PR Newswire | Nov 4, 2020 05:01PM EST

11/04 16:01 CST

Sun Life Reports Third Quarter 2020 Results TORONTO, Nov. 4, 2020

Sun Life Financial Inc. ("SLF Inc."), its subsidiaries and, where applicable,its joint ventures and associates are collectively referred to as "theCompany", "Sun Life", "we", "our", and "us". We manage our operations andreport our financial results in five business segments: Canada, United States("U.S."), Asset Management, Asia, and Corporate. The information in thisdocument is based on the unaudited interim financial results of SLF Inc. forthe period ended September 30, 2020 and should be read in conjunction with theinterim management's discussion and analysis ("MD&A") and our unaudited interimconsolidated financial statements and accompanying notes ("Interim ConsolidatedFinancial Statements") for the period ended September 30, 2020, prepared inaccordance with International Financial Reporting Standards ("IFRS"), which areavailable on www.sunlife.com under Investors - Financial results and reports.Additional information relating to SLF Inc. is available on the SEDAR websiteat www.sedar.com and on the U.S. Securities and Exchange Commission's websiteat www.sec.gov. Unless otherwise noted, all amounts are in Canadian dollars.

TORONTO, Nov. 4, 2020 /PRNewswire/ - Sun Life Financial Inc. (TSX: SLF) (NYSE: SLF) today announced its results for the third quarter ended September 30, 2020. Third quarter reported net income was $750 million and underlying net income(1) was $842 million.

Quarterly results Year-to-date

Profitability Q3'20 Q3'19 2020 2019

Reported net income ($ millions) 750 681 1,660 1,899

Underlying net income ($ millions)^(1) 842 809 2,351 2,265

Reported EPS ($)^(2) 1.28 1.15 2.83 3.19

Underlying EPS ($)^(1)(2) 1.44 1.37 4.02 3.81

Reported return on equity ("ROE")^(1) 13.5% 13.0% 10.1% 11.8%

Underlying ROE^(1) 15.1% 15.5% 14.3% 14.1%

Growth Q3'20 Q3'19 2020 2019

Insurance sales ($ millions)^(1) 681 685 2,076 2,122

Wealth sales ($ billions)^(1) 52.7 41.2 169.2 114.1

Value of new business ("VNB")($ millions)^(1) 261 252 847 869

Assets under management ("AUM")($ billions)^(1) 1,186.3 1,062.9 1,186.3 1,062.9

Financial Strength Q3'20 Q4'19

LICAT ratios (at period end)^(3)

Sun Life Financial Inc. 144% 143%

Sun Life Assurance^(4) 127% 130%

Financial leverage ratio (at period end)^(1) 21.5% 21.2%

"Sun Life delivered a strong third quarter. We achieved underlying net income of $842 million, an increase of $33 million from the prior year, and reported net income increased by 10% to $750 million when compared to the third quarter of 2019," said Dean Connor, President and CEO, Sun Life.

"Our Asset Management business generated a 25% increase in year-over-year sales and Sun Life reached approximately $1.2 trillion in AUM in the third quarter. We also completed the majority acquisition of InfraRed Capital Partners and recently announced our intention to purchase a majority stake in Crescent Capital Group LP, which will further extends SLC Management's platform to include alternative credit across public and private markets. This will bring SLC Management's total AUM to approximately $145 billion on a pro forma basis as at September 30, 2020."

Connor added, "So far this year we have delivered more than $140 million of claims payments to the families of Clients who have succumbed to COVID-19, and paid millions in additional pandemic related health claims. It is times like these that underscore the importance of what we do for Clients."

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^ Represents a non-IFRS financial measure. See the Non-IFRS Financial(1) Measures section in this document and in our interim MD&A for the period ended September 30, 2020 ("Q3 2020 MD&A").

^ All earnings per share ("EPS") measures refer to fully diluted EPS, unless(2) otherwise stated.

^ For further information on the Life Insurance Capital Adequacy Test(3) ("LICAT"), see section E - Financial Strength in the Q3 2020 MD&A.

^ Sun Life Assurance Company of Canada ("Sun Life Assurance") is SLF Inc.'s(4) principal operating life insurance subsidiary.

Financial and Operational Highlights - Quarterly Comparison (Q3 2020 vs. Q3 2019)

Our strategy is focused on four key pillars of growth, where we aim to be a leader in the markets in which we operate, with our continued progress detailed below.

($ millions, unless otherwise noted)

Reported Underlying Insurance Wealth net income (loss) net income (loss)^(1)sales^(1) sales^(1)

Q3'20Q3'19changeQ3'20Q3'19 change Q3'20Q3'19changeQ3'20 Q3'19 change

Canada 387 223 74% 293 268 9% 147 204 (28)% 6,837 4,136 65%

U.S. (113)(186)39% 136 135 1% 230 184 25% - - -

Asset Management251 221 14% 294 251 17% - - - 43,06634,44225%

Asia 236 170 39% 164 138 19% 304 297 2% 2,781 2,573 8%

Corporate (11) 253 nm^(2)(45) 17 nm^(2) - - - - - -

Total 750 681 10% 842 809 4% 681 685 (1)% 52,68441,15128%

^ Represents a non-IFRS financial measure. See the Non-IFRS Financial(1) Measures section in this document and in our Q3 2020 MD&A.

^ Not meaningful.(2)

Reported net income was $750 million in the third quarter of 2020, an increase of $69 million or 10% compared to the same period in 2019, driven by favourable market-related impacts and lower acquisition costs, partially offset by unfavourable assumption changes and management actions ("ACMA") and fair value adjustments on MFS's(1) share-based payment awards. Favourable market-related impacts were predominantly driven by interest rates and the rise in equity markets, partially offset by changes in the fair value of investment properties. Underlying net income was $842 million in the third quarter of 2020, an increase of $33 million or 4%, compared to the same period in 2019, driven by business growth, favourable results in Group Benefits ("GB") in Canada, favourable morbidity experience in the U.S., higher new business gains and higher investing activity, partially offset by tax matters that were favourable in the third quarter of 2019(2), unfavourable credit experience, lower net investment returns on surplus, unfavourable mortality experience and lower available-for-sale ("AFS") gains(3). Refer to the Non-IFRS Financial Measures section in this document for a reconciliation between reported net income and underlying net income.

Our reported ROE was 13.5% in the third quarter of 2020. Underlying ROE was 15.1%, compared to 15.5% in the third quarter of 2019, reflecting higher underlying net income and the increase in common shareholders' equity. Common shareholders' equity increased, driven by common shareholders' net income and the impacts of foreign exchange, partially offset by dividend distributions and share repurchases in the first quarter of 2020. SLF Inc. and its wholly-owned holding companies ended the quarter with $2.4 billion in cash and other liquid assets.

On October 1, 2020, SLF Inc. issued $750 million principal amount of Series 2020-2 Subordinated Unsecured 2.06% Fixed/Floating Debentures due 2035. The net proceeds will be used for general corporate purposes of SLF Inc., which may include investments in subsidiaries, repayment of indebtedness and other strategic investments. This transaction will not impact the LICAT ratio of Sun Life Assurance, however, it will increase the SLF Inc. LICAT ratio by over three percentage points.

On October 21, 2020, we announced our intention to acquire a majority stake in Crescent Capital Group LP(4), a global alternative credit investment manager with approximately $38 billion (US$28 billion) in AUM as at June 30, 2020. Crescent will form part of SLC Management, extending our solutions in alternative credit to the benefit of existing and prospective clients. The transaction includes the ability to acquire the remaining 49% interest of Crescent in the future. On acquisition, this transaction will not impact the LICAT ratio of Sun Life Assurance, however, it will decrease the SLF Inc. LICAT ratio by approximately two percentage points.

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^ MFS Investment Management ("MFS").(1)

The impact of the resolution of tax matters from prior years in 2019, including interest and investment income tax allocation updates between the^ participating policyholders' account and the shareholders' account ("tax(2) matters that were favourable in the third quarter of 2019"). The results include income of $78 million, of which $58 million was in Corporate and $20 million in Canada.

Excluding net gains relating to the impact from the repayment of our senior^ financing obligation related to U.S. statutory regulatory capital(3) requirements for In-force Management. See section I - Additional Financial Disclosure our Q3 2020 MD&A for additional information.

^ Crescent Capital Group LP ("Crescent").(4)

A leader in insurance and wealth solutions in our Canadian Home Market

Canada's reported net income was $387 million in the third quarter of 2020, an increase of $164 million or 74% compared to the same period in 2019, driven by market-related impacts and ACMA. Favourable market-related impacts were predominantly driven by interest rates and the rise in equity markets, partially offset by changes in the fair value of investment properties. Underlying net income was $293 million in the third quarter of 2020, an increase of $25 million or 9%, compared to the same period in 2019, driven by favourable results in GB and business growth, partially offset by lower net investment returns on surplus, lower AFS gains, and the impact of tax matters that were favourable in the third quarter of 2019. Favourable results in GB were driven by lower disability claim volumes in the quarter and pricing actions, partially offset by the investment we made to improve the disability operations.

Canada insurance sales were $147 million in the third quarter of 2020, a decrease of $57 million or 28% compared to the same period in 2019, primarily in GB as a result of lower market activity. Canada wealth sales were $6.8 billion for the third quarter of 2020, an increase of $2.7 billion or 65% compared to the same period in 2019, driven by higher large case sales in Group Retirement Services ("GRS") and higher guaranteed product sales in individual wealth.

We continue to make it easier for Clients to do business with us as 91% of all retail insurance applications were processed digitally in the quarter enabling advisors to focus on what matters most, advising our Clients. In addition to our digital offerings, we continued to demonstrate our core business strength and solidify our position as the leader(1) in Canada's Group Retirement space with significant wins in the quarter. In Defined Benefit Solutions, our pension risk transfer business, we completed a $1.1 billion payout annuity sale. This was the largest single day annuity transaction by an insurer in Canada, reinforcing our position as a leader in this market. In our Defined Contribution business, we continue to be the leading provider of defined contribution capital accumulation plans, and this quarter assumed responsibility for the administration of one of the largest plans in the education sector with $1.7 billion of assets.

A leader in U.S. group benefits

U.S.'s reported net loss was $113 million in the third quarter of 2020, an improvement of $73 million compared to the same period in 2019, driven by less unfavourable ACMA, and improved market-related impacts primarily from interest rates. Underlying net income in the third quarter of 2020 was in line with the same period in 2019, as favourable morbidity experience in medical stop-loss, business growth and higher investing activity were offset by unfavourable mortality in Group Benefits, unfavourable expense experience and less favourable credit experience. The trailing four-quarter after-tax profit margin for U.S. Group Benefits(2) was 7.8% as of the third quarter of 2020, compared to 7.2% as of the third quarter of 2019.

U.S. insurance sales were US$172 million in the third quarter of 2020, an increase of US$33 million or 24% compared to the same period in 2019, reflecting higher sales across all businesses, a good result given our direct sales force is operating virtually.

We launched a number of new products and partnerships in the quarter, continuing to create innovative solutions based on marketplace needs for digital tools and tailored insurance coverages. We added three stop-loss offerings for self-funded employers that provide protection from the risks of COVID-19. We also partnered with key human resources and benefits administration providers to connect directly to their digital platforms, simplifying benefits for Clients by removing manual processes and providing real-time insurance decisions. In addition, we entered into a 10-year renewal and expansion of our partnership with The MGIS Companies to provide customized life and disability products for the unique needs of healthcare professionals.

A leader in Global Asset Management

Asset Management's reported net income was $251 million in the third quarter of 2020, an increase of $30 million or 14% compared to the same period in 2019, reflecting lower acquisition, integration and restructuring costs, partially offset by unfavourable fair value adjustments on MFS's share-based payment awards. Underlying net income was $294 million in the third quarter of 2020, an increase of $43 million or 17% compared to the same period in 2019, driven by higher average net assets ("ANA"), partially offset by changes in net investment returns and higher sales expenses in MFS. The pre-tax net operating profit margin ratio for MFS(2) was 40% in the third quarter of 2020, consistent with the same period last year.

Asset Management ended the third quarter with $836.0 billion in AUM, consisting of $730.1 billion (US$548.2 billion) in MFS, and $105.9 billion in SLC Management. MFS reported net inflows of $6.0 billion (US$4.5 billion) and SLC Management reported net inflows of $0.9 billion.

In the third quarter of 2020, 86%, 89% and 84% of MFS's U.S. retail fund assets ranked in the top half of their Lipper categories based on ten-, five- and three-year performance, respectively.

At the beginning of the quarter, we completed the acquisition of the majority stake in InfraRed Capital Partners ("InfraRed"), a global infrastructure and real estate investment manager. As a leader in global infrastructure investing including renewable energy, InfraRed will broaden SLC Management's suite of alternative investment solutions while also creating the opportunity for InfraRed to access North American investors through our distribution networks. The transaction includes the ability to acquire the remaining 20% interest of InfraRed in the future.

On October 21, 2020, we announced our intention to acquire a majority stake in Crescent Capital Group LP, a global alternative credit investment manager with approximately $38 billion (US$28 billion) in assets under management as at June 30, 2020. Crescent will form part of SLC Management, extending our solutions in alternative credit to the benefit of existing and prospective clients. The transaction includes the ability to acquire the remaining 49% interest of Crescent in the future.

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^(1) 2019 Fraser Pension Universe Report released August 11, 2020.

^ Represents a non-IFRS financial measure. See the Non-IFRS Financial(2) Measures section in this document and in our Q3 2020 MD&A.

A leader in Asia through distribution excellence in higher growth markets

Asia's reported net income was $236 million in the third quarter of 2020, an increase of $66 million or 39% compared to the same period in 2019, driven by favourable ACMA impacts and improved market-related impacts, predominantly from equity markets. Underlying net income was $164 million in the third quarter of 2020, an increase of $26 million or 19% compared to the same period in 2019, driven by new business gains, primarily in International Hubs, favourable expense experience and business growth, partially offset by less favourable credit experience.

Asia insurance sales were $304 million in the third quarter of 2020, an increase of $7 million or 2% compared to the same period in 2019, as increases, primarily in International Hubs, were largely offset by the Philippines as a result of the impact of COVID-19. Asia wealth sales were $2.8 billion in the third quarter of 2020, an increase of $208 million or 8% compared to the same period in 2019, driven by fixed income sales in India, partially offset by lower wealth sales in the Philippines.

Over the quarter, we rolled out Remote Online Medical Exam ("ROME") in the Philippines, where accredited health professionals perform online medical examinations for prospective Sun Life Clients, a first in the local market. We were also one of the first insurers to introduce non-face-to-face sales in Vietnam with the launch of our new digital solution, SunFast, which supports advisors in approaching, consulting and completing the insurance application for Clients without requiring in-person meetings. Virtual sales experiences are now in operation across nearly all markets, enabling advisors and Clients to transact safely and securely. The introduction of these new virtual capabilities helps Clients to stay financially protected amid the COVID-19 pandemic and positions us to withstand future disruptions.

Corporate

Corporate's reported net loss was $11 million in the third quarter of 2020, compared to reported net income of $253 million in the same period in 2019, driven by ACMA impacts predominantly pertaining to the UK in the prior period. Underlying net loss was $45 million in the third quarter of 2020, compared to underlying net income of $17 million in the same period in 2019, reflecting the impact of tax matters that were favourable in the third quarter of 2019 and unfavourable credit experience, partially offset by improved expense experience.

COVID-19 Pandemic Update

COVID-19 has affected all areas of our business and we are working to continue to be there for our Clients, advisors, employees, communities and shareholders. We continue to adjust our operations across each of our businesses as government restrictions and measures evolve around the globe. Our business continuity processes have been successful in ensuring that key business functions and normal operations continue during this unprecedented disruption. We have processes in place to monitor and maintain ongoing systems availability, stability, and security. We thank our employees and advisors for being there for our Clients through these difficult times.

Our working from home strategy continues to operate effectively and, depending on each location, the return to offices has been gradual and measured to ensure the health and safety of our employees and our communities.

We continue to support Clients facing financial hardships. This includes the extension of grace periods for premium payments for individual insurance and Group Benefits Clients, and rebates and credits to Group Benefits Clients.

Earlier in the year, OSFI(1) had introduced temporary measures to provide relief to financial institutions at the start of the pandemic. For insurers, these measures included capital relief relating to certain payment deferrals granted. In August, OSFI announced that the relief relating to these payment deferrals will be gradually phased out. Deferrals granted before August 31, 2020 will not extend past 6 months. Deferrals granted between August 31, 2020 and September 30, 2020 will not extend past 3 months. Deferrals granted after September 30, 2020 will not be eligible for OSFI's special capital treatment. For our borrowers and real estate tenants, we have granted interest, principal and rent payment deferrals, on a case by case basis, with the majority of the deferrals being up to 3 months.

On March 13, 2020, OSFI set the expectation for all federally regulated financial institutions that dividend increases and share buybacks should be halted for the time being.

The path and implications of COVID-19 are still uncertain and dependent on the progression of the virus, potential treatments and therapies, the availability of a vaccine and on actions taken by governments, businesses and individuals, which could vary by country and result in differing outcomes. Given the extent of the circumstances, it is difficult to reliably measure or predict the potential impact of this uncertainty on our future financial results. For additional information, please refer to section H - Risk Management in our Q3 2020 MD&A.

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^(1) The Office of the Superintendent of Financial Institutions ("OSFI").

Earnings Conference Call

The Company's third quarter 2020 financial results will be reviewed at a conference call on Thursday, November 5, 2020, at 10:00 a.m. ET. To listen to the call via live audio webcast and to view the presentation slides, as well as related information, please visit www.sunlife.com and click on the link to Quarterly reports under Investors - Financial results & reports 10 minutes prior to the start of the call. Individuals participating in the call in a listen-only mode are encouraged to connect via our webcast. Following the call, the webcast and presentation will be archived and made available on the Company's website, www.sunlife.com, until the Q3 2022 period end. The conference call can also be accessed by phone by dialing 602-563-8756 (International) or 1-877-658-9101 (toll-free within North America) using Conference ID: 4449049. A replay of the conference call will be available from Thursday, November 5, 2020 at 1:00 p.m. ET until 1:00 p.m. ET on Thursday, November 19, 2020 by calling 404-537-3406 or 1-855-859-2056 (toll-free within North America) using Conference ID: 4449049.

Media Relations Contact: Investor Relations Contact:

Irene Poon Leigh Chalmers

Manager, Corporate Senior Vice-President, Head of Investor Relations &Communications Capital Management

Tel: 416-988-0542 Tel: 647-256-8201

irene.poon@sunlife.com investor.relations@sunlife.com

Non-IFRS Financial Measures

We report certain financial information using non-IFRS financial measures, aswe believe that these measures provide information that is useful to investorsin understanding our performance and facilitate a comparison of our quarterlyand full year results from period to period. Non-IFRS financial measures do nothave any standardized meaning and may not be comparable with similar measuresused by other companies. For certain non-IFRS financial measures, there are nodirectly comparable amounts under IFRS. Non-IFRS financial measures should notbe viewed in isolation from or as alternatives to measures of financialperformance determined in accordance with IFRS. Additional informationconcerning non-IFRS financial measures and reconciliations to the closest IFRSmeasures are available in the Q3 2020 MD&A under the heading M - Non-IFRSFinancial Measures, our annual MD&A and the Supplementary Financial Informationpackages that are available on www.sunlife.com under Investors - Financialresults and reports.

1. Underlying Net Income and Underlying EPS

Underlying net income (loss) and financial measures based on underlying netincome (loss), including underlying EPS or underlying loss per share, andunderlying ROE, are non-IFRS financial measures. Underlying net income (loss)removes from reported net income (loss) the impacts of the following items thatcreate volatility in our results under IFRS and when removed assist inexplaining our results from period to period:

market-related impacts that differ from our best estimate assumptions, which include: (i) impacts of returns in equity markets, net of hedging, for which our best estimate assumptions are approximately 2% per quarter. This also includes the impact of the basis risk inherent in our hedging program, which is the difference between the return on underlying funds of products that provide benefit guarantees and the return on the derivative(a) assets used to hedge those benefit guarantees; (ii) the impacts of changes in interest rates in the reporting period and on the value of derivative instruments used in our hedging programs including changes in credit and swap spreads, and any changes to the assumed fixed income reinvestment rates in determining the actuarial liabilities; and (iii) the impacts of changes in the fair value of investment properties in the reporting period;

assumption changes and management actions, which include: (i) the impacts of revisions to the methods and assumptions used in determining our liabilities for insurance contracts and investment contracts; and (ii) the(b) impacts on insurance contracts and investment contracts of actions taken by management in the current reporting period, referred to as management actions which include, for example, changes in the prices of in-force products, new or revised reinsurance on in-force business, and material changes to investment policies for assets supporting our liabilities; and

(c) other adjustments:

certain hedges in Canada that do not qualify for hedge accounting - (i) this adjustment enhances the comparability of our net income from period to period, as it reduces volatility to the extent it will be offset over the duration of the hedges;

fair value adjustments on MFS's share-based payment awards that are settled with MFS's own shares and accounted for as liabilities and (ii) measured at fair value each reporting period until they are vested, exercised and repurchased - this adjustment enhances the comparability of MFS's results with publicly traded asset managers in the United States;

(iii) acquisition, integration and restructuring costs (including impacts related to acquiring and integrating acquisitions); and

(iv) other items that are unusual or exceptional in nature.

All factors discussed in this document that impact our underlying net incomeare also applicable to reported net income.

All EPS measures in this document refer to fully diluted EPS, unless otherwisestated. As noted below, underlying EPS excludes the dilutive impacts ofconvertible instruments.

The following table sets out the amounts that were excluded from our underlyingnet income (loss) and underlying EPS, and provides a reconciliation to ourreported net income (loss) and EPS based on IFRS.

Reconciliations of Select Net Income Measures Quarterly results Year-to-date

($ millions, unless otherwise noted) Q3'20 Q2'20 Q3'19 2020 2019

Reported net income 750 519 681 1,660 1,899

Market-related impacts

Equity market impacts

Impacts from equity market changes 42 105 2 (156) 84

Basis risk impacts 8 (46) 7 (95) 3

Equity market impacts 50 59 9 (251) 87

Interest rate impacts^(1)

Impacts of interest rate changes 18 (123) (104) (192) (325)

Impacts of credit spread movements (27) (72) 4 28 (45)

Impacts of swap spread movements (5) (10) 10 24 33

Interest rate impacts (14) (205) (90) (140) (337)

Impacts of changes in the fair value of investment properties (37) (41) (8) (90) (5)

Less:Market-related impacts (1) (187) (89) (481) (255)

Less:Assumption changes and management actions (53) 5 - (101) (31)

Other adjustments

Certain hedges in Canada that do not qualify for hedge accounting 5 - (5) 4 (9)

Fair value adjustments on MFS's share-based payment awards (32) (24) (8) (46) (27)

Acquisition, integration and restructuring^(2) (11) (14) (26) (67) (44)

Less:Total of other adjustments (38) (38) (39) (109) (80)

Underlying net income 842 739 809 2,351 2,265

Reported EPS (diluted) ($) 1.28 0.88 1.15 2.83 3.19

Less:Market-related impacts ($) - (0.32)(0.16)(0.83)(0.42)

Assumption changes and mabnagement actions ($) (0.09)0.01 - (0.17)(0.05)

Certain hedges in Canada that do not qualify for hedge accounting ($)0.01 - (0.01)0.01 (0.02)

Fair value adjustments on MFS's share-based payment awards ($) (0.06)(0.04)(0.01)(0.08)(0.05)

Acquisition, integration and restructuring ($) (0.02)(0.03)(0.04)(0.12)(0.07)

Impact of convertible securities on diluted EPS ($) - - - - (0.01)

Underlying EPS (diluted) ($) 1.44 1.26 1.37 4.02 3.81

^ Our exposure to interest rates varies by product type, line of business,(1) and geography. Given the long-term nature of our business, we have a higher degree of sensitivity in respect of interest rates at long durations.

Amounts include acquisition costs for the BGO acquisition and the InfraRed acquisition, which includes the unwinding of the discount for the Put^ option and Deferred payments liability of $11 million in the third quarter(2) of 2020 and in the second quarter of 2020. As a result of various ongoing projects initiated in the fourth quarter of 2019 to simplify our organizational structure and drive efficiencies, we also recorded a restructuring charge of $28 million in the first quarter of 2020.

2. Additional Non-IFRS MeasuresManagement also uses the following non-IFRS financial measures, which arereferenced in this news release:

Return on equity. IFRS does not prescribe the calculation of ROE and thereforea comparable measure under IFRS is not available. To determine reported ROE andunderlying ROE, respectively, reported net income (loss) and underlying netincome (loss) is divided by the total weighted average common shareholders'equity for the period. The quarterly ROE is annualized.

Financial leverage ratio. This total debt to total capital ratio is ratio ofdebt plus preferred shares to total capital, where debt consists of all capitalqualifying debt securities. Capital qualifying debt securities consist ofsubordinated debt and innovative capital instruments.

Sales. In Canada, insurance sales consist of sales of individual insurance andgroup benefits products; wealth sales consist of sales of individual wealthproducts and sales in GRS. In the U.S., insurance sales consist of sales byGroup Benefits. In Asia, insurance sales consist of the individual and groupinsurance sales by our subsidiaries and joint ventures and associates, based onour proportionate equity interest, in the Philippines, Indonesia, India, China,Malaysia, Vietnam and sales from International and Hong Kong; wealth salesconsist of Hong Kong wealth sales, Philippines mutual fund sales, wealth salesby our India and China insurance joint ventures and associates, and AdityaBirla Sun Life AMC Limited's equity and fixed income mutual fund sales based onour proportionate equity interest, including sales as reported by our bankdistribution partners. Asset Management sales consist of gross sales (inflows)for retail and institutional Clients; unfunded commitments are not included insales. Sales are also expressed on a constant currency basis, which is ameasure of sales that provides greater comparability across reporting periodsby excluding the impacts of exchange rate fluctuations from the translation offunctional currencies to the Canadian dollar. There is no directly comparableIFRS measure.

Value of New Business. VNB represents the present value of our best estimate offuture distributable earnings, net of the cost of capital, from new businesscontracts written in a particular time period, except new business in our AssetManagement pillar. The assumptions used in the calculations are generallyconsistent with those used in the valuation of our insurance contractliabilities except that discount rates used approximate theoretical returnexpectations of an equity investor. Capital required is based on the higher ofSun Life Assurance's LICAT operating target and local (country specific)operating target capital. VNB is a useful metric to evaluate the present valuecreated from new business contracts. There is no directly comparable IFRSmeasure.

Pre-tax net operating profit margin ratio for MFS. This ratio is a measure ofthe profitability of MFS, which excludes the impacts of fair value adjustmentson MFS's share-based payment awards, investment income, and certain commissionexpenses that are offsetting. These commission expenses are excluded in orderto neutralize the impacts these items have on the pre-tax net operating profitmargin ratio and have no impact on the profitability of MFS. There is nodirectly comparable IFRS measure.

After-tax profit margin for U.S. Group Benefits. This ratio assists inexplaining our results from period to period and is a measure of profitabilitythat expresses U.S. employee benefits and medical stop-loss underlying netincome as a percentage of net premiums. This ratio is calculated by dividingunderlying net income (loss) by net premiums for the trailing four quarters.There is no directly comparable IFRS measure.

Forward-looking StatementsFrom time to time, the Company makes written or oral forward-looking statementswithin the meaning of certain securities laws, including the "safe harbour"provisions of the United States Private Securities Litigation Reform Act of1995 and applicable Canadian securities legislation. Forward-looking statementscontained in this document include statements (i) relating to our strategies,(ii) relating to our growth initiatives and other business objectives, (iii)relating to our pending acquisition of a majority stake in Crescent, (iv)relating to the plans we have implemented in response to the COVID-19 pandemicand related economic conditions and their impact on the Company, (v) that arepredictive in nature or that depend upon or refer to future events orconditions, and (vi) that include words such as "achieve", "aim", "ambition","anticipate", "aspiration", "assumption", "believe", "could", "estimate","expect", "goal", "initiatives", "intend", "may", "objective", "outlook","plan", "project", "seek", "should", "strategy", "strive", "target", "will",and similar expressions. Forward-looking statements include the informationconcerning our possible or assumed future results of operations. Thesestatements represent our current expectations, estimates, and projectionsregarding future events and are not historical facts, and remain subject tochange, particularly in light of the ongoing and developing COVID-19 pandemicand its impact on the global economy and its uncertain impact on our business.Forward-looking statements are not a guarantee of future performance andinvolve risks and uncertainties that are difficult to predict. Future resultsand shareholder value may differ materially from those expressed in theseforward-looking statements due to, among other factors, the impact of theCOVID-19 pandemic and related economic conditions on our operations, liquidity,financial conditions or results and the matters set out in the Q3 2020 MD&Aunder the headings C - Profitability - 5 - Income taxes, E - Financial Strengthand H - Risk Management and in SLF Inc.'s 2019 Annual Information Form underthe heading Risk Factors and the factors detailed in SLF Inc.'s other filingswith Canadian and U.S. securities regulators, which are available for review atwww.sedar.com and www.sec.gov, respectively.

Important risk factors that could cause our assumptions and estimates, andexpectations and projections to be inaccurate and our actual results or eventsto differ materially from those expressed in or implied by the forward-lookingstatements contained in this document, are set out below. The realization ofour forward-looking statements, essentially depends on our business performancewhich, in turn, is subject to many risks, which have been further heightenedwith the current COVID-19 pandemic given the uncertainty of its duration andimpact. Factors that could cause actual results to differ materially fromexpectations include, but are not limited to: market risks - related to theperformance of equity markets; changes or volatility in interest rates orcredit spreads or swap spreads; real estate investments; and fluctuations inforeign currency exchange rates; insurance risks - related to policyholderbehaviour; mortality experience, morbidity experience and longevity; productdesign and pricing; the impact of higher-than-expected future expenses; and theavailability, cost and effectiveness of reinsurance; credit risks - related toissuers of securities held in our investment portfolio, debtors, structuredsecurities, reinsurers, counterparties, other financial institutions and otherentities; business and strategic risks - related to global economic andpolitical conditions; the design and implementation of business strategies;changes in distribution channels or Client behaviour including risks relatingto market conduct by intermediaries and agents; the impact of competition; theperformance of our investments and investment portfolios managed for Clientssuch as segregated and mutual funds; changes in the legal or regulatoryenvironment, including capital requirements and tax laws; the environment,environmental laws and regulations; operational risks - related to breaches orfailure of information system security and privacy, including cyber-attacks;our ability to attract and retain employees; legal, regulatory compliance andmarket conduct, including the impact of regulatory inquiries andinvestigations; the execution and integration of mergers, acquisitions,strategic investments and divestitures; our information technologyinfrastructure; a failure of information systems and Internet-enabledtechnology; dependence on third-party relationships, including outsourcingarrangements; business continuity; model errors; information management;liquidity risks - the possibility that we will not be able to fund all cashoutflow commitments as they fall due; and other risks - tax matters, includingestimates and judgments used in calculating taxes; our internationaloperations, including our joint ventures; market conditions that affect ourcapital position or ability to raise capital; downgrades in financial strengthor credit ratings; and the impact of mergers, acquisitions and divestitures.

The following risk factors are related to our acquisition of a majority stakein Crescent that could have a material adverse effect on our forward-lookingstatements: (1) the ability of the parties to complete the transaction; (2)failure of the parties to obtain necessary consents and approvals or tootherwise satisfy the conditions to the completion of the transaction in atimely manner, or at all; (3) our ability to realize the financial andstrategic benefits of the transaction; (4) the impact of the announcement ofthe transaction on Sun Life and Crescent. These risks all could have an impacton our business relationships (including with future and prospective employees,Clients, distributors and partners) and could have a material adverse effect onour current and future operations, financial conditions and prospects.

The Company does not undertake any obligation to update or revise itsforward-looking statements to reflect events or circumstances after the date ofthis document or to reflect the occurrence of unanticipated events, except asrequired by law.

About Sun LifeSun Life Financial Inc. is a leading international financial servicesorganization providing insurance, wealth and asset management solutions toindividual and corporate Clients. Sun Life has operations in a number ofmarkets worldwide, including Canada, the United States, the United Kingdom,Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia,Singapore, Vietnam, Malaysia and Bermuda. As of September 30, 2020, Sun Lifehad total assets under management of $1,186 billion. For more informationplease visit www.sunlife.com.

Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) andPhilippine (PSE) stock exchanges under the ticker symbol SLF.

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SOURCE Sun Life Financial Inc.