Investor Deck Q2'15 final - Sun Life | Life Insurance...
Transcript of Investor Deck Q2'15 final - Sun Life | Life Insurance...
Q2 2015
BUILDING SUSTAINABLESHAREHOLDER VALUE
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 and we cannot guarantee that any forward-looking statement will materialize. 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 the 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. These non-IFRS financial measures should not be viewed as alternatives to measures of financial performance determined in accordance with IFRS.
Sources of earningsSources of earnings is based on the requirements of the Office of the Superintendent of Financial Institutions, Canada and draft guidelines of the Canadian Institute of Actuaries. It is used to identify the primary sources of gains or losses in each reporting period and is not based on IFRS. Additional information concerning our sources of earnings is included in the Company’s Annual Report.
Additional informationAdditional information concerning forward-looking statements and non-IFRS financial measures is included at the end of this presentation.
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SUN LIFE FINANCIAL
A leading, international financial services provider… operating through a balancedand diversified model… focused on creating shareholder value now and in the future
SUN LIFE FINANCIAL IN 2015
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SUN LIFE FINANCIAL
A growth strategy focused on high ROE and strong capital generation through leading positions in attractive markets globally
PREMIER GLOBAL ASSET MANAGER,anchored by MFS✓LEADER in FINANCIAL
PROTECTION and WEALTH SOLUTIONS in our Canadian home market
✓ GROWING Asia through DISTRIBUTION EXCELLENCE in HIGHER GROWTH MARKETS
✓LEADER in U.S. GROUP BENEFITS and INTERNATIONAL high net worth solutions
✓
OUR FOUR PILLAR STRATEGY
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SUN LIFE FINANCIAL
FOUNDATION
CHANGE
FOURPILLARS
LEVERAGEC
AN
AD
A
U.S
.
AS
SE
T M
AN
AG
EM
EN
T
AS
IA
High Performance CultureCustomer Focus
Productivity & Expense Discipline
• Brand • Customer Insights • The Brighter Way—Lean Six Sigma • Digital and Data Analytics • Third Party Investment Sourcing
• Risk and Capital Diversification • Distribution
Values + People + PartnershipDisciplined Risk Management
Lifetime Financial Security
SUN LIFE AT A GLANCE
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SUN LIFE FINANCIAL
LONG TERM MACRO DRIVERS OF CONSUMER DEMAND
PRODUCTS & MARKETS POSITIONED FOR GROWTH
RETIREMENTof baby boomers
DOWNLOADINGof responsibility from
government & employers to employees
GROWTHof the middle class in the emerging markets of Asia
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SUN LIFE FINANCIAL
1. Leadership position in Canada, one of the best financial markets in the world
2. First-rate investment manager in MFS
3. Significant and growing business in Asia, exclusively in higher growth markets
4. Leading medical stop-loss business in the U.S., with upside improvement in Group Benefits and leading International High Net Worth business
5. Strong capital and risk stance, with no U.S. variable annuities
6. Significant organic investments to drive earnings growth
COMPARED TO OTHER NORTH AMERICAN LIFE INSURERS
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SUN LIFE FINANCIAL
STOCK PRICE PERFORMANCE(1)
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Dividend Yield 3.7%Dividend Yield 3.7%
(1) Period December 31, 2011 to June 30, 2015
SLF 120.6%
From Announcement of Four Pillar Strategy
Stock Ap
preciatio
n%
SUN LIFE FINANCIAL
Q2’15 RESULTS(1)
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C$ millions (except EPS and ROE)
Q2’15 Q1’15 Q2’14
Operating net income 731 446 488Underlying net income 615 516 499Reported net income 726 441 425Diluted operating earnings per share (EPS) (C$) 1.19 0.73 0.80Diluted underlying EPS (C$) 1.00 0.84 0.81Operating return on equity (ROE) 16.5% 10.4% 12.6%Underlying ROE 13.9% 12.1% 12.9%
Strong Business Performance
• Broad-based strength in underlying earnings• Assets under management of $808 billion• Wealth sales up 25%; insurance sales up 8%• Adjusted premiums and deposits of $33.7 billion up 12% from Q2’14• Book value per share of $29.05
Effective Capital Management• Repurchased 2.2 million common shares• Strong capital position with an MCCSR(2) of 223% • $1.7 billion cash level at Sun Life Financial Inc.• Disciplined capital deployment
(1) Operating net income (loss), operating earnings per share (“EPS”) or operating loss per share, operating return on equity (“ROE”), underlying net income (loss), underlying EPS or underlying loss per share, underlying ROE, sales, adjusted premiums and deposits, assets under management (“AUM”), are non-IFRS financial measures. See Use of Non-IFRS Financial Measures at the end of this presentation.
(2) Minimum Continuing Capital and Surplus Requirements (“MCCSR”) ratio of Sun Life Assurance Company of Canada.
SUN LIFE FINANCIAL
SALES RESULTS
10
C$ millions (unless otherwise noted) Q2’15 Change over Q2’14
Individual life and health 214 8%
Group life and health 213 8%
Total Insurance sales 427 8%
Wealth sales 6,614 58%
MFS sales 24,673 16%
SLIM(1) sales 619 nm(2)
Total Wealth sales 31,906 25%
(1) Sun Life Investment Management ("SLIM") is an institutional investment management business of Sun Life Financial that includes the investment operations of Sun Life Investment Management Inc., and Ryan Labs Asset Management Inc.
(2) nm = not meaningful
SUN LIFE FINANCIAL
ON TRACK TO EXCEED 2015 EARNINGS OBJECTIVE(1)
• Q2’15 Underlying ROE 13.9% versus 2015 objective of 12-13%
9691,100
1,2001,343
302
481
616
665
Protection & Wealth MFS
LTM Q2’15
1,271
1,581
2,008
UNDERLYING NET INCOME(C$ millions)
2013 20142012
1,816
Protection & Wealth11% CAGR
MFS30% CAGR
(1) The 2015 operating net income and operating ROE objectives were provided on March 8, 2012 and adjusted to reflect the net impact of the sale of our U.S. Annuity Business, effective August 1, 2013. The objectives are forward-looking non-IFRS financial measures and are not earnings guidance. The deployment of capital build up will impact ROE.
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SUN LIFE FINANCIAL
ROE objective: 12-14%
Average EPS growth: 8-10% per annum
Payout ratio(2): 40-50%
NEW MEDIUM-TERM OBJECTIVES(1)
(1) The objectives are forward-looking non-IFRS financial measures and are not earnings guidance. These objectives were provided on March 5, 2015 (Investor Day).(2) Dividend payout ratio is based on underlying net income.
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SLF CANADA
STRATEGIC FOCUS
A strong and growing foundation in core businesses
Growing leadership in Group Benefits Growing leadership in Group Retirement Services Growing and evolving Career Sales Force and independent channels
Investments accelerating growth in Wealth businesses
Leveraging our group advantage, building Client Solutions and Defined Benefit Solutions businesses
Expanding retail wealth distribution to accelerate growth Increasing product breadth and margins
LEADER in FINANCIAL PROTECTION and WEALTH SOLUTIONS in our Canadian home market
✓
✓
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SLF CANADA
GROWING EARNINGS POWER
127,906 141,689
149,504
2013 2014 Q2’15
799 823
869
2013 2014LTM
Q2’15
ASSETS UNDER MANAGEMENT
(C$ millions)
UNDERLYING NET INCOME(C$ millions)
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Q2’15 HIGHLIGHTS
• Continued improvement in disability results in Group Benefits
• Completed the largest ever defined benefit contribution transfer in the GRS market
• Insurance sales up 22%; Wealth sales up 61%
• SLGI(1) retail and institutional sales up 86% and 17%, respectively
• Segregated fund launch off to fast start
(1) Sun Life Global Investments Canada Inc. (“SLGI”).
STRATEGIC FOCUS
• INVESTMENT PERFORMANCE: winning today and positioning ourselves for the future of investment management
• CLIENT SERVICE: making client service a true differentiator across all client segments
• GROW IN OUR MARKETS: building a strong retail presence at home while growing our institutional and retail presence globally
• PEOPLE: engaging, empowering and developing our greatest asset
GROWING MFS by being MARKETand Client Driven
ASSET MANAGEMENT
STRATEGIC FOCUS
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STRONG ASSET MANAGEMENT CAPABILITIES
Q2’15 HIGHLIGHTS
MFS• MFS assets under management of
US$440 billion• Strong fund performance, gross
sales increased to US$20.1 billion and net sales of US$(1.8) billion
Sun Life Investment Management Inc. • Expanded alternative yield and
liability driven investing capabilities with acquisitions of Bentall Kennedy and Prime Advisors
(1) Represents a non-IFRS financial measure.
413431
MFS ASSETS UNDER MANAGEMENT(1)
(US$ billions)
440
465
557
MFS OPERATING NET INCOME(1)
(US$ millions)
567
2013 Q2’152014 2013 LTM Q2’152014
ASSET MANAGEMENT
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MFS TRAILING 8 QUARTER FLOWSASSET MANAGEMENT
17
(25)
(15)
(5)
5
15
25
Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15
(US
$ in
Billi
ons)
26.8% 22.3% 22.4% 18.3% 18.2% 18.9% 21.6% 17.8%
19.0% 18.7% 16.9% 20.0% 20.7% 21.7% 19.4%17.7%
OverallAnnualized Gross Sales Rate
Annualized Redemption Rate
GROWING AND DIVERSIFYING SUN LIFE’S ASSET MANAGEMENT PILLAR
ASSET MANAGEMENT
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S U N L I F E I N V E S T M E N T O P E R A T I O N S
S U N L I F E I N V E S T M E N T O P E R A T I O N S
Manages Sun Life Assurance Company of Canada’s insurance assets.
S U N L I F E I N V E S T M E N T
M A N A G E M E N T C A N A D A
S U N L I F E I N V E S T M E N T
M A N A G E M E N T C A N A D A
Canadian third-party asset management business launched in 2014.
R Y A N L A B S A S S E T
M A N A G E M E N T
R Y A N L A B S A S S E T
M A N A G E M E N T
Established U.S. asset management firm. Acquired April 2, 2015.
B E N T A L L K E N N E D YB E N T A L L K E N N E D Y
SUN LIFE INVESTMENT MANAGEMENTLIABILITY‐DRIVEN INVESTING AND ALTERNATIVE YIELD STRATEGIES
SUN LIFE INVESTMENT MANAGEMENTLIABILITY‐DRIVEN INVESTING AND ALTERNATIVE YIELD STRATEGIES
AUM: $130 billion AUM: $1 billion AUM: $7 billion AUM: $28 billion
More than 200 investment professionals worldwide
Offers private asset class funds and liability driven investing strategies
Offers liability driven investing and total return fixed income strategies
Offers investment advisory & property management services
P R I M E A D V I S O R S
I N C .
P R I M E A D V I S O R S
I N C .
Established U.S. asset management firm. Acquired July 31, 2015.
Offers customized fixed income portfolios
AUM: $16 billion
AUM figures in C$ at June 30, 2015
North American real estate investment management firm. Acquisition expected to close in Q3 2015
Small to large national employers, excluding jumbo casesSolutions delivered through brokers, consultants and private
exchanges
Stop-loss Group and voluntary life, disability, dental Cancer, critical illness, accident
Specialized expertise and ability to leverage big data in stop-lossDistribution excellence Leverage Canadian Group BenefitsDistinctive product features, tools and capabilities
STRATEGIC FOCUSSUN LIFE U.S.
Market Focus
Product Breadth
Basis for winning
GROUP BENEFITS STRATEGIC FOCUS
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SUN LIFE U.S.
Q2’15 HIGHLIGHTS• Good progress in underlying profitability of
Group Benefits
• Group Benefits business in-force stable at US$2.5 billion
SLF U.S. TOTAL GROUP BENEFIT SALES
(US$ millions)
2013 2014 LTM Q2'15
571599
666
CONTINUING THE EVOLUTION
LTM Q2’1520142013
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Seven higher growth markets Partners that share our values and have impact in their markets
A mix of products by market that bring favourable return-risk results
Insurance in seven markets, health and accident in six markets, wealth management in four markets
Most Respected Agency and distribution excellence Leverage Sun Life brand and technologyRecruit, develop and retain the best peopleExcellent risk management
Market Focus
Product Breadth
Basis for winning
SUN LIFE ASIA
STRATEGIC FOCUS
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SUN LIFE ASIA
SALES GROWTH, EXPANDED FOOTPRINT
Q2’15 HIGHLIGHTS(1)
• Individual insurance sales up 19% driven by agency growth in key markets
• Health and Accident sales up 29%, representing 13% of total insurance sales in Q2’15
• Increasing profitability resulting in over 200 bps improvement in underlying ROE from Q2’14
(1) Highlights pertain to Q2’15 year over year (2) Sales for joint ventures are based on proportionate equity interest.
28 3144
95
174187
Wealth Protection
UNDERLYING NET INCOME
(C$ millions)
CAGR +37%
123 143
231
2013 2014 LTM Q2’15
INDIVIDUAL LIFE AND HEALTH INSURANCE
SALES(2)
(C$ millions)
22
373422
465
2013 2014 LTMQ2'15
2013 2014 LTM Q2’15
CAGR +12%
SUN LIFE FINANCIAL
DELIBERATE CAPITAL AND CASH ALLOCATION
DATE AMOUNT APPLICATION RESULTS
Q2 2013 $300 million Acquisition of Malaysia business Meeting business case expectations
Q4 2013 $250 million Restructure of U.S. reinsurance arrangement
$480 million of net income (Q4’13 and 2014)
Q1 2014 $500 million Redemption of debt Reduced interest expense
Q1 2014 $250 million Cash injected into Sun Life Investment Management New clients won
Q3 2014 Up to 9 million shares Launch of share buyback program EPS accretive
Q1-Q3 2015 -- Asset management acquisitions (Ryan
Labs, Prime Advisors, Bentall Kennedy(1))EPS accretive
23(1) Bentall Kennedy acquisition expected to close in Q3 2015
SUN LIFE FINANCIAL
BY BUSINESS GROUP(1) – Q2’15Underlying net income $615 million
BALANCED AND DIVERSIFIED BUSINESS MODEL
(1) Graphic excludes Corporate Support results 24
SLF Canada
39%
SLF U.K.7%
SLF U.S.16%
MFS27%
SLF Asia11%
STRONG UNDERLYING EARNINGS GROWTH FROM BOTH WEALTH AND INSURANCE BUSINESSES(2)
(C$ millions)
499
615
Q2'14 Q2'15
Protection Wealth
(2) Wealth earnings include Individual Wealth and Group Retirement Services results in SLF Canada, International Wealth in SLF U.S., the Company’s wealth businesses in SLF Asia and the results of Sun Life Investment Management in Corporate
SUN LIFE FINANCIAL
WEALTH MANAGEMENT(1)
Value of new businessLTM Q2’15 C$1.1 billion
60%
40%
WealthProtection
Sales(C$ billions)
100114 111
121
2012 2013 2014 LTM Q2’15
Fee income(C$ millions)
2,6323,339
4,0534,425
25
2012 2013 2014 LTM Q2’15
398
528606
673
Assets under management(C$ billions)
2012 2013 2014 Q2’15
(1) Wealth management includes results from MFS Investment Management, SLF Canada Individual Wealth (includes SLGI), SLF Canada Group Retirement Services, SLF U.S. International Wealth, Sun Life Investment Management Inc., Ryan Labs Asset Management Inc., and SLF Asia wealth and asset management.
STRONG CAPITAL AND FINANCIAL POSITION
Sun Life Assurance Company of Canada Q2’15 2014 2013 2012
A.M Best A+ A+ A+ A+
DBRS IC-1 IC-1 IC-1 IC-1
Moody’s Aa3 Aa3 Aa3 Aa3
Standard & Poor’s AA- AA- AA- AA-
Financial Strength Rating
MCCSR RATIO –SUN LIFE ASSURANCE COMPANY OF CANADA
219% 217% 223%
2013 Q2’152014
SUN LIFE FINANCIAL
• $1.7 billion cash level at Sun Life Financial Inc. as at June 30, 2015
• $500 million minimum cash target
STRONG CAPITAL AND FINANCIAL POSITION
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SUN LIFE FINANCIAL
SLA
SLF
U.K. Canada Bermuda Asia U.S.Branch
Capitalized to meet local capital rules
Book value excl. from MCCSR
MFS
$1.7 billion cash at Holding Company(1)
MCCSR of 223%
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CAPITAL MODEL
(1) At June 30, 2015.
SUN LIFE FINANCIAL
QUALITY ASSET PORTFOLIO
• Investment portfolio is well diversified by geography, asset class, industry sector or issuer
• High quality asset base• Self originated mortgage portfolio is diversified
across approximately 2,300 loans• Exposure to the energy sector for debt securities
and corporate loans was $5.7 billion, of which 96.0% is rated investment grade and above
97% of our bond portfolio is investment grade or higher
Q2’15 INVESTED ASSETS(C$130 billion)Equities
4%InvestmentProperties5%
Other6%
Cash &Short Terms6%
Mortgage& Loans28%
DebtSecurities
51%
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SUN LIFE FINANCIAL
COMPELLING FOUR PILLAR STRATEGY
EXECUTING ON GROWTH
AMBITIOUS AND ACHIEVABLE OBJECTIVES
DISCIPLINED CAPITAL/RISK MANAGEMENT
EXECUTION EXCELLENCE
SUSTAINABLE SHAREHOLDER VALUE
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SUN LIFE FINANCIAL
INVESTOR RELATIONS
CONTACT
GREG DILWORTHVice President, [email protected]‐979‐6230
JUSTIN WANGAssistant Vice President, [email protected]‐496‐3553
In this presentation, Sun Life Financial Inc. and its subsidiaries, joint ventures and associates are referred to as “we”, “us”, “our” and the “Company”.
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 our 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. These non‐IFRS financial measures should not be viewed as alternatives to measures of financial performance determined in accordance with IFRS. Additional information concerning these non‐IFRS financial measures and reconciliations to IFRS measures are included in our annual and interim management’s discussion and analysis (our “MD&A”) and the Supplementary Financial Information packages that are available on www.sunlife.com under Investors – Financial results & reports.
Operating net income (loss) and financial measures based on operating net income (loss), including operating earnings per share (“EPS”) or operating loss per share, and operating return on equity (“ROE”), are non‐IFRS financial measures. Operating net income (loss) excludes from reported net income the impact of following amounts that are not operational or ongoing in nature to assist investors in understanding our business performance: (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) the loss on the sale of our U.S. Annuity Business; (iv) the impact of assumption changes and management actions related to the sale of our U.S. Annuity Business; (v) restructuring and other related costs (including impacts related to the sale of our U.S. Annuity Business); (vi) goodwill and intangible asset impairment charges; and (vii) other items that are not operational or ongoing in nature. Operating EPS also excludes the dilutive impact of convertible securities.
Underlying net income (loss) and financial measures based on underlying net income (loss), including underlying EPS or underlying loss per share, and underlying ROE, are non‐IFRS financial measures. Underlying net income (loss) removes from operating net income (loss) the following items that create volatility in our results under IFRS and when removed assist in explaining our results from period to period: (a) market related impacts; (b) assumption changes and management actions; and (c) other items that have not been treated as adjustments to operating net income and when removed assist in explaining our results from period to period. Market related impacts include: (i) the net impact of changes in interest rates that differ from our best estimate assumptions in the reporting period on investment returns and the value of derivative instruments used in our hedging programs, including changes in credit and swap spreads, and any changes to the assumed fixed income reinvestment rates in determining the actuarial liabilities; (ii) the net impact of changes in equity markets, net of hedging, above or below our best estimate assumptions of approximately 2% growth per quarter in the reporting period and of basis risk inherent in our hedging program for products that provide benefit guarantees; and (iii) the net impact of changes in the fair value of real estate properties in the reporting period. Additional information regarding these adjustments is available in our interim MD&A for the quarter ended March 31, 2015 . Assumption changes reflect the impact of revisions to the assumptions used in determining our liabilities for insurance contracts and investment contracts. The impact of assumption changes related to actions taken by management in the current reporting period, referred to as management actions, include for example, changes in the prices of in‐force products, new or revised reinsurance on in‐force business or material changes to investment policies for asset segments supporting our liabilities. Underlying EPS also excludes the dilutive impact of convertible securities.
Management also uses the following non‐IFRS financial measures:1. Adjusted revenue. This measure adjusts revenue for the impact of: (i) the effects of exchange rate fluctuations, from the translation of functional currencies to the Canadian dollar, for comparisons (the “Constant
Currency Adjustment”); (ii) excluding fair value and foreign currency changes on assets and liabilities (the “FV Adjustment”); and (iii) excluding reinsurance for the insured business in SLF Canada’s GB operations (the “Reinsurance in SLF Canada’s GB Operations Adjustment”). This measure is an alternative measure of revenue that provides greater comparability across reporting periods.
2. Adjusted premiums and deposits. This measure adjusts premiums and deposits for the impact of: (i) the Constant Currency Adjustment and (ii) the Reinsurance in SLF Canada’s GB Operations Adjustment. This measure is an alternative measure of premiums and deposits that provides greater comparability across reporting periods.
3. Sales, including individual and health.4. Pre‐tax operating profit margin ratio for MFS. This ratio is a measure of MFS’s underlying profitability, which excludes certain investment income and commission expenses that are offsetting. These amounts are
excluded in order to neutralize the impact these items have on the pre‐tax operating profit margin ratio, as they are offsetting in nature and have no impact on MFS’s underlying profitability.5. Impact of foreign exchange. Several IFRS financial measures are adjusted to exclude the impact of foreign exchange rate fluctuations. These measures are calculated using the average or period end foreign exchange
rates, as appropriate, in effect at the date of the comparative period.6. MCCSR market sensitivities.7. Administrative services only, premium and deposit equivalents, mutual fund assets and sales, managed fund assets sales, premiums and deposits, assets under management 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. Assumption changes and management actions, which is a component of our sources of earnings disclosure. Sources of earnings is an alternative presentation of our Consolidated Statements of Operations that
identifies and quantifies various sources of income. The Company is required to disclose its sources of earnings by its principal regulator, the Office of the Superintendent of Financial Institutions.
Forward‐Looking Statements
Certain statements in this presentation, including statements (i) related to our proposed acquisition of the Bentall group of companies and the expected AUM of Sun Life Investment Management (ii) statements relating to our growth strategies, (iii) statements concerning our 2015 financial objectives, (iv) statements relating to productivity and expense initiatives, growth initiatives and other business objectives and (v) statements that are predictive in nature or that depend upon or refer to future events or conditions and (vi) 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 applicable Canadian securities laws and of the United States Private Securities Litigation Reform Act of 1995.
The forward‐looking statements in this presentation represent our current expectations, estimates and projections regarding future events and are not statements of historical facts. 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. Future results and shareholder value may differ materially from those expressed in forward‐looking statements due to, among other factors, the matters set out in the Company’s MD&A for the year ended December 31, 2014 and for the quarter ended June 30, 2015 under the heading “Forward‐looking Statements” and in the risk factors set out in the Company’s annual information form for the year ended December 31, 2014 (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 www.sedar.com and www.sec.gov.
The forward‐looking statements contained in this presentation describe our expectations, estimates and projected future events as at August 7, 2015. 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. The forward‐looking statements do not reflect the potential impact of any non‐recurring 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 7, 2015. 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. Factors that could cause actual results to differ materially from expectations include, but are not limited to: business risks ‐ economic and geo‐political risks; risks in implementing business strategies; changes in legislation and regulations, including capital requirements and tax laws; the inability to maintain strong distribution channels and risks relating to market conduct by intermediaries and agents; risks relating to operations in Asia, including the Company's joint ventures; the impact of competition; the performance of the Company's investments and investment portfolios managed for clients such as segregated and mutual funds; market conditions that affect the Company's capital position or its ability to raise capital; risks related to liquidity; downgrades in financial strength or credit ratings; risks relating to estimates and judgments used in calculating taxes; the impact of mergers, acquisitions and divestitures, including our proposed acquisition of Bentall Kennedy(1); the ineffectiveness of risk management policies and procedures; risks relating to the closed block of business; market, credit and liquidity risks ‐ the performance of equity markets; credit risks related to issuers of securities held in our investment portfolio, debtors, structured securities, reinsurers, derivative counterparties, other financial institutions and other entities; changes or volatility in interest rates or credit spreads or swap spreads; fluctuations in foreign currency exchange rates; risks relating to real estate investments; risks related to market liquidity; insurance risks ‐ risks relating to the rate of mortality improvement; risks relating to policyholder behaviour; risks relating to product design and pricing; risks relating to mortality and morbidity, including the occurrence of natural or man‐made disasters, pandemic diseases and acts of terrorism; the impact of higher‐than‐expected future expenses; the availability, cost and effectiveness of reinsurance; operational risks ‐ breaches or failure of information system security and privacy, including cyber terrorism; risks relating to our information technology infrastructure; failure of information systems and Internet‐enabled technology; the ability to attract and retain employees; legal and regulatory proceedings, including inquiries and investigations; risks relating to financial modelling errors; business continuity risks; dependence on third‐party relationships, including outsourcing arrangements; and risks relating to the environment, environmental laws and regulations and third‐party policies.
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.
(1) For additional information on risks related to our proposed acquisition of Bentall Kennedy, refer to the news release dated on June 15, 2015 announcing that acquisition.
Material assumptions and risk factorsThe Company’s medium-term financial objectives do not constitute guidance. Our ability to achieve our medium-term financial objectives is dependent on the Company’s success in achieving the growth initiatives, business objectives and productivity and expense targets that will be described in the Investor Day presentations and on certain other key assumptions that include:
i. a modest increase in interest rates, broadly in line with the forward yield curve;ii. average equity market growth of 8% per annum, in-line with long term experience;iii. credit experience within current actuarial assumptions;iv. no significant changes in regulatory capital requirements;v. no significant changes to our effective tax rate; and vi. share repurchases in line with current program;vii. other key assumptions include: no material changes to our hedging program; hedging costs that are consistent with our best estimate assumptions; no material assumption changes
including updates to the economic scenario generator and no material accounting standard changes.
Our medium-term financial objectives are also based on best estimate actuarial assumptions as at December 31, 2014. Our underlying ROE is dependent upon capital levels and options for deployment of excess capital. Our 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.
Important risk factors that could cause our assumptions and estimates to be inaccurate and our actual results or events to differ materially from those expressed in or implied by the forward-looking statements contained in the Investor Day presentations, including our financial objectives, are listed below. These risks include, but are not limited to: business risks - economic and geo-political risks; risks in implementing business strategies; changes in legislation and regulations, including capital requirements and tax laws; the inability to maintain strong distribution channels and risks relating to market conduct by intermediaries and agents; risks relating to operations in Asia, including SLF's joint ventures; the impact of competition; the performance of SLF's investments and investment portfolios managed for clients such as segregated and mutual funds; market conditions that affect the SLF's capital position or its ability to raise capital; risks related to liquidity; downgrades in financial strength or credit ratings; risks relating to estimates and judgments used in calculating taxes; the impact of mergers, acquisitions and divestitures; the ineffectiveness of risk management policies and procedures; risks relating to the closed block of business; market, credit and liquidity risks - the performance of equity markets; credit risks related to issuers of securities held in SLF’s investment portfolio, debtors, structured securities, reinsurers, derivative counterparties, other financial institutions and other entities; changes or volatility in interest rates or credit spreads or swap spreads; fluctuations in foreign currency exchange rates; risks relating to real estate investments; risks related to market liquidity; insurance risks - risks relating to the rate of mortality improvement; risks relating to policyholder behaviour; risks relating to product design and pricing; risks relating to mortality and morbidity, including the occurrence of natural or man-made disasters, pandemic diseases and acts of terrorism; the impact of higher-than-expected future expenses; the availability, cost and effectiveness of reinsurance; operational risks - breaches or failure of information system security and privacy, including cyber terrorism; risks relating to SLF’s information technology infrastructure; failure of information systems and Internet-enabled technology; the ability to attract and retain employees; legal and regulatory proceedings, including inquiries and investigations; risks relating to financial modelling errors; business continuity risks; dependence on third-party relationships, including outsourcing arrangements; and risks relating to the environment, environmental laws and regulations and third-party policies.