Ms. Krista Wilson reports

SUN LIFE REPORTS FIRST QUARTER 2024 RESULTS

Sun Life Financial Inc. has released its results for the first quarter ended March 31, 2024.

• Underlying net income of $875-million decreased $20-million or 2 per cent from Q1 2023; underlying ROE (return on equity) was 16.0 per cent.
  • Wealth and asset management underlying net income: $408-million, down $3-million or 1 per cent;
  • Group -- health and protection underlying net income: $280-million, down $23-million or 8 per cent;
  • Individual -- protection underlying net income: $278-million, down $13-million or 4 per cent;
  • Corporate expenses and other: $(91)-million net loss, improved $19-million or 17 per cent.
• Reported net income of $818-million increased $12-million or 1 per cent from Q1 2023; reported ROE was 15.0 per cent;
• Assets under management (AUM) of $1,470-billion increased $106-billion or 8 per cent from Q1 2023;
• Increase to common share dividend from 78 cents to 81 cents per share.

"In the first quarter, we delivered on our client impact strategy by advancing our asset management and insurance businesses with strong growth in insurance sales, CSM and AUM," said Kevin Strain, president and chief executive officer of Sun Life. "Underlying earnings were affected by the sale of Sun Life UK, higher morbidity claims and the end of the Public Health Emergency in the U.S. Our capital remains strong and this quarter, we announced a 4-per-cent increase to our shareholder dividend and expect to actively continue share buybacks in the second quarter."

Underlying net income of $875-million decreased $20-million from prior year, driven by:

• Wealth and asset management down $3-million: Higher fee income offset by higher expenses in asset management, as well as lower net seed investment income in SLC Management.
• Group -- health and protection down $23-million: Less favourable morbidity experience in U.S. medical stop-loss and lower results in U.S. Dental primarily reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, partially offset by strong revenue growth in U.S. group benefits, and business growth and improved disability experience in Canada.
• Individual -- protection down $13-million: Lower earnings due to the sale of Sun Life UK partially offset by business growth in Asia.
• Corporate expenses and other $19-million decrease in net loss driven by lower financing costs.

Reported net income of $818-million increased $12-million from prior year, driven by:

• Gains on partial sale of ABSLAMC and the early termination of a distribution agreement in asset management; largely offset by:
• The prior-year gain on sale of the sponsored markets business in Canada;
• Fair value changes in management's ownership of MFS shares;
• The decrease in underlying net income;
• Unfavourable real estate experience was mostly offset by favourable interest rate impacts.

Underlying ROE was 16.0 per cent and reported ROE was 15.0 per cent (Q1 2023 -- 17.3 per cent and 15.6 per cent, respectively). SLF Inc. ended the quarter with a LICAT (life insurance capital adequacy test) ratio of 148 per cent.

Business group highlights

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

Asset management underlying net income of $282-million was in line with prior year, driven by:

• MFS in line with prior year (up $1-million (U.S.)): Higher fee income from average net assets (ANA) mostly offset by higher expenses, which include fair value changes in management's participation in MFS shares. The MFS pretax net operating profit margin improved to 37.2 per cent for Q1 2024 from 36.8 per cent in the prior year due to higher ANA.
• SLC Management in line with prior year: Higher-fee related earnings offset by lower net seed investment income. Fee-related earnings increased 1 per cent driven by higher AUM, reflecting capital raising and deployment across the platform, offset by higher expenses. Fee-related earnings margin was 23.9 per cent for Q1 2024, compared with 24.3 per cent in the prior year.

Reported net income of $284-million increased $30-million or 12 per cent from prior year, driven by a gain on the early termination of a distribution agreement partially offset by fair value changes in management's ownership of MFS shares.

Asset management ended Q1 2024 with $1,079-billion of AUM, consisting of $852-billion ($630-billion (U.S.)) in MFS and $226-billion in SLC Management. Total asset management net outflows of $10.1-billion in Q1 2024 reflected MFS net outflows of $11.7-billion ($8.6-billion (U.S.)) partially offset by SLC Management net inflows of $1.5-billion.

During the first quarter, MFS celebrated its centennial anniversary. With a purpose of creating long-term value responsibly, MFS has been driven by a conviction to always do what is best for clients, staying true to its active investment approach, core values and collaborative culture.

The company's asset management businesses advanced their sustainable investing objectives with BentallGreenOak (BGO) completing Ontario's first all-electric net-zero carbon industrial building, owned by Sun Life. BGO was also awarded the 2024 ENERGY STAR Partner of The Year -- Sustained Excellence Award by the U.S. Environmental Protection Agency and the U.S. Department of Energy for the 14th consecutive year. lnfraRed Capital Partners continues to invest in assets helping to build a sustainable future, completing the acquisition of two operating, utility-scale renewable energy assets in the U.S. from Shell Windenergy Inc. and Savion Equity LLC.

Canada: a leader in health, wealth and insurance

Canada underlying net income of $310-million decreased $6-million from prior year, reflecting:

• Wealth and asset management down $5-million: includes lower earnings on surplus;
• Group -- health and protection up $19-million: business growth and improved disability experience reflecting lower claims volumes;
• Individual -- protection down $20-million: unfavourable mortality experience in the quarter;
• Lower earnings on surplus across all businesses primarily reflecting lower realized gains.

Reported net income of $290-million decreased $39-million or 12 per cent from prior year, reflecting a prior-year gain on sale of the sponsored markets business, partially offset by market-related impacts. The market-related impacts were primarily from interest rates, partially offset by real estate experience.

Canada's sales:

• Wealth sales and asset management gross flows of $4-billion were up 32 per cent, driven by higher mutual fund sales in individual wealth and higher defined benefit solution and defined contribution sales in group retirement services (GRS).
• Group -- Health and protection sales of $311-million were up 114 per cent, driven by higher large case sales.
• Individual -- Protection sales of $130-million were down 4 per cent, reflecting lower participating whole life insurance sales.

The company remains committed to developing targeted solutions for clients living with chronic conditions such as diabetes to improve their insurability and health outcomes. In Q1, Sun Life launched its diabetes care program, a free service for plan members as part of Lumino Health Pharmacy, an on-line pharmacy app. The diabetes support team, consisting of pharmacists, physicians and registered dieticians, provides pro-active support, coaching and education. The personalized plans, support and advice help plan members to manage their diabetes.

In Q1, defined benefit solutions (DBS) hit a milestone reaching $20-billion in cumulative sales since launching the business in 2008. The company continues to maintain its leadership position in the pension risk transfer market by ranking first in sales for 16 years in a row. DBS has played a pivotal role in the market through a client-focused approach and the creation of innovative solutions. This allows pension plan sponsors to transfer risks to Sun Life so they can focus on their core businesses, while helping to ensure long-term retirement security for plan members. Currently, DBS provides over $1.25-billion in annual pension payments to over 125,000 clients.

U.S.: a leader in health and benefits

U.S. underlying net income of $141-million (U.S.) decreased $35-million (U.S.) or 20 per cent ($189-million decreased $48-million or 20 per cent) from prior year, driven by:

• Group -- health and protection down $30-million (U.S.): Lower dental results primarily reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, and lower group benefits results primarily reflecting less favourable morbidity experience in medical stop-loss as utilization normalizes partially offset by strong revenue growth and favourable disability experience.
• Individual -- protection down $5-million (U.S.): The inclusion of the United Kingdom payout annuity business was offset by unfavourable credit experience in the quarter.

Reported net income of $71-million (U.S.) decreased $54-million (U.S.) or 43 per cent ($97-million decreased $71-million or 42 per cent) from prior year, reflecting the decrease in underlying net income and market-related impacts largely from real estate experience partially offset by favourable interest rate impacts.

U.S. group sales of $142-million (U.S.) were down $108-million (U.S.) or 43 per cent ($191-million, down $148-million or 44 per cent), reflecting comparable group benefits sales and lower Medicaid and commercial sales in dental driven by large institutional sales in the prior year.

The company continues to expand its capabilities and advance its strategy to help its members access the health care and coverage they need. In employee benefits, the company is now offering Health Navigator, powered by PinnacleCare, to the large employer group benefits market. This personal health care navigation and advisory service helps members get the right medical diagnoses, doctors and treatments for their specific needs and helps improve health and productivity outcomes for employers.

The company is also leveraging its expertise on leave, absence management and return-to-work services to offer family leave insurance (FLI) in Alabama, Arkansas, Florida, Tennessee and Texas. The company is the first major group benefits provider to offer FLI in these states, broadening members' access to paid leave to care for loved ones and giving employers the option to provide a valuable benefit to their employees more easily.

Asia: a regional leader focused on fast-growing markets

Asia underlying net income of $177-million increased $36-million or 26 per cent from prior year, driven by:

• Wealth and asset management up $2-million.
• Individual -- protection up $38-million: Good sales momentum and in-force business growth, higher earnings on surplus and favourable mortality experience in the quarter, partially offset by higher expenses reflecting volume growth and continued investments in the business.
• Regional office expenses and other $(4)-million increased net loss from higher expenses.

Reported net income of $235-million increased $101-million or 75 per cent from prior year, driven by a gain on partial sale of ABSLAMC and the increase in underlying net income, partially offset by market-related impacts. The market-related impacts were primarily from interest rates and lower equity markets in China, partially offset by real estate experience.

Asia's sales:

• Individual sales of $627-million were up 67 per cent, primarily driven by higher sales in Hong Kong reflecting expanded distribution capabilities, partially offset by lower sales in China, Vietnam and India reflecting industry and market conditions.
• Wealth sales and asset management gross flows of $2-billion were down 14 per cent, reflecting lower money market fund sales in the Philippines, lower Mandatory Provident Fund (MPF) sales in Hong Kong and lower sales in India primarily from fixed income funds.

New business CSM of $230-million in Q1 2024 was up from $102-million in the prior year, primarily driven by sales in Hong Kong.

The company is committed to delivering shareholder value, including building and realizing value through strategic investments. To meet regulatory obligations, in March, Sun Life sold 6.3 per cent of its ownership interest in Aditya Birla Sun Life AMC Ltd., unlocking value in its investment through generating a $98-million (posttax $84-million) gain. Since the initial public offering in 2021, Sun Life has generated gains of over $450-million (posttax gains of over $350-million), while still retaining 30.2-per-cent ownership of the listed entity following the most recent selldown. This highlights the value of ABSLAMC, reflecting a strong record of performance, with an attractive product mix including fixed income, equities and alternatives, and a fast-growing retail presence in India.

The company continue to build on its purpose to help clients achieve lifetime financial security and live healthier lives. The company's focus on making a difference in the lives of its clients was recognized by its Platinum award for the most trusted brand in the life insurance industry in the Philippines. This is Sun Life Philippines' 15th year in a row to be recognized in the Trusted Brand Awards.

Corporate

Corporate underlying net loss was $83-million compared with underlying net loss of $81-million in the prior year, reflecting lower earnings due to the sale of Sun Life UK partially offset by lower financing costs.

Reported net loss was $88-million compared with reported net loss of $79-million in the prior year, reflecting market-related impacts.

Earnings conference call

The company's Q1 2024 financial results will be reviewed at a conference call on Friday, May 10, 2024, at 10 a.m. ET. Visit the company 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 Q1 2025 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 March 31, 2024, Sun Life had total assets under management of $1.47-trillion.

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