Sun Life 2012 Annual Report Download - page 73

Liquidity
We generally maintain an overall asset liquidity profile that exceeds requirements to fund potential demand liabilities under prescribed
adverse liability demand scenarios. To strengthen our liquidity further, we actively manage and monitor our:
• capital levels
• asset levels
• matching position
• diversification and credit quality of investments
• cash forecasts and actual amounts against established targets
We are subject to various regulations in the jurisdictions in which we operate. The ability of SLF Inc.’s subsidiaries to pay dividends
and transfer funds is regulated in certain jurisdictions and may require local regulatory approvals and the satisfaction of specific
conditions in certain circumstances. Through effective cash management and capital planning, SLF Inc. ensures that its
subsidiaries, as a whole and on a stand-alone basis, are appropriately funded and maintain adequate liquidity to meet obligations,
both individually and in aggregate.
We maintain various credit facilities for general corporate purposes, as set out in the table below. Unless otherwise noted, all amounts
are in Canadian dollars.
($ millions) December 31, 2012 December 31, 2011
Credit Facility Amount Utilized Expiry Amount Utilized Expiry
Committed US$ 1,000 US$ 336 2015 US$ 1,000 US$ 348 2015
Committed US$ 500 US$ 215 2014 US$ 500 US$ 370 2014
Uncommitted $ 175 $ 88 n/a $ 210 $ 90 n/a
Uncommitted US$ 25 US$ 6 n/a
The agreements relating to our committed credit facilities contain typical covenants for investment grade companies regarding
solvency, credit ratings and financial strength, all of which were met as at December 31, 2012. These covenants include but are not
limited to the maintenance of total equity by SLF Inc. of at least $12 billion, tested as of the last day of each fiscal quarter. SLF Inc.’s
total equity was $16.8 billion as at December 31, 2012.
Our failure to comply with the covenants under the committed credit facilities would, subject to grace periods in the case of certain
covenants, result in an event of default. This could require us to repay any outstanding borrowings or to cash collateralize letters of
credit under such facility. A failure by SLF Inc. (or any of its subsidiaries) to pay an obligation due for an amount exceeding $250 million
would also result in an event of default under the committed credit facilities described above.
Based on our historical cash flows and liquidity management processes, we believe that the cash flows from our operating activities will
continue to provide sufficient liquidity for us to satisfy debt service obligations and to pay other expenses as they fall due.
Capital
We have a capital risk policy designed to maintain a strong capital position and to provide the flexibility necessary to take advantage of
growth opportunities, to support the risk associated with our businesses and to optimize shareholder return. Our capital risk policy is
also intended to provide an appropriate level of risk management over capital adequacy risk, which is defined as the risk that capital is
not or will not be sufficient to withstand adverse economic conditions, to maintain financial strength or to allow the Company and its
subsidiaries to take advantage of opportunities for expansion. Our capital base is structured to exceed minimum regulatory and internal
capital targets and to maintain strong credit and financial strength ratings, while maintaining a capital-efficient structure. Capital is
managed both on a consolidated basis under principles that consider all the risks associated with the business as well as at the
business group level under the principles appropriate to the jurisdictions in which we operate. The capital of our international
subsidiaries is managed on a local statutory basis in a manner commensurate with their individual risk profiles.
Sun Life Financial, including all of its business groups, engages in a capital planning process annually in which capital deployment
options, fundraising and dividend recommendations are presented to the Risk Review Committee of the Board. Capital reviews are
regularly conducted which consider the potential impacts under various business, interest rate and equity market scenarios. Relevant
components of these capital reviews, including dividend recommendations, are presented to the Risk Review Committee of the Board
of Directors on a quarterly basis. The Board of Directors is responsible for the annual review and approval of our capital plan.
The Company’s capital risk policy establishes policies, operating guidelines and procedures that govern the management of capital.
The Risk Review Committee of the Board of Directors reviews and approves SLF Inc.’s capital risk policy annually. Our Corporate
Treasury and Risk Management functions are responsible for the design and implementation of the capital risk policy.
The Company’s capital base consists mainly of common shareholders’ equity and retained earnings. Other sources of capital include
preferred shareholders’ equity and subordinated debt issued by SLF Inc., Sun Life Assurance and Sun Canada Financial Co. For
Canadian regulatory purposes, our capital also includes innovative capital instruments issued by Sun Life Capital Trust and Sun Life
Capital Trust II.
Management’s Discussion and Analysis Sun Life Financial Inc. Annual Report 2012 71