, these sensitivities reflect the expected impact of hedging activities based on the hedge programs in place as at the March 31 and December 31 calculation dates. The actual impact of hedging activity can differ materially from that assumed in the determination of these indicative sensitivities due to ongoing hedge re-balancing activities, changes in the scale or scope of hedging activities, changes in the cost or general availability of hedging instruments, basis risk (i.e., the risk that hedges do not exactly replicate the underlying portfolio experience), model risk, and other operational risks in the ongoing management of the hedge programs or the potential failure of hedge counterparties to perform in accordance with expectations. |
The sensitivities are based on methods and assumptions in effect as at March 31, 2020 and December 31, 2019, as applicable. Changes in the regulatory environment, accounting or actuarial valuation methods, models, or assumptions (including changes to the ASB promulgated URR) after those dates could result in material changes to these reported sensitivities. Changes in interest rates and equity market prices in excess of the ranges illustrated may result in other than proportionate impacts. |
Our hedging programs may themselves expose us to other risks, including basis risk (i.e., the risk that hedges do not exactly replicate the underlying portfolio experience), volatility risk, derivative counterparty credit risk, and increased levels of liquidity risk, model risk and other operational risks. These factors may adversely impact the net effectiveness, costs, and financial viability of maintaining these hedging programs and therefore adversely impact our profitability and financial position. While our hedging programs are intended to mitigate these effects (e.g., hedge counterparty credit risk is managed by maintaining broad diversification, dealing primarily with highly-rated counterparties, and transacting through over-the-counter ("OTC") contracts cleared through central clearing houses, exchange-traded contracts or bilateral OTC contracts negotiated directly between counterparties that include credit support annexes), residual risk, potential reported earnings and capital volatility remain. |
For the reasons outlined above, our sensitivities should only be viewed as directional estimates of the underlying sensitivities of each factor under these specialized assumptions, and should not be viewed as predictors of our future net income, OCI, and capital. Given the nature of these calculations, we cannot provide assurance that actual impact will be consistent with the estimates provided. |
• | market risks, such as equity, interest rates and spreads, real estate and foreign currency risk, including impact on fee income; |
• | insurance risk, including mortality, morbidity and policyholder behaviour; |
• | credit risk, including defaults, impairments and downgrades; |
• | business and strategic risk including economic and political risk, implementation of our business strategy, sales, investment performance, and changes in legal and regulatory environment; |
• | operational risk, including information security and privacy risk, human resources risks, regulatory compliance, legal and conduct risk, information technology risk, processing risk, third-party risk, and business disruption risk; and |
• | liquidity risk including collateral, and payment deferrals on invested assets or policyholder insurance premium impacts. |
I. Additional Financial Disclosure |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Premiums | ||||||
Gross | 5,739 | 7,280 | 4,942 | |||
Ceded | (593 | ) | (641 | ) | (572 | ) |
Net premiums | 5,146 | 6,639 | 4,370 | |||
Net investment income | ||||||
Interest and other investment income | 1,424 | 1,525 | 1,398 | |||
Fair value(1) and foreign currency changes on assets and liabilities | (1,809 | ) | (1,380 | ) | 4,154 | |
Net gains (losses) on available-for-sale assets | 70 | 64 | 23 | |||
Fee income | 1,639 | 1,677 | 1,447 | |||
Total revenue | 6,470 | 8,525 | 11,392 | |||
Adjusted revenue(2) | 8,347 | 10,074 | 7,381 |
Quarterly results | ||||
($ millions) | Q1'20 | Q1'19 | ||
Net cash and cash equivalents, beginning of period | 6,685 | 7,194 | ||
Cash flows provided by (used in): | ||||
Operating activities | 83 | (1,227 | ) | |
Investing activities | (97 | ) | (37 | ) |
Financing activities | (688 | ) | (601 | ) |
Changes due to fluctuations in exchange rates | 357 | (77 | ) | |
Increase (decrease) in cash and cash equivalents | (345 | ) | (1,942 | ) |
Net cash and cash equivalents, end of period | 6,340 | 5,252 | ||
Short-term securities, end of period | 3,106 | 2,944 | ||
Net cash, cash equivalents and short-term securities, end of period | 9,446 | 8,196 |
Quarterly results | ||||||||||||||||
($ millions, unless otherwise noted) | Q1'20 | Q4'19 | Q3'19 | Q2'19 | Q1'19 | Q4'18 | Q3'18 | Q2'18 | ||||||||
Total revenue | 6,470 | 8,525 | 9,616 | 10,146 | 11,392 | 8,180 | 5,998 | 6,826 | ||||||||
Common shareholders' net income (loss) | ||||||||||||||||
Reported | 391 | 719 | 681 | 595 | 623 | 580 | 567 | 706 | ||||||||
Underlying(1) | 770 | 792 | 809 | 739 | 717 | 718 | 730 | 729 | ||||||||
Diluted EPS ($) | ||||||||||||||||
Reported | 0.67 | 1.22 | 1.15 | 1.00 | 1.04 | 0.96 | 0.93 | 1.16 | ||||||||
Underlying(1) | 1.31 | 1.34 | 1.37 | 1.24 | 1.20 | 1.19 | 1.20 | 1.20 | ||||||||
Basic reported EPS ($) | ||||||||||||||||
Reported | 0.67 | 1.22 | 1.15 | 1.00 | 1.04 | 0.96 | 0.94 | 1.16 | ||||||||
Reported net income (loss) by segment | ||||||||||||||||
Canada | (42 | ) | 275 | 223 | 148 | 237 | 96 | 335 | 262 | |||||||
U.S. | 164 | 131 | (186 | ) | 94 | 124 | 118 | (267 | ) | 105 | ||||||
Asset Management | 239 | 228 | 221 | 229 | 219 | 244 | 241 | 214 | ||||||||
Asia | 100 | 136 | 170 | 134 | 80 | 125 | 164 | 133 | ||||||||
Corporate | (70 | ) | (51 | ) | 253 | (10 | ) | (37 | ) | (3 | ) | 94 | (8 | ) | ||
Total reported net income (loss) | 391 | 719 | 681 | 595 | 623 | 580 | 567 | 706 | ||||||||
Underlying net income (loss) by segment(1) | ||||||||||||||||
Canada | 256 | 264 | 268 | 243 | 237 | 245 | 251 | 245 | ||||||||
U.S. | 161 | 137 | 135 | 110 | 150 | 121 | 139 | 125 | ||||||||
Asset Management | 242 | 281 | 251 | 245 | 227 | 227 | 251 | 216 | ||||||||
Asia | 155 | 143 | 138 | 147 | 122 | 140 | 110 | 145 | ||||||||
Corporate | (44 | ) | (33 | ) | 17 | (6 | ) | (19 | ) | (15 | ) | (21 | ) | (2 | ) | |
Total underlying net income (loss)(1) | 770 | 792 | 809 | 739 | 717 | 718 | 730 | 729 |
(1) | Represents a non-IFRS financial measure. See section M - Non-IFRS Financial Measures in this document. |
J. Legal and Regulatory Matters |
K. Changes in Accounting Policies |
L. Internal Control Over Financial Reporting |
M. Non-IFRS Financial Measures |
(a) | market-related impacts that differ from our best estimate assumptions, which include: (i) impacts of returns in equity markets, net of hedging, for which our best estimate assumptions are approximately 2% per quarter. This also includes the impact of the basis risk inherent in our hedging program, which is the difference between the return on underlying funds of products that provide benefit guarantees and the return on the derivative assets used to hedge those benefit guarantees; (ii) the impacts of changes in interest rates in the reporting period and on the value of derivative instruments used in our hedging programs including changes in credit and swap spreads, and any changes to the assumed fixed income reinvestment rates in determining the actuarial liabilities; and (iii) the impacts of changes in the fair value of investment properties in the reporting period; |
(b) | assumption changes and management actions, which include: (i) the impacts of revisions to the methods and assumptions used in determining our liabilities for insurance contracts and investment contracts; and (ii) the impacts on insurance contracts and investment contracts of actions taken by management in the current reporting period, referred to as management actions which include, for example, changes in the prices of in-force products, new or revised reinsurance on in-force business, and material changes to investment policies for assets supporting our liabilities; and |
(c) | other adjustments: |
(i) | certain hedges in Canada that do not qualify for hedge accounting - this adjustment enhances the comparability of our net income from period to period, as it reduces volatility to the extent it will be offset over the duration of the hedges; |
(ii) | fair value adjustments on MFS's share-based payment awards that are settled with MFS’s own shares and accounted for as liabilities and measured at fair value each reporting period until they are vested, exercised and repurchased - this adjustment enhances the comparability of MFS’s results with publicly traded asset managers in the United States; |
(iii) | acquisition, integration and restructuring costs (including impacts related to acquiring and integrating acquisitions); and |
(iv) | other items that are unusual or exceptional in nature. |
Quarterly results | ||||||
($ millions, unless otherwise noted) | Q1'20 | Q4'19 | Q1'19 | |||
Reported net income | 391 | 719 | 623 | |||
Market-related impacts | ||||||
Equity market impacts | ||||||
Impacts from equity market changes | (303 | ) | 36 | 68 | ||
Basis risk impacts | (57 | ) | 4 | (10 | ) | |
Equity market impacts | (360 | ) | 40 | 58 | ||
Interest rate impacts(1) | ||||||
Impacts of interest rate changes | (87 | ) | 18 | (122 | ) | |
Impacts of credit spread movements | 127 | — | (27 | ) | ||
Impacts of swap spread movements | 39 | (29 | ) | 16 | ||
Interest rate impacts | 79 | (11 | ) | (133 | ) | |
Impacts of changes in the fair value of investment properties | (12 | ) | (11 | ) | 6 | |
Less: Market-related impacts | (293 | ) | 18 | (69 | ) | |
Less: Assumption changes and management actions | (53 | ) | (15 | ) | (11 | ) |
Other adjustments | ||||||
Certain hedges in Canada that do not qualify for hedge accounting | (1 | ) | 4 | 1 | ||
Fair value adjustments on MFS's share-based payment awards | 10 | (37 | ) | (8 | ) | |
Acquisition, integration and restructuring(2) | (42 | ) | (43 | ) | (7 | ) |
Less: Total of other adjustments | (33 | ) | (76 | ) | (14 | ) |
Underlying net income | 770 | 792 | 717 | |||
Reported EPS (diluted) ($) | 0.67 | 1.22 | 1.04 | |||
Less: Market-related impacts ($) | (0.50 | ) | 0.03 | (0.12 | ) | |
Assumption changes and management actions ($) | (0.09 | ) | (0.03 | ) | (0.02 | ) |
Certain hedges in Canada that do not qualify for hedge accounting ($) | — | 0.01 | — | |||
Fair value adjustments on MFS's share-based payment awards ($) | 0.02 | (0.06 | ) | (0.01 | ) | |
Acquisition, integration and restructuring ($) | (0.07 | ) | (0.07 | ) | (0.01 | ) |
Impact of convertible securities on diluted EPS ($) | — | — | — | |||
Underlying EPS (diluted) ($) | 1.31 | 1.34 | 1.20 |
(1) | Our exposure to interest rates varies by product type, line of business, and geography. Given the long-term nature of our business, we have a higher degree of sensitivity in respect of interest rates at long durations. |
(2) | Amounts include acquisition costs for the BGO acquisition and the pending InfraRed transaction, which includes the unwinding of the discount for the Put option and Deferred payments liability of $10 million and $8 million in the first quarter of 2020 and the fourth quarter of 2019, respectively. As a result of various ongoing projects initiated in the fourth quarter of 2019 to simplify our organizational structure and drive efficiencies, we also recorded a restructuring charge of $28 million in the first quarter of 2020 and $25 million in the fourth quarter of 2019. |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Revenue | 6,470 | 8,525 | 11,392 | |||
Less: Constant Currency Adjustment | 88 | (24 | ) | — | ||
FV Adjustment | (1,809 | ) | (1,380 | ) | 4,154 | |
Reinsurance in Canada’s GB Operations Adjustment | (156 | ) | (145 | ) | (143 | ) |
Adjusted revenue | 8,347 | 10,074 | 7,381 |
Quarterly results | ||||||
($ millions) | Q1'20 | Q4'19 | Q1'19 | |||
Premiums and deposits | 65,201 | 51,395 | 42,781 | |||
Less: Constant Currency Adjustment | 528 | (260 | ) | — | ||
Reinsurance in Canada’s GB Operations Adjustment | (156 | ) | (145 | ) | (143 | ) |
Adjusted premiums and deposits | 64,829 | 51,800 | 42,924 |
N. Forward-looking Statements |
CONSOLIDATED STATEMENTS OF OPERATIONS |
For the three months ended | ||||||||
(unaudited, in millions of Canadian dollars, except for per share amounts) | March 31, 2020 | March 31, 2019 | ||||||
Revenue | ||||||||
Premiums | ||||||||
Gross | $ | 5,739 | $ | 4,942 | ||||
Less: Ceded | 593 | 572 | ||||||
Net premiums | 5,146 | 4,370 | ||||||
Net investment income (loss): | ||||||||
Interest and other investment income | 1,424 | 1,398 | ||||||
Fair value and foreign currency changes on assets and liabilities (Note 4) | (1,809 | ) | 4,154 | |||||
Net gains (losses) on available-for-sale assets | 70 | 23 | ||||||
Net investment income (loss) | (315 | ) | 5,575 | |||||
Fee income (Note 8) | 1,639 | 1,447 | ||||||
Total revenue | 6,470 | 11,392 | ||||||
Benefits and expenses | ||||||||
Gross claims and benefits paid (Note 6) | 4,418 | 4,120 | ||||||
Increase (decrease) in insurance contract liabilities (Note 6) | (231 | ) | 4,640 | |||||
Decrease (increase) in reinsurance assets (Note 6) | (51 | ) | (21 | ) | ||||
Increase (decrease) in investment contract liabilities (Note 6) | 7 | 24 | ||||||
Reinsurance expenses (recoveries) (Note 7) | (531 | ) | (508 | ) | ||||
Commissions | 648 | 564 | ||||||
Net transfer to (from) segregated funds (Note 11) | (386 | ) | (85 | ) | ||||
Operating expenses | 1,733 | 1,668 | ||||||
Premium taxes | 108 | 100 | ||||||
Interest expense | 90 | 88 | ||||||
Total benefits and expenses | 5,805 | 10,590 | ||||||
Income (loss) before income taxes | 665 | 802 | ||||||
Less: Income tax expense (benefit) (Note 9) | 279 | 88 | ||||||
Total net income (loss) | 386 | 714 | ||||||
Less: Net income (loss) attributable to participating policyholders | (35 | ) | 67 | |||||
Net income (loss) attributable to non-controlling interests | 6 | — | ||||||
Shareholders’ net income (loss) | 415 | 647 | ||||||
Less: Preferred shareholders’ dividends | 24 | 24 | ||||||
Common shareholders’ net income (loss) | $ | 391 | $ | 623 | ||||
Average exchange rates during the reporting periods: U.S. dollars | 1.34 | 1.33 | ||||||
Earnings (loss) per share (Note 13) | ||||||||
Basic | $ | 0.67 | $ | 1.04 | ||||
Diluted | $ | 0.67 | $ | 1.04 | ||||
Dividends per common share | $ | 0.550 | $ | 0.500 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
For the three months ended | ||||||||
(unaudited, in millions of Canadian dollars) | March 31, 2020 | March 31, 2019 | ||||||
Total net income (loss) | $ | 386 | $ | 714 | ||||
Other comprehensive income (loss), net of taxes: | ||||||||
Items that may be reclassified subsequently to income: | ||||||||
Change in unrealized foreign currency translation gains (losses): | ||||||||
Unrealized gains (losses) | 1,044 | (280 | ) | |||||
Change in unrealized gains (losses) on available-for-sale assets: | ||||||||
Unrealized gains (losses) | (240 | ) | 269 | |||||
Reclassifications to net income (loss) | (56 | ) | (18 | ) | ||||
Change in unrealized gains (losses) on cash flow hedges: | ||||||||
Unrealized gains (losses) | 23 | 14 | ||||||
Reclassifications to net income (loss) | (44 | ) | (8 | ) | ||||
Share of other comprehensive income (loss) in joint ventures and associates: | ||||||||
Unrealized gains (losses) | 64 | 28 | ||||||
Total items that may be reclassified subsequently to income | 791 | 5 | ||||||
Items that will not be reclassified subsequently to income: | ||||||||
Remeasurement of defined benefit plans | 119 | (43 | ) | |||||
Total items that will not be reclassified subsequently to income | 119 | (43 | ) | |||||
Total other comprehensive income (loss) | 910 | (38 | ) | |||||
Total comprehensive income (loss) | 1,296 | 676 | ||||||
Less: Participating policyholders’ comprehensive income (loss) | (27 | ) | 66 | |||||
Non-controlling interests’ comprehensive income (loss) | 6 | — | ||||||
Shareholders’ comprehensive income (loss) | $ | 1,317 | $ | 610 |
INCOME TAXES INCLUDED IN OTHER COMPREHENSIVE INCOME (LOSS) |
For the three months ended | ||||||||
(unaudited, in millions of Canadian dollars) | March 31, 2020 | March 31, 2019 | ||||||
Income tax benefit (expense): | ||||||||
Items that may be reclassified subsequently to income: | ||||||||
Unrealized foreign currency translation gains (losses) | $ | (1 | ) | $ | — | |||
Unrealized gains (losses) on available-for-sale assets | 45 | (62 | ) | |||||
Reclassifications to net income for available-for-sale assets | 15 | 4 | ||||||
Unrealized gains (losses) on cash flow hedges | 11 | (5 | ) | |||||
Reclassifications to net income for cash flow hedges | (3 | ) | 3 | |||||
Total items that may be reclassified subsequently to income | 67 | (60 | ) | |||||
Items that will not be reclassified subsequently to income: | ||||||||
Remeasurement of defined benefit plans | (39 | ) | 20 | |||||
Total items that will not be reclassified subsequently to income | (39 | ) | 20 | |||||
Total income tax benefit (expense) included in other comprehensive income (loss) | $ | 28 | $ | (40 | ) |
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION |
As at | ||||||||
(unaudited, in millions of Canadian dollars) | March 31, 2020 | December 31, 2019 | ||||||
Assets | ||||||||
Cash, cash equivalents and short-term securities (Note 4) | $ | 9,548 | $ | 9,575 | ||||
Debt securities (Note 4) | 84,599 | 81,606 | ||||||
Equity securities (Note 4) | 4,605 | 4,787 | ||||||
Mortgages and loans | 50,253 | 48,222 | ||||||
Derivative assets | 3,128 | 1,548 | ||||||
Other invested assets (Note 4) | 5,795 | 5,357 | ||||||
Policy loans | 3,324 | 3,218 | ||||||
Investment properties (Note 4) | 7,359 | 7,306 | ||||||
Invested assets | 168,611 | 161,619 | ||||||
Other assets | 5,564 | 5,216 | ||||||
Reinsurance assets (Note 6) | 4,357 | 4,024 | ||||||
Deferred tax assets | 1,606 | 1,455 | ||||||
Intangible assets | 2,184 | 2,083 | ||||||
Goodwill | 6,044 | 5,832 | ||||||
Total general fund assets | 188,366 | 180,229 | ||||||
Investments for account of segregated fund holders (Note 11) | 102,824 | 116,973 | ||||||
Total assets | $ | 291,190 | $ | 297,202 | ||||
Liabilities and equity | ||||||||
Liabilities | ||||||||
Insurance contract liabilities (Note 6) | $ | 135,252 | $ | 131,184 | ||||
Investment contract liabilities (Note 6) | 3,120 | 3,116 | ||||||
Derivative liabilities | 4,509 | 2,040 | ||||||
Deferred tax liabilities | 313 | 406 | ||||||
Other liabilities | 15,865 | 14,937 | ||||||
Senior debentures | 500 | 500 | ||||||
Subordinated debt | 3,539 | 3,538 | ||||||
Total general fund liabilities | 163,098 | 155,721 | ||||||
Insurance contracts for account of segregated fund holders (Note 11) | 97,043 | 110,269 | ||||||
Investment contracts for account of segregated fund holders (Note 11) | 5,781 | 6,704 | ||||||
Total liabilities | $ | 265,922 | $ | 272,694 | ||||
Equity | ||||||||
Issued share capital and contributed surplus | $ | 10,579 | $ | 10,619 | ||||
Shareholders' retained earnings and accumulated other comprehensive income | 13,599 | 12,779 | ||||||
Total shareholders’ equity | 24,178 | 23,398 | ||||||
Participating policyholders’ equity | 1,064 | 1,091 | ||||||
Non-controlling interests’ equity | 26 | 19 | ||||||
Total equity | $ | 25,268 | $ | 24,508 | ||||
Total liabilities and equity | $ | 291,190 | $ | 297,202 | ||||
Exchange rates at the end of the reporting periods: U.S. dollars | 1.41 | 1.30 |
![]() | ![]() |
Dean A. Connor | Sara Grootwassink Lewis |
President and Chief Executive Officer | Director |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the three months ended | ||||||||
(unaudited, in millions of Canadian dollars) | March 31, 2020 | March 31, 2019 | ||||||
Shareholders: | ||||||||
Preferred shares | ||||||||
Balance, beginning and end of period | $ | 2,257 | $ | 2,257 | ||||
Common shares (Note 10) | ||||||||
Balance, beginning of period | 8,289 | 8,419 | ||||||
Stock options exercised | 9 | 10 | ||||||
Common shares purchased for cancellation | (50 | ) | (54 | ) | ||||
Balance, end of period | 8,248 | 8,375 | ||||||
Contributed surplus | ||||||||
Balance, beginning of period | 73 | 73 | ||||||
Share-based payments | 3 | 3 | ||||||
Stock options exercised | (2 | ) | (2 | ) | ||||
Balance, end of period | 74 | 74 | ||||||
Retained earnings | ||||||||
Balance, beginning of period, as previously reported | 11,318 | 11,267 | ||||||
Adjustment for change in accounting policy (Note 2) | — | (22 | ) | |||||
Balance, beginning of period, after change in accounting policy | 11,318 | 11,245 | ||||||
Net income (loss) | 415 | 647 | ||||||
Dividends on common shares | (323 | ) | (299 | ) | ||||
Dividends on preferred shares | (24 | ) | (24 | ) | ||||
Common shares purchased for cancellation (Note 10) | (150 | ) | (146 | ) | ||||
Balance, end of period | 11,236 | 11,423 | ||||||
Accumulated other comprehensive income (loss), net of taxes (Note 14) | ||||||||
Balance, beginning of period | 1,461 | 1,690 | ||||||
Total other comprehensive income (loss) for the period | 902 | (37 | ) | |||||
Balance, end of period | 2,363 | 1,653 | ||||||
Total shareholders’ equity, end of period | $ | 24,178 | $ | 23,782 | ||||
Participating policyholders: | ||||||||
Balance, beginning of period | $ | 1,091 | $ | 864 | ||||
Net income (loss) | (35 | ) | 67 | |||||
Total other comprehensive income (loss) for the period (Note 14) | 8 | (1 | ) | |||||
Total participating policyholders’ equity, end of period | $ | 1,064 | $ | 930 | ||||
Non-controlling interests: | ||||||||
Balance, beginning of period | $ | 19 | $ | — | ||||
Net income (loss) | 6 | — | ||||||
Additional contribution | 1 | — | ||||||
Total non-controlling interests’ equity, end of period | $ | 26 | $ | — | ||||
Total equity | $ | 25,268 | $ | 24,712 |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the three months ended | ||||||||
(unaudited, in millions of Canadian dollars) | March 31, 2020 | March 31, 2019 | ||||||
Cash flows provided by (used in) operating activities | ||||||||
Income (loss) before income taxes | $ | 665 | $ | 802 | ||||
Adjustments: | ||||||||
Interest expense related to financing activities | 55 | 66 | ||||||
Increase (decrease) in insurance and investment contract liabilities | (224 | ) | 4,664 | |||||
Decrease (increase) in reinsurance assets | (51 | ) | (21 | ) | ||||
Realized and unrealized (gains) losses and foreign currency changes on invested assets | 1,739 | (4,177 | ) | |||||
Sales, maturities and repayments of invested assets | 18,836 | 16,408 | ||||||
Purchases of invested assets | (20,111 | ) | (17,790 | ) | ||||
Income taxes received (paid) | (85 | ) | (230 | ) | ||||
Mortgage securitization (Note 4) | 87 | 96 | ||||||
Other operating activities | (828 | ) | (1,045 | ) | ||||
Net cash provided by (used in) operating activities | 83 | (1,227 | ) | |||||
Cash flows provided by (used in) investing activities | ||||||||
Net (purchase) sale of property and equipment | (37 | ) | (31 | ) | ||||
Investment in and transactions with joint ventures and associates | 6 | 14 | ||||||
Dividends received from joint ventures and associates | 20 | 14 | ||||||
Other investing activities | (86 | ) | (34 | ) | ||||
Net cash provided by (used in) investing activities | (97 | ) | (37 | ) | ||||
Cash flows provided by (used in) financing activities | ||||||||
Increase in (repayment of) borrowed funds | (56 | ) | 3 | |||||
Issuance of common shares on exercise of stock options | 7 | 8 | ||||||
Common shares purchased for cancellation (Note 10) | (200 | ) | (200 | ) | ||||
Dividends paid on common and preferred shares | (341 | ) | (319 | ) | ||||
Payment of lease liabilities | (37 | ) | (29 | ) | ||||
Interest expense paid | (61 | ) | (64 | ) | ||||
Net cash provided by (used in) financing activities | (688 | ) | (601 | ) | ||||
Changes due to fluctuations in exchange rates | 357 | (77 | ) | |||||
Increase (decrease) in cash and cash equivalents | (345 | ) | (1,942 | ) | ||||
Net cash and cash equivalents, beginning of period | 6,685 | 7,194 | ||||||
Net cash and cash equivalents, end of period | 6,340 | 5,252 | ||||||
Short-term securities, end of period | 3,106 | 2,944 | ||||||
Net cash, cash equivalents and short-term securities, end of period (Note 4) | $ | 9,446 | $ | 8,196 |
Condensed Notes to the Interim Consolidated Financial Statements |
1. Significant Accounting Policies |
2. Changes in Accounting Policies |
3. Segmented Information |
Canada | U.S. | Asset Management(1) | Asia | Corporate | Consolidation adjustments(1) | Total | ||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||
Gross premiums: | ||||||||||||||||||||||||||||
Annuities | $ | 427 | $ | — | $ | — | $ | 30 | $ | 3 | $ | — | $ | 460 | ||||||||||||||
Life insurance | 1,276 | 398 | — | 901 | 22 | — | 2,597 | |||||||||||||||||||||
Health insurance | 1,518 | 1,147 | — | 13 | 4 | — | 2,682 | |||||||||||||||||||||
Total gross premiums | 3,221 | 1,545 | — | 944 | 29 | — | 5,739 | |||||||||||||||||||||
Less: Ceded premiums | 374 | 166 | — | 49 | 4 | — | 593 | |||||||||||||||||||||
Net investment income (loss) | (743 | ) | 658 | (14 | ) | (154 | ) | (51 | ) | (11 | ) | (315 | ) | |||||||||||||||
Fee income | 341 | 20 | 1,185 | 136 | 28 | (71 | ) | 1,639 | ||||||||||||||||||||
Total revenue | 2,445 | 2,057 | 1,171 | 877 | 2 | (82 | ) | 6,470 | ||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Total benefits and expenses | 2,300 | 1,845 | 846 | 815 | 81 | (82 | ) | 5,805 | ||||||||||||||||||||
Income tax expense (benefit) | 177 | 48 | 80 | 7 | (33 | ) | — | 279 | ||||||||||||||||||||
Total net income (loss) | $ | (32 | ) | $ | 164 | $ | 245 | $ | 55 | $ | (46 | ) | $ | — | $ | 386 | ||||||||||||
Less: | ||||||||||||||||||||||||||||
Net income (loss) attributable to participating policyholders | 10 | — | — | (45 | ) | — | — | (35 | ) | |||||||||||||||||||
Net income (loss) attributable to non-controlling interests | — | — | 6 | — | — | — | 6 | |||||||||||||||||||||
Shareholders’ net income (loss) | $ | (42 | ) | $ | 164 | $ | 239 | $ | 100 | $ | (46 | ) | $ | — | $ | 415 | ||||||||||||
2019 | ||||||||||||||||||||||||||||
Gross premiums: | ||||||||||||||||||||||||||||
Annuities | $ | 398 | $ | 1 | $ | — | $ | — | $ | 6 | $ | — | $ | 405 | ||||||||||||||
Life insurance | 1,248 | 407 | — | 396 | 23 | — | 2,074 | |||||||||||||||||||||
Health insurance | 1,402 | 1,047 | — | 10 | 4 | — | 2,463 | |||||||||||||||||||||
Total gross premiums | 3,048 | 1,455 | — | 406 | 33 | — | 4,942 | |||||||||||||||||||||
Less: Ceded premiums | 362 | 155 | — | 50 | 5 | — | 572 | |||||||||||||||||||||
Net investment income (loss) | 3,243 | 892 | 28 | 1,014 | 406 | (8 | ) | 5,575 | ||||||||||||||||||||
Fee income | 308 | 21 | 1,023 | 126 | 35 | (66 | ) | 1,447 | ||||||||||||||||||||
Total revenue | 6,237 | 2,213 | 1,051 | 1,496 | 469 | (74 | ) | 11,392 | ||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Total benefits and expenses | 5,966 | 2,057 | 774 | 1,402 | 465 | (74 | ) | 10,590 | ||||||||||||||||||||
Income tax expense (benefit) | (32 | ) | 32 | 58 | 13 | 17 | — | 88 | ||||||||||||||||||||
Total net income (loss) | $ | 303 | $ | 124 | $ | 219 | $ | 81 | $ | (13 | ) | $ | — | $ | 714 | |||||||||||||
Less: | ||||||||||||||||||||||||||||
Net income (loss) attributable to participating policyholders | 66 | — | — | 1 | — | — | 67 | |||||||||||||||||||||
Shareholders’ net income (loss) | $ | 237 | $ | 124 | $ | 219 | $ | 80 | $ | (13 | ) | $ | — | $ | 647 |
(1) | Reflects a change in presentation for our Asset Management segment effective January 1, 2020. We have updated the prior period to reflect this change in presentation. |
4. Total Invested Assets and Related Net Investment Income |
As at | Fair value through profit or loss | Available- for-sale | Other(1) | Total | ||||||||||||
March 31, 2020 | ||||||||||||||||
Debt securities | $ | 70,714 | $ | 13,885 | $ | — | $ | 84,599 | ||||||||
Equity securities | $ | 4,304 | $ | 301 | $ | — | $ | 4,605 | ||||||||
Other invested assets | $ | 3,250 | $ | 965 | $ | 1,580 | $ | 5,795 | ||||||||
December 31, 2019 | ||||||||||||||||
Debt securities | $ | 67,894 | $ | 13,712 | $ | — | $ | 81,606 | ||||||||
Equity securities | $ | 4,474 | $ | 313 | $ | — | $ | 4,787 | ||||||||
Other invested assets | $ | 3,016 | $ | 813 | $ | 1,528 | $ | 5,357 |
For the three months ended | ||||||||
March 31, 2020 | March 31, 2019 | |||||||
Fair value change: | ||||||||
Cash, cash equivalents and short-term securities | $ | 2 | $ | (2 | ) | |||
Debt securities | (1,145 | ) | 2,907 | |||||
Equity securities | (784 | ) | 421 | |||||
Derivative investments | (332 | ) | 806 | |||||
Other invested assets | (63 | ) | 49 | |||||
Total change in fair value through profit or loss assets and liabilities | (2,322 | ) | 4,181 | |||||
Fair value changes on investment properties | 2 | 133 | ||||||
Foreign exchange gains (losses)(1) | 511 | (160 | ) | |||||
Fair value and foreign currency changes on assets and liabilities | $ | (1,809 | ) | $ | 4,154 |
(1) | Primarily arises from the translation of foreign currency denominated available-for-sale assets, as well as mortgages and loans. Any offsetting amounts arising from foreign currency derivatives are included in the fair value change on derivative investments. |
As at | March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||||||
Cash | $ | 2,134 | $ | 1,656 | $ | 1,766 | |||||||
Cash equivalents | 4,308 | 5,059 | 3,660 | ||||||||||
Short-term securities | 3,106 | 2,860 | 2,944 | ||||||||||
Cash, cash equivalents and short-term securities | 9,548 | 9,575 | 8,370 | ||||||||||
Less: Bank overdraft, recorded in Other liabilities | 102 | 30 | 174 | ||||||||||
Net cash, cash equivalents and short-term securities | $ | 9,446 | $ | 9,545 | $ | 8,196 |
As at | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash, cash equivalents and short-term securities | $ | 8,943 | $ | 605 | $ | — | $ | 9,548 | $ | 9,044 | $ | 531 | $ | — | $ | 9,575 | ||||||||||||||||
Debt securities – fair value through profit or loss | 1,931 | 68,578 | 205 | 70,714 | 1,641 | 66,005 | 248 | 67,894 | ||||||||||||||||||||||||
Debt securities – available-for-sale | 981 | 12,851 | 53 | 13,885 | 1,363 | 12,299 | 50 | 13,712 | ||||||||||||||||||||||||
Equity securities – fair value through profit or loss | 2,110 | 1,991 | 203 | 4,304 | 1,868 | 2,418 | 188 | 4,474 | ||||||||||||||||||||||||
Equity securities – available-for-sale | 128 | 135 | 38 | 301 | 152 | 126 | 35 | 313 | ||||||||||||||||||||||||
Derivative assets | 23 | 3,105 | — | 3,128 | 20 | 1,528 | — | 1,548 | ||||||||||||||||||||||||
Other invested assets | 1,031 | 431 | 2,753 | 4,215 | 1,000 | 384 | 2,445 | 3,829 | ||||||||||||||||||||||||
Investment properties | — | — | 7,359 | 7,359 | — | — | 7,306 | 7,306 | ||||||||||||||||||||||||
Total invested assets | $ | 15,147 | $ | 87,696 | $ | 10,611 | $ | 113,454 | $ | 15,088 | $ | 83,291 | $ | 10,272 | $ | 108,651 | ||||||||||||||||
Investments for account of segregated fund holders | 22,352 | 79,937 | 535 | 102,824 | 26,380 | 90,044 | 549 | 116,973 | ||||||||||||||||||||||||
Total assets measured at fair value | $ | 37,499 | $ | 167,633 | $ | 11,146 | $ | 216,278 | $ | 41,468 | $ | 173,335 | $ | 10,821 | $ | 225,624 | ||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Investment contract liabilities | $ | — | $ | — | $ | 2 | $ | 2 | $ | — | $ | — | $ | 2 | $ | 2 | ||||||||||||||||
Derivative liabilities | 78 | 4,431 | — | 4,509 | 14 | 2,026 | — | 2,040 | ||||||||||||||||||||||||
Put option liability | — | — | 1,043 | 1,043 | — | — | 956 | 956 | ||||||||||||||||||||||||
Total liabilities measured at fair value | $ | 78 | $ | 4,431 | $ | 1,045 | $ | 5,554 | $ | 14 | $ | 2,026 | $ | 958 | $ | 2,998 |
As at | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Canadian federal government | $ | — | $ | 3,819 | $ | 14 | $ | 3,833 | $ | — | $ | 3,875 | $ | 15 | $ | 3,890 | ||||||||||||||||
Canadian provincial and municipal government | — | 14,679 | — | 14,679 | — | 13,811 | 15 | 13,826 | ||||||||||||||||||||||||
U.S. government and agency | 1,931 | 160 | 1 | 2,092 | 1,641 | 106 | 1 | 1,748 | ||||||||||||||||||||||||
Other foreign government | — | 5,329 | — | 5,329 | — | 5,172 | 9 | 5,181 | ||||||||||||||||||||||||
Corporate | — | 38,492 | 169 | 38,661 | — | 37,508 | 173 | 37,681 | ||||||||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 1,904 | 6 | 1,910 | — | 1,753 | 6 | 1,759 | ||||||||||||||||||||||||
Residential mortgage-backed securities | — | 2,499 | — | 2,499 | — | 2,176 | — | 2,176 | ||||||||||||||||||||||||
Collateralized debt obligations | — | 178 | — | 178 | — | 157 | — | 157 | ||||||||||||||||||||||||
Other | — | 1,518 | 15 | 1,533 | — | 1,447 | 29 | 1,476 | ||||||||||||||||||||||||
Total debt securities – fair value through profit or loss | $ | 1,931 | $ | 68,578 | $ | 205 | $ | 70,714 | $ | 1,641 | $ | 66,005 | $ | 248 | $ | 67,894 |
As at | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Canadian federal government | $ | — | $ | 2,593 | $ | — | $ | 2,593 | $ | — | $ | 2,556 | $ | — | $ | 2,556 | ||||||||||||||||
Canadian provincial and municipal government | — | 1,177 | — | 1,177 | — | 1,139 | — | 1,139 | ||||||||||||||||||||||||
U.S. government and agency | 981 | — | — | 981 | 1,363 | — | — | 1,363 | ||||||||||||||||||||||||
Other foreign government | — | 789 | 1 | 790 | — | 735 | 1 | 736 | ||||||||||||||||||||||||
Corporate | — | 5,341 | 48 | 5,389 | — | 5,039 | 45 | 5,084 | ||||||||||||||||||||||||
Asset-backed securities: | ||||||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | 858 | — | 858 | — | 777 | — | 777 | ||||||||||||||||||||||||
Residential mortgage-backed securities | — | 417 | — | 417 | — | 362 | — | 362 | ||||||||||||||||||||||||
Collateralized debt obligations | — | 728 | — | 728 | — | 730 | — | 730 | ||||||||||||||||||||||||
Other | — | 948 | 4 | 952 | — | 961 | 4 | 965 | ||||||||||||||||||||||||
Total debt securities – available-for-sale | $ | 981 | $ | 12,851 | $ | 53 | $ | 13,885 | $ | 1,363 | $ | 12,299 | $ | 50 | $ | 13,712 |
For the three months ended | Debt securities – fair value through profit or loss | Debt securities – available-for-sale | Equity securities – fair value through profit or loss | Equity securities – available-for-sale | Other invested assets | Investment properties | Total invested assets measured at fair value | Investments for account of segregated fund holders | Total assets measured at fair value | Put option liability | ||||||||||||||||||||||||||||||
March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 248 | $ | 50 | $ | 188 | $ | 35 | $ | 2,445 | $ | 7,306 | $ | 10,272 | $ | 549 | $ | 10,821 | $ | 956 | ||||||||||||||||||||
Included in net income(1)(2)(3) | (5 | ) | — | 3 | — | 96 | (29 | ) | 65 | (36 | ) | 29 | 45 | |||||||||||||||||||||||||||
Included in OCI(2) | — | — | — | 1 | 10 | — | 11 | — | 11 | — | ||||||||||||||||||||||||||||||
Purchases | — | — | 5 | — | 196 | 66 | 267 | 15 | 282 | — | ||||||||||||||||||||||||||||||
Sales / Payments | (9 | ) | — | — | — | (55 | ) | (96 | ) | (160 | ) | (9 | ) | (169 | ) | — | ||||||||||||||||||||||||
Settlements | (1 | ) | — | — | — | — | — | (1 | ) | — | (1 | ) | — | |||||||||||||||||||||||||||
Transfers (out) of Level 3(4) | (37 | ) | — | — | — | — | — | (37 | ) | — | (37 | ) | — | |||||||||||||||||||||||||||
Foreign currency translation(5) | 9 | 3 | 7 | 2 | 61 | 112 | 194 | 16 | 210 | 42 | ||||||||||||||||||||||||||||||
Ending balance | $ | 205 | $ | 53 | $ | 203 | $ | 38 | $ | 2,753 | $ | 7,359 | $ | 10,611 | $ | 535 | $ | 11,146 | $ | 1,043 | ||||||||||||||||||||
Gains (losses) included in earnings relating to instruments still held at the reporting date(1) | $ | (4 | ) | $ | — | $ | 3 | $ | — | $ | 96 | $ | (24 | ) | $ | 71 | $ | (23 | ) | $ | 48 | $ | — | |||||||||||||||||
March 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 373 | $ | 43 | $ | 202 | $ | 36 | $ | 2,241 | $ | 7,157 | $ | 10,052 | $ | 1,596 | $ | 11,648 | $ | — | ||||||||||||||||||||
Included in net income(1)(2)(3) | 9 | — | (3 | ) | — | (24 | ) | 107 | 89 | (2 | ) | 87 | — | |||||||||||||||||||||||||||
Included in OCI(2) | — | 2 | — | — | 2 | — | 4 | — | 4 | — | ||||||||||||||||||||||||||||||
Purchases | 17 | 14 | 3 | 6 | 80 | 52 | 172 | 85 | 257 | — | ||||||||||||||||||||||||||||||
Sales / Payments | (9 | ) | — | (1 | ) | — | (27 | ) | (281 | ) | (318 | ) | (4 | ) | (322 | ) | — | |||||||||||||||||||||||
Settlements | (2 | ) | — | — | — | — | — | (2 | ) | — | (2 | ) | — | |||||||||||||||||||||||||||
Transfers (out) of Level 3(4) | (84 | ) | — | (4 | ) | — | — | — | (88 | ) | — | (88 | ) | — | ||||||||||||||||||||||||||
Foreign currency translation(5) | (3 | ) | (1 | ) | (2 | ) | (2 | ) | (12 | ) | (36 | ) | (56 | ) | (4 | ) | (60 | ) | — | |||||||||||||||||||||
Ending balance | $ | 301 | $ | 58 | $ | 195 | $ | 40 | $ | 2,260 | $ | 6,999 | $ | 9,853 | $ | 1,671 | $ | 11,524 | $ | — | ||||||||||||||||||||
Gains (losses) included in earnings relating to instruments still held at the reporting date(1) | $ | 4 | $ | — | $ | (2 | ) | $ | — | $ | (24 | ) | $ | 125 | $ | 103 | $ | (8 | ) | $ | 95 | $ | — |
(1) | Included in Net investment income (loss) for Total invested assets measured at fair value in our Interim Consolidated Statements of Operations. |
(2) | Total gains and losses in net income (loss) and other comprehensive income (“OCI”) are calculated assuming transfers into or out of Level 3 occur at the beginning of the period. For an asset or liability that transfers into Level 3 during the reporting period, the entire change in fair value for the period is included in the table above. For transfers out of Level 3 during the reporting period, the change in fair value for the period is excluded from the table above. |
(3) | Investment properties included in net income are comprised of fair value changes on investment properties of $2 ($133 in 2019), net of amortization of leasing commissions and tenant inducements of $31 ($26 in 2019). For the key unobservable inputs used in the valuation of investment properties, please refer to Note 5.A.iii Fair Value Hierarchy in our 2019 Annual Consolidated Financial Statements. At March 31, 2020, we have used assumptions that reflect known changes in the property values including changes in expected future cash flows. |
(4) | Transfers out of Level 3 occur when the pricing inputs become more transparent and satisfy the Level 1 or 2 criteria and are primarily the result of observable market data being available at the reporting date, thus removing the requirement to rely on inputs that lack observability. |
(5) | Foreign currency translation relates to the foreign exchange impact of translating Level 3 assets and liabilities of foreign subsidiaries from their functional currencies to Canadian dollars. |
5. Financial Instruments and Insurance Risk Management |
6. Insurance Contract Liabilities and Investment Contract Liabilities |
For the three months ended | For the three months ended | |||||||||||||||||||||||
March 31, 2020 | March 31, 2019 | |||||||||||||||||||||||
Insurance contract liabilities | Reinsurance assets | Net | Insurance contract liabilities | Reinsurance assets | Net | |||||||||||||||||||
Balances before Other policy liabilities and assets, beginning of period | $ | 123,894 | $ | 3,395 | $ | 120,499 | $ | 114,902 | $ | 3,653 | $ | 111,249 | ||||||||||||
Change in balances on in-force policies(1) | (968 | ) | 22 | (990 | ) | 4,315 | (14 | ) | 4,329 | |||||||||||||||
Balances arising from new policies(1) | 667 | 28 | 639 | 319 | 35 | 284 | ||||||||||||||||||
Method and assumption changes(2) | 70 | 1 | 69 | 6 | — | 6 | ||||||||||||||||||
Increase (decrease) in Insurance contract liabilities and Reinsurance assets | (231 | ) | 51 | (282 | ) | 4,640 | 21 | 4,619 | ||||||||||||||||
Foreign exchange rate movements | 4,006 | 264 | 3,742 | (978 | ) | (73 | ) | (905 | ) | |||||||||||||||
Balances before Other policy liabilities and assets | 127,669 | 3,710 | 123,959 | 118,564 | 3,601 | 114,963 | ||||||||||||||||||
Other policy liabilities and assets | 7,583 | 647 | 6,936 | 6,927 | 534 | 6,393 | ||||||||||||||||||
Total Insurance contract liabilities and Reinsurance assets, end of period | $ | 135,252 | $ | 4,357 | $ | 130,895 | $ | 125,491 | $ | 4,135 | $ | 121,356 |
(1) | Comparative figures in 2019 have been amended to conform to the current year’s methodology. |
(2) | The impact this quarter was due to an increase in provisions for adverse deviation for fixed income asset credit spreads assumed in the valuation. In March, as a result of the economic impact of the COVID-19 pandemic, credit spreads increased sharply. Credit spreads at the end of the quarter were outside of the historically normal range of spreads. With respect to all other actuarial valuation assumptions including mortality, morbidity, policyholder behaviour and asset default assumptions, no changes were made as a result of the COVID-19 pandemic and economic downturn. |
For the three months ended | For the three months ended | |||||||||||||||
March 31, 2020 | March 31, 2019 | |||||||||||||||
Measured at fair value | Measured at amortized cost | Measured at fair value | Measured at amortized cost | |||||||||||||
Balances, beginning of period | $ | 2 | $ | 2,612 | $ | 3 | $ | 2,646 | ||||||||
Deposits | — | 79 | — | 89 | ||||||||||||
Interest | — | 16 | — | 15 | ||||||||||||
Withdrawals | — | (126 | ) | — | (134 | ) | ||||||||||
Fees | — | (1 | ) | — | (1 | ) | ||||||||||
Other | — | 4 | — | 5 | ||||||||||||
Foreign exchange rate movements | — | 1 | (1 | ) | — | |||||||||||
Balances, end of period | $ | 2 | $ | 2,585 | $ | 2 | $ | 2,620 |
For the three months ended | ||||||||
March 31, 2020 | March 31, 2019 | |||||||
Balances, beginning of period | $ | 502 | $ | 515 | ||||
Change in liabilities on in-force policies | (9 | ) | 9 | |||||
Foreign exchange rate movements | 40 | (10 | ) | |||||
Balances, end of period | $ | 533 | $ | 514 |
For the three months ended | ||||||||
March 31, 2020 | March 31, 2019 | |||||||
Maturities and surrenders | $ | 710 | $ | 661 | ||||
Annuity payments | 485 | 472 | ||||||
Death and disability benefits | 1,059 | 1,062 | ||||||
Health benefits | 1,821 | 1,670 | ||||||
Policyholder dividends and interest on claims and deposits | 343 | 255 | ||||||
Total gross claims and benefits paid | $ | 4,418 | $ | 4,120 |
7. Reinsurance (Expenses) Recoveries |
For the three months ended | ||||||||
March 31, 2020 | March 31, 2019 | |||||||
Recovered claims and benefits | $ | 485 | $ | 468 | ||||
Commissions | 17 | 16 | ||||||
Reserve adjustments | 10 | 5 | ||||||
Operating expenses and other | 19 | 19 | ||||||
Total reinsurance (expenses) recoveries | $ | 531 | $ | 508 |
8. Fee Income |
For the three months ended | ||||||||
March 31, 2020 | March 31, 2019 | |||||||
Fee income from insurance contracts | $ | 259 | $ | 235 | ||||
Fee income from service contracts: | ||||||||
Distribution fees | 212 | 194 | ||||||
Fund management and other asset-based fees | 977 | 833 | ||||||
Administrative service and other fees | 191 | 185 | ||||||
Total fee income | $ | 1,639 | $ | 1,447 |
9. Income Taxes |
For the three months ended | ||||||||||||
March 31, 2020 | March 31, 2019 | |||||||||||
% | % | |||||||||||
Total net income (loss) | $ | 386 | $ | 714 | ||||||||
Add: Income tax expense (benefit) | 279 | 88 | ||||||||||
Total net income (loss) before income taxes | $ | 665 | $ | 802 | ||||||||
Taxes at the combined Canadian federal and provincial statutory income tax rate | $ | 176 | 26.5 | $ | 215 | 26.8 | ||||||
Increase (decrease) in rate resulting from: | ||||||||||||
Higher (lower) effective rates on income subject to taxation in foreign jurisdictions | (40 | ) | (6.0 | ) | (22 | ) | (2.7 | ) | ||||
Tax exempt investment (income) loss | 139 | 20.9 | (106 | ) | (13.2 | ) | ||||||
Adjustments in respect of prior periods, including resolution of tax disputes | — | — | (8 | ) | (1.0 | ) | ||||||
Tax (benefit) cost of unrecognized tax losses and tax credits | 5 | 0.8 | 5 | 0.6 | ||||||||
Tax rate and other legislative changes | (5 | ) | (0.8 | ) | — | — | ||||||
Other | 4 | 0.6 | 4 | 0.5 | ||||||||
Total income tax expense (benefit) and effective income tax rate | $ | 279 | 42.0 | $ | 88 | 11.0 |
10. Capital Management |
For the three months ended | ||||||||||||||
March 31, 2020 | March 31, 2019 | |||||||||||||
Common shares (in millions of shares) | Number of shares | Amount | Number of shares | Amount | ||||||||||
Balance, beginning of period | 587.8 | $ | 8,289 | 598.5 | $ | 8,419 | ||||||||
Stock options exercised | 0.2 | 9 | 0.2 | 10 | ||||||||||
Common shares purchased for cancellation | (3.5 | ) | (50 | ) | (4.1 | ) | (54 | ) | ||||||
Balance, end of period | 584.5 | $ | 8,248 | 594.6 | $ | 8,375 |
11. Segregated Funds |
As at | March 31, 2020 | December 31, 2019 | ||||||
Segregated and mutual fund units | $ | 90,224 | $ | 102,071 | ||||
Equity securities | 8,019 | 10,565 | ||||||
Debt securities | 3,841 | 3,825 | ||||||
Cash, cash equivalents and short-term securities | 738 | 589 | ||||||
Investment properties | 386 | 403 | ||||||
Mortgages | 22 | 21 | ||||||
Other assets | 179 | 146 | ||||||
Total assets | $ | 103,409 | $ | 117,620 | ||||
Less: Liabilities arising from investing activities | 585 | 647 | ||||||
Total investments for account of segregated fund holders | $ | 102,824 | $ | 116,973 |
Insurance contracts | Investment contracts | |||||||||||||||
For the three months ended | March 31, 2020 | March 31, 2019 | March 31, 2020 | March 31, 2019 | ||||||||||||
Balances, beginning of period | $ | 110,269 | $ | 96,663 | $ | 6,704 | $ | 6,399 | ||||||||
Additions to segregated funds: | ||||||||||||||||
Deposits | 3,257 | 3,041 | 20 | 23 | ||||||||||||
Net transfer (to) from general funds | (386 | ) | (85 | ) | — | — | ||||||||||
Net realized and unrealized gains (losses) | (13,461 | ) | 7,611 | (987 | ) | 484 | ||||||||||
Other investment income | 323 | 240 | 44 | 27 | ||||||||||||
Total additions | $ | (10,267 | ) | $ | 10,807 | $ | (923 | ) | $ | 534 | ||||||
Deductions from segregated funds: | ||||||||||||||||
Payments to policyholders and their beneficiaries | 3,062 | 3,732 | 134 | 149 | ||||||||||||
Management fees | 267 | 242 | 13 | 13 | ||||||||||||
Taxes and other expenses | 67 | 97 | (7 | ) | 5 | |||||||||||
Foreign exchange rate movements | (437 | ) | 134 | (140 | ) | 20 | ||||||||||
Total deductions | $ | 2,959 | $ | 4,205 | $ | — | $ | 187 | ||||||||
Net additions (deductions) | (13,226 | ) | 6,602 | (923 | ) | 347 | ||||||||||
Balances, end of period | $ | 97,043 | $ | 103,265 | $ | 5,781 | $ | 6,746 |
12. Commitments, Guarantees and Contingencies |
For the three months ended | SLF Inc. (unconsolidated) | Sun Life Assurance (consolidated) | Other subsidiaries of SLF Inc. (combined) | Consolidation adjustments | SLF Inc. (consolidated) | |||||||||||||||
March 31, 2020 | ||||||||||||||||||||
Revenue | $ | 42 | $ | 4,652 | $ | 2,052 | $ | (276 | ) | $ | 6,470 | |||||||||
Shareholders’ net income (loss) | $ | 415 | $ | 107 | $ | 299 | $ | (406 | ) | $ | 415 | |||||||||
March 31, 2019 | ||||||||||||||||||||
Revenue | $ | 55 | $ | 10,274 | $ | 1,631 | $ | (568 | ) | $ | 11,392 | |||||||||
Shareholders’ net income (loss) | $ | 647 | $ | 420 | $ | 206 | $ | (626 | ) | $ | 647 |
As at | SLF Inc. (unconsolidated) | Sun Life Assurance (consolidated) | Other subsidiaries of SLF Inc. (combined) | Consolidation adjustments | SLF Inc. (consolidated) | |||||||||||||||
March 31, 2020 | ||||||||||||||||||||
Invested assets | $ | 24,218 | $ | 160,214 | $ | 8,162 | $ | (23,983 | ) | $ | 168,611 | |||||||||
Total other general fund assets | $ | 4,516 | $ | 25,225 | $ | 13,491 | $ | (23,477 | ) | $ | 19,755 | |||||||||
Investments for account of segregated fund holders | $ | — | $ | 102,773 | $ | 51 | $ | — | $ | 102,824 | ||||||||||
Insurance contract liabilities | $ | — | $ | 135,467 | $ | 10,504 | $ | (10,719 | ) | $ | 135,252 | |||||||||
Investment contract liabilities | $ | — | $ | 3,120 | $ | — | $ | — | $ | 3,120 | ||||||||||
Total other general fund liabilities | $ | 4,555 | $ | 28,077 | $ | 7,993 | $ | (15,899 | ) | $ | 24,726 | |||||||||
December 31, 2019 | ||||||||||||||||||||
Invested assets | $ | 23,639 | $ | 152,512 | $ | 8,552 | $ | (23,084 | ) | $ | 161,619 | |||||||||
Total other general fund assets | $ | 4,135 | $ | 24,000 | $ | 11,955 | $ | (21,480 | ) | $ | 18,610 | |||||||||
Investments for account of segregated fund holders | $ | — | $ | 116,918 | $ | 55 | $ | — | $ | 116,973 | ||||||||||
Insurance contract liabilities | $ | — | $ | 131,428 | $ | 9,644 | $ | (9,888 | ) | $ | 131,184 | |||||||||
Investment contract liabilities | $ | — | $ | 3,116 | $ | — | $ | — | $ | 3,116 | ||||||||||
Total other general fund liabilities | $ | 4,376 | $ | 23,780 | $ | 8,053 | $ | (14,788 | ) | $ | 21,421 |
13. Earnings (Loss) Per Share |
For the three months ended | ||||||||
March 31, 2020 | March 31, 2019 | |||||||
Common shareholders’ net income (loss) for basic earnings per share | $ | 391 | $ | 623 | ||||
Add: Increase in income due to convertible instruments(1) | 3 | 3 | ||||||
Common shareholders’ net income (loss) on a diluted basis | $ | 394 | $ | 626 | ||||
Weighted average number of common shares outstanding for basic earnings per share (in millions) | 587 | 597 | ||||||
Add: Dilutive impact of stock options(2) (in millions) | 1 | 1 | ||||||
Add: Dilutive impact of convertible instruments(1) (in millions) | 4 | 4 | ||||||
Weighted average number of common shares outstanding on a diluted basis (in millions) | 592 | 602 | ||||||
Basic earnings (loss) per share | $ | 0.67 | $ | 1.04 | ||||
Diluted earnings (loss) per share | $ | 0.67 | $ | 1.04 |
(1) | The convertible instruments are the Sun Life ExchangEable Capital Securities (“SLEECS”) – Series B issued by Sun Life Capital Trust. |
(2) | Excludes the impact of 1 million stock options for the three months ended March 31, 2020 because these stock options were anti-dilutive for the period (1 million for the three months ended March 31, 2019). |
14. Accumulated Other Comprehensive Income (Loss) |
For the three months ended | For the three months ended | |||||||||||||||||||||||
March 31, 2020 | March 31, 2019 | |||||||||||||||||||||||
Balance, beginning of period | Other comprehensive income (loss) | Balance, end of period | Balance, beginning of period | Other comprehensive income (loss) | Balance, end of period | |||||||||||||||||||
Items that may be reclassified subsequently to income: | ||||||||||||||||||||||||
Unrealized foreign currency translation gains (losses), net of hedging activities | $ | 1,359 | $ | 1,044 | $ | 2,403 | $ | 1,923 | $ | (280 | ) | $ | 1,643 | |||||||||||
Unrealized gains (losses) on available-for-sale assets | 313 | (296 | ) | 17 | (56 | ) | 251 | 195 | ||||||||||||||||
Unrealized gains (losses) on cash flow hedges | (7 | ) | (21 | ) | (28 | ) | (21 | ) | 6 | (15 | ) | |||||||||||||
Share of other comprehensive income (loss) in joint ventures and associates | (33 | ) | 64 | 31 | (24 | ) | 28 | 4 | ||||||||||||||||
Items that will not be reclassified subsequently to income: | ||||||||||||||||||||||||
Remeasurement of defined benefit plans | (305 | ) | 119 | (186 | ) | (263 | ) | (43 | ) | (306 | ) | |||||||||||||
Revaluation surplus on transfers to investment properties | 145 | — | 145 | 145 | — | 145 | ||||||||||||||||||
Total | $ | 1,472 | $ | 910 | $ | 2,382 | $ | 1,704 | $ | (38 | ) | $ | 1,666 | |||||||||||
Total attributable to: | ||||||||||||||||||||||||
Participating policyholders | $ | 11 | $ | 8 | $ | 19 | $ | 14 | $ | (1 | ) | $ | 13 | |||||||||||
Shareholders | 1,461 | 902 | 2,363 | 1,690 | (37 | ) | 1,653 | |||||||||||||||||
Total | $ | 1,472 | $ | 910 | $ | 2,382 | $ | 1,704 | $ | (38 | ) | $ | 1,666 |
15. Legal and Regulatory Proceedings |
For information about Sun Life, corporate | United States | Direct deposit of dividends | |||
news and financial results, please visit | American Stock Transfer & Trust | Common shareholders residing in Canada | |||
sunlife.com. | Company, LLC | or the U.S. may have their dividend | |||
6201 15th Ave. | payments deposited directly into their | ||||
Corporate office | Brooklyn, NY 11219 | bank account. | |||
Sun Life Financial Inc. | Tel: 1-877-224-1760 | ||||
1 York Street | Email: sunlifeinquiries@astfinancial.com | The Request for Electronic Payment of | |||
Toronto, Ontario | Dividends Form is available for | ||||
Canada M5J 0B6 | United Kingdom | downloading from the AST Trust | |||
Tel: 416-979-9966 | Link Asset Services | Company (Canada) website, | |||
Website: www.sunlife.com | 34 Beckenham Road | www.astfinancial.com/ca-en, or you can | |||
Beckenham, Kent | contact AST Trust Company (Canada) to | ||||
Investor Relations | United Kingdom BR3 4TU | have a form sent to you. | |||
For financial analysts, portfolio managers | Tel: +44 (0) 345-602-1587 | ||||
and institutional investors requiring | Email: enquiries@linkgroup.co.uk | Canadian dividend reinvestment | |||
information, please contact: | and share purchase plan | ||||
Investor Relations | Philippines | Canadian-resident common shareholders | |||
Fax: 416-979-4080 | Rizal Commercial Banking Corporation | can enroll in the Dividend Reinvestment | |||
Email: investor.relations@sunlife.com | (RCBC) | and Share Purchase Plan. For details visit | |||
Please note that financial information can | RCBC Stock Transfer Processing Section | our website at sunlife.com or contact the | |||
also be obtained from www.sunlife.com. | Ground Floor, West Wing, | Plan Agent, AST Trust Company (Canada) | |||
GPL (Grepalife) Building, | at sunlifeinquiries@astfinancial.com | ||||
Transfer agent | 221 Senator Gil Puyat Avenue | ||||
For information about your shareholdings, | Makati City, 1200, | Stock exchange listings | |||
dividends, change in share registration or | Philippines | Sun Life Financial Inc. common shares are | |||
address, estate transfers, lost certificates, | From Metro Manila: 632-5318-8567 | listed on the Toronto (TSX), New York | |||
or to advise of duplicate mailings, please | From the Provinces: 1-800-1-888-2422 | (NYSE) and Philippine (PSE) stock | |||
contact the Transfer Agent in the country | Email: rcbcstocktransfer@rcbc.com | exchanges. Ticker Symbol: SLF | |||
where you reside. If you do not live in any | |||||
of the countries listed, please contact the | Hong Kong, SAR | Sun Life Financial Inc. Class A Preferred | |||
Canadian Transfer Agent. | Computershare Hong Kong Investor | Shares are listed on the Toronto Stock | |||
Services Limited | Exchange (TSX). | ||||
Canada | 17M Floor, Hopewell Centre | ||||
AST Trust Company (Canada) | 183 Queen’s Road East | Ticker Symbols: | Series 1 – SLF.PR.A | ||
P.O. Box 700 | Wanchai, Hong Kong | Series 2 – SLF.PR.B | |||
Station B | Tel: 852-2862-8555 | Series 3 – SLF.PR.C | |||
Montreal, Quebec | Email: hkinfo@computershare.com.hk | Series 4 – SLF.PR.D | |||
Canada H3B 3K3 | Series 5 – SLF.PR.E | ||||
Within North America: | Shareholder services | Series 8R – SLF.PR.G | |||
Tel: 1-877-224-1760 | For shareholder account inquiries, please | Series 9QR – SLF.PR.J | |||
Outside of North America: | contact the Transfer Agent in the country | Series 10R – SLF.PR.H | |||
Tel: 416-682-3865 | where you reside, or Shareholder Services: | Series 11QR – SLF.PR.K | |||
Fax: 1-888-249-6189 | Fax: 416-598-3121 | Series 12R – SLF.PR.I | |||
Email: sunlifeinquiries@astfinancial.com | English Email: | ||||
Website: www.astfinancial.com/ca-en | shareholderservices@sunlife.com | Normal course issuer bid | |||
Shareholders can view their account | French Email: | A copy of the Notice of Intention to | |||
details using AST Trust Company | servicesauxactionnaires@sunlife.com | commence the normal course issuer bid | |||
(Canada)’s Internet service, Investor | is available without charge by contacting | ||||
Central. | 2020 dividend dates | the Corporate Secretary’s Department at | |||
Register at https://www.astfinancial.com/ | Common Shares | shareholderservices@sunlife.com. | |||
ca-en/login | |||||
Record dates | Payment dates | ||||
March 2, 2020 | March 31, 2020 | ||||
May 27, 2020 | June 30, 2020 | ||||
August 26, 2020* | September 30, 2020 | * | |||
November 25, 2020* | December 31, 2020 | * | |||
* Subject to approval by the Board of Directors | |||||