Sun Life 2012 Annual Report Download - page 71

Liquidity Risk
We generally maintain a conservative liquidity position and employ a wide range of liquidity risk management practices and controls,
which are described below:
• Liquidity is managed in accordance with our liquidity policies and operating guidelines.
• Stress testing of our liquidity is performed by comparing liquidity coverage ratios under one-month and one-year stress scenarios to
our policy thresholds. These liquidity ratios are measured and managed at the enterprise and business segment level.
• Cash management and asset-liability management programs support our ability to maintain our financial position by ensuring that
sufficient cash flow and liquid assets are available to cover potential funding requirements. We invest in various types of assets with
a view of matching them to our liabilities of various durations.
• Target capital levels exceed regulatory minimums. We actively manage and monitor our capital and asset levels, and the
diversification and credit quality of our investments.
• We maintain various credit facilities for general corporate purposes.
• We also maintain liquidity contingency plans for the management of liquidity in the event of a liquidity crisis.
The following table summarizes the contractual maturities of our significant financial liabilities and contractual commitments as at
December 31, 2012, and December 31, 2011.
Financial Liabilities and Contractual Obligations
December 31, 2012(1)
($ millions)
Within
1 year
1 year to
3 years
3 years to
5 years
Over 5
years Total
Insurance and investment contract liabilities(2) 10,003 7,871 7,215 146,640 171,729
Senior debentures and unsecured financing(3) 121 241 241 5,260 5,863
Subordinated debt(3) 157 463 292 3,543 4,455
Innovative capital instruments(3) 44 87 87 1,788 2,006
Bond repurchase agreements 1,395 –––1,395
Accounts payable and accrued expenses 4,330 –––4,330
Borrowed funds(3) 31 117 139 124 411
Total liabilities 16,081 8,779 7,974 157,355 190,189
Contractual commitments(4)
Contractual loans, equities and mortgages 583 345 79 196 1,203
Operating leases 56 84 66 146 352
Total contractual commitments 639 429 145 342 1,555
December 31, 2011(1)
($ millions)
Within
1 year
1 year to
3 years
3 years to
5 years
Over 5
years Total
Insurance and investment contract liabilities(2) 11,083 11,018 9,202 146,539 177,842
Senior debentures and unsecured financing(3) 124 248 248 5,493 6,113
Subordinated debt(3) 171 342 484 3,770 4,767
Innovative capital instruments(3) 44 87 87 1,588 1,806
Bond repurchase agreements 1,341 – – – 1,341
Accounts payable and accrued expenses 4,318 – – – 4,318
Borrowed funds(3) 76 82 145 93 396
Total liabilities 17,157 11,777 10,166 157,483 196,583
Contractual commitments(4)
Contractual loans, equities and mortgages 694 490 50 116 1,350
Operating leases 85 128 92 204 509
Total contractual commitments 779 618 142 320 1,859
(1) Amounts as at December 31, 2012 do not include financial liabilities and contractual obligations of the Discontinued Operations. Comparative amounts in 2011 have not
been restated.
(2) These amounts represent the undiscounted estimated cash flows of insurance and investment contract liabilities on our Consolidated Statements of Financial Position.
These cash flows include estimates related to the timing and payment of death and disability claims, policy surrenders, policy maturities, annuity payments, minimum
guarantees on segregated fund products, policyholder dividends, amounts on deposit, commissions and premium taxes offset by contractual future premiums and fees
on in-force contracts. These estimated cash flows are based on the best estimated assumptions used in the determination of insurance and investment contract
liabilities. Due to the use of assumptions, actual cash flows will differ from these estimates.
(3) Payments due based on maturity dates and includes expected interest payments. Actual redemption of certain securities may occur sooner as some include an option
for the issuer to call the security at par at an earlier date.
(4) Contractual commitments and operating lease commitments are not reported on our Consolidated Statements of Financial Position. Additional information on these
commitments is included in Note 25 of our 2012 Consolidated Financial Statements.
Strategic Risk
Risk Description
Strategic risk is the risk to future earnings and capital arising from the inability to effectively adapt to change in the competitive,
economic, legal and/or political environment or a failure to achieve our strategic plans, through either incorrect choices or ineffective
implementation of those choices.
Management’s Discussion and Analysis Sun Life Financial Inc. Annual Report 2012 69