Sun Life Financial : Q1 2024 Shareholders' Report

Q1

2024

SUN LIFE FINANCIAL INC.

Shareholders' Report

For the period ended March 31, 2024

sunlife.com

Sun Life Reports First Quarter 2024 Results

Sun Life Financial Inc. ("SLF Inc."), its subsidiaries and, where applicable, its joint ventures and associates are collectively referred to as "the Company", "Sun Life", "we", "our", and "us". We manage our operations and report our financial results in five business segments: Canada, United States ("U.S."), Asset Management, Asia, and Corporate. The information in this document is based on the unaudited interim financial results of SLF Inc. for the period ended March 31, 2024 and should be read in conjunction with the interim management's discussion and analysis ("MD&A") and our unaudited interim consolidated financial statements and accompanying notes ("Interim Consolidated Financial Statements") for the period ended March 31, 2024, prepared in accordance with International Financial Reporting Standards ("IFRS"). We report certain financial information using non-IFRS financial measures. For more details, refer to the Non-IFRS Financial Measures section in this document. Additional information relating to SLF Inc. is available on www.sunlife.comunder Investors - Financial results and reports, on the SEDAR+ website at www.sedarplus.ca, and on the U.S. Securities and Exchange Commission's website at www.sec.gov.Reported net income (loss) refers to Common shareholders' net income (loss) determined in accordance with IFRS. Unless otherwise noted, all amounts are in Canadian dollars. Amounts in this document may be impacted by rounding. Certain 2023 results in the Drivers of Earnings and CSM Movement Analysis were refined to more accurately reflect how the business is managed.

TORONTO, ON - (May 9, 2024) - Sun Life Financial Inc. (TSX: SLF) (NYSE: SLF) announced its results for the first quarter ended March 31, 2024.

• Underlying net income(1) of $875 million decreased $20 million or 2% from Q1'23; underlying ROE(1) was 16.0%.
• • Wealth & asset management underlying net income(1): $408 million, down $3 million or 1%.
  • Group - Health & Protection underlying net income(1): $280 million, down $23 million or 8%.
  • Individual - Protection underlying net income(1): $278 million, down $13 million or 4%.
  • Corporate expenses & other(1): $(91) million net loss, improved $19 million or 17%.
• Reported net income of $818 million increased $12 million or 1% from Q1'23; reported ROE(1) was 15.0%.
• Assets under management ("AUM")(1) of $1,470 billion increased $106 billion or 8% from Q1'23.
• Increase to common share dividend from $0.78 to $0.81 per share.

"In the first quarter, we delivered on our Client Impact strategy by advancing our asset management and insurance businesses with strong growth in insurance sales, CSM and AUM," said Kevin Strain, President and CEO of Sun Life. "Underlying earnings were affected by the sale of Sun Life UK, higher morbidity claims, and the end of the Public Health Emergency in the U.S. Our capital remains strong and this quarter, we announced a 4% increase to our shareholder dividend and expect to actively continue share buybacks in the second quarter."

Financial and Operational Highlights

Quarterly results

1. Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the Q1'24 MD&A.
2. All earnings per share ("EPS") measures refer to fully diluted EPS, unless otherwise stated.
3. Prior period amounts related to U.S. Dental sales have been restated to reflect new information.
4. Life Insurance Capital Adequacy Test ("LICAT") ratio. Our LICAT ratios are calculated in accordance with the OSFI-mandated guideline, Life Insurance Capital Adequacy Test.
5. Sun Life Assurance Company of Canada ("Sun Life Assurance") is SLF Inc.'s principal operating life insurance subsidiary.
6. The calculation for the financial leverage ratio includes the CSM balance (net of taxes) in the denominator. The CSM (net of taxes) was $9.9 billion as at March 31, 2024 (March 31, 2023 - $9.0 billion).

Financial and Operational Highlights - Quarterly Comparison (Q1'24 vs. Q1'23)

1. Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the Q1'24 MD&A.
2. For more information about the business types in Sun Life's business groups, see section A - How We Report Our Results in the Q1'24 MD&A.
3. Not meaningful.

Underlying net income(1) of $875 million decreased $20 million from prior year, driven by:

• Wealth & asset management(1) down $3 million: Higher fee income offset by higher expenses in Asset Management, as well as lower net seed investment income in SLC Management.
• Group - Health & Protection(1) down $23 million: Less favourable morbidity experience in U.S. medical stop-loss and lower results in U.S. Dental primarily reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, partially offset by strong revenue growth in U.S. Group Benefits, and business growth and improved disability experience in Canada.
• Individual - Protection(1) down $13 million: Lower earnings due to the sale of Sun Life UK(2) partially offset by business growth in Asia.
• Corporate expenses & other(1) $19 million decrease in net loss driven by lower financing costs.

Reported net income of $818 million increased $12 million from prior year, driven by:

• Gains on partial sale of ABSLAMC(3) and the early termination of a distribution agreement in Asset Management; largely offset by
• The prior year gain on sale of the sponsored markets business in Canada(4);
• Fair value changes in management's ownership of MFS(5) shares; and
• The decrease in underlying net income.
• Unfavourable real estate experience(6) was mostly offset by favourable interest rate impacts.

Underlying ROE was 16.0% and reported ROE was 15.0% (Q1'23 - 17.3% and 15.6%, respectively). SLF Inc. ended the quarter with a LICAT ratio of 148%.

1. Refer to section C - Profitability in the Q1'24 MD&A for more information on notable items attributable to reported and underlying net income items and the Non-IFRS Financial Measures in this document for a reconciliation between reported net income and underlying net income. For more information about the business types in Sun Life's operating segments/business groups, see section A - How We Report Our Results in the Q1'24 MD&A.
2. On April 3, 2023 we completed the sale of SLF of Canada UK Limited to Phoenix Group Holdings plc ("the sale of Sun Life UK"). For additional information, refer to Note 3 of our 2023 Annual Consolidated Financial Statements.
3. To meet regulatory obligations, on March 21, 2024, we completed the sale of 6.3% of our ownership interest in Aditya Birla Sun Life AMC Limited ("partial sale of ABSLAMC"), generating a gain of $84 million. As a result of the transaction, our ownership interest in ABSLAMC was reduced from 36.5% to 30.2% for gross proceeds of $136 million.
4. On February 1, 2023, we completed the sale of the sponsored markets business from Sun Life Assurance, a wholly owned subsidiary of SLF Inc., to Canadian Premier Life Insurance Company (re-branded to Securian Canada) ("sale of the sponsored markets business").
5. MFS Investment Management ("MFS").
6. Real estate experience reflects the difference between the actual value of real estate investments compared to management's longer-term expected returns supporting insurance contract liabilities ("real estate experience").

Business Group Highlights

Asset Management: A global leader in both public and alternative asset classes through MFS and SLC Management

Asset Management underlying net income of $282 million was in line with prior year, driven by:

• MFS in line with prior year (up US$1 million): Higher fee income from average net assets ("ANA") mostly offset by higher expenses, which include fair value changes in management's participation in MFS shares. The MFS pre-tax net operating profit margin(1) improved to 37.2% for Q1'24 from 36.8% in the prior year due to higher ANA.
• SLC Management in line with prior year: Higher-fee related earnings offset by lower net seed investment income. Fee-related earnings(1) increased 1% driven by higher AUM, reflecting capital raising and deployment across the platform, offset by higher expenses. Fee-related earnings margin(1) was 23.9% for Q1'24, compared to 24.3% in the prior year.

Reported net income of $284 million increased $30 million or 12% from prior year, driven by a gain on the early termination of a distribution agreement partially offset by fair value changes in management's ownership of MFS shares.

Asset Management ended Q1'24 with $1,079 billion of AUM, consisting of $852 billion (US$630 billion) in MFS and $226 billion in SLC Management. Total Asset Management net outflows of $10.1 billion in Q1'24 reflected MFS net outflows of $11.7 billion (US$8.6 billion) partially offset by SLC Management net inflows of $1.5 billion.

During the first quarter, MFS celebrated its centennial anniversary. With a purpose of creating long-term value responsibly, MFS has been driven by a conviction to always do what's best for Clients, staying true to its active investment approach, core values and collaborative culture.

Our Asset Management businesses advanced their sustainable investing objectives with BentallGreenOak ("BGO") completing Ontario's first all-electric net zero carbon industrial building, owned by Sun Life. BGO was also awarded the 2024 ENERGY STAR® Partner of The Year - Sustained Excellence Award by the U.S. Environmental Protection Agency and the U.S. Department of Energy for the 14th consecutive year. lnfraRed Capital Partners ("lnfraRed") continues to invest in assets helping to build a sustainable future, completing the acquisition of two operating, utility-scale renewable energy assets in the U.S. from Shell Windenergy Inc.(2) and Savion Equity LLC(3).

Canada: A leader in health, wealth, and insurance

Canada underlying net income of $310 million decreased $6 million from prior year, reflecting:

• Wealth & asset management down $5 million: Includes lower earnings on surplus.
• Group - Health & Protection up $19 million: Business growth and improved disability experience reflecting lower claims volumes.
• Individual - Protection down $20 million: Unfavourable mortality experience in the quarter.
• Lower earnings on surplus across all businesses primarily reflecting lower realized gains.

Reported net income of $290 million decreased $39 million or 12% from prior year, reflecting a prior year gain on sale of the sponsored markets business, partially offset by market-related impacts. The market-related impacts were primarily from interest rates, partially offset by real estate experience.

Canada's sales(4):

• Wealth sales & asset management gross flows of $4 billion were up 32%, driven by higher mutual fund sales in Individual Wealth and higher defined benefit solution and defined contribution sales in Group Retirement Services ("GRS").
• Group - Health & Protection sales of $311 million were up 114%, driven by higher large case sales.
• Individual - Protection sales of $130 million were down 4%, reflecting lower participating whole life insurance sales.

We remain committed to developing targeted solutions for Clients living with chronic conditions such as diabetes to improve their insurability and health outcomes. In Q1, we launched our Diabetes Care Program, a free service for plan members as part of Lumino HealthTM Pharmacy, an online pharmacy app. The Diabetes Support Team, consisting of pharmacists, physicians, and registered dieticians, provides proactive support, coaching, and education. The personalized plans, support and advice help plan members to manage their diabetes.

In Q1, defined benefit solutions ("DBS") hit a milestone reaching $20 billion in cumulative sales since launching the business in 2008. We continue to maintain our leadership position in the pension risk transfer market by ranking first in sales for 16 years in a row(5). DBS has played a pivotal role in the market through a Client-focused approach and the creation of innovative solutions. This allows pension plan sponsors to transfer risks to Sun Life so they can focus on their core businesses, while helping to ensure long-term retirement security for plan members. Currently, DBS provides over $1.25 billion in annual pension payments to over 125,000 Clients.

1. Represents a non-IFRS financial measure. For more details, see the Non-IFRS Financial Measures section in this document and in the Q1'24 MD&A.
2. Shell Windenergy Inc. is a subsidiary of Shell plc that develops and operates wind farms.
3. Savion Equity LLC is a subsidiary of Shell plc that specializes in developing solar power and energy storage projects.
4. Compared to the prior year.
5. Life Insurance Marketing and Research Association ("LIMRA") market share as of Q4'23, on a year-to-date basis.

U.S.: A leader in health and benefits

U.S. underlying net income of US$141 million decreased US$35 million or 20% ($189 million decreased $48 million or 20%) from prior year, driven by:

• Group - Health & Protection down US$30 million: Lower Dental results primarily reflecting the impact of Medicaid redeterminations following the end of the Public Health Emergency, and lower Group Benefits results primarily reflecting less favourable morbidity experience in medical stop-loss as utilization normalizes partially offset by strong revenue growth and favourable disability experience.
• Individual - Protection down US$5 million: The inclusion of the UK payout annuity business(1) was offset by unfavourable credit experience in the quarter.

Reported net income of US$71 million decreased US$54 million or 43% ($97 million decreased $71 million or 42%) from prior year, reflecting the decrease in underlying net income and market-related impacts largely from real estate experience partially offset by favourable interest rate impacts.

U.S. group sales of US$142 million were down US$108 million or 43% ($191 million, down $148 million or 44%), reflecting comparable Group Benefits sales and lower Medicaid and commercial sales in Dental driven by large institutional sales in the prior year.

We continue to expand our capabilities and advance our strategy to help our members access the health care and coverage they need. In Employee Benefits, we are now offering Health Navigator, powered by PinnacleCare, to the large employer group benefits market. This personal health care navigation and advisory service helps members get the right medical diagnoses, doctors and treatments for their specific needs and helps improve health and productivity outcomes for employers.

We are also leveraging our expertise on leave, absence management, and return-to-work services to offer Family Leave Insurance ("FLI") in Alabama, Arkansas, Florida, Tennessee, and Texas. We are the first major group benefits provider to offer FLI in these states, broadening members' access to paid leave to care for loved ones and giving employers the option to provide a valuable benefit to their employees more easily.

Asia: A regional leader focused on fast-growing markets

Asia underlying net income of $177 million increased $36 million or 26% from prior year, driven by:

• Wealth & asset management up $2 million.
• Individual - Protection up $38 million: Good sales momentum and in-force business growth, higher earnings on surplus, and favourable mortality experience in the quarter, partially offset by higher expenses reflecting volume growth and continued investments in the business.
• Regional office expenses & other $(4) million increased net loss from higher expenses.

Reported net income of $235 million increased $101 million or 75% from prior year, driven by a gain on partial sale of ABSLAMC and the increase in underlying net income, partially offset by market-related impacts. The market-related impacts were primarily from interest rates and lower equity markets in China, partially offset by real estate experience.

Asia's sales(2):

• Individual sales of $627 million were up 67%, primarily driven by higher sales in Hong Kong reflecting expanded distribution capabilities, partially offset by lower sales in China, Vietnam and India reflecting industry and market conditions.
• Wealth sales & asset management gross flows of $2 billion were down 14%, reflecting lower money market fund sales in the Philippines, lower Mandatory Provident Fund ("MPF") sales in Hong Kong, and lower sales in India primarily from fixed income funds.

New business CSM of $230 million in Q1'24 was up from $102 million in the prior year, primarily driven by sales in Hong Kong.

We are committed to delivering shareholder value, including building and realizing value through strategic investments. To meet regulatory obligations, in March, we sold 6.3% of our ownership interest in Aditya Birla Sun Life AMC Limited (BSE: ABSLAMC.BO and NSE: ABSLAMC.NS), unlocking value in our investment through generating a $98 million (post-tax $84 million) gain. Since the Initial Public Offering in 2021, Sun Life has generated gains of over $450 million (post-tax gains of over $350 million), while still retaining 30.2% ownership of the listed entity following the most recent sell-down. This highlights the value of ABSLAMC, reflecting a strong track record of performance, with an attractive product mix including fixed income, equities and alternatives, and a fast-growing retail presence in India.

We continue to build on our Purpose to help Clients achieve lifetime financial security and live healthier lives. Our focus on making a difference in the lives of our Clients was recognized by our Platinum award(3) for the most trusted brand in the life insurance industry in the Philippines. This is Sun Life Philippines' 15th year in a row to be recognized in the Trusted Brand Awards.

Corporate

Corporate underlying net loss was $83 million compared to underlying net loss of $81 million in the prior year, reflecting lower earnings due to the sale of Sun Life UK(1) partially offset by lower financing costs.

Reported net loss was $88 million compared to reported net loss of $79 million in the prior year, reflecting market-related impacts(1).

1. On April 3, 2023, we completed the sale of SLF of Canada UK Limited to Phoenix Group Holdings plc ("the sale of Sun Life UK"). Under the agreement, we will retain our economic interest in the payout annuities business through a reinsurance treaty, which, effective Q2'23 is recorded in In-force Management within the U.S. business group. For additional information, refer to Note 3 of our 2023 Annual Consolidated Financial Statements. Prior year results include market-related gains from Sun Life UK in reported net income within the Corporate business group.
2. Compared to the prior year.
3. Trusted Brand Awards.

Sun Life Financial Inc.

Management's Discussion and Analysis

For the period ended March 31, 2024

Dated May 9, 2024

About Sun Life

Sun Life is a leading international financial services organization providing asset management, wealth, insurance and health solutions to individual and institutional Clients. Sun Life has operations in a number of markets 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 March 31, 2024, Sun Life had total assets under management ("AUM") of $1.47 trillion. For more information please visit www.sunlife.com.

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

A. How We Report Our Results

Sun Life Financial Inc. ("SLF Inc."), its subsidiaries and, where applicable, its joint ventures and associates are collectively referred to as "the Company", "Sun Life", "we", "our", and "us". We manage our operations and report our financial results in five business segments: Canada, United States ("U.S."), Asset Management, Asia, and Corporate. Information concerning these segments is included in our annual and interim consolidated financial statements and accompanying notes ("Annual Consolidated Financial Statements" and "Interim Consolidated Financial Statements", respectively, and "Consolidated Financial Statements" collectively) and interim and annual management's discussion and analysis ("MD&A"). We prepare our unaudited Interim Consolidated Financial Statements using International Financial Reporting Standards ("IFRS"), the accounting requirements of the Office of the Superintendent of Financial Institutions ("OSFI") and in accordance with the International Accounting Standard ("IAS") 34 Interim Financial Reporting. Reported net income (loss) refers to Common shareholders' net income (loss) determined in accordance with IFRS.

Unless otherwise noted, all amounts are in Canadian dollars. Amounts in this document may be impacted by rounding. Certain 2023 results in the Drivers of Earnings and CSM Movement Analysis were refined to more accurately reflect how the business is managed.

Underlying net income by Business Types

Sun Life has a diversified mix of businesses and our earnings by business type supports the analysis of our results:

• Wealth & asset management: Sun Life's wealth & asset management businesses generate fee income and/or spread on investment products.
• Group - Health & Protection: Group businesses provide health and protection benefits to employer and government plan members. The products generally have shorter-term coverage periods, and more frequent repricing. The revenues are driven by premiums for coverage provided as well as fee-based earnings (i.e., Administrative Services Only plans, and dental fees).
• Individual - Protection: Generally, individual protection businesses have a longer-term profitability profile and are more sensitive to experience trends. The premiums include a margin for providing protection and are invested to earn a return over the expected amounts required to fulfill insurance liabilities.

The following provides an overview of the business types in Sun Life's business segments/business groups:

1. Use of Non-IFRS Financial Measures

We report certain financial information using non-IFRS financial measures, as we believe that these measures provide information that is useful to investors in understanding our performance and facilitate a comparison of our quarterly and full year results from period to period. These non-IFRS financial measures do not have any standardized meaning and may not be comparable with similar measures used by other companies. For certain non-IFRS financial measures, there are no directly comparable amounts under IFRS. These non-IFRS financial measures should not be viewed in isolation from or as alternatives to measures of financial performance determined in accordance with IFRS. Additional information concerning non-IFRS financial measures and, if applicable, reconciliations to the closest IFRS measures are available in section N - Non-IFRS Financial Measures in this document and the Supplementary Financial Information package on www.sunlife.comunder Investors - Financial results and reports.

2. Forward-looking Statements

Certain statements in this document are forward-looking statements within the meaning of certain securities laws, including the

"safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Additional information concerning forward-looking statements and important risk factors that could cause our assumptions, estimates, expectations and projections to be inaccurate and our actual results or events to differ materially from those expressed in or implied by such forward-looking statements can be found in section O - Forward-looking Statements in this document.

3. Additional Information

Additional information about SLF Inc. can be found in the Consolidated Financial Statements, the annual and interim MD&A, and SLF Inc.'s Annual Information Form ("AIF") for the year ended December 31, 2023. These documents are filed with securities regulators in Canada and are available at www.sedarplus.ca. SLF Inc.'s Annual Consolidated Financial Statements, annual MD&A and AIF are filed with the United States Securities and Exchange Commission ("SEC") in SLF Inc.'s annual report on Form 40-F and SLF Inc.'s interim MD&A and Interim Consolidated Financial Statements are furnished to the SEC on Form 6-Ks and are available at www.sec.gov.

B. Financial Summary

1. Represents a non-IFRS financial measure. For more details, see section N - Non-IFRS Financial Measures in this document.
2. Prior period amounts related to U.S. Dental sales have been restated to reflect new information.
3. Life Insurance Capital Adequacy Test ("LICAT") ratio. Our LICAT ratios are calculated in accordance with the OSFI-mandated guideline, Life Insurance Capital Adequacy Test.
4. Sun Life Assurance is SLF Inc.'s principal operating life insurance subsidiary.
5. The calculation for the financial leverage ratio includes the CSM balance (net of taxes) in the denominator. The CSM (net of taxes) was $9.9 billion as at March 31, 2024 (December 31, 2023 - $9.6 billion; March 31, 2023 - $9.0 billion).