Scotiabank Financials Summit 2013

Transcription

1 Scotiabank Financials Summit 2013 Dean A. Connor President and Chief Executive Officer Thursday, September 5, Toronto

2 Forward-looking statements Certain statements in this presentation, including, but not limited to, statements that are not historical facts, are forward-looking and are subject to inherent risks, uncertainties and assumptions. The results or events predicted in these forward-looking statements may differ materially from actual results or events. As a result, we cannot guarantee that any forward-looking statement will materialize. The forward-looking statements in this presentation are made as of August 8, Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statements made in this presentation. Non-IFRS Financial Measures The Company prepares its financial statements in accordance with international financial reporting standards ( IFRS ). This presentation includes financial measures that are not based on IFRS ( non-ifrs financial measures ). The Company believes that these non-ifrs financial measures provide information that is useful to investors in understanding the Company s performance and facilitate a comparison of the quarterly and full year results of the Company s ongoing operations. These non-ifrs financial measures do not have any standardized meaning, may not be comparable with similar measures used by other companies and should not be viewed as an alternative to measures of financial performance determined in accordance with IFRS. Continuing Operations, Discontinued Operations and Combined Operations On December 17, 2012, we entered into a definitive stock purchase agreement pursuant to which we agreed to sell our U.S. annuities business and certain of our U.S. life insurance businesses (collectively, our U.S. Annuity Business ). This transaction closed effective August 1, We have defined our U.S. Annuity Business as Discontinued Operations, the remaining operations as Continuing Operations, and the total Discontinued Operations and Continuing Operations as Combined Operations. Additional Information In this presentation, the Company, Sun Life Financial, we, our and us refers to Sun Life Financial Inc. together with its subsidiaries and joint ventures. Information in this presentation is at June 30, 2013, unless indicated otherwise. References to $ are in Canadian dollars, unless indicated otherwise. Additional information concerning forward-looking statements and non-ifrs financial measures is included at the end of this presentation. 2

3 Agenda Overview Four pillar strategy Progress update Medium-term objectives

4 (1) Last Twelve Months ( LTM ) Q2 13; premiums and deposits adjusted ( P&D ). Represents a non-ifrs financial measure. (2) Assets under management. Represents a non-ifrs financial measure. 4

5 A global financial services company Sun Life Financial Canada U.S. (1) MFS Products and Services Asia Corporate Individual Insurance and Investments Life and health insurance Savings products Mutual funds Group Benefits Group Retirement Services Pension and investment products Defined Benefit Solutions Employee Benefits Group Employer-paid (life, disability, dental) Voluntary benefits (life, disability, dental, critical illness, personal accident) Medical stop-loss Individual Insurance (closed block of business) Offshore high net worth life insurance and investment products Retail mutual funds U.S. and international markets Institutional Pension and 401(k) Sovereign wealth funds Insurance platforms Philippines, Indonesia, Malaysia, Vietnam China and Hong Kong India Products: Life insurance Accident and health Mutual funds Group life & pensions SLF U.K. Individual life and pensions (closed block of business) Corporate Run-off reinsurance (closed block of business) (1) On December 17, 2012, we entered into a definitive stock purchase agreement pursuant to which we agreed to sell our U.S. Annuity Business to Delaware Life Holdings, LLC for a base price of US$1.350 million, which will be adjusted to reflect the performance of the business through closing. The transaction closed effective August 1,

6 Diversified by geography and market Revenue by business segment (1) (%) Value of new business by business type (1) (%) Corporate 5% SLF Asia 8% MFS 13% SLF Canada 45% Protection 43% Wealth 57% SLF U.S. 29% (1) Based on LTM Q2 13; revenue excludes the fair value change in FVTPL assets; based on Continuing Operations. (1) Based on LTM Q2 13; based on Continuing Operations. 6

7 Executing on our four pillar strategy A strategy focusing on growth, higher ROE, and less volatile businesses Becoming the best performing life insurer in Canada Enhancing leadership position in U.S. group insurance and becoming top 5 in voluntary benefits Growing our asset management business globally Growing Asia to be a more significant part of Sun Life s results 7

8 Actions to reduce volatility and capital intensive products Discontinued U.S. life insurance and annuity sales (January 2012) Reduced Canadian segregated fund sales from $2.1 billion (2009) to $875 million (2012) Reduced percentage of Canadian Insurance Sales from universal life insurance from 39% (2010) to 18% (YTD 2013) Divested U.S. Annuity Business (August 2013) 8

9 Driving growth in Canada Individual life insurance Strength in participating whole life and critical illness Growing Career Sales Force (CSF) Adding wholesalers Individual wealth Investing in Sun Life Global Investments (SLGI) Strength in fixed products Adding wholesalers De-emphasizing segregated funds Individual Insurance sales ($ millions) Wholesale Wealth deposits ($ millions) 1,865 2,105 2,321 1,736 2,583 2,590 CSF Fixed Products & Mutual Funds Seg Funds 1,

10 Driving growth in Canada Client assets under management (1) ($ millions) 6,048 Sun Life Global Investments Completed two full years of operations 3,318 Realized significant sales and AUM growth (1) Represents a non-ifrs financial measure. 10

11 Driving growth in Canada GRS assets under administration (1) ($ billions) Group Retirement Services (GRS) Steady growth in assets under administration through sales and client retention Investing in Defined Benefit Solutions Leading risk transfer business in Canada (1) Represents a non-ifrs financial measure. Defined Benefit Solutions sales ($ millions) 1,

12 Driving growth in Canada Business in-force (1) ($ millions) Group Benefits 6,878 7,305 7,475 7,976 Investing in mobile, pharmaceutical and wellness capabilities Growing sales power (1) Represents a non-ifrs financial measure. 12

13 Driving growth in Canada Pension rollover sales ($ millions) 855 1,043 1,081 1,168 Client Solutions Investing in call centre representatives and process Doing more for millions of Canadians who are plan members and clients Driving leads to Sun Life advisors Insurance sales 65 ($ millions)

14 Driving growth in U.S. Achieving key milestones in group and voluntary strategy Solid sales growth Total Employee Benefits Group sales up 17% with voluntary benefits sales up 35% in Q2 13 Launched our first voluntary benefits accident product Major transformation of Employee Benefits Group sales and service model underway Employee Benefits Group business in-force (1) (US$ millions) 2,111 2, , ,747 1,727 1,800 Q2'11 Q2'12 Q2'13 Group Life & Health Voluntary (1) Represents a non-ifrs financial measure. 14

15 Driving growth in U.S. Life insurance sales (US$ millions) 62 International high net-worth business Relatively few competitors Based on strong distribution relationships with brokers and banks De-risked insurance and investment solutions 27 LTM Q2'12 Investment sales (US$ millions) LTM Q2' LTM Q2'12 LTM Q2'13 15

16 Driving growth at MFS % of MFS fund assets ranked in the top half of their Lipper category (1) Strong investment performance created by unique culture and operating model Global research and investment platform across sectors Paid on collaboration Paid on three-year results Tight risk management 1 yr. 3 yrs. 5 yrs. 10 yrs. All Funds 81% 96% 97% 96% Fixed-Income Funds 52% 86% 89% 86% Global & International Equity Funds 65% 98% 99% 98% Domestic Equity Funds 100% 100% 99% 99% (1) Lipper rankings do not take into account sales charges and are based on historical total returns, which are not indicative of future results. Note that rankings are based on the MFS A share class as compared to performance of all share classes and sales load types as reported by Lipper in a particular classification. Note: excludes Closed-End, Money Market, VIT, VIT II, and Offshore. The MFS Institutional Large Cap Value Fund and the MFS Institutional International Equity Fund are included in the Domestic Equity and Global Equity sections, respectively. 16

17 Driving growth at MFS Assets under management (1) ($ billions) Retail Institutional Experiencing growth in: U.S. retail Sovereign Wealth Funds International Looking ahead: Client retention Non-U.S. retail Australian and Canadian growth Fixed Income (1) 2009 and 2010 have been restated to include McLean Budden. Represents a non-ifrs financial measure. 17

18 Driving growth at MFS Increasing diversification by channel 2001 US$137 billion Q2 13 US$354 billion Non-U.S. retail 4% Institutional 10% Insurance 23% Non-U.S. retail 6% U.S. retail 63% U.S. retail 36% Institutional 42% Insurance 16% Note: Retail includes all open and closed end funds. Institutional includes PPM and Structured Products. 18

19 Driving growth at MFS Increasing diversification by geographic domicile 2001 US$137 billion 2012 US$323 billion Other 3% Australia/ New Zealand 6% Middle East 4% Europe 10% Other Americas 1% Asia 6% U.S. 97% Canada 7% U.S. 66% 19

20 Driving growth in Asia Since 1999 Insurance & Asset Management Partnership with Aditya Birla Group 10,800 employees 106,000 advisors Since 2002 Partnership with the China Everbright Group Insurance Asset Management Company established in ,900 employees 3,200 advisors Since employees 1,200 advisors Wholly owned Third Party Pensions Administrator (TPA) Ranked #1 in TPA India China Hong Kong Since employees 4,600 advisors Since 2012 (1) Partnership with PVI Holdings 82 employees 285 agents Vietnam Philippines Since 2011 Partnership with the Yuchengco Group of Companies 420 employees Malaysia Since employees 6,300 advisors Since 2009 Partnership with CIMB Niaga 90 employees (1) The joint venture received license to operate in January (2) Acquisition of the joint venture was completed in April Indonesia Since 2013 (2) Joint venture with Khazanah Nasional Berhad Exclusive bancassurance partnership with CIMB Bank Life & Takaful business 386 employees

21 Driving growth in Asia Growing products and markets Attracting top talent in Asia Seven markets representing 70% of Asian population Early stages of growth; competing on ability to grow distribution Strong partnerships Highly successful integration of Philippines acquisition Investing in: Building out Malaysia and Vietnam Accident and Health Wealth business Reduce expense gaps in China and India (C$ millions) Q Change over Q Operating net income (1) % Individual Life Insurance Sales % Philippines % Hong Kong % Indonesia 12 33% India 35 (13)% China 44 - Malaysia 14 N/A Wealth sales (2) % (1) Represents a non-ifrs financial measure; based on Continuing Operations. (2) Includes 100% of sales of the Company s joint ventures in SLF Asia. 21

22 Three fundamental changes in how we work Talent and high performance focus Customer focus Productivity and expenses 22

23 Strong capital and cash position MCCSR Ratio Sun Life Assurance Company of Canada 210% 214% 217% Q2'12 Q1'13 Q2'13 $1.95 billion estimated cash level at Sun Life Financial Inc. at the close of sale of the U.S. Annuity Business on August 1,

24 Robust earnings growth Operating net income (C$ millions) (1) Q2'12 Q2'13 Q2'12 YTD* Q2'13 YTD Q2 13 value of new business up 60% Q2 13 expected profit up 18% Q2 13 new business strain down 73% (1) Represents a non-ifrs financial measure; based on a Continuing Operations. * Year to date (YTD) 24

25 Our 2015 financial objectives Operating net income (C$ millions) 2015 Objectives (1) 2011 adjusted net income (2) SLF Canada SLF U.S operating net income objective of $1.85 billion MFS SLF Asia Corporate (70) (73) 2015 operating ROE objective of 12% - 13% Total Company 1,850 1,245 (1) The 2015 operating net income and operating return on equity (ROE) objectives are forward-looking non-ifrs financial measures and are not earnings guidance. The deployment of capital build up will impact ROE. (2) Provided on March 8, SLF U.S. and Total Company adjusted to reflect the net impact of the sale of the U.S. Annuity Business for illustration purposes. 25

26 Key takeaways Executing on growth Lower risk, higher ROE businesses Disciplined capital deployment Ambitious but achievable objectives 26

27 Question & Answer Session 27

28 Use of Non-IFRS Financial Measures We report certain financial information using non-ifrs financial measures, as we believe that they provide information that is useful to investors in understanding our performance and facilitate a comparison of the quarterly and full year results from period to period. These non-ifrs financial measures do not have any standardized meaning and may not be comparable with similar measures used by other companies. For certain non- IFRS financial measures, there are no directly comparable amounts under IFRS. They should not be viewed as an alternative to measures of financial performance determined in accordance with IFRS. Operating net income (loss) and other financial information based on operating net income (loss), including operating ROE, are non-ifrs financial measures. Operating net income (loss) excludes: (i) the impact of certain hedges in SLF Canada that do not qualify for hedge accounting; (ii) fair value adjustments on share-based payment awards at MFS; (iii) restructuring and other related costs; (iv) goodwill and intangible asset impairment charges; and (v) other items that are not operational or ongoing in nature. Management also uses the following non-ifrs financial measures: 1. Adjusted revenue, which excludes from revenue the impact of: (i) foreign exchange; (ii) fair value changes in FVTPL assets and liabilities; (iii) reinsurance for the insured business in SLF Canada s Group Benefits operations; and (iv) net premiums from Life and Investment Products in SLF U.S. that closed to new sales effective December 30, Adjusted premiums and deposits, which excludes from premiums and deposits the impact of: (i) foreign exchange; (ii) reinsurance for the insured business in SLF Canada s Group Benefits operations; and (iii) net premiums and deposits from Life and Investment Products in SLF U.S. that closed to new sales effective December 30, Pre-tax operating profit margin ratio for MFS, which is a measure of the underlying profitability of MFS, which excludes certain investment income and commission expenses that are offsetting. 4. Financial measures that exclude the impact of foreign exchange and currency fluctuations. 5. MCCSR market sensitivities. 6. ASO premium and deposit equivalents, mutual fund sales, managed fund sales and total premiums and deposits. 7. AUM, mutual fund assets, managed fund assets, other AUM and assets under administration. 8. The value of new business, which is used to measure the estimated lifetime profitability of new sales and is based on actuarial calculations. 9. Management actions and changes in assumptions which is a component of our sources of earnings disclosure. Additional information concerning non-ifrs financial measures and reconciliations to IFRS measures are included in our annual and interim management s discussion and analysis ( MD&A ) and the Supplementary Financial Information packages that are available on under Investors Financial Results & Reports. 28

29 Forward-Looking Statements Certain statements in this presentation, including (i) the anticipated impact of the sale of our U.S. Annuity Business, (ii) statements relating to our business outlook, financial objectives, future results of operations, and strategic plans, (iii) statements concerning our 2015 operating income objective and our 2015 operating return on equity objective (collectively, our 2015 financial objectives ), (iv) statements relating to productivity and expense initiatives, growth initiatives and other business objectives, and (v) statements that include words such as "aim", "anticipate", "assumption", "believe", "could", "estimate", "expect", "goal", "intend", "may", "objective", "outlook", "plan", "project", "seek", "should", "initiatives", "strategy", "strive", "target", "will" and similar expressions are forward-looking statements. All such forward-looking statements are made pursuant to the safe harbour provisions of the United States Private Securities Litigation Reform Act of 1995 and of applicable Canadian securities laws. The forward-looking statements in this presentation represent our expectations, estimates and projections regarding future events as at August 8, 2013 and are not statements of historical facts. Except as may be required by Canadian securities laws, we do not undertake any obligation to update or revise any forward-looking statements contained in this presentation. Forward-looking statements are not a guarantee of future performance and involve inherent risks and uncertainties and are based on key factors and assumptions, all of which are difficult to predict. Future results and shareholder value may differ materially from those expressed in forwardlooking statements due to, among other factors, the matters set out in the Company s MD&A for the quarter ended June 30, 2013 under the heading Forward-looking Statements, in the risk factors set out in the Company s annual information form for the year ended December 31, 2012 (our AIF ) under the heading Risk Factors and other factors detailed in the Company s annual and interim financial statements and any other filings with Canadian and U.S. securities regulators made available at and By their very nature, forward-looking statements are subject to inherent risks and uncertainties and are based on several assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statements. As a result, we cannot guarantee that any forward-looking statement will materialize and undue reliance should not be placed on these forward-looking statements. The forward-looking statements do not reflect the potential impact of any nonrecurring or other special items or of any dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after August 8, If any non-recurring or other special item or any transaction should occur, the financial impact could be complex and the effect on our operations or results would depend on the facts particular to such item and we cannot describe the expected impact in a meaningful way or in the same way we could present known risks affecting our business. Forward-looking statements are presented for the purpose of assisting investors and others in understanding our expected financial position and results of operations as at the date of this presentation, as well as our objectives, strategic priorities and business outlook, and in obtaining a better understanding of our anticipated operating environment. Readers are cautioned that such forward-looking statements may not be appropriate for other purposes. 29

30 Material assumptions and risk factors Our 2015 financial objectives are based on the assumptions set out in our 2012 annual MD&A. They are also based on best estimate actuarial assumptions as at December 31, The Company s operating ROE is dependent upon its capital levels and options for deployment of any excess capital. Our 2015 financial objectives do not reflect the indirect effects of interest rate and equity market movements including the potential impacts on goodwill or the current valuation allowance on deferred tax assets as well as other items that may be non-operational in nature. The information concerning our financial objectives is forward-looking information and is based on the assumptions set out above and is subject to the risk factors described below. Our 2015 financial objectives do not constitute guidance. Although considered reasonable by the Company, our results could differ materially from our objectives and we may not be able to achieve our growth initiatives and other business objectives or our assumptions may prove to be inaccurate. Important risk factors that could cause our assumptions and estimates to be inaccurate and our actual results and events to differ materially from those expressed in or implied by the forward-looking statements (including our 2015 financial objectives) in this presentation include, but are not limited to: (1) economic uncertainty; (2) changes or volatility in interest rates and spreads; (3) credit risks related to issuers of securities held in our investment portfolio, debtors, structured securities, reinsurers, derivative counterparties, other financial institutions and other entities; (4) changes in legislation and regulations including capital requirements and tax laws; (5) legal and regulatory proceedings, including inquiries and investigations; (6) risks relating to product design and pricing; (7) the performance of equity markets; (8) risks in implementing business strategies; (9) risk management; (10) market conditions that affect the Company's capital position or its ability to raise capital; (11) risks related to the sale of our U.S. Annuity Business; (12) downgrades in financial strength or credit ratings; (13) risks relating to financial modelling errors; (14) the impact of higher-than-expected future expenses; (15) risks relating to mortality and morbidity, including the occurrence of natural or man-made disasters, pandemic diseases and acts of terrorism; (16) risks relating to the rate of mortality improvement; (17) risks relating to policyholder behaviour; (18) risks related to liquidity; (19) the ability to attract and retain employees; (20) the performance of the Company's investments and investment portfolios managed for clients such as segregated and mutual funds; (21) risks relating to our information technology infrastructure; (22) breaches or failure of information system security and privacy, including cyber terrorism; (23) dependence on third-party relationships including outsourcing arrangements; (24) risks relating to real estate investments; (25) risks relating to operations in Asia including the Company's joint ventures; (26) the inability to maintain strong distribution channels and risks relating to market conduct by intermediaries and agents; (27) business continuity risks; (28) failure of information systems and Internet-enabled technology; (29) risks relating to estimates and judgements used in calculating taxes; (30) the impact of mergers, acquisitions and divestitures; (31) the impact of competition; (32) fluctuations in foreign currency exchange rate; (33) the availability, cost and effectiveness of reinsurance; (34) risks relating to the closed block of business and (35) risks relating to the environment, environmental laws and regulations and third-party policies. Additional information about each of these risk is provided in our AIF under the heading Risk Factors. 30