Mr. Kevin Strain reports

SUN LIFE REPORTS THIRD QUARTER 2023 RESULTS

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

• Underlying net income of $930-million decreased $19-million or 2 per cent from Q3 2022; underlying ROE (return on equity) was 17.7 per cent.
  • Wealth and asset management underlying net income: $457-million, up $38-million or 9 per cent.
  • Group -- Health and Protection underlying net income: $285-million, up $4-million or 1 per cent.
  • Individual -- Protection underlying net income: $297-million, down $8-million or 3 per cent.
  • Corporate expenses and other: $(109)-million net loss, increase in net loss of $(53)-million or 95 per cent.
• Reported net income of $871-million increased $760-million from Q3 2022; reported ROE was 16.6 per cent.
• Increase to common share dividend from 75 cents to 78 cents per share.

"Sun Life delivered good results and we continue to benefit from our diversified business mix with strong net income in Canada, growth in SLC Management fee-related earnings and good growth in Asia," said Kevin Strain, president and chief executive officer of Sun Life.

"We completed our acquisition of Dialogue, Canada's leading virtual health and wellness provider that gives access to quality, high-touch care. In Asia, we increased our investment in Bowtie, Hong Kong's first virtual insurer. Since the beginning of our partnership five years ago, Bowtie has grown in digital distribution, sales and increased market share. In the U.S., we've extended our Teledentistry.com partnership to DentaQuest, which will provide approximately 3.5 million people across 20 states access to oral and dental care. SLC Management's strategic relationship with Scotiabank Global Wealth Management to provide private asset solutions in the Canadian market will help to meet the growing demand for alternative investments."

Underlying net income of $930-million decreased $19-million or 2 per cent from prior year, driven by:

• Wealth and asset management up $38-million: Higher investment income driven by volume growth and an increase in yields, and higher asset management fee-related earnings.
• Group -- Health and protection up $4-million: Strong revenue growth across all United States businesses and better disability experience in Canada, largely offset by health and protection experience in the U.S., and lower fee-related earnings in Canada.
• Individual -- Protection down $8-million: Lower earnings due to the sale of Sun Life UK, and lower net investment results in the U.S., partially offset by business growth reflecting good sales momentum during the past year in Asia.
• Corporate expenses and other $(53)-million increase in net loss includes higher debt financing costs.
• Higher expenses across business types were driven by volume growth, continued investments in the business and higher incentive compensation.
• Favourable foreign currency translation led to an increase of $16-million.

Reported net income of $871-million increased $760-million, driven by:

• Favourable market-related impacts primarily reflecting interest rates partially offset by real estate experience;
• A $170-million charge related to the sale of Sun Life UK and a higher increase in SLC Management's acquisition-related liabilities in the prior year;
• ACMA impacts; partially offset by:
• Fair value changes in management's ownership of MFS shares.

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

Asset management underlying net income of $330-million increased $32-million or 11 per cent from prior year, driven by:

• MFS up $4-million (down $5-million (U.S.)): Higher average net assets (ANA), an increase in net investment income, favourable foreign exchange translation and higher variable compensation expenses. The MFS pretax net operating profit margin was 41 per cent for Q3 2023, consistent with the prior year.
• SLC Management up $28-million: Fee-related earnings increased 17 per cent driven by higher AUM (assets under management), reflecting strong capital raising and deployment across the platform and the AAM acquisition. Fee-related earnings margin for Q3 2023 of 24 per cent was consistent with the prior year. The increase in underlying net income was driven by the higher fee-related earnings, a favourable tax rate and higher retention expenses in the prior year that did not repeat.

Reported net income of $268-million increased $50-million or 23 per cent from prior year, driven by a lower increase in SLC Management's acquisition-related liabilities compared with the prior year and an increase in underlying net income, partially offset by fair value changes in management's ownership of MFS shares.

Foreign exchange translation led to an increase of $7-million in underlying net income and reported net income.

Asset Management ended Q3 2023 with $974-billion of AUM, consisting of $755-billion ($556-billion (U.S.)) in MFS and $219-billion in SLC Management. Total asset management net outflows of $9.1-billion in Q3 2023 reflected MFS net outflows of $12.5-billion ($9.3-billion (U.S.)) partially offset by SLC Management net inflows of $3.4-billion.

MFS maintained good momentum in growing the defined contribution business. On a year-to-date basis, defined contribution gross sales are up 14 per cent compared with prior year due to strong placement on consultant, adviser and record-keeping platforms' select lists, driving approximately $3-billion (U.S.) in net inflows, despite challenging market conditions.

In October, SLC Management entered into a strategic partnership with Scotiabank to distribute alternative investment capabilities to the Canadian retail market through Scotia Global Wealth Management. This will allow SLC Management to extend alternative investment capabilities to new clients and expands the roster of investment solutions Scotiabank can offer the Canadian wealth management market. This strategic partnership, coupled with the recent acquisition of Advisors Asset Management Inc. (AAM), positions SLC Management to meet the growing demand for alternative assets among high-net-worth (HNW) investors. AAM also announced it will distribute Crescent Private BDC, a non-traded closed-end fund launched by Crescent Capital Group LP. This is the second collaboration between AAM and other SLC Management affiliates since its acquisition in Q1, highlighting the strategic benefit of adding this distribution channel.

Canada: a leader in health, wealth and insurance

Canada underlying net income of $338-million increased $45-million or 15 per cent from prior year, reflecting:

• Wealth and asset management up $14-million: Increase in investment income driven by higher volume and yields.
• Group -- Health and protection up $34-million: Improved disability experience reflecting higher margins and shorter claims durations, partially offset by lower fee-related earnings.
• Individual -- Protection down $3-million: In line with prior year.
• Higher expenses across all businesses were driven by volume growth, continued investments in the business and higher incentive compensation.

Reported net income of $365-million increased $309-million from prior year, driven by more favourable market-related impacts primarily from interest rates, ACMA impacts and the increase in underlying net income, partially offset by real estate experience.

Canada's sales:

• Wealth sales and asset management gross flows of $3-billion were up 7 per cent, driven by higher individual wealth sales, primarily from mutual funds, partially offset by lower defined contribution sales in group retirement services (GRS).
• Group -- Health and protection sales of $119-million were up 4 per cent, reflecting higher health sales.
• Individual -- Protection sales of $148-million were up 24 per cent, reflecting higher participating whole life insurance sales.

The company continues to execute on its strategy of helping clients access the care they need to prevent and mitigate health risks and live healthier lives. In Q3, Sun Life was selected to move forward in the final stages of contract negotiations with the government of Canada to be the administrator of the Canadian Dental Care Plan (CDCP), which will provide access to dental care for Canadians in need. Through the CDCP, up to nine million additional Canadians will have access to dental care.

In support of the company's focus on inclusive workplace benefits, Sun Life is making it easier for plan members to understand and access culturally relevant covered health expenses under the standard personal spending accounts (PSA). For example, the company created a new indigenous health category which outlines and creates awareness that Sun Life provides coverage for traditional medicines, fees and supplies for indigenous ceremonies, and more under the PSA. The company also expanded its partnership with Spirit North, a national charitable organization, committing $1-million in funding over three years, to deliver physical health programs and address health inequities in underserved indigenous communities.

U.S.: a leader in health and benefits

U.S. underlying net income of $140-million (U.S.) decreased $33-million (U.S.) or 19 per cent ($185-million decreased $42-million or 19 per cent) from prior year, driven by:

• Group -- Health and protection down $24-million (U.S.): Lower dental results as strong revenue growth was more than offset by the impact of Medicaid redeterminations following the end of the Public Health Emergency and investments in the Advantage Dental+ business. In group benefits, strong revenue growth was largely offset by less favourable morbidity experience.
• Individual -- Protection down $9-million (U.S.): The inclusion of the United Kingdom payout annuity business was more than offset by lower net investment results.

Reported net income of $105-million (U.S.) increased $9-million (U.S.) or 9 per cent ($132-million increased $7-million or 6 per cent) from prior year, driven by market-related impacts largely from interest rates, offset by the decrease in underlying net income and ACMA impacts.

Foreign exchange translation led to an increase of $5-million and $4-million in underlying net income and reported net income, respectively.

U.S. group sales of $179-million (U.S.) were down $102-million (U.S.) or 36 per cent ($239-million, down $127-million or 35 per cent), reflecting lower large case Medicaid sales in dental, partially offset by higher commercial dental sales.

As a leader in health and benefits, the company is helping clients get access to the right care at the right time to live healthier lives. In Q3, Sun Life established a new preferred partnership with OptiMed, a U.S. national health care organization, to make specialty drugs more accessible and affordable for its stop-loss members. The new program will improve how specialty drugs are administered for members who need them, often in their own home, while also managing rising health care costs. Also, in employee benefits, the company launched an enhanced disability product suite specially designed for health care professionals, providing them with income replacement coverage that meets their specific needs.

The company extended its partnership with Teledentistry.com to include DentaQuest members. The service offers members 24/seven virtual access to dental providers, making it easier to get dental care and advice digitally. It is expected to be available to Medicaid and commercial dental plan members in 20 states by the end of 2023, increasing access to oral health care for approximately 3.5 million members in those states.

Asia: a regional leader focused on fast-growing markets

Asia underlying net income of $166-million increased $13-million or 8 per cent from prior year, driven by:

• Wealth and asset management down $8-million: Lower earnings in the Philippines.
• Individual -- Protection up $39-million: Business growth reflecting good sales momentum during the past year. Experience in the quarter included favourable mortality from lower claims volumes, largely offset by higher expense experience.
• Regional office expenses and other: $(18)-million increased net loss primarily reflecting higher incentive compensation.

Reported net income of $211-million compared with nil reported net income in the prior year, driven by ACMA impacts, and favourable market-related impacts largely from interest rates partially offset by real estate experience.

Foreign exchange translation led to an increase of $3-million and $5-million in underlying net income and reported net income, respectively.

Asia's sales:

• Wealth sales and asset management gross flows of $2-billion were down 34 per cent, primarily reflecting lower money market fund sales in the Philippines.
• Individual sales of $521-million were up 60 per cent, driven by higher sales in Hong Kong reflecting increased demand as pandemic-related travel restrictions were lifted in early 2023, and in international reflecting large case sales, partially offset by lower sales in Vietnam reflecting market conditions.

New business CSM of $238-million in Q3 2023, compared with $79-million in the prior year, was primarily driven by sales in Hong Kong and high net worth.

The company continues to execute on its growth strategy through strategic partnerships and investments. Sun Life launched its 15-year exclusive bancassurance partnership with Dah Sing Bank in Hong Kong with strong sales. The company also increased its strategic investment in Bowtie Life Insurance Company Ltd., Hong Kong's first virtual insurer with a leading market share of approximately 30 per cent in Hong Kong's direct sales channel.

Demonstrating the company's focus on adopting prudent financial practices that protect its clients while strengthening its risk management capabilities, Sun Life Hong Kong received approval from the Hong Kong Insurance Authority for the early adoption of the risk-based capital (RBC) regime, effective end of June, 2023. Sun Life Hong Kong is among the few insurers in Hong Kong that has transitioned to the RBC regime earlier than scheduled, reflecting the company's risk management capabilities and financial strength.

Corporate

Corporate underlying net loss was $89-million compared with underlying net loss of $22-million in the prior year, driven by the sale of Sun Life UK, higher operating expenses including incentive compensation, an increase in debt financing costs, partially offset by higher investment income from surplus assets.

Reported net loss was $105-million compared with reported net loss of $288-million in the prior year, driven by the impacts from the sale of Sun Life UK, partially offset by the change in underlying net loss.

Earnings conference call

The company's Q3 2023 financial results will be reviewed at a conference call on Tuesday, Nov. 14, 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 Q3 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 Sept. 30, 2023, Sun Life had total assets under management of $1.34-trillion.

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