Sun Life 2015 Annual Report Download - page 31

Net income in the fourth quarter of 2015 also reflected favourable impact from investment activity on insurance contract liabilities
largely in SLF Canada and SLF U.S., positive credit and morbidity and mortality experience, and other experience items including a
change to post-retirement benefit liabilities in SLF U.S. This was partially offset by unfavourable expense experience including
investment in growing our businesses.
Net income in the fourth quarter of 2014 also reflected unfavourable impacts of mortality and morbidity, lapse and other policyholder
behaviour and expense experience, mainly compensation-related and other seasonal costs, partially offset by gains from investing
activity on insurance contract liabilities.
Performance by Business Group
We manage our operations and report our financial results in five business segments. The following section describes the operations
and financial performance of SLF Canada, SLF U.S., SLF Asset Management, SLF Asia and Corporate.
SLF Canada
SLF Canada’s reported net income was $210 million in the fourth quarter of 2015, compared to $117 million in the fourth quarter of
2014. Operating net income was $200 million, compared to $123 million in the fourth quarter of 2014. Operating net income in SLF
Canada excludes the impact of certain hedges that do not qualify for hedge accounting in 2015 and 2014, which is set out in the table
above.
Underlying net income in the fourth quarter of 2015 was $269 million, compared to $181 million in the fourth quarter of 2014.
Underlying net income excludes from operating net income market related impacts and assumption changes and management actions,
which are set out in the table above. The unfavourable effect of market related impacts in the fourth quarter of 2015 was primarily
driven by interest rates and equity markets, compared to the unfavourable effect in the fourth quarter of 2014, primarily driven by
interest rates.
Net income in the fourth quarter of 2015 also reflected gains from investing activities on insurance contract liabilities in Individual
Insurance & Wealth, new business gains in GRS and favourable disability experience in GB, partially offset by expense experience
including investment in growing our individual wealth business.
Net income in the fourth quarter of 2014 also reflected gains from investing activities on insurance contract liabilities in Individual
Insurance & Wealth and new business gains in GRS, offset by unfavourable mortality and morbidity experience in GB and
unfavourable policyholder behaviour in Individual Insurance & Wealth.
SLF U.S.
SLF U.S.’s reported net income was C$100 million in the fourth quarter of 2015, compared to C$168 million in the fourth quarter of
2014. Operating net income was C$163 million, compared to C$168 million in the fourth quarter of 2014. Operating net income in SLF
U.S. excludes the impact of acquisition, integration and restructuring costs which included assumption changes and management
actions related to the closing of our International wealth business to new sales in 2015, which are set out in the table above. Underlying
net income was C$158 million, compared to C$13 million in the fourth quarter of 2014. The favourable impact of the weakening
Canadian dollar relative to average exchange rates in the fourth quarter of 2014 increased operating net income by $24 million.
SLF U.S.’s reported net income was US$75 million in the fourth quarter of 2015, compared to US$146 million in the fourth quarter of
2014. Operating net income was US$121 million in the fourth quarter of 2015, compared to US$146 million in the fourth quarter of
2014. Underlying net income was US$118 million in the fourth quarter of 2015, compared to US$9 million in the fourth quarter of 2014.
Underlying net income excludes from operating net income market related impacts and assumption changes and management actions,
which are set out in the table above. The favourable effects of market related impacts in the fourth quarter of 2015 were primarily driven
by interest rate and equity market changes, compared to a favourable effect in the fourth quarter of 2014, primarily driven by the impact
of credit spreads partially offset by interest rate changes.
Net income in the fourth quarter of 2015 also reflected the impact in Group Benefits related to pricing increases on new and renewing
business, expense actions, and continued investment in our disability claim operations. Results also reflected the favourable impact of
investing activities on insurance contract liabilities, favourable credit experience, net realized gains on the sale of AFS assets,
favourable mortality experience in International, and a change to post-retirement benefit liabilities. These items were partially offset by
unfavourable group life claims experience.
Net income in the fourth quarter of 2014 also reflected unfavourable underwriting experience in Group Benefits, unfavourable mortality
experience in In-force Management and International, and unfavourable expense experience.
SLF Asset Management
SLF Asset Management’s reported net income was C$177 million in the fourth quarter of 2015, compared to C$157 million in the fourth
quarter of 2014. SLF Asset Management had operating net income and underlying net income of C$183 million in the fourth quarter of
2015, compared to C$156 million in the fourth quarter of 2014. Operating net income and underlying net income in SLF Asset
Management excludes the impact of fair value adjustments on MFS’s share-based payment awards, which is set out in the table
above. The favourable impact of the weakening Canadian dollar in the fourth quarter of 2015 relative to average exchange rates in the
fourth quarter of 2014 increased operating net income by $27 million.
SLF Asset Management’s net income increased in the fourth quarter of 2015 compared to the same period in 2014 primarily due to the
favourable impact of exchange rates.
In U.S. dollars, MFS’s reported net income was US$126 million in the fourth quarter of 2015, compared to US$137 million in the fourth
quarter of 2014. MFS’s operating net income was US$131 million in the fourth quarter of 2015, compared to US$137 million in the
fourth quarter of 2014. Operating net income in MFS excludes the impact of fair value adjustments on share-based payment awards,
which is set out in the table above. MFS’s operating net income in U.S. dollars decreased in the fourth quarter of 2015 compared to the
same period in 2014, primarily due to lower average net assets. MFS’s pre-tax operating profit margin ratio was 38% in the fourth
quarter of 2015, down from 39% in the fourth quarter of 2014.
Management’s Discussion and Analysis Sun Life Financial Inc. Annual Report 2015 29