Sun Life 2015 Annual Report Download - page 28

Other Taxes
In addition to income taxes, we pay various indirect taxes in jurisdictions in which we carry on business. Indirect taxes include premium
taxes, investment income tax, payroll related taxes, property taxes, sales taxes, business taxes and other taxes, as follows:
($ millions) 2015 2014
Income tax expense 599 491
Indirect taxes
Premium taxes (net of premium taxes on ceded business)(1) 264 227
Payroll taxes 128 113
Property taxes 125 129
Goods and services tax (GST), harmonized tax (HST) and other sales taxes 85 81
Business taxes and other 13 11
Total indirect taxes 615 561
Total taxes 1,214 1,052
Reported effective income tax rate 20.7% 20.7%
Total taxes as a percentage of net income before deduction of total taxes 34.5% 35.9%
(1) Premium taxes include investment income tax.
Discontinued Operations
On August 1, 2013, we completed the sale of our U.S. annuities business and certain of our U.S. life insurance businesses
(collectively, our “U.S. Annuity Business”), to Delaware Life Holdings, LLC. The transaction consisted primarily of the sale of 100% of
the shares of Sun Life Assurance Company of Canada (U.S.), which included U.S. domestic variable annuity, fixed annuity and fixed
indexed annuity products, corporate and bank-owned life insurance products, and variable life insurance products. The sale included
the transfer of certain related operating assets, systems and employees that supported these businesses. For 2013, we defined our
U.S. Annuity Business as “Discontinued Operations” and the remaining operations as “Continuing Operations” and the total
Discontinued Operations and Continuing Operations as “Combined Operations”. Note that in accordance with the requirements of IFRS
5Non-current Assets Held for Sale and Discontinued Operations, income and expenses associated with the U.S. Annuity Business
were classified as discontinued operations in our Consolidated Statements of Operations in our 2012 and 2013 Annual Consolidated
Financial Statements.
In 2013, our reported net loss from Discontinued Operations was $754 million, reflecting the disposition of our U.S. Annuity Business,
and our reported net income from Combined Operations of $942 million.
There were no Discontinued Operations in 2015 or 2014. For additional information on Discontinued Operations in 2013, refer to our
2014 and 2013 Annual Consolidated Financial Statements and annual MD&A for the year ended December 31, 2013.
Impact of Foreign Exchange Rates
We have operations in many 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, and generate revenues and incur
expenses in local currencies in these jurisdictions, which are translated to Canadian dollars. The majority of our exposure to
movements in foreign exchange rates is to the U.S. dollar.
Items impacting our Consolidated Statements of Operations are translated to Canadian dollars using average exchange rates for the
respective period. For items impacting our Consolidated Statements of Financial Position, period end rates are used for currency
translation purposes. The following table provides the most relevant foreign exchange rates over the past five quarters and two years.
Exchange rate Quarterly Full year
Q4’15 Q3’15 Q2’15 Q1’15 Q4’14 2015 2014
Average
U.S. Dollar 1.335 1.307 1.229 1.240 1.136 1.278 1.104
U.K. Pounds 2.025 2.025 1.882 1.878 1.797 1.953 1.818
Period end
U.S. Dollar 1.384 1.331 1.249 1.269 1.162 1.384 1.162
U.K. Pounds 2.040 2.014 1.962 1.880 1.809 2.040 1.809
In general, our net income benefits from a weakening Canadian dollar and is adversely affected by a strengthening Canadian dollar as
net income from the Company’s international operations is translated back to Canadian dollars. Conversely, in a period of losses, the
weakening of the Canadian dollar has the effect of increasing the losses. The relative impact of foreign exchange in any given period is
driven by the movement of foreign exchange rates as well as the proportion of earnings generated in our foreign operations. We
generally express the impact of foreign exchange on net income on a year-over-year basis.
During the fourth quarter of 2015, our operating net income increased by $63 million as a result of the favourable impact of the
weakening Canadian dollar in the fourth quarter of 2015 relative to the average exchange rates in the fourth quarter of 2014. In
addition, during 2015, our operating net income increased by $200 million as a result of the favourable impact of the weakening
Canadian dollar in 2015 relative to the average exchange rates in 2014.
26 Sun Life Financial Inc. Annual Report 2015 Management’s Discussion and Analysis