Best's Credit Rating Effective Date
February 22, 2024
Analytical Contacts
Kevin Varvaro
Senior Financial Analyst
Kevin.V[email protected]
+1(908) 439-2200 Ext. 5487
Michael Adams
Associate Director
+1(908) 439-2200 Ext. 5133
Information
Best's Credit Rating Methodology
Guide to Best's Credit Ratings
Market Segment Outlooks
Financial Data Presented
Financial data in this report: (i) includes
data of affiliated entities that are not rating
unit members where analytics benefit from
inclusion; and/or (ii) excludes data of rating
unit member entities if they operate in
different segments or geographic areas than
the Rating Unit generally. See list of
companies for details of rating unit
members and any such included and/or
excluded entities.
The financial data in this report reflects the
most current data available to the Analytical
Team at the time of the rating. Updates to
the financial exhibits in this report are
available here: Best's Financial Report.
Sun Life Assurance Company of Canada
AMB #: 067413
Associated Ultimate Parent: AMB # 050913 - Sun Life Financial Inc.
Best's Credit Ratings - for the Rating Unit Members
Financial Strength Rating Issuer Credit Rating
(FSR) (ICR)
A+ aa
Superior Superior
Outlook: Stable Outlook: Stable
Action: Affirmed Action: Affirmed
Assessment Descriptors
Balance Sheet Strength Strongest
Operating Performance Strong
Business Profile Favorable
Enterprise Risk Management Very Strong
Rating Unit - Members
Rating Unit: Sun Life Assur Co of Canada | AMB #: 067413
AMB # Rating Unit Members
007101 Sun Life Assur Co of Canada
AMB # Rating Unit Members
008474 Sun Life and Health Ins Co US
www.ambest.com Page 1
Rating Rationale
Balance Sheet Strength: Strongest
•
Very strong risk-adjusted capital profile, as measured by Best's Capital Adequacy Ratio (BCAR), that has been maintained at a
favorable level historically and is supportive of growth initiatives in all geographic territories and market segments.
•
The favorable balance sheet strength assessment is bolstered further by the support of the ultimate parent, Sun Life Financial
Inc., which has maintained financial leverage and interest coverage at target levels and has the ability to provide capital in a
hypothetical stress scenario if ever needed.
•
Strong liquidity profile supported by positive earnings and a highly liquid investment portfolio backed by highly rated bonds and
strong credit performance in its mortgage-related exposure.
Operating Performance: Strong
•
The group has a long history of producing favorable operating performance from multiple lines of business despite some volatility
related to managing a complex global organization that is sensitive to macroeconomic changes.
•
With the exception of a few outlier years, the investment performance of the group over the long term has provided the
organization with a stable stream of consistent earnings.
•
Underwriting is subject to periodic volatility related to actuarial assumption changes in reserve modeling, strain from direct
premiums written, and management actions.
Business Profile: Favorable
•
Sun Life has several leading market share positions in various products and jurisdictions within the United States, Canada, and
Asian marketplaces.
•
The organization has been able to demonstrate the ability to expand in various markets through multiple distribution channels
with a diversified range of products.
•
Execution risk with regard to growth and expansion strategies does exist as part of its business profile pertaining to asset
management segments in Asia.
Enterprise Risk Management: Very Strong
•
The group's ERM program is considered a competitive advantage and is heavily supported by both quantitative and qualitative
measures. Active monitoring of these measures coupled with a risk-aware culture allows the framework to be embedded within
all levels of the organization.
•
The group conducts an array of stress tests above and beyond that which are required by regulators including impacts on
earnings, capital, and liquidity.
•
Given the international footprint of the organization, a highly sophisticated and integrated ERM program is required within its
operations and to date has been successful.
Outlook
•
The stable outlooks reflect the expectation that the group will maintain a balance sheet strength assessment in the strongest
range with operating results that will contribute to surplus growth needed to support an evolving book of business.
Rating Drivers
•
Negative rating action could occur if there is a substantial deterioration in operating performance metrics.
•
Negative rating action could occur if there is a substantial deterioration in risk-adjusted capitalization.
•
Negative rating action could occur if the holding company's financial leverage or interest coverage metrics were to substantially
deteriorate.
•
While unlikely over the near term, positive rating action may occur by expansion resulting in dominant market positions outside
of Canada, enhancing the overall profile of Sun Life.
AMB #: 067413 - Sun Life Assurance Company of Canada
www.ambest.com Page 2
Key Financial Indicators
Best's Capital Adequacy Ratio (BCAR) Scores (%)
Confidence Level 95.0 99.0 99.5 99.6
BCAR Score 54.1 34.3 26.9 24.8
Source: Best's Capital Adequacy Ratio Model - L/H, Canada
Year End - December 31
Key Financial Indicators CAD (000)
2022 2021 2020 2019 2018
Assets:
General Account 194,039,451 199,356,310 196,766,499 176,512,494 164,997,736
Segregated Funds 125,242,099 139,928,738 125,859,351 116,917,805 103,013,870
Total Assets 319,281,550 339,285,048 322,625,850 293,430,299 268,011,606
Liabilities:
Actuarial Liabilities:
Non-Participating Life 27,864,387 30,661,916 31,287,261 28,621,239 26,427,297
Non-Participating Annuity 28,250,158 28,482,999 28,387,390 24,032,107 21,979,307
Non-Participating Accident and Sickness 16,517,263 16,989,451 16,488,319 15,330,280 13,943,415
Participating 32,240,177 33,101,686 30,946,438 28,879,840 26,781,844
Other 26,911,256 30,621,943 30,803,811 27,280,998 25,920,928
Other Contract Liabilities 11,946,657 11,499,415 11,223,246 10,401,327 10,176,829
Other Liabilities, including Segregated Funds 149,880,216 164,177,024 151,780,687 140,696,031 124,815,294
Total Liabilities 293,610,114 315,534,434 300,917,152 275,241,822 250,044,914
Equity 25,671,436 23,750,614 21,708,698 18,188,477 17,966,692
Net Income 1,990,148 2,978,114 1,406,916 1,735,779 2,035,476
Net Premiums 21,830,826 20,504,031 21,145,136 18,888,209 18,521,065
Net Investment Income -9,187,863 4,691,116 11,160,949 11,441,031 2,442,921
Source: BestLink
®
- Best's Financial Suite
Local Currency: Canadian Dollar
Year End - December 31
Weighted
Average
Key Financial Ratios (%)
2022 2021 2020 2019 2018
Operating Return on Net Premiums 13.7 22.3 13.6 10.7 10.6 14.3
Operating Return on Equity 12.1 20.1 14.4 11.2 11.2 14.0
Pre-Tax Investment Total Return -6.0 2.5 7.0 7.9 1.5 2.4
Source: BestLink
®
- Best's Financial Suite
Year End - December 31
Leverage (%)
2022 2021 2020 2019 2018
General Account Liabilities to Equity 6.6 7.4 8.1 8.7 8.2
Non-Investment Grade Bonds to Equity 11.8 13.7 17.2 11.2 11.1
Mortgages and Investment Properties to Equity 98.7 102.7 104.8 127.7 129.9
Net Unsatisfactory Mortgages to Equity 0.6 0.6 0.7 0.9 0.2
Source: BestLink
®
- Best's Financial Suite
Year End - December 31
Liquidity Analysis (%)
2022 2021 2020 2019 2018
Current Liquidity 81.9 82.6 82.1 79.0 79.0
Source: BestLink
®
- Best's Financial Suite
AMB #: 067413 - Sun Life Assurance Company of Canada
www.ambest.com Page 3
Credit Analysis
Balance Sheet Strength
Capitalization
The balance sheet strength of SLA is considered at the strongest level on a consolidated basis relative to its current insurance and
investment risks. In addition, SLA maintains a very strong level of risk-adjusted capitalization per Best's Capital Adequacy Ratio model.
The company has a capital policy designed to provide the flexibility to take advantage of growth opportunities and to support the risks
associated with their business lines.
The company’s capital base consists mainly of common shareholders’ equity. Other sources of capital include preferred shareholders’
equity, limited recourse capital notes, and subordinated debt issued by SLF Inc. and Sun Life Assurance. For Canadian regulatory
purposes, capital also includes innovative capital instruments issued by Sun Life Capital Trust.
The group's regulatory capital consists primarily of common equity along with a moderate mix of preferred equity, SLEECS (Sun Life
ExchangEable Securities), and subordinated debt. The increase in total capital over time has primarily been the result of profitable
operations.
Through Sun Life Capital Trust, SLA has only one outstanding SLEEC at Year End 2022 (SLEECS Series B). The SLEECS is a long-dated
subordinated unsecured debt that qualifies as capital for Canadian regulatory purposes. The SLEECS Series B can be converted into
SLA's preferred shares that are exchangeable in certain limited circumstances at a future date into SLF common shares at a price equal
to 95% of the trading price at the time of the exchange. The SLEECS represents low-cost and tax-efficient capital that AM Best believes
provides the company with increased capital flexibility.
Year End - December 31
Capital Generation Analysis CAD (000)
2022 2021 2020 2019 2018
Beginning Equity 23,750,614 21,708,698 18,188,477 17,966,692 16,938,129
Pre-Tax Operating Income 18,701,208 5,515,761 -3,860,560 -4,711,223 5,215,002
Net Realized Capital Gains (Losses) 291,229 133,669 161,747 377,370 483,665
Income Taxes 312,526 326,495 129,840 45,707 426,523
Net Unrealized Capital Gains (Losses) -17,629,842 -2,232,634 5,924,787 6,788,442 -3,172,346
Net Change in Paid In Capital and Equity 672,904 1,362,904 547,904 54,509 53,404
Stockholder Dividends 432,228 1,880,860 1,280,875 1,630,860 1,830,860
Other Changes in Equity 630,077 -530,429 2,157,058 -610,746 706,221
Net Change in Equity 1,920,822 2,041,916 3,520,221 221,785 1,028,563
Ending Equity 25,671,436 23,750,614 21,708,698 18,188,477 17,966,692
Net Change in Equity (%) 8.1 9.4 19.4 1.2 6.1
Net Change in Equity (5 Yr CAGR) 8.7 ... ... ... ...
Source: BestLink
®
- Best's Financial Suite
Local Currency: Canadian Dollar
Asset Liability Management - Investments
The majority of the general fund is invested in medium- to long-term fixed income instruments, such as debt securities, mortgages and
loans. Debt securities represent the largest portion of invested assets. The quality of the bond portfolio remains high, with a minimal
amount of below investment grade issues, as a percent of total invested assets. Impaired assets to total invested assets is considered
low and not a material risk factor at this time. SLF's bond portfolio is very diverse, represented by a large number of credits and good
diversification across multiple segments. Its bond portfolio is actively managed through a regular program of purchases and sales
directed at optimizing yield quality and liquidity, while ensuring that asset/liability matching requirements are met. The company
maintains exposure to private placements (approximately one-third of fixed-income securities), collateralized mortgage obligations and
mortgage-backed securities in its United States branch operations and indirectly through its U.S.-domiciled subsidiaries. Although these
investments are highly rated, they are volatile in price and duration during changing interest rate environments coupled with volatility in
the global economy. The company utilizes derivative instruments to manage risks related to equity market, interest rate and currency
fluctuations and in replication strategies for permissible investments, but does not engage in speculative investment in derivatives.
AMB #: 067413 - Sun Life Assurance Company of Canada
www.ambest.com Page 4
Balance Sheet Strength (Continued...)
SLF's mortgage loan portfolio is almost entirely in first mortgages. Mortgages are diversified by type including multi-family, office, retail,
industrial and other. Given more recent concerns with office real estate, the company has reduced its exposure to office type properties
over the previous several years. The portfolio is supported by low weighted average loan-to-values and the estimated weighted average
debt service coverage adequately supports the underwriting of the asset class.
The company also originates and manages mortgage-backed investments for institutional clients. The fee-based business allows SLF to
leverage its commercial mortgage underwriting expertise and enhance its asset management strength. SLF's actively manages its real
estate portfolio focusing on acquisitions and dispositions, leasing and rehabilitation, and the management of foreclosed properties.
SLF's equity portfolio represents approximately four percent of invested assets and remains well diversified by industry classification
and issuer. To attain desired spreads and maintain appropriate matching, the company adheres to stringent asset/liability management
guidelines for interest-sensitive products. A somewhat less conservative strategy is maintained for non-interest-sensitive products.
SLF has a hedging program, involving the use of derivative instruments, to mitigate a portion of the equity market-related volatility in
the cost of providing these guarantees. For segregated fund products (including variable annuities), SLF has implemented hedging
programs involving the use of derivative instruments to mitigate a large portion of the equity market risk associated with the
guarantees. The unhedged portion of risk for these products reflects equity market risks associated with items such as provisions for
adv
erse deviation and a portion of fee income that is not related to the guarantees provided.
Year End - December 31
Composition of Cash and Invested Assets
2022 2021 2020 2019 2018
Total Cash and Invested Assets CAD (000) 169,930,354 176,820,071 174,514,488 154,580,323 145,646,909
Composition Percentages (%)
Unaffiliated:
Cash and Short Term Investments 4.2 4.0 4.7 3.4 3.7
Bonds 67.0 68.9 69.9 71.0 69.4
Stocks 4.1 4.6 3.8 3.1 3.2
Mortgage Loans 9.0 8.8 8.8 10.3 11.2
Other Invested Assets 14.8 12.8 11.9 11.2 11.6
Total Unaffiliated 99.1 99.1 99.1 99.0 99.0
Investments in Affiliates 0.9 0.9 0.9 1.0 1.0
Total 100.0 100.0 100.0 100.0 100.0
Source: BestLink
®
- Best's Financial Suite
Local Currency: Canadian Dollar
Year End - December 31
Bonds - Distribution by Issuer
2022 2021 2020 2019 2018
Bonds CAD (000) 113,791,949 121,862,885 121,999,516 109,817,632 101,066,881
Government (%) 23.5 27.0 28.0 28.6 27.8
Municipal, Public Authority (%) 11.6 10.7 11.0 11.4 11.4
Corporate:
Investment Grade (%) 62.7 60.2 58.4 58.6 59.1
Below Investment Grade (%) 2.2 2.2 2.6 1.4 1.6
Source: BestLink
®
- Best's Financial Suite
Holding Company Assessment
The holding company, Sun Life Financial Inc. (SLFI) is viewed as a positive factor in the assessment of SLF. SLFI maintains positive
metrics including unadjusted financial leverage under 30%, interest coverage over 8 times, and significant absolute capital of over $36
billion for year-end 2022 under IFRS 4 reporting. While year-end 2023 capital is expected to be reported lower due to moving to an
IFRS 17 accounting standard the balance sheet continues to be viewed favorable. The company has the ability to access the capital
AMB #: 067413 - Sun Life Assurance Company of Canada
www.ambest.com Page 5
Balance Sheet Strength (Continued...)
markets, which increases financial flexibility of entities enterprise wide. SLFI has over $11 billion of cash and short-term investments
and operating results remain favorable through 3Q 2023.
Financial Leverage Summary - Holding Company
Financial Leverage Ratio (%) 25.30
Adjusted Financial Leverage Ratio (%) 15.50
Interest Coverage (x) 8.40
Operating Performance
Direct premiums written in most lines grew year over year in 2022 with participating lines, individual annuities, and group accident and
sickness products in particular demonstrating a year of material improvement compared to the previous year. Group annuity, individual
life, and Asian business saw modest declines from the previous year, somewhat offsetting the more modest growth in group life and
individual accident and sickness business. Total direct written premiums from all lines and regions were up 6.6% from the previous
year. Despite a slight slowdown in Asia sales non-Canada business has generally increased over the long-term with substantial US
growth in most recent years. Overall, Canadian insurance sales have been on an increasing trend since 2015 due to multiple factors
over the past several years along with a fundamental effort to reprice products. Asian wealth sales are expected to continue a trend of
growth with potential volatility year over year due market volatility and money flow behavior related to client activity.
The group reported statutory net income from operations of CAD 2,106 million in 2022, compared to CAD 3,313 million in 2021 which
was considered an outlier year after a 5 year income trend that was essentially flat. The results for 2022 represent an operating return
on equity of just approximately 9.5%. This is below the 3-year and 5-year total returns on equity of just under 12%. On a per line basis
ev
ery line of business was profitable overall for year-end 2022. This is an improvement over the previous year which had group life
produce a small loss. Earnings through 3Q 2023 remain favorable with overall profitability trending towards further improvement from
year-end 2022 results.
Year End - December 31
Net Premiums by Line of Business CAD (000)
2022 2021 2020 2019 2018
Non-Participating Life:
Individual 1,163,170 1,124,467 1,102,990 1,117,205 1,128,533
Group 1,620,491 1,509,121 1,518,805 1,549,646 1,545,142
Non-Participating Annuity:
Individual 788,086 612,194 841,898 660,297 697,782
Group 2,854,308 2,982,618 2,459,766 2,343,654 2,137,322
Non-Participating Accident and Sickness:
Individual 473,659 453,421 436,922 418,093 398,236
Group 7,724,281 6,981,634 6,991,047 7,567,538 8,131,250
Participating 3,779,732 3,362,555 2,943,459 2,767,686 2,441,319
Other 3,427,099 3,478,021 4,850,249 2,464,090 2,041,481
Total 21,830,826 20,504,031 21,145,136 18,888,209 18,521,065
Source: BestLink
®
- Best's Financial Suite
Local Currency: Canadian Dollar
AMB #: 067413 - Sun Life Assurance Company of Canada
www.ambest.com Page 6
Operating Performance (Continued...)
Year End - December 31
Total Revenue By Line of Business CAD (000)
2022 2021 2020 2019 2018
Non-Participating Life:
Individual -1,091,662 1,693,805 2,970,102 3,068,026 1,345,173
Group 1,650,043 1,570,412 1,627,188 1,657,828 1,593,716
Non-Participating Annuity:
Individual 521,194 880,750 2,171,372 1,849,519 1,401,672
Group 3,378,855 3,983,630 4,003,004 3,597,538 2,925,551
Non-Participating Accident and Sickness:
Individual -28,201 463,207 797,231 710,539 393,496
Group 7,729,957 7,644,109 8,258,825 8,774,332 8,776,452
Participating 2,454,015 5,662,168 5,435,446 5,507,052 3,393,292
Other 293,951 5,711,135 9,111,804 7,191,613 3,089,287
Total 14,908,152 27,609,216 34,374,972 32,356,447 22,918,639
Source: BestLink
®
- Best's Financial Suite
Local Currency: Canadian Dollar
Year End - December 31
Net Income by Line of Business CAD (000)
2022 2021 2020 2019 2018
Non-Participating Life:
Individual 17,003 555,689 -107,155 -41,191 -46,984
Group 68,262 -12,527 96,444 157,623 114,679
Non-Participating Annuity:
Individual 103,355 205,167 -109,814 123,217 25,442
Group 338,519 368,912 256,698 325,631 391,991
Non-Participating Accident and Sickness:
Individual 47,173 131,625 -86,914 -37,919 30,973
Group 618,071 468,242 657,988 349,019 462,922
Participating 229,262 305,783 270,074 221,508 689,506
Other 683,883 1,290,254 712,655 868,452 664,804
Total 2,105,528 3,313,145 1,689,976 1,966,340 2,333,333
Source: BestLink
®
- Best's Financial Suite
Local Currency: Canadian Dollar
Business Profile
Sun Life Assurance Company of Canada (SLA) is the Canadian insurance company and lead insurance company for Sun Life Financial
Inc. (SLF).
The key life insurance subsidiary of Sun Life Financial Inc. (SLF) is Sun Life Assurance Company of Canada (SLA). SLA owns Sun Life
and Health Insurance Company (U.S.) (SLHIC), which markets group life and A&H products. With the sale of Sun Life Assurance
Company of Canada (U.S.) (SLUS) and Sun Life Insurance and Annuity Company of New York (SLNY) in August 2013, SLHIC became
the U.S. marketing arm in New York.
SLA maintains a market leading position in Canada through their workplace segment. SLA has three main business units: Individual
Insurance & Wealth, Group Benefits and Group Retirement Services. These units offer a full range of protection, wealth accumulation
and income products and services to individuals in their communities and their workplaces. SLA also has investments in the Canadian
asset management sector.
GB provides life, dental, drug, extended health care, disability and critical illness benefits programs to employers of all sizes. In
addition, voluntary benefits are offered directly to individual plan members, including post-employment life and health plans to
members exiting their plan. Products are marketed and distributed across Canada by sales representatives in collaboration with
AMB #: 067413 - Sun Life Assurance Company of Canada
www.ambest.com Page 7
Business Profile (Continued...)
independent advisors, benefits consultants and the Sun Life Financial Career Sales Force (CSF). To further support this business SLF
acquired Dialogue Health Technologies Inc., a Canadian-based health and wellness virtual care platform in October 2023.
While each of its business units remain focused on their respective markets, SLA recognizes the opportunity to serve its clients through
the combination of some aspects of these businesses. This has led to the formation of SLA's Total Benefits offering for group clients
and customer solutions, which addresses the needs of individual and group clients as they do business with the company through the
exclusive CSF. The CSF provides solutions to members at the worksite while they are enrolling in group plans and through ongoing
services at important life events including transition guidance for members changing jobs or retiring. Client Solutions (CS) business was
created in January 2009 to address these needs and help manage retirement planning while giving them access to products such as
term life insurance, health coverage, home and auto and travel insurance, as well as providing solutions to members at the worksite
while enrolling in group plans, and changing jobs. The Defined Benefit Solutions (DBS) business, which falls under GRS, provides de-
risking solutions to pension clients through annuity buyout and liability driven investment solutions. SLA's Canadian Individual Insurance
and Wealth business comprises permanent life, participating life, term life, universal life, critical illness, long-term care and personal
health insurance. Savings and retirement products include internally manufactured Sun Life Global Investments (Canada) Inc. (SLGIC)
mutual funds, third-party mutual funds, segregated funds, accumulation annuities, guaranteed investment certificates and payout
annuities. These products are marketed through a multi-channel distribution model consisting of the CSF and third-party distribution
channels, such as independent insurance and mutual fund licensed brokers and broker-dealers. Certain products, including accidental
death insurance and personal health insurance, are marketed directly to retail clients in partnership with advisor channels.
SLF U.S. Group Benefits provides protection solutions to employers and employees including group life, disability, medical stop-loss and
dental insurance products, as well as a suite of voluntary benefits products. In-force Management includes certain closed individual life
insurance products, primarily universal life and participating whole life insurance. SLF acquired Assurant Inc.'s (Assurant) employee
benefits business in 2016, which created the sixth largest group benefits business in the U.S., with the combined business having one
of the broadest product portfolios in the industry. The transaction added significant new capabilities to the SLF U.S. Group Benefits
business, including a strong dental business with the second largest proprietary provider network in the U.S. and will also significantly
increase the size and scale of the SLF U.S. Group Benefits business.
In June 2022 Sun Life acquired DentaQuest for just under $2.5 billion to become the top dental carrier in government programs within
the U.S. while allowing for further opportunities to grow in the commercial dental space. The company projects that by the end of 2024
the integration of systems and conversion of Sun Life dental clients to the DentaQuest claims platform will be complete.
Prior to 2019 Sun Life Investment Management Inc. (SLIM) in Canada was created to help Canadian pension funds and other investors
seeking additional yield in a low return environment by giving them access to SLF’s investments in commercial mortgages, private fixed
income and real estate, as well as liability-driven investment (LDI) capabilities. Since 2019 the group's global asset management pillar
has been managed by SLC Management, an institutional investment management business focused on LDI, alternative fixed income,
and global real estate solutions. SLF has an extensive history of acquisitions over the years that has provided the company an excellent
platform for serving institutional clients and expanding business in the U.S. Strategic acquisitions is expected to part of the company’s
growth strategy as they continue to grow in the business segment.
MFS, headquartered in Boston, MA, is a global investment management company. MFS has investment teams located in Hong Kong,
London, Mexico City, Sao Paulo, Singapore, Sydney, Tokyo, Melbourne and Toronto and offer products and services that address the
varying needs of retail and institutional investors over time. Retail investors have access to MFS' advisory services through a broad
selection of financial products including mutual funds, variable annuities, separate accounts, college and retirement savings plans, and
offshore investment products. These products are distributed through financial intermediaries that provide sales support, product
administration and client services. MFS provides asset management services to institutional clients for corporate retirement plans,
separate accounts, public or government funds and insurance company assets. Institutional clients are serviced through a direct sales
force and a network of independent consultants. MFS' strategy has expanded in recent years to include institutional product sales. Over
the last few years, MFS has initiated several institutionally focused investment products, designed to better meet the market
diversification of investment performance linked to an index and investment performance based on the management of investment
vehicles.
SLF Asia operates in eight markets, through subsidiaries, joint ventures (JV) and local partners in the Philippines, Hong Kong,
Indonesia, India, China, Vietnam, Singapore, and Malaysia. It provides individual life and health insurance as well as group life
insurance and savings products in the markets in which it operates as well as pension and retirement products in Hong Kong and India,
and mutual funds in the Philippines and India. These protection and wealth management products are distributed to middle and upper
income individuals, employer / employee groups and affinity clients. SLF Asia's parent is Sun Life Assurance. The international segment,
AMB #: 067413 - Sun Life Assurance Company of Canada
www.ambest.com Page 8
Business Profile (Continued...)
which was previously held in SLF U.S., was moved to SLF Asia in 2019. International offers individual life insurance products to high net
worth clients outside of the U.S. and Canada.
The Corporate segment includes the results of Corporate Support operations that consist of the company's run-off reinsurance business
as well as investment income, expenses, capital and other items not allocated to Sun Life Financial's other business segments. Since
2008, SLF began consolidating the results of SLF Reinsurance into Corporate Support as reinsurance business is a closed block that
consists of reinsurance assumed from other insurers with coverages of individual disability income, long-term care, group long-term
disability and personal accident and medical coverage, as well as guaranteed minimum income and death benefit coverage. The block
also includes group long-term disability and personal accident which are 100% retroceded. Discontinued Operations in Corporate relate
to Corporate Support only.
Direct Premiums
Written
Reinsurance
Premiums
Assumed
Reinsurance
Premiums Ceded
Net Premiums
Written
Business
Retention
2022 By Line Business
CAD (000) % CAD (000) % CAD (000) % CAD (000) % %
Non-Participating Life:
Individual 1,925,370 7.2 29,963 7.7 792,163 14.7 1,163,170 5.3 59.5
Group 1,950,339 7.3 3,620 0.9 333,468 6.2 1,620,491 7.4 82.9
Non-Participating Annuity:
Individual 785,659 2.9 2,427 0.6 ... ... 788,086 3.6 100.0
Group 3,121,378 11.6 ... ... 267,070 5.0 2,854,308 13.1 91.4
Non-Participating Accident
and Sickness:
Individual 580,116 2.2 1,886 0.5 108,343 2.0 473,659 2.2 81.4
Group 10,925,758 40.7 351,553 90.3 3,553,030 66.0 7,724,281 35.4 68.5
Participating 3,906,662 14.6 ... ... 126,930 2.4 3,779,732 17.3 96.8
Other 3,629,750 13.5 -101 ... 202,550 3.8 3,427,099 15.7 94.4
Total 26,825,032 100.0 389,348 100.0 5,383,554 100.0 21,830,826 100.0 80.2
Source: BestLink
®
- Best's Financial Suite
Local Currency: Canadian Dollar
Enterprise Risk Management
SLF maintains a strong risk management framework that emanates from the Board of Directors and is reflected throughout the
management and employees. This framework highlights six major categories of risk: credit risk, market risk, insurance risk, operational
risk, liquidity risk and strategic and business risk. Qualitative and quantitative measures have been set out to control the amount of risk
the company is willing to bear with respect to each of these risk categories in aggregate. This risk appetite defines the type and
amount of risk SLF is willing to assume in pursuit of its business objectives. The same set of considerations is used in developing
business strategy. This risk appetite is laid out in a formal policy that is approved by the Board of Directors. In addition to the
company's risk management framework, SLF uses the Financial Condition Test (FTC) process that is required by the regulator to project
income and capital for a five-year period based on plausible adverse scenarios. SLF also stress tests the company's earnings and LICAT
ratio to key emerging risks and scenarios on a regular basis.
SLF’s risk culture is well-defined. Employees at all levels of the organization share a common philosophy and set of values regarding
risk. Every employee must feel accountable for achieving the best results for his or her business unit and for SLF as a whole. Business
decisions
are made at all levels of the organization, and every employee has a role in managing risk, including identification of
exposures, and communication and escalation of risk concerns.
SLF’s risk philosophy is based on the premise that SLF is in the business of accepting risks for appropriate return. In conducting its
business activities, SLF, driven by shareholder and policyholder expectations, external ratings and its positioning in the marketplace, will
take on those risks that meet the objectives of the organization. Risk management is aligned with the corporate vision and strategy,
and is embedded within the business management practices of every Business Group and Corporate leader.
SLF defines its risk appetite as the level of enterprise-wide risk that the company is willing to assume in pursuit of its business
objectives and is used in determining the types and levels of risks that can be assumed in the design and pricing of products offered. It
AMB #: 067413 - Sun Life Assurance Company of Canada
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Enterprise Risk Management (Continued...)
represents a foundational element of the overall Enterprise Risk Management Framework by providing important context to the risk
identification, measurement, risk response development, monitoring and control and reporting elements of the framework. SLF has
integrated its Risk Appetite and Enterprise Key Risk processes with its Strategic and Business Planning processes.
SLF has developed a list of significant risk categories and sub-categories. These categories reflect the business environment and
facilitate consistency in reporting and aggregation. Changes to the risk categories or sub-categories must be approved by the Board of
Directors as changes to the Risk Management Framework. The Risk Management Framework outlines six major categories of risk
(credit, market, insurance, operational, liquidity and strategic and business risks) and sets out the key risk management processes in
the areas of risk appetite, risk identification, risk measurement, risk management, risk monitoring and risk reporting. The Risk
Management Framework sets out qualitative and quantitative measures that aim to control the amount of risk the Company will bear in
respect of each of these risk categories and in aggregate.
Risk measurement involves determining and evaluating potential risk exposures, and includes a number of techniques such as
monitoring key risk indicators, stress testing including sensitivity and scenario analysis, and stochastic modeling.
A robust stress testing program is an essential component of the Company’s Risk Management Framework. Stress testing plays an
important role in measuring, monitoring, understanding and mitigating the company’s risk exposures and ensuring on-going capital
adequacy under plausible stress events. Stress testing is performed on earnings, regulatory capital ratios and liquidity which is used to
set
the company’s risk appetite and evaluate risk exposures versus limits and enables us to identify and monitor potential vulnerabilities
to key risk drivers and ensure that the company is operating within its risk appetite.
Monitoring processes include oversight by the Board of Directors, which is exercised through four Board committees. Senior
management risk oversight is provided primarily through the Executive Risk Committee. The risk oversight is supported through several
other Senior Management Committees, each of which focuses on specific risks.
The Senior Management Committees, Board Committees and the Board of Directors review reports that summarize the exposures
across the company's principal risks including any changes in risk exposures and trends on a quarterly basis. These committees also
review the effectiveness of the mitigation strategies presented in the reports. On annual regular basis, the Board of Directors and the
Board Committees review and approve significant changes to key policies for the management of risk and review compliance with these
policies.
Reinsurance Summary
On a single life or joint-first-to-die basis retention limit is $40 million in Canada and is US$40 million outside of Canada. For survivorship
life insurance, maximum global retention limit is $50 million in Canada and is US$50 million outside of Canada. In certain markets and
jurisdictions retention levels below the maximum are applied. Reinsurance is utilized
for numerous products in most business segments,
and placement is done on an automatic basis for defined insurance portfolios and on a facultative basis for individual risks with certain
characteristics. Reinsurance is used to provide catastrophic mortality and morbidity coverage for the Canadian group benefits business.
Environmental, Social & Governance
AM Best believes that there is low risk to ESG factors at this time and that the company has been active in the area to remain ahead of
peers. Credit quality, investment risk, and underwriting activities are viewed as having limited ESG risk. Despite this limited risk to date
SLF maintains a focus on sustainable investing and other initiatives related to ESG.
Rating Lift/Drag
Sun Life financial Inc. is viewed as a positive rating consideration to the balance sheet assessment of the rating unit. Factors supporting
this view include the access to public debt markets at the parent along with an ability to obtain additional leverage if needed. The level
of financial leverage at the parent and operating unit is considered at an acceptable level compared to the insurance industry as a
whole. This access to the capital markets, along with current convertibility of outstanding debt into the parent's capital structure,
provides an added level of financial flexibility to the company structure. The parent also provides additional sources of liquidity to the
group through an available line of credit for quick access to funds in addition to current high levels of cash held at the parent.
AMB #: 067413 - Sun Life Assurance Company of Canada
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Financial Statements
Year End - December 31
2022 2021
Balance Sheet
CAD (000) % CAD (000) %
Cash and Short Term Investments 7,078,976 2.2 7,125,555 2.1
Bonds 113,791,949 35.6 121,862,885 35.9
Preferred and Common Stock 6,967,956 2.2 8,177,693 2.4
Other Invested Assets 42,091,473 13.2 39,653,938 11.7
Total Cash and Invested Assets 169,930,354 53.2 176,820,071 52.1
Accounts Receivable 2,807,666 0.9 1,694,831 0.5
Reinsurance Recoverables 13,325,891 4.2 13,966,254 4.1
Goodwill and Other Intangible Assets 3,477,454 1.1 3,448,199 1.0
Other Assets 4,498,086 1.4 3,426,955 1.0
Total General Account Assets 194,039,451 60.8 199,356,310 58.8
Segregated Funds Assets 125,242,099 39.2 139,928,738 41.2
Total Assets 319,281,550 100.0 339,285,048 100.0
Gross Actuarial Liabilities 131,783,241 41.3 139,857,995 41.2
Other Contract Liabilities 11,946,657 3.7 11,499,415 3.4
Other Liabilities 24,638,117 7.7 24,248,286 7.1
Total General Account Liabilities 168,368,015 52.7 175,605,696 51.8
Segregated Funds Liabilities 125,242,099 39.2 139,928,738 41.2
Total Liabilities 293,610,114 92.0 315,534,434 93.0
Capital Stock 4,536,684 1.4 4,536,684 1.3
Paid In and Contributed Equity 2,524,882 0.8 1,851,978 0.5
Retained Earnings 13,782,549 4.3 12,375,066 3.6
Accumulated Other Comprehensive Income (Loss) 331,264 0.1 809,084 0.2
Other Capital and Equity 4,496,057 1.4 4,177,802 1.2
Total Equity 25,671,436 8.0 23,750,614 7.0
Total Liabilities and Equity 319,281,550 100.0 339,285,048 100.0
Source: BestLink
®
- Best's Financial Suite
Local Currency: Canadian Dollar
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Year End - December 31
Income Statement CAD (000)
2022 2021
Net Premiums Earned 21,830,826 20,504,031
Net Investment Income -9,187,863 4,691,116
Other Revenue 2,265,189 2,414,069
Total Revenue 14,908,152 27,609,216
Net Policy and Contract Benefits 15,729,335 14,202,679
Net Changes to Actuarial and Contract Liabilities -9,506,686 3,004,141
Commissions 1,763,964 1,683,758
General and Other Expenses 5,652,709 5,429,869
Net Transfers to (from) Segregated Funds -1,149,224 -350,871
Total Benefits and Expenses 12,490,098 23,969,576
Pre-Tax Income 2,418,054 3,639,640
Income Taxes Incurred 312,526 326,495
Income before Attribution to Participating Policyholders and
Other Funds
2,105,528 3,313,145
Income Attributable to Participating Policyholders and Other
Funds
115,380 335,031
Net Income 1,990,148 2,978,114
Source: BestLink
®
- Best's Financial Suite
Local Currency: Canadian Dollar
Related Methodology and Criteria
Best's Credit Rating Methodology, 01/18/2024
Available Capital & Insurance Holding Company Analysis, 01/18/2024
Scoring and Assessing Innovation, 02/27/2023
Understanding BCAR for US and Canadian Life/Health Insurers, 03/07/2024
Additional Rating Types
AM Best assigns Best’s Issue Credit Ratings. Refer to the profile page to view current Issue Ratings for Sun Life Assur Co of Canada (AMB#007101)
A Best's Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. The ratings are not assigned to specific insurance policies or contracts
and do not address any other risk, including, but not limited to, an insurer's claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of
misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. A Financial Strength Rating is not a recommendation to purchase, hold or terminate any
insurance policy, contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser.
A Best's Issue/Issuer Credit Rating is an opinion regarding the relative future credit risk of an entity, a credit commitment or a debt or debt-like security.
Credit risk is the risk that an entity may not meet its contractual, financial obligations as they come due. These credit ratings do not address any other risk, including but not limited to liquidity risk,
market value risk or price volatility of rated securities. The rating is not a recommendation to buy, sell or hold any securities, insurance policies, contracts or any other financial obligations, nor does it
address the suitability of any particular financial obligation for a specific purpose or purchaser.
In arriving at a rating decision, AM Best relies on third-party audited financial data and/or other information provided to it. While this information is believed to be reliable, AM Best does not
independently verify the accuracy or reliability of the information. Any and all ratings, opinions and information contained herein are provided "as is," without any express or implied warranty.
Visit https://www.ambest.com/ratings/index html
for additional information or https://www.ambest.com/terms html for details on the Terms of Use.
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