Mr. Kevin Strain reports

SUN LIFE REPORTS SECOND QUARTER 2023 RESULTS

Sun Life Financial Inc. has released its results for the second quarter ended June 30, 2023.

• Underlying net income of $920-million increased $112-million or 14 per cent from Q2 2022; underlying ROE (return on equity) was 17.7 per cent.
  • Wealth and asset management underlying net income: $419-million, down $1-million;
  • Group -- health and protection underlying net income: $360-million, up $122-million or 51 per cent;
  • Individual -- protection underlying net income: $265-million, up $50-million or 23 per cent;
• Reported net income of $660-million decreased $270-million or 29 per cent from Q2 2022; reported ROE was 12.7 per cent.

"Sun Life delivered good second quarter results as our diversified set of businesses continued to demonstrate resilience in a challenging economic environment," said Kevin Strain, president and chief executive officer of Sun Life. "Health and protection sales growth was strong, which shows the importance and priority that our Clients continue to place on health and protection services. Providing access to health and health education remains a priority for Sun Life. We're excited about our announcement to acquire Dialogue Health Technologies, Canada's leading integrated health platform that provides access to affordable, on-demand, quality care. Our investment in Dialogue allows us to play a larger role in Canada's health ecosystem, while reducing the strain on traditional health care organizations."

"We're also seeing momentum from many of our recent acquisitions and strategic partnerships. This includes solid Q2 results from DentaQuest, the strong start to our 15-year bancassurance partnership with Dah Sing Bank in Hong Kong and the successful IPO for BGO's IREIT, a product that supports our high-net-worth alternative strategies, distributed through our U.S. retail distributor, Advisors Asset Management Inc."

Underlying net income of $920-million increased $112-million or 14 per cent from prior year, driven by:

• Wealth and asset management down $1-million: Higher investment income driven by volume growth and an increase in yields was largely offset by lower fee-based earnings in MFS, reflecting equity market declines over the past year, as well as higher expenses in Canada.
• Group -- Health and protection up $122-million: Strong performance driven by good premium growth and better disability experience in Canada and the United States, as well as a full quarter of DentaQuest contributions.
• Individual -- Protection up $50-million: Higher premiums reflecting good sales momentum during the past year in Asia, and improved insurance experience in Canada and the United States.
• Corporate expenses and other -- A total of $(59)-million increased net loss driven by higher operating expenses including incentive compensation and an increase in debt financing costs.
• Higher earnings on surplus reflecting an increase in realized gains and net interest income from higher rates.
• An increase of $27-million from the impacts of foreign exchange translation.

Reported net income of $660-million decreased $270-million or 29 per cent, driven by:

• Market-related impacts primarily reflecting interest rates and real estate investments;
• Prior year gain on the sale-leaseback of the Wellesley office in the U.S.;
• Fair value changes in management's ownership of MFS shares; partially offset by:
• The increase in underlying net income.

Asset management: a global leader in both public and alternative asset classes through MFS and SLC Management

Asset management underlying net income of $296-million increased $1-million from prior year, driven by:

• MFS up $2-million (down $10-million (U.S.)): Higher net investment income and the impacts from foreign exchange translation was largely offset by lower average net assets (ANA) reflecting equity market declines over the past year and net outflows. The MFS pretax net operating profit margin was 37 per cent for Q2 2023, compared with 36 per cent in the prior year.
• SLC Management down $1-million: Fee-related earnings increased 19 per cent driven by higher AUM, reflecting strong capital raising and deployment across the platform and the AAM acquisition. Fee-related earnings margin for Q2 2023 was 24 per cent compared with 23 per cent in the prior year. Underlying net income was in line with prior year, with the increase in fee-related earnings offset by higher earned operating income in the prior year that did not repeat.

Reported net income of $248-million decreased $50-million or 17 per cent, driven by fair value changes in management's ownership of MFS shares and losses on real estate investments held in the SLC Management surplus account.

Foreign exchange translation led to an increase of $13-million and $12-million in underlying net income and reported net income, respectively.

Asset management ended Q2 2023 with $998-billion of AUM, consisting of $780-billion ($589-billion (U.S.)) in MFS and $218-billion in SLC Management. Total asset management net outflows of $3.3-billion in Q2 2023 reflected MFS net outflows of $5.3-billion ($4.0-billion (U.S.)) partially offset by SLC Management net inflows of $2.0-billion.

The company's asset management businesses continue to maintain a strong focus on sustainable investing. During the second quarter, BentallGreenOak (BGO) received Gold Recognition in the 2023 Green Lease Leaders program organized by the Institute for Market Transformation and the U.S. Department of Energy Better Buildings Alliance. InfraRed Capital Partners continues to invest capital in companies helping to build a sustainable future. For example, in Q2 2023, InfraRed announced an investment in JOLT, an e-mobility company. InfraRed's investment in JOLT's rapid electric vehicle charging infrastructure supports a low-carbon future and supports its target of achieving 50 per cent of AUM invested in climate solutions by 2025.

Advisors Asset Management Inc. (AAM), a U.S. retail distribution affiliate of SLC Management which the company acquired last quarter, announced it will distribute BGO IREIT, a non-traded real estate investment trust launched by BGO, demonstrating the strategic benefit from the AAM acquisition.

Canada: a leader in health, wealth and insurance

Canada underlying net income of $372-million increased $73-million or 24 per cent from prior year, reflecting:

• Wealth and asset management in line with prior year: Increase in investment income driven by higher volume and yields, largely offset by higher expenses.
• Group -- Health and protection up $48-million: Better disability experience reflecting higher margins, lower claims volumes and shorter claims durations.
• Individual -- Protection up $25-million: Improved insurance experience as well as higher investment contributions.

Reported net income of $210-million decreased $266-million or 56 per cent from prior year, reflecting market-related impacts primarily from interest rates and real estate experience, partially offset by the increase in underlying net income.

Canada's sales:

• Wealth sales and asset management gross flows of $3-billion were down 6 per cent, reflecting lower defined benefit solution sales partially offset by higher defined contribution sales in Group Retirement Services (GRS).
• Group sales of $153-million were up 66 per cent, reflecting higher large case sales.
• Individual sales of $154-million were up 22 per cent, reflecting higher participating whole life insurance sales.

The company continues to deliver on its strategy of strengthening and expanding the company's health business. The company provides Canadians with the support they need to take action throughout their health journey, helping to prevent and mitigate health risks and live healthier lives. During the second quarter, the company launched Lumino Health Pharmacy, a new on-line pharmacy app, which will help clients consult a knowledgeable pharmacist by chat or a phone call and have medications delivered to their door free of charge. This service helps clients to keep track of their medications, usage, refills and sends them important notifications regarding their prescriptions.

In July, the company entered into an agreement to acquire Dialogue Health Technologies Inc., Canada's premier virtual health care and wellness platform, providing affordable on-demand access to quality care, which will help us empower Canadians with access to the care they need from the convenience of their home.

U.S.: a leader in health and benefits

U.S. underlying net income of $160-million (U.S.) increased $58-million (U.S.) or 57 per cent ($215-million increased $81-million or 60 per cent) from prior year, driven by:

• Group -- Health and protection up $46-million (U.S.): Strong performance across all businesses including good premium growth, contribution from the DentaQuest acquisition, higher investment contributions and favourable experience. Experience in the quarter included higher medical stop-loss margins and favourable group disability.
• Individual -- Protection up $12-million (U.S.): The inclusion of the United Kingdom payout annuity business and insurance experience. Mortality experience in the quarter improved compared with the prior year.
• Higher earnings on surplus reflecting an increase in net interest income from higher rates.

Reported net income of $133-million (U.S.) increased $20-million (U.S.) or 18 per cent ($175-million increased $26-million or 17 per cent) from prior year, reflecting the increase in underlying net income and favourable ACMA, partially offset by a prior year gain on the sale-leaseback of the Wellesley office.

Foreign exchange translation led to an increase of $11-million and $10-million in underlying net income and reported net income, respectively.

U.S. group sales of $484-million were up $271-million, driven by higher dental and medical stop-loss sales.

The company continues to take action to support its strategic priority to help clients access the health care and coverage they need. In the company's dental business, it expanded the Advantage Dental+ care practices with two new offices in Texas. These practices are in areas where access to quality oral health care is a challenge for children with Medicaid coverage. The company also recorded the largest Medicare Advantage sale in DentaQuest history, bringing dental sales to approximately $580-million since closing the DentaQuest acquisition on June 1, 2022.

The company also announced a relationship with Philadelphia-based Independence Health Group to exclusively provide medical stop-loss insurance for their self-financed group medical clients to help protect against large, unpredictable health care costs. This supports the company's strategy of partnering with other insurers and health plans to expand its market presence and deliver its expertise to additional clients.

Asia: a regional leader focused on fast-growing markets

Asia underlying net income of $150-million increased $32-million or 27 per cent from prior year, driven by:

• Wealth and asset management down $2-million: Lower fee-based earnings reflecting lower AUM in the Philippines.
• Individual -- Protection up $38-million: Higher premiums reflecting good sales momentum during the past year, and improved expenses and lapse experience in the company's joint ventures. This was partially offset by less favourable morbidity experience in Hong Kong.
• Regional office expenses and other $(4)-million increased net loss: In line with the prior year.

Reported net income of $122-million increased $115-million from prior year, driven by market-related impacts, largely from interest rates partially offset by real estate experience and the increase in underlying net income.

Foreign exchange translation led to an increase of $3-million in underlying net income and reported net income.

Asia's sales:

• Wealth sales and asset management gross flows of $2-billion were down 51 per cent, primarily reflecting lower money market fund sales in the Philippines.
• Individual sales of $450-million were up 55 per cent, driven by higher sales in Hong Kong, China and India.

New business CSM of $118-million in Q2 2023, compared with $70-million in the prior year, was primarily driven by sales and favourable product mix in high-net-worth and Hong Kong.

The company continues to make progress on its strategic priorities of establishing digital leadership and leveraging distribution excellence. In Hong Kong, the company introduced eSunPro, a new digital health care service platform which provides comprehensive, one-stop care and assistance to clients, ranging from services at the point of diagnosis to posttreatment care, enabling them to access advanced treatment and support throughout their recovery process.

The company strives to enhance clients' experience and make it easier for them to do business with us. During the second quarter, the company opened the Sun Gateway prestige client centre in Hong Kong. The centre offers high-net-worth clients professional insurance consultancy and one-stop financial products and services, with a dedicated team of onsite financial advisers and client service representatives catering to their wealth management and protection needs as they evolve through different life stages.

Corporate

Corporate underlying net loss was $113-million compared with underlying net loss of $38-million in the prior year, reflecting higher operating expenses including incentive compensation and an increase in debt financing costs, the impact from the sale of Sun Life U.K., partially offset by higher investment income from surplus assets.

Reported net loss was $95-million compared with nil reported net income in the prior year, reflecting the change in underlying net loss and market-related impacts, partially offset by a gain on the sale of Sun Life U.K.

Sun Life was recognized as one of Corporate Knights' Global 100 Most Sustainable Corporations in the World for the 14th consecutive year and was the top ranked insurance company globally. The company announced its second sustainability bond offering, issuing $500-million. The company will invest an amount equal to the net proceeds of this offering into green and/or social assets that meet the eligibility criteria as set out under Sun Life's Sustainability Bond Framework. This supports the company's continued commitment to sustainable investing.

Earnings conference call

The company's Q2 2023 financial results will be reviewed at a conference call on Wednesday, Aug. 9, 2023, at 10 a.m. ET. Visit the Sun Life website 10 minutes prior to the start of the event to access the call through either the webcast or conference call options. Individuals participating in the call in a listen-only mode are encouraged to connect via the company's webcast. Following the call, the webcast and presentation will be archived and made available on the company's website until the Q2 2024 period end.

About Sun Life Financial Inc.

Sun Life is a leading international financial services organization providing asset management, wealth, insurance and health solutions to individual and institutional clients. Sun Life has operations in a number of markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam, Malaysia and Bermuda. As of June 30, 2023, Sun Life had total assets under management of $1.37-trillion.

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