Sun Life 2015 Annual Report Download - page 80

Dividends declared
Amount per share 2015 2014 2013
Common shares $ 1.51 $ 1.44 $ 1.44
Class A preferred shares
Series 1 $1.187500 $1.187500 $1.187500
Series 2 $1.200000 $1.200000 $1.200000
Series 3 $1.112500 $1.112500 $1.112500
Series 4 $1.112500 $1.112500 $1.112500
Series 5 $1.125000 $1.125000 $1.125000
Series 6R(1) $–$0.750000 $1.500000
Series 8R(2) $0.828100 $1.087500 $1.087500
Series 9QR(3) $0.243300 $–$–
Series 10R $0.975000 $0.975000 $0.975000
Series 12R $1.062500 $1.062520 $1.062520
(1) Class A Non-Cumulative 5-Year Rate Reset Preferred Shares Series 6R shares were redeemed in full on June 30, 2014.
(2) Prior to June 30, 2015, the annual dividend rate was 4.35%. The dividend rate was reset on June 30, 2015 to a fixed annual dividend rate of 2.275% until June 30, 2020.
Every five years thereafter, the dividend rate will reset to an annual rate equal to the 5-year Government of Canada bond yield plus 1.41%. The annual dividend per share in
the table above is the amount paid per share in 2015. Holders of the Series 8R Shares will have the right, at their option, to convert their Series 8R Shares into Series 9QR
Shares on June 30, 2020 and every five years thereafter.
(3) Holders of the Series 9QR Shares are entitled to receive quarterly floating rate non-cumulative dividends at an annual rate equal to the then 3-month Government of Canada
treasury bill yield plus 1.41%. The dividend rate for the period commencing on June 30, 2015 to but excluding September 30, 2015 was 2.075% per annum or $0.13 per
share per quarter. The dividend rate for the period commencing on September 30, 2015 to but excluding December 31, 2015, was 1.786% per annum or $0.11 per share per
quarter. Total dividends paid in 2015 were $0.24 per share. Holders of the Series 9QR Shares will have the right, at their option, to convert their Series 9QR Shares into
Series 8R Shares on June 30, 2020 and on June 30 every five years thereafter.
Capital Adequacy
SLF Inc.
SLF Inc. is a non-operating insurance company. Prior to January 1, 2016, SLF Inc. was subject to OSFI’s Guideline A-2 – Capital
Regime for Regulated Insurance Holding Companies and Non-Operating Life Companies, which sets out the framework to assess
capital adequacy for regulated insurance holding companies and non-operating life companies (collectively, “Insurance Holding
Companies”). In accordance with this guideline, SLF Inc. manages its capital in a manner commensurate with its risk profile and control
environment, and SLF Inc.’s regulated subsidiaries comply with the capital adequacy requirements imposed in the jurisdictions in which
they operate. SLF Inc.’s consolidated capital position is above its internal target. Effective January 1, 2016, Insurance Holding
Companies are subject to the MCCSR capital rules which have been established by OSFI and Guideline A-2 will be repealed.
Sun Life Assurance
Sun Life Assurance, SLF Inc.’s principal operating life insurance subsidiary in Canada, is also subject to OSFI’s MCCSR capital rules.
The Company expects to maintain an MCCSR ratio for Sun Life Assurance at or above 200%. With an MCCSR ratio of 240% as at
December 31, 2015, Sun Life Assurance’s capital ratio is well above OSFI’s supervisory ratio of 150% and regulatory minimum ratio of
120%. The MCCSR calculation involves using qualifying models or applying quantitative factors to specific assets and liabilities based
on a number of risk components to arrive at required capital and comparing this requirement to available capital to assess capital
adequacy. Certain of these risk components, along with available capital, are sensitive to changes in equity markets and interest rates
as outlined in the Risk Management section of this MD&A.
The following table shows the components of Sun Life Assurance’s MCCSR ratio for the last two years.
Sun Life Assurance MCCSR
($ millions) 2015 2014
Capital available
Retained earnings and contributed surplus 10,831 9,791
Accumulated other comprehensive income 2,194 923
Common and preferred shares 5,596 4,346
Innovative capital instruments and subordinated debt 1,047 1,047
Other 152 167
Less:
Goodwill 1,553 1,363
Non-life investments and other 1,880 1,770
Total capital available 16,387 13,141
Required capital
Asset default and market risks 4,078 3,672
Insurance risks 1,646 1,375
Interest rate risks 1,095 1,009
Total capital required 6,819 6,056
MCCSR ratio 240% 217%
78 Sun Life Financial Inc. Annual Report 2015 Management’s Discussion and Analysis