Sun Life 2015 Annual Report Download - page 76

Principal Sources and Uses of Funds
Our primary source of funds is cash provided by operating activities, including premiums, investment management fees and net
investment income. These funds are used primarily to pay policy benefits, dividends to policyholders, claims, commissions, operating
expenses, interest expenses and shareholder dividends. Excess cash flows generated from operating activities are generally invested
to support future payment requirements. We also raise funds from time to time, through borrowing and issuing of securities, to finance
growth, acquisitions or other needs.
As at December 31, 2015, we maintained cash, cash equivalents and short-term securities totaling $8.8 billion. In addition to providing
for near-term funding commitments, cash, cash equivalents and short-term securities include amounts that support short-term payment
obligations.
Net cash, cash equivalents and short-term securities increased by $2,003 million in 2015. Cash flows generated by operating activities
were $4,461 million in 2015, compared to $1,804 million in 2014. Cash used in financing activities in 2015 decreased by $834 million
from 2014. Investing activities decreased cash by $723 million during 2015, compared to $13 million in 2014 due to acquisitions in
2015. The favourable effect of the weakening of the Canadian dollar against foreign currencies increased cash balances by $516
million in 2015, compared to an increase of $189 million in 2014.
($ millions) 2015 2014
Net cash provided by operating activities 4,461 1,804
Net cash provided by (used in) financing activities (1,106) (1,940)
Net cash provided by (used in) investing activities (723) (13)
Changes due to fluctuations in exchange rates 516 189
Increase (decrease) in cash and cash equivalents 3,148 40
Net cash and cash equivalents, beginning of year 3,364 3,324
Net cash and cash equivalents, end of year 6,512 3,364
Short-term securities, end of year 2,305 3,450
Net cash, cash equivalents and short-term securities, end of year 8,817 6,814
Liquidity
We generally maintain an overall asset liquidity profile that exceeds requirements to fund insurance contract 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 properly funded and maintain adequate liquidity to meet obligations, both individually and in aggregate.
The legal entity, SLF Inc. (the ultimate parent company) and its wholly-owned holding companies had $990 million in cash and other
liquid assets as at December 31, 2015. Of this amount, $785 million was held at SLF Inc. The remaining $205 million of liquid assets
were held by SLF Inc.’s wholly-owned holding companies, which are available to SLF Inc. without any regulatory restrictions. SLF Inc.
and its wholly-owned holding companies had $1,827 million in cash and other liquid assets as at December 31, 2014. The decrease in
cash and liquid assets in 2015 was primarily attributable to the acquisitions during 2015, including the purchase of $1,250 million of
Sun Life Assurance preferred shares in connection with the funding of the pending acquisition of Assurant EB, as well as other
operating and financing activities. Liquid assets as noted above, include cash and cash equivalents, short-term investments, and
publicly traded securities.
We maintain various credit facilities for general corporate purposes, as set out in the table below. Unless otherwise noted, all amounts
are in Canadian dollars.
($ millions) December 31, 2015 December 31, 2014
Credit Facility Amount Utilized Expiry Amount Utilized Expiry
Committed US$ 500 US$ 77 2018 US$ 500 US$ 74 2018
Uncommitted US$ 400 US$ 400 2017 US$ – US$ – –
Uncommitted $ 205 $ 89 n/a $ 225 $ 99 n/a
Uncommitted US$ 25 US$ 12 n/a US$ 25 US$ 12 n/a
The agreement relating to our committed credit facility contains typical covenants for investment grade companies regarding solvency,
credit ratings and financial strength, all of which were met as at December 31, 2015. These covenants include, but are not limited to,
74 Sun Life Financial Inc. Annual Report 2015 Management’s Discussion and Analysis