Sun Life 2015 Annual Report Download - page 63

The following table sets out the estimated immediate impact on, or sensitivity of our net income, our OCI, and Sun Life Assurance’s
MCCSR ratio to certain instantaneous changes in interest rates and equity market prices as at December 31, 2015 and December 31,
2014.
Interest Rate and Equity Market Sensitivities
As at December 31, 2015(1)
($ millions, unless otherwise noted)
Interest rate sensitivity(2)(6)
100 basis point
decrease
50 basis point
decrease
50 basis point
increase
100 basis point
increase
Potential impact on net income(3)(6) $(300) $(100) $50 $50
Potential impact on OCI $500 $250 $(250) $(500)
Potential impact on MCCSR(4) 10% points
decrease
4% points
decrease
4% points
increase
7% points
increase
Equity markets sensitivity(5) 25% decrease 10% decrease 10% increase 25% increase
Potential impact on net income(3) $(350) $(100) $100 $300
Potential impact on OCI $(150) $(50) $50 $150
Potential impact on MCCSR(4) 4% points
decrease
1% points
decrease
2% points
increase
4% points
increase
As at December 31, 2014(1)
($ millions, unless otherwise noted)
Interest rate sensitivity(2)(6) 100 basis point
decrease
50 basis point
decrease
50 basis point
increase
100 basis point
increase
Potential impact on net income(3)(6) $(400) $(100) $50 $100
Potential impact on OCI $500 $250 $(250) $(500)
Potential impact on MCCSR(4) 12% points
decrease
5% points
decrease
4% points
increase
8% points
increase
Equity markets sensitivity(5) 25% decrease 10% decrease 10% increase 25% increase
Potential impact on net income(3) $(250) $(50) $50 $150
Potential impact on OCI $(150) $(50) $50 $150
Potential impact on MCCSR(4) 5% points
decrease
1% points
decrease
1% points
increase
1% points
increase
(1) Net income and OCI sensitivities have been rounded to the nearest $50 million. The sensitivities exclude the market impacts on the income from our joint ventures and
associates, which we account for on an equity basis.
(2) Interest rate sensitivities assume a parallel shift in assumed interest rates across the entire yield curve as at December 31, 2015 and December 31, 2014. Variations in
realized yields based on factors such as different terms to maturity and geographies may result in realized sensitivities being significantly different from those illustrated
above. Sensitivities include the impact of re-balancing interest rate hedges for dynamic hedging programs at 10 basis point intervals (for 50 basis point changes in interest
rates) and at 20 basis point intervals (for 100 basis point changes in interest rates).
(3) The market risk sensitivities include the estimated mitigation impact of our hedging programs in effect as at December 31, 2015 and December 31, 2014, and include new
business added and product changes implemented prior to such dates.
(4) The MCCSR sensitivities illustrate the impact on Sun Life Assurance as at December 31, 2015 and December 31, 2014. This excludes the impact on assets and liabilities
that are in SLF Inc. but not included in Sun Life Assurance. MCCSR sensitivities as at December 31, 2014 reflect the impact of International Accounting Standard 19
Employee Benefits and its phase-in impact on available capital.
(5) Represents the respective change across all equity markets as at December 31, 2015 and December 31, 2014. Assumes that actual equity exposures consistently and
precisely track the broader equity markets. Since in actual practice equity-related exposures generally differ from broad market indices (due to the impact of active
management, basis risk and other factors), realized sensitivities may differ significantly from those illustrated above. Sensitivities include the impact of re-balancing equity
hedges for dynamic hedging programs at 2% intervals (for 10% changes in equity markets) and at 5% intervals (for 25% changes in equity markets).
(6) The majority of interest rate sensitivity, after hedging, is attributed to individual insurance products. We also have interest rate sensitivity, after hedging, from our fixed annuity
and segregated funds products.
Our net income sensitivities to interest rates and equity markets have changed since December 31, 2014. This is primarily as a result
of changes in measurement of sensitivities related to assumption changes and management actions.
The above sensitivities were determined using a 50 basis point change in interest rates and a 10% change in our equity markets
because we believe that these market shocks were reasonably possible as at December 31, 2015. We have also disclosed the impact
of a 100 basis point change in interest rates and a 25% change in equity markets to illustrate that significant changes in interest rates
and equity market levels may result in other than proportionate impacts on our sensitivities at more significant market movements.
Credit Spread and Swap Spread Sensitivities
We have estimated the immediate impact or sensitivity of our shareholder net income attributable to certain instantaneous changes in
credit and swap spreads. The credit spread sensitivities reflect the impact of changes in credit spreads on our asset and liability
valuations (including non-sovereign fixed income assets, provincial governments, corporate bonds and other fixed income assets). The
swap spread sensitivities reflect the impact of changes in swap spreads on swap-based derivative positions and liability valuations.
Management’s Discussion and Analysis Sun Life Financial Inc. Annual Report 2015 61