# EDGAR Filing Document

**Accession Number:** 0001097362
**File Stem:** 0001193125-23-081958
**Filing Date:** 2023-3
**Character Count:** 1146455
**Document Hash:** 42853952f7a6b61c9d3757f44c8a94bf
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001193125-23-081958.hdr.sgml**: 20230328

**ACCESSION NUMBER**: 0001193125-23-081958

**CONFORMED SUBMISSION TYPE**: 6-K

**PUBLIC DOCUMENT COUNT**: 85

**CONFORMED PERIOD OF REPORT**: 20230328

**FILED AS OF DATE**: 20230328

**DATE AS OF CHANGE**: 20230328

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** SUN LIFE FINANCIAL INC
- **CENTRAL INDEX KEY:** 0001097362
- **STANDARD INDUSTRIAL CLASSIFICATION:** LIFE INSURANCE [6311]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** Z4
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 6-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-15014
- **FILM NUMBER:** 23768656

**BUSINESS ADDRESS:**
- **STREET 1:** SUN LIFE ASSURANCE CO OF CANADA
- **STREET 2:** ONE YORK STREET
- **CITY:** TORONTO
- **STATE:** A6
- **ZIP:** M5J 0B6
- **BUSINESS PHONE:** 4169794800

**MAIL ADDRESS:**
- **STREET 1:** SUN LIFE ASSURANCE CO OF CANADA
- **STREET 2:** ONE YORK STREET
- **CITY:** TORONTO
- **STATE:** A6
- **ZIP:** M5J 0B6

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** SUN LIFE FINANCIAL SERVICES INC
- **DATE OF NAME CHANGE:** 20030702

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** SUN LIFE FINANCIAL SERVICES OF CANADA INC
- **DATE OF NAME CHANGE:** 20000224

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**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, D.C. 20549** 

**FORM 6-K** 

**Report of Foreign Private Issuer** 

**Pursuant to Rule 13a-16 or 15d-16** 

**under the Securities Exchange Act of 1934** 

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| | |
|:---|:---|
| **For the month of March, 2023** | Commission File Number: **001-15014** |

---

**SUN LIFE FINANCIAL INC.** 

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*(Translation of registrant's name into English)* 

***1 York Street, 31st Floor, Toronto, Ontario M5J 0B6*** 

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*(Address of principal executive offices)* 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F Form 40-F **<u>X</u>**

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):<u> </u>

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):<u> </u>

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Exhibits

99.1 Notice of Annual Meeting and Management Information Circular

99.2 Notice and Access – Notice of Annual Meeting and Notice of Availability of Meeting Materials

99.3 Proxy Form and Request for Delivery of Financial Statements

99.4 Electronic Distribution Insert

99.5 Annual Report

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**SIGNATURE** 

Pursuant to the requirements of the <u>Securities Exchange Act of 1934,</u> the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | |
|:---|:---|:---|
|  | ***Sun Life Financial Inc.***<br> (Registrant) | ***Sun Life Financial Inc.***<br> (Registrant) |
| Date: March 28, 2023 | By | <u>/s/ Tracie Allan</u> |
|  |  | Tracie Allan |
|  |  | Assistant Vice-President & Managing Counsel |

---

## Exhibit 99.1

##### [**Table of Contents**](#toc)
**Exhibit 99.1**![LOGO](g384576g00m01.jpg)

SUN LIFE FINANCIAL INC. 2023 Notice of annual meeting of common shareholders May 11, 2023 Management Information Circular Sun Life

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##### [**Table of Contents**](#toc)
**Contents** 

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##### [**Table of Contents**](#toc)
![LOGO](g431192g41i66.jpg)

Dear Shareholder:

You are invited to attend our annual meeting of common shareholders on Thursday, May 11, 2023 at 5:00 p.m. (Toronto time).

As in prior years, shareholders will have the opportunity to virtually attend the meeting, ask questions and vote on a number of important matters by way of live webcast at https://web.lumiagm.com/451195677. Subject to ongoing developments related to the COVID-19 pandemic, and being permitted by public health guidelines, the meeting will also be held at Sun Life's head office at 1 York Street (at Harbour Street), 35th floor, Toronto, Ontario, Canada. Shareholders are advised to check our website www.sunlife.com/2023agm periodically in advance of the meeting for any updates on in person attendance in light of the COVID-19 pandemic.

The business of the meeting is described in the accompanying Notice of our 2023 annual meeting and Management Information Circular.

We will be conducting the annual meeting of the voting policyholders and sole shareholder of Sun Life Assurance Company of Canada at the same time. The formal business of each meeting will be conducted separately, however, management's presentation will address shareholders and policyholders.

Your vote is important. If you cannot attend the meeting, please vote by submitting your proxy by mail, internet or telephone by 5:00 p.m. (Toronto time) on Tuesday, May 9, 2023, as described on pages 9 to 13 in the attached circular.

We look forward to your attendance at this year's meeting.

---

| | |
|:---|:---|
| <br> ![LOGO](g431192g03a01.jpg)  | <br> ![LOGO](g431192g18i10.jpg) <br>|
| **Scott F. Powers** | **Kevin D. Strain** |
|  Chair of the Board | President & Chief Executive Officer |

---

Si vous désirez recevoir l'avis de convocation à l'assemblée annuelle et la circulaire d'information en français, veuillez communiquer avec le secrétaire en écrivant au 1 York Street, 31<sup>st</sup> Floor, Toronto (Ontario) Canada M5J 0B6, en composant le 1-877-786-5433, ou en envoyant un courriel à servicesauxactionnaires@sunlife.com.

MANAGEMENT INFORMATION CIRCULAR 2023 \| 1

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##### [**Table of Contents**](#toc)
![LOGO](g431192g41i66.jpg)

**Notice of our 2023 annual meeting** 

You are invited to our annual meeting of common shareholders:

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| | |
|:---|:---|
| **When** | Thursday, May 11, 2023 at 5:00 p.m. (Toronto time)  |

---

---

| | |
|:---|:---|
| **Where** | **Virtually**  |

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Via live webcast online at https://web.lumiagm.com/451195677

Password: "sunlife2023" (case sensitive)

**In Person (subject to ongoing developments related to the COVID-19 pandemic and being permitted by public health guidelines)**

1 York Street (at Harbour Street), 35<sup>th</sup> floor, Toronto, Ontario, Canada

Shareholders are advised to check our website www.sunlife.com/2023agm periodically in advance of the meeting for any updates on in person attendance in light of the COVID-19 pandemic.

**What the meeting will cover** 

1. Receipt of the 2022 consolidated financial statements

2. Election of the directors

3. Appointment of the auditor

4. A non-binding advisory vote on our approach to executive compensation

5. Consideration of the shareholder proposal

6. Consideration of other business that may properly be brought before the meeting.

**A total of 586,748,683 votes are eligible to be cast at the meeting.** 

Similar to last year, and in consideration of the health and safety of our employees, shareholders and the broader community, shareholders will have the opportunity to virtually attend the meeting, ask questions and vote on a number of important matters in real time regardless of their geographic location, provided they are connected to the internet and follow the instructions in the attached circular.

The annual meeting of Sun Life Assurance Company of Canada will also be held at the same time.

The attached circular is being sent to you because you owned common shares of Sun Life Financial Inc. on March 17, 2023 (the record date). It includes important information about what the meeting will cover, who can vote and how to vote.

The board of directors has approved the contents of this circular and has authorized us to send it to you.

![LOGO](g431192g80g71.jpg)

**Troy Krushel**

Vice-President, Associate General Counsel & Corporate Secretary

Toronto, Ontario

March 17, 2023

2 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)
**Management Information Circular** 

**March 17, 2023** 

In this document, *we*, *us*, *our*, *the company* and *SLF Inc.* mean Sun Life Financial Inc., and *Sun Life Assurance* means Sun Life Assurance Company of Canada. *You*, *your* and *shareholder* mean common shareholders of SLF Inc.

Unless otherwise stated, information in this Circular is provided as of February 28, 2023.

**Delivery of meeting materials** 

**Notice and access** 

As permitted by the Canadian Securities Administrators and pursuant to an exemption from the proxy solicitation requirement received from the Office of the Superintendent of Financial Institutions Canada (OSFI), we are using notice and access to deliver this Management Information Circular (Circular) to both our registered and non-registered shareholders. Instead of receiving a paper copy of this Circular in the mail, shareholders who hold common shares of SLF Inc. as of March 17, 2023, the record date for the meeting, have access to it online. A package was sent to the shareholders in the mail with a notice (Notice) explaining how to access this Circular electronically and how to request a paper copy of it. A form of proxy for registered shareholders and share ownership account participants, or a voting instruction form for non-registered shareholders, was included with the Notice with instructions so that you can vote your shares.

Notice and access allows for faster access to this Circular, helps reduce printing and postage costs, contributes to the protection of the environment and is consistent with our sustainability strategy.

**How to access the Circular electronically** 

This Circular is available on our website www.sunlife.com/2023agm and on the website of our transfer agent, TSX Trust Company (TSX Trust)(www.meetingdocuments.com/TSXT/slf), on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov/edgar.shtml).

**Delivery of financial statements and management's discussion and analysis** 

The manner in which we deliver our financial statements and management's discussion and analysis (MD&A) to you depends on whether you are a registered shareholder, a share ownership account participant or a non-registered shareholder (see page 10 for a description of who falls within each of these categories of shareholders).

***Registered shareholders***

Registered shareholders who have not opted out of receiving our financial statements will receive them in hard copy, unless they have consented to electronic delivery (e-delivery). Please see Go digital! below for more information on signing up for e-delivery of our financial statements.

As permitted under securities laws, we are using notice and access to deliver our MD&A to registered shareholders. You may access the MD&A online in the same manner as described above for accessing the Circular online.

***Share ownership account participants and non-registered shareholders***

As permitted under securities laws, we are using notice and access to deliver our financial statements and MD&A to share ownership account participants and non-registered shareholders. You may access these materials online in the same manner as described above for accessing the Circular online.

MANAGEMENT INFORMATION CIRCULAR 2023 \| 3

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##### [**Table of Contents**](#toc)
**Go Digital!** 

All shareholders are encouraged to sign up for email delivery of notices of meeting.

Registered shareholders who have not opted out of receiving our financial statements and who currently receive them in hard copy are encouraged to consent to e-delivery to receive them. Doing so means that you will be notified by email when the financial statements are made available, at which time they can be viewed and/or downloaded from our website (www.sunlife.com).

The chart below outlines the process by which shareholders can sign up for e-delivery.

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| | |
|:---|:---|
| Go Digital!<br> How to sign up for e-delivery | Go Digital!<br> How to sign up for e-delivery |
| Registered shareholders and<br> share ownership account participants | Non-registered shareholders<br> in Canada and the United States |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Sign up for e-delivery at the following website: tsxtrust.com/SL/GoDigital or by checking the box on the reverse side of your proxy form and providing your email address. | Sign up for e-delivery at www.proxyvote.com using the control number appearing on your voting instruction form, or after the meeting by obtaining a unique registration number from your financial intermediary. |

---

**How to request a paper copy of materials provided to you through notice and access** 

Shareholders may request a paper copy of this Circular or our financial statements and MD&A up to one year from the date the Circular was filed on SEDAR. If you would like to receive a paper copy prior to the voting deadline, please follow the instructions provided in the Notice or make a request by no later than April 26, 2023 on TSX Trust's website (www.meetingdocuments.com/TSXT/slf), by contacting TSX Trust at 1-888-433-6443 (toll free in Canada and the United States) or 416-682-3801 (other countries) or email TSXT-fulfilment@tmx.com. A copy of the requested documents will be sent to you at no cost within three business days of your request. If you request a paper copy of any materials, you will not receive a new form of proxy, so you should keep the original form sent to you in order to vote.

**Questions?** 

If you have questions about notice and access or to request a paper copy of this Circular after the meeting at no charge, you can call TSX Trust at 1-888-433-6443 (toll free in Canada and the United States), or 416-682-3801 (other countries) or email TSXT-fulfilment@tmx.com.

4 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)
**Our 2023 annual meeting** 

**How to attend** 

Similar to last year, shareholders will have the opportunity to virtually attend the meeting online, ask questions and vote on a number of important matters by way of live webcast at https://web.lumiagm.com/451195677 in real time and regardless of their location.

Subject to ongoing developments related to the COVID-19 pandemic, and being permitted by public health guidelines, this year's annual meeting will also be held at Sun Life's head office at 1 York Street (at Harbour Street), 35th floor, Toronto, Ontario, Canada.

Registered shareholders and duly appointed proxyholders (including non-registered shareholders who have duly appointed themselves as proxyholder) that attend the meeting online will be able to vote by completing a ballot online during the meeting through the live webcast platform.

Guests (including non-registered shareholders who have not duly appointed themselves as proxyholder) can log into the meeting as set out below. Guests will be able to listen to the meeting but will not be able to vote during the meeting.

• Step 1: Log in online at https://web.lumiagm.com/451195677

We recommend that you log in at least one hour before the meeting starts.

• Step 2: Follow these instructions:

Registered shareholders: Click "I have a control number" and then enter your control number and password "sunlife2023" (case sensitive). Your control number is the number located on the form of proxy or in the email notification you received from TSX Trust. If you use your control number to log in to the meeting, any vote you cast at the meeting will revoke any proxy you previously submitted. If you do not wish revoke a previously submitted proxy, you should not vote during the meeting.

Duly appointed proxyholders: Click "I have a control number" and then enter your control number and password "sunlife2023" (case sensitive). Proxyholders who have been duly appointed and registered with TSX Trust as described in this Circular will receive a control number by email from TSX Trust after the proxy voting deadline has passed.

Guests: Click "Guest" and then complete the online form.

It is your responsibility to ensure internet connectivity for the duration of the meeting and you should allow ample time to log in to the meeting online before it begins. You will need the latest versions of Chrome, Safari, Edge or Firefox. **Please do not use Internet Explorer**. It is possible that internal network security protocols, including firewalls and VPN connections may block access to the webcast. If you are experiencing any difficulty connecting or watching the meeting, please ensure your VPN setting is disabled or use a computer on a network not restricted to security settings of your organization.

**Additional information and updates on how to attend the meeting will be made available on our website www.sunlife.com/2023agm. Please see Voting on pages 9 to 13 for further instructions. Shareholders are advised to check our website periodically in advance of the meeting for updates on in person attendance in light of the COVID-19 pandemic.**

MANAGEMENT INFORMATION CIRCULAR 2023 \| 5

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##### [**Table of Contents**](#toc)
**What the meeting will cover:** 

**Financial statements** 

You will receive the consolidated financial statements for the year ended December 31, 2022, the auditors' reports thereon and the actuary's report on the policy liabilities reported in the financial statements.

**Electing the directors (see pages 14 to 21)** 

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| |
|:---|
| You will vote on the election of 12 directors to serve on our board until the next annual meeting. All of the director nominees currently serve on our board. All 12 individuals are also nominated to serve as directors of Sun Life Assurance, a principal operating subsidiary |
| which we wholly own. **The board recommends voting FOR each nominee. If you do not specify in your proxy form or voting instruction form how you want to vote your shares, the persons named in the form of proxy will vote FOR electing each of the director nominees profiled below.** |

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We expect that all of the nominees will be able to serve as director but if for any reason a nominee is unable to serve, the persons named in the proxy form have the right to vote at their discretion for another nominee proposed according to the company's by-laws and applicable law.

***Our policy on majority voting*** 

The election of directors at the meeting is expected to be an uncontested election, meaning that the number of nominees will be equal to the number of directors to be elected. If a director receives more "withheld" than "for" votes in an uncontested election, he or she must tender a written offer to resign to the board. The board will accept the resignation within 90 days unless there are exceptional circumstances and will disclose the reasons for its decision in a news release. The director will not participate in these deliberations.

**Appointing the auditor** 

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| | |
|:---|:---|
| You will vote on the appointment of Deloitte LLP (Deloitte) as our auditor for 2023. Deloitte has been our auditor since SLF Inc. was incorporated in 1999 and has served as the auditor of Sun Life Assurance since 1875.<br>We maintain independence from our auditor through | ![LOGO](g431192g10a02.jpg)  |

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Audit Committee oversight, a robust regulatory framework in Canada, including the requirement to rotate the lead audit partner at least every five years, and Deloitte's own internal independence procedures which are designed to comply with Canadian Public Accountability Board and Public Company Accounting Oversight Board requirements. The Audit Committee pre-approves services provided by the auditors, and also conducts a formal review of the external auditors every year. We completed a comprehensive audit tender process in 2016 and have since carried out an annual review each year. It is our intention to carry out a more comprehensive review in 2024 following the completion of the initial adoption of International Financial Reporting Standards 17 (IFRS 17) Insurance Contracts and at a minimum every 5 years thereafter. **The board, on recommendation of the Audit Committee, recommends voting FOR Deloitte as our auditor. If you do not specify in your proxy form or voting instruction form how you want to vote your shares, the persons named in the form of proxy will vote *FOR* the appointment of Deloitte as our auditor.**

6 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)
***Auditor's fees*** 

The table below shows the fees relating to services provided by Deloitte for the past two years.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31 | ($millions) | ($millions) |
| &nbsp;&nbsp;&nbsp;&nbsp;For the year ended December 31 | 2022 | 2021 |
| &nbsp;&nbsp;&nbsp; Audit fees | 30.3 | 19.3 |
| &nbsp;&nbsp;&nbsp; Audit-related fees | 1.5 | 1.2 |
| &nbsp;&nbsp;&nbsp; Tax fees | 0.0 | 0.2 |
| &nbsp;&nbsp;&nbsp; All other fees | 0.2 | 0.2 |
| &nbsp;&nbsp;&nbsp; **Total** | **32.0** | **20.9** |

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*Audit fees* relate to professional services rendered by the auditors for the audit of our annual consolidated financial statements, the statements for our segregated funds and services related to statutory and regulatory filings. Audit fees of $21.9 (2021: $13.0) relates to the audit of the consolidated financial statements of SLF Inc. and its subsidiaries to support the audit opinion expressed in the independent auditor's report; the remaining audit fees of $8.4 (2021: $6.3) relate to audit of the statements for segregated funds and statutory and regulatory filing. The increase in audit fees in 2022 compared to 2021 is largely due to audit work in preparation for the adoption of new accounting standards, IFRS 17 Insurance and IFRS 9 Financial Instruments.

*Audit-related fees* include assurance services not directly related to performing the audit of the annual consolidated financial statements of the SLF Inc. These include internal control reviews, specified procedure audits and employee benefit plan audits.

*Tax fees* relate to tax compliance, tax advice and tax planning.

*All other fees* relate to products and services other than audit, audit-related and tax as described above. We have a policy that requires the Audit Committee to pre-approve any services that are to be provided by the external auditor. The committee has, subject to reporting requirements, pre-approved certain audit, audit-related and other permissible non-audit services that are consistent with maintaining the independence of the external auditor. You can find more information about this policy in our 2022 annual information form which is available on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov/edgar.shtml).

MANAGEMENT INFORMATION CIRCULAR 2023 \| 7

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##### [**Table of Contents**](#toc)
**Having a "say on pay"** 

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| | |
|:---|:---|
| You will participate in a non-binding advisory vote on our approach to executive compensation, giving you an opportunity to express your view on the board's approach to setting executive compensation, as described in the *Executive compensation* section starting on page 63. | ![LOGO](g431192g10a03.jpg)  |
| We will ask the shareholders to consider and vote on the | We will ask the shareholders to consider and vote on the |

---

following resolution. We will ask the shareholders to consider and vote on the following resolution. **The board recommends that shareholders vote *FOR* the resolution. If you do not specify in your proxy form or your voting instruction form how you want to vote your shares, the persons named in the form of proxy will vote *FOR* the resolution:**

"RESOLVED THAT on an advisory basis and not to diminish the role and responsibilities of the board of directors, the shareholders accept the approach to executive compensation disclosed in the Management Information Circular dated March 17, 2023 delivered in advance of the annual meeting of common shareholders on May 11, 2023."

One of the board's primary responsibilities is to ensure Sun Life is able to attract, retain and reward qualified executives. While shareholders will provide their collective views on our approach to executive compensation through the advisory vote, the directors are still fully responsible for their compensation decisions. We will file the results of the votes, including the advisory vote, on SEDAR (www.sedar.com) and publish them on our website (www.sunlife.com). If a significant number of shareholders oppose the "say on pay" resolution, the board will consult shareholders to understand their concerns, and then review our approach to executive compensation with their concerns in mind. Our executive officers have a material interest in the outcome of the vote because it may affect our process for determining their compensation. It is impossible, however, for us to describe the impact of the vote or the consultations before they have taken place.

**Considering the shareholder proposal (see page 48)** 

We received one shareholder proposal for consideration at the meeting from the Salal Foundation of 185-911 Yates St., Suite 561, Victoria, BC V8V 4Y9 represented by Investors for Paris Compliance. The shareholder proposal along with Sun Life's response is set out in schedule A beginning on page 119. **The board recommends that shareholders vote AGAINST the shareholder proposal*.* If you do not specify in your proxy form or your voting instruction form how you want to vote your shares, the persons named in the form of proxy will vote AGAINST the proposal.**

**Considering other business** 

You can vote on other items of business that are properly brought before the meeting. As of the date of this Circular, we were not aware of any other items to be brought forward.

8 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)
**Voting** 

**Who can vote** 

You are entitled to receive notice of and vote at our annual meeting of common shareholders if you were a shareholder of record as of 5:00 p.m. (Toronto time) on March 17, 2023

As of March 17, 2023, we had 586,748,683 common shares outstanding. Each common share carries one vote. We require a simple majority of votes cast for any of the items of business to be approved.

At least two persons holding, or representing by proxy, at least 25% of the shares entitled to vote constitute a quorum for the transaction of business at the meeting.

Common shares beneficially owned by the following entities and persons cannot be voted (except in circumstances approved by the Minister of Finance):

• the Government of Canada or any of its agencies

• the government of a province or any of its agencies

• the government of a foreign country or any political subdivision of a foreign country or any of its agencies

• any person who has acquired more than 10% of any class of our shares.

Also, if a person, or an entity controlled by a person, beneficially owns common shares that in total are more than 20% of the eligible votes that may be cast, that person or entity may not vote any of the common shares (unless permitted by the Minister of Finance).

To the best of our knowledge, no person or company beneficially owns or exercises control or direction over, directly or indirectly, more than 10% of the voting rights attached to our common shares.

MANAGEMENT INFORMATION CIRCULAR 2023 \| 9

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##### [**Table of Contents**](#toc)
**How to vote** 

You have **<u>three</u>** ways to vote:

1. by proxy;

2. by attending the meeting and voting by online ballot through the live webcast platform; or

3. by attending the meeting and voting in person (subject to ongoing developments related to the COVID-19 pandemic, and being permitted by public health guidelines).

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp; **Registered shareholders and**<br> **share ownership account participants** | **Non-registered shareholders** |
| &nbsp;&nbsp;&nbsp;&nbsp; You are registered shareholder if you hold a paper share certificate in your name or your shares are recorded electronically in the Direct Registration System (DRS) maintained by our transfer agent.<br>You are a share ownership account participant if you hold a share ownership statement. | You are a non-registered shareholder (also known as a beneficial shareholder) if your securities broker, clearing agency, financial institution, trustee or custodian or other intermediary (your nominee) holds your shares for you in a nominee account.<br>Non-Registered Holders who have not objected to their intermediary disclosing certain ownership information about themselves to the company are referred to as non-objecting beneficial owners or "NOBOs". The company has elected to send the proxy-related materials directly to the NOBOs.<br>|

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***Voting by proxy before the meeting*** 

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Registered shareholders and**<br> **share ownership account participants** | &nbsp;&nbsp;&nbsp; **Registered shareholders and**<br> **share ownership account participants** | &nbsp;&nbsp;&nbsp; **Non–registered shareholders** | &nbsp;&nbsp;&nbsp; **Non–registered shareholders** |
| &nbsp;&nbsp;&nbsp;&nbsp; You can provide your instructions in one of these ways: | &nbsp;&nbsp;&nbsp;&nbsp; You can provide your instructions in one of these ways: | &nbsp;&nbsp;&nbsp;&nbsp; You can provide your instructions in one of these ways: | &nbsp;&nbsp;&nbsp;&nbsp; You can provide your instructions in one of these ways: |
| ![LOGO](g431192g02y01.jpg) <br>| Mark, sign, date and return the proxy form in the envelope provided. | ![LOGO](g431192g02y01.jpg) | Mark, sign, date and return the voting instruction form in the envelope provided.<br>|
| ![LOGO](g431192g03t01.jpg)  | Mark, sign, date, scan and email both pages of the proxy form to proxyvote@tmx.com. | ![LOGO](g431192g01a01.jpg)  | (Canada only) Call 1-800-474-7493 (English) or 1-800-474-7501 (French); or (U.S. only) |
| <br> ![LOGO](g431192g01a01.jpg)  | <br> (Canada & U.S. only) Call 1-888-489-7352 from a touchtone telephone and follow the voice instructions. You will need your control number located on the form of proxy or in the email notification you received from our transfer agent.<br>| <br> ![LOGO](g431192g86a83.jpg)  | Call 1- 800-454-8683, from a touchtone telephone and follow the voice instructions. You will need your control number printed on the front of the voting instruction form.<br>Go to www.proxyvote.com and follow the instructions on screen. You will need your control number printed on the front of the voting instruction form provided.<br>Carefully follow the instructions on the voting instruction form your nominee provided with the notice of meeting. |
| ![LOGO](g431192g86a83.jpg)  | Go to www.meeting-vote.com and follow the instructions on screen. You will need your control number located on the form of proxy or in the email notification from our transfer agent. | <br> ![LOGO](g431192g86a83.jpg)  | Call 1- 800-454-8683, from a touchtone telephone and follow the voice instructions. You will need your control number printed on the front of the voting instruction form.<br>Go to www.proxyvote.com and follow the instructions on screen. You will need your control number printed on the front of the voting instruction form provided.<br>Carefully follow the instructions on the voting instruction form your nominee provided with the notice of meeting. |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> You can also find a blank form of proxy on TSX Trust's website at www.meetingdocuments.com/TSXT/slf. | &nbsp;&nbsp;&nbsp;&nbsp; <br> You can also find a blank form of proxy on TSX Trust's website at www.meetingdocuments.com/TSXT/slf. |  | Call 1- 800-454-8683, from a touchtone telephone and follow the voice instructions. You will need your control number printed on the front of the voting instruction form.<br>Go to www.proxyvote.com and follow the instructions on screen. You will need your control number printed on the front of the voting instruction form provided.<br>Carefully follow the instructions on the voting instruction form your nominee provided with the notice of meeting. |

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10 \| MANAGEMENT INFORMATION CIRCULAR 2023

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp; **If you did not receive a proxy form**<br> **with a control number** | **If you did not receive**<br> **a voting instruction form**<br> **with a control number** |
| &nbsp;&nbsp;&nbsp;&nbsp; To vote by proxy, **you will need a control number**.<br>If you did not receive a form of proxy or email notification from our transfer agent containing the **control number**, at least one business day prior to the meeting please:<br>&nbsp;&nbsp;&nbsp;&nbsp;• contact TSX Trust at 1 (866) 751-6315 (within North America) or 1 (647)-252-9650 (outside of North America), or<br> &nbsp;&nbsp;&nbsp;&nbsp;• complete a form online using the following link: https://www.tsxtrust.com/control-number-request to obtain your control number.<br>| To vote by proxy, **you will need a control number**.<br>If you did not receive a voting instruction form with a **control number**, please contact your nominee (i.e. your securities broker, clearing agency, financial institution, trustee or custodian or other intermediary).<br>|
| &nbsp;&nbsp;&nbsp; **If you change your mind** | **If you change your mind** |
| &nbsp;&nbsp;&nbsp;&nbsp; You can revoke instructions you have already provided by giving us new instructions.<br>Registered shareholders and share ownership account participants can download a blank proxy form from www.meetingdocuments.com/TSXT/slf and send a new proxy form in one of the following ways:<br>&nbsp;&nbsp;&nbsp;&nbsp;• complete and sign the proxy form with a later date than the one you previously sent, and deliver or deposit it to TSX Trust as described on the proxy form before 5:00 p.m. (Toronto time) on Tuesday, May 9, 2023.<br> &nbsp;&nbsp;&nbsp;&nbsp;• submit new voting instructions to TSX Trust by telephone or internet before 5:00 p.m. (Toronto time) on Tuesday, May 9, 2023.<br> &nbsp;&nbsp;&nbsp;&nbsp;• deliver or deposit a notice in writing with your new instructions signed by you, or your attorney as authorized by you in writing, to us before 5:00 p.m. (Toronto time) on Wednesday, May 10, 2023, or if the meeting is adjourned or postponed, before 5:00 p.m. (Toronto time) on the business day before the meeting is reconvened, at: SLF Inc., 1 York Street, 31st Floor, Toronto, Ontario, Canada M5J 0B6 Attention: Corporate Secretary.<br> &nbsp;&nbsp;&nbsp;&nbsp;• if you are attending the meeting in person, give your written instructions signed by you, or your attorney as authorized by you in writing, to the Chair of the meeting before the start of the meeting or before the meeting is reconvened.<br> &nbsp;&nbsp;&nbsp;&nbsp;• if you have followed the instructions for attending and voting at the meeting online, voting at the meeting online will revoke your previous instructions.<br>| You can send a new voting instruction form to your nominee. To allow your nominee time to act on your instructions, you should provide them your instructions at least seven days before the meeting.<br>|

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##### [**Table of Contents**](#toc)
***Voting during the meeting*** 

Shareholders will have the opportunity to virtually attend the meeting, ask questions and vote on a number of important matters by way of live webcast. Subject to ongoing developments related to the COVID-19 pandemic and being permitted by public health guidelines, this year's annual meeting will also be held at Sun Life's head office at 1 York Street (at Harbour Street), 35th floor, Toronto, Ontario, Canada. Attending the meeting, in person or online, gives you an opportunity to hear directly from management.

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|:---|:---|
| &nbsp;&nbsp;&nbsp; **Registered shareholders and**<br> **share ownership account participants** | **Non–registered shareholders** |
| &nbsp;&nbsp;&nbsp; **Voting at the virtual meeting - If you want to attend the meeting and vote your shares virtually:** | &nbsp;&nbsp;&nbsp; **Voting at the virtual meeting - If you want to attend the meeting and vote your shares virtually:** |
| &nbsp;&nbsp;&nbsp;&nbsp;• You will need a **control number** to log in if you intend to cast your vote virtually during the meeting. Your control number can be found on the form of proxy included with the notice of meeting. If you did not receive a proxy form with a control number, follow the instructions above on page 11.<br> &nbsp;&nbsp;&nbsp;&nbsp;• Do not complete or return the proxy form.<br> &nbsp;&nbsp;&nbsp;&nbsp;• You can also appoint another person to attend the meeting and vote your shares on your behalf (your proxyholder) by printing his or her name in the space provided on the proxy form and following the instructions on the proxy form.<br> &nbsp;&nbsp;&nbsp;&nbsp;• You or your proxyholder must also complete the additional step of registering the proxyholder by following the instructions below.<br> &nbsp;&nbsp;&nbsp;&nbsp;• Provided you or your proxyholder are connected to the internet and follow the instructions in this Circular, you or your proxyholder will be able to vote online in real time by completing an online ballot through the live webcast platform.<br>| • You will need a **control number** to log in if you intend to cast your vote virtually during the meeting. The control number on your voting instruction form cannot be used to vote virtually at the meeting.<br> • To obtain a new control number:<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• You must appoint yourself or another person as proxyholder by printing your or their name in the space provided on the voting instruction form and then following your nominee's instructions for returning the form. If you did not receive a voting instruction form follow the instructions above on page 11.<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• You or your proxyholder must also complete the additional step of registering the proxyholder by following the instructions below to obtain a new control number. Non-registered shareholders who have not duly appointed themselves as proxyholder will not be able to vote at the meeting virtually but will be able to participate as a guest.<br> • Provided you or your proxyholder are connected to the internet and follow the instructions in this Circular, you or your proxyholder will be able to vote online in real time by completing an online ballot through the live webcast platform.<br>|
| &nbsp;&nbsp;&nbsp; **Registering the proxyholder to obtain a control number** | &nbsp;&nbsp;&nbsp; **Registering the proxyholder to obtain a control number** |
| &nbsp;&nbsp;&nbsp;&nbsp; You or your proxyholder must also complete the additional step of registering the proxyholder by:<br>&nbsp;&nbsp;&nbsp;&nbsp;• calling TSX Trust at 1-866-751-6315 (within North America) or (647)-252-9650 (outside of North America); or<br> &nbsp;&nbsp;&nbsp;&nbsp;• completing a form online using the following link: https://www.tsxtrust.com/control-number-request by no later than 5:00 p.m. (Toronto time) on Tuesday, May 9, 2023. **Failing to register your proxyholder with TSX Trust will result in the proxyholder not receiving a control number, which is required to vote at the meeting.** | &nbsp;&nbsp;&nbsp;&nbsp; You or your proxyholder must also complete the additional step of registering the proxyholder by:<br>&nbsp;&nbsp;&nbsp;&nbsp;• calling TSX Trust at 1-866-751-6315 (within North America) or (647)-252-9650 (outside of North America); or<br> &nbsp;&nbsp;&nbsp;&nbsp;• completing a form online using the following link: https://www.tsxtrust.com/control-number-request by no later than 5:00 p.m. (Toronto time) on Tuesday, May 9, 2023. **Failing to register your proxyholder with TSX Trust will result in the proxyholder not receiving a control number, which is required to vote at the meeting.** |
| &nbsp;&nbsp;&nbsp; **Voting in person - If you want to attend the meeting and vote your shares in person, please check our website www.sunlife.com/2023agm periodically in advance of the meeting for any updates on in person attendance in light of the COVID-19 pandemic.** | &nbsp;&nbsp;&nbsp; **Voting in person - If you want to attend the meeting and vote your shares in person, please check our website www.sunlife.com/2023agm periodically in advance of the meeting for any updates on in person attendance in light of the COVID-19 pandemic.** |
| &nbsp;&nbsp;&nbsp;&nbsp;• Do not complete or return the proxy form.<br> &nbsp;&nbsp;&nbsp;&nbsp;• When you arrive at the meeting, register with a representative of our transfer agent, TSX Trust, to receive a ballot.<br>| • Appoint yourself as proxyholder by printing your name in the space provided on the voting instruction form. Then follow your nominee's instructions for returning the form.<br> • When you arrive at the meeting, register with a representative of our transfer agent, TSX Trust, to receive a ballot.<br>|

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##### [**Table of Contents**](#toc)
Voting by proxy is the easiest way to vote because you are giving someone else the authority to attend the meeting and vote your shares for you. If you specify on your proxy form or in your voting instructions how you want to vote on a particular matter, then your proxyholder must vote your shares according to your instructions.

The enclosed proxy form names Scott F. Powers, Chair of the Board (Board Chair), or in his absence, M. Marianne Harris, Chair of the Governance, Investment & Conduct Review Committee, or in her absence, another director appointed by the board, as your proxyholder to vote your shares at the meeting according to your instructions.

If you appoint them as proxyholders but do not specify on the proxy form how you want to vote your shares, your shares will be voted:

•  ***FOR*** electing each of the director nominees who are listed in the proxy form and Circular

•  ***FOR*** appointing Deloitte as auditor

•  ***FOR*** the advisory resolution accepting our approach to executive compensation

•  ***AGAINST*** the shareholder proposal.

**You can appoint another person to vote your shares by printing his or her name in the space provided on the proxy form or voting instruction form and registering them with TSX Trust, as described in the "Voting during the meeting" section above.** This person does not need to be a shareholder, but your vote can only be counted if he or she participates in the meeting and votes for you. Regardless of who you appoint as your proxyholder, if you do not specify how you want to vote your shares, your proxyholder can vote as he or she sees fit. Your proxyholder can also vote as he or she decides on any other matters that may properly come before the meeting, and on any amendments or variations to the items listed above, whether or not the amendment, variation or other matter that comes before the meeting is routine or contested (as permitted by law).

**TSX Trust must receive your voting instructions by 5:00 p.m. (Toronto time) on Tuesday, May 9, 2023 to have your vote recorded.** If the meeting is adjourned or postponed, TSX Trust must receive your voting instructions by 5:00 p.m. (Toronto time) on the date that is two business days before the meeting is reconvened.

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| &nbsp;&nbsp;&nbsp;&nbsp; **You can call TSX Trust or one of its agents directly at the following numbers:** | &nbsp;&nbsp;&nbsp;&nbsp; **You can call TSX Trust or one of its agents directly at the following numbers:** |
| &nbsp;&nbsp;&nbsp;&nbsp; Canada and the United States: | 1-877-224-1760 |
| &nbsp;&nbsp;&nbsp;&nbsp; United Kingdom, Republic of Ireland, Channel<br> Islands and Isle of Man: | + 44 (0) 345-602-1587 |
| &nbsp;&nbsp;&nbsp;&nbsp; Philippines: | 632-5318-8567 (Metro Manila)<br> 1-800-1-888-2422 (Provinces)  |
| &nbsp;&nbsp;&nbsp;&nbsp; Hong Kong: | 852-2862-8555 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other countries: | 416-682-3865 |

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**Processing the votes** 

TSX Trust counts and tabulates the votes on our behalf. Individual shareholder votes are kept confidential and voting instructions are only communicated to management if it is clear that the shareholder wants to communicate directly with management, or when the law requires it.

We will file the voting results on SEDAR (www.sedar.com) and publish them on our website (www.sunlife.com).

**Solicitation of proxies** 

We solicit proxies by mail, but our outside agency, Morrow Sodali (Canada) Ltd. may also contact you by mail, email or phone to ask you to vote. SLF Inc. pays for the costs of the proxy solicitation. We expect to pay approximately $40,000 to Morrow Sodali (Canada) Ltd. for their services, plus any related expenses. You can reach them toll-free at 1-888-777-1546 or by email at inquiries@morrowsodali.com.

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##### [**Table of Contents**](#toc)
**Director nominees at a glance** 

At the 2023 annual meeting you'll be asked to elect 12 directors to hold office for a term ending on the conclusion of the next annual meeting. All of the 12 nominees currently serve on our board. Laurie G. Hylton and Joseph M. Natale are standing for election by the shareholders for the first time at the meeting.

Board composition and size are reviewed every year (see more about the selection process on page 35).

![LOGO](g431192g22t87.jpg)

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##### [**Table of Contents**](#toc)
**Director nominee profiles** 

The following profiles provide information about each of the director nominees, including when they joined our board, their business experience, their committee memberships, their attendance at board and committee meetings in 2022, the level of support received from shareholders at our 2022 annual meeting, and other public company directorships held in the last five years.

**The board recommends that shareholders vote *for* electing each of the director nominees profiled below.** 

***Share ownership***

The director nominee profiles also include information about the value of their holdings of SLF Inc. common shares and deferred share units (DSUs). A DSU is equal in value to a common share but cannot be redeemed until a director leaves the board. Common shares and DSUs count towards the achievement of our share ownership guidelines for directors which each director is expected to meet within five years of joining the board. The director share ownership guidelines were revised in 2022 to increase the share ownership guideline effective January 1, 2023 to $805,000 in common shares and/or DSUs. New directors must achieve the guideline within five years of joining the board and existing directors have an additional year to achieve the increased guideline. For director nominees who have not achieved the guideline, we determine if they are "on target" by calculating the number of common shares and DSUs they will hold by their achievement due dates based on the form of remuneration they have individually elected. For this purpose we assume that the share price and dividend rate remain constant until the applicable achievement due date. The amounts shown in the profiles are as of February 28, 2023 and February 28, 2022 when the closing price of our common shares on the Toronto Stock Exchange (TSX) was $65.94 and $66.66, respectively. You can find additional information about our director compensation program and share ownership guidelines starting on pages 58 to 62.

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| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | <br> Mr. Chopra is a corporate director and most recently served as the President and Chief Executive Officer of Canada Post Corporation from 2011 to 2018. He has more than 30 years of global experience in the financial services, technology, logistics and supply-chain industries. Prior to joining Canada Post, he held various senior positions during his 23-year career with Pitney Bowes Inc., a NYSE-traded technology company known for postage meters, mail automation and location intelligence services, including President & Chief Executive Officer, Canada & Latin America, President, Asia Pacific & Middle East and Vice-President & Chief Financial Officer, Europe, Africa & Middle East. Mr. Chopra has previously served on the boards of Canada Post Corporation, Purolator Inc., SCI Group, the Canada Post Community Foundation, the Toronto Region Board of Trade and the Conference Board of Canada. He is a Fellow of the Institute of Chartered Professional Accountants of Canada and holds a Bachelor's degree in Commerce (Honours) and a Post Graduate Diploma in Business Management (PGDBM). | <br> Mr. Chopra is a corporate director and most recently served as the President and Chief Executive Officer of Canada Post Corporation from 2011 to 2018. He has more than 30 years of global experience in the financial services, technology, logistics and supply-chain industries. Prior to joining Canada Post, he held various senior positions during his 23-year career with Pitney Bowes Inc., a NYSE-traded technology company known for postage meters, mail automation and location intelligence services, including President & Chief Executive Officer, Canada & Latin America, President, Asia Pacific & Middle East and Vice-President & Chief Financial Officer, Europe, Africa & Middle East. Mr. Chopra has previously served on the boards of Canada Post Corporation, Purolator Inc., SCI Group, the Canada Post Community Foundation, the Toronto Region Board of Trade and the Conference Board of Canada. He is a Fellow of the Institute of Chartered Professional Accountants of Canada and holds a Bachelor's degree in Commerce (Honours) and a Post Graduate Diploma in Business Management (PGDBM). | <br> Mr. Chopra is a corporate director and most recently served as the President and Chief Executive Officer of Canada Post Corporation from 2011 to 2018. He has more than 30 years of global experience in the financial services, technology, logistics and supply-chain industries. Prior to joining Canada Post, he held various senior positions during his 23-year career with Pitney Bowes Inc., a NYSE-traded technology company known for postage meters, mail automation and location intelligence services, including President & Chief Executive Officer, Canada & Latin America, President, Asia Pacific & Middle East and Vice-President & Chief Financial Officer, Europe, Africa & Middle East. Mr. Chopra has previously served on the boards of Canada Post Corporation, Purolator Inc., SCI Group, the Canada Post Community Foundation, the Toronto Region Board of Trade and the Conference Board of Canada. He is a Fellow of the Institute of Chartered Professional Accountants of Canada and holds a Bachelor's degree in Commerce (Honours) and a Post Graduate Diploma in Business Management (PGDBM). | <br> Mr. Chopra is a corporate director and most recently served as the President and Chief Executive Officer of Canada Post Corporation from 2011 to 2018. He has more than 30 years of global experience in the financial services, technology, logistics and supply-chain industries. Prior to joining Canada Post, he held various senior positions during his 23-year career with Pitney Bowes Inc., a NYSE-traded technology company known for postage meters, mail automation and location intelligence services, including President & Chief Executive Officer, Canada & Latin America, President, Asia Pacific & Middle East and Vice-President & Chief Financial Officer, Europe, Africa & Middle East. Mr. Chopra has previously served on the boards of Canada Post Corporation, Purolator Inc., SCI Group, the Canada Post Community Foundation, the Toronto Region Board of Trade and the Conference Board of Canada. He is a Fellow of the Institute of Chartered Professional Accountants of Canada and holds a Bachelor's degree in Commerce (Honours) and a Post Graduate Diploma in Business Management (PGDBM). | <br> Mr. Chopra is a corporate director and most recently served as the President and Chief Executive Officer of Canada Post Corporation from 2011 to 2018. He has more than 30 years of global experience in the financial services, technology, logistics and supply-chain industries. Prior to joining Canada Post, he held various senior positions during his 23-year career with Pitney Bowes Inc., a NYSE-traded technology company known for postage meters, mail automation and location intelligence services, including President & Chief Executive Officer, Canada & Latin America, President, Asia Pacific & Middle East and Vice-President & Chief Financial Officer, Europe, Africa & Middle East. Mr. Chopra has previously served on the boards of Canada Post Corporation, Purolator Inc., SCI Group, the Canada Post Community Foundation, the Toronto Region Board of Trade and the Conference Board of Canada. He is a Fellow of the Institute of Chartered Professional Accountants of Canada and holds a Bachelor's degree in Commerce (Honours) and a Post Graduate Diploma in Business Management (PGDBM). | <br> Mr. Chopra is a corporate director and most recently served as the President and Chief Executive Officer of Canada Post Corporation from 2011 to 2018. He has more than 30 years of global experience in the financial services, technology, logistics and supply-chain industries. Prior to joining Canada Post, he held various senior positions during his 23-year career with Pitney Bowes Inc., a NYSE-traded technology company known for postage meters, mail automation and location intelligence services, including President & Chief Executive Officer, Canada & Latin America, President, Asia Pacific & Middle East and Vice-President & Chief Financial Officer, Europe, Africa & Middle East. Mr. Chopra has previously served on the boards of Canada Post Corporation, Purolator Inc., SCI Group, the Canada Post Community Foundation, the Toronto Region Board of Trade and the Conference Board of Canada. He is a Fellow of the Institute of Chartered Professional Accountants of Canada and holds a Bachelor's degree in Commerce (Honours) and a Post Graduate Diploma in Business Management (PGDBM). |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships | Other public company directorships | Other public company directorships |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | Board | 12 of 13<sup>1</sup> | 92.3% | The Descartes Systems Group Inc. | The Descartes Systems Group Inc. | 2020 – present |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | <br> Audit | <br> 5 of 5 | <br> 100% | <br> Celestica Inc. | <br> Celestica Inc. | <br> 2018 – present |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | <br> Governance, Investment & Conduct Review | <br> 7 of 7 | <br> 100% | <br> The North West Company Inc. | <br> The North West Company Inc. | <br> 2018 – present |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | <br> 2022 Annual Meeting votes in favour: 99.0% | <br> 2022 Annual Meeting votes in favour: 99.0% | <br> 2022 Annual Meeting votes in favour: 99.0% | <br> 2022 Annual Meeting votes in favour: 99.0% | <br> 2022 Annual Meeting votes in favour: 99.0% |  |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |  |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | Year | Common<br>shares | DSUs | Total common<br>shares and DSUs | Total<br>value | Share ownership guideline/ target date |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | <br> 2023 | <br> 250 | <br> 6622 | <br> 6872 | <br> $453140 | <br> On target for <br> May 5, 2027  |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | <br> 2022 | <br> 250 | <br> 2451 | <br> 2701 | <br> $180049 | <br> On target for <br> May 5, 2027  |
| <br> ![LOGO](g431192g32m44.jpg) <br>**Deepak Chopra,**<br> **FCPA**<br> Toronto, ON, Canada<br>Director since May 2021<br>**Independent**<br>Age: 59<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Governance, Investment & Conduct Review | <br> Change | <br> 0 | <br> 4171 | <br> 4171 | <br> $273091 |  |
|  | <br> <sup>1</sup> Mr. Chopra was unable to attend a board meeting due to a commitment made prior to his joining the board. | <br> <sup>1</sup> Mr. Chopra was unable to attend a board meeting due to a commitment made prior to his joining the board. | <br> <sup>1</sup> Mr. Chopra was unable to attend a board meeting due to a commitment made prior to his joining the board. | <br> <sup>1</sup> Mr. Chopra was unable to attend a board meeting due to a commitment made prior to his joining the board. | <br> <sup>1</sup> Mr. Chopra was unable to attend a board meeting due to a commitment made prior to his joining the board. | <br> <sup>1</sup> Mr. Chopra was unable to attend a board meeting due to a commitment made prior to his joining the board. |

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| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | <br> Ms. Coyles is a corporate director. Her background is as a strategic consultant and advisor who has worked with a diverse clientele across North America, including retail, consumer distribution, private equity and business consulting organizations. She was previously Chief Strategic Officer at LoyaltyOne Co. from 2008 to 2012 and a partner at McKinsey & Company Canada from 2000 to 2008. In addition to the public company boards listed below, Ms. Coyles serves on the board of The Earth Rangers Foundation. She holds a Master in Public Policy degree. Ms. Coyles received the ICD.D designation from the Institute of Corporate Directors and the CERT Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University. | <br> Ms. Coyles is a corporate director. Her background is as a strategic consultant and advisor who has worked with a diverse clientele across North America, including retail, consumer distribution, private equity and business consulting organizations. She was previously Chief Strategic Officer at LoyaltyOne Co. from 2008 to 2012 and a partner at McKinsey & Company Canada from 2000 to 2008. In addition to the public company boards listed below, Ms. Coyles serves on the board of The Earth Rangers Foundation. She holds a Master in Public Policy degree. Ms. Coyles received the ICD.D designation from the Institute of Corporate Directors and the CERT Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University. | <br> Ms. Coyles is a corporate director. Her background is as a strategic consultant and advisor who has worked with a diverse clientele across North America, including retail, consumer distribution, private equity and business consulting organizations. She was previously Chief Strategic Officer at LoyaltyOne Co. from 2008 to 2012 and a partner at McKinsey & Company Canada from 2000 to 2008. In addition to the public company boards listed below, Ms. Coyles serves on the board of The Earth Rangers Foundation. She holds a Master in Public Policy degree. Ms. Coyles received the ICD.D designation from the Institute of Corporate Directors and the CERT Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University. | <br> Ms. Coyles is a corporate director. Her background is as a strategic consultant and advisor who has worked with a diverse clientele across North America, including retail, consumer distribution, private equity and business consulting organizations. She was previously Chief Strategic Officer at LoyaltyOne Co. from 2008 to 2012 and a partner at McKinsey & Company Canada from 2000 to 2008. In addition to the public company boards listed below, Ms. Coyles serves on the board of The Earth Rangers Foundation. She holds a Master in Public Policy degree. Ms. Coyles received the ICD.D designation from the Institute of Corporate Directors and the CERT Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University. | <br> Ms. Coyles is a corporate director. Her background is as a strategic consultant and advisor who has worked with a diverse clientele across North America, including retail, consumer distribution, private equity and business consulting organizations. She was previously Chief Strategic Officer at LoyaltyOne Co. from 2008 to 2012 and a partner at McKinsey & Company Canada from 2000 to 2008. In addition to the public company boards listed below, Ms. Coyles serves on the board of The Earth Rangers Foundation. She holds a Master in Public Policy degree. Ms. Coyles received the ICD.D designation from the Institute of Corporate Directors and the CERT Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University. | <br> Ms. Coyles is a corporate director. Her background is as a strategic consultant and advisor who has worked with a diverse clientele across North America, including retail, consumer distribution, private equity and business consulting organizations. She was previously Chief Strategic Officer at LoyaltyOne Co. from 2008 to 2012 and a partner at McKinsey & Company Canada from 2000 to 2008. In addition to the public company boards listed below, Ms. Coyles serves on the board of The Earth Rangers Foundation. She holds a Master in Public Policy degree. Ms. Coyles received the ICD.D designation from the Institute of Corporate Directors and the CERT Certificate in Cybersecurity Oversight, issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University. |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships | Other public company directorships | Other public company directorships |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | <br> Board | <br> 13 of 13 | <br> 100% | <br> Corus Entertainment Inc. | <br> Corus Entertainment Inc. | <br> 2020 – present |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | <br> Governance, Investment & Conduct Review | <br> 7 of 7 | <br> 100% | <br> Metro Inc. | <br> Metro Inc. | <br> 2015 – present |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | <br> Management Resources<sup>1</sup> | <br> 5 of 5 | <br> 100% | <br> Hudson's Bay Company | <br> Hudson's Bay Company | <br> 2019 – 2020 |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% |  |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |  |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | Year | Common<br>shares | DSUs | Total common<br>shares and DSUs | Total<br>value | Share <br> ownership <br> guideline/ <br> target date  |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | <br> 2023 | <br> 12800 | <br> 15094 | <br> 27894 | <br> $1839330 | <br> Meets  |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | <br> 2022 | <br> 12000 | <br> 12191 | 24191 | $1612572 |  |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | <br> Change | <br> 800 | <br> 2903 | <br> 3703 | <br> $226758 |  |
| <br> ![LOGO](g431192g35k63.jpg) <br>**Stephanie L. Coyles**<br> Toronto, ON, Canada<br>Director since January 2017<br>**Independent**<br>Age: 55<br><u>Areas of expertise:</u><br>• client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources (Chair)<sup>1</sup><br> • Governance, Investment & Conduct Review | <br> <sup>1</sup> Ms. Coyles became Chair of the Management Resources Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Coyles became Chair of the Management Resources Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Coyles became Chair of the Management Resources Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Coyles became Chair of the Management Resources Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Coyles became Chair of the Management Resources Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Coyles became Chair of the Management Resources Committee on May 11, 2022. |

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| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | <br> Mr. Gupta is a corporate director. He is also Chair of Mercer Limited. During his 40-year career in the UK insurance and financial services industry, he has held a number of senior executive, advisor and actuarial positions. From 2010 to 2013, he was an advisor to the Group Chief Executive Officer of Old Mutual plc. Prior to this he held various senior positions with the Pearl Group plc (now Phoenix Group Holdings plc), Kinnect of Lloyd's of London, CGU plc (now part of Aviva plc), Scottish Amicable Life Assurance Company (now part of Prudential) and Tillinghast, Nelson &Warren Inc. (now part of Willis Towers Watson plc). Mr. Gupta is a Fellow of the Institute and Faculty of Actuaries. He is a Chairman of Evalue Ltd. and a director of EV Risk Ratings Limited. From 2013 to 2019, Mr. Gupta was a director of New Ireland Assurance Company plc. He was involved in the UK public sector and served as a trustee of the Ethical Journalism Network from 2014 to 2021, served on the Actuarial Council and Codes and Standards Committee of the Financial Reporting Council in the U.K. between 2012 and 2018, was Chair of the Defined Benefits Taskforce of the Pensions and Lifetime Savings Association from 2016 to 2017 and Joint Deputy Chair of the Procyclicality Working Group of the Bank of England from 2012 to 2014. Mr. Gupta holds a Master of Business Administration degree. | <br> Mr. Gupta is a corporate director. He is also Chair of Mercer Limited. During his 40-year career in the UK insurance and financial services industry, he has held a number of senior executive, advisor and actuarial positions. From 2010 to 2013, he was an advisor to the Group Chief Executive Officer of Old Mutual plc. Prior to this he held various senior positions with the Pearl Group plc (now Phoenix Group Holdings plc), Kinnect of Lloyd's of London, CGU plc (now part of Aviva plc), Scottish Amicable Life Assurance Company (now part of Prudential) and Tillinghast, Nelson &Warren Inc. (now part of Willis Towers Watson plc). Mr. Gupta is a Fellow of the Institute and Faculty of Actuaries. He is a Chairman of Evalue Ltd. and a director of EV Risk Ratings Limited. From 2013 to 2019, Mr. Gupta was a director of New Ireland Assurance Company plc. He was involved in the UK public sector and served as a trustee of the Ethical Journalism Network from 2014 to 2021, served on the Actuarial Council and Codes and Standards Committee of the Financial Reporting Council in the U.K. between 2012 and 2018, was Chair of the Defined Benefits Taskforce of the Pensions and Lifetime Savings Association from 2016 to 2017 and Joint Deputy Chair of the Procyclicality Working Group of the Bank of England from 2012 to 2014. Mr. Gupta holds a Master of Business Administration degree. | <br> Mr. Gupta is a corporate director. He is also Chair of Mercer Limited. During his 40-year career in the UK insurance and financial services industry, he has held a number of senior executive, advisor and actuarial positions. From 2010 to 2013, he was an advisor to the Group Chief Executive Officer of Old Mutual plc. Prior to this he held various senior positions with the Pearl Group plc (now Phoenix Group Holdings plc), Kinnect of Lloyd's of London, CGU plc (now part of Aviva plc), Scottish Amicable Life Assurance Company (now part of Prudential) and Tillinghast, Nelson &Warren Inc. (now part of Willis Towers Watson plc). Mr. Gupta is a Fellow of the Institute and Faculty of Actuaries. He is a Chairman of Evalue Ltd. and a director of EV Risk Ratings Limited. From 2013 to 2019, Mr. Gupta was a director of New Ireland Assurance Company plc. He was involved in the UK public sector and served as a trustee of the Ethical Journalism Network from 2014 to 2021, served on the Actuarial Council and Codes and Standards Committee of the Financial Reporting Council in the U.K. between 2012 and 2018, was Chair of the Defined Benefits Taskforce of the Pensions and Lifetime Savings Association from 2016 to 2017 and Joint Deputy Chair of the Procyclicality Working Group of the Bank of England from 2012 to 2014. Mr. Gupta holds a Master of Business Administration degree. | <br> Mr. Gupta is a corporate director. He is also Chair of Mercer Limited. During his 40-year career in the UK insurance and financial services industry, he has held a number of senior executive, advisor and actuarial positions. From 2010 to 2013, he was an advisor to the Group Chief Executive Officer of Old Mutual plc. Prior to this he held various senior positions with the Pearl Group plc (now Phoenix Group Holdings plc), Kinnect of Lloyd's of London, CGU plc (now part of Aviva plc), Scottish Amicable Life Assurance Company (now part of Prudential) and Tillinghast, Nelson &Warren Inc. (now part of Willis Towers Watson plc). Mr. Gupta is a Fellow of the Institute and Faculty of Actuaries. He is a Chairman of Evalue Ltd. and a director of EV Risk Ratings Limited. From 2013 to 2019, Mr. Gupta was a director of New Ireland Assurance Company plc. He was involved in the UK public sector and served as a trustee of the Ethical Journalism Network from 2014 to 2021, served on the Actuarial Council and Codes and Standards Committee of the Financial Reporting Council in the U.K. between 2012 and 2018, was Chair of the Defined Benefits Taskforce of the Pensions and Lifetime Savings Association from 2016 to 2017 and Joint Deputy Chair of the Procyclicality Working Group of the Bank of England from 2012 to 2014. Mr. Gupta holds a Master of Business Administration degree. | <br> Mr. Gupta is a corporate director. He is also Chair of Mercer Limited. During his 40-year career in the UK insurance and financial services industry, he has held a number of senior executive, advisor and actuarial positions. From 2010 to 2013, he was an advisor to the Group Chief Executive Officer of Old Mutual plc. Prior to this he held various senior positions with the Pearl Group plc (now Phoenix Group Holdings plc), Kinnect of Lloyd's of London, CGU plc (now part of Aviva plc), Scottish Amicable Life Assurance Company (now part of Prudential) and Tillinghast, Nelson &Warren Inc. (now part of Willis Towers Watson plc). Mr. Gupta is a Fellow of the Institute and Faculty of Actuaries. He is a Chairman of Evalue Ltd. and a director of EV Risk Ratings Limited. From 2013 to 2019, Mr. Gupta was a director of New Ireland Assurance Company plc. He was involved in the UK public sector and served as a trustee of the Ethical Journalism Network from 2014 to 2021, served on the Actuarial Council and Codes and Standards Committee of the Financial Reporting Council in the U.K. between 2012 and 2018, was Chair of the Defined Benefits Taskforce of the Pensions and Lifetime Savings Association from 2016 to 2017 and Joint Deputy Chair of the Procyclicality Working Group of the Bank of England from 2012 to 2014. Mr. Gupta holds a Master of Business Administration degree. | <br> Mr. Gupta is a corporate director. He is also Chair of Mercer Limited. During his 40-year career in the UK insurance and financial services industry, he has held a number of senior executive, advisor and actuarial positions. From 2010 to 2013, he was an advisor to the Group Chief Executive Officer of Old Mutual plc. Prior to this he held various senior positions with the Pearl Group plc (now Phoenix Group Holdings plc), Kinnect of Lloyd's of London, CGU plc (now part of Aviva plc), Scottish Amicable Life Assurance Company (now part of Prudential) and Tillinghast, Nelson &Warren Inc. (now part of Willis Towers Watson plc). Mr. Gupta is a Fellow of the Institute and Faculty of Actuaries. He is a Chairman of Evalue Ltd. and a director of EV Risk Ratings Limited. From 2013 to 2019, Mr. Gupta was a director of New Ireland Assurance Company plc. He was involved in the UK public sector and served as a trustee of the Ethical Journalism Network from 2014 to 2021, served on the Actuarial Council and Codes and Standards Committee of the Financial Reporting Council in the U.K. between 2012 and 2018, was Chair of the Defined Benefits Taskforce of the Pensions and Lifetime Savings Association from 2016 to 2017 and Joint Deputy Chair of the Procyclicality Working Group of the Bank of England from 2012 to 2014. Mr. Gupta holds a Master of Business Administration degree. |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources |  |  |  |  |  |  |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships | Other public company directorships | Other public company directorships |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | <br> Board | <br> 13 of 13 | <br> 100% | <br> JPMorgan European Discovery<br>Trust plc (formerly JPMorgan<br>European Smaller Companies<br>Trust plc) | <br> JPMorgan European Discovery<br>Trust plc (formerly JPMorgan<br>European Smaller Companies<br>Trust plc) | <br> 2013 – present |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | <br> Management Resources | <br> 5 of 5 | <br> 100% |  |  |  |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | <br> Risk | <br> 4 of 4 | <br> 100% |  |  |  |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% |  |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources |  |  |  |  |  |  |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |  |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | Year | Common<br>shares | DSUs | Total common<br>shares and DSUs | Total<br>value | Share <br> ownership <br> guideline/ <br> target date  |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | <br> 2023 | <br> 1481 | <br> 18226 | <br> 19707 | <br> $1299480 | <br> Meets  |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | <br> 2022 | <br> 1481 | <br> 12796 | <br> 14277 | <br> $951705 |  |
| <br>![LOGO](g431192g19b26.jpg) <br>**Ashok K. Gupta, FFA**<br> London, England<br>Director since May 2018<br>**Independent**<br>Age: 68<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Risk (Chair)<br> • Management Resources | <br> Change | <br> 0 | <br> 5430 | <br> 5430 | <br> $347775 |  |

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16 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)

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| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br> Ms. Harris is a corporate director. She was Managing Director and President, Corporate and Investment Banking, Merrill Lynch Canada, Inc., an international banking and financial services organization, until 2013. She held progressively senior positions during her 13-year career with Merrill Lynch and affiliated companies in Canada and the U.S., including President, Global Markets and Investment Banking, Canada, Head of Financial Institutions Group, Americas and Head of Financial Institutions, Canada. Before joining Merrill Lynch, Ms. Harris held various investment banking positions with RBC Capital Markets from 1984 to 2000, including Head of the Financial Institutions Group. She is a director of the Public Sector Pension Investment Board, a director of President's Choice Bank and a member of the Dean's Advisory Council for the Schulich School of Business, and a member of the Advisory Council for the Hennick Centre for Business and Law. Ms. Harris holds a Master of Business Administration degree and a Juris Doctorate. | <br> Ms. Harris is a corporate director. She was Managing Director and President, Corporate and Investment Banking, Merrill Lynch Canada, Inc., an international banking and financial services organization, until 2013. She held progressively senior positions during her 13-year career with Merrill Lynch and affiliated companies in Canada and the U.S., including President, Global Markets and Investment Banking, Canada, Head of Financial Institutions Group, Americas and Head of Financial Institutions, Canada. Before joining Merrill Lynch, Ms. Harris held various investment banking positions with RBC Capital Markets from 1984 to 2000, including Head of the Financial Institutions Group. She is a director of the Public Sector Pension Investment Board, a director of President's Choice Bank and a member of the Dean's Advisory Council for the Schulich School of Business, and a member of the Advisory Council for the Hennick Centre for Business and Law. Ms. Harris holds a Master of Business Administration degree and a Juris Doctorate. | <br> Ms. Harris is a corporate director. She was Managing Director and President, Corporate and Investment Banking, Merrill Lynch Canada, Inc., an international banking and financial services organization, until 2013. She held progressively senior positions during her 13-year career with Merrill Lynch and affiliated companies in Canada and the U.S., including President, Global Markets and Investment Banking, Canada, Head of Financial Institutions Group, Americas and Head of Financial Institutions, Canada. Before joining Merrill Lynch, Ms. Harris held various investment banking positions with RBC Capital Markets from 1984 to 2000, including Head of the Financial Institutions Group. She is a director of the Public Sector Pension Investment Board, a director of President's Choice Bank and a member of the Dean's Advisory Council for the Schulich School of Business, and a member of the Advisory Council for the Hennick Centre for Business and Law. Ms. Harris holds a Master of Business Administration degree and a Juris Doctorate. | <br> Ms. Harris is a corporate director. She was Managing Director and President, Corporate and Investment Banking, Merrill Lynch Canada, Inc., an international banking and financial services organization, until 2013. She held progressively senior positions during her 13-year career with Merrill Lynch and affiliated companies in Canada and the U.S., including President, Global Markets and Investment Banking, Canada, Head of Financial Institutions Group, Americas and Head of Financial Institutions, Canada. Before joining Merrill Lynch, Ms. Harris held various investment banking positions with RBC Capital Markets from 1984 to 2000, including Head of the Financial Institutions Group. She is a director of the Public Sector Pension Investment Board, a director of President's Choice Bank and a member of the Dean's Advisory Council for the Schulich School of Business, and a member of the Advisory Council for the Hennick Centre for Business and Law. Ms. Harris holds a Master of Business Administration degree and a Juris Doctorate. | <br> Ms. Harris is a corporate director. She was Managing Director and President, Corporate and Investment Banking, Merrill Lynch Canada, Inc., an international banking and financial services organization, until 2013. She held progressively senior positions during her 13-year career with Merrill Lynch and affiliated companies in Canada and the U.S., including President, Global Markets and Investment Banking, Canada, Head of Financial Institutions Group, Americas and Head of Financial Institutions, Canada. Before joining Merrill Lynch, Ms. Harris held various investment banking positions with RBC Capital Markets from 1984 to 2000, including Head of the Financial Institutions Group. She is a director of the Public Sector Pension Investment Board, a director of President's Choice Bank and a member of the Dean's Advisory Council for the Schulich School of Business, and a member of the Advisory Council for the Hennick Centre for Business and Law. Ms. Harris holds a Master of Business Administration degree and a Juris Doctorate. | <br> Ms. Harris is a corporate director. She was Managing Director and President, Corporate and Investment Banking, Merrill Lynch Canada, Inc., an international banking and financial services organization, until 2013. She held progressively senior positions during her 13-year career with Merrill Lynch and affiliated companies in Canada and the U.S., including President, Global Markets and Investment Banking, Canada, Head of Financial Institutions Group, Americas and Head of Financial Institutions, Canada. Before joining Merrill Lynch, Ms. Harris held various investment banking positions with RBC Capital Markets from 1984 to 2000, including Head of the Financial Institutions Group. She is a director of the Public Sector Pension Investment Board, a director of President's Choice Bank and a member of the Dean's Advisory Council for the Schulich School of Business, and a member of the Advisory Council for the Hennick Centre for Business and Law. Ms. Harris holds a Master of Business Administration degree and a Juris Doctorate. |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships | Other public company directorships | Other public company directorships |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br> Board | <br> 13 of 13 | <br> 100% | <br> George Weston Limited | <br> George Weston Limited | <br> May 2022 – present |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br> Audit<sup>1</sup> | <br> 3 of 3 | <br> 100% | <br> Loblaw Companies Limited | <br> Loblaw Companies Limited | <br> 2016 – present |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br> Governance, Investment & Conduct Review<sup>1</sup> | <br> 7 of 7 | <br> 100% | <br> Hydro One Limited | <br> Hydro One Limited | <br> 2015 – 2018 |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br> Management Resources<sup>1</sup> | <br> 3 of 3 | <br> 100% |  |  |  |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br>2022 Annual Meeting votes in favour: 99.6% | <br>2022 Annual Meeting votes in favour: 99.6% | <br>2022 Annual Meeting votes in favour: 99.6% | <br>2022 Annual Meeting votes in favour: 99.6% | <br>2022 Annual Meeting votes in favour: 99.6% |  |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |  |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | Year | Common shares | DSUs | Total common<br> shares and DSUs | Total<br>value | Share <br> ownership <br> guideline/ <br> target date  |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br> 2023 | <br> 6735 | <br> 54104 | <br> 60839 | <br> $4011724 | <br> Meets  |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br> 2022 | <br> 6443 | <br> 47302 | <br> 53745 | <br> $3582642 |  |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br> Change | <br> 292 | <br> 6802 | <br> 7094 | <br> $429082 |  |
| <br>![LOGO](g431192g39m53.jpg) <br>**M. Marianne Harris**<br> Toronto, ON, Canada<br>Director since December 2013<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review (Chair)<sup>1</sup><br> • Audit<sup>1</sup> | <br> <sup>1</sup> Ms. Harris ceased to be a member of the Management Resources Committee and became a member of the Audit Committee and Chair of the Governance, Investment & Conduct Review Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Harris ceased to be a member of the Management Resources Committee and became a member of the Audit Committee and Chair of the Governance, Investment & Conduct Review Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Harris ceased to be a member of the Management Resources Committee and became a member of the Audit Committee and Chair of the Governance, Investment & Conduct Review Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Harris ceased to be a member of the Management Resources Committee and became a member of the Audit Committee and Chair of the Governance, Investment & Conduct Review Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Harris ceased to be a member of the Management Resources Committee and became a member of the Audit Committee and Chair of the Governance, Investment & Conduct Review Committee on May 11, 2022. | <br> <sup>1</sup> Ms. Harris ceased to be a member of the Management Resources Committee and became a member of the Audit Committee and Chair of the Governance, Investment & Conduct Review Committee on May 11, 2022. |

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|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | Mr. Ho is Chairman and Founder of Kiina Investment Limited, a venture capital firm that invests in start-up companies in the technology, media and telecommunications industries. He was previously a senior advisor for Permira Advisors LLC, a private equity buyout fund, from 2010 to 2018 and Chairman and founding partner of CRU Capital, a China-based private equity buyout fund, from 2017 to 2019. He has held senior leadership roles with Nokia Siemens Networks, Nokia Corporation, Motorola, and Nortel Networks in China and Canada. In addition to the public companies listed below, Mr. Ho serves on the board of DBS Bank (Hong Kong) Limited, a subsidiary of DBS Group Holdings. Mr. Ho previously served as a director of China Ocean Shipping Company from 2011 until its merger with China Shipping Group in 2016 to become China COSCO Shipping Corporation, China COSCO Shipping Corporation from 2016 to 2021, China Mobile Communications Group Co., Ltd. from 2016 to 2020, and Sinosteel Corporation from 2008 to 2016, each of which are state-owned enterprises in China. He holds a Bachelor of Applied Science (Honours Systems Design Engineering) and a Master of Applied Science in Management Sciences. | Mr. Ho is Chairman and Founder of Kiina Investment Limited, a venture capital firm that invests in start-up companies in the technology, media and telecommunications industries. He was previously a senior advisor for Permira Advisors LLC, a private equity buyout fund, from 2010 to 2018 and Chairman and founding partner of CRU Capital, a China-based private equity buyout fund, from 2017 to 2019. He has held senior leadership roles with Nokia Siemens Networks, Nokia Corporation, Motorola, and Nortel Networks in China and Canada. In addition to the public companies listed below, Mr. Ho serves on the board of DBS Bank (Hong Kong) Limited, a subsidiary of DBS Group Holdings. Mr. Ho previously served as a director of China Ocean Shipping Company from 2011 until its merger with China Shipping Group in 2016 to become China COSCO Shipping Corporation, China COSCO Shipping Corporation from 2016 to 2021, China Mobile Communications Group Co., Ltd. from 2016 to 2020, and Sinosteel Corporation from 2008 to 2016, each of which are state-owned enterprises in China. He holds a Bachelor of Applied Science (Honours Systems Design Engineering) and a Master of Applied Science in Management Sciences. | Mr. Ho is Chairman and Founder of Kiina Investment Limited, a venture capital firm that invests in start-up companies in the technology, media and telecommunications industries. He was previously a senior advisor for Permira Advisors LLC, a private equity buyout fund, from 2010 to 2018 and Chairman and founding partner of CRU Capital, a China-based private equity buyout fund, from 2017 to 2019. He has held senior leadership roles with Nokia Siemens Networks, Nokia Corporation, Motorola, and Nortel Networks in China and Canada. In addition to the public companies listed below, Mr. Ho serves on the board of DBS Bank (Hong Kong) Limited, a subsidiary of DBS Group Holdings. Mr. Ho previously served as a director of China Ocean Shipping Company from 2011 until its merger with China Shipping Group in 2016 to become China COSCO Shipping Corporation, China COSCO Shipping Corporation from 2016 to 2021, China Mobile Communications Group Co., Ltd. from 2016 to 2020, and Sinosteel Corporation from 2008 to 2016, each of which are state-owned enterprises in China. He holds a Bachelor of Applied Science (Honours Systems Design Engineering) and a Master of Applied Science in Management Sciences. | Mr. Ho is Chairman and Founder of Kiina Investment Limited, a venture capital firm that invests in start-up companies in the technology, media and telecommunications industries. He was previously a senior advisor for Permira Advisors LLC, a private equity buyout fund, from 2010 to 2018 and Chairman and founding partner of CRU Capital, a China-based private equity buyout fund, from 2017 to 2019. He has held senior leadership roles with Nokia Siemens Networks, Nokia Corporation, Motorola, and Nortel Networks in China and Canada. In addition to the public companies listed below, Mr. Ho serves on the board of DBS Bank (Hong Kong) Limited, a subsidiary of DBS Group Holdings. Mr. Ho previously served as a director of China Ocean Shipping Company from 2011 until its merger with China Shipping Group in 2016 to become China COSCO Shipping Corporation, China COSCO Shipping Corporation from 2016 to 2021, China Mobile Communications Group Co., Ltd. from 2016 to 2020, and Sinosteel Corporation from 2008 to 2016, each of which are state-owned enterprises in China. He holds a Bachelor of Applied Science (Honours Systems Design Engineering) and a Master of Applied Science in Management Sciences. | Mr. Ho is Chairman and Founder of Kiina Investment Limited, a venture capital firm that invests in start-up companies in the technology, media and telecommunications industries. He was previously a senior advisor for Permira Advisors LLC, a private equity buyout fund, from 2010 to 2018 and Chairman and founding partner of CRU Capital, a China-based private equity buyout fund, from 2017 to 2019. He has held senior leadership roles with Nokia Siemens Networks, Nokia Corporation, Motorola, and Nortel Networks in China and Canada. In addition to the public companies listed below, Mr. Ho serves on the board of DBS Bank (Hong Kong) Limited, a subsidiary of DBS Group Holdings. Mr. Ho previously served as a director of China Ocean Shipping Company from 2011 until its merger with China Shipping Group in 2016 to become China COSCO Shipping Corporation, China COSCO Shipping Corporation from 2016 to 2021, China Mobile Communications Group Co., Ltd. from 2016 to 2020, and Sinosteel Corporation from 2008 to 2016, each of which are state-owned enterprises in China. He holds a Bachelor of Applied Science (Honours Systems Design Engineering) and a Master of Applied Science in Management Sciences. | Mr. Ho is Chairman and Founder of Kiina Investment Limited, a venture capital firm that invests in start-up companies in the technology, media and telecommunications industries. He was previously a senior advisor for Permira Advisors LLC, a private equity buyout fund, from 2010 to 2018 and Chairman and founding partner of CRU Capital, a China-based private equity buyout fund, from 2017 to 2019. He has held senior leadership roles with Nokia Siemens Networks, Nokia Corporation, Motorola, and Nortel Networks in China and Canada. In addition to the public companies listed below, Mr. Ho serves on the board of DBS Bank (Hong Kong) Limited, a subsidiary of DBS Group Holdings. Mr. Ho previously served as a director of China Ocean Shipping Company from 2011 until its merger with China Shipping Group in 2016 to become China COSCO Shipping Corporation, China COSCO Shipping Corporation from 2016 to 2021, China Mobile Communications Group Co., Ltd. from 2016 to 2020, and Sinosteel Corporation from 2008 to 2016, each of which are state-owned enterprises in China. He holds a Bachelor of Applied Science (Honours Systems Design Engineering) and a Master of Applied Science in Management Sciences. |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources |  |  |  |  |  |  |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships | Other public company directorships | Other public company directorships |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | <br> Board | <br> 13 of 13 | <br> 100% | <br> Qorvo, Inc. | <br> Qorvo, Inc. | <br> 2015 – present |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | <br> Management Resources | <br> 5 of 5 | <br> 100% | <br> Air Products & Chemicals, Inc. | <br> Air Products & Chemicals, Inc. | <br> 2013 – present |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | <br> Governance, Investment & Conduct Review | <br> 7 of 7 | <br> 100% | <br> nVent Electric plc<br> COL Digital Publishing Group<br>Co. Limited | <br> nVent Electric plc<br> COL Digital Publishing Group<br>Co. Limited | <br> 2018 – 2020<br> 2014 – 2020 |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources |  |  |  | <br> Pentair plc | <br> Pentair plc | <br> 2007 – 2018 |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources |  |  |  |  |  |  |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | Year | Common<br> shares | DSUs | Total common<br> shares and DSUs | Total<br>value | Share ownership guideline/ target date |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | <br> 2023 | <br> 227 | <br> 6721 | <br> 6948 | $458151 | <br> On target for May 5, 2027  |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | <br> 2022 | <br> 227 | <br> 2451 | <br> 2678 | $178515 | <br> On target for May 5, 2027  |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources | <br> Change | <br> 0 | <br> 4270 | <br> 4270 | $279636 | <br> On target for May 5, 2027  |
|  <br> ![LOGO](g431192g66c11.jpg) <br>**David H. Y. Ho**<br> Shenzhen, China<br>Director since May 2021<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • international business<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Governance, Investment & Conduct Review<br> • Management Resources |  |  |  |  |  |  |

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MANAGEMENT INFORMATION CIRCULAR 2023 \| 17

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##### [**Table of Contents**](#toc)

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|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | Ms. Hylton is a corporate director. She was previously a senior finance executive with more than 30 years of global experience in asset management, banking and public accounting. Prior to her retirement in March 2021, Ms. Hylton held various senior positions during her 27-year career with Eaton Vance Corp. (Eaton Vance), most recently serving as Vice-President & Chief Financial Officer, where she was a key part of the executive team leading the company's strategic planning and business transformations. Prior to that, she was Vice-President & Chief Accounting Officer and Head of Internal Audit, where she was responsible for internal controls and management of finance functions, and oversaw complex integrations of these functions in major acquisitions. Prior to joining Eaton Vance, Ms. Hylton was a Senior Auditor with Deloitte & Touche, where she covered financial services companies. She currently serves on the boards of Newburyport Art Association and Theater In the Open, and has previously served on the board of The Pike School. Ms. Hylton holds a Master of Business Administration degree and was a Certified Public Accountant from 1994 to June 2022. | Ms. Hylton is a corporate director. She was previously a senior finance executive with more than 30 years of global experience in asset management, banking and public accounting. Prior to her retirement in March 2021, Ms. Hylton held various senior positions during her 27-year career with Eaton Vance Corp. (Eaton Vance), most recently serving as Vice-President & Chief Financial Officer, where she was a key part of the executive team leading the company's strategic planning and business transformations. Prior to that, she was Vice-President & Chief Accounting Officer and Head of Internal Audit, where she was responsible for internal controls and management of finance functions, and oversaw complex integrations of these functions in major acquisitions. Prior to joining Eaton Vance, Ms. Hylton was a Senior Auditor with Deloitte & Touche, where she covered financial services companies. She currently serves on the boards of Newburyport Art Association and Theater In the Open, and has previously served on the board of The Pike School. Ms. Hylton holds a Master of Business Administration degree and was a Certified Public Accountant from 1994 to June 2022. | Ms. Hylton is a corporate director. She was previously a senior finance executive with more than 30 years of global experience in asset management, banking and public accounting. Prior to her retirement in March 2021, Ms. Hylton held various senior positions during her 27-year career with Eaton Vance Corp. (Eaton Vance), most recently serving as Vice-President & Chief Financial Officer, where she was a key part of the executive team leading the company's strategic planning and business transformations. Prior to that, she was Vice-President & Chief Accounting Officer and Head of Internal Audit, where she was responsible for internal controls and management of finance functions, and oversaw complex integrations of these functions in major acquisitions. Prior to joining Eaton Vance, Ms. Hylton was a Senior Auditor with Deloitte & Touche, where she covered financial services companies. She currently serves on the boards of Newburyport Art Association and Theater In the Open, and has previously served on the board of The Pike School. Ms. Hylton holds a Master of Business Administration degree and was a Certified Public Accountant from 1994 to June 2022. | Ms. Hylton is a corporate director. She was previously a senior finance executive with more than 30 years of global experience in asset management, banking and public accounting. Prior to her retirement in March 2021, Ms. Hylton held various senior positions during her 27-year career with Eaton Vance Corp. (Eaton Vance), most recently serving as Vice-President & Chief Financial Officer, where she was a key part of the executive team leading the company's strategic planning and business transformations. Prior to that, she was Vice-President & Chief Accounting Officer and Head of Internal Audit, where she was responsible for internal controls and management of finance functions, and oversaw complex integrations of these functions in major acquisitions. Prior to joining Eaton Vance, Ms. Hylton was a Senior Auditor with Deloitte & Touche, where she covered financial services companies. She currently serves on the boards of Newburyport Art Association and Theater In the Open, and has previously served on the board of The Pike School. Ms. Hylton holds a Master of Business Administration degree and was a Certified Public Accountant from 1994 to June 2022. | Ms. Hylton is a corporate director. She was previously a senior finance executive with more than 30 years of global experience in asset management, banking and public accounting. Prior to her retirement in March 2021, Ms. Hylton held various senior positions during her 27-year career with Eaton Vance Corp. (Eaton Vance), most recently serving as Vice-President & Chief Financial Officer, where she was a key part of the executive team leading the company's strategic planning and business transformations. Prior to that, she was Vice-President & Chief Accounting Officer and Head of Internal Audit, where she was responsible for internal controls and management of finance functions, and oversaw complex integrations of these functions in major acquisitions. Prior to joining Eaton Vance, Ms. Hylton was a Senior Auditor with Deloitte & Touche, where she covered financial services companies. She currently serves on the boards of Newburyport Art Association and Theater In the Open, and has previously served on the board of The Pike School. Ms. Hylton holds a Master of Business Administration degree and was a Certified Public Accountant from 1994 to June 2022. | Ms. Hylton is a corporate director. She was previously a senior finance executive with more than 30 years of global experience in asset management, banking and public accounting. Prior to her retirement in March 2021, Ms. Hylton held various senior positions during her 27-year career with Eaton Vance Corp. (Eaton Vance), most recently serving as Vice-President & Chief Financial Officer, where she was a key part of the executive team leading the company's strategic planning and business transformations. Prior to that, she was Vice-President & Chief Accounting Officer and Head of Internal Audit, where she was responsible for internal controls and management of finance functions, and oversaw complex integrations of these functions in major acquisitions. Prior to joining Eaton Vance, Ms. Hylton was a Senior Auditor with Deloitte & Touche, where she covered financial services companies. She currently serves on the boards of Newburyport Art Association and Theater In the Open, and has previously served on the board of The Pike School. Ms. Hylton holds a Master of Business Administration degree and was a Certified Public Accountant from 1994 to June 2022. |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships  | Other public company directorships  | Other public company directorships  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | <br> Ms. Hylton became a director on<br>December 31, 2022. | <br> Ms. Hylton became a director on<br>December 31, 2022. | <br> Ms. Hylton became a director on<br>December 31, 2022. |  |  |  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk |  |  |  |  |  |  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | Year | Common<br>shares | DSUs | Total common<br>shares and DSUs | Total<br>value | Share ownership guideline/ <br> target date  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | <br> 2023 | <br> 0 | <br> 0 | <br> 0 | <br> $0 | <br> On target for <br> December 31, <br> 2027  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk |  |  |  |  |  |  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk |  |  |  |  |  |  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk |  |  |  |  |  |  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk |  |  |  |  |  |  |
|  ![LOGO](g431192g02w01.jpg) <br>**Laurie G. Hylton**<br> Newburyport, MA, United States<br>Director since December 2022<br>**Independent**<br>Age: 56<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • risk management<br> • talent and culture<br> • leadership<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk |  |  |  |  |  |  |

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| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | Ms. Mallovy Hicks is a corporate director. Prior to her retirement in June 2021, she was a partner of PricewaterhouseCoopers (PwC) with over 30 years of global business management and advisory experience. She most recently served as PwC's Global Valuation Business Line Leader from 2016 to 2021 and prior to that held various executive positions, including Canada GTA Deals Leader, Canada Valuation Leader and Deals Valuation Partner. She has advised boards and executives on complex transactions, value creation, capital allocation, business transformation and restructuring matters across a wide range of industries. In addition to the public companies listed below, she serves on the boards of the Public Sector Pension Investment Board and Princess Margaret Cancer Foundation, and has previously served on the boards of PricewaterhouseCoopers LLP - Canadian Partnership, Canadian Partnership Against Cancer, The Toronto Symphony Foundation and Toronto Symphony Orchestra. Ms. Mallovy Hicks is a Fellow of the Canadian Institute of Chartered Business Valuators and a Fellow of the Chartered Professional Accountants of Ontario.  | Ms. Mallovy Hicks is a corporate director. Prior to her retirement in June 2021, she was a partner of PricewaterhouseCoopers (PwC) with over 30 years of global business management and advisory experience. She most recently served as PwC's Global Valuation Business Line Leader from 2016 to 2021 and prior to that held various executive positions, including Canada GTA Deals Leader, Canada Valuation Leader and Deals Valuation Partner. She has advised boards and executives on complex transactions, value creation, capital allocation, business transformation and restructuring matters across a wide range of industries. In addition to the public companies listed below, she serves on the boards of the Public Sector Pension Investment Board and Princess Margaret Cancer Foundation, and has previously served on the boards of PricewaterhouseCoopers LLP - Canadian Partnership, Canadian Partnership Against Cancer, The Toronto Symphony Foundation and Toronto Symphony Orchestra. Ms. Mallovy Hicks is a Fellow of the Canadian Institute of Chartered Business Valuators and a Fellow of the Chartered Professional Accountants of Ontario.  | Ms. Mallovy Hicks is a corporate director. Prior to her retirement in June 2021, she was a partner of PricewaterhouseCoopers (PwC) with over 30 years of global business management and advisory experience. She most recently served as PwC's Global Valuation Business Line Leader from 2016 to 2021 and prior to that held various executive positions, including Canada GTA Deals Leader, Canada Valuation Leader and Deals Valuation Partner. She has advised boards and executives on complex transactions, value creation, capital allocation, business transformation and restructuring matters across a wide range of industries. In addition to the public companies listed below, she serves on the boards of the Public Sector Pension Investment Board and Princess Margaret Cancer Foundation, and has previously served on the boards of PricewaterhouseCoopers LLP - Canadian Partnership, Canadian Partnership Against Cancer, The Toronto Symphony Foundation and Toronto Symphony Orchestra. Ms. Mallovy Hicks is a Fellow of the Canadian Institute of Chartered Business Valuators and a Fellow of the Chartered Professional Accountants of Ontario.  | Ms. Mallovy Hicks is a corporate director. Prior to her retirement in June 2021, she was a partner of PricewaterhouseCoopers (PwC) with over 30 years of global business management and advisory experience. She most recently served as PwC's Global Valuation Business Line Leader from 2016 to 2021 and prior to that held various executive positions, including Canada GTA Deals Leader, Canada Valuation Leader and Deals Valuation Partner. She has advised boards and executives on complex transactions, value creation, capital allocation, business transformation and restructuring matters across a wide range of industries. In addition to the public companies listed below, she serves on the boards of the Public Sector Pension Investment Board and Princess Margaret Cancer Foundation, and has previously served on the boards of PricewaterhouseCoopers LLP - Canadian Partnership, Canadian Partnership Against Cancer, The Toronto Symphony Foundation and Toronto Symphony Orchestra. Ms. Mallovy Hicks is a Fellow of the Canadian Institute of Chartered Business Valuators and a Fellow of the Chartered Professional Accountants of Ontario.  | Ms. Mallovy Hicks is a corporate director. Prior to her retirement in June 2021, she was a partner of PricewaterhouseCoopers (PwC) with over 30 years of global business management and advisory experience. She most recently served as PwC's Global Valuation Business Line Leader from 2016 to 2021 and prior to that held various executive positions, including Canada GTA Deals Leader, Canada Valuation Leader and Deals Valuation Partner. She has advised boards and executives on complex transactions, value creation, capital allocation, business transformation and restructuring matters across a wide range of industries. In addition to the public companies listed below, she serves on the boards of the Public Sector Pension Investment Board and Princess Margaret Cancer Foundation, and has previously served on the boards of PricewaterhouseCoopers LLP - Canadian Partnership, Canadian Partnership Against Cancer, The Toronto Symphony Foundation and Toronto Symphony Orchestra. Ms. Mallovy Hicks is a Fellow of the Canadian Institute of Chartered Business Valuators and a Fellow of the Chartered Professional Accountants of Ontario.  | Ms. Mallovy Hicks is a corporate director. Prior to her retirement in June 2021, she was a partner of PricewaterhouseCoopers (PwC) with over 30 years of global business management and advisory experience. She most recently served as PwC's Global Valuation Business Line Leader from 2016 to 2021 and prior to that held various executive positions, including Canada GTA Deals Leader, Canada Valuation Leader and Deals Valuation Partner. She has advised boards and executives on complex transactions, value creation, capital allocation, business transformation and restructuring matters across a wide range of industries. In addition to the public companies listed below, she serves on the boards of the Public Sector Pension Investment Board and Princess Margaret Cancer Foundation, and has previously served on the boards of PricewaterhouseCoopers LLP - Canadian Partnership, Canadian Partnership Against Cancer, The Toronto Symphony Foundation and Toronto Symphony Orchestra. Ms. Mallovy Hicks is a Fellow of the Canadian Institute of Chartered Business Valuators and a Fellow of the Chartered Professional Accountants of Ontario.  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships  | Other public company directorships  | Other public company directorships  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | <br> Board | <br> 13 of 13 | <br> 100% | <br> Northland Power Inc. | <br> Northland Power Inc. | <br> 2021 – present |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | <br> Audit | <br> 5 of 5 | <br> 100%<br>|  |  |  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | <br> Risk | <br> 4 of 4 | <br> 100% |  |  |  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | Year | Common<br>shares | DSUs | Total common<br>shares and DSUs | Total<br>value | Share ownership guideline/ <br> target date  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | <br> 2023 | <br> 425 | <br> 4751 | <br> 5176 | <br> $341305 | <br> On target for October 31, <br> 2027  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | <br> 2022 | <br> 425 | <br> 663 | <br> 1088 | <br> $72526 | <br> On target for October 31, <br> 2027  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk | <br> Change | <br> 0 | <br> 4088 | <br> 4088 | <br> $268779 | <br> On target for October 31, <br> 2027  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk |  |  |  |  |  |  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk |  |  |  |  |  |  |
| <br> ![LOGO](g431192g22s22.jpg) <br>**Helen M. Mallovy Hicks** <br> **FCPA, FCBV**<br> Toronto, ON, Canada<br>Director since October 2021<br>**Independent**<br>Age: 62<br><u>Areas of expertise:</u><br>• finance, accounting and<br>actuarial<br> • insurance, health and wealth<br> • risk management<br> • international business<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit<br> • Risk |  |  |  |  |  |  |

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18 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)

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| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | Ms. Morin is a corporate director. She was Executive Director for Canada, Ireland and the Caribbean at the World Bank from 2010 to 2013. Previously Ms. Morin pursued a 30-year career in Federal Public Service, including National Security Advisor to the Prime Minister and Associate Secretary to the Cabinet, Deputy Minister for International Trade and Associate Deputy Minister of Foreign Affairs. In 1997, Ms. Morin was appointed Canada's Ambassador to Norway with accreditation to Iceland. Earlier in her career she completed assignments in San Francisco, Jakarta, London, and Moscow with the Department of Foreign Affairs and International Trade. Ms. Morin was named Chevalier de la Légion d'Honneur by the Government of France in 2012, was sworn into the Queen's Privy Council for Canada in 2015 and became a member of the Order of Canada in 2016. In addition to the public companies listed below, Ms. Morin serves as the Vice-Chair of The Canadian Ditchley Foundation and Palette Skills Inc. and serves on the boards of CDPQ Infra, Canadian Institute for Advanced Research, Century Initiative and The Toronto Centre. She is currently a member of the National Security and Intelligence Review Agency and the ESG Advisory Council of Export Development Canada. She was admitted to the Québec Bar in 1980. | Ms. Morin is a corporate director. She was Executive Director for Canada, Ireland and the Caribbean at the World Bank from 2010 to 2013. Previously Ms. Morin pursued a 30-year career in Federal Public Service, including National Security Advisor to the Prime Minister and Associate Secretary to the Cabinet, Deputy Minister for International Trade and Associate Deputy Minister of Foreign Affairs. In 1997, Ms. Morin was appointed Canada's Ambassador to Norway with accreditation to Iceland. Earlier in her career she completed assignments in San Francisco, Jakarta, London, and Moscow with the Department of Foreign Affairs and International Trade. Ms. Morin was named Chevalier de la Légion d'Honneur by the Government of France in 2012, was sworn into the Queen's Privy Council for Canada in 2015 and became a member of the Order of Canada in 2016. In addition to the public companies listed below, Ms. Morin serves as the Vice-Chair of The Canadian Ditchley Foundation and Palette Skills Inc. and serves on the boards of CDPQ Infra, Canadian Institute for Advanced Research, Century Initiative and The Toronto Centre. She is currently a member of the National Security and Intelligence Review Agency and the ESG Advisory Council of Export Development Canada. She was admitted to the Québec Bar in 1980. | Ms. Morin is a corporate director. She was Executive Director for Canada, Ireland and the Caribbean at the World Bank from 2010 to 2013. Previously Ms. Morin pursued a 30-year career in Federal Public Service, including National Security Advisor to the Prime Minister and Associate Secretary to the Cabinet, Deputy Minister for International Trade and Associate Deputy Minister of Foreign Affairs. In 1997, Ms. Morin was appointed Canada's Ambassador to Norway with accreditation to Iceland. Earlier in her career she completed assignments in San Francisco, Jakarta, London, and Moscow with the Department of Foreign Affairs and International Trade. Ms. Morin was named Chevalier de la Légion d'Honneur by the Government of France in 2012, was sworn into the Queen's Privy Council for Canada in 2015 and became a member of the Order of Canada in 2016. In addition to the public companies listed below, Ms. Morin serves as the Vice-Chair of The Canadian Ditchley Foundation and Palette Skills Inc. and serves on the boards of CDPQ Infra, Canadian Institute for Advanced Research, Century Initiative and The Toronto Centre. She is currently a member of the National Security and Intelligence Review Agency and the ESG Advisory Council of Export Development Canada. She was admitted to the Québec Bar in 1980. | Ms. Morin is a corporate director. She was Executive Director for Canada, Ireland and the Caribbean at the World Bank from 2010 to 2013. Previously Ms. Morin pursued a 30-year career in Federal Public Service, including National Security Advisor to the Prime Minister and Associate Secretary to the Cabinet, Deputy Minister for International Trade and Associate Deputy Minister of Foreign Affairs. In 1997, Ms. Morin was appointed Canada's Ambassador to Norway with accreditation to Iceland. Earlier in her career she completed assignments in San Francisco, Jakarta, London, and Moscow with the Department of Foreign Affairs and International Trade. Ms. Morin was named Chevalier de la Légion d'Honneur by the Government of France in 2012, was sworn into the Queen's Privy Council for Canada in 2015 and became a member of the Order of Canada in 2016. In addition to the public companies listed below, Ms. Morin serves as the Vice-Chair of The Canadian Ditchley Foundation and Palette Skills Inc. and serves on the boards of CDPQ Infra, Canadian Institute for Advanced Research, Century Initiative and The Toronto Centre. She is currently a member of the National Security and Intelligence Review Agency and the ESG Advisory Council of Export Development Canada. She was admitted to the Québec Bar in 1980. | Ms. Morin is a corporate director. She was Executive Director for Canada, Ireland and the Caribbean at the World Bank from 2010 to 2013. Previously Ms. Morin pursued a 30-year career in Federal Public Service, including National Security Advisor to the Prime Minister and Associate Secretary to the Cabinet, Deputy Minister for International Trade and Associate Deputy Minister of Foreign Affairs. In 1997, Ms. Morin was appointed Canada's Ambassador to Norway with accreditation to Iceland. Earlier in her career she completed assignments in San Francisco, Jakarta, London, and Moscow with the Department of Foreign Affairs and International Trade. Ms. Morin was named Chevalier de la Légion d'Honneur by the Government of France in 2012, was sworn into the Queen's Privy Council for Canada in 2015 and became a member of the Order of Canada in 2016. In addition to the public companies listed below, Ms. Morin serves as the Vice-Chair of The Canadian Ditchley Foundation and Palette Skills Inc. and serves on the boards of CDPQ Infra, Canadian Institute for Advanced Research, Century Initiative and The Toronto Centre. She is currently a member of the National Security and Intelligence Review Agency and the ESG Advisory Council of Export Development Canada. She was admitted to the Québec Bar in 1980. | Ms. Morin is a corporate director. She was Executive Director for Canada, Ireland and the Caribbean at the World Bank from 2010 to 2013. Previously Ms. Morin pursued a 30-year career in Federal Public Service, including National Security Advisor to the Prime Minister and Associate Secretary to the Cabinet, Deputy Minister for International Trade and Associate Deputy Minister of Foreign Affairs. In 1997, Ms. Morin was appointed Canada's Ambassador to Norway with accreditation to Iceland. Earlier in her career she completed assignments in San Francisco, Jakarta, London, and Moscow with the Department of Foreign Affairs and International Trade. Ms. Morin was named Chevalier de la Légion d'Honneur by the Government of France in 2012, was sworn into the Queen's Privy Council for Canada in 2015 and became a member of the Order of Canada in 2016. In addition to the public companies listed below, Ms. Morin serves as the Vice-Chair of The Canadian Ditchley Foundation and Palette Skills Inc. and serves on the boards of CDPQ Infra, Canadian Institute for Advanced Research, Century Initiative and The Toronto Centre. She is currently a member of the National Security and Intelligence Review Agency and the ESG Advisory Council of Export Development Canada. She was admitted to the Québec Bar in 1980. |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk |  |  |  |  |  |  |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships | Other public company directorships | Other public company directorships |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> Board | <br> 13 of 13 | <br> 100% | <br> Chorus Aviation Inc. | <br> Chorus Aviation Inc. | <br> 2016 – present |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> Management Resources | <br> 5 of 5 | <br> 100% | <br> Stantec Inc. | <br> Stantec Inc. | <br> 2016 – present |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> Risk | <br> 4 of 4 | <br> 100% | <br> AGT Foods and Ingredients Inc. | <br> AGT Foods and Ingredients Inc. | <br> 2016 – 2019 |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk |  |  |  |  |  |  |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | Year | Common<br> shares | DSUs | Total common<br> shares and DSUs | Total<br>value | Share ownership guideline/ target date |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> 2023 | <br> 1200 | <br> 2608 | <br> 3808 | $251100 | <br> On target for December 31, <br> 2027  |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> 2022 | <br> 0 | <br> 0 | <br> 0 | $0 | <br> On target for December 31, <br> 2027  |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> Change | <br> 1200 | <br> 2608 | <br> 3808 | $251100 | <br> On target for December 31, <br> 2027  |
| <br> ![LOGO](g431192g01g44.jpg) <br>**Marie-Lucie Morin**<br> **CM, PC**<br> Ottawa, ON, Canada<br>Director since December 2021<br>**Independent**<br>Age: 65<br><u>Areas of expertise:</u><br>• risk management<br> • talent and culture<br> • international business<br> • government relations/policy<br> • corporate strategy and development<br><u>Current committees:</u><br>• Management Resources<br> • Risk |  |  |  |  |  |  |

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|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk | Mr. Natale is a corporate director and most recently served as the President and Chief Executive Officer of Rogers Communications Inc., a diversified Canadian communications and media company, from 2017 to 2021. Prior to joining Rogers, he held several executive positions at TELUS Corporation, a communications technology company, from 2003 to 2015, including President and Chief Executive Officer, Executive Vice President & Chief Commercial Officer, Executive Vice President & President, Customer Solutions and Executive Vice President & President, Business Solutions. Prior to that, Mr. Natale has held senior leadership roles with KPMG Consulting Inc. (later BearingPoint Inc.) including Global Leader, Automotive and Transportation Markets and Country Leader, Canada. Prior to KPMG Consulting, he was President and Co-founder of Piller, Natale & Oh Management Consultants which was acquired by KPMG Consulting in 1997. Mr. Natale serves as a trustee of The Hospital for Sick Children. He holds a Bachelor of Applied Science in Electrical Engineering. Mr. Natale was a recipient of Canada's Top 40 Under 40 Award in 2001, was awarded the Queen Elizabeth II Diamond Jubilee Medal in 2012, and was named as one of the Top 100 executives in global communications and media by Cablefax Magazine in 2021. | Mr. Natale is a corporate director and most recently served as the President and Chief Executive Officer of Rogers Communications Inc., a diversified Canadian communications and media company, from 2017 to 2021. Prior to joining Rogers, he held several executive positions at TELUS Corporation, a communications technology company, from 2003 to 2015, including President and Chief Executive Officer, Executive Vice President & Chief Commercial Officer, Executive Vice President & President, Customer Solutions and Executive Vice President & President, Business Solutions. Prior to that, Mr. Natale has held senior leadership roles with KPMG Consulting Inc. (later BearingPoint Inc.) including Global Leader, Automotive and Transportation Markets and Country Leader, Canada. Prior to KPMG Consulting, he was President and Co-founder of Piller, Natale & Oh Management Consultants which was acquired by KPMG Consulting in 1997. Mr. Natale serves as a trustee of The Hospital for Sick Children. He holds a Bachelor of Applied Science in Electrical Engineering. Mr. Natale was a recipient of Canada's Top 40 Under 40 Award in 2001, was awarded the Queen Elizabeth II Diamond Jubilee Medal in 2012, and was named as one of the Top 100 executives in global communications and media by Cablefax Magazine in 2021. | Mr. Natale is a corporate director and most recently served as the President and Chief Executive Officer of Rogers Communications Inc., a diversified Canadian communications and media company, from 2017 to 2021. Prior to joining Rogers, he held several executive positions at TELUS Corporation, a communications technology company, from 2003 to 2015, including President and Chief Executive Officer, Executive Vice President & Chief Commercial Officer, Executive Vice President & President, Customer Solutions and Executive Vice President & President, Business Solutions. Prior to that, Mr. Natale has held senior leadership roles with KPMG Consulting Inc. (later BearingPoint Inc.) including Global Leader, Automotive and Transportation Markets and Country Leader, Canada. Prior to KPMG Consulting, he was President and Co-founder of Piller, Natale & Oh Management Consultants which was acquired by KPMG Consulting in 1997. Mr. Natale serves as a trustee of The Hospital for Sick Children. He holds a Bachelor of Applied Science in Electrical Engineering. Mr. Natale was a recipient of Canada's Top 40 Under 40 Award in 2001, was awarded the Queen Elizabeth II Diamond Jubilee Medal in 2012, and was named as one of the Top 100 executives in global communications and media by Cablefax Magazine in 2021. | Mr. Natale is a corporate director and most recently served as the President and Chief Executive Officer of Rogers Communications Inc., a diversified Canadian communications and media company, from 2017 to 2021. Prior to joining Rogers, he held several executive positions at TELUS Corporation, a communications technology company, from 2003 to 2015, including President and Chief Executive Officer, Executive Vice President & Chief Commercial Officer, Executive Vice President & President, Customer Solutions and Executive Vice President & President, Business Solutions. Prior to that, Mr. Natale has held senior leadership roles with KPMG Consulting Inc. (later BearingPoint Inc.) including Global Leader, Automotive and Transportation Markets and Country Leader, Canada. Prior to KPMG Consulting, he was President and Co-founder of Piller, Natale & Oh Management Consultants which was acquired by KPMG Consulting in 1997. Mr. Natale serves as a trustee of The Hospital for Sick Children. He holds a Bachelor of Applied Science in Electrical Engineering. Mr. Natale was a recipient of Canada's Top 40 Under 40 Award in 2001, was awarded the Queen Elizabeth II Diamond Jubilee Medal in 2012, and was named as one of the Top 100 executives in global communications and media by Cablefax Magazine in 2021. | Mr. Natale is a corporate director and most recently served as the President and Chief Executive Officer of Rogers Communications Inc., a diversified Canadian communications and media company, from 2017 to 2021. Prior to joining Rogers, he held several executive positions at TELUS Corporation, a communications technology company, from 2003 to 2015, including President and Chief Executive Officer, Executive Vice President & Chief Commercial Officer, Executive Vice President & President, Customer Solutions and Executive Vice President & President, Business Solutions. Prior to that, Mr. Natale has held senior leadership roles with KPMG Consulting Inc. (later BearingPoint Inc.) including Global Leader, Automotive and Transportation Markets and Country Leader, Canada. Prior to KPMG Consulting, he was President and Co-founder of Piller, Natale & Oh Management Consultants which was acquired by KPMG Consulting in 1997. Mr. Natale serves as a trustee of The Hospital for Sick Children. He holds a Bachelor of Applied Science in Electrical Engineering. Mr. Natale was a recipient of Canada's Top 40 Under 40 Award in 2001, was awarded the Queen Elizabeth II Diamond Jubilee Medal in 2012, and was named as one of the Top 100 executives in global communications and media by Cablefax Magazine in 2021. | Mr. Natale is a corporate director and most recently served as the President and Chief Executive Officer of Rogers Communications Inc., a diversified Canadian communications and media company, from 2017 to 2021. Prior to joining Rogers, he held several executive positions at TELUS Corporation, a communications technology company, from 2003 to 2015, including President and Chief Executive Officer, Executive Vice President & Chief Commercial Officer, Executive Vice President & President, Customer Solutions and Executive Vice President & President, Business Solutions. Prior to that, Mr. Natale has held senior leadership roles with KPMG Consulting Inc. (later BearingPoint Inc.) including Global Leader, Automotive and Transportation Markets and Country Leader, Canada. Prior to KPMG Consulting, he was President and Co-founder of Piller, Natale & Oh Management Consultants which was acquired by KPMG Consulting in 1997. Mr. Natale serves as a trustee of The Hospital for Sick Children. He holds a Bachelor of Applied Science in Electrical Engineering. Mr. Natale was a recipient of Canada's Top 40 Under 40 Award in 2001, was awarded the Queen Elizabeth II Diamond Jubilee Medal in 2012, and was named as one of the Top 100 executives in global communications and media by Cablefax Magazine in 2021. |
|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships | Other public company directorships | Other public company directorships |
|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> Mr. Natale became a director on February 7, 2023 | <br> Mr. Natale became a director on February 7, 2023 | <br> Mr. Natale became a director on February 7, 2023 | <br> Home Capital Group Inc. | <br> Home Capital Group Inc. | <br> May 2022 – Present |
|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> Mr. Natale became a director on February 7, 2023 | <br> Mr. Natale became a director on February 7, 2023 | <br> Mr. Natale became a director on February 7, 2023 | <br> Toronto-Dominion Bank | <br> Toronto-Dominion Bank | <br> 2021 – April 2022 |
|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> Mr. Natale became a director on February 7, 2023 | <br> Mr. Natale became a director on February 7, 2023 | <br> Mr. Natale became a director on February 7, 2023 | <br> Rogers Communications Inc. | <br> Rogers Communications Inc. | <br> 2017 – 2021 |
|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk |  |  |  |  |  |  |
|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |  |
|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk | Year | Common<br>shares | DSUs | Total common<br>shares and DSUs | Total<br>value | Share ownership guideline/ target date |
|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk | <br> 2023 | <br> 0 | <br> 0 | <br> 0 | <br> $0 | On target for February 7, 2028 |
|  ![LOGO](g431192g02w03.jpg) <br>**Joseph M. Natale**<br> Toronto, ON, Canada<br>Director since February<br> 2023<br>**Independent**<br>Age: 58<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • leadership<br> • corporate strategy and development<br> • digital and data/analytics<br><u>Current committees:</u><br>• Management Resources<br> • Risk |  |  |  |  |  |  |

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| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> Mr. Powers is the Chair of the Boards of SLF Inc. and Sun Life Assurance. He was President and Chief Executive Officer of State Street Global Advisors until his retirement in August 2015. Before joining State Street in 2008, Mr. Powers was President and Chief Executive Officer of Old Mutual Asset Management Plc, the U.S.-based global asset management business of Old Mutual plc. Prior to 2008, he held senior executive positions at Mellon Institutional Asset Management, BNY Mellon's investment management business, and at The Boston Company Asset Management, LLC. Mr. Powers has also served as a member of the Systemic Risk Council and the Advisory Board of the U.S. Institute of Institutional Investors. | <br> Mr. Powers is the Chair of the Boards of SLF Inc. and Sun Life Assurance. He was President and Chief Executive Officer of State Street Global Advisors until his retirement in August 2015. Before joining State Street in 2008, Mr. Powers was President and Chief Executive Officer of Old Mutual Asset Management Plc, the U.S.-based global asset management business of Old Mutual plc. Prior to 2008, he held senior executive positions at Mellon Institutional Asset Management, BNY Mellon's investment management business, and at The Boston Company Asset Management, LLC. Mr. Powers has also served as a member of the Systemic Risk Council and the Advisory Board of the U.S. Institute of Institutional Investors. | <br> Mr. Powers is the Chair of the Boards of SLF Inc. and Sun Life Assurance. He was President and Chief Executive Officer of State Street Global Advisors until his retirement in August 2015. Before joining State Street in 2008, Mr. Powers was President and Chief Executive Officer of Old Mutual Asset Management Plc, the U.S.-based global asset management business of Old Mutual plc. Prior to 2008, he held senior executive positions at Mellon Institutional Asset Management, BNY Mellon's investment management business, and at The Boston Company Asset Management, LLC. Mr. Powers has also served as a member of the Systemic Risk Council and the Advisory Board of the U.S. Institute of Institutional Investors. | <br> Mr. Powers is the Chair of the Boards of SLF Inc. and Sun Life Assurance. He was President and Chief Executive Officer of State Street Global Advisors until his retirement in August 2015. Before joining State Street in 2008, Mr. Powers was President and Chief Executive Officer of Old Mutual Asset Management Plc, the U.S.-based global asset management business of Old Mutual plc. Prior to 2008, he held senior executive positions at Mellon Institutional Asset Management, BNY Mellon's investment management business, and at The Boston Company Asset Management, LLC. Mr. Powers has also served as a member of the Systemic Risk Council and the Advisory Board of the U.S. Institute of Institutional Investors. | <br> Mr. Powers is the Chair of the Boards of SLF Inc. and Sun Life Assurance. He was President and Chief Executive Officer of State Street Global Advisors until his retirement in August 2015. Before joining State Street in 2008, Mr. Powers was President and Chief Executive Officer of Old Mutual Asset Management Plc, the U.S.-based global asset management business of Old Mutual plc. Prior to 2008, he held senior executive positions at Mellon Institutional Asset Management, BNY Mellon's investment management business, and at The Boston Company Asset Management, LLC. Mr. Powers has also served as a member of the Systemic Risk Council and the Advisory Board of the U.S. Institute of Institutional Investors. | <br> Mr. Powers is the Chair of the Boards of SLF Inc. and Sun Life Assurance. He was President and Chief Executive Officer of State Street Global Advisors until his retirement in August 2015. Before joining State Street in 2008, Mr. Powers was President and Chief Executive Officer of Old Mutual Asset Management Plc, the U.S.-based global asset management business of Old Mutual plc. Prior to 2008, he held senior executive positions at Mellon Institutional Asset Management, BNY Mellon's investment management business, and at The Boston Company Asset Management, LLC. Mr. Powers has also served as a member of the Systemic Risk Council and the Advisory Board of the U.S. Institute of Institutional Investors. |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships | Other public company directorships | Other public company directorships |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | Board | <br> 13 of 13 | 100% | <br> Automatic Data Processing, Inc. | <br> Automatic Data Processing, Inc. | <br> 2018 – Present |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> Audit<sup>1</sup> | <br> 2 of 2 | <br> 100% | <br> PulteGroup, Inc. | <br> PulteGroup, Inc. | <br> 2016 – Present |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> Governance, Investment & Conduct Review<sup>1</sup> | <br> 5 of 5 | <br> 100% |  |  |  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> Governance, Investment & Conduct Review<sup>1</sup> | <br> 5 of 5 | <br> 100% |  |  |  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> 2022 Annual Meeting votes in favour: 99.3% | <br> 2022 Annual Meeting votes in favour: 99.3% | <br> 2022 Annual Meeting votes in favour: 99.3% | <br> 2022 Annual Meeting votes in favour: 99.3% | <br> 2022 Annual Meeting votes in favour: 99.3% |  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | Year | Common<br>shares | DSUs | Total common<br>shares and DSUs | Total<br>value | Share <br> ownership <br> guideline/ <br> target date  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> 2023 | <br> 975 | <br> 34302 | <br> 35277 | <br> $2326165 | <br> Meets  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> 2022 | <br> 975 | <br> 26636 | <br> 27611 | <br> $1840549 |  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> Change | <br> 0 | <br> 7666 | <br> 7666 | <br> $485616 |  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> <sup>1</sup> Mr. Powers was appointed as Board Chair on May 11, 2022, hence ceased to be member of the Audit Committee and the Governance, Investment & Conduct Review Committee.  | <br> <sup>1</sup> Mr. Powers was appointed as Board Chair on May 11, 2022, hence ceased to be member of the Audit Committee and the Governance, Investment & Conduct Review Committee.  | <br> <sup>1</sup> Mr. Powers was appointed as Board Chair on May 11, 2022, hence ceased to be member of the Audit Committee and the Governance, Investment & Conduct Review Committee.  | <br> <sup>1</sup> Mr. Powers was appointed as Board Chair on May 11, 2022, hence ceased to be member of the Audit Committee and the Governance, Investment & Conduct Review Committee.  | <br> <sup>1</sup> Mr. Powers was appointed as Board Chair on May 11, 2022, hence ceased to be member of the Audit Committee and the Governance, Investment & Conduct Review Committee.  | <br> <sup>1</sup> Mr. Powers was appointed as Board Chair on May 11, 2022, hence ceased to be member of the Audit Committee and the Governance, Investment & Conduct Review Committee.  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> |  |  |  |  |  |  |
| <br> ![LOGO](g431192g01l49.jpg) <br>**Scott F. Powers**<br> Boston, MA,<br> United States<br>Director since October 2015<br>**Independent**<br>Age: 63<br><u>Areas of expertise:</u><br>• talent and culture<br> • client needs, sales and distribution<br> • international business<br> • leadership<br> • corporate strategy and development<br><u>Current committees:</u><br>• None<sup>1</sup> |  |  |  |  |  |  |

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| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | Mr. Strain is President & Chief Executive Officer of SLF Inc. and Sun Life Assurance. Prior to his appointment in August 2021, he held several senior positions with SLF Inc. and Sun Life Assurance, including President, Executive Vice-President & Chief Financial Officer, President of Sun Life Asia, Senior Vice-President of the Individual Insurance and Investments division in Canada, and Vice-President of Investor Relations. Prior to joining the company in May 2002, Mr. Strain was Vice-President of the Pension business of Clarica Life Insurance Company, which was acquired by Sun Life in 2002, and played an instrumental role in the integration of Clarica. Mr. Strain is currently a director of Sunnybrook Health Sciences Centre and the Board of Governors of the University of Waterloo. He is a Certified Public Accountant and holds a Master of Accounting degree. | Mr. Strain is President & Chief Executive Officer of SLF Inc. and Sun Life Assurance. Prior to his appointment in August 2021, he held several senior positions with SLF Inc. and Sun Life Assurance, including President, Executive Vice-President & Chief Financial Officer, President of Sun Life Asia, Senior Vice-President of the Individual Insurance and Investments division in Canada, and Vice-President of Investor Relations. Prior to joining the company in May 2002, Mr. Strain was Vice-President of the Pension business of Clarica Life Insurance Company, which was acquired by Sun Life in 2002, and played an instrumental role in the integration of Clarica. Mr. Strain is currently a director of Sunnybrook Health Sciences Centre and the Board of Governors of the University of Waterloo. He is a Certified Public Accountant and holds a Master of Accounting degree. | Mr. Strain is President & Chief Executive Officer of SLF Inc. and Sun Life Assurance. Prior to his appointment in August 2021, he held several senior positions with SLF Inc. and Sun Life Assurance, including President, Executive Vice-President & Chief Financial Officer, President of Sun Life Asia, Senior Vice-President of the Individual Insurance and Investments division in Canada, and Vice-President of Investor Relations. Prior to joining the company in May 2002, Mr. Strain was Vice-President of the Pension business of Clarica Life Insurance Company, which was acquired by Sun Life in 2002, and played an instrumental role in the integration of Clarica. Mr. Strain is currently a director of Sunnybrook Health Sciences Centre and the Board of Governors of the University of Waterloo. He is a Certified Public Accountant and holds a Master of Accounting degree. | Mr. Strain is President & Chief Executive Officer of SLF Inc. and Sun Life Assurance. Prior to his appointment in August 2021, he held several senior positions with SLF Inc. and Sun Life Assurance, including President, Executive Vice-President & Chief Financial Officer, President of Sun Life Asia, Senior Vice-President of the Individual Insurance and Investments division in Canada, and Vice-President of Investor Relations. Prior to joining the company in May 2002, Mr. Strain was Vice-President of the Pension business of Clarica Life Insurance Company, which was acquired by Sun Life in 2002, and played an instrumental role in the integration of Clarica. Mr. Strain is currently a director of Sunnybrook Health Sciences Centre and the Board of Governors of the University of Waterloo. He is a Certified Public Accountant and holds a Master of Accounting degree. | Mr. Strain is President & Chief Executive Officer of SLF Inc. and Sun Life Assurance. Prior to his appointment in August 2021, he held several senior positions with SLF Inc. and Sun Life Assurance, including President, Executive Vice-President & Chief Financial Officer, President of Sun Life Asia, Senior Vice-President of the Individual Insurance and Investments division in Canada, and Vice-President of Investor Relations. Prior to joining the company in May 2002, Mr. Strain was Vice-President of the Pension business of Clarica Life Insurance Company, which was acquired by Sun Life in 2002, and played an instrumental role in the integration of Clarica. Mr. Strain is currently a director of Sunnybrook Health Sciences Centre and the Board of Governors of the University of Waterloo. He is a Certified Public Accountant and holds a Master of Accounting degree. | Mr. Strain is President & Chief Executive Officer of SLF Inc. and Sun Life Assurance. Prior to his appointment in August 2021, he held several senior positions with SLF Inc. and Sun Life Assurance, including President, Executive Vice-President & Chief Financial Officer, President of Sun Life Asia, Senior Vice-President of the Individual Insurance and Investments division in Canada, and Vice-President of Investor Relations. Prior to joining the company in May 2002, Mr. Strain was Vice-President of the Pension business of Clarica Life Insurance Company, which was acquired by Sun Life in 2002, and played an instrumental role in the integration of Clarica. Mr. Strain is currently a director of Sunnybrook Health Sciences Centre and the Board of Governors of the University of Waterloo. He is a Certified Public Accountant and holds a Master of Accounting degree. |
| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> 2022 Meeting attendance | <br> 2022 Meeting attendance | <br> 2022 Meeting attendance | <br> Other public company directorships | <br> Other public company directorships | <br> Other public company directorships |
| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> Board | <br> 13 of 13 | <br> 100% |  |  |  |
| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% | <br> 2022 Annual Meeting votes in favour: 99.8% |  |
| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |
| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | Year | Common<br>shares | DSUs | Total common<br>shares and DSUs | Total<br>value | Share ownership guideline/ target date |
| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> 2023 | <br> 33009 | <br> 10425 | <br> 43434 | <br> $2864038 | <br> Meets<sup>2</sup>  |
| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> 2022 | <br> 19202 | <br> 9969 | <br> 29171 | <br> $1944539 |  |
| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> Change | <br> 13807 | <br> 456 | <br> 14263 | <br> $919499 |  |
| ![LOGO](g431192g01l50.jpg) <br>**Kevin D. Strain, CPA**<br> Toronto, ON, Canada<br>Director since February 2021<br>**Non-independent**<br>Age: 56<br><u>Current committees:</u><br>• None<sup>1</sup> | <br> <sup>1</sup> Mr. Strain attends committee meetings, in full or in part, as appropriate, at the request of the committee chairs, but is not a member of any committee.<br><sup>2</sup> As President & CEO, Mr. Strain is subject to different share ownership guidelines than the independent directors. See page 78. | <br> <sup>1</sup> Mr. Strain attends committee meetings, in full or in part, as appropriate, at the request of the committee chairs, but is not a member of any committee.<br><sup>2</sup> As President & CEO, Mr. Strain is subject to different share ownership guidelines than the independent directors. See page 78. | <br> <sup>1</sup> Mr. Strain attends committee meetings, in full or in part, as appropriate, at the request of the committee chairs, but is not a member of any committee.<br><sup>2</sup> As President & CEO, Mr. Strain is subject to different share ownership guidelines than the independent directors. See page 78. | <br> <sup>1</sup> Mr. Strain attends committee meetings, in full or in part, as appropriate, at the request of the committee chairs, but is not a member of any committee.<br><sup>2</sup> As President & CEO, Mr. Strain is subject to different share ownership guidelines than the independent directors. See page 78. | <br> <sup>1</sup> Mr. Strain attends committee meetings, in full or in part, as appropriate, at the request of the committee chairs, but is not a member of any committee.<br><sup>2</sup> As President & CEO, Mr. Strain is subject to different share ownership guidelines than the independent directors. See page 78. | <br> <sup>1</sup> Mr. Strain attends committee meetings, in full or in part, as appropriate, at the request of the committee chairs, but is not a member of any committee.<br><sup>2</sup> As President & CEO, Mr. Strain is subject to different share ownership guidelines than the independent directors. See page 78. |

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20 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)

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| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | Ms. Stymiest is a corporate director. She was a member of the Group Executive at Royal Bank of Canada, an international banking and financial services organization, from 2004 to 2011; Royal Bank's Group Head, Strategy, Treasury and Corporate Services from 2010 to 2011; Chief Operating Officer from 2004 to 2009. Prior to that Ms. Stymiest held senior positions in the financial services sector including Chief Executive Officer, TSX Group Inc. (now TMX Group Inc.), Executive Vice-President and Chief Financial Officer, BMO Nesbitt Burns, and Partner, Financial Services Group, Ernst & Young LLP. She is a Fellow of the Institute of Chartered Professional Accountants of Ontario and received an Award of Outstanding Merit from that organization in 2011. In addition to the public company boards listed below, Ms. Stymiest is the Vice-Chair of AGE-WELL NCE Inc., and a member of the Advisory Board of AgeTech Catalyst Fund, a director of the Canadian Institute for Advanced Research and a director of President's Choice Bank. She holds an Honours Business Administration degree. | Ms. Stymiest is a corporate director. She was a member of the Group Executive at Royal Bank of Canada, an international banking and financial services organization, from 2004 to 2011; Royal Bank's Group Head, Strategy, Treasury and Corporate Services from 2010 to 2011; Chief Operating Officer from 2004 to 2009. Prior to that Ms. Stymiest held senior positions in the financial services sector including Chief Executive Officer, TSX Group Inc. (now TMX Group Inc.), Executive Vice-President and Chief Financial Officer, BMO Nesbitt Burns, and Partner, Financial Services Group, Ernst & Young LLP. She is a Fellow of the Institute of Chartered Professional Accountants of Ontario and received an Award of Outstanding Merit from that organization in 2011. In addition to the public company boards listed below, Ms. Stymiest is the Vice-Chair of AGE-WELL NCE Inc., and a member of the Advisory Board of AgeTech Catalyst Fund, a director of the Canadian Institute for Advanced Research and a director of President's Choice Bank. She holds an Honours Business Administration degree. | Ms. Stymiest is a corporate director. She was a member of the Group Executive at Royal Bank of Canada, an international banking and financial services organization, from 2004 to 2011; Royal Bank's Group Head, Strategy, Treasury and Corporate Services from 2010 to 2011; Chief Operating Officer from 2004 to 2009. Prior to that Ms. Stymiest held senior positions in the financial services sector including Chief Executive Officer, TSX Group Inc. (now TMX Group Inc.), Executive Vice-President and Chief Financial Officer, BMO Nesbitt Burns, and Partner, Financial Services Group, Ernst & Young LLP. She is a Fellow of the Institute of Chartered Professional Accountants of Ontario and received an Award of Outstanding Merit from that organization in 2011. In addition to the public company boards listed below, Ms. Stymiest is the Vice-Chair of AGE-WELL NCE Inc., and a member of the Advisory Board of AgeTech Catalyst Fund, a director of the Canadian Institute for Advanced Research and a director of President's Choice Bank. She holds an Honours Business Administration degree. | Ms. Stymiest is a corporate director. She was a member of the Group Executive at Royal Bank of Canada, an international banking and financial services organization, from 2004 to 2011; Royal Bank's Group Head, Strategy, Treasury and Corporate Services from 2010 to 2011; Chief Operating Officer from 2004 to 2009. Prior to that Ms. Stymiest held senior positions in the financial services sector including Chief Executive Officer, TSX Group Inc. (now TMX Group Inc.), Executive Vice-President and Chief Financial Officer, BMO Nesbitt Burns, and Partner, Financial Services Group, Ernst & Young LLP. She is a Fellow of the Institute of Chartered Professional Accountants of Ontario and received an Award of Outstanding Merit from that organization in 2011. In addition to the public company boards listed below, Ms. Stymiest is the Vice-Chair of AGE-WELL NCE Inc., and a member of the Advisory Board of AgeTech Catalyst Fund, a director of the Canadian Institute for Advanced Research and a director of President's Choice Bank. She holds an Honours Business Administration degree. | Ms. Stymiest is a corporate director. She was a member of the Group Executive at Royal Bank of Canada, an international banking and financial services organization, from 2004 to 2011; Royal Bank's Group Head, Strategy, Treasury and Corporate Services from 2010 to 2011; Chief Operating Officer from 2004 to 2009. Prior to that Ms. Stymiest held senior positions in the financial services sector including Chief Executive Officer, TSX Group Inc. (now TMX Group Inc.), Executive Vice-President and Chief Financial Officer, BMO Nesbitt Burns, and Partner, Financial Services Group, Ernst & Young LLP. She is a Fellow of the Institute of Chartered Professional Accountants of Ontario and received an Award of Outstanding Merit from that organization in 2011. In addition to the public company boards listed below, Ms. Stymiest is the Vice-Chair of AGE-WELL NCE Inc., and a member of the Advisory Board of AgeTech Catalyst Fund, a director of the Canadian Institute for Advanced Research and a director of President's Choice Bank. She holds an Honours Business Administration degree. | Ms. Stymiest is a corporate director. She was a member of the Group Executive at Royal Bank of Canada, an international banking and financial services organization, from 2004 to 2011; Royal Bank's Group Head, Strategy, Treasury and Corporate Services from 2010 to 2011; Chief Operating Officer from 2004 to 2009. Prior to that Ms. Stymiest held senior positions in the financial services sector including Chief Executive Officer, TSX Group Inc. (now TMX Group Inc.), Executive Vice-President and Chief Financial Officer, BMO Nesbitt Burns, and Partner, Financial Services Group, Ernst & Young LLP. She is a Fellow of the Institute of Chartered Professional Accountants of Ontario and received an Award of Outstanding Merit from that organization in 2011. In addition to the public company boards listed below, Ms. Stymiest is the Vice-Chair of AGE-WELL NCE Inc., and a member of the Advisory Board of AgeTech Catalyst Fund, a director of the Canadian Institute for Advanced Research and a director of President's Choice Bank. She holds an Honours Business Administration degree. |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | 2022 Meeting attendance | 2022 Meeting attendance | 2022 Meeting attendance | Other public company directorships | Other public company directorships | Other public company directorships |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | <br> Board | <br> 13 of 13 | <br> 100% | <br> George Weston Limited | <br> George Weston Limited | <br> 2011 – present |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | <br> Audit | <br> 5 of 5 | <br> 100% | <br> BlackBerry Limited | <br> BlackBerry Limited | <br> 2007 –<br>June 2022 |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | <br> Risk | <br> 4 of 4 | <br> 100% |  |  |  |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | <br> 2022 Annual Meeting votes in favour: 98.1% | <br> 2022 Annual Meeting votes in favour: 98.1% | <br> 2022 Annual Meeting votes in favour: 98.1% | <br> 2022 Annual Meeting votes in favour: 98.1% | <br> 2022 Annual Meeting votes in favour: 98.1% |  |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: | SLF Inc. securities held: |  |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | Year | Common<br>shares | DSUs | Total common<br>shares and DSUs | Total<br>value | Share ownership guideline/ target date |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | <br> 2023 | <br> 5000 | <br> 60180 | <br> 65180 | <br> $4297969 | <br> Meets  |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | <br> 2022 | <br> 5000 | <br> 53365 | <br> 58365 | <br> $3890611 |  |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk | <br> Change | <br> 0 | <br> 6815 | <br> 6815 | <br> $407358 |  |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk |  |  |  |  |  |  |
| ![LOGO](g431192g99c71.jpg) <br>**Barbara G. Stymiest,<br>CM, FCPA**<br> Toronto, ON, Canada<br>Director since May 2012<br>**Independent**<br>Age: 66<br><u>Areas of expertise:</u><br>• finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development<br>• designated audit committee financial expert<br><u>Current committees:</u><br>• Audit (Chair)<br> • Risk |  |  |  |  |  |  |

---

***Additional information*** 

To the best of the company's knowledge, other than as set out below, no proposed director as at the date of this Circular:

(a) is or has been, in the last ten years a director, chief executive officer or chief financial officer of any company (including SLF Inc.) that was subject to a cease trade or similar order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days that: (i) was issued while the proposed director was acting in the capacity as director, chief executive officer or chief financial officer; or (ii) was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer; or

(b) is or has been, in the last ten years a director or executive officer of any company (including SLF Inc.) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

(c) has, within in the last ten years, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director; or

(d) has been subject to (i) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (ii) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable security holder in deciding whether to vote for a proposed director.

Ms. Coyles was a director of Postmedia Network Canada Corp. while it completed a restructuring following an arrangement plan under the C*anada Business Corporations Act* in October 2016. Ms. Coyles is no longer a director of Postmedia Network Canada Corp.

MANAGEMENT INFORMATION CIRCULAR 2023 \| 21

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##### [**Table of Contents**](#toc)
**Corporate governance practices** 

Our board regularly reviews our governance processes and practices to make sure the board continues to effectively oversee management and our business affairs, and to ensure our governance framework meets regulatory requirements and reflects evolving best practices.

We believe our governance processes and practices are consistent with the *Insurance Companies Act* (Canada), the Canadian Securities Administrators' corporate governance guidelines, guidelines issued by OSFI for effective corporate governance in federally regulated financial institutions, the TSX corporate governance rules, the New York Stock Exchange (NYSE) corporate governance rules for U.S. publicly listed companies and the Philippine Stock Exchange corporate governance guidelines applicable to us.

**Governance at a glance** 

**We say "Yes" to** 

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Strong Culture** (see more on pages 26 to 27) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• We have a strong culture founded on ethical behavior, high business standards, integrity, respect and doing the right thing for our Clients

&nbsp;&nbsp;&nbsp;&nbsp;• Our Code of Conduct (Code) applies to every director, officer and employee, who are each required to review and certify compliance every year

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Independence** (see more on page 34) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• Our Board Chair, committee chairs and all members of our committees are independent directors

&nbsp;&nbsp;&nbsp;&nbsp;• Independent directors meet without management at each board and committee meeting

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Key competencies and experience** (see more on pages 37 to 38) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• The eight key attributes we expect of our directors are integrity, independent and informed judgment, accountability, knowledge of business issues and financial matters, commitment to operational excellence,
responsiveness, initiative and collaboration

&nbsp;&nbsp;&nbsp;&nbsp;• The Governance, Investment & Conduct Review Committee ensures that the board includes members with a broad range of skills and experience to carry out its mandate

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Tenure and renewal** (see more on pages 42 to 43) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• We use professional executive search firms and referrals to identify prospective director candidates

&nbsp;&nbsp;&nbsp;&nbsp;• The Governance, Investment & Conduct Review Committee, together with the Board Chair, continuously monitors board succession requirements and maintains a directors' skills matrix

&nbsp;&nbsp;&nbsp;&nbsp;• Shareholders elect individual directors annually

&nbsp;&nbsp;&nbsp;&nbsp;• Our policy on majority voting is informed by best practices and complies with TSX rules

&nbsp;&nbsp;&nbsp;&nbsp;• We limit the number of public company directorships our directors may have (limit of one other for directors that are executive officers of another public company, and limit of three others for any other director)

&nbsp;&nbsp;&nbsp;&nbsp;• We have a limit on board interlocks (no more than two directors may serve on the same board of another public company and directors may not serve together on more than one other public company without the prior consent
of the Governance, Investment & Conduct Review Committee)

&nbsp;&nbsp;&nbsp;&nbsp;• The board has adopted a proxy access policy

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Diversity, equity and inclusion** (see more on pages 36 to 37) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• We have a board diversity policy that considers multiple aspects of diversity, including gender representation and representation by individuals who self-identify as members of Black, Indigenous, People of Colour,
disabled and/or LGBTQ2+<sup>1</sup> communities

&nbsp;&nbsp;&nbsp;&nbsp;• We are committed to diversity, equity and inclusion, and have an enterprise strategy to strengthen diversity across our workforce

&nbsp;&nbsp;&nbsp;&nbsp;• If all of our director nominees are elected, 82% of our independent board nominees will be diverse<sup>2</sup>:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 6 out of our 11 independent director nominees (55%) self-identify as women

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 3 out of our 4 current committee chairs (75%) self-identify as women

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 1 out of our 4 current committee chairs (25%) self-identify as a member of an underrepresented group

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 3 out of our 11 independent director nominees (27%) self-identify as a member of an underrepresented group (one self-identifies as Chinese and two self-identify as South Asian)<sup>3</sup>

<sup>1</sup> acronym for Lesbian, Gay, Bisexual, Transgender, Queer or questioning, and Two Spirited people

<sup>2</sup> individuals who have self-identified as women or belonging to an underrepresented group

<sup>3</sup> individuals who have self-identified as members of the Black, Indigenous, People of Colour, disabled and/or LGBTQ2+ communities

22 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Board development and assessment** (see more on pages 39-40 and 44-45) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• Both current and new directors are provided orientation and continuing education programs

&nbsp;&nbsp;&nbsp;&nbsp;• Travel permitting, new directors will attend site visits to each of the company's four business pillar locations over a two to three year period primarily through the annual board strategy meeting

&nbsp;&nbsp;&nbsp;&nbsp;• Individual directors participate in an annual chair, board and committee effectiveness assessment process

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Strategic planning and risk management oversight** (see more on page 27) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• Travel permitting, all directors attend an annual strategic planning meeting held in one of our four business pillar locations and management updates the board on the execution of strategy and strategic considerations
at every regular board meeting

&nbsp;&nbsp;&nbsp;&nbsp;• The board provides ongoing oversight of risk management programs, including through the allocation of risk oversight to its four committees, and monitors that the principal risks are appropriately identified and managed

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Sustainability** (see more on page 32) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• The board has ultimate oversight of our sustainability and climate change issues

&nbsp;&nbsp;&nbsp;&nbsp;• In 2021, Sun Life appointed the company's first Chief Sustainability Officer

&nbsp;&nbsp;&nbsp;&nbsp;• In 2022, Sun Life appointed the company's first Vice-President of Climate Change and Environmental Impact

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Succession planning and talent management** (see more on page 28) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• The board has oversight of succession planning for the President & CEO

&nbsp;&nbsp;&nbsp;&nbsp;• The Management Resources Committee has oversight of talent development and succession planning for senior management and the President & CEO's assessment of other senior officers, and the board conducts
the assessment of the President & CEO

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Shareholder engagement and alignment** (see more on pages 45 to 47) |

---

&nbsp;&nbsp;&nbsp;&nbsp;• The Board Chair communicates with shareholders and other stakeholders in connection with governance-related matters

&nbsp;&nbsp;&nbsp;&nbsp;• Independent directors must own at least $805,000 (7x the cash portion of the independent director base retainer) in common shares and/or DSUs (see page 60)

**We say "No" to** 

---

| | |
|:---|:---|
| <sub>×</sub> | <br> **Slate voting for directors** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• Shareholders can vote for or withhold their vote from individual directors, and we do not have slate voting

---

| | |
|:---|:---|
| <sub>×</sub> | <br> **Staggered voting for directors** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• Directors are not elected for staggered terms, and we have annual elections for all directors

---

| | |
|:---|:---|
| <sub>×</sub> | <br> **Unequal voting structure** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• We do not have dual-class or subordinate voting structures

---

| | |
|:---|:---|
| <sub>×</sub> | <br> **Tie-breaking vote** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• In the event of a tie vote at the board our Board Chair does not have a deciding vote

---

| | |
|:---|:---|
| <sub>×</sub> | <br> **Pledging or hedging of Sun Life securities** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• We do not allow pledging or hedging of SLF Inc. securities by directors and senior management

---

| | |
|:---|:---|
| <sub>×</sub> | <br> **Pensions and stock options for independent directors** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• Independent directors are not allowed to participate in our stock option or pension plans

MANAGEMENT INFORMATION CIRCULAR 2023 \| 23

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##### [**Table of Contents**](#toc)
**The board of directors** 

**Mandate, roles and responsibilities** 

The board is responsible for supervising the management of the business and affairs of the company. Its mission is to be a strategic asset of the company, measured by effective execution of its overall stewardship role and the contribution the directors make, individually and collectively, to the long-term success of the enterprise. The board's duties and responsibilities are set out in its charter, which is reviewed by the board and the Governance, Investment & Conduct Review Committee at least annually.

The board's charter is incorporated by reference into this Circular and has been filed with securities regulators on www.sedar.com and www.sec.gov and can be found on our website (www.sunlife.com).

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; **Our board's main responsibilities** | &nbsp;&nbsp;&nbsp;&nbsp; **Our board's main responsibilities** |
| &nbsp;&nbsp;&nbsp;&nbsp; **Culture and Conduct** | · sets the tone for the culture of the organization on integrity, leadership, diversity, equity and inclusion, sustainability and good governance and for an appropriate and sound risk culture<br> · satisfies itself that the President & CEO and other senior management is sustaining that culture throughout the organization<br> · approves, complies with, and promotes our values set out in our Code and reviews employee compliance with the Code |
| &nbsp;&nbsp;&nbsp;&nbsp; **Strategy and Business Performance** | · oversees our vision and purpose statements<br> · provides challenge, advice and guidance on the strategic planning process and established plans<br> · annually approves our strategic plan and business, capital, investment and sustainability plans<br> · oversees our significant strategic initiatives, investments and transactions, including significant activities of our subsidiaries<br> · provides challenge, advice and guidance on our enterprise approach to climate change<br> · reviews quarterly reports on the performance of our four strategic pillars |
| &nbsp;&nbsp;&nbsp;&nbsp; **Risk Management** | · oversees and approves significant policies (such as our Risk Management Framework, Risk Appetite Policy, Capital Risk Policy and Capital Liquidity and Management Framework), plans and strategic initiatives related to the management of, or that materially impact risk, capital and liquidity<br> · provides challenge, advice and guidance on the effectiveness of risk management |
| &nbsp;&nbsp;&nbsp;&nbsp; **Financial Reporting, Communication and Disclosure** | · approves our quarterly and annual financial reports and corporate governance disclosure, including this Circular and the Sustainability Report<br> · approves the internal and external audit plans<br> · approves the Internal Control Framework and provides challenge, advice and guidance on its effectiveness to ensure the safeguarding of our assets<br> · satisfies itself that the right communication and disclosure practices are in place, including that shareholders are able to provide feedback to independent directors |

---

24 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; **Our board's main responsibilities** | &nbsp;&nbsp;&nbsp;&nbsp; **Our board's main responsibilities** |
| &nbsp;&nbsp;&nbsp;&nbsp; **Board and Senior Management** | · oversees board composition, the evaluation and selection of candidates at each annual meeting based on a skills, qualifications and competencies assessment process and consideration of the level of diversity on the board (see pages 33 to 38) in accordance with our Board Diversity Policy<br> · formulates succession plans for the President & CEO, Board Chair, committee chairs and other directors<br> · approves the appointment, evaluation and, if necessary, replacement of or succession plans for the President & CEO and other members of senior management<br> · annually reviews and approves the President & CEO's mandate and objectives, reviews his or her performance against those objectives, and approves his or her compensation |
| &nbsp;&nbsp;&nbsp;&nbsp; **Governance** | · performs its overall stewardship responsibilities either directly or through delegation to its four standing committees (see pages 49 to 57 for a description of the key activities of the committees), including the allocation of risk oversight to its committees<br> · establishes corporate governance practices and policies and monitors corporate governance trends<br> · establishes position descriptions for the Directors, Board Chair and Chairs of Board Committees<br> · delegates to the President & CEO, management and control functions powers to manage the business and affairs of the company<br> · annually meets with OSFI to review its annual examination report and the status of items to be reviewed with management on a regular basis |

---

**2022 Highlights**

· approved the strategic plan, and the business, capital, investment plans and the sustainability plan

· reviewed and approved a 15-year bancassurance arrangement with Dah Sing Bank in Hong
Kong, the acquisition of a majority stake in Advisors Asset Management, an agreement to sell Sun Life's UK business to Phoenix Group Holdings plc

· onboarded two new directors (appointed in 2021) and appointed one new director to enhance the skills, experience and
expertise on the board, complement the existing board composition and enhance board diversity

· integrated new independent Board Chair

· approved amendments to our Board Diversity Policy

· reviewed CEO and Executive Team succession planning and approved the appointments of a new Chief Client and Innovation
Officer and a new Chief Risk Officer

· received insights from external experts on the U.S. political and geopolitical landscape

· received updates on a variety of topics including Sun Life's culture, information technology, cybersecurity, and
digital leadership, IFRS 17 and 9 implementation plans, sustainability, shareholder activism and the war in Ukraine

· continued to prioritize board oversight of environmental, social and governance (ESG) matters, including approving
disclosures in our annual management's discussion and analysis (MD&A) in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and continuing to support sustainability as an area of focus in our
Client impact strategy to ensure that sustainability is integrated into everything we do, including in our strategy, culture, and operations (see pages 32)

MANAGEMENT INFORMATION CIRCULAR 2023 \| 25

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##### [**Table of Contents**](#toc)
**Board Chair, Committee Chairs, President & CEO** 

The Board Chair is an independent director. The Board Chair is responsible for providing leadership that enhances the effectiveness and independence of the board. The Board Chair manages the board's affairs to assist the directors in carrying out their responsibilities and helps the board operate cohesively. The Board Chair works closely with the Chair of the Governance, Investment & Conduct Review Committee to regularly evaluate, and in appropriate circumstances propose enhancements to, the board's governance structure and procedures. The Board Chair is a regular attendee of board committee meetings.

The Board Chair and respective committee chairs are responsible for setting meeting agendas and reviewing the meeting materials with management before meetings so that the meetings are productive and enhance the board's effectiveness and independence.

Committee chairs are consulted in advance in connection with the appointment, reassignment, replacement or dismissal of senior management within their respective committee's areas of responsibility, including those in OSFI-identified control functions. Committee chairs are consulted annually on the performance assessment and compensation awarded to those individuals. Each committee chair is an independent director and generally holds the position for five years. Committees, in consultation with the Board Chair, can hire independent advisors.

The role of President & CEO is held by Kevin D. Strain. He is also a director of the company. There is a written statement of mandate for the President & CEO which is reviewed by the board annually and which specifies the President & CEO's overall accountability for leading the company's business operations and creating sustainable value for all stakeholders. The President & CEO is responsible for championing the company's global mission, purpose and values, managing the company's resources to ensure optimal performance, and setting a standard for culture, conduct and character through his or her own behaviour and actions. The President & CEO develops the leadership capabilities and succession required for execution of the strategy and long-term success of Sun Life and provides leadership in the vision, purpose, governing principles, risk management and regulatory compliance, consistent with Sun Life's risk appetite and culture.

The full position descriptions of our President & CEO, our directors, our Board Chair and our committee chairs can be found on our website (www.sunlife.com).

**Culture and conduct** 

We have built a strong corporate culture founded on ethical behaviour, high business standards, integrity, respect and doing the right thing for our Clients. The board establishes the "tone from the top" and makes every effort to ensure that senior management consists of people of integrity who create and sustain a culture of integrity throughout the organization. Questions about integrity are included as part of our annual board, committee and chair effectiveness review process.

The board has established the Code that applies to every director, officer and employee, with no exception. Each director, officer and employee receives annual training and is required to complete a declaration of compliance with the Code.

Our Code promotes speaking up and outlines our commitment against retaliation. Our Code also requires employees and directors to report all known and suspected breaches. Our Ethics Hotline empowers our employees to play an active role in protecting the organization. Employees may use the Ethics Hotline to report allegations of misconduct anonymously or if they feel their concerns have not been resolved using other reporting methods.

Communications that accompanied the Code in 2022 further reinforced our expectations of behaviour in the workplace; emphasizing the importance of speaking up, fostering a workplace that is free of harassment of any kind and promoting diversity, equity and inclusion.

The Governance, Investment & Conduct Review Committee is responsible for reviewing the effectiveness of the Code, monitoring compliance with the Code and reporting the results of its review to the board annually. On a quarterly basis, the Chief Compliance Officer reports on breaches of the Code and reviews our controls and compliance with the Governance, Investment & Conduct Review Committee.

26 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)
A copy of our most recent Code is available on our website (www.sunlife.com). The Code has been filed with the securities regulators in Canada on SEDAR (www.sedar.com) and with the U.S. Securities and Exchange Commission (SEC) on EDGAR (www.sec.gov/edgar.shtml).

**Related party transactions** 

We are required by the *Insurance Companies Act* (Canada) and the *Trust and Loan Companies Act* (Canada) (the Acts) to develop procedures to identify potential or actual transactions with related parties of the company, a group that includes directors and senior officers. We are also required to have our conduct review committee (the Governance, Investment & Conduct Review Committee) review on an annual basis, the related party procedures and their effectiveness in ensuring that we comply with the related party provisions of the Acts and to review any related party transactions requiring regulatory reporting. We have established procedures for a broad range of potential transactions with related parties of the company and in 2022 the Governance, Investment & Conduct Review Committee reviewed these and their effectiveness to ensure that any transactions with related parties of the company that may have a material effect on the stability or solvency of the company are identified (also see page 53).

**Strategic planning** 

The board sets the strategic direction for the company and approves the annual strategic plan, including the company's purpose statement, enterprise and group strategies, and the annual business capital, investment, and sustainability plans. It also reviews the effectiveness of our strategic planning process on a regular basis.

As part of the strategic plans and priorities for each of our four business groups, the board focused on the key risks and uncertainties facing the business relating to strategic execution including the COVID-19 pandemic, the changing economic and geopolitical environment, climate change (including stakeholder and regulatory expectations on climate and social actions), operational resilience (including people resources and technology and cyber risks), strategic execution, the competitive and regulatory environment, and maintaining strong financial discipline and a strong capital position. The board also reviewed trends emerging in strategic and financial decision making with a focus on the geopolitical climate, the shifting asset management landscape, an increasing client and employer focus on health, the rise of new technologies, the evolution of work, and increasing economic tensions, including rising inflation and interest rates. Consideration was also given to the alignment of the strategic plan projections with our risk appetite and the uncertainty brought on by rising inflation and interest rates and the adoption of IFRS 17. The Executive Team reviewed and discussed the feedback and perspectives provided by the board and the board then approved the updated strategic plan at its meeting in August.

Management updates the board on the execution of the strategy and strategic considerations at every regular board meeting. The board must approve any transaction that will have a significant strategic impact on the company.

**Risk Management Oversight** 

Our board is ultimately responsible for ensuring the oversight of all risks across the enterprise and has primary responsibility for taking action to ensure risk management policies, programs and practices are in place. By approving our Risk Management Framework and the Risk Appetite Policy, and providing ongoing oversight of the risk management programs, including through the allocation of risk oversight to its four standing committees, the board monitors that the significant risks are appropriately identified and managed. The board of directors also oversees business and strategic risk through review and approval of the business and strategic plans, and regularly discusses key themes, issues and risks emerging in connection with the design or implementation of these plans.

You can find more information about our risk management practices and the oversight provided by the board and the board committees in the description of our board committees beginning on page 49 and in our annual information form and MD&A for the year ended December 31, 2022 which are available on our website (www.sunlife.com), on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov/edgar.shtml).

**Internal control and management information systems** 

The board has approved a comprehensive Internal Control Framework that codifies the company's existing system of internal controls set out in policies and related documents. The Internal Control Framework is based on *Internal Control – Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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The Audit Committee reviews and monitors the effectiveness of our internal control and management information systems and receives regular reports on internal control from management, including corporate oversight functions in the actuarial, finance, and internal audit departments. This oversight provides reasonable assurance of the reliability of our financial information and the safeguarding of assets.

**Succession planning and talent management** 

The Management Resources Committee has primary oversight of talent development and succession planning for senior management and the President & CEO's assessments of the other senior officers. The board has primary oversight of talent management, succession planning and the performance assessment of the President & CEO. The Management Resources Committee and the board conduct in-depth reviews of succession options relating to senior management positions and the President & CEO, respectively, and, when appropriate, approves the rotation of senior executives into new roles to broaden their responsibilities and experiences and deepen the pool of internal candidates for senior management positions.

Annually the Management Resources Committee reviews in detail updated succession plans for Executive Team roles and heads of key control functions. Each committee also reviews the talent and succession plans relevant to their specific functions and responsibilities.

Over the course of the year, the board will typically have direct exposure to senior executives as they present on their part of the company's activities.

The board typically hosts one or more social events that includes members of management below the Executive Team. These events allow the board to interact and build relationships with high performance and high potential employees who are our future leaders.

Succession planning and talent management processes are a key part our enterprise strategy to strengthen diversity, equity and inclusion, discussed in greater detail below.

**Diversity, equity and inclusion** 

Our commitment to diversity, equity and inclusion is at the centre of our company values and is critical to the board and executive management. Qualified directors and executive leaders who reflect the Clients we serve, our employees around the world, and the communities where we operate bring broader perspectives and experience to deepen our insight, enhance innovation and accelerate growth. We strive to create an inclusive, high-performing culture where all employees, regardless of sex, gender identity, race, religion, age, country of origin, physical ability, sexual orientation or other diversity attributes, can contribute to their full potential. We stand for equality, social change and justice for all and are committed to creating equal opportunities and fostering inclusion. For more information on diversity, equity and inclusion and how we are taking action, please see our Diversity, Equity and Inclusion Strategy 2025 and our Sustainability Report on our website (www.sunlife.com/sustainability/diversity-and-inclusion and www.sunlife.com/sustainability).

To drive our commitment to diversity, equity and inclusion we have:

• signed on to the goals in the BlackNorth Initiative, which aims to remove systemic barriers that negatively affect Black
Canadians; and

• become a member of the Canadian Council for Aboriginal Business and began our Progressive Aboriginal Relations (PAR)
certification, which confirms corporate performance in Indigenous relations, and formed a working group to create an intentional and progressive approach to impact four key performance areas: leadership, employment, business development, and
community partnerships.

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**Advancement of women and underrepresented groups in our workplace** 

We have an enterprise strategy to strengthen diversity, equity and inclusion. The strategy focuses on a series of actions that review and enhance our talent management practices, enrich our already collaborative and inclusive culture, and ensure our investments and participation in the community support our objectives.

Below is a list of efforts we have made to support our commitment to the advancement of women and underrepresented groups in our workplace.

• **Recruitment** – we require a diverse and gender balanced slate of candidates when we select leaders for executive
officer and senior leadership positions, both internally and externally. In situations where we are working with external executive search firms, one of the standard terms and conditions in our contracts is the presentation of diverse candidate
slates. We also apply a language analysis tool to our recruitment postings, to ensure our language is gender inclusive and an artificial intelligence resumé screening tool to minimize discrimination and bias while recommending top candidates.

• **Inclusion Networks** – we have numerous internal, voluntary, employee-led inclusion networks which play an important role in fostering and embedding a culture of inclusion within the company, including our Asian American Heritage Association network, our Black Excellence Alliance network, our DiverseABILITY network, our
Hispanic Organization for Leaders and Achievers network, our Mosaic network, our Sun Life Pride network, and our networks focused on the advancement of women: Bright Women in North America and InvestHER in our asset management group.

• **Mentorship and Development Programs** – we have a number of informal and formal mentor and mentee opportunities
across our company and have implemented a global mentorship framework with an inclusion focus to ensure consistency across our businesses.

• **Community Involvement** – we celebrate events such as International Women's Day and Pride month and sponsor
several charities and programs related to gender equality and advancing inclusion, especially for disadvantaged or marginalized communities such as:

&nbsp;&nbsp;&nbsp;&nbsp;• the Simmons Conference, the Women in Insurance STEM program, the Bentley University program for first-generation college
students, the Right to Play and Kids Help Phone programs for Indigenous children and youth across Canada,

&nbsp;&nbsp;&nbsp;&nbsp;• the Foundation for Black Communities, serving Black communities across Canada, and

&nbsp;&nbsp;&nbsp;&nbsp;• the launch of the Dean Connor Sun Life Inclusion Scholarships for Black and Indigenous Students in 2021

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For more information on our community involvement, please see our Sustainability Report on our website (www.sunlife.com/sustainability).

• **Building External Partnerships** – we believe it is important to build key relationships with external partners
that have the same commitment to building diverse and inclusive communities that also enable us to establish relationships with diverse talent for future opportunities, including Bentley University's Center for Women and Business, and INDspire.
For more information on our external partnerships, please see our Sustainability Report on our website (www.sunlife.com/sustainability).

• **Employee Training** – We offer diversity, equity and inclusion education seminars through our online learning
resources as well as through internal, executive-led forums that focus on fostering mutual understanding, and encourage participants to get more comfortable having uncomfortable conversations and were the
first insurer to invest in Kaleidoscope by Hive Learning, the world's leading interactive digital inclusion program. Please see our Diversity, Equity and Inclusion Strategy 2025 on our website (www. sunlife.com/sustainability/diversity-and-inclusion) for more information on our employee diversity, equity and inclusion training.

• **Flexible Work Arrangements** – during another year of uncertainty, our company continued to provide various
additional support measures in order to attract and retain diverse talent, including flexible work arrangements, myWellness days to promote the importance of taking time away from work, and continuing to have an increased allotment of personal
emergency days to support childcare, eldercare or other responsibilities arising from the COVID-19 pandemic.

• **Monitoring Activities** – we regularly monitor and review the number of women and underrepresented groups in
executive and senior leadership positions through our annual talent review and succession planning process (see page 28). One of the key metrics we review is the number of women and underrepresented groups in executive and senior leadership roles
and in our management pipeline.

• **Compensation Analyses** – at the conclusion of our annual performance management and compensation cycle, we
analyze compensation levels across the organization, including the compensation of women holding executive officer and senior leadership positions, to ensure fair and equitable treatment, free from systemic bias. We also ensure to review pay
outcomes with a lens for employees that identify as members of underrepresented groups in addition to gender.

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We pride ourselves on creating an inclusive and welcoming environment that encourages diverse perspectives, experiences, preferences and beliefs. Below are examples of how we have been recognized for our ongoing commitment to gender equality, diversity, equity and inclusion:

• we have been included in the Pax Ellevate Global Women's Index Fund (PXWEX) since 2014,

• we have been included in the Bloomberg Gender-Equality Index (GEI) since 2017,

• we received Parity Certification by Women in Governance for our strong commitment to gender equality in the workplace,

• in 2016 we signed the 100% Talent Compact pledge to move to closing the gender wage gap in Boston, and

• we achieved a perfect score for the thirteenth consecutive year on the Human Rights Campaign Foundation's corporate
equality Index.

***Women and underrepresented groups in executive officer positions***

The following chart shows the number and percentage of men and women who are executive officers (members of the Executive Team), direct reports of the President & CEO and senior executives of the company as of February 28, 2023. The executive officers are also officers of Sun Life Assurance.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Gender | Number of<br> Executive<br>Officers | Percentage of<br> Executive<br>Team Members | Number of<br> President &<br>CEO Direct<br>Reports<sup>1</sup> | Percentage of<br>President<br> CEO Direct<br>Reports | Number<br>of Senior<br>Executives | Percentage<br>of Senior<br>Executives |
| &nbsp;&nbsp; Men | 8 | 62% | 7 | 50% | 193 | 62% |
| &nbsp;&nbsp; Women | 5 | 38% | 7 | 50% | 117 | 38% |
| &nbsp;&nbsp; Total | 13 | 100% | 14 | 100% | 310 | 100% |

---

<sup>1</sup> President & CEO Direct Reports includes twelve Executive Officers, and two Senior Executives that report directly to the President & CEO.

***Representation commitments for executive officer positions***

We have committed to improving the representation of women leaders by setting a goal of 50% women at the Vice-President level and above globally by 2025 and a goal to reach 25% underrepresented groups at the Vice-President level and above in North America by 2025. The following chart shows the percentages of self-identified women and underrepresented groups<sup>1</sup> who are senior management (Vice-President and above) of the company as of February 28, 2023.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; **Senior Management**<br> **(Vice-President and above)** | **Commitment<br>by 2025** | **2023** |
| &nbsp;&nbsp; Women (Global) | 50% | ![LOGO](g431192g10n01.jpg) |
| &nbsp;&nbsp; Underrepresented groups<sup>1</sup>  | 25% | ![LOGO](g431192g10n02.jpg) |

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<sup>1</sup> individuals who self-identify as members of the Black, Indigenous, and/or People of Colour communities

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**Sustainability** 

Our Sustainability Plan represents the areas where we have the greatest opportunity to drive positive impact in society, while creating competitive advantage for our business: increasing financial security, fostering healthier lives and advancing sustainable investing. These efforts build from our foundation of operating as a trusted and responsible business. This area represents table stake issues that we believe every company should act on. Our sustainability report and complementary web disclosures provide more information about our sustainability commitments and performance and is available on our website (www.sunlife.com/sustainability).

The board has ultimate oversight of sustainability and climate change issues, and uses reports from the board committee chairs noted below, and other direct presentations by management and external experts, to decide the nature and extent of its input and to provide challenge, advice and guidance on our enterprise approach to sustainability and climate change (see also page 24). Our four board committees have oversight over aspects of sustainability and climate change:

• the Governance, Investment & Conduct Review Committee of the Board of Directors assists the Board with its
oversight of sustainability matters. This includes reviewing and approving our enterprise-wide Sustainability Policy and reviewing and recommending approval of our annual Sustainability Report and Sustainability Plan to the Board.

• the Risk Committee provides enterprise-wide oversight of the management of current and emerging risks, including of
climate-related risks and, more broadly, environmental risks. For more detail on the Risk Committee's role, refer to our annual MD&A available on our website (www.sunlife.com//investors/financial-results-and-reports).

• the Audit Committee has oversight of all financial disclosures in the financial statements and MD&A, including those
related to climate change. For more information on our climate-related disclosures, see our TCFD report available on our website (https://www.sunlife.com/en/sustainability/data-and-reports/).

• the Management Resources Committee provides oversight of our diversity, equity and inclusion strategy. For more
information on our diversity, equity and inclusion at Sun Life, please see our Diversity, Equity and Inclusion Strategy 2025 on our website (https://www.sunlife.com/en/sustainability/trusted-and-responsible-business/fostering-dei/).

In 2021, Sun Life appointed the company's first Chief Sustainability Officer who is responsible for delivering on Sun Life's long-term sustainability commitments to design and lead greater sustainability performance for Sun Life. In 2022, Sun Life appointed the company's first Vice-President of Climate Change and Environmental Impact to oversee the development and implementation of the enterprise-wide climate change strategy, climate risk and decarbonization performance and reporting functions.

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**Building an effective board** 

The Governance, Investment & Conduct Review Committee is accountable for recruiting highly qualified candidates with the competencies, experience and characteristics required to drive effective governance and create sustainable value for Sun Life's stakeholders over the long term.

***Board size***

The board reviews its size every year to ensure it will promote open dialogue and effective decision making, ensure the right caliber and scope of director expertise, allow for board renewal and provide for effective committee membership. According to our by-laws, our board can have a minimum of eight and a maximum of 20 directors. At its meeting held on February 8, 2023, the board fixed the number of directors at 12. All of the director nominees currently serve as directors. Directors are elected for a one-year term. The board can appoint directors between shareholder meetings.

![LOGO](g431192g24j06.jpg)

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**Independence** 

---

| | |
|:---|:---|
| The board maintains a majority of independent directors to ensure it operates effectively and independently of management. All members of the board's standing committees must be independent. | ![LOGO](g431192g10a04.jpg)  |

---

A director is independent under our Director Independence Policy if he or she does not have a direct or indirect relationship with SLF Inc. that could reasonably be expected to interfere with his or her ability to exercise independent judgment. You can find a copy of our Director Independence Policy on our website (www.sunlife.com).

The Governance, Investment & Conduct Review Committee evaluated the independence of each director nominee according to our Director Independence Policy and confirmed that 11 of the 12 are independent, and that all of the current members of the Audit Committee and Management Resources Committee meet the additional independence requirements set out in that policy for membership on those committees. Kevin D. Strain is not independent because he is our President & CEO.

***Independent Chair of the Board***

The roles of the Board Chair and the President & CEO are separate. The board believes that this separation increases the effectiveness of the board and facilitates enhanced oversight of management. Mr. Powers is our Board Chair and an independent director. Having an independent Board Chair promotes strong board leadership, encourages open discussion and debate at board meetings, and avoids potential conflicts of interest.

***Private Meetings***

The independent directors meet privately with the President & CEO and privately without management at each board meeting. The Board Chair and committee chairs encourage open and candid discussions among the independent directors by providing them with an opportunity to express their views on key topics before decisions are made. The independent directors also routinely meet privately with the heads of key control functions at committee meetings (see committee reports pages 49 to 57).

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**Selecting directors** 

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; Candidate <br> Search  | <br> ![LOGO](g431192g18o51.jpg)  | Board Chair and<br>Chair of the<br>Governance,<br>Investment &<br>Conduct Review<br>Committee<br>identifies<br>prospective<br>candidates | <br> ![LOGO](g431192g18o51.jpg)  | Candidate<br>interviews with<br>the Board Chair,<br>Committee<br>Chairs, and the<br>President & CEO | <br> ![LOGO](g431192g18o51.jpg)  | Governance,<br>Investment &<br>Conduct Review<br>Committee makes<br>recommendation<br>to the Board | =  | Board<br> Approval<br> of New<br> Candidate |

---

The Governance, Investment & Conduct Review Committee, together with the Board Chair, have primary responsibility for identifying potential new directors and have adopted guidelines for director recruitment.

As part of the recruitment process, the GICRC develops a preferred candidate profile that reflects the particular competencies, experience and other characteristics required to complement the existing Board profile, taking into account both current and future needs.

Candidates are identified through executive search firms and referrals. An evergreen list of prospective candidates is maintained, which is comprised of individuals who the committee feels may be appropriate as a board candidate when a vacancy arises.

When recruiting candidates for appointment or election to the board, the Governance, Investment & Conduct Review Committee:

• is committed to ensuring equitable and inclusive recruitment practices and will require search firms to identify and present
diverse and balanced slates of potential Director candidates, including women and members of the Black, Indigenous, People of Colour, disabled and/or LGBTQ2+ communities (underrepresented
groups)<sup>1</sup>, and

• will create equity by ensuring candidates have equal access to opportunities, free of bias and discrimination.

The Governance, Investment & Conduct Review Committee will also consider the board's representation commitments for women and underrepresented groups on the board (see pages 36 to 37) when recruiting candidates. Executive search and background screening firms conduct reference and background checks on potential candidates. Suitable candidates are interviewed by the Board Chair, the committee chairs and the President & CEO. The committee receives input from all of these sources in connection with its recommendation to the board for the appointment or nomination of a new director.

Every year the Governance, Investment & Conduct Review Committee recommends a list of candidates for nomination to the board.

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<sup>1</sup> individuals who self-identify as members of the Black, Indigenous, People of Colour, disabled and/or LGBTQ2+ communities.

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**Diversity and skills** 

We expect our directors to act ethically and with integrity in all personal, business and professional dealings. Directors must understand our corporate vision and strategic objectives, continually build their knowledge about our businesses and the financial services sectors in which we operate, and prepare for and actively participate in board and committee meetings in an objective way. They must also understand the board and committee charters and our corporate governance policies and practices, comply with our Code and meet our share ownership guidelines (see page 60). Directors have unrestricted access to management, as necessary, to carry out their responsibilities.

We have eight key attributes we expect of our directors when they carry out their duties:

![LOGO](g431192g26s09.jpg)

**Diversity** 

We believe that a diverse group of directors produces better corporate governance and oversight, as such the board has adopted a diversity policy that includes provisions on representation and diverse candidate slates. The objective of the board's diversity policy is to ensure that the board as a whole possesses diverse qualifications, skills, experience and expertise relevant to the company's business, in order to fulfil its mandate.

Effective implementation of the board's diversity policy is the responsibility of the Governance, Investment & Conduct Review Committee and the Board Chair. See "Selecting directors" above for more information on how Sun Life ensures diverse candidates are considered as prospective board members.

To ensure the board's diversity commitments are effectively implemented, the Governance, Investment & Conduct Review Committee assesses the effectiveness of the board's diversity policy on an annual basis by:

• considering the level of diversity on the board based on the above factors, which includes the consideration of the level of
gender representation and representation of underrepresented groups<sup>1</sup>

• progress towards the board's representation commitments for women and underrepresented groups<sup>1</sup> on the board, and

• whether its representation commitments have been achieved or exceeded.

***Representation commitments for women and underrepresented groups on the board***

The board's diversity policy includes provisions relating to identification and nomination of women directors and underrepresented groups<sup>1</sup>. Taking into account the desired qualifications, skills, experience, expertise and the board's commitment to diversity, it aims to have:

• individuals self-identifying as men and individuals self-identifying as women each comprise 35% to 45% of directors, as the
board progresses towards the aim of balanced gender representation by 2025; and

• members of the Black, Indigenous, People of Colour, disabled and/or LGBTQ2+ communities (underrepresented groups)<sup>1</sup> comprise 20% to 25% of directors.<sup></sup>

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<sup>1</sup> individuals who self-identify as members of the Black, Indigenous, People of Colour, disabled and/or LGBTQ2+ communities.

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**Diversity of our Independent Director Nominees** 

---

| | | |
|:---|:---|:---|
| ![LOGO](g431192g30e14.jpg) | ![LOGO](g431192g70p34.jpg) | ![LOGO](g431192g56l32.jpg) |

---

As of the date of this Circular 6 out of our 11 (55%) independent director nominees<sup>1</sup> and 3 out of our 4 (75%) current committee chairs self-identify as women, 3 out of our 11 (27%) independent director nominees<sup>2</sup> self-identify as a member of an underrepresented group<sup>3</sup> and combined with our representation of women, 9 out of 11 (82%) of our independent board nominees will be diverse<sup>4</sup>. No directors have self-identified as Indigenous peoples or persons with disabilities.

<sup>1</sup> 6 out of 12 (50%) of all director nominees self-identify as women 

<sup>2</sup> 3 out of 12 (25%) of all director nominees self-identify as a member of an underrepresented group (one self-identifies as Chinese and two self-identify as South Asian). 

<sup>3</sup> individuals who self-identify as members of the Black, Indigenous, People of Colour, disabled and/or LGBTQ2+ communities.

<sup>4</sup> 9 out of 12 (75%) of all director nominees self-identify as women or belonging to an underrepresented group. 

**Key competencies and experience** 

The Governance, Investment & Conduct Review Committee ensures at all times that the board includes members with a broad range of business and strategic experience and expertise so that the board is able to effectively carry out its mandate. On an annual basis, the Governance, Investment & Conduct Review Committee and the board determine the key competencies and experience that they believe are necessary for the board as a whole to possess in order to be an asset to the company and fulfil its responsibilities. These include the eight key attributes listed on page 36 above and the specific competencies and experience listed in the table below (skills matrix) and described in the text that follows. The table below also shows the key competencies and experience that each independent director nominee has indicated he or she brings to the board. Each such director nominee has also identified the principal areas of expertise that he or she possesses and those are listed in the respective director nominee profiles on pages 15 to 21. The Governance, Investment & Conduct Review Committee reviewed the areas indicated by each nominee and the rationale provided for their respective selections and is satisfied that the nominees possess skills in those areas. 

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| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Deepak Chopra** | **Stephanie L. Coyles** | **Ashok K. Gupta** | **M. Marianne Harris** | **David H. Y. Ho** | **Laurie G. Hylton** | **Helen M. Mallovy-Hicks** | **Marie-Lucie Morin** | **Joseph M. Natale** | **Scott F. Powers** | **Barbara G. Stymiest** |
| &nbsp;&nbsp;&nbsp;&nbsp; Key Competencies and Experience |  |  |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **Finance, Accounting and Actuarial**<br> knowledge of and experience with complex accounting, actuarial and/or capital management issues | ✓ |  | ✓ | ✓ | ✓ | ✓ | ✓ |  |  |  | ✓ |
| &nbsp;&nbsp;&nbsp;&nbsp; **Insurance, Health and Wealth**<br> industry experience in insurance, re-insurance, asset management, wealth management and/or health to provide insight into operations, strategy and market factors |  |  | ✓ | ✓ |  |  | ✓ |  |  | ✓ | ✓ |
| &nbsp;&nbsp;&nbsp;&nbsp; **Risk Management**<br> knowledge of and experience with the identification of material risks, risk assessment, internal risk mitigation and controls, and risk reporting |  | ✓ | ✓ | ✓ |  | ✓ | ✓ | ✓ |  | ✓ | ✓ |
| &nbsp;&nbsp;&nbsp;&nbsp; **Talent and Culture**<br> experience guiding and championing a high performance culture, embedding human resources practices that attract, retain and develop a disproportionate share of top talent, including knowledge of and experience with compensation plan design and administration, leadership development and talent management, succession planning and organizational design | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| &nbsp;&nbsp;&nbsp;&nbsp; **Client Needs, Sales and Distribution**<br> experience in creating financial products for retail distribution, Client research or brand development and positioning; experience in overseeing sales forces and third-party distribution channels  | ✓ | ✓ | ✓ |  |  |  |  |  | ✓ | ✓ |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **International Business**<br> experience in a senior level role in an organization with operations in Asia or other international jurisdictions and experience working with different cultures  | ✓ | ✓ | ✓ |  | ✓ |  | ✓ | ✓ | ✓ | ✓ | ✓ |
| &nbsp;&nbsp;&nbsp;&nbsp; **Government Relations/Policy**<br> experience in government relations or public policy | ✓ | ✓ | ✓ | ✓ |  |  |  | ✓ | ✓ |  | ✓ |
| &nbsp;&nbsp;&nbsp;&nbsp; **Leadership**<br> experience as a senior executive or director at a publicly traded company, with insight on the operations and governance of an organization of significant size and complexity  | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |  | ✓ | ✓ | ✓ | ✓ |
| &nbsp;&nbsp;&nbsp;&nbsp; **Corporate Strategy and Development**<br> experience in strategic planning and identifying and evaluating corporate development opportunities, including acquisitions, partnerships and joint ventures  | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| &nbsp;&nbsp;&nbsp;&nbsp; **Digital and Data/Analytics**<br> experience or knowledge relating to the cybersecurity, technology, digital and data/analytics needs and/or strategy for a major organization  | ✓ | ✓ | ✓ |  | ✓ |  | ✓ |  | ✓ |  | ✓ |
| &nbsp;&nbsp;&nbsp;&nbsp; **Sustainability, Environmental, Social and Governance**<br> experience in sustainability matters, climate change, environmental issues, social issues and/or corporate governance principles and practices in an organization of significant size and complexity  |  | ✓ |  | ✓ |  |  |  |  | ✓ |  | ✓ |

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The Governance, Investment & Conduct Review Committee also reviews the membership of each committee annually to ensure each committee is comprised of members with the competencies and experience required to fulfil the commitee's mandate.

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**Orientation and development** 

Our orientation program for new directors includes informal introductory meetings with each Executive Team and board member, formal information sessions, and a directors' manual with information about the company, the board and its committees, board administration, directors' duties, policies applicable to the directors, and future meeting schedules. The Board Chair matches new directors with an experienced board member to act as a mentor by providing perspective and informal feedback and offering insights on board culture and dynamics.

---

| | |
|:---|:---|
| Formal information sessions cover the company's four business groups, each corporate function, our corporate strategy and financial objectives and are tailored to account for individual backgrounds, experience and the expected committee responsibilities. The Board Chair and committee chairs meet with new directors to discuss the role of the board and board committees in detail.<br>Directors are provided with an extensive list of upcoming outside professional development programs that may be of interest, which is updated throughout the year as new programs become available. The list includes governance, financial, compensation and industry topics. Directors can participate in these programs at our expense, as long as the Board Chair approves them in advance. As part of the annual assessment process Directors are asked to provide input on continuing education sessions that each Director would find valuable and this input is reflected in the Director education program.<br>Travel permitting, new directors attend site visits to each of the company's four business pillar locations over a two to three year period, primarily through the board's annual strategic planning board meeting in one of our four business pillar locations. The board believes that these site visits enhance ongoing director education. All of the directors are members of the Institute of Corporate Directors in Canada and the National Association of Corporate Directors in the U.S., which provide continuing education for directors through publications, seminars and conferences. | ![LOGO](g431192g64a01.jpg) |

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In addition, we hold regular education sessions in conjunction with board and committee meetings to give directors a deeper understanding of our businesses and operating environment, to address ongoing and emerging issues in the functional areas of board oversight, and to encourage more in-depth discussion in specific areas. The table below lists the education sessions we organized for our directors in 2022.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Month | Topic | Audience/Committee<sup>1</sup> |
| &nbsp;&nbsp;&nbsp; February | Covid-19 Update | Board |
| &nbsp;&nbsp;&nbsp; February | IFRS 17/9 Update | AC |
| &nbsp;&nbsp;&nbsp; February | Covid Outlook for 2022 | RC |
| &nbsp;&nbsp;&nbsp; February | Cyber Security Update | RC |
| &nbsp;&nbsp;&nbsp; May | Discussion with Janice Stein on Shifting Geopolitical Alliances | Board |
| &nbsp;&nbsp;&nbsp; May | Discussion with Ed Hyman on the Global Economic Outlook | Board |
| &nbsp;&nbsp;&nbsp; May | Competitive Update and External Trends | Board |
| &nbsp;&nbsp;&nbsp; May | IFRS 17/9 Update | AC |
| &nbsp;&nbsp;&nbsp; May | Market Trends in Executive Compensation | MRC |
| &nbsp;&nbsp;&nbsp; May | Real Estate Asset Class Presentation | GICRC |
| &nbsp;&nbsp;&nbsp; August | IFRS 17/9 Update | AC |
| &nbsp;&nbsp;&nbsp; August | Stagflation Scenario Stress Test | GICRC |
| &nbsp;&nbsp;&nbsp; August | IFRS 17 ALM Actions | RC |
| &nbsp;&nbsp;&nbsp; November | Discussion on Current Economic Conditions | Board |
| &nbsp;&nbsp;&nbsp; November | Health Panel Presentation | Board |
| &nbsp;&nbsp;&nbsp; November | Sun Life Asia Finance and Internal Audit Presentation | AC |
| &nbsp;&nbsp;&nbsp; November | Update on Recent Tax Developments | AC |
| &nbsp;&nbsp;&nbsp; November | IFRS 17/9 Update | AC |
| &nbsp;&nbsp;&nbsp; November | Managing Risk Uncertainty and Interconnectedness | RC |

---

<sup>1</sup> The overall attendance rate of board and committee members at these education sessions was 100%. 

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##### [**Table of Contents**](#toc)
**Commitment and Tenure** 

**Meeting attendance** 

The Governance, Investment & Conduct Review Committee reviews the attendance record of each director as part of the nomination process. Directors must attend at least 75% of board and committee meetings every year. A director who does not meet this attendance requirement in two consecutive years must, if requested by the Governance, Investment & Conduct Review Committee, offer to resign. The table below is a consolidated view of how many board and committee meetings each director attended in 2022. From time to time unscheduled board meetings may be called on short notice to consider mergers and acquisitions (M&A) transactions or other matters and one or more of our directors may be unable to attend these meetings due to the short notice. Where a director is unable to attend a meeting, feedback and questions based on meeting materials are directed to the Board Chair or the Chair of the applicable committee, as appropriate, to address at the meeting. During the year ended December 31, 2022, average attendance of all directors at both board and committee meetings was 99.4% and 100%, respectively.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Name | Board meetings<br>attended | Board meetings<br>attended | Committee<br>meetings attended | Committee<br>meetings attended | Total meetings <br>attended | Total meetings <br>attended |
| &nbsp;&nbsp;&nbsp; William D. Anderson<sup>1</sup> | 6 of 6 | 100% | n/a | n/a | 6 of 6 | 100% |
| &nbsp;&nbsp;&nbsp; Deepak Chopra<sup>2</sup> | 12 of 13 | 92.3% | 12 of 12 | 100% | 24 of 25 | 96% |
| &nbsp;&nbsp;&nbsp; Stephanie L. Coyles<sup>3</sup> | 13 of 13 | 100% | 12 of 12 | 100% | 25 of 25 | 100% |
| &nbsp;&nbsp;&nbsp; Martin J. G. Glynn<sup>4</sup> | 6 of 6 | 100% | 5 of 5 | 100% | 11 of 11 | 100% |
| &nbsp;&nbsp;&nbsp; Ashok K. Gupta | 13 of 13 | 100% | 9 of 9 | 100% | 22 of 22 | 100% |
| &nbsp;&nbsp;&nbsp;&nbsp;M. Marianne Harris<sup>5</sup> | 13 of 13 | 100% | 13 of 13 | 100% | 26 of 26 | 100% |
| &nbsp;&nbsp;&nbsp; David H. Y. Ho | 13 of 13 | 100% | 12 of 12 | 100% | 25 of 25 | 100% |
| &nbsp;&nbsp;&nbsp; Helen M. Mallovy Hicks | 13 of 13 | 100% | 9 of 9 | 100% | 22 of 22 | 100% |
| &nbsp;&nbsp;&nbsp; Marie-Lucie Morin | 13 of 13 | 100% | 9 of 9 | 100% | 22 of 22 | 100% |
| &nbsp;&nbsp;&nbsp; Scott F. Powers<sup>6</sup> | 13 of 13 | 100% | 7 of 7 | 100% | 20 of 20 | 100% |
| &nbsp;&nbsp;&nbsp; Kevin D. Strain | 13 of 13 | 100% | n/a | n/a | 13 of 13 | 100% |
| &nbsp;&nbsp;&nbsp; Barbara G. Stymiest | 13 of 13 | 100% | 9 of 9 | 100% | 22 of 22 | 100% |

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<sup>1.</sup> On May 11, 2022, Mr. Anderson retired from the Board. He was the non-executive Chair of the Board and attended committee meetings in that capacity.

<sup>2.</sup> Mr. Chopra was unable to attend a board meeting due to a commitment made prior to his joining the board.

<sup>3.</sup> On May 11, 2022, Ms. Coyles became Chair of the Management Resources Committee.

<sup>4.</sup> On May 11, 2022, Mr. Glynn retired from the Board. He was a member of the Risk Committee and Management Resources Committee.

<sup>5.</sup> On May 11, 2022, Ms. Harris ceased to be Chair and a member of the Management Resources Committee and became a member of the Audit Committee. She also became Chair of the Governance, Investment and Conduct Review Committee.

<sup>6.</sup> On May 11, 2022, Mr. Powers became the non-executive Chair of the Board after which he attended committee meetings in that capacity. He ceased to be Chair of the Governance, Investment and Conduct Review Committee and a member of the Audit Committee.

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##### [**Table of Contents**](#toc)
**Serving on other public company boards and audit committees** 

The board has a policy limiting the number of public company directorships that directors should hold. Directors who are employed full-time should hold no more than one other public company directorship and directors who are not employed full-time should hold no more than three other public company directorships.

The board has also adopted a policy limiting the number of board interlocks among our directors. This policy is intended to promote independence and avoid potential conflicts of interest. No more than two directors may serve together on the same board of another public company, and directors may not serve together on the boards of more than one other public company (each, an interlock), without the prior consent of the Governance, Investment & Conduct Review Committee. Currently, Ms. Harris and Ms. Stymiest both serve on the board of George Weston Limited.

Directors are also required to notify the Board Chair, the Chair of the Governance, Investment & Conduct Review Committee, the President & CEO and the Chief Legal Officer prior to accepting a directorship on an additional public, private or not-for-profit board, to provide an opportunity for them to verify that the director continues to have the time and commitment to fulfil his or her obligations to the board and to be satisfied that the director is in compliance with the above policies, including the impact of any public company or other interlocks and no real or apparent conflict of interest would result.

The NYSE corporate governance rules suggest that audit committee members should not serve on more than three public company audit committees. All of the current members of the Audit Committee comply with this standard.

**Tenure** 

Our Director Independence Policy includes provisions on directors' tenure. Independent directors will generally retire from the board after they have served for 12 years. The independent directors can waive this retirement requirement to allow a director to serve for up to three additional years if they unanimously determine that it is in the company's best interests to do so. Thereafter, the retirement requirement can be waived by the independent directors on an annual basis if they unanimously determine that it is in the company's best interests to do so. The board does not have a mandatory retirement age for directors. Other mechanisms of board renewal include the rigorous board and committee assessments (see page 44), the evergreen list of prospective candidates (see page 35) and the annual review of the directors' skills matrix (see page 38).

The average tenure of the independent director nominees is 4 years.

![LOGO](g431192g59h59.jpg)

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##### [**Table of Contents**](#toc)
The table below shows the directors who are currently expected to retire or who will be required to retire under our director tenure provisions, unless waived, during the next three years, and the areas of expertise that they have indicated they bring to our board.

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Director | Retirement Year | Committee<br>Memberships | Areas of Expertise |
| &nbsp;&nbsp;&nbsp;&nbsp; Barbara G. Stymiest | Tenure limit<br> reached in<br> May 2024 | Audit (Chair)<br> Risk | • finance, accounting and actuarial<br> • insurance, health and wealth<br> • risk management<br> • talent and culture<br> • corporate strategy and development |
| &nbsp;&nbsp;&nbsp;&nbsp;M. Marianne Harris | Tenure limit<br> reached in<br> May 2025 | Audit<br> Governance, Investment & Conduct Review (Chair) | • finance, accounting and actuarial<br> • insurance, health and wealth<br> • talent and culture<br> • public company<br> • corporate strategy and development |

---

The President & CEO must resign from the board when he or she retires or leaves the company.

A director must tender a written offer to resign if he or she receives more *withheld* votes than *for* votes from shareholders in an uncontested election.

If requested by the Governance, Investment & Conduct Review Committee, a director must tender a written offer to resign if:

• he or she has not attended at least 75% of board and committee meetings for two consecutive years

• his or her principal employment or other business or professional circumstances have changed materially

Committee chairs are appointed annually. Generally, a director will serve as a committee chair for five years.

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##### [**Table of Contents**](#toc)
**Assessing the board** 

The board, board committees and individual directors participate in an annual assessment process with the assistance of an independent consultant as needed. The last independent assessment process was conducted in 2021. As part of the 2022 assessment process, each of the Board members completed questionnaires to assess the Board, each of the Committees and the Committee Chairs and the Board Chair conducted interviews with each of the Board members, in each case with the objective of:

• providing the board with insight into its functioning and effectiveness, including the performance of the board, and the
performance and leadership of the Board Chair and committee chairs in carrying out their mandates

• identifying opportunities to enhance governance in ways that will have a direct impact on the company's performance and
ability to meet its strategic and operational priorities

• providing the board insight into areas of individual director contributions in order to plan for future board education,
recruitment and succession planning

• enhancing the working relationship among board members and between the board and management

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| | | |
|:---|:---|:---|
| ![LOGO](g431192g06m50.jpg) | ![LOGO](g431192g06m50.jpg) | ![LOGO](g431192g06m50.jpg) |
| <br> • all directors and certain senior executives completed written assessment questionnaires<br> • the Board Chair conducted follow up one-on-one interviews to elicit feedback | <br> • the Board Chair and each Committee Chair analyzed the feedback from the questionnaires and interviews for discussion at the Board and the Committees<br> • the Chair of the Governance, Investment & Conduct Review Committee provided feedback to the Board Chair on his assessment results and to discuss the assessment reports<br> • each committee reviewed and discussed their respective committee reports | <br> • the Board Chair and Committee Chairs reviewed the assessment results at the Board and Committee meetings in May 2022, including themes and recommendations coming out of the effectiveness review<br> • the board discussed the assessment results and recommendations and identified priorities and action items to improve the effectiveness of the board<br> • reports and interview feedback are taken into consideration during the director re-nomination process and committee chair appointment process |

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##### [**Table of Contents**](#toc)
**Shareholder engagement and communications** 

The Board believes it is important to have constructive engagement with the company's shareholders to allow shareholders to express their views. Sun Life has well developed practices to facilitate constructive engagement with its investor base. The table below outlines the key contacts and methods that shareholders can use to engage with Sun Life and access important information:

---

| | |
|:---|:---|
|  **Board of Directors** | The Board Chair or his or her designate may communicate from time to time with shareholders, regulators, rating agencies and corporate governance-focused coalitions in connection with governance-related matters, including the results of the annual advisory vote on executive compensation. All such communications are reported to the board of directors no later than its next regularly scheduled meeting. Shareholders can contact the Board Chair as indicated below under "Contacting the Board".<br>|
|  **Senior Management** | The President & CEO, the Chief Financial Officer, the Head of Investor Relations and Capital Markets, and/or other senior management meet regularly with financial analysts and institutional investors, and senior management has recently engaged with institutional investors on topics such as strategic direction, sustainability, diversity, equity and inclusion and engagement with Indigenous communities.<br>Senior management of the company also engages with shareholders and other stakeholders through executive presentations and by way of special events and announcements. In 2022, these additional opportunities for engagement included participation and presentations at peer led financial services conferences and summits and institutional investors' conferences and an IFRS 17 Investor Education Call hosted on May 31, 2022. Shareholders can contact senior management as indicated below under "Contacting Investor Relations" and can refer to our Investor Relations website at: https://www.sunlife.com/Global/Investors for more information on upcoming presentations and engagements.<br>|
|  **Investor Relations** | Investor Relations provides shareholder resources including analyst coverage information, financial strength ratings, annual financial information and governance and sustainability practices information. Shareholders can contact Sun Life's Investor Relations as indicated below under "Contacting Investor Relations".<br>|
|  **Shareholder Services** | Our Shareholder Services team focuses on serving the needs of individual shareholders of the company and engages with our shareholders either directly or through our transfer agent, on matters related to annual meeting materials, dividend payments, tax receipts and the management and escalation of shareholder inquiries and complaints. In addition, our Shareholder Services team proactively operates asset reunification programs from time to time to find lost shareholders entitled to unclaimed shares and dividends. Shareholders can contact SLF Inc.'s Shareholder Services team or its transfer agent as indicated below under "Shareholder contacts".<br>|
|  **Live Broadcasts** | Management conducts live webcasts of quarterly earnings release conference calls which are accessible to the shareholders and other interested parties, and the company's annual meeting of shareholders may also be viewed by webcast and shareholders may ask questions through the webcast.<br>|

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##### [**Table of Contents**](#toc)
**Contacting the Board** 

Shareholders and other interested parties can contact the directors and the company directly to give feedback:

Board of Directors

Sun Life Financial Inc.

1 York Street, 31<sup>st</sup> Floor

Toronto, Ontario, Canada M5J 0B6

Email: boarddirectors@sunlife.com

***Contacting Investor Relations***

Investor Relations

Sun Life Financial Inc.

1 York Street, 29<sup>th</sup> Floor

Toronto, Ontario, Canada M5J 0B6

Email: investor.relations@sunlife.com

**Disclosure policy** 

The board reviews and approves the content of all major disclosure documents including the annual and interim financial statements, MD&A, earnings news releases, the annual information form and this Circular.

We strive to be responsive to the disclosure needs of the investment community and other stakeholders and provide timely, consistent and accurate information to the investing public while meeting our disclosure obligations. The Governance, Investment & Conduct Review Committee receives a report annually on the status of compliance with and effectiveness of our disclosure and securities trading policy and the policy is reviewed on a regular basis to determine whether revisions are required to respond to legal and regulatory developments, to reflect changes in the business environment or internal operations or to enhance governance.

The table below lists our corporate governance documents and when they are reviewed. All of them are available on our website (www.sunlife.com). Our Code is also available on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov/edgar.shtml).

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate governance document | Review cycle |
| &nbsp;&nbsp;&nbsp; Board of Directors charter and committee charters | Annually |
| &nbsp;&nbsp;&nbsp; Position descriptions for directors, including<br> the Board Chair and the committee chairs | Annually |
| &nbsp;&nbsp;&nbsp; Statement of Corporate Governance Policies and Practices | Annually |
| &nbsp;&nbsp;&nbsp; Director Independence Policy | Annually |
| &nbsp;&nbsp;&nbsp; Code of Conduct | Annually, in-depth review at least every three years |
| &nbsp;&nbsp;&nbsp; Board Diversity Policy | Annually |
| &nbsp;&nbsp;&nbsp; Director Recruitment Guidelines | Annually |

---

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##### [**Table of Contents**](#toc)
**Shareholder contacts** 

For dividend information, change in share registration or address, lost stock certificates, tax forms, estate transfers or dividend reinvestment, please contact:

---

| |
|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;For shareholders residing in Canada: |
| &nbsp;&nbsp;&nbsp; TSX Trust Company<br> P.O. Box 700, Station B<br> Montreal, Quebec, Canada H3B 3K3<br>American Stock Transfer & Trust Company, LLC<br> 6201 15<sup>th</sup> Ave<br> Brooklyn, New York 11219 U.S.A.<br>|

---

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Phone:<br>&nbsp;&nbsp;&nbsp;&nbsp;Email: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Canada: 1-877-224-1760<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International: 1-416-682-3865<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;sunlifeinquiries@tmx.com <br>| Phone:<br>Email: | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S.: 1-877-224-1760<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International: 1-416-682-3865<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;sunlifeinquiries@tmx.com |

---

Additional contact information for other regions is available at https://www.sunlife.com/en/investors/shareholder-services/shareholder-contacts/

For other shareholder inquiries, please contact:

Shareholder Services

Sun Life Financial Inc.

1 York Street, 31<sup>st</sup> Floor

Toronto, Ontario, Canada M5J 0B6

Email: shareholderservices@sunlife.com

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##### [**Table of Contents**](#toc)
**Shareholder proposals** 

We received one shareholder proposal for consideration at the meeting from the Salal Foundation of 185-911 Yates St., Suite 561, Victoria, BC V8V 4Y9, represented by Investors for Paris Compliance. The shareholder proposal along with Sun Life's response is set out in schedule A beginning on page 119.

Shareholder proposals for our 2024 annual meeting must be sent to us in writing. We must receive them by 5:00 p.m. (Toronto time) on December 18, 2023 to consider including them in our management information circular for the 2024 meeting.

Send the proposal to the Corporate Secretary at Sun Life Financial Inc.

Email: Mail: boarddirectors@sunlife.com 1 York Street, 31<sup>st</sup> Floor Toronto, Ontario, Canada M5J 0B6

**Our policy on proxy access** 

Under the board's proxy access policy, qualifying shareholders may submit one or more director nominations to be included in the Circular and form of proxy and ballot for any annual meeting. To make a nomination, qualifying shareholders must, prior to the deadline for submitting shareholder proposals above, submit a nomination notice in the required form. The policy has the following principal features:

• one or more nominating shareholders (up to a maximum of 20) may nominate up to the greater of two directors and 20% of the
board

• nominating shareholders must collectively own at least 5% of the company's common shares

• nominating shareholders must have held their shares for at least three years

• the proposal will be included in the company's Circular, form of proxy and ballot for the annual shareholders'
meeting

• nominating shareholders may include a statement of up to 500 words in support of their candidates.

A copy of the policy is available on our website (www.sunlife.com).

Alternatively, in accordance with section 147 of the *Insurance Companies Act* (Canada), shareholders holding in the aggregate not less than 5% of the company's shares for the minimum period of time set out by the *Insurance Companies Act* (Canada) may submit a formal proposal for individuals to be nominated for election as directors in accordance with the specified procedures to be followed.

**Our advance notice by-law** 

Our by-laws specify that a shareholder who wishes to nominate an individual for election as a director at an annual meeting must provide between 30 and 65 days advance notice to the company. The notice to the company must include information about the nominee, including age, address, principal occupation, the number of SLF Inc. shares owned or controlled, and any other information that would be required to be disclosed in a dissident's proxy circular in connection with solicitations of proxies for the election of directors. The notice must also include information about the nominating shareholder, including ownership or control of, or rights to vote, SLF Inc. shares and any other information that would be required to be disclosed in a dissident's proxy circular in connection with solicitations of proxies for the election of directors. The company may require additional information to be provided, including information to comply with requirements of OSFI relating to the suitability of directors and potential changes to the board.

The advance notice provisions described above do not apply to nominations made by or on behalf of the board or by shareholders pursuant to shareholder proposals, requisitioned meetings, or through our proxy access policy which have separate requirements and deadlines. In addition, in the case of a special meeting at which directors are to be elected, a shareholder's notice of a nomination must be provided not later than 15 days after the date of the special meeting is announced.

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##### [**Table of Contents**](#toc)

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| | |
|:---|:---|
| **2023 Committee reports**<br>The board's four standing committees are:<br>• Audit Committee<br> • Governance, Investment & Conduct Review Committee<br> • Management Resources Committee<br> • Risk Committee<br>The board delegates work to its committees to fulfil its responsibility to supervise the management of the business and affairs of the company. The committee charters are reviewed at least annually and updated as required. All standing committees are comprised entirely of independent directors as defined in our Director Independence Policy. | ![LOGO](g431192g10a05.jpg)  |

---

The committees meet prior to board meetings at which the annual business plan and our annual and quarterly financial results are reviewed and approved, and at other times as required or appropriate.

The Board Chair and the committee chairs review and approve the agenda for each committee meeting. Agendas are developed using the forward agenda and items noted for consideration or follow-up at prior meetings. The committees hold private meetings with individual members of management, including the heads of key control functions at the beginning and/or end of each meeting, discuss reports prepared by management, and then meet in private at the end of each meeting. Each committee chair reports to the board on the committee's deliberations and any recommendations that require board approval

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##### [**Table of Contents**](#toc)

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| | | |
|:---|:---|:---|
| <br> &nbsp;&nbsp;&nbsp;&nbsp;Audit Committee (AC) Report | <br> &nbsp;&nbsp;&nbsp;&nbsp;Audit Committee (AC) Report | <br> **Oversees**<br>The AC is responsible for assisting<br>the board in overseeing the<br>integrity of financial statements<br>and related information provided<br>to shareholders and other<br>stakeholders, compliance with<br>financial regulatory requirements,<br>adequacy and effectiveness of the<br>internal controls implemented and<br>maintained by management, and<br>assessing the qualifications,<br>independence and performance of<br>the external auditor. Management<br>is responsible for preparing our<br>consolidated financial statements<br>and the reporting process. Deloitte<br>is responsible for auditing our<br>annual consolidated financial<br>statements in accordance with<br>Canadian generally accepted<br>auditing standards and the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S., and the effectiveness of our<br>internal control over financial<br>reporting in accordance with the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S. |
| &nbsp;&nbsp; <br> The members of the AC are satisfied with the committee's mandate and that it met the terms of its charter in 2022. | &nbsp;&nbsp; <br> The members of the AC are satisfied with the committee's mandate and that it met the terms of its charter in 2022. | <br> **Oversees**<br>The AC is responsible for assisting<br>the board in overseeing the<br>integrity of financial statements<br>and related information provided<br>to shareholders and other<br>stakeholders, compliance with<br>financial regulatory requirements,<br>adequacy and effectiveness of the<br>internal controls implemented and<br>maintained by management, and<br>assessing the qualifications,<br>independence and performance of<br>the external auditor. Management<br>is responsible for preparing our<br>consolidated financial statements<br>and the reporting process. Deloitte<br>is responsible for auditing our<br>annual consolidated financial<br>statements in accordance with<br>Canadian generally accepted<br>auditing standards and the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S., and the effectiveness of our<br>internal control over financial<br>reporting in accordance with the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**Members** | <br> · Barbara G. Stymiest (Chair)<br> · Deepak Chopra<br> · M. Marianne Harris<br> · Laurie G. Hylton<br> · Helen M. Mallovy Hicks<br>| <br> **Oversees**<br>The AC is responsible for assisting<br>the board in overseeing the<br>integrity of financial statements<br>and related information provided<br>to shareholders and other<br>stakeholders, compliance with<br>financial regulatory requirements,<br>adequacy and effectiveness of the<br>internal controls implemented and<br>maintained by management, and<br>assessing the qualifications,<br>independence and performance of<br>the external auditor. Management<br>is responsible for preparing our<br>consolidated financial statements<br>and the reporting process. Deloitte<br>is responsible for auditing our<br>annual consolidated financial<br>statements in accordance with<br>Canadian generally accepted<br>auditing standards and the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S., and the effectiveness of our<br>internal control over financial<br>reporting in accordance with the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**2022**<br> &nbsp;&nbsp;&nbsp;&nbsp;**meetings** | <br> · Met 5 times in 2022<br> · Met without management present at each meeting<br> · Met in private with each of Deloitte, the Chief Financial Officer (CFO), the Chief Auditor and the Chief Actuary regularly<br>| <br> **Oversees**<br>The AC is responsible for assisting<br>the board in overseeing the<br>integrity of financial statements<br>and related information provided<br>to shareholders and other<br>stakeholders, compliance with<br>financial regulatory requirements,<br>adequacy and effectiveness of the<br>internal controls implemented and<br>maintained by management, and<br>assessing the qualifications,<br>independence and performance of<br>the external auditor. Management<br>is responsible for preparing our<br>consolidated financial statements<br>and the reporting process. Deloitte<br>is responsible for auditing our<br>annual consolidated financial<br>statements in accordance with<br>Canadian generally accepted<br>auditing standards and the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S., and the effectiveness of our<br>internal control over financial<br>reporting in accordance with the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**100%**<br> &nbsp;&nbsp;&nbsp;&nbsp;**independent** | <br> · All AC members are independent (see page 34).<br>| <br> **Oversees**<br>The AC is responsible for assisting<br>the board in overseeing the<br>integrity of financial statements<br>and related information provided<br>to shareholders and other<br>stakeholders, compliance with<br>financial regulatory requirements,<br>adequacy and effectiveness of the<br>internal controls implemented and<br>maintained by management, and<br>assessing the qualifications,<br>independence and performance of<br>the external auditor. Management<br>is responsible for preparing our<br>consolidated financial statements<br>and the reporting process. Deloitte<br>is responsible for auditing our<br>annual consolidated financial<br>statements in accordance with<br>Canadian generally accepted<br>auditing standards and the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S., and the effectiveness of our<br>internal control over financial<br>reporting in accordance with the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**100%**<br> &nbsp;&nbsp;&nbsp;&nbsp;**financially literate** | <br> · All AC members are "financially literate" as defined in the rules of the Canadian Securities Administrators and U.S. Securities and Exchange Commission (SEC) and standards of the NYSE<br> · Mr. Chopra, Ms. Mallovy Hicks, Ms. Hylton and Ms. Stymiest are Audit Committee Financial Experts as defined by SEC rules and have the accounting or related financial management experience required under the rules of the NYSE<br>| <br> **Oversees**<br>The AC is responsible for assisting<br>the board in overseeing the<br>integrity of financial statements<br>and related information provided<br>to shareholders and other<br>stakeholders, compliance with<br>financial regulatory requirements,<br>adequacy and effectiveness of the<br>internal controls implemented and<br>maintained by management, and<br>assessing the qualifications,<br>independence and performance of<br>the external auditor. Management<br>is responsible for preparing our<br>consolidated financial statements<br>and the reporting process. Deloitte<br>is responsible for auditing our<br>annual consolidated financial<br>statements in accordance with<br>Canadian generally accepted<br>auditing standards and the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S., and the effectiveness of our<br>internal control over financial<br>reporting in accordance with the<br>standards of the Public Company<br>Accounting Oversight Board in the<br>U.S. |

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| | |
|:---|:---|
|  | **2022 Highlights** |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Financial Reporting and Internal Control** | <br> **ü** reviewed our principal accounting and actuarial practices and policies and management's accounting estimates and judgments with management and Deloitte<br> **ü** reviewed regular reports from management on IFRS developments and received updates on IFRS 17 and 9 implementation plans<br> **ü** reviewed the following documents with management and Deloitte, and recommended them to the board for approval: annual consolidated financial statements, quarterly unaudited consolidated financial statements, MD&A and earnings news releases on our annual and quarterly results<br> **ü** reviewed disclosures in the MD&A in line with the recommendations of the TCFD<br> **ü** considered emerging industry, regulatory and accounting standards and the possible impact on the company's principal accounting practices and policies, including the use of non-IFRS measures and other reporting changes under IFRS 17 and 9<br> **ü** reviewed with management the appropriateness of adjustments to determine underlying net income with the purpose of assisting management, investors and other stakeholders in understanding the company's underlying business growth and performance<br> **ü** reviewed reports from management on the effectiveness of our disclosure controls and procedures, internal control over financial reporting, and the attestation by Deloitte of the effectiveness of our internal controls<br> **ü** reviewed reports from management on approaches to sustainability reporting, talent, and Finance technology infrastructure<br>|

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|:---|:---|
|  | **2022 Highlights**<br>**ü** reviewed and recommended to the board for approval amendments to the internal control framework<br> **ü** reviewed updates on tax matters<br> **ü** reviewed an independent third party actuarial peer review of 2021 year-end policy liabilities, and an update on recommendations in the peer review<br> **ü** reviewed quarterly reports from the Chief Actuary on method and assumption changes and management actions and their impacts<br> **ü** reviewed an annual report on Provisions for Adverse Deviations (PfADS) in our actuarial liabilities |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Internal Audit**<br>**The Chief Auditor reports on a functional basis to the AC chair** | <br> **ü** reviewed the scope of the 2023 Internal Audit plan with management and the Chief Auditor, and approved the budget and staffing resources proposed for executing the plan and recommended the plan to the board for approval<br> **ü** reviewed reports on Internal Audit's talent strategy and resource augmentation plans<br> **ü** reviewed quarterly reports from the Chief Auditor on audit activities, findings and recommendations and the adequacy and effectiveness of internal control, risk management and governance processes across the first and second lines of defence<br> **ü** reviewed and was satisfied with the independence of the Internal Audit function |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **External Auditor** | <br> **ü** conducted the annual evaluation of the external auditor and recommended their re-appointment to the board for approval<br> **ü** reviewed and accepted the independence of the external auditor, including timing and implementation of the rotation of the lead audit partner, and reviewed and approved the restricting use of external auditor policy<br> **ü** reviewed and approved the overall scope of the annual audit plan and necessary resources and recommended the plan to the board for approval<br> **ü** reviewed and approved the scope and terms of the external auditor's engagement and reviewed and recommended their engagement letter and remuneration to the board for approval<br> **ü** reviewed the results of audits and opinion of the external auditor with respect to our financial statements, including areas identified as significant audit risks, having significant management judgment, and other notable matters<br> **ü** received updates from the external auditor on IFRS 17 implementation, key areas of focus for the transition opening balance sheet under IFRS 17, insurance contract liabilities, addressing climate change, emerging risk and COVID-19 related risks |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Governance, Resourcing and Talent** | <br> **ü** reviewed reports from the Chief Compliance Officer on compliance matters within the committee mandate, including compliance with the Code and whistleblowing program<br> **ü** received updates on litigation matters<br> **ü** reviewed and approved the mandates of the CFO, the Chief Auditor, and the Chief Actuary and their functions organizational structures, reviewed the appropriateness of resources and assessed the effectiveness of their functions<br> **ü** reviewed the succession plans for the CFO, the Chief Auditor, and the Chief Actuaryreviewed and approved the annual objectives of the CFO, the Chief Auditor, and the Chief Actuary and assessed their annual performance |

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| <br> &nbsp;&nbsp;&nbsp;&nbsp;**Governance, Investment & Conduct Review**<br> &nbsp;&nbsp;&nbsp;&nbsp;**Committee (GICRC) Report** | <br> &nbsp;&nbsp;&nbsp;&nbsp;**Governance, Investment & Conduct Review**<br> &nbsp;&nbsp;&nbsp;&nbsp;**Committee (GICRC) Report** | <br> **Oversees**<br>The GICRC is responsible for<br>assisting the board in overseeing:<br>(i) the development of effective<br>corporate governance guidelines<br>and processes, including those<br>addressing the effectiveness of the<br>board and its committees and<br>director succession planning and<br>recruitment, (ii) Sun Life's<br>Investment Plan and investment<br>performance, including investment<br>practices, procedures and controls<br>related to the management of the<br>general fund investment portfolio;<br>(iii) sustainability matters including<br>Sun Life's Sustainability Policy,<br>Sustainability Report and<br>Sustainability Plan; and<br>(iv) compliance and compliance<br>management programs, including<br>compliance with legal and<br>regulatory requirements, the<br>identification and management of<br>compliance risks and the<br>development of policies and<br>processes to sustain ethical<br>behaviour. The Committee also<br>serves as the conduct review<br>committee of Sun Life in<br>accordance with applicable<br>provisions of the *Insurance<br>Companies Act (Canada)*. |
| &nbsp;&nbsp; <br> The members of the GICRC are satisfied with the committee's mandate and that it met the terms of its charter in 2022. | &nbsp;&nbsp; <br> The members of the GICRC are satisfied with the committee's mandate and that it met the terms of its charter in 2022. | <br> **Oversees**<br>The GICRC is responsible for<br>assisting the board in overseeing:<br>(i) the development of effective<br>corporate governance guidelines<br>and processes, including those<br>addressing the effectiveness of the<br>board and its committees and<br>director succession planning and<br>recruitment, (ii) Sun Life's<br>Investment Plan and investment<br>performance, including investment<br>practices, procedures and controls<br>related to the management of the<br>general fund investment portfolio;<br>(iii) sustainability matters including<br>Sun Life's Sustainability Policy,<br>Sustainability Report and<br>Sustainability Plan; and<br>(iv) compliance and compliance<br>management programs, including<br>compliance with legal and<br>regulatory requirements, the<br>identification and management of<br>compliance risks and the<br>development of policies and<br>processes to sustain ethical<br>behaviour. The Committee also<br>serves as the conduct review<br>committee of Sun Life in<br>accordance with applicable<br>provisions of the *Insurance<br>Companies Act (Canada)*. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**Members** | <br> · M. Marianne Harris (Chair)<br> · Deepak Chopra<br> · Stephanie L. Coyles<br> · David H. Y Ho<br>| <br> **Oversees**<br>The GICRC is responsible for<br>assisting the board in overseeing:<br>(i) the development of effective<br>corporate governance guidelines<br>and processes, including those<br>addressing the effectiveness of the<br>board and its committees and<br>director succession planning and<br>recruitment, (ii) Sun Life's<br>Investment Plan and investment<br>performance, including investment<br>practices, procedures and controls<br>related to the management of the<br>general fund investment portfolio;<br>(iii) sustainability matters including<br>Sun Life's Sustainability Policy,<br>Sustainability Report and<br>Sustainability Plan; and<br>(iv) compliance and compliance<br>management programs, including<br>compliance with legal and<br>regulatory requirements, the<br>identification and management of<br>compliance risks and the<br>development of policies and<br>processes to sustain ethical<br>behaviour. The Committee also<br>serves as the conduct review<br>committee of Sun Life in<br>accordance with applicable<br>provisions of the *Insurance<br>Companies Act (Canada)*. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**2022**<br> &nbsp;&nbsp;&nbsp;&nbsp;**meetings** | <br> · Met 7 times in 2022<br> · Met without management present at each meeting<br> · Met in private with each of the Chief Compliance Officer and the Chief Investment Officer quarterly<br>| <br> **Oversees**<br>The GICRC is responsible for<br>assisting the board in overseeing:<br>(i) the development of effective<br>corporate governance guidelines<br>and processes, including those<br>addressing the effectiveness of the<br>board and its committees and<br>director succession planning and<br>recruitment, (ii) Sun Life's<br>Investment Plan and investment<br>performance, including investment<br>practices, procedures and controls<br>related to the management of the<br>general fund investment portfolio;<br>(iii) sustainability matters including<br>Sun Life's Sustainability Policy,<br>Sustainability Report and<br>Sustainability Plan; and<br>(iv) compliance and compliance<br>management programs, including<br>compliance with legal and<br>regulatory requirements, the<br>identification and management of<br>compliance risks and the<br>development of policies and<br>processes to sustain ethical<br>behaviour. The Committee also<br>serves as the conduct review<br>committee of Sun Life in<br>accordance with applicable<br>provisions of the *Insurance<br>Companies Act (Canada)*. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**100%**<br> &nbsp;&nbsp;&nbsp;&nbsp;**independent** | <br> · All members of the GICRC are independent | <br> **Oversees**<br>The GICRC is responsible for<br>assisting the board in overseeing:<br>(i) the development of effective<br>corporate governance guidelines<br>and processes, including those<br>addressing the effectiveness of the<br>board and its committees and<br>director succession planning and<br>recruitment, (ii) Sun Life's<br>Investment Plan and investment<br>performance, including investment<br>practices, procedures and controls<br>related to the management of the<br>general fund investment portfolio;<br>(iii) sustainability matters including<br>Sun Life's Sustainability Policy,<br>Sustainability Report and<br>Sustainability Plan; and<br>(iv) compliance and compliance<br>management programs, including<br>compliance with legal and<br>regulatory requirements, the<br>identification and management of<br>compliance risks and the<br>development of policies and<br>processes to sustain ethical<br>behaviour. The Committee also<br>serves as the conduct review<br>committee of Sun Life in<br>accordance with applicable<br>provisions of the *Insurance<br>Companies Act (Canada)*. |

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|:---|:---|
| <br>&nbsp;&nbsp;&nbsp;&nbsp; <br> **Corporate Governance Guidelines and Processes** | **2022 Highlights**<br>**ü** reviewed corporate governance developments and recommended to the board approval of our statement of corporate governance policies and practices<br> **ü** reviewed and recommended to the board approval of our policies regarding board diversity and director independence<br> **ü** reviewed and recommended to the board updates to the board and committee charters and approval of position descriptions for the Board Chair, Committee Chairs and Directors<br> **ü** reviewed subsidiary governance activities, policies and processes |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Board Effectiveness, Orientation and Education** | <br> **ü** reviewed and recommended to the board the process for assessing the effectiveness of the board and its Committees<br> **ü** received feedback on the orientation program for new directors and education programs for current directors |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Board Composition, Succession and Recruitment** | <br> **ü** reviewed and recommended the appointment of two new directors to enhance the diversity, skills, experience and expertise on the board and complement the existing board composition<br> **ü** reviewed and recommended updates to the director recruitment guidelines and directors' skills matrix |

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|  | **2022 Highlights**<br>**ü** assessed the independence of directors and reviewed and made recommendations to the board relating to board and committee composition<br> **ü** reviewed and recommended approval of the management information circular, voting policyholders booklet, forms of proxy and the annual information form |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Sustainability (***you can find our Sustainability Report on our website (www.sunlife.com/ sustainability)***)** | <br> **ü** reviewed reports on our sustainability strategy, initiatives, and practices<br> **ü** reviewed and recommended to the board approval of Sun Life's 2023 Sustainability Plan and Sustainability Report<br> **ü** received reports on net zero commitments and human rights<br> **ü** received an annual report on our philanthropic program |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Investments** | <br> **ü** reviewed investment strategy, actions and performance for the general account and the company's asset management businesses<br> **ü** reviewed reports on significant investment transactions<br> **ü** received presentations and updates on real estate assets, private fixed income and mortgages asset classes.<br> **ü** received reports from the Chief Credit Risk Officer on market outlook, including investment risks and credit events impacting the company's asset portfolio<br> **ü** discussed investment strategy and reviewed and recommended to the board approval of the annual investment plan |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Oversight of Compliance** | <br> **ü** received regular reports from the Chief Compliance Officer on Compliance risk assessments, Compliance risk controls assessment, key compliance matters, including compliance with applicable laws and regulations, anti-money laundering, market conduct, business conduct, privacy and anti-bribery and anti-corruption<br> **ü** reviewed and approved the annual Compliance plan<br> **ü** received updates on key regulatory developments and key regulator interactions<br> **ü** reviewed policies and programs to monitor compliance with legal and regulatory requirements<br> **ü** received an annual report from Internal Audit as to the effectiveness of the company's anti-money laundering and anti-terrorist financing controls |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Ethics & Conduct Review/Related Party Transactions** | <br> **ü** received reports on the Code of Conduct program, whistleblowing and ethical conduct<br> **ü** reviewed the effectiveness of the company's procedures and practices to ensure compliance with regulations relating to related party transactions |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Resourcing and Talent** | <br> **ü** reviewed and approved the mandates of the Chief Investment Officer and the Chief Compliance Officer and the organizational structures of their functions, reviewed the appropriateness of resources and assessed the effectiveness of their functions<br> **ü** reviewed the succession plans for the Chief Investment Officer and the Chief Compliance Officer<br> **ü** reviewed and approved the annual objectives of the Chief Investment Officer and Chief Compliance Officer and assessed their annual performance |

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| <br> &nbsp;&nbsp;&nbsp;&nbsp;Management Resources Committee (MRC) Report | <br> &nbsp;&nbsp;&nbsp;&nbsp;Management Resources Committee (MRC) Report | <br> **Oversees**<br>The MRC is responsible for<br>assisting the board with oversight<br>of succession planning for senior<br>executive positions and programs<br>to effectively attract, retain,<br>develop and reward employees. It<br>provides guidance to management<br>on advancing the talent agenda to<br>achieve strategic objectives and<br>foster Sun Life's culture. The MRC<br>reviews incentive designs and<br>governance of material incentive<br>programs against alignment with<br>business objectives and avoiding<br>excessive risk taking. The MRC<br>reviews the implications of key<br>enterprise risks, including people<br>and culture risks pertaining to<br>compensation design and human<br>resources practices. In addition,<br>the MRC reviews compensation<br>matters, including the<br>remuneration of executives who<br>have a material impact on the risk<br>exposure of the company. |
| &nbsp;&nbsp; <br> The members of the MRC are satisfied with the committee's mandate and that it met the terms of its charter in 2022. | &nbsp;&nbsp; <br> The members of the MRC are satisfied with the committee's mandate and that it met the terms of its charter in 2022. | <br> **Oversees**<br>The MRC is responsible for<br>assisting the board with oversight<br>of succession planning for senior<br>executive positions and programs<br>to effectively attract, retain,<br>develop and reward employees. It<br>provides guidance to management<br>on advancing the talent agenda to<br>achieve strategic objectives and<br>foster Sun Life's culture. The MRC<br>reviews incentive designs and<br>governance of material incentive<br>programs against alignment with<br>business objectives and avoiding<br>excessive risk taking. The MRC<br>reviews the implications of key<br>enterprise risks, including people<br>and culture risks pertaining to<br>compensation design and human<br>resources practices. In addition,<br>the MRC reviews compensation<br>matters, including the<br>remuneration of executives who<br>have a material impact on the risk<br>exposure of the company. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**Members** | <br> · Stephanie L. Coyles(Chair)<br> · Ashok K. Gupta<br> · David H. Y. Ho<br> · Marie-Lucie Morin<br> · Joseph M. Natale<br>| <br> **Oversees**<br>The MRC is responsible for<br>assisting the board with oversight<br>of succession planning for senior<br>executive positions and programs<br>to effectively attract, retain,<br>develop and reward employees. It<br>provides guidance to management<br>on advancing the talent agenda to<br>achieve strategic objectives and<br>foster Sun Life's culture. The MRC<br>reviews incentive designs and<br>governance of material incentive<br>programs against alignment with<br>business objectives and avoiding<br>excessive risk taking. The MRC<br>reviews the implications of key<br>enterprise risks, including people<br>and culture risks pertaining to<br>compensation design and human<br>resources practices. In addition,<br>the MRC reviews compensation<br>matters, including the<br>remuneration of executives who<br>have a material impact on the risk<br>exposure of the company. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**2022**<br> &nbsp;&nbsp;&nbsp;&nbsp;**meetings** | <br> · Met 5 times in 2022<br> · Met without management present at each meeting<br> · Met in private at each quarterly meeting with each of the Executive Vice-President, Chief People and Culture Officer and the independent compensation consultant<br>| <br> **Oversees**<br>The MRC is responsible for<br>assisting the board with oversight<br>of succession planning for senior<br>executive positions and programs<br>to effectively attract, retain,<br>develop and reward employees. It<br>provides guidance to management<br>on advancing the talent agenda to<br>achieve strategic objectives and<br>foster Sun Life's culture. The MRC<br>reviews incentive designs and<br>governance of material incentive<br>programs against alignment with<br>business objectives and avoiding<br>excessive risk taking. The MRC<br>reviews the implications of key<br>enterprise risks, including people<br>and culture risks pertaining to<br>compensation design and human<br>resources practices. In addition,<br>the MRC reviews compensation<br>matters, including the<br>remuneration of executives who<br>have a material impact on the risk<br>exposure of the company. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**100%**<br> &nbsp;&nbsp;&nbsp;&nbsp;**independent** | <br> · All members of the MRC are independent (see page 34)<br>| <br> **Oversees**<br>The MRC is responsible for<br>assisting the board with oversight<br>of succession planning for senior<br>executive positions and programs<br>to effectively attract, retain,<br>develop and reward employees. It<br>provides guidance to management<br>on advancing the talent agenda to<br>achieve strategic objectives and<br>foster Sun Life's culture. The MRC<br>reviews incentive designs and<br>governance of material incentive<br>programs against alignment with<br>business objectives and avoiding<br>excessive risk taking. The MRC<br>reviews the implications of key<br>enterprise risks, including people<br>and culture risks pertaining to<br>compensation design and human<br>resources practices. In addition,<br>the MRC reviews compensation<br>matters, including the<br>remuneration of executives who<br>have a material impact on the risk<br>exposure of the company. |

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|:---|:---|
| <br>&nbsp;&nbsp;&nbsp;&nbsp; **Succession and Appointments** | **2022 Highlights**<br>**ü** conducted an in-depth review of succession options for senior management positions and reviewed development plans for succession candidates with added attention to Executive Team succession and operating model and with a lens towards ensuring diversity and equity are addressed<br> **ü** recommended the appointment of the new successor for the Chief Risk Officer, and the appointment of the Chief Client and Innovation Officer who both joined the Executive Team in 2022<br> **ü** recommended role changes related to the Executive Vice-President, Chief Strategy and Enablement Officer, Executive Vice-President, Chief People and Culture Officer and Chief Information and Technology Innovation Officer |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Talent Development, Diversity, Equity & Inclusion, Employee Engagement and Culture** | <br> **ü** reviewed the talent pipeline strength, methodology, metrics and results<br> **ü** reviewed the talent development strategy<br> **ü** discussed employee relations and engagement matters<br> **ü** reviewed the results of employee culture and engagement surveys and the major themes that require action<br> **ü** reviewed progress against our diversity, equity and inclusion strategy, including an update on gender pay equity, pay equity for diverse employee groups and diversity commitments<br> **ü** monitored the human resources risk dashboard and reviewed trends, including employee wellbeing and engagement, productivity and innovation for the future of work, and diversity, equity and inclusion<br> **ü** received a report on the DentaQuest integration |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Executive Compensation** | <br> **ü** recommended to the board appropriate compensation for the President & CEO based on our corporate performance and his leadership in 2021. |

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|  | **2022 Highlights**<br>**ü** reviewed compensation recommendations for the Corporate Executive Vice-Presidents, Business Group Presidents, control function heads and other Material Risk Takers and Select Executive Management<br> **ü** reviewed annual incentive plan (AIP) design to prepare AIP for IFRS 17, reflect the diversity of our businesses, and reflect the evolving measurement of Client impacts<br> **ü** reviewed long-term incentive (LTI) plan design to prepare for IFRS 17, recognize the importance of capital management and return on equity (ROE) by adding it as an absolute performance metric, increase peer group exposure to reflect the diversity of our businesses and to incorporate sustainability metrics aligned with our sustainability plan, which includes goals focused on advancing sustainable investing and operating as a trusted and responsible business<br> **ü** reviewed assessment updates related to 2023 payouts under AIP and LTI plans<br> **ü** recommended to the board for approval the AIP targets for 2023 and salary budgets for 2023<br> **ü** reviewed and approved executive compensation policies and programs, including retirement and benefit arrangements<br> **ü** reviewed the application of our compensation principles<br> **ü** received and considered the implications of reports from the independent executive compensation advisor, including reports on market trends in executive compensation and ESG metrics in incentive plans |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Retirement<br>Plan Governance** | <br> **ü** reviewed an annual assessment of worldwide retirement and savings plans and related governance policies |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Governance and<br>Risk** | <br> **ü** reviewed and considered market trends and key issues in executive compensation and governance, including asset management compensation trends, ESG metrics in incentive plans, evolution of Client metrics, quantum of CEO pay, pay-for-performance analysis, gender pay equity, and peer group analysis<br> **ü** met with the Chief Risk Officer to review risk performance and management for consideration in compensation assessments<br> **ü** considered the implications of key risks (including human resources risks) across the enterprise on compensation programs and human resources practices<br> **ü** reviewed the design, approval and governance of material incentive programs to ensure they do not encourage excessive risk taking, as well as an overview of the design and operation of all compensation plans<br> **ü** reviewed the Chief Internal Auditor's assessment of our compensation programs against OSFI's expectations and the Financial Stability Board's Principles for Sound Compensation Practices<br> **ü** reviewed key aspects of the compensation frameworks for an M&A transaction |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Resourcing and Talent** | <br> **ü** reviewed and approved the mandate of the Executive Vice-President, Chief People and Culture Officer, reviewed the succession plan, appropriateness of resources and the organizational structure of the function<br> **ü** reviewed and approved the annual objectives of the Executive Vice-President, Chief People and Culture Officer and assessed her annual performance<br> **ü** evaluated the independence, appointment and terms of engagement for the independent compensation advisor |

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| <br> &nbsp;&nbsp;&nbsp;&nbsp;Risk Committee (RC) Report | <br> &nbsp;&nbsp;&nbsp;&nbsp;Risk Committee (RC) Report | <br> **Oversees**<br>The RC's primary functions are to<br>assist the board with oversight of<br>the management of current and<br>emerging risks enterprise-wide,<br>and of the risk management<br>function to ensure that<br>management has in place<br>programs, policies, processes and<br>controls designed to identify and<br>effectively manage the significant<br>risks to which the Company is<br>exposed and has sufficient capital<br>to underpin those risks. It reviews<br>and approves all risk management<br>policies and reviews compliance<br>with those policies. In addition,<br>where the board has delegated<br>risk oversight to other committees<br>of the board, the RC provides the<br>board with an integrated view of<br>oversight of risk management<br>across all board committees. The<br>RC regularly monitors the<br>Company's risk profile to ensure it<br>is within the agreed risk appetite<br>and that the Company's capital<br>position exceeds regulatory capital<br>requirements, and monitors and<br>recommends to the board for<br>approval, the specific risk limits<br>allocated to the businesses and<br>the annual Capital Plan. |
| &nbsp;&nbsp; <br> The members of the RC are satisfied with the committee's mandate and that it met the terms of its charter in 2022. | &nbsp;&nbsp; <br> The members of the RC are satisfied with the committee's mandate and that it met the terms of its charter in 2022. | <br> **Oversees**<br>The RC's primary functions are to<br>assist the board with oversight of<br>the management of current and<br>emerging risks enterprise-wide,<br>and of the risk management<br>function to ensure that<br>management has in place<br>programs, policies, processes and<br>controls designed to identify and<br>effectively manage the significant<br>risks to which the Company is<br>exposed and has sufficient capital<br>to underpin those risks. It reviews<br>and approves all risk management<br>policies and reviews compliance<br>with those policies. In addition,<br>where the board has delegated<br>risk oversight to other committees<br>of the board, the RC provides the<br>board with an integrated view of<br>oversight of risk management<br>across all board committees. The<br>RC regularly monitors the<br>Company's risk profile to ensure it<br>is within the agreed risk appetite<br>and that the Company's capital<br>position exceeds regulatory capital<br>requirements, and monitors and<br>recommends to the board for<br>approval, the specific risk limits<br>allocated to the businesses and<br>the annual Capital Plan. |
| &nbsp;&nbsp;&nbsp;&nbsp;**Members** | · Ashok K. Gupta (chair)<br> · Helen M. Mallovy Hicks<br> · Laurie G. Hylton<br> · Marie-Lucie Morin<br> · Barbara G. Stymiest<br> · Joseph M. Natale<br>| <br> **Oversees**<br>The RC's primary functions are to<br>assist the board with oversight of<br>the management of current and<br>emerging risks enterprise-wide,<br>and of the risk management<br>function to ensure that<br>management has in place<br>programs, policies, processes and<br>controls designed to identify and<br>effectively manage the significant<br>risks to which the Company is<br>exposed and has sufficient capital<br>to underpin those risks. It reviews<br>and approves all risk management<br>policies and reviews compliance<br>with those policies. In addition,<br>where the board has delegated<br>risk oversight to other committees<br>of the board, the RC provides the<br>board with an integrated view of<br>oversight of risk management<br>across all board committees. The<br>RC regularly monitors the<br>Company's risk profile to ensure it<br>is within the agreed risk appetite<br>and that the Company's capital<br>position exceeds regulatory capital<br>requirements, and monitors and<br>recommends to the board for<br>approval, the specific risk limits<br>allocated to the businesses and<br>the annual Capital Plan. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**2022**<br> &nbsp;&nbsp;&nbsp;&nbsp;**meetings** | <br> · Met 4 times in 2022<br> · Met in private with the Chief Risk Officer regularly and without management present at each meeting<br>| <br> **Oversees**<br>The RC's primary functions are to<br>assist the board with oversight of<br>the management of current and<br>emerging risks enterprise-wide,<br>and of the risk management<br>function to ensure that<br>management has in place<br>programs, policies, processes and<br>controls designed to identify and<br>effectively manage the significant<br>risks to which the Company is<br>exposed and has sufficient capital<br>to underpin those risks. It reviews<br>and approves all risk management<br>policies and reviews compliance<br>with those policies. In addition,<br>where the board has delegated<br>risk oversight to other committees<br>of the board, the RC provides the<br>board with an integrated view of<br>oversight of risk management<br>across all board committees. The<br>RC regularly monitors the<br>Company's risk profile to ensure it<br>is within the agreed risk appetite<br>and that the Company's capital<br>position exceeds regulatory capital<br>requirements, and monitors and<br>recommends to the board for<br>approval, the specific risk limits<br>allocated to the businesses and<br>the annual Capital Plan. |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**100%**<br> &nbsp;&nbsp;&nbsp;&nbsp;**independent** | <br> · All members of the RC are independent<br>| <br> **Oversees**<br>The RC's primary functions are to<br>assist the board with oversight of<br>the management of current and<br>emerging risks enterprise-wide,<br>and of the risk management<br>function to ensure that<br>management has in place<br>programs, policies, processes and<br>controls designed to identify and<br>effectively manage the significant<br>risks to which the Company is<br>exposed and has sufficient capital<br>to underpin those risks. It reviews<br>and approves all risk management<br>policies and reviews compliance<br>with those policies. In addition,<br>where the board has delegated<br>risk oversight to other committees<br>of the board, the RC provides the<br>board with an integrated view of<br>oversight of risk management<br>across all board committees. The<br>RC regularly monitors the<br>Company's risk profile to ensure it<br>is within the agreed risk appetite<br>and that the Company's capital<br>position exceeds regulatory capital<br>requirements, and monitors and<br>recommends to the board for<br>approval, the specific risk limits<br>allocated to the businesses and<br>the annual Capital Plan. |

---

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| | |
|:---|:---|
|  | **2022 Highlights** |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Risk Management** | <br> **ü** reviewed the emerging and top risks facing our business activities and the controls being applied to mitigate risks, including discussions on the resiliency of the overall enterprise and the associated evolution of the risk framework<br> **ü** received regular briefings and held regular discussions on emerging industry, regulatory and risk management issues and governance trends, including political/geopolitical risks<br> **ü** received quarterly reports from Internal Audit on the effectiveness of controls within the business and risk function and Internal Audit's annual opinion on risk governance<br> **ü** reviewed and recommended board approval of amendments to the Risk Management Framework and Risk Appetite Policy, and periodically reviewed and approved amendments to policies for the management and control of risk<br> **ü** reviewed reports on compliance with risk policies, including risk limits, and monitored related management actions<br> **ü** reviewed risk monitoring programs and quarterly reports on risk monitoring activities, including those related to risk appetite, asset liability management risk, product risk, investment and market risks, operational risks and insurance risks to ensure the risk profile remained within the risk appetite<br> **ü** reviewed regular reports on information security matters and cyber security risks<br> **ü** reviewed reports and received presentations on topics such as: COVID-19 outlook, risk appetite under IFRS 17, IFRS 17 asset liability management actions, and managing risk uncertainty and interconnectedness |

---

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##### [**Table of Contents**](#toc)

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| | |
|:---|:---|
| | **2022 Highlights**<br>**ü** reviewed quarterly stress testing reports including future considerations for macroeconomic and recession related stress scenarios<br> **ü** reviewed specific risk reports to provide an integrated view of the oversight of risk management programs to the board, including<br> &nbsp;&nbsp;&nbsp;&nbsp;• risk considerations under the company's business plan<br> &nbsp;&nbsp;&nbsp;&nbsp;• risk considerations in the strategic plan at its annual strategy session |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Capital, Liquidity & Treasury Management** | <br> **ü** reviewed quarterly reports on the capital and liquidity position of the company<br> **ü** reviewed quarterly with management our current and forecasted capital position and financial strength along with sensitivities to certain market conditions, and made recommendations to the board about allocation of capital, dividends, debt and security issuances/redemptions<br> **ü** reviewed local capital ratios and dividends on a quarterly basis<br> **ü** reviewed quarterly updates on capital market trends, including cost of new issues, current coupon levels and interest coverage and leverage ratios<br> **ü** reviewed and recommended to the board approval of the annual capital plan<br> **ü** reviewed and recommended to the board approval of authorizations related to credit facilities and the issuance of debt securities, class A shares and common shares of SLF Inc. into the Canadian market<br> **ü** reviewed and recommended board approval of amendments to the Capital Risk Policy and Capital and Liquidity Management Framework<br> **ü** received reports on historical and current sources and uses of capital and key drivers influencing capital generation in the business and a report on management's target operating capital ratio outlining the purpose of the ratio, how calculated, tracked and monitored<br> **ü** reviewed capital allocation by business unit<br> **ü** reviewed the results of Financial Condition Testing (FCT) and the company's own risk and solvency assessment (ORSA) and recommended to the board approval of internal and operating capital targets in accordance with OSFI guidelines |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Resourcing and Talent** | <br> **ü** reviewed and approved the mandate for the Chief Risk Officer and organizational structure, reviewed the appropriateness of resources and assessed the effectiveness of the risk function<br> **ü** reviewed the succession plans for the Chief Risk Officer, including reviewing and approving the appointment of a new Chief Risk Officer<br> **ü** reviewed and approved the annual objectives of the Chief Risk Officer and assessed his annual performance |

---

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##### [**Table of Contents**](#toc)
**Director compensation** 

**Compensation discussion and analysis** 

***Our philosophy, approach and process***

We have two primary compensation objectives:

• to align directors' interests with the interests of our shareholders

• to fairly and competitively compensate directors in order to attract well qualified board members.

The board's philosophy is to compensate directors fairly for the time and effort required to fulfil their responsibilities and contribute to the effective leadership and direction of the enterprise.

We compare the target pay for our directors (excluding the Board Chair and the President & CEO) against the total compensation (annual retainer and meeting fees) paid to directors of financial services sector peers. We determine the median pay for the "typical director" at other financial institutions by reviewing publicly available information from our peer group (see below). We calculate the amount that a typical director at each financial institution would receive in a year assuming an equal number of board and committee meetings at each institution and an equal number of committee memberships for each director. We also benchmark the total compensation paid and trends in director compensation using a broad survey of the public companies included in the TSX60. Typically we assess the competitiveness of our directors' compensation program every two years.

We benchmark pay for the Board Chair against the compensation paid to the chairs of companies in our peer group. The median total compensation among peer board chairs is used as a baseline to assess the competitiveness of the Board Chair's compensation. The Governance, Investment & Conduct Review Committee also considers other qualitative factors when making recommendations to the board on the Board Chair's compensation.

---

| | | |
|:---|:---|:---|
| <br> For the review conducted in 2022 we aligned our peer group with the peer group and weighting used for our Senior Executive Sun Share Unit Plan, which is made up of five major Canadian banks and nine North American insurance and asset management companies.<br>We selected these companies as peers because they are leading financial services and asset management organizations in North America that we believe recruit director candidates with similar skills and experience as we seek. | <br> • Bank of Montreal<br> • CIBC<br> • RBC<br> • The Bank of Nova Scotia<br> • The Toronto-Dominion Bank<br> • Equitable Holdings<br> • Great-West Life | <br> • Lincoln National<br> • Manulife Financial<br> • MetLife<br> • Principal Financial Group<br> • Prudential Financial<br> • T. Rowe Price<br> • Unum Group |

---

The Governance, Investment & Conduct Review Committee considers the responsibilities and time commitment required to be an effective director as well as the competitiveness of our program relative to our peer group and makes recommendations to the board.

**Program structure** 

Directors receive an annual retainer, committee retainers and travel fees for serving on the boards of SLF Inc. and Sun Life Assurance. The cost is shared equally between the two companies. Directors are also reimbursed for travel and other expenses they incur to attend our board and committee meetings. Committee chairs receive an additional retainer because of their increased responsibilities.

Directors receive a portion of their annual board retainer in DSUs pursuant to our Deferred Share Unit Plan (see below). The Board Chair receives a separate annual retainer that includes a portion in DSUs (see below). He is also reimbursed for travel and other expenses he incurs while carrying out his duties as Board Chair. He does not receive travel fees.

Mr. Strain does not receive any director compensation because he is our President & CEO. Details regarding Mr. Strain's compensation can be found in the Executive Compensation section of this Circular beginning on page 63.

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***Directors' Compensation***

The Governance, Investment & Conduct Review Committee (GICRC) reviews director compensation every two years. The GICRC last reviewed director compensation in 2020 and did not recommend making any changes to amounts payable to directors' resulting in the same compensation structure being in place since January 1, 2019. In 2022, the GICRC retained Meridian Compensation Partners (Meridian), an independent compensation consultant, to provide a competitive review of our director compensation program. Meridian used data from our peer group and data from constituents in the TSX 60 Index and compared that data to two "model director" profiles with the first profile reflecting a director who is a Committee Chair and a member of another Committee and the second profile reflecting a director who is a member of two Committees (all Board members serve on two Committees). Meridian's analysis indicated that the total director compensation for Sun Life directors was significantly below the peer median (25% and 28% below peer median for the two profiles). Meridian recommended a $50,000 increase to the total compensation for the directors, including the Board Chair, with an increase to the minimum required to be taken in DSUs from $120,000 to $160,000 (see below). With the changes recommended by Meridian total compensation is positioned 12% and 13% below median for the two profiles. Based on Meridian's analysis and recommendations the GICRC recommended, and the board approved the following compensation structure effective January 1, 2023:

---

| |
|:---|
| &nbsp;&nbsp;&nbsp; <br> 2023 Director Compensation |
| &nbsp;&nbsp;&nbsp; <br> Board Chair's retainer<br>490000<sup>1</sup> <br>|
| &nbsp;&nbsp;&nbsp; <br> Directors' retainers<br>275000<sup>2</sup> <br>|
| &nbsp;&nbsp;&nbsp; <br> Committee chairs' retainers<br>&nbsp;&nbsp;&nbsp;&nbsp;45000 <br>|
| &nbsp;&nbsp;&nbsp; <br> Committee members' retainers<br>&nbsp;&nbsp;&nbsp;&nbsp;10000 <br>|
| &nbsp;&nbsp;&nbsp; <br> Travel fees<br>&nbsp;&nbsp;&nbsp;&nbsp;1,500 – 3,000 / meeting<sup>3</sup><br>|

---

<sup>1</sup> $245,000 of which must be received in DSUs with the balance to be received in cash, DSUs and/or shares. 

<sup>2</sup> $160,000 of which must be received in DSUs with the balance to be received in cash, DSUs and/or shares. 

<sup>3</sup> Travel fees are (i) $1,500 when travel time for a round trip was two to six hours and (ii) $3,000 when travel time for a round trip was six hours or more. 

The table below shows the directors' compensation structure in effect prior to January 1, 2023:

---

| |
|:---|
| &nbsp;&nbsp;&nbsp; <br> 2022 Director Compensation |
| &nbsp;&nbsp;&nbsp; Board Chair's retainer<br>440000<sup>1</sup> <br>|
| &nbsp;&nbsp;&nbsp; <br> Directors' retainers<br>225000<sup>2</sup> <br>|
| &nbsp;&nbsp;&nbsp; <br> Committee chairs' retainers<br>&nbsp;&nbsp;&nbsp;&nbsp;45000 <br>|
| &nbsp;&nbsp;&nbsp; <br> Committee members' retainers<br>&nbsp;&nbsp;&nbsp;&nbsp;10000 <br>|
| &nbsp;&nbsp;&nbsp; <br> Travel fees<br>&nbsp;&nbsp;&nbsp;&nbsp;1,500 – 3,000 / meeting<sup>3</sup><br>|

---

<sup>1</sup> $220,000 of which must be received in DSUs with the balance to be received in cash, DSUs and/or shares. 

<sup>2</sup> $120,000 of which must be received in DSUs with the balance to be received in cash, DSUs and/or shares. 

<sup>3</sup> Travel fees are (i) $1,500 when travel time for a round trip was two to six hours and (ii) $3,000 when travel time for a round trip was six hours or more. 

Directors can choose to receive the balance of their compensation in any combination of cash, additional DSUs and common shares of SLF Inc. acquired on the open market. Directors cannot redeem their DSUs until they leave the board. All DSU awards are paid out in cash. For information on the material terms of the Deferred Share Unit Plan see page 86.

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Except for the Deferred Share Unit Plan, independent directors do not participate in the company's stock option plan or any other equity-based or incentive compensation arrangements.

***Director Share ownership guidelines***

We believe it is important for our directors to have a significant stake in the company to align their interests with those of our shareholders.

Effective January 1, 2023, Directors (other than Mr. Strain) must own at least $805,000 (7x the cash portion of the independent director base retainer) in common shares and/or DSUs where such amount shall be achieved by new directors within five years of joining the Board and existing directors shall have one additional year to achieve the increased ownership requirement. Directors may not engage in equity monetization transactions, including pledges or hedges involving securities of SLF Inc. (see page 78).

As President & CEO, Mr. Strain has separate share ownership requirements which are described on page 78.

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##### [**Table of Contents**](#toc)
***Share ownership***

The table below shows the common shares and DSUs each director (other than Mr. Strain) held as of February 28, 2023 and February 28, 2022, the portion of their base retainer they chose to receive in common shares or DSUs (excluding the portion of the annual board retainer that is automatically paid in DSUs) and the percentage of total annual board retainer received in common shares or DSUs.

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; Director | Year | Number<br>of<br>common<br>shares | Number<br>of DSUs | Total<br>number<br>of<br>common<br>shares<br>and DSUs | Total<br>value of<br>common<br>shares<br>and DSUs<br>($) | **Guideline<br>met (**✓**)<br>or value<br>($)<br>required** ****<br> **to meet**<br> guideline<sup>1</sup> | **Portion<br>chosen as<br>common<br>shares or<br>DSUs** ****<br> **(%)**<sup>2</sup> | Total<br>received in<br>common<br>shares or<br>DSUs<br>(%)<sup>3</sup> |
| &nbsp;&nbsp;&nbsp; Deepak Chopra | 2023 | 250 | 6622 | 6872 | 453140 | 351860 | 100 | 100 |
| &nbsp;&nbsp;&nbsp; Deepak Chopra | 2022 | 250 | 2451 | 2701 | 180049 | 554951 | 100 | 100 |
| &nbsp;&nbsp;&nbsp; Deepak Chopra | Change | 0 | 4171 | 4171 | 273091 |  |  |  |
| &nbsp;&nbsp;&nbsp; Stephanie L. Coyles | 2023 | 12800 | 15094 | 27894 | 1839330 | ✓ | -<sup>4</sup> | 58<sup>4</sup> |
| &nbsp;&nbsp;&nbsp; Stephanie L. Coyles | 2022 | 12000 | 12191 | 24191 | 1612572 | ✓ | -<sup>4</sup> | 53<sup>4</sup> |
| &nbsp;&nbsp;&nbsp; Stephanie L. Coyles | Change | 800 | 2903 | 3703 | 226758 |  |  |  |
| &nbsp;&nbsp;&nbsp; Ashok K. Gupta | 2023 | 1481 | 18226 | 19707 | 1299480 | ✓ | 100 | 100 |
| &nbsp;&nbsp;&nbsp; Ashok K. Gupta | 2022 | 1481 | 12796 | 14277 | 951705 | ✓ | 100 | 100 |
| &nbsp;&nbsp;&nbsp; Ashok K. Gupta | Change | 0 | 5430 | 5430 | 347775 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;M. Marianne Harris | 2023 | 6735 | 54104 | 60839 | 4011724 | ✓ | 100 | 100 |
| &nbsp;&nbsp;&nbsp;&nbsp;M. Marianne Harris | 2022 | 6443 | 47302 | 53745 | 3582642 | ✓ | 100 | 100 |
| &nbsp;&nbsp;&nbsp;&nbsp;M. Marianne Harris | Change | 292 | 6802 | 7094 | 429082 |  |  |  |
| &nbsp;&nbsp;&nbsp; David H. Y. Ho | 2023 | 227 | 6721 | 6948 | 458151 | 346849 | 100 | 100 |
| &nbsp;&nbsp;&nbsp; David H. Y. Ho | 2022 | 227 | 2451 | 2678 | 178515 | 556485 | 100 | 100 |
| &nbsp;&nbsp;&nbsp; David H. Y. Ho | Change | 0 | 4270 | 4270 | 279636 |  |  |  |
| &nbsp;&nbsp;&nbsp; Laurie G. Hylton | 2023 | – | – | – | – | 805000 | – | – |
| &nbsp;&nbsp;&nbsp; Laurie G. Hylton | 2022 | – | – | – | – | – | – | – |
| &nbsp;&nbsp;&nbsp; Laurie G. Hylton | Change | – | – | – | – |  |  |  |
| &nbsp;&nbsp;&nbsp; Helen M. Mallovy Hicks | 2023 | 425 | 4751 | 5176 | 341305 | 463695 | 100 | 100 |
| &nbsp;&nbsp;&nbsp; Helen M. Mallovy Hicks | 2022 | 425 | 663 | 1088 | 72526 | 662474 | 100 | 100 |
| &nbsp;&nbsp;&nbsp; Helen M. Mallovy Hicks | Change | 0 | 4088 | 4088 | 268779 |  |  |  |
| &nbsp;&nbsp;&nbsp; Marie-Lucie Morin | 2023 | 1200 | 2608 | 3808 | 251100 | 553900 | 13 | 64 |
| &nbsp;&nbsp;&nbsp; Marie-Lucie Morin | 2022 | 0 | 0 | 0 | 0 | 735000 | 5 | 56 |
| &nbsp;&nbsp;&nbsp; Marie-Lucie Morin | Change | 1200 | 2608 | 3808 | 251100 |  |  |  |
| &nbsp;&nbsp;&nbsp; Joseph M.<br> Natale | 2023 | – | – | – | – | 805000 | – | – |
| &nbsp;&nbsp;&nbsp; Joseph M.<br> Natale | 2022 | – | – | – | – | – | – | – |
| &nbsp;&nbsp;&nbsp; Joseph M.<br> Natale | Change | – | – | – | – |  |  |  |
| &nbsp;&nbsp;&nbsp; Scott F. Powers | 2023 | 975 | 34302 | 35277 | 2326165 | ✓ | 100 | 100 |
| &nbsp;&nbsp;&nbsp; Scott F. Powers | 2022 | 975 | 26636 | 27611 | 1840549 | ✓ | 100 | 100 |
| &nbsp;&nbsp;&nbsp; Scott F. Powers | Change | 0 | 7666 | 7666 | 485616 |  |  |  |
| &nbsp;&nbsp;&nbsp; Barbara G. Stymiest | 2023 | 5000 | 60180 | 65180 | 4297969 | ✓ | 90 | 96 |
| &nbsp;&nbsp;&nbsp; Barbara G. Stymiest | 2022 | 5000 | 53365 | 58365 | 3890611 | ✓ | 90 | 95 |
| &nbsp;&nbsp;&nbsp; Barbara G. Stymiest | Change | 0 | 6815 | 6815 | 407358 |  |  |  |

---

<sup>1</sup> The director share ownership guidelines were revised in 2022 to increase the share ownership guideline effective January 1, 2023 from $735,000 to $805,000 in common shares and/or DSUs. 

<sup>2</sup> For the portion of their retainer that directors are not required to receive in DSUs, the % reflects the amount of compensation that director has elected to receive in common shares or DSUs that can otherwise be received in cash. 

<sup>3</sup> Reflects the total % of their retainer that directors received in common shares or DSUs (optional and required amounts). 

<sup>4</sup> Ms. Coyles used 100% of her after tax director income to purchase common shares of the company on the open market. 

The closing value of our common shares on the TSX was $65.94 on February 28, 2023 and $66.66 on February 28, 2022

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##### [**Table of Contents**](#toc)
**Compensation details** 

***Director compensation table***

We paid a total of $2,758,297 to the directors of SLF Inc. and Sun Life Assurance in 2022<sup>1</sup>, compared to $2,842,315 in 2021.

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp; Name | Fees<br> earned<br> ($) | Share-<br>based<br>awards<sup>2</sup><br>($) | Travel<br> fees<br>($) | Option-<br>based<br>awards<sup>3</sup><br> ($) | Non-equity<br>incentive plan<br>compensation<br>($) | Pension<br>value<br> ($) | All other<br>compen-<br>sation<sup>4</sup><br> ($) | Total<br> ($) |
| &nbsp;&nbsp; William D. Anderson<sup>3</sup> | 79780 | 79780 | – |  |  |  | 10000<sup>5</sup> | 169560 |
| &nbsp;&nbsp; Deepak Chopra | – | 245000 | – |  |  |  | – | 245000 |
| &nbsp;&nbsp; Stephanie L. Coyles | 126202 | 141202 | – |  |  |  | – | 267404 |
| &nbsp;&nbsp; Martin J. G. Glynn<sup>3</sup> | 45330 | 43516 | 3000 |  |  |  | 13918<sup>6</sup> | 105764 |
| &nbsp;&nbsp; Ashok K. Gupta | – | 280000 | 12000 |  |  |  | – | 292000 |
| &nbsp;&nbsp;&nbsp;&nbsp;M. Marianne Harris | – | 280000 | – |  |  |  | – | 280000 |
| &nbsp;&nbsp; David H. Y. Ho | – | 245000 | 6000 |  |  |  | – | 251000 |
| &nbsp;&nbsp; Helen M. Mallovy Hicks | – | 245000 | – |  |  |  | – | 245000 |
| &nbsp;&nbsp; Marie-Lucie Morin | 100000 | 145000 | 12000 |  |  |  | – | 257000 |
| &nbsp;&nbsp; Scott F. Powers | – | 382569 | 3000 |  |  |  | – | 385569 |
| &nbsp;&nbsp; Barbara G. Stymiest | 16000 | 264000 | – |  |  |  | – | 280000 |
| &nbsp;&nbsp; **TOTAL** |  |  |  |  |  |  |  | **2778297** |

---

<sup>1</sup> Ms. Laurie G. Hylton's compensation is not included as she became a director on December 31, 2022. Mr. Joseph M. Natale's compensation is not included as he became a director on February 7, 2023.

<sup>2</sup> Independent directors do not participate in the company's stock option plan.

<sup>3</sup> This includes DSUs awarded in 2022, including both mandatory DSUs as well as DSUs elected to be received by the directors in lieu of cash fees.

<sup>4</sup> Mr. Anderson and Mr. Glynn retired in May 2022.

<sup>5</sup> This includes $10,000 in charitable donations made on behalf of Mr. Anderson when he retired from the board. 

<sup>6</sup> This includes $10,000 in charitable donations made on behalf of Mr. Glynn when he retired from the board and travel reimbursement of $3,918 paid for Mr. Glynn's spouse in connection with his retirement. 

The *Insurance Companies Act* (Canada) requires that an insurance company's by-laws set a maximum amount of remuneration that may be paid in aggregate to all directors for their services during a fixed period of time. Directors receive an annual retainer, committee retainers and travel fees for serving on the boards of SLF Inc. and Sun Life Assurance. The cost is shared equally between the two companies. By-law No. 1 of the company currently sets that amount at $2,600,000 and the by-laws of Sun Life Assurance also set that amount at $2,600,000, for an aggregate limit of $5,200,000 between the two companies.

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##### [**Table of Contents**](#toc)
**Executive compensation** 

This section discusses our approach to executive compensation, how we make decisions, the different components of our programs, what we paid our NEOs in 2022 and the rationale for our decisions. Management prepared the compensation discussion and analysis, and compensation details provided below on behalf of the Management Resources Committee (MRC). It was reviewed and approved by the MRC and our board. The executive compensation disclosure includes non-IFRS measures. Additional information concerning these measures is available in Section L - Non-IFRS measures in our 2022 MD&A, which is incorporated by reference in this section. Our 2022 MD&A has been filed with securities regulators in Canada and with the SEC and available at www.sunlife.com, www.sedar.com and www.sec.gov. All figures are in Canadian dollars unless stated otherwise.

**Contents** 

---

| | | |
|:---|:---|:---|
|  [Letter to shareholders](#tx431192_501) | [Letter to shareholders](#tx431192_501) | 64 |
| &nbsp;&nbsp;&nbsp;&nbsp; [Compensation discussion and analysis](#tx431192_502) | &nbsp;&nbsp;&nbsp;&nbsp; [Compensation discussion and analysis](#tx431192_502) | 68 |
| • | [2022 compensation decisions and approvals](#tx431192_503) | 68 |
| • | [Changes for 2023](#tx431192_504) | 69 |
| • | [Comparing shareholder value to executive compensation](#tx431192_505) | 71 |
| • | [Compensation philosophy and approach](#tx431192_506) | 72 |
| • | [Compensation governance](#tx431192_507) | 74 |
| • | [Alignment of compensation programs and risk management](#tx431192_508) | 75 |
| • | [Decision-making cycle](#tx431192_509) | 77 |
| • | [Our compensation program](#tx431192_510) | 79 |
| &nbsp;&nbsp;&nbsp;&nbsp; [Compensation details](#tx431192_511) | &nbsp;&nbsp;&nbsp;&nbsp; [Compensation details](#tx431192_511) | 91 |
| • | [Individual pay and performance outcomes](#tx431192_512) | 91 |
| • | [Summary compensation table](#tx431192_513) | 100 |
| • | [Incentive plan awards](#tx431192_514) | 104 |
| • | [Pension benefits](#tx431192_515) | 110 |
| • | [Termination and change of control benefits](#tx431192_516) | 111 |
| • | [Aggregate compensation for Material Risk Takers](#tx431192_517) | 116 |
| • | [Securities authorized for issue under equity compensation plans](#tx431192_518) | 117 |

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**Letter to shareholders** 

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| | |
|:---|:---|
| <br> **To our fellow shareholders:**<br>2022 was a year of significant challenge and opportunity. Our overall performance continues to demonstrate the resiliency of the company's four pillar strategy and the strength of its geographic diversification. The company also undertook several transformative business transactions that expanded the scope and nature of the workforce.<br>In this environment marked by economic and geo-political complexity, strong labour market dynamics, and an overall shift in workforce expectations, strategies | ![LOGO](g431192g10h00.jpg) <br>|

---

to attract, retain and develop talent are more critical than ever. As a result, the Committee focused significant attention on management's actions to: strengthen leadership development and succession for the next generation of talent; manage overall people risk; differentiate Sun Life's approach to the Future of Work through flexibility and choice; and build an empowered and inclusive culture.

The board recognizes that Sun Life's strength resides in its ability to build great talent motivated by the delivery of our Purpose: helping Clients achieve lifetime financial security and live healthier lives. Our compensation design and practices are essential tools in driving the execution of our business and talent strategy. We regularly review compensation design to ensure it is competitive, fair, simple and clearly communicated, provides incentives that align executive interests with that of our shareholders, delivers on our longer-term strategic objectives, and supports our commitment to sustainable practices. We carefully assess business and incentive results with input from the Chief Risk Officer and an independent advisor to ensure appropriate challenge is in place. We apply a rigorous approach to assessing performance to ensure final pay outcomes reflect true pay-for-performance.

We value your input and are pleased that our approach to date has continued to receive strong shareholder support. At our last AGM, 94.8% voted in favour of our compensation program. In the remainder of this letter, we provide an outline of the application of our principles to Executive Compensation in 2022 and our plans for continued evolution in 2023 to reinforce our commitment to long-term sustainable growth.

**2022 Company Performance Highlights** 

The board is satisfied with the business results delivered in 2022, particularly in a year of equity market volatility, rising interest rates and persistent inflation. While Reported earnings per share (EPS) and return on equity (ROE) were down year-over-year, Underlying EPS, a measure that adjust for temporary market volatility, was up 4%. Insurance sales experienced strong growth, while wealth sales declined due to market volatility. Value of new business decreased from last year's strong results, driven by lower wealth sales. Overall results were supported by our balanced and diversified business model. Our U.S., Canada and Asia businesses contributed strong earnings performance, partially offset by MFS, where performance was impacted by equity market declines. SLC Management recorded strong net inflows, continued momentum on capital raising, and growth in fee-related earnings. See the table below and our 2023 MD&A for more details.

Of particular note, this year we executed on a number of important acquisitions, partnerships and divestitures that position the company well for growth by building on our geographic diversity and distribution strength. In June 2022, we completed the acquisition of DentaQuest, further strengthening our position as a leader in U.S. health and benefits. We announced the acquisition of a majority stake in Advisors Asset Management (AAM), which will allow SLC Management to expand the distribution of its alternative investments into the U.S. high-net worth retail market. We announced our intention to sell our closed block U.K. business to Phoenix Group, providing a long-term home for our Clients. This transaction included the formation of a long-term partnership to become a strategic asset management partner to Phoenix Group through our leading asset management businesses – MFS and SLC Management. In Asia, we strengthened our bancassurance distribution through a renewed partnership with Rizal Commercial Banking Corporation in the Philippines and announced an expanded partnership with CIMB Niaga in Indonesia (commencing in 2025). In January 2023, we announced a 15-year partnership with Dah Sing Bank, Sun Life's first exclusive bancassurance partnership in Hong Kong. In February 2023, we announced the completion of our sale of the association, affinity and group creditor business in Canada.

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As we executed on these important strategic transactions, the company made good progress advancing key strategic priorities. In financial reporting, the company is carefully managing the significant, global transition to the new IFRS 17 and IFRS 9 accounting standards. In digital innovation, Employee experience, and sustainability, Sun Life's performance was recognized by stakeholders around the world, including Alida's Delta Award for innovation in Client experience in the U.S., Great Place to Work<sup>®</sup> certifications in North America, India, Vietnam, and the Philippines, and being recognized by Corporate Knights as one of the Global 100 Most Sustainable Corporations for the 14<sup>th</sup> year in a row.

**Key Financial Results** 

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Basis | Measure | 2022 | 2021 | Year-over-year Change |
|  Reported | Net Income | $3,060 million | $3,934 million | -22% |
|  | ROE | 12.5% | 17.1% | Down 4.6 percentage points |
|  | EPS | $5.21 | $6.69 | -22% |
|  Underlying | Net<br>Income<sup>1</sup> | $3,674 million | $3,533 million | 4% |
|  | ROE<sup>1</sup> | 15.1% | 15.4% | Down 0.3 percentage points |
|  | EPS<sup>2</sup> | $6.27 | $6.03 | 4% |

---

---

| | | |
|:---|:---|:---|
|  | Value | Year-over-year Change |
|  Insurance sales | $4,321 million | 18% |
|  Wealth sales and asset management gross flows | $204 billion | -11% |
|  Value of new business (VNB) | $1,253 million | -7% |
|  Assets under management (AUM) | $1,326 billion | -8% |

---

<sup>1</sup> Underlying net income and underlying ROE are non-IFRS measures, are not standardized financial measures under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures disclosed by other issuers. See Section L - Non-IFRS measures in our 2022 MD&A. 

<sup>2</sup> Underlying EPS is a non-IFRS measure, is not a standardized financial measure under the financial reporting framework used to prepare our financial statements and might not be comparable to similar financial measures disclosed by other issuers. See Section L - Non-IFRS measures in our 2022 MD&A. 

**2022 Compensation Highlights** 

With consideration to the company's 2022 performance, the board, on the recommendation of the Committee, approved the following decisions:

• Annual incentive plan (AIP) total company performance factor, including for CEO and CFO, of 95%

• The score includes a positive discretionary adjustment to moderate factors impacting reported EPS and recognize significant
outcomes on multiple, strategic initiatives

• Senior Executive Sun Share Unit Plan (Sun Shares) performance factor of 117%. No discretion was applied, and NEOs have 25 -
75% of long-term incentives delivered in Sun Shares (page 82).

The total company AIP funding of 95% reflects mixed performance results on financial measures and solid outcomes on Client measures as well as strong performance on strategic initiatives.

Additional detail on use of discretion in compensation plans is on page 78.

Our Sun Share performance factor of 117% for the 2020 Sun Share grant vesting in 2023, reflects relative Total Shareholder Return (TSR) performance over a five-year period, with very strong results in early years tempered by lower results in the final three years. Our five-year annualized TSR is 8.0% and ranks top quartile among global insurance competitors.

Overall, we assess that our incentive plans delivered rewards consistent with our strategy, performance, and long-term value created. We continue to ground our decisions in the principle of pay-for-performance based on a rigorous assessment of the delivery of financial and strategic objectives.

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##### [**Table of Contents**](#toc)
**2022 CEO Performance and Compensation** 

When determining compensation for the CEO, we consider target compensation set with the inputs of market data, business and individual performance versus annual strategic and financial goals, funding under the compensation plans, and results in the broader context of Client, employee, and shareholder experience. The board's assessment of the CEO's performance includes consideration of results versus short, medium, and long-term goals, as well as broader strategic, sustainability and financial performance. Our process seeks input from the CEO through a self-assessment as well as feedback from the executive team and all board members. The Committee considers the board's performance assessment, reviews compensation history and market information, and seeks input from an independent advisor, in making a compensation recommendation to the board.

Following the review, the Committee recommended, and the board approved, annualized 2022 total direct compensation (TDC) for Mr. Strain of $8,990,000, $210,000 above his target of $8,780,000 and $1,741,000 above his 2021 actual TDC. 2022 annual incentive compensation was awarded at $1,710,000, reflecting the 95% total company performance factor and a 120% individual performance multiplier, which was 14% above target and 22% below his 2021 actual annual incentive compensation.

In addition, the Committee recommended, and the board approved, target TDC of $9,650,000 for Mr. Strain in 2023, $870,000 above 2022, with the increase delivered in long-term incentives that align to shareholders interests. We believe the compensation awarded to Mr. Strain appropriately reflects his growth in the President & CEO role, leadership in executing on our strategy, and long-term value delivered, as well as competitive pay levels. Additional details on Mr. Strain's compensation can be found on page 92.

**Looking Ahead to 2023** 

Our talent strategies and compensation programs continue to evolve in concert with business strategy and our environment including the interests and expectations of our stakeholders.

While we regularly review our approach, this year we undertook a comprehensive assessment both to reflect the potential impact of changes in accounting practices within the insurance business (IFRS 17) and more importantly to reflect the company's ongoing ambition and commitment to creating a focus on long-term sustainable growth.

Following the review of our incentive plans, we are pleased to share that certain 2023 AIP metrics will be adjusted to moderate outsized market impacts of Reported EPS on payouts, thereby reducing the need for discretionary adjustment in the future. Furthermore, Client Satisfaction (CSAT) will replace Client Index as a more flexible and market comparable measure of Client experience across geographies and businesses. We will also introduce a metric to track progress on building digital relationships as a key Client outcome given its strategic importance.

More significant changes are to be reflected in our longer-term incentive plan. We recognize sustainability and the positive impact the company can drive for Clients and communities is vital to both internal and external stakeholders. We are pleased to share that our 2023 Sun Shares will incorporate a component to incent and reward achievement of our strategic sustainability plan. Our top Leaders are aligned to achieve ambitious outcomes for Clients in advancing sustainable investing and operating as a trusted and responsible business, including increasing gender and racial diversity at executive levels and reducing greenhouse gas emissions in our operations.

Also starting in 2023, the Executive Sun Share plan will incorporate performance on Underlying ROE, in addition to relative TSR as critical long-term financial metrics. Adding this metric aligns to our strategy and responds to shareholder feedback to utilize both absolute and relative performance metrics. These changes reflect our strategic focus on capital management and our deep commitment to sustainability-driven growth in delivering on our Purpose and ambition: to be one of the best asset management and insurance companies in the world.

\*\*\*

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Once again, we appreciate your feedback and invite you to contact us at boarddirectors@sunlife.com on matters pertaining to executive compensation and encourage you to continue to take advantage of your "say on pay" in 2023. In the following pages, we aim to provide you with all the information you need to feel confident that our actions and decisions are aligned to your interests.

**Sincerely,** 

---

| | |
|:---|:---|
| ![LOGO](g431192g80x66.jpg) | ![LOGO](g431192g03a01.jpg) |
| **Stephanie L. Coyles** | **Scott F. Powers** |
| **Chair, Management Resources Committee** | **Chair of the Board** |

---

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**Compensation discussion and analysis (CD&A)** 

**2022 compensation decisions and approvals** 

We evaluate our business performance to assess whether our targets set at the beginning of the year remain appropriate, whether external perceptions of our performance are consistent with the calculated results from our formulae, and the extent to which delivered results could represent one-off events. When determining 2022 AIP payouts, unique circumstances in each business group were considered and positive discretion was applied to ensure final AIP outcomes aligned with the overall performance of each business. Use of discretion is described on page 78.

Mr. Strain's salary and AIP target are not changing for 2023, while his long-term incentive grant has increased. The other NEOs have received increases to their total target compensation for 2023. LTI awards are forward looking and recognize the critical role our executives play in providing leadership, managing risk and driving achievement of our ambitious goals for Clients and shareholders. The final payout of these awards depends on the long-term value delivered to stakeholders.

As disclosed in last year's management information circular, 2022 salaries, AIP targets, and LTI grants were approved and executed in February 2022. 2022 actual incentive outcomes reflect a range of business and individual performance, in alignment with our compensation principles. We describe annual incentive plan business results on page 109.

The table below summarizes the 2022 compensation decisions for the individuals who are our NEOs for 2022. We describe the plans, payouts and new grants in more detail starting on page 79.

---

| | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  |  |  | Long Term Incentives (000s) | Long Term Incentives (000s) | Long Term Incentives (000s) | Long Term Incentives (000s) | Long Term Incentives (000s) | Long Term Incentives (000s) |
|  |  |  | Annual Incentives (000s) | Annual Incentives (000s) | Annual Incentives (000s) | Sun Shares | Sun Shares | Options | Options | <br> SLC Management<br>Phantom Units | <br> SLC Management<br>Phantom Units |
|  | Annualized<br>salary<br>(000s) | Annualized<br>salary<br>(000s) | Actual | Target | Target | <br> Value<br>Vested /<br>Paid<br><sup>(2020 grant)</sup> | Value<br>Granted | Value<br>Exercised | Value<br>Granted | Value<br>Vested<br>/ Paid<br><sup>(2020 grant)</sup> | Value<br>Granted |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;Named Executive<br> &nbsp;&nbsp;&nbsp;&nbsp;Officer | 2022 | 2023 | 2022 | 2022 | 2023 | 2023 | 2023 | 2023 | 2023 | 2023 | 2023 |
| &nbsp;&nbsp;&nbsp;&nbsp; **Kevin D. Strain**<br> President & Chief Executive Officer | 1000 | 1000 | 1710 | 1500 | 1500 | 2253 | 5363 | 598 | 1788 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **Manjit Singh**<br> EVP & Chief Financial Officer | 650 | 650 | 912 | 800 | 800 |  | 1875 |  | 625 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **Stephen C. Peacher**<br> President,<br>SLC Management | US 700 | US 750 | US 1,908 | US 1,500 | US 1,500 | US 835 | US 750 |  | US 750 | US 1,485 | US 1,500 |
| &nbsp;&nbsp;&nbsp;&nbsp; **Daniel R. Fishbein**<br> President,<br>Sun Life U.S. | US 600 | US 600 | US 1,418 | US 900 | US 900 | US 1,503 | US 1,875 | US 219 | US 625 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **Jacques Goulet**<br> President,<br>Sun Life Canada | 600 | 600 | 972 | 800 | 900 | 3361 | 2100 |  | 700 |  |  |

---

As disclosed last year, in March 2022, Mr. Peacher received a one-time long-term incentive grant of US$2,000,000 in Sun Shares and US$2,000,000 in SLC Phantom Units to recognize his critical role in leading the multi-year transformation of SLC Management thus far and to create a powerful incentive to grow the business going forward. The grants cliff vest in 2027 and vesting is contingent upon achieving both financial and strategic goals key to SLC Management's mid-term strategy. The final number of units

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vesting can go to zero, if performance is below threshold, and up to a maximum 125% of units granted, if performance exceeds expectations.

Summaries of performance for each NEO that formed the basis for compensation decisions start on page 91.

The value of the 2020 Sun Share awards paid in 2023 reflects the change in share price, accumulated dividends and application of the 117% performance factor. See page 83 for details about the performance factor for Sun Share awards (the "Performance Factor"). Above-target payouts on long-term incentives granted in 2020 were based on Sun Life's absolute and relative total shareholder return compared to a peer group of Canadian banks and North American insurers over the performance period.

**Changes for 2023** 

***Management Resources Committee***

The MRC conducted its annual review of our compensation programs and completed a periodic substantive review of our global incentive plans, and approved material changes to the annual incentive plan (AIP) and Executive Sun Share plan. This review was performed in the context of an evolving external environment and our transition to new accounting standards (International Financial Reporting Standard (IFRS) 17 and 9), and with the guidance and support of the board's independent compensation consultant. These changes are intended to ensure that our plans are well aligned to our business strategy and that our programs continue to drive key strategic objectives and align executives with the interests of our Clients and shareholders.

**Annual Incentive Plan** 

For the 2023 AIP performance year onwards, we are making the following adjustments to support fair outcomes and better align with our compensation strategy:

**Total company Reported Earnings Per Share (EPS):** We will narrow the payout range from the current <25% to 200%> range (threshold-maximum) to <50% to 150%>, with below-threshold performance still resulting in a zero factor payout. This will reduce the risk of outsized variability in compensation outcomes driven by uncontrollable external events (e.g., market volatility), while still reflecting shareholder experience in annual incentive payouts. For clarity, the underlying EPS/earnings performance metric will remain unchanged.

**Value of New Business:** This metric will be retitled "Growth" and at the total company level will be calculated as a weighted average of the performance under Value of New Business (VNB) in Sun Life Canada and Sun Life Asia, and Sun Life U.S.'s "Client Revenue" performance versus an annual target. Client Revenue is defined as net premiums + fees received from Clients. This better aligns our metrics to our US Group Benefits business while maintaining VNB for our long-term insurance businesses. Going forward VNB will no longer be measured on a constant currency basis to simplify and align to our approach with earnings measures.

**Client Measures:** We will replace the existing Client Index (our key measure of Client loyalty and satisfaction) survey measure with a new Client Satisfaction (CSAT) score. This allows for a wider range of responses and reflects our Clients' overall satisfaction with their relationship with Sun Life, while aligning with common market practice.

**Executive Sun Share plan** 

For the 2023 Sun Share grants onwards, we are adding one new metric and one new modifier used to determine the overall performance factor.

**Relative TSR:** This existing metric will now be weighted at 75% (previously, 100% of the calculation was based on this metric). The performance range around the peer group average will be widened to ±15% to reflect potential for more variable outcomes during the transition to the new IFRS 17 and 9 accounting standards, among our peers applicable only to Canadian insurance companies.

**Peer Group:** We will add Equitable Holdings Inc. (NYSE: EQH) and T Rowe Price Inc. (NASDAQ: TROW) to our peer group to further emphasize our asset management focus and broaden our group of comparators.

In calculating the relative TSR component of the performance factor, we will remove currency averaging and market capitalization-weighting to simplify calculating the peer average and will reduce the weight

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of Canadian banks from 25% to 20%, while increasing the weight of the North American group to 80% to again strengthen focus on our insurance and asset management peers.

**Underlying ROE:** This new metric will be weighted at 25% of the overall performance factor. For the initial grant, one-year goals will be aligned to each year's business plan, designed to support achievement of our medium-term financial objectives and incent continued focus on capital allocation decisions within the company. This internally focused metric helps balance the external focus of relative Total Shareholder Return. The performance range around each annual goal will be ±15% (threshold-maximum).

**Sustainability Modifier:** This "modifier" will adjust the combined relative TSR (75% weight) and Underlying ROE (25% weight) score by up to ±10 percentage points. The Sustainability modifier applied will be either -10 percentage points (pp), -5 pp, "no change", +5 pp or +10 pp. Scores will be assessed based on our performance over three years against four goals, aligned to two of our Sustainability Pillars (please see Sun Life's Sustainability Report, available on our website): 1) Advancing Sustainable Investing, 2) Operating as a Trusted and Responsible Business. Each metric has an associated baseline and target and will be weighted equally in the assessment. Performance over the period will be assessed to determine the degree of success in achieving the four goals. Goals include sustainable investment, gender and under-represented ethnicity representation at executive levels, and greenhouse gas emissions reduction in our operations.

For clarity, this does not impact Sun Share grants made before 2023.

**Stock Options:** 

For the 2023 stock option grants onwards, we are changing our 4 year vesting schedule from the current 25% per year following the date of grant, to 50% after year 3 and 50% after year 4. This will align us more closely to market practice and emphasizes the long-term nature of this program.

For clarity, this does not impact stock option grants made before 2023.

**NEO Pension Entitlement:** 

Per "Amendment Number 6 to the Sun Life Assurance Company of Canada Canadian Non-Registered Pension Plan" which became effective on December 31, 2022, the total annual retirement income payable of Mr. Strain upon his retirement shall not exceed $1.4M. In accordance with our compensation philosophy and approach, this ensures his compensation can be set annually based on performance and in alignment with shareholder interests.

**Clawback:** 

In late 2022, the U.S. Securities and Exchange Commission (SEC) finalized a set of proposed rules requiring companies listed on U.S. stock exchanges to implement a "clawback policy" for the recovery of incentive-based executive compensation received by current or former executive officers if the company must restate its financial statements. Companies must publicly file their clawback policy and disclose how they have applied the policy, if applicable. These rules will apply to Sun Life as a foreign private issuer on the New York Stock Exchange, once applicable, as is anticipated later in 2023.

Sun Life will update our existing compensation recovery approach and file it with the SEC as required to conform to the new rules and maintain continuous compliance.

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**Comparing shareholder value to executive compensation** 

The graph below compares the cumulative value of $100 invested in Sun Life shares for the five years starting on December 31, 2017 with the value of $100 invested in each of two indices, the S&P/TSX Composite Index and the S&P/TSX Composite Financials Index, for the same period, assuming dividends were reinvested. The graph also shows total compensation, as outlined in the summary compensation table on page 100, for the NEOs (limited to the CEO, CFO and the next three highest paid NEOs for each year) as a dollar value and indexed to 100 over the same period.

2022 total compensation for NEOs\* reflects previously disclosed target changes made in February 2022, 2022 AIP outcomes across our businesses, and the Canada-US exchange rate.

Over five years, Sun Life's returns have outpaced our NEO total compensation growth, and are above the two indices listed. For more information on the alignment between CEO pay and shareholder value, see page 92.

![LOGO](g431192g00w20.jpg)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Year ended December 31 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
| &nbsp;&nbsp;&nbsp; SLF Inc. | 100 | 91 | 123 | 122 | 158 | 147 |
| &nbsp;&nbsp;&nbsp; S&P/TSX Composite Index | 100 | 91 | 112 | 118 | 148 | 139 |
| &nbsp;&nbsp;&nbsp; S&P/TSX Composite Financials Index | 100 | 91 | 110 | 112 | 153 | 139 |
| &nbsp;&nbsp;&nbsp; NEO Total Compensation Index | 100 | 112 | 101 | 112 | 144 | 130 |
| &nbsp;&nbsp;&nbsp; Total compensation of top-5 paid NEOs (millions)\* | $27.6 | $31.0 | $27.8 | $31.0 | $39.7 | $35.8 |

---

\* For 2021, includes Kevin Strain and excludes Dean Connor.

**Cost of management ratio** 

The cost of management ratio below expresses total compensation, as outlined in the summary compensation table for the top five most highly paid NEOs as a percentage of underlying net income attributed to shareholders. This table shows that the cost of management ratio is in line with recent years.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Cost of management ratio | 2018 | 2019 | 2020 | 2021 | 2022 |
| &nbsp;&nbsp;&nbsp; Total Compensation of top-5 paid NEOs (millions)\* | $31 | $27.8 | $31 | $39.7 | $35.8 |
| &nbsp;&nbsp;&nbsp; Underlying net income attributed to shareholders (millions) | $2947 | $3057 | $3213 | $3533 | $3674 |
| &nbsp;&nbsp;&nbsp; Cost of management ratio | 1.1% | 0.9% | 1.0% | 1.1% | 1.0% |

---

\* For 2021, includes Kevin Strain and excludes Dean Connor.

**Compensation philosophy and approach** 

**What we do** 

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Take a principles-based approach** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• Manage compensation design and decision-making within a set of guiding principles

&nbsp;&nbsp;&nbsp;&nbsp;• Ensure our compensation practices align with Financial Stability Board (FSB) Principles for Sound Compensation Practices and their Implementation Standards

&nbsp;&nbsp;&nbsp;&nbsp;• Benchmark compensation against peer companies

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Align with strategy and long-term shareholder value** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• Provide incentive to achieve strategic business priorities, such as our focus on Clients

&nbsp;&nbsp;&nbsp;&nbsp;• Align pay with shareholder experience over the short, mid and long-term

&nbsp;&nbsp;&nbsp;&nbsp;• Align our LTI programs to pay based on a mix of absolute and relative shareholder returns

&nbsp;&nbsp;&nbsp;&nbsp;• Maintain a leading share ownership requirement and share retention policy

&nbsp;&nbsp;&nbsp;&nbsp;• Consider shareholder feedback through annual "say on pay" and other channels

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Pay for performance** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• Pay senior executives with a focus on results-based, formulaic at-risk pay (at risk compensation as a percentage of target pay: 89% for the CEO and 78% for the Executive Team)

&nbsp;&nbsp;&nbsp;&nbsp;• Define performance measures in the AIP that reflect value added for stakeholders, and are based on individual and company/business group performance

---

| | |
|:---|:---|
| <sub>✔</sub> | <br> **Manage risk and ensure sound governance** |

---

&nbsp;&nbsp;&nbsp;&nbsp;• The Chief Risk Officer makes an annual presentation to the MRC on the key enterprise risks and their relationship to compensation

&nbsp;&nbsp;&nbsp;&nbsp;• Manage pay mix so that more senior roles have a significant portion of their compensation deferred, much of it tied to multi-year performance

&nbsp;&nbsp;&nbsp;&nbsp;• Regularly audit our compensation programs, including reviews against the FSB Principles and Standards

&nbsp;&nbsp;&nbsp;&nbsp;• Stress-test the designs of our incentive plans to ensure a robust understanding of possible outcomes

&nbsp;&nbsp;&nbsp;&nbsp;• Directly link performance targets in the AIP to the annual business plan approved by the board and aligned with Sun Life's risk framework

&nbsp;&nbsp;&nbsp;&nbsp;• Use both absolute and relative performance metrics

&nbsp;&nbsp;&nbsp;&nbsp;• Ensure Risk, Compliance and Control considerations are considered prior to payouts via a modifier that is neutral to negative, and can be applied to lower the overall business result to zero if appropriate

&nbsp;&nbsp;&nbsp;&nbsp;• Make LTI contingent upon compliance with post-retirement shareholding requirements

&nbsp;&nbsp;&nbsp;&nbsp;• Apply compensation clawbacks as appropriate

&nbsp;&nbsp;&nbsp;&nbsp;• Retain external independent advice at the board level

&nbsp;&nbsp;&nbsp;&nbsp;• Incorporate caps on payouts in all non-sales compensation plan designs and, where appropriate, sales compensation plan designs. Payouts under some plans are designed as a maximum
% of financial measures (e.g., earnings)

&nbsp;&nbsp;&nbsp;&nbsp;• Require a Code of Conduct declaration and monitor compliance for all employees

**What we don't do** 

---

| | |
|:---|:---|
| <sub>×</sub> | <br> **No excessive perquisites / no "grossing up"** |

---

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| | |
|:---|:---|
| <sub>×</sub> | <br> **No encouraging excessive risk-taking** |

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| | |
|:---|:---|
| <sub>×</sub> | <br> **No repricing or backdating of stock options** |

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| | |
|:---|:---|
| <sub>×</sub> | <br> **No hedging or pledging of equity awards** |

---

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| | |
|:---|:---|
| <sub>×</sub> | <br> **No single-trigger change of control agreements** |

---

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| | |
|:---|:---|
| <sub>×</sub> | <br> **No multi-year guarantees** |

---

Compensation principles

Our approach to compensation is guided by five principles for designing compensation programs that:

---

| | |
|:---|:---|
| ![LOGO](g431192g38l53.jpg) | **align to our business strategy**, such as our focus on Clients and shareholders |
| ![LOGO](g431192g48m26.jpg) | **provide incentive** to meet strategic business priorities |
| ![LOGO](g431192g80e02.jpg) | **support fairness** for all employees, and reward top performance |
| ![LOGO](g431192g80v44.jpg) | **are simple and clearly communicated** |
| ![LOGO](g431192g64m86.jpg) | **ensure alignment** with the investor experience of short, mid and long-term performance and create a longer-term ownership mindset for senior leaders, including leading share ownership requirements. |

---

How we ensure alignment

The following are four ways we ensure our pay and performance are aligned with shareholder interests:

1. **at-risk pay** (including variable and deferred compensation) accounts for 89%
of total compensation paid to our CEO and 78% for the other Executive Team members

2. **performance measures** in the AIP that reflect value added for stakeholders through earnings, and profitable sales
and progress on key Client outcomes across the enterprise that drive shareholder value creation

3. **performance targets** in the AIP that are based on the annual business plan approved by the board and aligned with
the company's risk framework

4. **absolute and relative shareholder returns** that are reflected in our Executive Sun Share program.

Our approach to setting compensation

**Benchmark against peer companies** 

• On average, we target compensation at the median (or middle) of pay levels of peer companies and benchmark target total
compensation to ensure the target market position for each role is appropriate

• We align perquisites, benefits and pension arrangements with the median of practices among peer companies. The value of
these benefits does not fluctuate significantly with business or individual performance

**Pay for performance** 

• At the end of the year, we adjust the actual pay based on achieving both business and individual performance goals. If we
deliver superior performance above target, that will result in pay above target market position (in aggregate, the median of the market). Performance below expectations will result in pay below target market position

**Align with Sun Life's strategy** 

• We use a formal decision-making process that incorporates assessment of performance and value added for shareholders and
Clients, benchmarking against peers, independent advice, an annual decision-making cycle and the use of board discretion when appropriate.

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**Compensation governance** 

***Management Resources Committee involvement and composition***

The MRC oversees compensation design and outcomes, focusing on programs that are considered material to the company. The MRC and board exercise oversight over the compensation programs at MFS Investment Management through approval of the annual salary budget, bonus pool and long-term equity awards.

Composed entirely of independent directors, MRC members have direct experience related to executive compensation, succession planning and risk management. Collectively, they have the expertise required to make decisions on executive compensation and governance.

The profiles of all directors are contained in the section on director nominees starting on page 14. Additional committee-specific information relevant to MRC members is provided below.

• **Stephanie L. Coyles, Chair of the MRC** was Chief Strategic Officer at LoyaltyOne from 2008 to 2012 and a partner at
McKinsey & Company Canada from 2000 to 2008. Ms. Coyles has expertise in governance, risk management, and talent and culture, including knowledge of and experience with compensation plan design and administration, leadership
development and talent management, succession planning and organizational design. She was previously on the human resources and compensation committee of Corus Entertainment Inc. and now sits on its governance committee, and served on the human
resources committee of Hudson's Bay Company from 2019 to 2020.

• **Ashok K. Gupta** has 40 years of experience in the insurance and financial services industry in the UK, holding a
number of senior executive, advisor and actuarial positions. He was an advisor to the Group Chief Executive Officer of Old Mutual plc from 2010 to 2013, Operating Partner of the Pearl Group plc (now Phoenix Group Holdings plc) from 2004 to 2009,
Chief Executive Officer of Kinnect of Lloyd's of London from 2001 to 2004, and Head of Group Strategy of CGU plc (now part of Aviva plc) from 1997 to 2000. Mr. Gupta is currently Chairman of EValue Ltd., a director and member of the
remuneration committee of JPMorgan Discovery Trust plc (formerly JPMorgan European Smaller Companies Trust plc), and Chair of Mercer Limited, Chair of its nominations committee and non-executive director of
its remuneration committee. He also served on the remuneration committee of Old Mutual Wealth Management Limited (now Quilter PLC) from 2013 to 2014. These roles had responsibility for executive compensation and executive development.

• **David H. Y. Ho** is Chairman and Founder of Kiina Investment Limited. He was previously a senior advisor for Permira
Advisors LLC from 2010 to 2018 and Chairman and founding partner of CRU Capital from 2017 to 2019. He is currently a member of the management development and compensation committee of Air Products & Chemicals, Inc. and the compensation
committee of Qorvo, Inc. Mr. Ho was the Chair of the compensation committee of China COSCO Shipping Corporation Limited from 2020 to 2021 and Sinosteel Corporation from 2014 to 2016. He was a member of the compensation committee of nVent
Electric plc from 2018 to 2020, China Mobile Communications Group Co., Ltd. from 2016 to 2020, Dongfang Electric Corporation from 2009 to 2015, TriQuint Semiconductor Inc. from 2010 to 2014 and 3COM Corporation from 2008 to 2010.

• **Marie-Lucie Morin** has over 30 years of experience in Canadian federal public service where she had the responsibility
for various human resources and executive compensation matters. Ms. Morin has expertise in governance, risk management, and talent and culture, including knowledge of and experience with compensation plan design and administration, leadership
development and talent management, succession planning and organizational design. She is currently the Chair of the corporate governance and compensation committee of Stantec Inc., serves as a member of the human resources & compensation
committee of Chorus Aviation Inc, and was a member of the compensation committee of AGT Foods and Ingredients Inc. from 2016 to 2019.

• **Joseph M. Natale** was President and Chief Executive Officer of Rogers Communications Inc. from 2017 to 2021, President
and Chief Executive Officer from 2014 to 2015 and other executive roles from 2003 to 2014 at TELUS Corporation, Global Leader, Automotive and Transportation Markets and Country Leader, Canada from 2000 to 2003 and Managing Partner from 1997 to 2000
at KPMG Consulting and President and Co-founder of Piller, Natale & Oh Management Consultants from 1990 to 1997. Mr. Natale is currently the Chair of the human resources and compensation
committee of The Hospital for Sick Children and a member of the compensation committee of Home Capital Group Inc. He was also a member of the compensation committee of Celestica Inc. from 2012 to 2017 and the Chair of the human resources and
compensation committee at Livingston International from 2008 to 2013.

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The MRC's membership is reviewed annually to ensure members have the experience and expertise required to fulfil the MRC's mandate. More information on the operation and activities of the MRC can be found on pages 54 to 55.

***Incentive Plan Review Group – Management oversight***

A group of senior executives from finance, actuarial, risk management, legal/compliance, human resources and internal audit comprise our Incentive Plan Review Group (IPRG) and participate in the compensation decision-making process. The IPRG meets prior to each MRC meeting to review the design of our incentive compensation plans, performance targets and assessments, and information on risk management. It provides input for the CEO, MRC and the board to consider as part of their final recommendations and approvals. More information on our decision-making cycle is available on page 77.

***Independent advice***

Since 2016, the MRC has retained Pay Governance LLC (Pay Governance) as its independent consultant. Pay Governance provides advice on the strategy, design and quantum of compensation programs for the CEO and top executive officers and on our executive compensation governance, including advice on compensation programs relating to MFS Investment Management.

The MRC approves the engagement of the independent consultant, the proposed work plan and all associated fees. It considers any other work to be assigned to the independent consultant that is material in nature and will only approve it if it believes the work will not compromise the consultants' independence as advisor to the MRC.

The independent consultant advises the MRC throughout the year, giving input on policy recommendations, helping assess the appropriateness of our executive compensation programs including design and outcomes and reviewing this circular. The MRC considers information provided by the independent consultant and makes recommendations to the board for approval. It also reviews the performance and independence of the consultant annually. The board is ultimately responsible for compensation decisions.

The table below shows the fees paid to Pay Governance over the last two years. In 2022, Pay Governance assisted Sun Life with a detailed review of its incentive design programs, which is reflected in the higher fees paid. Pay Governance did not provide any non-executive-compensation-related services to Sun Life over the period.

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Executive compensation-related fees | 2022 | 2022 | 2021 | 2021 |
| &nbsp;&nbsp;&nbsp; Pay Governance | US$ | 197765 | US$ | 104204 |

---

**Alignment of compensation programs and risk management** 

Our risk management approach

Our compensation programs are aligned to the organization's risk management practices through our:

1. Governance structure for the design and approval of incentive compensation plans

2. Processes used to support the alignment of compensation and risk management.

![LOGO](g431192g53f58.jpg)

Described in more detail below, the MRC concluded that we did not take risks beyond our risk appetite to generate the business results that led to incentive payouts.

We use the "three-lines-of-defence" model as a means to ensure roles and responsibilities are consistent, transparent and clearly documented for decision-making, risk management and control in support of effective governance. Under the model:

• **The first line** refers to business roles who own, identify, and manage business risks.

• **The second line** is the oversight functions, which are independent of the first line, and oversee the risk management
programs through the risk framework and policies. Independence of the second line is supported with no direct business unit reporting relationships or direct incentive measures based on individual business unit performance.

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• **The third line** of defence is the internal audit function or a third party, which provides independent assurance as to
the effectiveness of risk management, control and governance processes.

***Governance structure for approval of incentive plans***

The MRC reviews the annual, mid and long-term incentive plans, which typically represent ~90% of the total spend on incentive programs across the enterprise. The remaining plans are generally sales compensation plans developed within approved frameworks and managed through the three-lines-of-defence model. Amounts and key risks under these plans are reviewed by the MRC on an annual basis.

In addition to formal approval processes, the following actions also support the alignment of compensation and risk management:

• Identification of Material Risk Takers (MRTs). MRTs are individuals in roles having a material impact on our risk exposure.
Pay decisions for MRTs are reviewed by the MRC and alignment of their compensation with long-term performance of the company is ensured by requiring that a minimum of 40% of their variable pay is deferred when the company earnings threshold is
exceeded. See page 117 for the aggregate compensation of our MRTs.

• Application of compensation clawbacks. See page 70 for a description of our clawback policy.

• Ability to lower share unit payments. The MRC and board have discretion in the Executive Sun Share plan to cancel all
outstanding awards if they determine that payments would seriously jeopardize our capital position or solvency.

• Application of overall discretion. The MRC and board have discretion to lower or zero out incentive awards, and to lower or
not grant long-term incentive awards to individuals or groups, if they conclude results were achieved by taking risks outside of board-approved risk appetite levels.

• Regular audit of our compensation programs. Internal audit reviews our compensation programs against the FSB Principles and
reports to the MRC on its findings regularly in alignment with the MRC Charter.

In November 2022 and February 2023, the MRC approved updated AIP and Executive Sun Share designs, applicable for new incentive periods starting in 2023.

***Processes supporting the alignment of compensation and risk management***

Our compensation design and review processes incorporate the following risk management practices:

• They are managed through the three-lines-of-defense model and compensation principles, including alignment with FSB principles

• Each year an annual business plan is developed and approved by the board based on approved risk appetite levels and is used
as the basis for setting annual performance targets under the AIP

• The Chief Risk Officer makes an annual presentation to the MRC on the key enterprise risks and whether they are being
managed appropriately and if adjustments to outcomes are required, and attends other meetings as required

• The MRC receives updates on the incentive plan assessments, including human resources talent risk and has the discretion to
lower or zero out incentive awards, and to lower or not grant long-term incentive awards to individuals or groups, if they conclude results were achieved by taking risks outside of approved risk-appetite limits

• The IPRG meets prior to each MRC meeting to review incentive plan outcomes from the perspective of finance, actuarial, risk
management, legal/compliance, human resources and internal audit. The IPRG also meets after the end of the year to discuss whether any adjustments should be made to the overall or business group AIP score based on the risk, compliance and control
environment

• The MRC reviews information on the grant value and outstanding value of all salary, bonus and long-term incentive awards
over the past five years for each member of the Executive Team. The MRC also reviews stress-testing analysis for Executive Team members by reviewing the potential value of outstanding equity awards over a range of future share prices

• The MRC annually reviews aggregate payouts under all incentive programs, the processes and the control environment governing
incentive plans and areas of focus for the upcoming year based on an assessment of indicators of potential risk such as size of plan, size and variability of payout levels, and plan design and operational features.

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***Design of incentive compensation plans to mitigate risk***

The design of our incentive plans helps to mitigate risk, as follows:

• Designs are stress-tested to ensure an understanding of possible outcomes.

• Pay mix is managed so that more senior roles have a significant portion of their compensation deferred, a significant
portion of which is tied to multi-year performance.

• Executives have share ownership and share retention requirements that reinforce the focus on the long term and alignment
with shareholders' interests.

• Caps on payouts are incorporated in all non-sales compensation plan designs and,
where appropriate, sales compensation design. Payouts under some compensation plans are designed as a maximum % of a financial measure (e.g., earnings).

• The AIP (see page 80) includes a measure whereby funding can be reduced based on the risk, compliance and control
environment.

• Performance measures generally include a mix of financial and non-financial absolute
and relative measures.

• AIP funding is limited to total company and business group performance, with no direct compensation impact for sales or
decisions around individual products within a business group.

**Decision-making cycle** 

Our annual incentive decision-making cycle is a rigorous process carried out in three stages for the relevant performance period:

![LOGO](g431192g59k18.jpg)

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***Use of discretion***

The board has discretion to:

• Increase or decrease awards under the AIP based on its assessment of risk management and the impact on our financial
results, and other factors that may have had an effect on performance

• Lower or zero out AIP awards, and to lower or not grant new long-term incentive awards for individuals or groups, if it
concludes that results were achieved by taking risks outside of board approved risk appetite levels

• Cancel outstanding awards under the Executive Sun Share plan if it determines that payment would seriously jeopardize the
capital position or solvency of the organization.

Actual use of discretion has been modest and is a mixture of positive and negative over time.

***Executive share ownership and share retention requirements***

Our executives align their interests with those of our shareholders by holding an ongoing stake in the company. Those new to the company or newly promoted have five years to achieve their required minimum ownership levels, which can include ownership of common shares, DSUs, Sun Shares and SLC phantom units.

In 2016, we increased the minimum levels of share ownership for NEOs and added a requirement that they achieve at least 25% of their minimum level of share ownership through personal actions, including personal ownership of shares and DSUs.

In addition, starting with grants in 2017, we added a requirement that following an exercise of stock options, our active executive officers must retain shares equal to 50% of the after-tax gain from the exercise for three years. This hold requirement does not apply if they have achieved their share ownership requirements and at least 25% of their minimum level of share ownership through personal actions or if they retire.

---

| | |
|:---|:---|
| | Post-retirement guidelines |
| &nbsp;&nbsp;&nbsp; Chief Executive Officer (CEO)<br> 10x | Hold at least 100% of guideline for 1 year<br> Hold at least 50% of guideline for 2 years |
| &nbsp;&nbsp;&nbsp; Named Executive Officers (NEO)<br> 5x | Hold at least 100% of guideline for 1 year |

---

Our former CEO, Dean Connor, remains in compliance with these guidelines at time of publishing.

All insiders must follow our insider trading rules, and executives and directors must notify the appropriate individual of their intention to trade in our securities. Executives must notify the CEO, while directors, including the CEO, must notify the Chair of the Board. The Chair of the Board must notify the Chair of the GICRC.

***No hedging or pledging***

We have a policy that prohibits all insiders subject to our share ownership requirements from participating in equity monetization transactions including pledging or hedges involving the company's securities.

***Clawbacks***

Our clawback policy allows the company to recoup compensation in situations of material restatement and/or misconduct. The policy gives the board discretion to recover any or all of the incentive compensation received or realized in the previous 24 months if the employee (or former employee) was involved in misconduct, including fraud, dishonesty, negligence, and/or non-compliance with legal requirements or our internal policies, including the Code. In the case of material restatement, compensation can be recovered if the incentive compensation received would have been less had the restated financial results been known. Sun Life is monitoring developments with respect to recent changes to rules for clawbacks from the U.S. Securities and Exchange Commission and we will ensure continued compliance with relevant legislation.

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**Our compensation program** 

Seven components made up our 2022 compensation program:

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Component | Pay type | Performance period | Who's eligible |
| &nbsp;&nbsp;&nbsp; **Salary** | Fixed | • reviewed annually | • all employees |
| &nbsp;&nbsp;&nbsp; **Annual incentives** | Variable | • up to 1 year | • all employees |
| &nbsp;&nbsp;&nbsp; **Sun Share plan** | Variable | • 3 years' forward-looking performance | • key contributors; Vice- Presidents and above |
| &nbsp;&nbsp;&nbsp; **Executive stock option plan** | Variable | • 10 years<br> • vest over 4 years | • Executive Team |
| &nbsp;&nbsp;&nbsp; **Deferred share unit plan (DSU plan)** | Variable | • redeemed when the executive leaves the organization | • Vice-Presidents and above |
| &nbsp;&nbsp;&nbsp; **Pension and other benefits** | Fixed | • accrue during employment | • all employees |
| &nbsp;&nbsp;&nbsp; **Perquisites** | Fixed | • available during employment | • Vice-Presidents and above |

---

In addition to the above, the President, SLC Management participates in the SLC Management Phantom Unit Plan, as described below.

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Component | Pay type | Performance period | Who's eligible |
| &nbsp;&nbsp;&nbsp; **SLC Management Phantom Unit Plan** | Variable | • 3 years' forward-looking performance | • Managing Director and above levels in SLC Management |

---

The majority of compensation paid to our senior executives is variable and at risk. Pay mix varies based on the ability of the executive to influence short and long-term business results, the level and location of the executive and competitive practices. The average mix of total direct compensation by level, based on target pay, is summarized below. The actual pay mix for individuals may be different depending on business and individual performance and geographic location, as well as investor experience (i.e., dividends and share price movements), per our guiding principles. Pension, benefits, and perquisites are supplemental, and outlined on pages 100 to 102.

![LOGO](g431192g76y32.jpg)

***Benchmarking***

• We look at how other companies similar to us compensate similar roles taking size of organization into account. We look at
each component of compensation along with total compensation to ensure we can attract and retain the talent we need.

• Surveys of peer groups are used to benchmark our compensation levels for certain executive officers, as outlined below. We
selected these peer groups because they include the leading financial services organizations in Canada and the broader U.S. insurance industry that we compete in for talent. We

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also review publicly available compensation information for relevant companies that are publicly traded and compensation information for the asset management sector as appropriate before setting the compensation range for our executive officers.

• **Canadian market survey:** The Financial Services Executive Compensation Survey produced by Korn Ferry is used to
benchmark Canadian executives. Our Canadian peer group is made up of six major Canadian banks and two insurance companies:

---

| | | | |
|:---|:---|:---|:---|
| • BMO Financial Group | • CIBC | • National Bank Financial Group | • Scotiabank |
| • Canada Life | • Manulife Financial | • RBC | • TD Bank Financial Group |

---

• **U.S. market surveys:** The Diversified Insurance Study of Executive Compensation produced by Willis Towers Watson is
used to benchmark most U.S. executives. The study includes 18 publicly traded (or subsidiary) U.S. insurance companies (in addition to Sun Life):

---

| | | | |
|:---|:---|:---|:---|
| • AFLAC<br>• AIG<br>• Allstate<br>• Allianz Life<br>• Brighthouse Financial | • Cigna<br>• CNO Financial<br>• Equitable<br>• Genworth Financial<br>• Hartford Financial Services | • John Hancock<br>• Lincoln Financial<br>• MetLife<br>• Principal Financial Group<br>• Prudential Financial | • Transamerica<br>• Unum<br>• Voya Financial Services |

---

• For Mr. Peacher, President, SLC Management, we consider benchmarking information from the 2022 McLagan Investment
Management survey, which includes investment management roles from over 50 US insurance companies.

***Salaries***

![LOGO](g431192g33a70.jpg)

***Annual incentive plan***

![LOGO](g431192g33b01.jpg)

This plan rewards employees with cash awards based on how well we achieved our financial, sales and Client objectives for the year. The maximum overall AIP payout for exceptional business results and individual performance is 250% of target.

Awards are determined using the following formula:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; Annual<br> incentive<br> plan target<br> ($) | **X** | Business<br> results<br> (%) | **X** | Individual multiplier<br> (%) | **=** | Annual incentive<br> plan award<br> ($) |

---

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**Business results** 

We used four measures to assess our total company performance under the AIP as outlined below.

![LOGO](g431192g12d12.jpg)

Management uses a business performance scorecard to conduct a comprehensive "look back" on performance and ensure fairness and reasonableness of the final performance payout factor. Total company performance is reviewed to confirm the calculated results and inform whether a discretionary adjustment of up to ±20% is appropriate based on a set of guiding principles. The plan also includes a modifier for Risk, Compliance and Control considerations that is neutral to negative, and can be applied to lower the overall business result to zero. The MRC maintains the discretion to increase, lower or zero out incentive awards.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; Calculated payout<br> factor | **±** | Scorecard adjustment<br> *(if any)* | **–** | Risk, Compliance and<br>Control adjustment<br> *(if any)* | **=** | Final performance<br> payout factor |

---

Underlying net income (loss) removes from reported net income (loss) the impacts of items as defined in Section L - Non-IFRS measures in our 2022 MD&A filed with Canadian securities regulators.

**Mix of business results** 

The mix of business results for our NEOs in 2022 was as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Total Company | Total Company | Total Company | Total Company |
|  | Reported EPS | <br> Underlying<br>EPS | VNB | <br> Client<br>measures |
| &nbsp;&nbsp;&nbsp; **CEO** | 25% | 25% | 25% | 25% |
| &nbsp;&nbsp;&nbsp; <br> **CFO** | 25% | 25% | 25% | 25% |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | &nbsp;&nbsp;&nbsp;&nbsp;Total Company | Relevant Business Group | Relevant Business Group | Relevant Business Group |
|  | <br> Reported<br>EPS | <br> Underlying<br> Net Income | VNB | <br> Client<br>measures |
| &nbsp;&nbsp;&nbsp; **NEOs**<br> **(excluding the President, SLC Management)** | 25% | 25% | 25% | 25% |
| &nbsp;&nbsp;&nbsp; **President, SLC Management** | Performance of SLC Management business group including Client outcomes, investment performance, and financial measures. | Performance of SLC Management business group including Client outcomes, investment performance, and financial measures. | Performance of SLC Management business group including Client outcomes, investment performance, and financial measures. | Performance of SLC Management business group including Client outcomes, investment performance, and financial measures. |

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Executive Team members who run a business group continue to have a significant portion of their compensation tied to total company results through the mid and long-term incentive programs.

**Individual multiplier** 

All eligible employees, including the NEOs, receive an individual performance multiplier based on their individual contributions during the year. Performance is assessed against individual performance objectives for the year. The multiplier for the NEOs can range from 0% for unsatisfactory performance to 200% for exceptional performance.

***Long-term incentive compensation***

![LOGO](g431192g64q25.jpg)

These incentive plans are designed to align and reward executives and other key contributors for creating shareholder value and generating superior returns over the performance period of the plans, which range from three to 10 years. In the case of the CEO and the Executive Team, the proportion of long-term incentive delivered in options is considered in light of age and career stage but is limited to a maximum of 25% of total long-term incentive. Incentive pools are allocated to business leaders to decide the award for participants based on contributions during the year and their potential impact on long-term results. Awards are granted as a fixed amount, however, the actual payout value will vary based on our share price, dividends and, in the case of Sun Shares, our performance relative to peers over the performance period, and for the SLC Management Phantom Unit Plan, based on SLC Management performance over the performance period. Prior to approving awards, the MRC receives information on past awards for each Executive Team member. Awards are granted based on position level, individual performance and potential, and competitive practice.

***Executive Sun Share Plan***

![LOGO](g431192g35k11.jpg)

Objectives for the Executive Sun Share plan include aligning payouts to sustained performance, absolute and relative total return performance versus peers, and retention. The plan design has a range of potential payouts (from 0% to 200% of target) for our most senior executives, reflecting their accountability and impact on our results. Less senior participants have a narrower range of potential payouts because our focus at those levels is more on alignment of deferred pay to absolute TSR and retention.

Under the plan, recent grants through 2022 incorporate two performance measures:

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Performance Measure | Description | Applies to |
|  &nbsp;&nbsp;&nbsp;&nbsp;**1. Absolute TSR** | the underlying value of the share units based on increases or decreases to share price and dividend performance | All Sun Share participants |
|  &nbsp;&nbsp;&nbsp;&nbsp;**2. Relative TSR** | modifies the ultimate number of units awarded based on our relative TSR performance versus peers | Vice-Presidents and above |

---

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The relative TSR performance measure for executives ensures that payouts are aligned to both absolute and relative total return performance over the performance period.

The grant value of each Sun Share is the average closing price of our common shares on the TSX over the five trading days before the grant date. Sun Shares accumulate dividend equivalents over the performance period and vest in full after three years. The payout value of each Sun Share is based on the average closing price of our common shares on the TSX over the five trading days before the vesting date and is adjusted through the application of the performance factor for executives.

The formula below shows how we calculate the payout value of Sun Shares for NEOs:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Sun Shares (#) | **X** | Share price ($) | **X** | Performance factor | **=** | Payout value |
| (number of units awarded plus additional units credited as reinvested dividends) |  | (average price of our common shares on the TSX over the five trading days before the vesting date) |  | (0% to 200%) based on the weighted average of three annual 3-year TSR factors |  | of Sun Shares on vesting ($) |

---

We calculate the TSR performance factor for Sun Shares using the weighted average of three annual three-year TSR factors. The annual TSR factor is calculated as the change in price of our common shares over the 36-month period ending December 31 of the applicable year plus reinvested dividends during the same period measured relative to peers.

For the 2022 Sun Share grant the annual TSR factors are weighted as follows:

![LOGO](g431192g25d11.jpg)

We benchmark our performance under the Executive Sun Share plan against a custom weighted index of 12 public Canadian banks and North American insurance companies. These companies are most similar to us in terms of measuring business performance since they operate in the same broader financial services market and directly compete with us in some business segments. We also compete with these companies for talent and access to capital. The companies listed below have been used in calculating the annual performance factors since 2015.

This custom weighted index is a subset of the peer groups that we use for benchmarking compensation levels (see page 79). The custom weighted index is not used for any other purpose.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | Weight | Sun Share Benchmark Peers | Sun Share Benchmark Peers | Sun Share Benchmark Peers |
| &nbsp;&nbsp;&nbsp; Canadian banks | 25% | • RBC<br> • TD Bank Group | • Scotiabank<br> • BMO Financial Group | • CIBC |
| &nbsp;&nbsp;&nbsp; <br> North American insurance<br> companies | <br> 75% | <br> • Canada Life<br> • Lincoln Financial<br> • Manulife Financial | <br> • MetLife<br> • Principal Financial Group<br> • Prudential Financial | <br> • Unum Group |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Level of<br> performance | If the 3-year relative TSR | Then the annual <br> TSR factor is  |
| &nbsp;&nbsp;&nbsp; <br> Maximum | <br> exceeds the average of the custom weighted index by 10% or more | <br> 200%  |
| &nbsp;&nbsp;&nbsp; Target | is at the average of the custom weighted index | 100% |
| &nbsp;&nbsp;&nbsp; Threshold | is at 10% below the custom weighted index | 25% |
| &nbsp;&nbsp;&nbsp; Below threshold | is more than 10% below the average of the custom weighted index | 0% |

---

Intermediate values are interpolated.

***Executive stock option plan***

![LOGO](g431192g37m91.jpg)

Starting in 2013, we limited the use of options to Executive Team members, who receive up to 25% of their annual long-term incentive award in options. The exercise price of an option is the closing price of our common shares on the TSX on the grant date. Options vest 25% per year over four years, starting on the first anniversary of the grant date, and are exercisable until 10 years after grant. Starting with the 2017 grant, if an executive has not achieved share ownership and personal action requirements, we require that active executives hold shares equal to 50% of the after-tax gain on exercise for 3 years. Options are not subject to any performance goals and only have value if the price of our common shares increases after the grant date.

The MRC recommends the terms of each grant to the board for approval. The exercise price of an option already granted cannot be lowered or forfeited in exchange for options with a lower exercise price. If there is a change of control, the board can choose from a range of alternatives to address outstanding options, including accelerated vesting. Options cannot be transferred or assigned.

The option plan may be amended by the board as long as we receive other necessary approvals. The following amendments require shareholder approval unless they result from the plan's anti-dilution provisions:

• increasing the number of common shares that can be issued under the plan

• reducing the exercise price of an option, including cancelling and re-granting an
option on different terms within three months

• extending the expiry date of an option or permitting the grant of an option with an expiry date of more than 10 years from
the grant date

• permitting an option to be transferred other than to a spouse, minor child or minor grandchild

• expanding the categories of eligible participants in the plan

• increasing or deleting the limits relating to common shares that may be issued to insiders or any one person

• permitting other types of compensation (e.g., share awards) by issuing equity

• revising the amendment procedure itself.

For grants from 2019 onwards, the board has amended our option plan to align our post-retirement treatment of options with our peer group. Options granted under the amended plan will terminate on the earlier of the last exercise date of the options and the date that is 60 months following the retirement of the Executive.

In 2022, the board approved certain forward-looking amendments to our option plan in order to (i) clarify when a termination of employment occurs for purposes of entitlements under the plan, (ii) provide a definition of "Just Cause", (iii) clarify when a participant will be viewed as having retired from Sun Life for purposes of the plan, and (iv) make other housekeeping changes. These amendments did not require shareholder approval pursuant to the amendment provisions of the plan.

The plan allows the board to grant options with stock appreciation rights, although it has not granted any to date. A stock appreciation right allows the executive to exercise his or her option and receive, in cash, the difference between the market price of our common shares and the exercise price of the option.

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Stock appreciation rights provide the same compensation value as the underlying options.

The table below shows the number of options granted, outstanding and available for grant under the option plan as at December 31, 2022. We can issue up to 29,525,000 of our common shares under the plan (5.0% of the shares outstanding as at December 31, 2022), as long as we do not issue more than 10% of our total outstanding common shares to insiders and no more than 1% to any one person. Stock option grants are determined based on a calculated five-year-average Black-Scholes value (12.3% for February 2022 grant, 12.3% for May 2021 grant,12.2% for February 2021 grant, 12.2% for December 2020 grant, 12.4% for February 2020 grant).

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Measure of dilution | 2022 | 2022 | 2021 | 2021 | 2020 | 2020 |
| &nbsp;&nbsp;&nbsp;&nbsp;Measure of dilution | # of<br> options | <br> % of<br> shares<br> outstanding | # of<br> options | <br> % of<br> shares<br> outstanding | # of<br> options | <br> % of<br> shares<br> outstanding |
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;Annual grant<sup>1</sup><br>| <br> 709248<br>| <br> 0.12<br>| <br> 769290<br>| <br> 0.13<br>| <br> 730442<br>| <br> 0.12<br>|
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;Options outstanding<sup>2</sup><br>| <br> 3588520<br>| <br> 0.61<br>| <br> 3042240<br>| <br> 0.52<br>| <br> 3173204<br>| <br> 0.54<br>|
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;Options available for grant<sup>3</sup><br>| <br> 3214108<br>| <br> 0.55<br>| <br> 3875905<br>| <br> 0.66<br>| <br> 4645195<br>| <br> 0.79<br>|
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;Overhang<sup>4</sup><br>| <br> 6802628<br>| <br> 1.16<br>| <br> 6918145<br>| <br> 1.18<br>| <br> 7818399<br>| <br> 1.34<br>|
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;Burn rate<sup>5</sup><br>|  | <br> 0.12<br>|  | <br> 0.13<br>|  | <br> 0.12<br>|

---

---

| | |
|:---|:---|
| <sup>1.</sup> | the total number of options granted under the option plan each year  |

---

---

| | |
|:---|:---|
| <sup>2.</sup> | the total number of options outstanding at the end of each year, including the annual grant  |

---

<sup>3.</sup> the number of options in reserve approved by shareholders that are available for grant at the end of each year

<sup>4.</sup> the number of options outstanding plus the number of options in reserve approved by shareholders that are available for grant in the future

---

| | |
|:---|:---|
| <sup>5.</sup> | the number of awards granted in the applicable fiscal year as a percentage of the weighted average number of outstanding shares for the same fiscal year  |

---

***SLC Management Phantom Unit Plan***

![LOGO](g431192g12e26.jpg)

The plan allows participants to share in the overall success and value creation of SLC Management and aligns the interest of participants and shareholders in the corporation by providing incentive for future performance. For Mr. Peacher, the 2022 plan rewards performance over a three-year period based on overall SLC Management performance metrics; third party AUM, third party fee revenue, and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). SLC Management Phantom Units vest in full on the third anniversary of the grant date and are paid in cash. No significant changes were made for 2023.

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**Mix of long-term incentive vehicles** 

The current mix of long-term incentive vehicles for eligible participants is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Eligible participants | &nbsp;&nbsp;&nbsp;&nbsp;Eligible participants | Stock Options | Sun Shares | SLC <br> Management <br>Phantom Units  |
|  &nbsp;&nbsp;&nbsp;&nbsp;CEO and Executive Team<br> &nbsp;&nbsp;&nbsp;&nbsp;(excluding the President, SLC Management) | &nbsp;&nbsp;&nbsp;&nbsp;CEO and Executive Team<br> &nbsp;&nbsp;&nbsp;&nbsp;(excluding the President, SLC Management) | 25% | 75% | – |
|  &nbsp;&nbsp;&nbsp;&nbsp;President, SLC Management | &nbsp;&nbsp;&nbsp;&nbsp;President, SLC Management | 25% | 25% | 50% |
|  &nbsp;&nbsp;&nbsp;&nbsp;Senior Vice-Presidents, Vice-Presidents and key<br> &nbsp;&nbsp;&nbsp;&nbsp;contributors (below Vice-President) | &nbsp;&nbsp;&nbsp;&nbsp;Senior Vice-Presidents, Vice-Presidents and key<br> &nbsp;&nbsp;&nbsp;&nbsp;contributors (below Vice-President) | – | 100% | – |
|  &nbsp;&nbsp;&nbsp;&nbsp;SLC<br> &nbsp;&nbsp;&nbsp;&nbsp;Management | Senior Managing Directors, Managing Directors and key contributors | – | – | 100% |
|  &nbsp;&nbsp;&nbsp;&nbsp;SLC<br> &nbsp;&nbsp;&nbsp;&nbsp;Management | Select Senior Managing Directors | – | Mix of SLC Management<br>Phantom Units and<br>Sun Shares | Mix of SLC Management<br>Phantom Units and<br>Sun Shares |

---

***Deferred share unit plan***

![LOGO](g431192g89j63.jpg)

DSUs are an effective way for executives to meet their share ownership requirements and they can only be redeemed when the executive leaves the organization. We sometimes grant DSUs to new executives to replace the value of long-term incentives they forfeited with a previous employer, and on a limited basis to recognize additional responsibilities associated with promotions during the year.

DSUs are redeemed for cash based on the value of our common shares at the time of redemption, plus any dividend equivalents accumulated over the period.

The formula below shows how we calculate the payout value of DSUs:

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; Deferred Share Units (#) | **X** | Share price ($) | **=** | Payout value |
| (number of units plus<br> additional units credited as reinvested dividends) |  | (average price of our<br> common shares on the<br> TSX over the five trading<br> days before the<br> redemption date) |  | of DSU on redemption ($) |

---

***Share ownership levels***

The table below shows the values of common shares and share units held by each NEO as at December 31, 2022. We calculated the value of common shares and share units using $62.85, the closing price of our common shares on the TSX on December 31, 2022. In 2016, we added a requirement for the CEO and Executive Team members to achieve at least 25% of their minimum level of share ownership through personal actions, including personal ownership of shares and DSUs (personal ownership excludes Sun Shares). For presentation purposes, the Sun Shares have been valued using the target performance factor (100%).

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named<br> executive<br>&nbsp;&nbsp;&nbsp;&nbsp;officer |  |  | Total share ownership at December 31, 2022 ($) | Total share ownership at December 31, 2022 ($) | Total share ownership at December 31, 2022 ($) | Total share ownership at December 31, 2022 ($) | Total share ownership at December 31, 2022 ($) | Total share ownership at December 31, 2022 ($) |
| &nbsp;&nbsp;&nbsp;&nbsp;Named<br> executive<br>&nbsp;&nbsp;&nbsp;&nbsp;officer | Minimum<br>ownership<br>requirement | <br> Total<br>ownership<br>as a<br>multiple<br>of salary | Common<br>shares | Sun Shares | <br> SLC<br> Management<br> Phantom<br> Units | <br> Deferred<br>share<br>units<br>(DSUs) | Total<br>ownership | Personal<br>Actions<br>Achieved<br>(need 25%<br>or greater) |
|  &nbsp;&nbsp;&nbsp;&nbsp;Kevin D. Strain | 10x salary | 11.8 | 1971411 | 9213139 | – | 655221 | 11839771 | 26.3% |
|  &nbsp;&nbsp;&nbsp;&nbsp;Manjit Singh | 5x salary | 15.2 | 62057 | 6370274 | – | 3462035 | 9894366 | 108.4% |
|  &nbsp;&nbsp;&nbsp;&nbsp;Stephen C. Peacher | 5x salary | 18.3 | – | 5162400 | 9478194 | 2059652 | 16700246 | 45.2% |
|  &nbsp;&nbsp;&nbsp;&nbsp;Daniel R. Fishbein | 5x salary | 8.4 | 267409 | 5177227 | – | 1090825 | 6535461 | 34.8% |
|  &nbsp;&nbsp;&nbsp;&nbsp;Jacques Goulet | 5x salary | 13.5 | 485391 | 6925318 | – | 677351 | 8088060 | 38.8% |

---

All NEOs have met their share ownership requirement and personal actions requirement by the attainment date.

***Pension benefits***

Our pension plans deliver a portion of pay that provides protection and wealth accumulation for retirement. Only defined contribution plans are available to new hires worldwide (except for our defined benefit plan in the Philippines, which is limited to employees of the local subsidiary). The NEOs participate in the pension plans available in their country of employment.

**Canadian plans** 

On January 1, 2009, we closed the Canadian staff defined benefit plan to new employees and replaced it with a defined contribution plan, which we describe in more detail below. Canadian employees hired before then continue to participate in the previous plan, which includes both defined benefit and defined contribution components.

Mr. Strain was hired before 2009 and he participates in the defined benefit plan. Mr. Goulet and Mr. Singh are NEOs in Canada who were hired after January 1, 2009, and they participate in the defined contribution plan.

Our retirement program for Canadian employees hired before January 1, 2009 (including applicable NEOs) consists of two elements:

• a defined benefit accrual for service prior to 2005

• a combination of defined benefit and defined contribution accruals for service after January 1, 2005.

Benefits up to the tax limits are paid from registered plans. Benefits above the tax limits are paid from non-registered pension plans that are secured, where applicable, through a Retirement Compensation Arrangement.

***Defined benefit formula for service prior to 2005***

The pension formula for service prior to 2005 depends on which legacy pension plan the applicable executive participated in.

Mr. Strain's defined benefit pension formula for service prior to January 1, 2005 is based on the Clarica pension plan, which was acquired by Sun Life in 2001.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; Years of service <br> before 2005  | **X<sub></sub>** | 1.0% of average <br> pensionable earnings <br> up to $100,000  | **+** | 1.50\*% of average <br> pensionable <br> earnings above <br> $100,000  | **<sub></sub>=** | Annual pension <br> as of age 65  |

---

---

| | |
|:---|:---|
| \*In | past circulars, the percentage of average pensionable earnings in this graphic was stated as 1.65% rather than the correct rate of accrual of 1.5% for service prior to 2005.  |

---

Under the Clarica formula, pensionable earnings consist of annual salary and annual incentives. Average pensionable earnings is based on the employee's highest average pensionable earnings in the best three consecutive years in the last 120 months of employment.

Clarica benefits are payable from age 65 for life, with 60 monthly payments guaranteed. Other forms of payment are available on an actuarially equivalent basis. Employees with Clarica service can retire as early as age 55, and the benefit is reduced by 3% for each year that retirement precedes age 63, and an additional 3% for each year that retirement precedes age 60.

***Defined benefit formula for service after 2004***

*(Designated executive, Mr. Strain)* 

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp; Years of service <br> after 2004  | **X** | 1.6% of average <br> pensionable <br> earnings  | **=** | Annual pension <br> as of age 65  |

---

Under this formula, pensionable earnings consist of annual salary and the actual annual incentive award, capped at the lesser of 100% of target and 100% of base salary. Average pensionable earnings is based on the employee's highest average pensionable earnings in any three consecutive calendar years in the last 10 years of employment.

The pension is payable for the lifetime of the employee. Other forms of payment are available on an actuarially equivalent basis.

If a designated executive leaves before age 62, the pension formula is reduced. If they leave:

• before age 51, we use a factor of 1.0% in the pension formula (instead of 1.6%)

• between the ages 51 and 62, we increase the factor of 1.0% by 0.05% for each complete year between age 50 and retirement, to
a maximum of 1.6% at age 62 or later.

Designated executives can choose to start receiving the pension benefit as early as age 55, but the benefit is actuarially reduced from age 62 to reflect the earlier start.

**Pension maximums** 

The total combined annual pension benefit for all service in all company sponsored defined benefit plans, excluding Clarica service, is capped at 65% of the NEO's highest consecutive, three-calendar-year average pensionable earnings over the last 10 years of employment. Pensionable earnings include actual annual incentive compensation only up to the target level, limiting the pension benefit for all employees even if annual incentive awards are paid above target levels. The target incentive is further capped at 100% of annual salary for service after 2004.

In 2022, Mr. Strain's pension arrangement was amended so that his total annual pension in respect of all service is limited to a maximum of $1,400,000.

***Defined contribution plan for employees hired before 2009***

The pension plan also includes a defined contribution component for service after 2004. Employees can contribute 1.5% of pensionable earnings up to the year's maximum pensionable earnings (YMPE), and 3.0% of pensionable earnings above the YMPE. Sun Life matches 50% of employee contributions. Pensionable earnings consist of salary and actual annual incentive, capped at target. Participants will receive the value of their vested accumulated contributions and associated investment return upon termination or retirement.

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Total contributions to the plan (employee and company matching contributions) are subject to the limits of the *Income Tax Act* (Canada). Employee and company contributions end once the maximum contribution limit is reached ($30,780 for 2022).

***Defined contribution plan for new hires after 2008***

New hires on or after January 1, 2009 participate in the Sun Life staff pension plan, which provides a core company contribution of 3% of pensionable earnings from the date of hire. Employees have the option to make voluntary contributions of 1% to 5% of pensionable earnings and will receive a matching company contribution of 50%. Starting in 2020 new hires are auto-enrolled at the 5% level, and can adjust their contribution level to suit their needs. Pensionable earnings consist of salary and actual annual incentives, capped at target. Company contributions vest immediately, and participants will receive the value of their vested accumulated contributions and associated investment return upon termination or retirement. Total company and employee contributions are restricted to the defined contribution limit in the *Income Tax Act* (Canada) ($30,780 for 2022).

Vice-Presidents and above hired on or after January 1, 2009, including Mr. Goulet and Mr. Singh, participate in a supplemental, non-registered defined contribution plan. Once an executive has reached the maximum limit under the registered plan, the supplemental plan provides a contribution of 10.5% of his or her pensionable earnings above the level of pay where the maximum contribution limit is reached for the registered plan. The contribution rate in the supplemental plan is set at 10.5% to equal the maximum amount that the company and employee, combined, can contribute under the registered plan.

**U.S. plans** 

On January 1, 2006, the defined benefit plan in the U.S. was frozen to new entrants and participants who were under age 50 and had not yet reached 60 years of combined age and service (60 points). We introduced a Retirement Investment Account (RIA), an employer-paid defined contribution arrangement, to replace the defined benefit plan as of January 1, 2006. In December 2014, the defined benefit pension plan was frozen for all legacy participants who were still accruing benefits. Mr. Peacher and Mr. Fishbein, our NEOs in the U.S., were hired after January 1, 2006 and do not participate in the defined benefit plan.

Our U.S. defined contribution retirement program has three elements:

• a voluntary tax-qualified 401(k) plan

• a tax-qualified RIA that provides automatic employer contributions

• a non-qualified retirement investment plan for certain employees whose compensation
exceeds the IRS limits (US$305,000 for 2022).

***401(k) plan***

Employees can contribute up to 60% of their eligible earnings (salary, sales incentives, actual incentive payments, and other eligible pay), up to the maximum contribution set by the IRS (for 2022, US$20,500 plus an additional US$6,500 for participants age 50 and older). A participant can contribute on a pre-tax or after-tax basis. Beginning January 1, 2019, we match 100% on the first 3% and 50% on the next 2% of the employee's contribution (maximum of US$12,200 matching contributions for 2022). Participants receive the value of their vested accumulated contributions and associated investment return upon termination or retirement.

Effective January 1, 2019, the 401(k) plan was changed to qualify for certain IRS "safe harbor" rules and to add auto-enrollment and auto-escalation features. All new hires who do not make an election will be automatically enrolled at 3% employee contribution level, which will increase by 1% each subsequent year until reaching 10%. Employees can adjust their level of contributions to meet their needs.

***RIA***

We contribute a percentage of eligible earnings to the RIA each year based on the employee's age and years of service, as of January 1. The NEOs in the U.S. participate in the RIA and their eligible earnings consist of salary plus the actual incentive bonus up to the IRS compensation limit, and other eligible pay (US$305,000 for 2022).

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The table below shows the age and service criteria for the RIA contribution.

---

| | |
|:---|:---|
| <br> &nbsp;&nbsp;&nbsp;&nbsp;Age and service<br> &nbsp;&nbsp;&nbsp;&nbsp;as at January 1<br>| <br> % of eligible<br> earnings<br>|
|  &nbsp;&nbsp;&nbsp;&nbsp;Under 40 | 2 |
|  &nbsp;&nbsp;&nbsp;&nbsp;40 to 54 | 4 |
|  &nbsp;&nbsp;&nbsp;&nbsp;55 and over | 6 |

---

Total contributions that we and the participant make to the tax-qualified RIA and the 401(k) cannot exceed the maximum set by the IRS (US$61,000 for each participant under age 50 and $67,500 for each participant age 50 or older in 2022). Maximum eligible earnings that can be used to determine the annual allocations under the RIA and the 401(k) are US$305,000 for each participant in 2022).

***Non-qualified retirement investment plan (Top-Hat)***

Mr. Peacher and Mr. Fishbein participate in the Top-Hat plan. We contribute 15% of eligible earnings that exceed the IRS compensation limit for the tax-qualified plan. Eligible earnings for the Top-Hat plan are defined as salary plus the actual incentive bonus, capped at the target payout.

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**Compensation details** 

**Individual pay and performance outcomes** 

The board assessed the performance of the CEO, and the CEO assessed the performance of the other NEOs, against their individual objectives for 2022. In addition to a review of pay-for-performance and competitive practice, these assessments formed the basis for compensation decisions. A summary of the individual performance for each NEO follows.

 **Kevin D. Strain, President & Chief Executive Officer**

---

| | |
|:---|:---|
| ![LOGO](g431192g01l50.jpg)  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br>Mr. Strain was promoted to President & Chief Executive Officer on August 7, 2021. <br>As President & CEO, Mr. Strain defined our business strategy and measures of success and in 2022, ensured continued progress on key priorities in our strategic plan.<br>In recognition of his contribution in 2022, Mr. Strain was allocated an AIP award of $1,710,000 (120% individual multiplier). He was granted a 2023 long-term incentive award of $7,150,000. |

---

Significant accomplishments in 2022 include:

• Driving our Client Impact Strategy. Increased the number of Clients globally to approximately 85 million. Created the
EVP, Chief Client and Innovation Officer (CCIO) role on the Executive Team. Began measuring Client impacts through positive financial and health outcomes.

• Delivered solid financial results in a challenging environment reinforcing the resiliency of our diversified business mix.
Underlying net income was $3,674 million, up 4% from prior year, and underlying ROE was 15.1%. Reported net income was down 22% from 2021, VNB decreased by 7%, and assets under management ended the year at $1.3 trillion with positive net flows
at SLC Management of $21 billion, partially offsetting net outflows at MFS of US$33 billion. LICAT capital ended the year strong with a ratio of 130% at SLF Inc.

• Built scale and capabilities in the business through programmatic M&A with the acquisition of a majority stake in AAM, a
strategic asset management partnership with Phoenix Group, and an expanded bancassurance partnership with CIMB Niaga in Indonesia. Continued to drive focus on low capital, high growth businesses with the announced sale of our UK business.
Successfully completed the closing of the DentaQuest acquisition, with integration efforts well underway.

• Continued to think and act like a digital company, building digital capabilities throughout the business with key results
for Client Digital Engagement, 79% of claims and 69% of applications submitted digitally, and 1,874 employees engaged in a Digital way of working.

• Continued to build on our inclusive culture with Diversity, Equity and Inclusion targets communicated, and good progress
made. Continue to target diverse leaders, with the addition of one new Board member and two new Executive Team members in 2022.

• Aligned to our strategy, added the Chief Sustainability Officer, Chief Actuary and Chief Investment Officer to the Global
Leadership Team.

• Employee engagement results remain strong at 89%—above pre-pandemic levels
(+4pp) and the financial Services norm (+4pp).

• Maintained an effective risk, compliance and control environment by establishing appropriate tone from the top, and managing
the organization within established risk appetite levels as approved by the Board.

• Sun Life's brand continues to represent trust, sustainability and optimism wherever we do business.

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**Compensation Summary** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2021 | 2020 | <br> ![LOGO](g431192g53y97.jpg)  |
| | Target | Actual | Actual | Actual | <br> ![LOGO](g431192g53y97.jpg)  |
| &nbsp;&nbsp;&nbsp; **Salary** | **1000000** | **1000000** | **863462** | **638462** | <br> ![LOGO](g431192g53y97.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Annual incentives | 1500000 | 1710000 | 2185079 | 924699 | <br> ![LOGO](g431192g53y97.jpg)  |
| &nbsp;&nbsp;&nbsp; **Total Cash** | **2500000** | **2710000** | 3048541 | 1563161 | <br> ![LOGO](g431192g53y97.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DSUs | – | – | 700011 |  | <br> ![LOGO](g431192g53y97.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Sun Shares | 4717549 | 4717549 | 2625040 | 1650058 | <br> ![LOGO](g431192g53y97.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock Options | 1562505 | 1562505 | 875007 | 550001 | <br> ![LOGO](g431192g53y97.jpg)  |
| &nbsp;&nbsp;&nbsp; **Long Term Incentives** | **6280054** | **6280054** | **4200058** | **2200059** | <br> ![LOGO](g431192g53y97.jpg)  |
| &nbsp;&nbsp;&nbsp; **Total Direct Comp** | **8780054** | **8990054** | **7248599** | **3763220** | <br> ![LOGO](g431192g53y97.jpg)  |

---

The following table illustrates the alignment between CEO pay and shareholder value during the applicable fiscal years. The table compares the current value of total direct compensation awarded to Mr. Connor (former President & CEO until August 6, 2021) and Mr. Strain over the last five years to a comparable measure of the value received by shareholders over the same period. The actual compensation values include salary and cash incentive payments, the value at vesting of Sun Shares granted (or current value for units that are outstanding), the value of stock options exercised during the period and the value of in-the-money stock options that remain outstanding. Compensation outcomes are also compared to the value to shareholders, which represents the cumulative value of a $100 investment in our shares made on the first trading day of the period indicated, assuming the reinvestment of dividends.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  |  | | |  | <br> Value of $100 | <br> Value of $100 |
| &nbsp;&nbsp;&nbsp;&nbsp;Fiscal<br> &nbsp;&nbsp;&nbsp;&nbsp;Year | CEO | Total Direct<br>Compensation<br>Awarded<br>($000)<sup>1</sup> | Compensation<br>realized and<br>realizable<br>($000) | Period | CEO<sup>2</sup> | Shareholder <br>value<sup>3</sup> |
| &nbsp;&nbsp;&nbsp;&nbsp;**2018** | D. Connor | 9300 | 14319 | December 31, 2017 – December 31, 2022 | 154 | 147 |
| &nbsp;&nbsp;&nbsp;&nbsp;**2019** | D. Connor | 9202 | 17318 | December 31, 2018 – December 31, 2022 | 188 | 163 |
| &nbsp;&nbsp;&nbsp;&nbsp;**2020** | D. Connor | 9520 | 8504 | December 31, 2019 – December 31, 2022 | 89 | 120 |
| &nbsp;&nbsp;&nbsp;&nbsp;**2021** | D. Connor / K. Strain | 10115 | 10020 | December 31, 2020 – December 31, 2022 | 99 | 120 |
| &nbsp;&nbsp;&nbsp;&nbsp;**2022** | K. Strain | 8990 | 7250 | December 31, 2021 – December 31, 2022 | 81 | 93 |
|  |  |  |  | **Average** | **122** | **129** |

---

<sup>1</sup> Includes salary and variable compensation awarded at year-end in respect of performance during the year.

<sup>2</sup> Represents the actual value to the CEO for each $100 awarded in total direct compensation during the fiscal years indicated. 

<sup>3</sup> Represents the cumulative value of a $100 investment in shares made on the first trading day of the period indicated, assuming reinvestment of dividends. 

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 **Manjit Singh, EVP & Chief Financial Officer**

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br> ![LOGO](g431192g44d10.jpg)  | <br> Mr. Singh has been our EVP & Chief Financial Officer since March 29, 2021 and is responsible for overseeing a portfolio of functions including Finance, Taxation, Capital, and Investor Relations. Mr. Singh advances the achievement of our four pillar strategy through continued financial and risk management prudence.<br>In recognition of his contribution in 2022, Mr. Singh was allocated an AIP award of $912,000 (120% individual multiplier). He was granted a 2023 annual long-term incentive award of $2,500,000. |

---

Significant accomplishments in 2022 include:

• Worked effectively across the organization to deliver solid results in a challenging operating environment.

• Made significant enhancements to external disclosures and established strong relationships with key external stakeholders.

• Effective leadership of the IFRS 17 program, including proactively engaging with key internal and external stakeholders on
the nature and impact of the change in accounting standards.

• Provided strong support for corporate development initiatives throughout the year including the acquisition of a majority
stake in AAM, a strategic asset management partnership with Phoenix Group, and an expanded bancassurance partnership with CIMB Niaga in Indonesia.

• Actively managed capital and liquidity to maintain a strong position in a rapidly evolving environment.

• Continued to drive strong focus on expense discipline across the organization, including generating productivity to
facilitate investment in strategic initiatives.

• Made good progress on continuing to enhance Finance processes through standardization, automation, and leveraging new tools.

• Maintained strong focus on attracting and developing talent and fostering a positive work environment, leading to strong
engagement scores.

• Active member of community organizations, which are helping to drive equity and inclusion as well as helping people lead
healthier lives.

**Compensation Summary** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2021 | 2020 | <br> ![LOGO](g431192g60k60.jpg)  |
| | <br> Target | <br> Actual | <br> Actual | <br> Actual | <br> ![LOGO](g431192g60k60.jpg)  |
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;**Salary** | <br> **650000** | <br> **638462** | <br> **461538** |  | <br> ![LOGO](g431192g60k60.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br> &nbsp;&nbsp;&nbsp;&nbsp;Annual<br> &nbsp;&nbsp;&nbsp;&nbsp;incentives | <br> 800000 | <br> 912000 | <br> 1372800 |  | <br> ![LOGO](g431192g60k60.jpg)  |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;Sign-on cash | <br> **-** | <br> - | <br> 200000 |  | <br> ![LOGO](g431192g60k60.jpg)  |
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;**Total Cash** | <br> **1450000** | <br> **1550462** | <br> **2034338** |  | <br> ![LOGO](g431192g60k60.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br> &nbsp;&nbsp;&nbsp;&nbsp;Sun Shares | <br> 1650060 | <br> 1650060 | <br> 1575024 |  | <br> ![LOGO](g431192g60k60.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br> &nbsp;&nbsp;&nbsp;&nbsp;Stock options | 550007 | 550007 | 525006 |  | <br> ![LOGO](g431192g60k60.jpg)  |
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;**Long Term**<br> &nbsp;&nbsp;&nbsp;&nbsp;**Incentives** | <br> **2200067** | <br> **2200067** | <br> **2100030** |  | <br> ![LOGO](g431192g60k60.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br> &nbsp;&nbsp;&nbsp;&nbsp;Sun Shares | <br> - | <br> - | <br> 3050066 |  | <br> ![LOGO](g431192g60k60.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br> &nbsp;&nbsp;&nbsp;&nbsp;Stock options | <br> - | <br> - | <br> 1000005 |  | <br> ![LOGO](g431192g60k60.jpg)  |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;DSUs | <br> **-** | <br> **-** | <br> 3350065 |  | <br> ![LOGO](g431192g60k60.jpg)  |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**Long Term**<br> &nbsp;&nbsp;&nbsp;&nbsp;**Incentives**<br> &nbsp;&nbsp;&nbsp;&nbsp;**(One-time, on-hire)** | <br> **-** | <br> **-** | 7400136  |  | <br> ![LOGO](g431192g60k60.jpg)  |
| <br> &nbsp;&nbsp;&nbsp;&nbsp;**Total Direct**<br> &nbsp;&nbsp;&nbsp;&nbsp;**Comp** | <br> **3650067** | <br> **3750529** | <br> **11534504** |  |  |

---

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Annual incentives in 2021 reflect a one-time $200,000 cash award to replace forfeited annual bonus, that was paid on-hire with a 12-month clawback provision.

Long-term incentives in 2021 reflect a one-time award of $4,050,000 to replace forfeited equity value and a one-time award of $3,350,000 to replace approximate forfeited pension value from Mr. Singh's previous employer. The pension value replacement was granted in DSUs, which are held until departure from the company, and vests 50% per year on anniversary of the grant date.

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##### [**Table of Contents**](#toc)
Stephen C. Peacher, President, SLC Management

---

| | |
|:---|:---|
| <br> ![LOGO](g431192g19l92.jpg)  | <br> Mr. Peacher has been our President, SLC Management since January 11, 2016 and is responsible for the strategy, development and performance of our invested asset portfolio, and SLC Management, our third-party institutional asset management business. Mr. Peacher advances our leadership in global asset management, one of our four strategic pillars which includes SLC Management and MFS Investment Management.<br>In recognition of his contribution in 2022, Mr. Peacher was allocated an AIP award of US$1,908,000 (120% individual multiplier). He was granted an annual 2023 long-term incentive award of US$3,000,000.<br>In 2022, Mr. Peacher also received a one-time long-term incentive grant of US$2,000,000 in Sun Shares and US$2,000,000 in SLC Phantom Units to recognize his critical role in leading the multi-year transformation of SLC Management thus far and to create a powerful incentive to grow the business going forward. The grants cliff-vest in 2027 and vesting is contingent upon achieving both financial and strategic goals key to SLC Management's mid-term strategy. The final number of vested units may range from zero if performance is below threshold, up to a maximum 125% of units granted if performance exceeds expectations. |

---

Significant accomplishments in 2022 include:

• Expanding SLC's capabilities through the acquisition of a majority stake in AAM.

• Generating exceptional investment results in Sun Life's general account to support product sales and net income.

• Delivering strong performance in our Client portfolios leading to strong Client retention.

• Raising $18.2 billion of new Client commitments for the SLC Management platform with $209.6 billion in AUM for the
fourth quarter of 2022, up 14% from the fourth quarter of 2021.

• Enhancing Asset Management Pillar through expanded partnerships across SLC Affiliates, SLGI and Sun Life Financial.

• Furthering sustainability efforts across SLC including improved data infrastructure and reporting to increase transparency
and support portfolio management.

• Maintaining a strong culture at SLC evidenced by strong employee engagement scores, employee retention and development,
becoming a founding signatory for the CFA Institute new Diversity, Equity and Inclusion Code, and being recognized by Pension & Investments<sup>1</sup> as one of the 2022 Best Places to Work in
Money Management for the third consecutive year.

• Driving key system projects and financial reporting enhancements.

• Continuing to be an active member of the Sun Life Executive Team, especially in areas related to asset management, M&A
and the strategic partnership with Phoenix.

<sup>1</sup>. Pensions & Investments, a global news source of money management.

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##### [**Table of Contents**](#toc)
**Compensation Summary (USD)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2021 | 2020 | <br> ![LOGO](g431192g63v63.jpg)  |
| | <br> Target | <br> Actual | <br> Actual | <br> Actual | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;**Salary** | **700000** | **724808** | **580000** | **580000** | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;Annual<br> &nbsp;&nbsp;&nbsp;&nbsp;incentives | 1500000 | 1908000 | 2153250 | 1903125 | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;**Total Cash** | **2200000** | **2632808** | 2733250 | 2483125 | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;Sun Shares | 683997 | 683997 | 656076 | 617563 | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;Stock Options | 683970 | 683970 | 656037 | 617517 | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;SLC Phantom Units | 1367940 | 1367940 | 1312073 | 1235033 | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;**Long Term**<br> &nbsp;&nbsp;&nbsp;&nbsp;**Incentives** | **2735907** | **2735907** | **2624186** | **2470113** | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;Sun Shares | 1967681 | 1967681 |  |  | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;SLC Phantom Units | 1967632 | 1967632 | - | - | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;**Long Term**<br> &nbsp;&nbsp;&nbsp;&nbsp;**Incentives (One-time)** | **3935314** | **3935314** | **-** | **-** | <br> ![LOGO](g431192g63v63.jpg)  |
| &nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;**Total Direct**<br> &nbsp;&nbsp;&nbsp;&nbsp;**Comp** | **8871221** | **9304029** | **5357436** | **4953238** |  |

---

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Daniel R. Fishbein, President, Sun Life U.S.

---

| | |
|:---|:---|
| <br> ![LOGO](g431192g27y49.jpg)  | <br> Mr. Fishbein has been our President, Sun Life U.S. since March 17, 2014 and is responsible for leading our United States insurance businesses, which include a stop-loss and employee benefits business, a voluntary benefits business, a dental business, and in-force blocks of individual life insurance. Mr. Fishbein advances our leadership in U.S. group benefits, one of our four strategic pillars.<br>In recognition of his contribution in 2022, Mr. Fishbein was allocated an AIP award of US$1,417,500 (125% individual multiplier). He was granted a 2023 long-term incentive award of US$2,500,000. |

---

Significant accomplishments in 2022 include:

• Increasing Reported Net Income by 13% to $453 million and Underlying Net Income by 35% to $557 million, reflecting
growth across all businesses and contributions from the DentaQuest acquisition.

• Growing new sales by 18% to $1.46 billion, reflecting contributions from the DentaQuest acquisition and our focus on
making health and benefits easier to access for Clients through our new digital capabilities and partnerships.

• Reaching $6.3 billion in Client revenue, including seven months of DentaQuest results and strong growth in Group
Benefits.

• Completing our acquisition of DentaQuest, the second-largest<sup>1</sup> dental
benefits provider in the U.S. by membership, advancing our strategy of being a leader in health and benefits.

• Increasing the number of Americans we serve to over 50 million with the addition of DentaQuest and growth in our health
and group businesses.

• As the largest Medicaid dental benefits provider, DentaQuest added approximately three million total members in 2022,
increasing access for low-income American families and children who typically have not had access to dental care.

• Leveraging our new digital connectivity capabilities to automate processes and alleviate manual administrative tasks,
reducing work for our Clients and improving their experience.

• Maintaining strong employee engagement scores, which reflects our continued commitment to our people and culture, and making
meaningful progress on our Diversity, Equity and Inclusion commitments in 2022.

• Being certified as a Great Place to Work<sup>®</sup> in the U.S. and Ireland
and receiving five top workplace recognitions in 2022.

<sup>1</sup>. Based on number of members as of December 31, 2021. Ranking based on data disclosed by competitors.

**Compensation Summary (USD)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2021 | 2020 | <br> ![LOGO](g431192g66v49.jpg)  |
|  | <br> Target | <br> Actual | <br> Actual | <br> Actual | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp; **Salary** | **600000** | **600000** | **600000** | **594231** | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Annual<br> incentives | 900000 | 1417500 | 1235000 | 1045000 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp; **Total Cash** | **1500000** | **2017500** | 1835000 | 1639231 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Sun Shares | 1465671 | 1465671 | 1249027 | 1111574 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock Options | 488554 | 488554 | 416331 | 370514 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp; **Long Term**<br> **Incentives** | **1954225** | **1954225** | **1665358** | **1482088** | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp; **Total Direct Comp** | **3454225** | **3971725** | **3500358** | **3121319** | <br> ![LOGO](g431192g66v49.jpg)  |
|  |  |  |  |  | <br> ![LOGO](g431192g66v49.jpg)  |

---

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Jacques Goulet, President, Sun Life Canada

---

| | |
|:---|:---|
| <br> ![LOGO](g431192g17k20.jpg)  | <br> Mr. Goulet has been our President Sun Life Canada since January 15, 2018 and is responsible for leading our largest business group providing insurance, wealth management including mutual funds, group retirement services and group benefits in Canada. Mr. Goulet advances our leadership in Canadian insurance and wealth solutions for Sun Life Canada, one of our four strategic pillars.<br>In recognition of his contribution in 2022, Mr. Goulet was allocated an AIP award of $972,320 (118% individual multiplier). He was granted a 2023 long-term incentive award of $2,800,000. |

---

Significant accomplishments in 2022 include:

• Achieving $1,266 million in underlying net income, up 12% over the prior year, and growing underlying ROE to 15.2%.

• Sustaining the #1 position<sup>1</sup> in Group Retirement Services with over
$133 billion in assets under administration. Achieved strong sales results, including $3.4 billion in Rollover, sales of $2.1 billion in our pension risk transfer business, and over $5.4 billion of Client retentions.

• Upholding Sun Life's leadership position in individual insurance<sup>2</sup>.
Delivered 65,000 financial roadmaps to Clients and launched Prospr by Sun Life, a first-of-its-kind hybrid advice platform, that
empowers Canadians to manage their financial goals.

• Maintaining Sun Life Health's #1 position<sup>3</sup> in the group benefits
market with over $12.8 billion of business-in-force. Introduced new Surrogacy & Adoption benefits for Sun Life Health group plans and expanded the Mental
Health Coach pilot.

• Growing our suite of on-demand digital health experiences. Launched a Lumino Health

• Maintaining a high level of employee engagement through focus on flexible, high-performing, mentally healthy and inclusive
workplace. Exceeded industry benchmark on Employee mental health outcomes and received seven top workplace awards including best workplace for Inclusion, Mental Wellness, Women, and Hybrid Work by Great Place to Work® Canada.

• Advancing Diversity, Equity and Inclusion commitments by maintaining gender parity on the Canadian Executive Team, exceeding
25% representation of underrepresented ethnicities at the VP+ level, and progressing toward the Progressive Aboriginal Relations certification.

• Driving impact and establishing sustainability as a competitive differentiator for Sun Life Canada with the launch of
innovative products, including a Shariah fund in Group Retirement Services, a Diabetes signature solution, and a term wellness for retail Clients.

• Continuing to mobilize action on Canada's mental health crisis by inspiring executives across the country to act within
their workplaces.

• Becoming the Official Health and Wellness Partner of the Toronto Raptors, helping Canadians empower their health journey and
live healthier lives.

---

| | |
|:---|:---|
| <sup>1</sup>. | Based on total Capital Accumulation Plan assets for the year ended December 2021 from 2022 Fraser Pension Universe Report  |

---

<sup>2</sup>. LIMRA Market Share by premiums within individual life and health market as of third quarter 2022 year to date

<sup>3</sup>. 1st place group benefits provider based on revenue for year ended December 2021 from 2022 Group Benefits Provider Report

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##### [**Table of Contents**](#toc)
**Compensation Summary** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | 2022 | 2022 | 2021 | 2020 | <br> ![LOGO](g431192g66v49.jpg)  |
|  | <br> Target | <br> Actual | <br> Actual | <br> Actual | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp; **Salary** | **600000** | **600000** | **600000** | **588462** | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Annual<br> incentives | 800000 | 972320 | 1359000 | 851640 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp; **Total Cash** | **1400000** | **1572320** | 1959000 | 1440102 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Sun Shares | 2100020 | 2100020 | 2025034 | 1650058 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock Options | 700004 | 700004 | 675005 | 550001 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp; **Long Term**<br> **Incentives**  | **2800024** | **2800024** | **2700040** | **2200059** | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Sun Shares | - | - |  | 750022 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock Options | - | - | - | 250001 | <br> ![LOGO](g431192g66v49.jpg)  |
| &nbsp;&nbsp;&nbsp; **Long Term Incentives (One-time)** | **-** | **-** | **-** | **1000023** |  |
| &nbsp;&nbsp;&nbsp; **Total Direct**<br> **Comp** | **4200024** | **4372344** | **4659039** | **4640184** |  |

---

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**Summary compensation table** 

The table below shows the total compensation paid to our NEOs for the fiscal years ended December 31, 2022, 2021 and 2020. 2022 total compensation for NEOs was driven by previously disclosed target changes made in February 2022, lower incentive plan outcomes across our businesses, and the Canada-US exchange rate.

Mr. Peacher and Mr. Fishbein receive their compensation in U.S. dollars. We have converted their compensation to Canadian dollars in the tables that follow using the average annual exchange rates of C$1.301 for 2022, C$1.254 for 2021, and C$1.341 for 2020.

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Name and principal<br> &nbsp;&nbsp;&nbsp;&nbsp;position | Year | Paid<br>salary<br> ($) | Share<br>awards<br>($) | Option<br>awards<br>($) | <br> Non-equity<br> annual<br> incentive<br> plan<br> compen-<br>sation ($) | Pension<br>value<br> ($) | All other<br>compen-<br>sation ($) | Total<br>compen-<br> sation ($) |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Kevin D. Strain**<br> President & Chief Executive Officer | <br> 2022 | <br> 1000000 | <br> 4717549 | <br> 1562505 | <br> 1710000 | <br> 435260 | <br> 700 | <br> 9426014 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Kevin D. Strain**<br> President & Chief Executive Officer | <br> 2021 | <br> 863462 | <br> 3325051 | <br> 875007 | <br> 2185079 | <br> 3938737 | <br> 140283 | <br> 11327619 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Kevin D. Strain**<br> President & Chief Executive Officer | <br> 2020 | <br> 638462 | <br> 1650058 | <br> 550001 | <br> 924699 | <br> 573277 | <br> 199255 | <br> 4535752 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Manjit Singh**<br> EVP & Chief Financial Officer | <br> 2022 | <br> 638462 | <br> 1650060 | <br> 550007 | <br> 912000 | <br> 137660 | –  | <br> 3888188 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Manjit Singh**<br> EVP & Chief Financial Officer | <br> 2021 | <br> 461538 | <br> 7975155 | <br> 1525011 | <br> 1372800 | <br> 34615 | <br> 200000 | <br> 11569119 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Stephen C. Peacher**<br> President, SLC Management | <br> 2022 | <br> 943193 | <br> 7791210 | <br> 890051 | <br> 2482880 | <br> 397389 | –  | <br> 12504723 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Stephen C. Peacher**<br> President, SLC Management | <br> 2021 | <br> 727320 | <br> 2468059 | <br> 822670 | <br> 2700176 | <br> 363660 | <br> 264838 | <br> 7346723 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Stephen C. Peacher**<br> President, SLC Management | <br> 2020 | <br> 777780 | <br> 2484332 | <br> 828090 | <br> 2552091 | <br> 389225 | <br> 120864 | <br> 7152382 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Daniel R. Fishbein**<br> President, Sun Life U.S. | <br> 2022 | <br> 780780 | <br> 1907278 | <br> 635755 | <br> 1844593 | <br> 292310 | –  | <br> 5460715 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Daniel R. Fishbein**<br> President, Sun Life U.S. | <br> 2021 | <br> 752400 | <br> 1566280 | <br> 522080 | <br> 1548690 | <br> 237633 | –  | <br> 4627083 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Daniel R. Fishbein**<br> President, Sun Life U.S. | <br> 2020 | <br> 796863 | <br> 1490621 | <br> 496859 | <br> 1401345 | <br> 246562 | –  | <br> 4432250 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Jacques Goulet**<br> President, Sun Life Canada | <br> 2022 | <br> 600000 | <br> 2100020 | <br> 700004 | <br> 972320 | <br> 146423 | <br> 2781 | <br> 4521548 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Jacques Goulet**<br> President, Sun Life Canada | <br> 2021 | <br> 600000 | <br> 2025034 | <br> 675005 | <br> 1359000 | <br> 137660 | –  | <br> 4796699 |
| &nbsp;&nbsp;&nbsp;&nbsp; <br> **Jacques Goulet**<br> President, Sun Life Canada | <br> 2020 | <br> 588462 | <br> 2400080 | <br> 800002 | <br> 851640 | <br> 128433 | <br> 18498 | <br> 4787115 |

---

***Paid Salary***

• Includes salary increases in March as follows:

&nbsp;&nbsp;&nbsp;&nbsp;• Messrs. Strain, Fishbein and Goulet in 2021

&nbsp;&nbsp;&nbsp;&nbsp;• Messrs. Singh and Peacher in 2022

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***Share Awards***

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Fiscal Year | Grant Date | Sun Share<br>Price | Deferred Share<br>Unit Price | SLC <br>Management <br>Phantom <br>Unit Price |
| &nbsp;&nbsp;&nbsp; 2022 | 14-Mar-22 | $66.66 |  | $10.00 |
| &nbsp;&nbsp;&nbsp; 2022 | 04-Mar-22 |  | $66.24 |  |
| &nbsp;&nbsp;&nbsp; 2022 | 22-Feb-22 | $68.30 |  | $10.00 |
| &nbsp;&nbsp;&nbsp; 2021 | 15-Nov-21 | $70.88 | $70.88 |  |
| &nbsp;&nbsp;&nbsp; 2021 | 07-Jun-21 | $65.10 | $65.10 |  |
| &nbsp;&nbsp;&nbsp; 2021 | 17-May-21 | $65.24 | $65.24 |  |
| &nbsp;&nbsp;&nbsp; 2021 | 05-Mar-21 |  | $62.36 |  |
| &nbsp;&nbsp;&nbsp; 2021 | 23-Feb-21 | $62.28 |  | $10.00 |
| &nbsp;&nbsp;&nbsp; 2020 | 04-Dec-20 | $57.57 |  |  |
| &nbsp;&nbsp;&nbsp; 2020 | 25-Feb-20 | $65.05 |  | $10.00 |

---

• The Sun Share and Deferred Share Unit Price is based on the average closing price of our common shares on the TSX over the
five trading days before the grant date. The SLC Management Phantom Unit Price is set equal to $10.00 for each new, annual grant.

• Mr. Peacher received a one-time grant in 2022 of US$2,000,000 in Sun Shares and
US$2,000,000 in SLC Phantom Units to recognize his critical role in leading the multi-year transformation of SLC Management thus far and to create a powerful incentive to grow the business going forward.

• Mr. Strain received a one-time grant of $700,011 DSUs on November 15, 2021
to ensure his pay as President & CEO, which is heavily weighted to long-term share-based incentives, is commensurate with his new role. It was calculated as the additional LTI he would have received for the rest of 2021 at his
President & CEO target pay.

• Mr. Singh received grants to replace value forfeited at his former employer, as follows: a one-time DSU grant of $3,350,065 upon hire to replace pension payments, a one-time stock option grant of $1,000,005 to replace unvested stock options; a one-time Sun Share grant of $3,050,066 to replace performance share units. He also received his first annual LTI grant. These grants were made on May 17 and June 7, 2021.

• Mr. Goulet's 2020 Share award included a one-time Sun Share award on
December 4, 2020 in addition to the February 25, 2020 award.

***Option Awards***

• The grant date fair value of stock options awarded was calculated using the following data:

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Fiscal Year | Grant Date | Exercise Price | Accounting Fair Value |
| &nbsp;&nbsp;&nbsp; 2022 | 22-Feb-22 | $68.12 | $9.64 |
| &nbsp;&nbsp;&nbsp; 2021 | 17-May-21 | $65.84 | $9.33 |
| &nbsp;&nbsp;&nbsp; 2021 | 23-Feb-21 | $62.59 | $8.54 |
| &nbsp;&nbsp;&nbsp; 2020 | 04-Dec-20 | $57.16 | $7.70 |
| &nbsp;&nbsp;&nbsp; 2020 | 25-Feb-20 | $62.12 | $5.90 |

---

• We use a five-year average calculated Black-Scholes ratio to determine awards.

• The five-year average represents a long-term value considering long-term estimates of factors used in the Black-Scholes
valuation model.

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• The following assumptions informed the Black-Scholes compensation value of the annual option awards:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| Fiscal Year | Term | Expected life<br> (years) | Expected<br> Volatility | Dividend Yield | Risk-free<br> Rate |
| 2022 | 10 years | 6.3 | 23.69% | 4% | 1.76% |
| 2021 | 10 years | 6.3 | 24.93% | 4% | 0.85% |
| 2020 | 10 years | 6.3 | 18.87% | 4% | 1.19% |

---

• Mr. Singh's 2021 option award included an award to replace unvested options forfeited at his former employer, in
addition to his regular 2021 annual option grant.

• Mr. Goulet's 2020 option award included a one-time option award on
December 4, 2020 in addition to the February 25, 2020 award.

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***Non-equity annual incentive plan compensation***

• Values include the amounts the NEOs chose to defer.

***Pension value***

• Represents compensatory costs as described in the defined benefit and defined contribution tables on pages 110 and 111.

***All other compensation***

• Includes flexible benefit credits taken in cash by Mr. Strain and Mr. Singh.

• Mr. Singh's 2021 amount includes a sign-on cash payment provided to
replace variable incentives that were forfeited from his previous employer.

• The 2020 amounts shown for Mr. Strain, and Mr. Goulet include payments made under the 2018 and 2019 Canadian
Carryover Vacation Payout programs available to all employees with outstanding carryover vacation days.

• Mr. Strain's 2020 amount also includes taxes paid relating to a previous overseas assignment and executive
allowance.

• Includes tax equalization adjustments in 2020 for Mr. Peacher. The 2020 amount for Mr. Peacher also includes
executive allowance and tax preparation assistance.

• For all NEOs, except Mr. Strain and Mr. Peacher in 2020 and 2021, the amounts shown exclude the total value of
perquisites and other personal benefits provided to each NEO that are not generally available to all employees because the total for each NEO is less than $50,000 in the aggregate and less than 10% of their total salary for the fiscal year.

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**Incentive plan awards** 

**Outstanding share and option awards** 

The table below is a summary of the outstanding option awards and share awards for the NEOs as at December 31, 2022.

*Value of unexercised in-the-money options* is the difference between the exercise price of the options and $62.85 (Sun Life Financial's closing share price on the TSX on December 31, 2022), multiplied by the number of options.

*Market value of share awards that have not vested* or *not been paid* is $62.85 multiplied by the number of share units. For presentation purposes, the Sun Shares have been valued using the target performance factor (100%). Share awards that have vested but have not been paid represent an elected deferral of annual incentive, payout under an incentive plan prior to demutualization and/or awards for recruiting purposes or upon mid-year promotion.

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | Option awards | Option awards | Option awards | Option awards | Share awards | Share awards | Share awards | Share awards |
| Named<br> executive<br> officer | Year | Number of<br>securities<br>underlying<br>unexercised<br>options<br>(#) | Option<br>exercise<br>price<br>($) | Option<br>expiration<br>date | Value of<br>unexercised<br>in-the<br>money<br>options<br>($) | Plan | Number<br>of share<br>units<br> that<br> have<br> not<br>vested<br>(#) | Market<br>value of<br>share<br>awards<br>that have<br>not<br> vested<br>($) | <br> Market<br>value of<br>vested<br>share<br>awards<br>that have<br>not been<br>paid<br>($) |
| &nbsp;&nbsp;&nbsp; **Kevin D. Strain** | 2017 | 34233 | 48.20 | Feb 28, 2027 | 501513 |  |  |  |  |
| &nbsp;&nbsp;&nbsp; **Kevin D. Strain** | 2018 | 43190 | 53.96 | Feb 27, 2028 | 383959 |  |  |  |  |
|  | 2019 | 63944 | 50.58 | Feb 26, 2029 | 784593 |  |  |  |  |
|  | 2020 | 71402 | 62.12 | Feb 25, 2030 | 52123 | Sun Shares | 28707 | 1804208 | – |
|  | 2021 | 114590 | 62.59 | Feb 23, 2031 | 29793 | Sun Shares | 45652 | 2869210 | – |
|  | 2022 | 186484 | 68.12 | Feb 22, 2032 | – | Sun Shares | 72231 | 4539721 | – |
|  |  |  |  |  |  | DSU | 10425 | 655221 | – |
| &nbsp;&nbsp;&nbsp; **Total** |  | **513843** |  |  | **1751982** |  | **157014** | **9868360** | **–** |
| &nbsp;&nbsp;&nbsp; **Manjit Singh** | 2021 | 188312 | 65.84 | May 17, 2031 | – | Sun Shares | 70368 | 4422629 | – |
|  |  |  |  |  |  | Sun Shares | 5724 | 359784 |  |
|  | 2022 | 65643 | 68.12 | Feb 22, 2032 | – | Sun Shares | 25264 | 1587861 | – |
|  |  |  |  |  |  | DSU | 27541 | 1730950 | 1731085 |
| &nbsp;&nbsp;&nbsp; **Total** |  | **253955** |  |  | **–**  |  | **128898** | **8101224** | **1731085** |
| &nbsp;&nbsp; **Stephen C. Peacher** | 2018 | 18242 | 53.96 | Feb 27, 2028 | 162171 |  |  |  |  |
| &nbsp;&nbsp; **Stephen C. Peacher** | 2019 | 54695 | 50.58 | Feb 26, 2029 | 671108 |  |  |  |  |
|  | 2020 | 107504 | 62.12 | Feb 25, 2030 | 78478 | Sun Shares | 14408 | 905518 | – |
|  |  |  |  |  |  | SLC<br>Phantom<br>Units | 165618 | 1919513 | – |
|  | 2021 | 107736 | 62.59 | Feb 23, 2031 | 28011 | Sun Shares | 14308 | 899245 | – |
|  |  |  |  |  |  | SLC<br>Phantom<br>Units | 164534 | 2137297 | – |
|  | 2022 | 106227 | 68.12 | Feb 22, 2032 | – | Sun Shares | 13628 | 856534 | – |
|  |  |  |  |  |  | SLC<br>Phantom<br>Units | 178010 | 2223345 | – |
|  |  |  |  |  |  | Sun Shares | 39795 | 2501104 | – |
|  |  |  |  |  |  | SLC<br>Phantom<br>Units | 256048 | 3198040 | – |
|  |  |  |  |  |  | DSU | – | – | 2059652 |
| &nbsp;&nbsp; **Total** |  | **394404** |  |  | **939768** |  | **846348** | **14640594** | **2059652** |

---

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---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | Option awards | Option awards | Option awards | Option awards | Share awards | Share awards | Share awards | Share awards |
| Named<br> executive<br> officer | Year | Number of<br>securities<br>underlying<br>unexercised<br>options<br>(#) | Option<br>exercise<br>price<br>($) | Option<br>expiration<br>date | Value of<br>unexercised<br>in-the<br>money<br>options<br>($) | Plan | Number<br>of share<br>units<br>that<br>have<br>not<br>vested<br>(#) | Market<br>value of<br>share<br>awards<br>that have<br>not<br>vested<br>($) | <br> Market<br>value of<br>vested<br>share<br>awards<br>that have<br>not been<br>paid<br>($) |
| &nbsp;&nbsp; **Daniel R. Fishbein** | 2014 | 11780 | 36.98 | May 16, 2024 | 304749 |  |  |  |  |
| &nbsp;&nbsp; **Daniel R. Fishbein** | 2015 | 31999 | 39.02 | Feb 24, 2025 | 762536 |  |  |  |  |
|  | 2016 | 37662 | 40.16 | Feb 23, 2026 | 854551 |  |  |  |  |
|  | 2017 | 32701 | 48.20 | Feb 28, 2027 | 479070 |  |  |  |  |
|  | 2018 | 43118 | 53.96 | Feb 27, 2028 | 383319 |  |  |  |  |
|  | 2019 | 63811 | 50.58 | Feb 26, 2029 | 782961 |  |  |  |  |
|  | 2020 | 64503 | 62.12 | Feb 25, 2030 | 47087 | Sun Shares | 25933 | 1629876 | – |
|  | 2021 | 68371 | 62.59 | Feb 23, 2031 | 17776 | Sun Shares | 27239 | 1711969 | – |
|  | 2022 | 75877 | 68.12 | Feb 22, 2032 | – | Sun Shares | 29203 | 1835383 | – |
|  |  |  |  |  |  | DSU | – | – | 1090825 |
| &nbsp;&nbsp; **Total** |  | **429822** |  |  | **3632049** |  | **82374** | **5177227** | **1090825** |
| &nbsp;&nbsp; **Jacques Goulet** | 2018 | 39264 | 53.96 | Feb 27, 2028 | 349057 |  |  |  |  |
| &nbsp;&nbsp; **Jacques Goulet** | 2019 | 58759 | 50.58 | Feb 26, 2029 | 720973 |  |  |  |  |
|  | 2020 | 71402 | 62.12 | Feb 25, 2030 | 52123 | Sun Shares | 28707 | 1804208 | – |
|  |  | 35850 | 57.16 | Dec 05, 2030 | 203987 | Sun Shares | 14111 | 886855 |  |
|  | 2021 | 88398 | 62.59 | Feb 23, 2031 | 22983 | Sun Shares | 35217 | 2213395 | – |
|  | 2022 | 83545 | 68.12 | Feb 22, 2032 | – | Sun Shares | 32154 | 2020860 | – |
|  |  |  |  |  |  | DSU | – | – | 677351 |
| &nbsp;&nbsp; **Total** |  | **377218** |  |  | **1349123** |  | **110188** | **6925318** | **677351** |

---

We have not amended, cancelled, replaced or modified any option-based awards that were previously granted.

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***Incentive plan awards – value vested or earned during the year*** 

The table below shows:

• the value the NEOs would have realized if they had exercised the options that vested in 2022 on their vesting dates

• the value of share awards that vested and were paid out in 2022

• the annual incentive award earned in 2022 and paid out in March 2023.

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive<br> &nbsp;&nbsp;&nbsp;&nbsp;officer | Option-based awards –<br>value vested during the<br>year ($) | Share-based awards –<br>value vested during the<br>year ($) | Non-equity incentive<br> plan compensation –<br> value earned during<br>the year ($) |
|  &nbsp;&nbsp;&nbsp;&nbsp;Kevin D. Strain | 646575 | 3467668 | 1710000 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Manjit Singh | —  | —  | 912000 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Stephen C. Peacher | 973770 | 5932256 | 2482880 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Daniel R. Fishbein | 579078 | 3460462 | 1844593 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Jacques Goulet | 636263 | 3186522 | 972320 |

---

***Value of options vested during the year*** 

The table below shows the value of options that vested for each NEO in 2022. See Executive stock option plan on page 84 for more information about the option plan.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive<br> officer | Grant year | Vesting date | Options<br>vesting (#) | Option<br>exercise<br>price ($) | Share price<br>on vesting<br>date ($) | Option-based<br> awards – value<br>vested during<br>the year ($) |
|  &nbsp;&nbsp;&nbsp;&nbsp;Kevin D. Strain | 2018 | 27-Feb-2022 | 10797 | 53.96 | 67.29 | 143924 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Kevin D. Strain | 2019 | 26-Feb-2022 | 15986 | 50.58 | 67.29 | 267126 |
|  | 2020 | 25-Feb-2022 | 17850 | 62.12 | 67.29 | 92285 |
|  | 2021 | 23-Feb-2022 | 28648 | 62.59 | 67.59 | 143240 |
|  |  |  |  |  | **Total** | **646575** |
|  &nbsp;&nbsp;&nbsp;&nbsp;Manjit Singh | 2021 | 17-May-2022 | 47078 | 65.84 | 62.65 | – |
|  |  |  |  |  | **Total** | **–** |
|  &nbsp;&nbsp;&nbsp;&nbsp;Stephen C. Peacher | 2018 | 27-Feb-2022 | 18242 | 53.96 | 67.29 | 243166 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Stephen C. Peacher | 2019 | 26-Feb-2022 | 27348 | 50.58 | 67.29 | 456985 |
|  | 2020 | 25-Feb-2022 | 26876 | 62.12 | 67.29 | 138949 |
|  | 2021 | 23-Feb-2022 | 26934 | 62.59 | 67.59 | 134670 |
|  |  |  |  |  | **Total** | **973770** |
|  &nbsp;&nbsp;&nbsp;&nbsp;Daniel R. Fishbein | 2018 | 27-Feb-2022 | 10779 | $53.96 | 67.29 | 143684 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Daniel R. Fishbein | 2019 | 26-Feb-2022 | 15952 | $50.58 | 67.29 | 266558 |
|  | 2020 | 25-Feb-2022 | 16126 | $62.12 | 67.29 | 83371 |
|  | 2021 | 23-Feb-2022 | 17093 | $62.59 | 67.59 | 85465 |
|  |  |  |  |  | **Total** | **579078** |

---

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---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive<br> officer | Grant year | Vesting date | Options<br>vesting (#) | Option<br>exercise<br>price ($) | Share price<br>on vesting<br>date ($) | Option-based<br> awards – value<br>vested during<br>the year ($) |
|  &nbsp;&nbsp;&nbsp;&nbsp;Jacques Goulet | 2018 | 27-Feb-2022 | 9816 | 53.96 | 67.29 | 130847 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Jacques Goulet | 2019 | 26-Feb-2022 | 14689 | 50.58 | 67.29 | 245453 |
|  | 2020 | 25-Feb-2022 | 17850 | 62.12 | 67.29 | 92285 |
|  |  | 04-Dec-2022 | 8962 | 57.16 | 63.54 | 57178 |
|  | 2021 | 23-Feb-2022 | 22100 | 62.59 | 67.59 | 110500 |
|  |  |  |  |  | **Total** | **636263** |
|  |  |  |  |  | **Total** | **2835685** |

---

• *Share price on vesting date* is the closing price of our common shares on the TSX on the vesting date or the previous
trading day if the vesting date falls on a weekend or holiday

• *Value vested during the year* is the number of options vesting multiplied by the difference between the option
exercise price and share price on the vesting date.

***Aggregate option exercises for the year ended December 31, 2022*** 

The following table shows, for each NEO, the number of common shares acquired through option exercises during the year ended December 31, 2022 and the aggregate value realized upon exercise. Value realized upon exercise is the difference between the closing price of our common shares on the TSX on the exercise date and the exercise price of the option.

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive officer | Securities acquired at exercise (#) | Aggregate value realized ($) |
|  &nbsp;&nbsp;&nbsp;&nbsp;Kevin D. Strain | 27391 | 597678 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Manjit Singh | – | – |
|  &nbsp;&nbsp;&nbsp;&nbsp;Stephen C. Peacher | – | – |
|  &nbsp;&nbsp;&nbsp;&nbsp;Daniel R. Fishbein | 11781 | 284909 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Jacques Goulet | – | – |

---

***Share awards*** 

The table below shows the total Sun Shares vested and paid out to each NEO in 2022. The value of Sun Shares received on vesting is the number of accrued Sun Shares multiplied by the performance factor, multiplied by the vesting price.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive officer | Grant date | Sun Shares<br>accrued (#) | Performance<br>factor | Vesting<br> price ($) | Value received<br> on vesting ($) |
|  &nbsp;&nbsp;&nbsp;&nbsp;Kevin D. Strain | Feb 26, 2019 | 31362.08 | 164% | 67.42 | 3467668 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Manjit Singh | – | – | – | – | – |
|  &nbsp;&nbsp;&nbsp;&nbsp;Stephen C. Peacher | Feb 26, 2019 | 53652.17 | 164% | 67.42 | 5932256 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Daniel R. Fishbein | Feb 26, 2019 | 31296.91 | 164% | 67.42 | 3460462 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Jacques Goulet | Feb 26, 2019 | 28819.36 | 164% | 67.42 | 3186522 |

---

• *Vesting price* is the average price of our common shares on the TSX over the five trading days before the vesting
date.

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The table below shows how we calculated the performance factor for the 2019 Sun Share awards (for the performance period from 2019 to 2021, and paid out in early 2022).

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  |  |  | Relative Peer TSR Performance | Relative Peer TSR Performance | Relative Peer TSR Performance | Relative Peer TSR Performance |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Performance<br> cycle | Peer<br>groups | Weight |  | Below<br>threshold | Threshold | Target<br>(peer avg.) | Maximum | SLF<br>TSR | Actual<br>TSR<br>multiplier |
| &nbsp;&nbsp;&nbsp;&nbsp;2019 –<br> &nbsp;&nbsp;&nbsp;&nbsp;2021 | North American Insurance | <br>75% | TSX | < 2.9% | 2.9% | 12.9% | 22.9% | 17.8% | 150% |
| &nbsp;&nbsp;&nbsp;&nbsp;2019 –<br> &nbsp;&nbsp;&nbsp;&nbsp;2021 | North American Insurance | <br>75% | NYSE<br>| < 3.4%<br>| 3.4%<br>| 13.4%<br>| 23.4%<br>| 19.7%<br>| 163%<br>|
| &nbsp;&nbsp;&nbsp;&nbsp;2019 –<br> &nbsp;&nbsp;&nbsp;&nbsp;2021 | Canadian Banks | <br> 25% | <br> TSX | <br> < 4.0% | <br> 4.0% | <br> 14.0% | <br> 24.0% | <br> 17.8% | <br> 138% |
|  &nbsp;&nbsp;&nbsp;&nbsp;**2021 Multiplier – payout factor (50% weight) 0%** | &nbsp;&nbsp;&nbsp;&nbsp;**2021 Multiplier – payout factor (50% weight) 0%** | &nbsp;&nbsp;&nbsp;&nbsp;**2021 Multiplier – payout factor (50% weight) 0%** | &nbsp;&nbsp;&nbsp;&nbsp;**2021 Multiplier – payout factor (50% weight) 0%** |  | **25%** | **100%** | **200%** |  | **151%** |
| &nbsp;&nbsp;&nbsp;&nbsp;2018 –<br> &nbsp;&nbsp;&nbsp;&nbsp;2020 | North American Insurance | <br>75% | TSX | < -16.9% | -16.9% | -6.9% | 3.1% | 7.7% | 200% |
| &nbsp;&nbsp;&nbsp;&nbsp;2018 –<br> &nbsp;&nbsp;&nbsp;&nbsp;2020 | North American Insurance | <br>75% | NYSE<br>| < -17.1%<br>| -17.1%<br>| -7.1%<br>| 2.9%<br>| 6.8%<br>| 200%<br>|
|  | Canadian Banks | <br> 25% | <br> TSX | <br> < -9.0% | <br> -9.0% | <br> 1.0% | <br> 11.0% | <br> 7.7% | <br> 168% |
|  &nbsp;&nbsp;&nbsp;&nbsp;**2020 Multiplier – payout factor (25% weight) 0%** | &nbsp;&nbsp;&nbsp;&nbsp;**2020 Multiplier – payout factor (25% weight) 0%** | &nbsp;&nbsp;&nbsp;&nbsp;**2020 Multiplier – payout factor (25% weight) 0%** | &nbsp;&nbsp;&nbsp;&nbsp;**2020 Multiplier – payout factor (25% weight) 0%** |  | **25%** | **100%** | **200%** |  | **192%** |
| &nbsp;&nbsp;&nbsp;&nbsp;2017 –<br> &nbsp;&nbsp;&nbsp;&nbsp;2019 | North American Insurance | <br>75% | TSX | < -6.1% | -6.1% | 3.9% | 13.9% | 11.0% | 171% |
| &nbsp;&nbsp;&nbsp;&nbsp;2017 –<br> &nbsp;&nbsp;&nbsp;&nbsp;2019 | North American Insurance | <br>75% | NYSE<br>| < -5.9%<br>| -5.9%<br>| 4.1%<br>| 14.1%<br>| 11.5%<br>| 175%<br>|
|  | Canadian Banks | <br> 25% | <br> TSX | <br> < -1.1% | <br> -1.1% | <br> 8.9% | <br> 18.9% | <br> 11.0% | <br> 121% |
|  &nbsp;&nbsp;&nbsp;&nbsp;**2019 Multiplier – payout factor (25% weight) 0%** | &nbsp;&nbsp;&nbsp;&nbsp;**2019 Multiplier – payout factor (25% weight) 0%** | &nbsp;&nbsp;&nbsp;&nbsp;**2019 Multiplier – payout factor (25% weight) 0%** | &nbsp;&nbsp;&nbsp;&nbsp;**2019 Multiplier – payout factor (25% weight) 0%** |  | **25%** | **100%** | **200%** |  | **160%** |
|  **Overall weighted average performance factor** | **Overall weighted average performance factor** | **Overall weighted average performance factor** | **Overall weighted average performance factor** | **Overall weighted average performance factor** | **Overall weighted average performance factor** | **Overall weighted average performance factor** | **Overall weighted average performance factor** | **Overall weighted average performance factor** | **164%** |

---

***Non-equity incentive plan compensation*** 

See *Annual incentive plan* starting on page 80 for more information.

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive officer | Target award<br> ($) | Business<br>results | Individual<br>multiplier | Final award<br> ($) |
|  &nbsp;&nbsp;&nbsp;&nbsp;Kevin D. Strain | 1500000 | 95% | 120% | 1710000 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Manjit Singh | 800000 | 95% | 120% | 912000 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Stephen C. Peacher | 1951950 | 106% | 120% | 2482880 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Daniel R. Fishbein | 1171170 | 126% | 125% | 1844593 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Jacques Goulet | 800000 | 103% | 118% | 972320 |

---

• **Target Award** pro-rated for active employment is used to calculate AIP
(subject to any sign-on provisions for the initial year of employment).

• The business results for the CEO and CFO are based 100% on total company performance. For the other NEOs (excluding the
President, SLC Management), the business results reflect 25% weighting on total company Reported EPS and 75% on relevant business group performance. Business group performance is measured using Underlying earnings, VNB (AIP basis) and Client
measures. For the President, SLC Management, AIP is based on SLC Management business group results.

• The AIP total company performance factor is 95%, including a positive discretionary adjustment to 1) offset a negative
accounting impact related to the divestiture of the U.K. business that was not

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included in the Business Plan due to uncertain timing of the transaction, 2) moderate some of the outsized, negative impact of external factors on Reported EPS, and 3) recognize multiple strategic initiatives, including the U.K. divestiture, were executed to drive growth and long-term value for shareholders. This result is down from our 2021 factor of 143%, reflecting mixed performance results on financial measures and solid outcomes on Client measures. <br>

• AIP business group performance factors reflect a range of outcomes, with overall 2022 scores for NEO business group
Presidents all exceeding target, generally reflecting strong business group underlying earnings performance.

The table below shows how we calculated the performance factor for total company business results. Underlying EPS removes from Reported EPS the impacts of items that create volatility in our results under IFRS and as defined in Section L - Non-IFRS measures in our 2022 MD&A filed with Canadian securities regulators. VNB (AIP basis) excludes the asset management business and is measured on a constant currency basis.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  |  | | | | | What we achieved<br>in 2022 | What we achieved<br>in 2022 |
| &nbsp;&nbsp;&nbsp;&nbsp;Primary measures | Weighting | Below<br>threshold | Threshold | Target | Maximum | Result | Result |
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;Reported<br> &nbsp;&nbsp;&nbsp;&nbsp;Earnings per share | <br> 25% | <br> < $4.10 | <br> $4.10 | <br> $5.86 | <br> $7.03 | <br> $5.21 | <br> Below<br>Target |
| &nbsp;&nbsp;&nbsp;&nbsp;**Payout factor** |  | 0% | 25% | 100% | 200% |  | **72%** |
| &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** |
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;Underlying<br> &nbsp;&nbsp;&nbsp;&nbsp;Earnings per share | <br> 25% | <br> < $4.48 | <br> $4.48 | <br> $6.40 | <br> $7.68 | <br> $6.27 | <br> Below<br>Target |
| &nbsp;&nbsp;&nbsp;&nbsp;**Payout factor** |  | 0% | 25% | 100% | 200% |  | **95%** |
| &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** |
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;Value of new business<br> &nbsp;&nbsp;&nbsp;&nbsp;(AIP basis) | <br> 25% | <br> < $970 | <br> $970 | <br> $1386 | <br> $1663 | <br> $1253 | <br> Below<br>Target |
| &nbsp;&nbsp;&nbsp;&nbsp;**Payout factor** |  | 0% | 25% | 100% | 200% |  | **76%** |
| &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** |
|  <br> &nbsp;&nbsp;&nbsp;&nbsp;Client measures | 25% | Assessment of Client Index scores and<br>performance on key Client Business Outcomes | Assessment of Client Index scores and<br>performance on key Client Business Outcomes | Assessment of Client Index scores and<br>performance on key Client Business Outcomes | Assessment of Client Index scores and<br>performance on key Client Business Outcomes | Assessment of Client Index scores and<br>performance on key Client Business Outcomes | Above<br>Target |
| &nbsp;&nbsp;&nbsp;&nbsp;**Payout factor** | &nbsp;&nbsp;&nbsp;&nbsp;**Payout factor** | 0% | 50% | 100% | 150% |  | **109%** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Overall calculated payout factor** | &nbsp;&nbsp;&nbsp;&nbsp;**Overall calculated payout factor** | &nbsp;&nbsp;&nbsp;&nbsp;**Overall calculated payout factor** | &nbsp;&nbsp;&nbsp;&nbsp;**Overall calculated payout factor** |  |  |  | **88%** |
| &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Business performance**<br> &nbsp;&nbsp;&nbsp;&nbsp;**scorecard** | A mechanism to conduct a comprehensive look back on performance and alignment with shareholder experience *(up to ±20%)* | A mechanism to conduct a comprehensive look back on performance and alignment with shareholder experience *(up to ±20%)* | A mechanism to conduct a comprehensive look back on performance and alignment with shareholder experience *(up to ±20%)* | A positive discretionary<br>adjustment to moderate<br>factors impacting reported<br>EPS and recognize significant<br>outcomes on multiple,<br>strategic initiatives | A positive discretionary<br>adjustment to moderate<br>factors impacting reported<br>EPS and recognize significant<br>outcomes on multiple,<br>strategic initiatives | A positive discretionary<br>adjustment to moderate<br>factors impacting reported<br>EPS and recognize significant<br>outcomes on multiple,<br>strategic initiatives | **7%** |
| &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** | &nbsp;&nbsp;&nbsp; **+** |
| &nbsp;&nbsp;&nbsp;&nbsp;**Risk, Compliance and**<br> &nbsp;&nbsp;&nbsp;&nbsp;**Control** | Results reviewed for any risk, compliance and control considerations (neutral to negative and can lower results to zero) | Results reviewed for any risk, compliance and control considerations (neutral to negative and can lower results to zero) | Results reviewed for any risk, compliance and control considerations (neutral to negative and can lower results to zero) | No adjustment | No adjustment | No adjustment | **–%** |
| &nbsp;&nbsp;&nbsp; **=** | &nbsp;&nbsp;&nbsp; **=** | &nbsp;&nbsp;&nbsp; **=** | &nbsp;&nbsp;&nbsp; **=** | &nbsp;&nbsp;&nbsp; **=** | &nbsp;&nbsp;&nbsp; **=** | &nbsp;&nbsp;&nbsp; **=** | &nbsp;&nbsp;&nbsp; **=** |
| **Final performance payout factor** | **Final performance payout factor** | 0% | 25% | 100% |  | 200% | **95%** |

---

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In addition to these objectives and values outlined in the previous table, highlights of our performance in 2022 are provided on page 64.

You can find more information about our business segment results in our 2022 MD&A.

**Pension benefits** 

***Defined benefit plans***

The table below shows the defined benefit pension plan obligations for each NEO as at December 31, 2022.

We used the same actuarial methods and assumptions in 2022 that we used to calculate the pension liabilities and annual expenses in our 2022 consolidated financial statements. These assumptions reflect our best estimate of future events, so the values shown in the table below may not be directly comparable to pension liabilities estimates disclosed by other companies.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive<br> officer | Number<br>of years<br>credited<br>service | <br> Annual lifetime<br>pension | <br> Annual lifetime<br>pension | Accrued<br>obligation<br>at start of<br>year ($) | Compensatory<br>change<br>($) | Non-<br>compensatory<br>change<br>($) | Accrued<br>obligation<br>at year end<br>($) |
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive<br> officer | Number<br>of years<br>credited<br>service | At year<br>end | At age 65 | Accrued<br>obligation<br>at start of<br>year ($) | Compensatory<br>change<br>($) | Non-<br>compensatory<br>change<br>($) | Accrued<br>obligation<br>at year end<br>($) |
|  &nbsp;&nbsp;&nbsp;&nbsp;Kevin D. Strain | 25.1 | 571000 | 875000 | 11301000 | 425000 | -3051000 | 8675000 |
|  &nbsp;&nbsp;&nbsp;&nbsp;Manjit Singh | – | – | – | – | – | – | – |
|  &nbsp;&nbsp;&nbsp;&nbsp;Stephen C. Peacher | – | – | – | – | – | – | – |
|  &nbsp;&nbsp;&nbsp;&nbsp;Daniel R. Fishbein | – | – | – | – | – | – | – |
|  &nbsp;&nbsp;&nbsp;&nbsp;Jacques Goulet | – | – | – | – | – | – | – |

---

• *Credited service* is the actual years of service with the company as of December 31, 2022 used for purposes of the
Canadian defined benefit plan.

• Figures for *annual lifetime pension* at age 65 are based on the NEO's pensionable earnings up to December 31,
2022. • *Accrued obligation* is the actuarial value of projected defined benefit obligations for service to December 31,
2021 and December 31, 2022. The values have been determined using the same actuarial assumptions and methods as those used to determine the year-end pension plan obligations disclosed in the "Fiscal
Year 2021 Financial Statement and Disclosure Information report required under IAS19 and the 2022 expense estimates for Canadian Benefit Programs" dated January 2022 and in the upcoming "Fiscal Year 2022 Financial Statement and Disclosure
Information report required under IAS19 and the 2023 expense estimates for Canadian Benefit Programs". The actuarial opinion in the aforementioned disclosure reports is also applicable to the results presented herein. The accrued obligation
assumes a Named Executive Officer will achieve target bonus. The difference between the accrued obligation at the end of 2021 and 2022 is attributable to the compensatory cost detailed in the chart, interest on the obligations, the impact of changes
to the accounting assumptions, and other actuarial gains and losses.

• *Compensatory change* is the defined benefit service cost for 2022 (the value of the projected pension earned during
the year) and the impact of any differences between actual increases in compensation in 2022 and the actuarial assumptions used for the year.

• Differences between actual future compensation and increases assumed for purposes of valuation, (as well as other plan
experience differing from assumptions), will be reflected in future valuations.

• *Non–compensatory change* represents the change in pension obligation based on non–compensatory factors like
interest on the obligations, impact of changes to the accounting assumptions, and other actuarial gains and losses. The negative non-compensatory change for Mr. Strain in 2022 is primarily due to
increases in market interest rate in 2022 which decreases the accrued obligation.

• Per "Amendment Number 6 to the Sun Life Assurance Company of Canada Canadian Non-Registered Pension Plan" which became effective on December 31, 2022, the total annual retirement income payable of Mr. Strain upon his retirement shall not exceed $1.4M. This "Pension
Cap" has been reflected in the accrued obligation at December 31, 2022.

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***Defined contribution plans*** 

The table below shows the defined contribution pension plan values for each NEO as at December 31, 2022.

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive officer | Accumulated value at <br> &nbsp;&nbsp;&nbsp;&nbsp;start of year ($)  | Compensatory <br> ($)  | Accumulated value at <br> end of year ($)  |
|  &nbsp;&nbsp;&nbsp;&nbsp;Kevin D. Strain | 628375  | 10260  | 608109  |
|  &nbsp;&nbsp;&nbsp;&nbsp;Manjit Singh | 51302  | 137660  | 192347  |
|  &nbsp;&nbsp;&nbsp;&nbsp;Stephen C. Peacher | 8127766  | 394328  | 7041159  |
|  &nbsp;&nbsp;&nbsp;&nbsp;Daniel R. Fishbein | 2764168  | 290058  | 2585172  |
|  &nbsp;&nbsp;&nbsp;&nbsp;Jacques Goulet | 539695  | 146423  | 612325  |

---

• U.S. plan values have been converted to Canadian dollars using an exchange rate of 1.263 as of January 1, 2022, 1.355
as of December 31, 2022, and the 2022 average rate of 1.301 for amounts other than beginning and ending balances.

• *Compensatory* amounts shown for Mr. Strain, Mr. Goulet and Mr. Singh represent our matching
contributions to the Canadian defined contribution plan. The amounts shown for Mr. Peacher and Mr. Fishbein reflect our contributions to the U.S. 401(k) plan, RIA and non-qualified (Top Hat) plan.

• *Accumulated values* include net investment earnings and employee contributions.

**Termination and change of control benefits** 

***Change of control*** 

We have change of control agreements with our NEOs so we can retain our key leaders if we are involved in a transaction affecting the control of Sun Life. This is key to balancing the goals of the business and the interests of shareholders during a transaction.

If employment is terminated without cause within three years of the change of control (double trigger), benefits are paid as follows:

• 24 months of annual pay and incentive compensation from the date of termination

• mid and long-term incentive awards vest (prorated for Mr. Fishbein in the event of a change of control for our U.S.
business) and are paid according to the terms of the respective plans

• most benefits and perquisites continue during the severance period. The early retirement reduction factors in the pension
plan may be enhanced, depending on the provisions of the pension plan in which the executive participates.

We define change of control as:

• a consolidation or merger of SLF Inc. or Sun Life Assurance with a non-affiliate, when our outstanding voting shares represent less than 60% (50% for Mr. Fishbein) of the outstanding voting shares of the new entity immediately after the transaction is complete,

• the sale of all or substantially all of the assets of SLF Inc. or Sun Life Assurance to a non-affiliate (except for Mr. Fishbein), or

• the acquisition by a non-affiliate of more than 20% (30% for Mr. Fishbein) of
the voting shares of SLF Inc. or Sun Life Assurance.

If the majority of the assets of SLF Inc., Sun Life Assurance, or our U.S. business are sold, it constitutes a change of control for Mr. Fishbein.

When there is a *change of control*:

• Sun Shares vest and are paid on an accelerated basis when an executive is terminated without cause or leaves the
organization for good reason (double trigger) prior to the normal payment date (which is a maximum of three years from the grant date) and are otherwise paid on the normal payment date under the terms of the plan,

• any unvested DSUs vest, and vested DSUs are paid either when the executive leaves the organization or on the normal payment
date, whichever is earlier,

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• the board can choose from a range of alternatives to address outstanding options, including accelerated vesting.

***Employee agreements***

The table below summarizes our contractual agreements with the NEOs who are actively employed as of December 31, 2022:

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Nature of termination | Who it applies to | Type of arrangement |
|  &nbsp;&nbsp;&nbsp;&nbsp;Termination<br> &nbsp;&nbsp;&nbsp;&nbsp;(without cause) | Manjit Singh | • Entitled to receive 24 months' compensation in lieu of notice consistent with our practice pertaining to base salary and annual cash incentive at the time. |
|  &nbsp;&nbsp;&nbsp;&nbsp;Termination<br> &nbsp;&nbsp;&nbsp;&nbsp;(without cause) | Stephen C. Peacher<br>Daniel R. Fishbein | • Governed by the terms of severance arrangements that apply to all of our U.S. employees above the Vice-President level. Entitled to four weeks of compensation for each year of service with a minimum severance amount of 12 months of base salary and a maximum of 18 months. |

---

***Benefits on termination and change of control*** 

The table below summarizes how we treat the components of our executive compensation program under different termination scenarios. For our NEOs, termination for cause results in the forfeiture of outstanding unvested share units and options, and can also result in a clawback of any or all of the incentive compensation received or realized in the previous 24 months where appropriate.

---

| | | | | |
|:---|:---|:---|:---|:---|
| |  | Incremental entitlements on other termination scenarios | Incremental entitlements on other termination scenarios | Incremental entitlements on other termination scenarios |
| &nbsp;&nbsp;&nbsp;&nbsp;Compensation <br> element | Entitlement on<br>resignation | Termination <br>(without cause) | Retirement | Change of<br>control and <br>termination<br>without cause |
| **Salary** | • salary ends | • salary ends unless otherwise stated in employment agreement | • salary ends | • 24 months of salary |
| &nbsp;&nbsp;&nbsp;&nbsp;**Annual incentive**<br> &nbsp;&nbsp;&nbsp;&nbsp;**award** | • award forfeited | • award forfeited | • receive pro-rated award calculated from January 1 to retirement date | • receive prorated award calculated from January 1 to the date of termination (assumes target performance)<br> • 24 months of bonus calculated as the average bonus paid for the previous three years, or the target bonus for the current year, whichever is higher |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | |  | Incremental entitlements on other termination<br>scenarios | Incremental entitlements on other termination<br>scenarios | Incremental entitlements on other termination<br>scenarios |
| &nbsp;&nbsp;&nbsp;&nbsp;Compensation <br> element | &nbsp;&nbsp;&nbsp;&nbsp;Compensation <br> element | Entitlement on<br>resignation | Termination <br>(without cause) | Retirement | Change of<br>control and <br>termination<br>without cause |
| &nbsp;&nbsp; **Mid-term incentives** | Sun Shares | • unvested awards forfeited | • receive pro-rated portion of Sun Shares for active employment during performance period<br> • paid immediately<br> • valued using performance factor that includes any variables known at the time of termination | • fully vest and paid at normal payment date<br> • valued using actual performance factor | • unvested awards vest<br> • paid immediately<br> • valued using performance factor that includes any variables known at the time of termination |
|  | SLC Management Phantom Units | • unvested awards forfeited | • receive pro-rated portion of phantom units to reflect service from the grant date to termination date<br> • unit value determined as of the termination date | • fully vest and paid at normal vesting date | • unvested units vest<br> • unit value determined as of the termination date |
| &nbsp;&nbsp; **Long-term incentives** | Stock options | • 60 days to exercise vested options<br> • unvested awards forfeited | • 60 days to exercise vested options<br> • unvested awards forfeited | • up to 36 months to exercise vested options and options that become vested during the period; up to 60 months for the 2019 grant onward | • accelerated vesting of all options and up to 36 months to exercise vested options |
| &nbsp;&nbsp; **DSUs** | &nbsp;&nbsp; **DSUs** | • vested awards are paid with timing at the executive's election<br> • unvested awards forfeited | • vested awards are paid with timing at the executive's election<br> • unvested awards forfeited | • vested awards are paid with timing at the executive's election<br> • unvested awards are forfeited | • vested awards are paid with timing at the executive's election<br> • unvested awards vest |

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| | | | | |
|:---|:---|:---|:---|:---|
| |  | Incremental entitlements on other termination scenarios | Incremental entitlements on other termination scenarios | Incremental entitlements on other termination scenarios |
| &nbsp;&nbsp;&nbsp;&nbsp;Compensation <br> element | Entitlement on<br>resignation | Termination <br>(without cause) | Retirement | Change of<br>control and <br>termination<br>without cause |
| &nbsp;&nbsp; **Estimated pension** | • estimated lump-sum value of accrued pension | • estimated lump-sum value of accrued pension | • estimated lump-sum value of accrued pension | • estimated lump-sum value of accrued pension including change of control severance period under the defined benefit plans |
| &nbsp;&nbsp; **Estimated perquisites** | • perquisites end | • perquisites end | • perquisites end | • perquisites continue until 24 months after termination or reemployment, whichever is earlier<br> • outplacement counselling services <br>(maximum $40,000 in CAD, or USD if paid in USD) |

---

Executives are required to meet specific conditions to qualify for retirement under each of our incentive plans, which include:

For incentives granted on or after July 31, 2019:

• Be at least 55 years old

• Having 5 or more years of continuous service

• Sum of age and years of service being at least 65

• Voluntarily terminate employment and provide at least six months' notice

• Agree not to compete with Sun Life or solicit any of our employees or customers for 12 months under the option plan, and for
the length of time that units remain outstanding under the Executive Sun Share plan.

For incentives granted before July 31, 2019:

• Be at least 55 years old and have 10 years of continuous service

• Voluntarily terminate employment and provide at least six months' notice

• Agree not to compete with Sun Life or solicit any of our employees or customers for 12 months under the option plan, and for
the length of time that units remain outstanding under the Executive Sun Share plan.

The table below shows the estimated value of the incremental payments the NEOs would receive in each of the situations listed above, assuming a termination date of December 31, 2022.

U.S. values have been converted to Canadian dollars using an exchange rate of 1.263 as of December 31, 2022 for pension ending balances and the 2022 average rate of 1.301 for all other amounts. In the table:

• **termination** (without cause) represents only contractually agreed upon severance amounts

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• **change of control** assumes double trigger (change of control and termination without cause)

• cash includes salary and annual incentives

• vested and unvested awards include awards under the mid and long–term incentive plans.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive<br> officer | Compensation<br>component | Estimated<br>existing<br> payments on<br> resignation | Estimated <u>incremental</u> value on termination,<br>retirement or change of control as of<br>December 31, 2022 | Estimated <u>incremental</u> value on termination,<br>retirement or change of control as of<br>December 31, 2022 | Estimated <u>incremental</u> value on termination,<br>retirement or change of control as of<br>December 31, 2022 |
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive<br> officer | Compensation<br>component | Estimated<br>existing<br> payments on<br> resignation | <br> Termination<br>(without cause) | Retirement | <br> Change of<br>control |
| &nbsp;&nbsp;&nbsp; **Kevin D. Strain** | Cash: |  |  | 1500000 | 6500000 |
| &nbsp;&nbsp;&nbsp; President &<br>Chief Executive Officer | Vested awards: | 1507427 |  |  |  |
| &nbsp;&nbsp;&nbsp; President &<br>Chief Executive Officer | Unvested awards: |  | 5635267 | 10480206 | 10480206 |
| &nbsp;&nbsp;&nbsp; President &<br>Chief Executive Officer | Pension: | 6758109 |  |  | 2555000 |
|  | Perquisites: | – | – | – | 100008 |
|  | **Total:** | **8265536** | **5635267** | **11980206** | **19635214** |
|  | Vested DSUs | – | – | – | – |
| &nbsp;&nbsp;&nbsp; **Manjit Singh**<br>| Cash: |  | 2900000 |  | 3700000 |
| &nbsp;&nbsp;&nbsp; EVP & Chief Financial Officer | Vested awards: |  |  |  | 0 |
| &nbsp;&nbsp;&nbsp; EVP & Chief Financial Officer | Unvested awards: |  | 3369007 |  | 6991988 |
|  | Pension: | 192347 |  |  | 0 |
|  | Perquisites: | – | – | – | 90024 |
|  | **Total:** | **192347** | **6269007** | – | **10782012** |
|  | Vested DSUs: | 1731085 | – | – | – |
| &nbsp;&nbsp;&nbsp; **Stephen C. Peacher**<br>| Cash: |  | 1003160 | 1500000 | 8223865 |
| &nbsp;&nbsp;&nbsp; President, SLC<br> Management | Vested awards: | 543973 |  |  |  |
| &nbsp;&nbsp;&nbsp; President, SLC<br> Management | Unvested awards: |  | 5825117 | 9780134 | 9780134 |
|  | Pension: | 7041159 |  |  |  |
|  | Perquisites: | – | – | – | 87178 |
|  | **Total:** | **7585133** | **6828277** | **11280134** | **18091177** |
|  | Vested DSUs: | 2059652 | – | – | – |
| &nbsp;&nbsp;&nbsp; **Daniel R. Fishbein**<br>| Cash: |  | 780697 | 900000 | 5211185 |
| &nbsp;&nbsp;&nbsp; President, Sun Life U.S. | Vested awards: | 3399430 |  |  |  |
| &nbsp;&nbsp;&nbsp; President, Sun Life U.S. | Unvested awards: |  | 3827462 | 6219157 | 6219157 |
|  | Pension: | 2585172 |  |  |  |
|  | Perquisites: | – | – | – | 87178 |
|  | **Total:** | **5984602** | **4608159** | **7119157** | **11517519** |
|  | Vested DSUs: | 1090825 | – | – | – |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive<br> officer | Compensation<br>component | Estimated<br>existing<br> payments on<br> resignation | Estimated <u>incremental</u> value on termination,<br>retirement or change of control as of<br>December 31, 2022 | Estimated <u>incremental</u> value on termination,<br>retirement or change of control as of<br>December 31, 2022 | Estimated <u>incremental</u> value on termination,<br>retirement or change of control as of<br>December 31, 2022 |
| &nbsp;&nbsp;&nbsp;&nbsp;Named executive<br> officer | Compensation<br>component | Estimated<br>existing<br> payments on<br> resignation | <br> Termination<br>(without cause) | Retirement | <br> Change of<br>control |
| &nbsp;&nbsp;&nbsp; **Jacques Goulet**<br>| Cash: |  |  |  | 3923760 |
| &nbsp;&nbsp;&nbsp; President, Sun Life Canada | Vested awards: | 1023585 |  |  |  |
| &nbsp;&nbsp;&nbsp; President, Sun Life Canada | Unvested awards: |  | 5037819 |  | 8507380 |
|  | Pension: | 612325 |  |  |  |
|  | Perquisites: | – | – |  | 90024 |
|  | **Total:** | **1635910** | **5037819** |  | **12521164** |
|  | Vested DSUs: | 677351 | – |  | – |

---

Mr. Peacher qualifies as retirement eligible because of his age and years of service. Mr. Fishbein is retirement eligible for incentives granted after July 31, 2019. This has the following effects:

• the cash amount under Retirement represents an AIP award at target

• unvested Sun Shares would fully vest for Mr. Peacher, be valued using the actual performance factor and be paid at the
normal payment date. Mr. Fishbein's unvested 2020, 2021 and 2022 Sun Shares would fully vest.

**Aggregate compensation for Material Risk Takers** 

As required under the FSB's Implementation Standard 15, we have defined executives who have a material impact on our risk exposure as MRTs. We had 34 MRT positions in 2022, including members of our Executive Team, executives who perform certain corporate and investment oversight roles, and Business Leaders with significant profit-and-loss accountability who have authority to materially impact the risk exposure of the organization. In 2022, 1 individual received a sign-on payment. The table below shows the total compensation granted, paid or outstanding for MRTs as of and for the year ended December 31, 2022. Any compensation paid in U.S. dollars has been converted to Canadian dollars using the 2022 average annual exchange rate of 1.301.

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Annual fixed and variable compensation | Annual fixed and variable compensation | Annual fixed and variable compensation | Annual fixed and variable compensation | Annual fixed and variable compensation | Annual fixed and variable compensation | Annual fixed and variable compensation | | |
|  |  | Annual incentives | Annual incentives | Share-based incentives | Share-based incentives | Share-based incentives | Share-based incentives |  |  |
|  |  |  |  |  |  | Outstanding | Outstanding |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Compensation<br> element | Salary | Cash | Deferred<br>(DSUs) | Granted | Paid | Vested | Unvested | Sign-on<br>payments | Severance<br>payments |
| &nbsp;&nbsp;&nbsp; Aggregate value ($M) | 15.2 | 19.6 | 0.1 | 41 | 40.6 | 29.6 | 89.7 | 2.1 |  |

---

• **Cash incentives** for 2022 did not include any guaranteed payments

• **Annual incentives** represent bonus earned for the 2022 performance year, paid in 2023, inclusive of business and
individual performance results

• **Share-based** incentives include the value of share units and options and any additional units credited as dividends on
share units

• **Granted** represents the value at grant in 2022

• **Paid** represents the value received in 2022 when options were exercised and value at vesting, including performance
adjustments for Sun Shares (i.e., performance share units)

• **Outstanding** share-based incentives represents the in-the-money value of options and the market value of share unit awards using a share price of $62.85 for vested and unvested options and share units as at
December 31, 2022

• **Sign-on payments** represent cash and share unit commitments made upon hire to
replace amounts forfeited from previous employer

• **Severance payments** represent the value of benefits received on termination.

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The table below shows the change in value of outstanding MRT deferred compensation during 2022 based on explicit, implicit and other adjustments as outlined in the guidelines issued by the Basel Committee on Banking Supervision.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  |  | Change in value during 2022 | Change in value during 2022 | Change in value during 2022 |  |
|  | Aggregate value of<br>deferred<br>compensation<br>at January 1, 2022<br>($M) | Explicit<br>adjustments<br>($M) | Implicit<br>adjustments<br>($M) | Other<br>adjustments<br>($M) | Aggregate value of <br>deferred <br>compensation <br>at December 31, <br>2022 <br>($M) |
| &nbsp;&nbsp;&nbsp; Total | 152.4 | -8.1 | -19.0 | -3.0 | 122.3 |
| &nbsp;&nbsp;&nbsp; <br> Percentage change |  | <br> -5.3% | <br> -12.5% | <br> -2.0% | <br> -19.7%  |

---

• **Aggregate value at January 1, 2022** reflects the value of outstanding share units and options

• **Explicit adjustments** reflect the interim performance factor estimates for the 2020, 2021 and 2022 awards approved by
the board in February 2023. This would also include clawbacks if applicable, but none were applied in 2022

• **Implicit adjustments** reflect the impact of changes in share price and accumulated dividends

• **Other adjustments** reflect the net impact of the redemption of vested share units, the grant of new share units,
forfeited units and option exercises during 2022

• **Aggregate value at December 31, 2022** reflects the impact of explicit, implicit and other
adjustments during 2022 on the value of outstanding share units and options.

**Securities authorized for issue under equity compensation plans** 

The table below shows the common shares to be issued under the option plan as at December 31, 2022. It also shows the number of common shares available for issue under the option plan which was approved by our common shareholders.

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;Plan category | Number of securities to<br>be issued upon exercise<br>of outstanding options,<br>warrants and rights (a) | Weighted-average<br>exercise price of<br>outstanding options,<br>warrants and rights | Number of securities remaining <br>available for future issuance <br>under equity compensation <br>plans (excluding securities <br>reflected in column (a)) |
| &nbsp;&nbsp;&nbsp; Equity compensation plans approved by security holders | 3588520 | $58.51 | 3214108 |

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MANAGEMENT INFORMATION CIRCULAR 2023 \| 117

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##### [**Table of Contents**](#toc)
**Other information** 

**Loans to directors, executives and employees** 

We do not grant or guarantee personal loans to our directors and executive officers. The information in the table below is as at February 28, 2023 and shows: (i) the total loans outstanding to current and former employees from SLF Inc. or our subsidiaries; and (ii) the total loans outstanding to current and former employees of a subsidiary of SLF Inc. from other entities where such loans have been made to facilitate investments by those employees in certain funds managed by the subsidiary and the subsidiary has guaranteed those loans.

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| | | |
|:---|:---|:---|
|  | Total outstanding loans  | Total outstanding loans  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purpose | Payable by Employees/<br>Former Employees<br>to Sun Life<br>or our subsidiaries<br>($) | Payable by Employees/ <br> Former Employees <br> to another entity <br> ($)  |
| &nbsp;&nbsp;&nbsp; Securities purchases | $486000 | $13857570 |
| &nbsp;&nbsp;&nbsp; <br> Other | <br> $2928182 | <br> –  |

---

**Directors and officers liability insurance** 

We have liability insurance to protect our directors and officers against liabilities they may incur in their capacity as directors and officers of SLF Inc. and our subsidiaries in circumstances where the company cannot provide indemnification. The current policy runs from November 1, 2022 to October 31, 2023 with coverage of up to $210 million. We pay a premium of approximately $1.2 million and there is no deductible.

**For more information** 

You can find recent financial information about SLF Inc. in our consolidated financial statements and MD&A for the year ended December 31, 2022. These and other documents are available on our website (www.sunlife.com), on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov/edgar.shtml).

You may also request a copy of our most recent consolidated financial statements and MD&A from our Corporate Secretary.

118 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)
**Schedule A: Shareholder proposal** 

The Salal Foundation of 185-911 Yates St., Suite 561, Victoria, BC V8V 4Y9, represented by Investors for Paris Compliance (I4PC) has submitted the following proposal:

**Proposal No. 1** 

*Resolved: Shareholders request that Sun Life produce a report, at reasonable expense and omitting confidential information, documenting the health impacts and potential insurance implications of its investments in fossil fuels on its current and future client base. The report should be reviewed by independent experts to add credibility.*

***Supporting Statement***

As a health and life insurer, Sun Life's stated purpose is "to help our clients achieve lifetime financial security and live healthier lives." On its home page under "Why choose Sun Life?" the company answers: "We're building sustainable, healthier communities for life."<sup>1</sup>

Yet, as an asset owner and asset manager, Sun Life via its subsidiaries invests tens of billions of dollars in fossil fuels. Sun Life is the largest Canadian investor in companies on the Global Coal Exit List, at US$11.9 billion in 2021.<sup>2</sup> An independent study of Sun Life's financed emissions estimated them at 222 million tonnes of carbon dioxide equivalent, nearly the combined entire emissions of Ontario and Quebec.<sup>3</sup>

Fossil fuel use has a range of direct adverse health impacts via air pollution and indirect health impacts via climate change, for example:

&nbsp;&nbsp;&nbsp;&nbsp;• The Government of Canada finds coal combustion impacts include asthma, respiratory diseases, and hundreds of thousands of
premature deaths worldwide.<sup>4</sup>

&nbsp;&nbsp;&nbsp;&nbsp;• A 2022 Lancet Journal study found the costs of premature mortality due to air pollution amounted to US$2.3 trillion in 2020,
the equivalent of 2.7% of gross world product.<sup>5</sup>

&nbsp;&nbsp;&nbsp;&nbsp;• The same study found heat-related deaths increased by 68% since 2000 and global

&nbsp;&nbsp;&nbsp;&nbsp;• heat-related mortality was estimated to cost $144 billion in 2021, equivalent to the average income of
12.4 million people. A "heat dome" killed over 600 people in British Columbia in 2021.<sup>6</sup>

&nbsp;&nbsp;&nbsp;&nbsp;• A national assessment of climate and health by the Government of Canada concludes: "Health risks will increase as
warming continues, and the greater the warming, the greater the threats to health."<sup>7</sup>

Sun Life has pledged to reach net zero in its financed emissions by 2050, but to date only its subsidiary InfraRed has a fossil fuel exclusion, calling it "vital to drive this transition."<sup>8</sup> Other subsidiaries continue to invest in fossil fuels with no timelines for change, driving the adverse health impacts listed above, and hindering Sun Life's transition to net zero.

The contradiction between Sun Life's stated purpose and its investments in fossil fuels represents a business risk. Its uneven approach to fossil fuels across its subsidiaries represents a governance risk and compliance risk as financial regulators develop guidance to address climate change, as the Office of the Superintendent of Financial Institutions is now doing.<sup>9</sup>

Investors require more disclosure regarding the nature of this business risk, including information about the potential client base in the emerging markets that Sun Life is currently targeting for growth and where climate and health impacts are more extreme.<sup>10</sup>

We respectfully request that shareholders vote for this proposal.

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<sup>1</sup> https://www.sunlife.ca/en/

<sup>2</sup> https://www.coalexit.org/

<sup>3</sup> https://www.investorsforparis.com/insuring-the-climate-crisis/

<sup>4</sup> https://www.canada.ca/en/services/environment/weather/climatechange/canada-international-action/coal-phase-out.html#toc3

<sup>5</sup> https://www.lancetcountdown.org/2022-report/

<sup>6</sup> https://news.gov.bc.ca/releases/2022PSSG0035-000911

<sup>7</sup> https://changingclimate.ca/site/assets/uploads/sites/5/2022/02/CCHA-REPORT-EN.pdf

<sup>8</sup> https://www.ircp.com/sites/default/files/2022-05/infrared_exclusion_policy_2022.pdf

<sup>9</sup> https://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/b15-dft.aspx

<sup>10</sup> https://foreignpolicy.com/2022/08/24/extreme-weather-asia-climate-change-floods-droughts-heatwave/

MANAGEMENT INFORMATION CIRCULAR 2023 \| 119

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##### [**Table of Contents**](#toc)
**Board response to Proposal 1:** 

Sun Life is committed to being part of the climate solution. Meaningful climate action aligns with our values and is essential to achieving our Purpose to help our Clients achieve lifetime financial security and live healthier lives. In 2021, we set out our goal of achieving net zero greenhouse gas (GHG) emissions in our investments and operations by 2050. In 2022, we focused efforts on setting interim targets and implementation plans toward achieving this goal. Four of our asset management businesses had their interim targets approved by the Net Zero Asset Managers initiative: MFS Investment Management, BentallGreenOak, InfraRed Capital Partners and SLGI Asset Management. At the same time, we have undertaken extensive efforts to develop our baseline GHG profile for our general account (GA) investments–spanning multiple asset classes and geographies–and developed a climate strategy for the GA. We have also set a first round of interim net zero targets <sup>11</sup> for 2030, from a 2019 baseline: a minimum 40% reduction in carbon intensity for listed corporate bonds, 50% reduction in carbon intensity for listed equities, and a 50% reduction in carbon intensity for the BGO Sun Life Real Estate Equity Fund. We have already commenced the hard work of delivering on these promises and we will continue to scale up our efforts towards net zero.

We are committed to working together across industries, with our Clients, investees and other stakeholders to contribute to help solve the global challenge climate change presents. We recognize that we do not yet have all the answers to this complex topic, and we welcome opportunities to engage in constructive conversations and engagements with a variety of stakeholders as we seek to advance this critical work as we have been with I4PC since 2022.

Using our own investments and our influence as an asset manager, we seek opportunities to drive the transition to a low-carbon and more inclusive economy. We invest proactively in assets and businesses that support the transition to a lower-carbon economy. Examples include renewable energy, energy efficiency, sustainable buildings and clean transportation. We set a goal of $20 billion in new sustainable investments from 2021-2025 in assets and businesses that support that transition. We have already made meaningful progress. New sustainable investment in 2022 totaled $6.5 billion, bringing our total progress towards our goal to $14.2 billion.

We assess climate-related impacts on our businesses and investments with the aim of prudently managing them to realize our commitments, while acknowledging the challenges of uncertainty and imperfect data to inform such decisions. Improvements in emissions data and in methodologies for assessing climate-related risks and opportunities, including the impacts and implications of investments in fossil fuels, will continue to help us enhance our climate transition plans. However, we also believe that a successful energy transition requires affordable, accessible and reliable energy to meet society's needs today while accelerating action to a net-zero future. That's why we are committed to working with the companies in which we invest in to support them in this critical transition to a low-carbon economy.

We believe our climate strategy must be considered holistically based on a full and reasoned analysis of Sun Life's overall business strategy, our approach to risk management, the interests of various stakeholders and the best allocation of resources over the long-term. The board and management are actively involved in sustainability and climate strategy oversight. The proposal would constrain the exercise of the board's business judgment by dictating how Sun Life's climate and broader sustainability strategy should be managed to best meet its Purpose. Given the importance of sustainability to Sun Life's overall strategy, the board must be able to exercise its best judgment in these matters.

Furthermore, the proposal is unlikely to result in the reporting of meaningful information for investors. As stated by the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD), investors want information about climate-related risks and opportunities that is consistent, comparable, reliable and clear. That is why Sun Life supports climate-related disclosure aligned with the TCFD's recommendations, which provide a consistent and comparable framework for climate-related reporting across organizations and jurisdictions. In contrast, the proposal does not reference any existing framework for the requested disclosure, nor does it seek information that investors could easily compare to equivalent information from other organizations. Rather, the proposal asks Sun Life to speculate and report on a complex, bespoke and possibly unanswerable question – i.e., whether and how specific future emissions from companies in which Sun Life invests will result in specific health impacts to Clients that will result in insurance claims now and in the future. We are not aware of any industry standard for

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<sup>11</sup> Refer to our Net Zero by 2050 report for further details on target setting methodology.

120 \| MANAGEMENT INFORMATION CIRCULAR 2023

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##### [**Table of Contents**](#toc)
analyzing or reporting on this question and it is not required by current regulatory proposals such as OSFI's proposed guideline B-15 which the proposal cites. We believe the pressing need for meaningful climate action should guide our efforts and resources towards areas where we can have the most material impact. Making significant, measurable progress on limiting global greenhouse gas emissions must be a priority for this decade, to avoid the worst consequences of a changing climate. Preparation of the report requested would require Sun Life to expend funds and resources to produce a document that would not provide meaningful information; it would divert resources and fail to serve the best interests of Sun Life and its stakeholders.

Our prudential regulator, the Office of the Superintendent of Financial Services (OSFI) in March published Guideline B-15: Climate Risk Management. It sets out detailed expectations on climate risk management for federally regulated financial institutions (FRFIs). This Guideline addresses prudential oversight of these risks, governance expectations and specific comparable disclosures. Compliance with the final Guideline is a significant area of focus for Sun Life.

**The board respectfully requests that shareholders vote AGAINST** this proposal given Sun Life's existing sustainability strategy and commitments, the pending regulatory guidance from OSFI, the hiring of a climate team under our Chief Sustainability Officer (VP, Climate Change & Environmental Impact; AVP, Climate Change Risk, AVP Climate & Environment Performance, AVP Climate & Environment PMO; Director, Scope 3 Emissions, Director, Climate & Environment Business Group Strategy were all hired in the past nine months), our in-depth sustainability disclosure, the comprehensive governance structure we have put in place to monitor and manage climate-related issues, including those related to the direct and indirect impacts of investments in fossil fuels, the limited utility in the production and disclosure of a costly report on a topic for which there is not a well-recognized framework for clear, consistent and comparable reporting, and the active role of the board and management in sustainability and climate strategy oversight.

MANAGEMENT INFORMATION CIRCULAR 2023 \| 121

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##### [**Table of Contents**](#toc)
![LOGO](g384576g00m02.jpg)

At Sun Life, we believe that being accountable for the impact of our operations on the environment is one part of being a trusted and responsible business. The adoption of "Notice and Access" to deliver this circular to our shareholders has resulted in significant cost savings as well as the following environmental savings: 540 35 lbs 251,350 16,825 lbs 46,340 lbs 250 mil. BTUs Trees water gallons of solid waste greenhouse of total pollutants water gases energy This circular is printed on FSC® certified paper. The fibre used in the manufacture of the paper stock comes from well-managed forests and controlled sources. The greenhouse gas emissions associated with the production, distribution and paper lifecycle of this circular have been calculated and offset by Carbonzero. Being a sustainable company is essential to our long-term business success. Learn more at sunlife.com/sustainability 1 York Street, Toronto, ON Canada, M5J 0B6 sunlife.com MIC-1-2023 Sun Life MIX Paper from responsible sources FSC® C132107 czc-1531-2102-2012

## Exhibit 99.2

**Exhibit 99.2**![LOGO](g384576stamp_03.jpg)

Notice of 2023 annual meeting of common shareholders and notice of availability of meeting materials Notice and access As permitted by the Canadian Securities Administrators and pursuant to an exemption from the proxy solicitation requirement received from the Office of the Superintendent of Financial Institutions, we are using notice and access to deliver our Management Information Circular (circular) to our registered and non-registered shareholders for our annual meeting. We are also using notice and access to deliver our annual management's discussion and analysis (MD&A) to our registered shareholders and our MD&A and annual financial statements (together with our MD&A and circular, the "meeting materials") to share ownership account participants and non-registered shareholders. This means that instead of receiving a paper copy of certain meeting materials, you are receiving this notice, which provides information on how to access these meeting materials. You will also find below information on how to request paper copies of these meeting materials if you prefer. Adopting notice and access allows us to reduce our printing and mailing costs, and is consistent with our sustainability strategy. You will find enclosed with this notice a proxy or voting instruction form, enabling you to vote at our annual meeting. We encourage you to read the circular before exercising your vote. Shareholders are invited to attend our annual meeting: When: Thursday, May 11, 2023 at 5:00 P.M. (Toronto time). Where: Virtually Via live webcast online at https://web.lumiagm.com/451195677 Password: "sunlife2023" (case sensitive) We recommend that you log in at least one hour before the meeting starts. In Person (subject to ongoing developments related to the COVID-19 pandemic and being permitted by public health guidelines) 1 York Street (at Harbour Street), 35th floor, Toronto, Ontario, Canada Shareholders are advised to check our website www.sunlife.com/2023agm periodically in advance of the meeting for any updates on in person attendance in light of the COVID-19 pandemic. Shareholders will be asked to consider and vote on the following matters: 01 Election of the directors (page 14 of the circular) 02 Appointment of the auditor (page 6 of the circular) 03 A non-binding advisory vote on our approach to executive compensation (page 8 of the circular) 04 Consideration of the shareholder proposal (page 48 of the circular) Meeting materials can be found online on: SEDAR at www.sedar.com EDGAR at www.sec.gov/edgar.shtml Our transfer agent's website at www.meetingdocuments.com/TSXT/slf Our website at www.sunlife.com/2023agm NA-1-23 Notice of 2023 Annual Meeting \| NOTICE AVAILABILITY OF MEETING MATERIALS 01

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![LOGO](g384576stamp_04.jpg)

Voting: Voting Deadline: May 9, 2023 at 5:00 P.M. (Toronto time) Registered shareholders and share ownership account participants Return your completed proxies, or exercise your vote by the voting deadline. Please refer to your proxy for detailed instructions on how to vote. Internet: www.meeting-vote.com Telephone: 1-888-489-7352 (toll–free Canada & U.S.) Scan & Email: proxyvote@tmx.com Mail: Please use the envelope provided Non-registered shareholders Return your completed voting instruction form (VIF) or exercise your vote by the voting deadline using the control number on your VIF. Please refer to your VIF for detailed instructions on how to vote. Internet: www.proxyvote.com Telephone: Canadian holders: 1-800-474-7493 (English) 1-800-474-7501 (French) US holders: 1-800-454-8683 Smartphone: Scan QR code found on the VIF Mail: Please use the envelope provided If you want to attend the meeting and vote your shares virtually, you need to first appoint yourself or your proxyholder by using one of the methods above and then obtain a control number, which is required to vote at the meeting. You can get a control number by calling TSX Trust Company at 1-866-751-6315 (within North America) or 1-647-252-9650 (outside of North America) or by completing an online form at: https://www.tsxtrust.com/control-number-request. Requesting a paper copy of meeting materials: Upon request received at any time prior to or up to one year following the date of filing of the circular, annual report, annual financial statements or annual MD&A, as applicable we will send you a paper copy of the document at no cost within three business days of your request The request can be made online at www.meetingdocuments.com/TSXT/slf or by telephone at 1-888-433-6443 (toll–free from Canada and the U.S.) or 416-682-3801 (other countries) or by email at TSXT-fulfilment@tmx.com. For the circular, your request for a paper copy should be received by April 26, 2023 in order to receive the circular in advance of the voting deadline. If you request a paper copy of any materials, you will not receive a new form of proxy, so you should keep the original form sent to you in order to vote. Please Call: TSX Trust Company, our transfer agent, at 1-888-433-6443 (toll–free Canada and the U.S.) or 416-682-3801 (other countries) if you have questions about Notice and Access. Go Digital! Electronic delivery of other continuous disclosure documents Registered shareholders and share ownership account participants Sign up for e-delivery at tsxtrust.com/SL/GoDigital OR by checking the box on the reverse side of your proxy form and providing your email address. Non-registered shareholders in Canada and U.S. Sign up for e-delivery at www.proxyvote.com using the control number on your VIF OR after the meeting by obtaining a unique registration number from your financial intermediary. NA-1-23 Notice of 2023 Annual Meeting \| NOTICE AVAILABILITY OF MEETING MATERIALS 02

## Exhibit 99.3

**Exhibit 99.3**![LOGO](g384576g01a11.jpg)

Sun Life Financial Inc. Form of Shareholder Proxy for the May 11, 2023 Annual Meeting Your control number is: The UNDERSIGNED common shareholder of Sun Life Financial Inc. (the "Company") hereby appoints Scott F. Powers, Chair of the Board, or failing him, M. Marianne Harris, Chair of the Governance, Investment & Conduct Review Committee, or failing her, a director of the Company appointed by the directors present at the meeting, or instead of any of the foregoing, as the proxyholder of the undersigned to attend, vote and act on behalf of the undersigned at the Annual Meeting of the Company to be held on Thursday, May 11, 2023 and at any continuation of the meeting after any adjournment or postponement thereof, to the same extent and with the same powers as if the undersigned were personally present at such meeting or any such continuation thereof. A common shareholder has the right to appoint a person or company other than those designated above by inserting the name of such person in the space provided above. In addition, if you or your proxyholder want to attend the meeting and vote your shares virtually, YOU OR YOUR PROXYHOLDER MUST obtain a new control number by calling 1 (866) 751-6315 (within North America) or 1 (647) 252-9650 (outside of North America) or by completing an online form at: https://www.tsxtrust.com/control-number-request by 5:00 pm (Toronto time) on Tuesday, May 9, 2023 from the Company's transfer agent and registrar, TSX Trust Company (TSX Trust). This new control number will allow you or your proxyholder to log in to and vote at the meeting. Without this new control number, you or your proxyholder will only be able to log in to the meeting as a guest and will not be able to vote. A duly completed form of proxy must be received by TSX Trust no later than 5:00 pm (Toronto time) on Tuesday, May 9, 2023 or, in the case of an adjournment or postponement of the meeting, by no later than 5:00 pm (Toronto time) on the date that is two business days before the meeting is reconvened. See reverse side for instructions for submitting your proxy. Information on the following can be found in the Management Information Circular of the Company dated March 17, 2023. The directors and management recommend common shareholders vote FOR the matters 1 - 3 below. Unless otherwise specified, the proxyholders designated by the directors and management intend to vote FOR the matters below: 1. Election of Directors 01 Deepak Chopra For Withhold 07 Helen M. Mallovy Hicks For Withhold 02 Stephanie L. Coyles For Withhold 08 Marie-Lucie Morin For Withhold 03 Ashok K. Gupta For Withhold 09 Joseph M. Natale For Withhold 04 M. Marianne Harris For Withhold 10 Scott F. Powers For Withhold 05 David H. Y. Ho For Withhold 11 Kevin D. Strain For Withhold 06 Laurie G. Hylton For Withhold 12 Barbara G. Stymiest For Withhold 2. Appointment of Deloitte LLP as Auditor For Withhold 3. Non-Binding Advisory Vote on Approach to Executive Compensation For Against The directors and management recommend common shareholders vote AGAINST the matter below. The proxyholders designated by the directors and management intend to vote AGAINST the matter below: Shareholder Proposal No. 1 For Against Abstain Your Signature(s) (all common shareholders named on proxy must sign) Date (dd-mm-yyyy) X – – If you have questions regarding this proxy, please refer to the Voting section of the Management Information Circular for contact information. S-1

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![LOGO](g384576g02b22.jpg)

Notes to the Form of Proxy This form of proxy is solicited by and on behalf of the Board of Directors and management. This proxy is valid only for the Annual Meeting on May 11, 2023, and any continuation of the Annual Meeting after any adjournment or postponement thereof. a) If the common shareholder intends to vote by proxy, this form of proxy must be signed and dated by the common shareholder. All signatures must agree with the names on this proxy. If the common shareholder is a corporation, it must be signed by a duly authorized signing officer whose title should be provided. b) If this form of proxy is signed pursuant to a power of attorney, written evidence of the appointment of the attorney must be returned with the completed proxy. c) Should any of the nominees named in paragraph one of this proxy be unable to serve as a director for any reason, the proxyholder reserves the right to vote for another nominee in his or her discretion unless the proxyholder has been specifically instructed on this form of proxy to withhold the vote for the election of directors. d) This form of proxy confers discretionary authority upon the proxyholder with respect to matters that may properly come before the meeting, including any amendments or variations to matters identified in the Notice of Meeting, in each instance, to the extent permitted by law, whether or not the amendment, variation or other matter that comes before the meeting is routine or contested. e) This proxy must be delivered in accordance with the provisions set out in the Management Information Circular dated March 17, 2023. f) An undated proxy is deemed to be dated on the day it was received by TSX Trust Company. Instructions for Submitting Your Proxy By Mail: Mark, sign, date and return in the envelope provided. By Email: Mark, sign, date, scan and email both pages to proxyvote@tmx.com. By Telephone: From Canada or the United States only, using a touch-tone telephone, call toll free 1 (888) 489-7352 (English and French) and follow the voice instructions. You will need to refer to your control number printed on the front of this proxy form. By Internet: Access www.meeting-vote.com and follow the instructions. You will need to refer to your control number printed on the front of this proxy form. THIS IS THE END OF THE PROXY FORM FOR THE 2023 ANNUAL MEETING. GO DIGITAL! Sign up for our electronic delivery service. Electronic Delivery of Documents We are permitted to deliver our Management Information Circular and management's discussion and analysis to you through notice-and-access as described in the Circular. If you wish to go digital and receive other materials prepared by Sun Life Financial Inc., such as notices of meeting, proxy forms, annual financial statements and other information by e-mail instead of in hard copy, you can provide your consent by signing up on-line at: tsxtrust.com/SL/GoDigital or by checking the box and providing your e-mail address below. We encourage you to take advantage of this service. You may change your instructions at any time by writing to the Company's transfer agent, TSX Trust Company, at sunlifeinquiries@tmx.com. Please provide your instructions along with your name, address and Shareholder Account Number at the bottom of this form. To: TSX Trust Company I wish to receive materials prepared by Sun Life Financial Inc., such as notices of meeting, proxy forms, annual financial statements and other information required to be sent to shareholders, electronically. Doing so means that you will be notified by email when such documents are available, at which time they can be viewed and/or downloaded from our website: www.sunlife.com. My e-mail address is: The Insurance Companies Act (Canada) provides that you may also decline to receive annual financial statements, by mail or electronically, by providing written instructions. Please check the box below if you do not wish to receive future annual financial statements. If you do not provide instructions below, the annual financial statements will be sent to you. I do not wish to receive annual financial statements. Shareholder's name and account number Your signature(s) (all common shareholders named on proxy must sign) Date (dd-mm-yyyy) X – – S-1

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![LOGO](g384576g98z56.jpg) <br>BROKER ADDRESS 123 ANY STREET ANY CITY/PROVINCE A1A 1A1 BROKER LOGO 1 of 2 S91970-81 010 E: C S:3 E:2 1/1 M A:A V: 1 JOHN A. SAMPLE 123 ANY STREET ANYCITY PR A1A 1A1 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX <br>See reverse / Voir au verso E

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![LOGO](g384576g71j91.jpg)

REQUEST FOR FINANCIAL STATEMENTS \| DEMANDE D'ÉTATS FINANCIERS \* ONLINE: VISIT BROADRIDGEFINANCIALREQUESTS.COM USING YOUR COMPUTER OR MOBILE DATA DEVICE. YOUR CONTROL NUMBER IS LOCATED BELOW. CONTROL NUMBER: NUMÉRO DE CONTRÔLE : 9999 9999 9999 9999 25470E503 EN LIGNE : VISITEZ BROADRIDGEFINANCIALREQUESTS.COM À L'AIDE DE VOTRE ORDINATEUR OU DE VOTRE APPAREIL PORTABLE. VOTRE NUMÉRO DE CONTRÔLE EST INDIQUÉ CI-DESSOUS. SCAN TO REQUEST MATERIAL NOW NUMÉRISEZ POUR DEMANDER LES DOCUMENTS MAINTENANT GR1 To: Holders of Sun Life Financial Inc. ("SLF") Class A Preferred Shares, Series 3, 4, 5, 8R, 9QR, 10R and 11QR Request for Financial Statements Sun Life Financial Inc.'s annual financial statements, interim financial statements and the related management's discussion and analysis are available on-line at www.sunlife.com/financialreports. If you want us to mail you a printed copy of these documents, please indicate below. If you do not provide instructions, these documents will not be sent to you. You will be asked this question annually. YES, I wish to receive a paper copy of the 2023 annual financial statements and the related management's discussion and analysis. YES, I wish to receive a paper copy of the 2023 interim financial statements and the related management's discussion and analysis. You may also sign up on-line at: http://tsxtrust.com/financialstatements (company code: 6981b). Signature Date (dd/mm/yy) Thank you for investing in Sun Life Financial Inc. Dest. : Porteurs d'actions privilégiées de catégorie A, série 3, 4, 5, 8R, 9QR, 10R et 11QR de la Financière Sun Life inc. (la «FSL») Demande d'envoi des états financiers Les états financiers annuels et les états financiers intermédiaires de la Financière Sun Life inc., de même que les rapports de gestion s'y rapportant, sont accessibles en ligne sur le site www.sunlife.com/rapportsfinanciers.. Si vous désirez que nous vous envoyions par la poste un exemplaire imprimé de ces documents, veuillez l'indiquer ci-dessous. Si vous ne fournissez pas de directives, ces documents ne vous seront pas envoyés. Cette question vous sera posée chaque année. OUI – Je désire recevoir un exemplaire Papier des états financiers annuels de 2023 et du rapport de gestion s'y rapportant. OUI – Je désire recevoir un exemplaire papier des états financiers intermédiaires de 2023 et des rapports de gestion s'y rapportant. Vous pouvez également vous inscrire en ligne à l'adresse http://tsxtrust.com/financialstatements/fr (code de la société : 6981b). Signature Date (jj/mm/aa) Nous vous remercions d'avoir investi dans la Financière Sun Life inc. 9999 9999 9999 9999

## Exhibit 99.4

**Exhibit 99.4**![LOGO](g384576stamp_17.jpg)

Go Digital! At Sun Life we have a long-standing commitment to sustainability. As part of that commitment, we are accountable for the impact of our operations on the environment. Help us reduce the amount of printed material we produce: please consider receiving your investor information electronically. E-delivery is easy and convenient. Follow these simple steps now: Go to www.proxyvote.com or use your smartphone to scan the QR code provided Enter the 16-digit control number from the enclosed Voting Instruction Form Vote and make your final submission Go to "More options for this meeting" Click on "Sign up for email delivery" Click "email" Enter your email address Read and accept the E-delivery Service Agreement Click "Submit" and you are done! E-1-2023 Sun Life

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![LOGO](g384576stamp_18.jpg)

Passez au numérique! À la Sun Life, nous faisons depuis longtemps preuve d'engagement à l'égard de la durabilité. Suivant cet engagement, nous sommes responsables des répercussions de nos activités sur l'environnement. Aidez-nous à réduire la quantité de documents que nous imprimons : veuillez envisager de recevoir par voie électronique les renseignements qui vous sont destinés à titre d'investisseur. La livraison électronique est facile et pratique. Veuillez maintenant suivre ces étapes simples : Rendez-vous à l'adresse www.proxyvote.com ou lisez le code QR à l'aide de votre téléphone intelligent Entrez le numéro de contrôle à 16 chiffres qui figure sur le formulaire de demande d'instructions de vote Votez et envoyez votre réponse Rendez-vous à la section « Plus d'options pour cette assemblée » Cliquez sur « Inscrivez-vous à la livraison par courriel » Cliquez sur « Courriel » Entrez votre adresse courriel Lisez et acceptez le Contrat de service de livraison électronique Validez en cliquant sur « Soumettre », et c'est tout! E-1-2023 Sun Life

### Attached PDF Documents

**Attachment 1:** `d384576dex995.pdf`

Exhibit 99.5

# 2022 Annual Report

![img-0.jpeg](img-0.jpeg)

![img-1.jpeg](img-1.jpeg)

## Sun Life at a glance

OUR PURPOSE

Helping our Clients achieve lifetime financial security and live healthier lives

28 markets*

85M Clients*

52,500 employees*

97,400 advisors*

$22B

Gross claims & benefits paid in 2022

*As of December 31, 2022. Rounded to the nearest hundred. Represents full-time equivalent employees, temporary employees and employees in Asia joint ventures.

OUR AMBITION

To be one of the best asset management and insurance companies in the world

![img-2.jpeg](img-2.jpeg)

**Front Cover Artwork:** Life

**Artist:** Loretta Gould

Loretta Gould is a Mi'kmaq artist from Canada's East Coast best known for her paintings. Working with a wide range of styles, she often blends traditional and contemporary values, reflecting a spiritual element in her work.

Her artwork, *Life*, on the cover of this year's Annual Report is a tribute to showcasing diverse voices and perspectives. Her art embodies our principle of unity in purpose and reminds us of the importance of coming together as a community.

## Table of contents

| 02 | Financial highlights | 114 | Consolidated financial statements and notes | 211 | Major offices |
| --- | --- | --- | --- | --- | --- |
| 03 | Message from the Chair | 201 | Sources of earnings | 215 | Corporate and shareholder information |
| 04 | Message from the CEO | 204 | Board of directors and executive team |  |  |
| 09 | Management's discussion and analysis | 205 | Subsidiaries and associates |  |  |

## Moments that matter - Mason’s story

Mason was born with spinal muscular atrophy type 1 - a condition that his parents were devastated to learn would be fatal without treatment. Time was of the essence to help Mason.

Given an unsuccessful first-line therapy, Mason’s doctor proposed a newly approved drug. Sun Life Canada had no claims experience with this drug but worked quickly with the hospital and pharmaceutical company.

Mason’s new treatment was well-received and today he’s a playful and active toddler. From this experience, Sun Life can now assist other Clients in similar circumstances.

![img-3.jpeg](img-3.jpeg)

Mason, front right, with sibling Mya and parents Mike and Lindsay.

*“Your patience and willingness to help our family in one of the most unexpected and challenging seasons we have ever faced will be forever remembered.”*

- Lindsay

## Balanced and diversified business

### Business pillars

Underlying net income$^{1,2,3}$

**32%**

Sun Life Asset Management

![img-4.jpeg](img-4.jpeg)

### Business mix

Underlying net income$^{1,2,4}$

**44%**

Wealth & asset management

![img-5.jpeg](img-5.jpeg)

Refer to page 213 for endnotes. All numbers are impacted by rounding and in Canadian dollars, unless otherwise noted.

Sun Life Financial Inc. | 2022 ANNUAL REPORT

1

FINANCIAL HIGHLIGHTS

## Strong capital and financial flexibility

| Medium-term financial objectives 5,6,7 |  |  |
| --- | --- | --- |
| Growth in underlying earnings per share | Underlying return on equity | Underlying dividend payout ratio |
| 8-10% per annum | 16%+ (increases to 18%+) 8 | 40-50% |

| 5-year progress on medium-term financial objectives 8 |  |  |
| --- | --- | --- |
| Growth in underlying earnings per share | Average underlying return on equity | Average underlying dividend payout ratio |
| 9% | 14.7% | 41% |

Life insurance capital adequacy test (LICAT) ratio$^{9}$

**130%**

Sun Life Financial Inc.

Financial leverage ratio$^{12}$

Target - 25%

**25.1%**

### Reported net income in $ millions

![img-6.jpeg](img-6.jpeg)

### Underlying net income$^{2}$ in $ millions

![img-7.jpeg](img-7.jpeg)

### Dividend per common share

![img-8.jpeg](img-8.jpeg)

### Assets under management$^{12}$

![img-9.jpeg](img-9.jpeg)

**$1.33T**

### Wealth sales and asset management gross flows$^{2}$

in $ billions
2022: $204

![img-10.jpeg](img-10.jpeg)

### Insurance sales$^{2}$

in $ millions
2022: $4,321

![img-11.jpeg](img-11.jpeg)

## Delivering value to our shareholders

### 5-year total shareholder return

![img-12.jpeg](img-12.jpeg)

- 47% Sun Life
- 39% TSX Composite
- 39% TSX Financial Sector

Represents Total Shareholder Return as described in our 2022 Management Information Circular.
Data source: Bloomberg.

Refer to page 213 for endnotes. All numbers are impacted by rounding and in Canadian dollars, unless otherwise noted.

2 Sun Life Financial Inc. | 2022 ANNUAL REPORT

MESSAGE FROM THE CHAIR

![img-13.jpeg](img-13.jpeg)

“Leading around diversity, equity and inclusion starts in our boardroom and in 2022 we reached an important milestone, achieving gender parity at the Board level.”

# To my fellow shareholders,

Over the past year, the world continued to experience a great deal of turbulence including geopolitical strife, supply chain disruption, volatile markets and the ongoing impact of the COVID-19 health crisis. Sun Life navigated through these challenges with resilience, optimism and strong leadership, making sure we were there for our Clients. As it has always been, our Purpose - to help our Clients achieve lifetime financial security and live healthier lives - served as our compass.

Through the company’s disciplined approach, Sun Life delivered solid five-year performance, including a Total Shareholder Return of 8.0%. Throughout that time, our balance sheet and capital position remained strong with a dividend payout ratio of 41%, underlying earnings per share annual growth rate of 9%, and underlying return on equity at 14.7%.

I’m proud of the results Sun Life delivered for our shareholders and Clients. Behind

all of this work are teams of innovative and passionate Sun Life employees and advisors.

The company’s approach to capital allocation and its focus on capital light businesses - through organic investments, acquisitions and partnerships - have made a tremendous difference to our growth and our increasing ability to deliver innovative products and solutions to Clients.

Contributions from DentaQuest and many of our bancassurance partnerships in Asia are both enhancing our bottom line and providing access to health and financial security to even more people around the world.

I’m especially proud to lead a Board with accomplished leaders who bring a thoughtful and disciplined approach to governance and an extensive set of skills, backgrounds and ideas to Sun Life. Leading around diversity, equity and

inclusion starts in our boardroom and in 2022 we reached an important milestone, achieving gender parity at the Board level.

On a personal note, this was my first year as Sun Life’s Chair. It’s my honour to represent our company and our shareholders, Clients and other stakeholders. It is clear to me that through Sun Life, our Purpose, our leadership, and our people are making a difference in the lives of our Clients.

On behalf of our Board and all Sun Life employees and advisors, thank you to our Clients for their ongoing trust and loyalty and to you, our shareholders for your confidence and commitment.

Scott F. Powers
Chair of the Board

Sun Life Financial Inc. | 2022 ANNUAL REPORT

3

MESSAGE FROM THE CEO

“As I reflect on 2022, I’m proud of our results and how we achieved them.”

![img-14.jpeg](img-14.jpeg)

**Helping Clients achieve lifetime financial security and live healthier lives. It’s our Purpose.** It’s the company’s reason for being. It connects every Sun Life employee and advisor around the world and most importantly, it drives what we do every day.

As I reflect on 2022, I’m proud of our results and how we achieved them - our dedicated people, their resilience, our inclusive and caring culture, and our focus on Clients to deliver on our Purpose.

Our 85 million Clients worldwide create an incredible opportunity, on a global scale, to deliver financial security and increase positive health outcomes and well-being. We know we play an essential role for our Clients in the areas that matter most, and we take great pride in helping them build brighter, optimistic futures for themselves and their families.

## Resilience in the face of challenge

2022 highlighted our resilience. Faced with many external challenges, from economic, to geopolitical, to the COVID-19 pandemic, it was the resilience of our people and our strategy that enabled Sun Life to remain in a position of strength and deliver solid financial performance for our shareholders.

Sun Life’s reported net income for 2022 was $3.06 billion and underlying net income was $3.67 billion, up by 4% over the previous year. We saw strong growth in our protection and health businesses, which reinforces the importance Clients continue to place on health and financial security. While declines in global equity markets affected our asset management businesses, we are confident about their ability to perform and grow.

MFS maintained a leadership position in the U.S. retail mutual funds industry, ending the year 10th in assets under management$^{1}$, while SLC Management had net inflows of $21.5 billion. We also effectively deployed capital through organic investment, selected strategic acquisitions and quarterly shareholder dividends, which were in line with our dividend payout ratio of 40 to 50%. Since November 2021, after regulator restrictions were lifted for dividend increases during the pandemic, we’ve increased our dividends by 31%.

Underlying Return on Equity (ROE) of 15.1% continues to trend towards our medium-term financial objective of 16+%. Our disciplined approach to risk and capital management, as well as our focus on capital light businesses, has served us well. Sun Life’s balance sheet remains strong with a LICAT ratio of 130% for Sun Life Financial Inc. We ended the year with $1.33 trillion in assets under management.

These results aren’t just numbers but reflections of the promises we’re making to Clients to be there for them now, and when they need us in the future.

4

Sun Life Financial Inc. | 2022 ANNUAL REPORT

MESSAGE FROM THE CEO

## Delivering positive Client outcomes

Our Clients remain at the centre of everything we do. We continue to make a positive impact across all four business pillars - Asset Management, Canada, U.S. and Asia. Our focused approach allowed us to not only grow our business but to support our Clients in meaningful ways, like increasing distribution to enable greater access to our products; helping Clients navigate complex health systems and access the care they need; and developing innovative solutions and providing digital tools to create a more seamless experience.

Providing access to innovative investment solutions was a priority in our *Asset Management* businesses. We acquired a majority stake in Advisors Asset Management Inc., allowing us to bring our diversified range of alternative asset management capabilities to the U.S. high net worth market. We also announced the sale of our UK business to Phoenix Group,

which will include a strategic asset management partnership for both SLC Management and MFS.

The pandemic brought to the forefront an already concerning mental health crisis. Sun Life wants to be part of the solution. In *Canada*, we announced a $3.7 million investment to support mental health programs for youth with the goal of improving access and expanding the reach of services and programs. Building capabilities and innovative solutions will expand access to care and support overall well-being, while helping employers manage benefits costs.

In the U.S. we closed our DentaQuest acquisition, the biggest in our history outside of Canada, building on our capability to be a leader in the health and benefits space. DentaQuest will transform our U.S. business into a larger, more health-care-focused organization with more than 70 per cent

of our benefits revenue coming from health care. Their focus on delivering quality oral health care to approximately 36 million Americans is helping make a difference in the lives of families in underserved markets.

With more than one billion Asians set to join the global middle class by 2030$^{12}$, Asia continues to represent a significant opportunity for growth. We're building quality distribution channels with new and extended bancassurance partnerships, making our products more accessible to more people. Dah Sing in Hong Kong and CIMB Niaga in Indonesia are great additions to our more than 20 quality bancassurance partnerships across seven Asian markets. Our history of execution in Asia has proven that strong bancassurance relationships coupled with high quality advisory networks provides a critical platform creating more Client impact.

![img-15.jpeg](img-15.jpeg)

![img-16.jpeg](img-16.jpeg)

![img-17.jpeg](img-17.jpeg)

Sun Life Financial Inc. | 2022 ANNUAL REPORT

5

MESSAGE FROM THE CEO

## Accelerating our digital journey

Future chapters of Sun Life's success will be defined by digital. Tied to our Purpose, we continue to build capabilities that create a frictionless digital experience for Clients. The goal is to build deeper digital relationships and more personalized experiences so we can better anticipate and serve our Clients' unique needs.

In Canada, we created more than 65,000 financial roadmaps for Clients last year using our Sun Life One Plan

digital tool. Having a personalized financial roadmap helps our Clients build financial confidence and provides clear steps to help them achieve lifetime financial security.

Clients are embracing digital more and more. Last year in Asia, 83% of applications were submitted digitally, up 12% from the previous year. And in Vietnam we saw a significant increase in Clients' comfort submitting claims digitally. Claims that previously took

up to two days to process can now be done in 15 minutes - benefitting our company and Clients.

We launched Sun Life Onboard in the U.S., a new, fully digital way to simplify the benefits setup process. How we 'onboard' new benefits Clients is now a faster and easier digital experience for employers and their employees.

![img-18.jpeg](img-18.jpeg)

## Passionate people and trusted brand

None of this happens without teams of passionate people motivated to deliver on our Purpose. Last year, I was pleased to visit many employees and advisors in person for the first time since the pandemic. I always come away energized and inspired. It's clear to me that our caring people and optimistic, Purpose-driven culture differentiates us and makes us an employer of choice for top talent.

Sun Life has been certified as a Great Place to Work® in many of our markets around the world. In the U.S., we received numerous recognitions, including being named a 2022 Top Place to Work by *The Boston Globe* for the fifth year in a row. And SLC Management was named 2022 Best Places to Work in Money Management for the third year in a row by *Pensions & Investments*.

Sun Life's recognition extends beyond being an employer of choice to being recognized as a trusted brand. For the 14th consecutive year, we're listed by Corporate Knights as one of the Global 100 Most Sustainable Corporations in the World, and this year as the top-ranked insurance company globally.

Awards are nice, but ultimately it's about our commitment to an inclusive culture. We're proud to support an environment where diversity is championed and where our people have access to resources and flexibility to support their mental, physical and professional well-being.

6

Sun Life Financial Inc. | 2022 ANNUAL REPORT

MESSAGE FROM THE CEO

![img-19.jpeg](img-19.jpeg)

![img-20.jpeg](img-20.jpeg)

## Being sustainability-driven

Sustainability is a shared goal. We **all** have a role to play if we are truly going to make the world a better, more sustainable place. It's why we believe in engaging everyone on this journey. We all need to do our part. Being sustainability-driven is a tremendous opportunity to nurture Client relationships, be innovative and drive real progress. It's simply the right thing to do. As part of the legacy we're creating, we're committed to embed sustainability into the actions we take and decisions we make.

Our efforts focus on where we can have the greatest impact: *increasing financial security, fostering healthier lives, and advancing sustainable investing*. This supports our reputation as a trusted and responsible business. Helping our Clients achieve financial security and health - which are at the very core of our Purpose - makes for stronger, more sustainable communities. As one of the largest asset managers

in the world, we understand our role in supporting sustainable companies through our investments.

And we're making an impact. For example, according to Diabetes Canada, one in three Canadians have diabetes or prediabetes. We've integrated our philanthropic diabetes focus into our business by increasing access to affordable insurance for Canadians living with diabetes. This includes a health and wellness solution where eligible Clients can access a specialized diabetes clinic and wellness platform with targeted content and resources. Since 2012, we've committed more than $46 million globally to the cause.

Another great example is one of my favourite investment stories. SLC Management invested in a state-of-the-art health-care facility in Montreal that provides a wide range of health-care services and a cancer research institute. This provides tremendous

social benefit and access to much needed cancer care, positively contributing to local employment in the community. The facility also achieved LEED Gold certification demonstrating sustainable design and a high level of operating efficiency.

Sun Life is continuing to progress on its climate commitments. Our general account interim climate targets have been announced as part of our sustainability reporting. InfraRed Capital Partners, our international infrastructure investment manager, set interim targets aligned with the Net Zero Asset Managers initiative, including to have 70% of in-scope assets$^{13}$ aligned or aligning$^{14}$ by 2030. MFS set an interim target to align$^{14}$90% of in-scope assets$^{15}$ with the Net Zero Asset Managers initiative. And SLGI Asset Management Inc. set out an initial target to have 24% of total AUM$^{16}$ to be net zero aligned or aligning$^{14}$ by 2030.

Sun Life Financial Inc. | 2022 ANNUAL REPORT

7

MESSAGE FROM THE CEO

## Well-positioned for the future

While we can't predict the year ahead, what is certain is that Sun Life will be there for our Clients and we have the resilience to deliver for our shareholders. Even in the most challenging times - whether it's inflation, interest rate volatility, geopolitical unrest or global health concerns - we're confident in our ability to navigate uncertainty. Sun Life's brand continues to represent trust, resilience and optimism.

Our ambition is to be one of the best asset management and insurance companies in the world. We hold a unique position of strength in both our asset management and insurance businesses to take advantage of opportunities where both sides can work together. We also have strength in the global nature of our business. This helps us better understand the world and what's happening. All of this is in support of delivering on our Purpose: helping Clients achieve lifetime financial security and live healthier lives.

I'll close my letter with thanks. Thank you to our Clients for trusting us with your financial security and health needs - nothing is more important. Thank you to our shareholders for your ongoing trust and support. Thank you to our people for bringing their best to work each day and delivering excellence for our Clients and partners. And finally, to our Board of Directors for the role they play in helping guide our journey.

Kevin Strain
President & Chief Executive Officer

![img-21.jpeg](img-21.jpeg)

Refer to page 213 for endnotes.

8

Sun Life Financial Inc. | 2022 ANNUAL REPORT

# MANAGEMENT'S DISCUSSION AND ANALYSIS

10 A. HOW WE REPORT OUR RESULTS

11 B. OVERVIEW

11 1. Strategy
14 2. Financial Objectives
14 3. Sustainability Plan
15 4. Acquisitions and Other

16 C. FINANCIAL SUMMARY

17 D. PROFITABILITY

20 E. GROWTH

20 1. Sales, Gross Flows and Value of New Business
21 2. Assets Under Management

22 F. FINANCIAL STRENGTH

24 G. PERFORMANCE BY BUSINESS GROUP

24 1. Canada
28 2. U.S.
32 3. Asset Management
37 4. Asia
42 5. Corporate

43 H. INVESTMENTS

43 1. Investment Profile
43 2. Debt Securities
45 3. Equities
45 4. Mortgages and Loans
47 5. Derivatives
49 6. Investment Properties
49 7. Impaired Assets
49 8. Asset Default Provision

50 I. CAPITAL AND LIQUIDITY MANAGEMENT

50 1. Capital
53 2. Capital Adequacy
54 3. Shareholder Dividends
55 4. Principal Sources and Uses of Funds
56 5. Liquidity

57 J. RISK MANAGEMENT

57 1. Risk Management Framework
58 2. Risk Governance
59 3. Risk Universe
59 4. Risk Appetite
60 5. Risk Management Policies
60 6. Risk Management Process
60 7. Three Lines of Defence
61 8. Risk Culture and Philosophy
62 9. Risk Categories

85 K. ADDITIONAL FINANCIAL DISCLOSURE

85 1. Selected Annual Information
85 2. Items related to Statement of Operations
88 3. Items related to Statement of Financial Position
89 4. Fourth Quarter 2022 Profitability
91 5. Fourth Quarter 2022 Growth
92 6. Previous Quarters

94 L. NON-IFRS FINANCIAL MEASURES

103 M. ACCOUNTING AND CONTROL MATTERS

103 1. Critical Accounting Policies and Estimates
109 2. Changes in Accounting Policies
111 3. Disclosure Controls and Procedures

112 N. LEGAL AND REGULATORY PROCEEDINGS

112 O. FORWARD-LOOKING STATEMENTS

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

9

# Management's Discussion and Analysis

February 8, 2023

## A. How We Report Our Results

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 December 31, 2022, Sun Life had total assets under management ('AUM') of $1.33 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.

Sun Life Financial Inc. ('SLF Inc.') is a publicly traded company domiciled in Canada and is the holding company of Sun Life Assurance Company of Canada ('Sun Life Assurance'). In this management's discussion and analysis ('MD&A'), 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'. Unless otherwise indicated, all information in this MD&A is presented as at and for the year ended December 31, 2022 and the information contained in this document is in Canadian dollars.

Where information at and for the year ended December 31, 2022 is not available, information available for the latest period before December 31, 2022 is used. Except where otherwise noted, financial information is presented in accordance with International Financial Reporting Standards ('IFRS') and the accounting requirements of the Office of the Superintendent of Financial Institutions ('OSFI'). Reported net income (loss) refers to Common shareholders' net income (loss) determined in accordance with IFRS.

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 this MD&A document.

### 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 L - Non-IFRS Financial Measures in this document and the Supplementary Financial Information package that are available on www.sunlife.com under 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, 2022. These documents are filed with securities regulators in Canada and are available at www.sedar.com. 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.

### 4. COVID-19 Pandemic Considerations

In early 2020, the world was impacted by COVID-19, which was declared a pandemic by the World Health Organization. The overall impact of the COVID-19 pandemic is still uncertain and dependent on the progression of the virus 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, refer to section J - Risk Management - 9 - Risk Categories - vii - Other Risks - Risks relating to the COVID-19 pandemic in this document.

10 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## B. Overview

Sun Life is a leading international financial services organization providing a diverse range of asset management, wealth, insurance, and health solutions to individual and institutional Clients. We have four business pillars: Asset Management, Canada, U.S. and Asia.

### 1. Strategy

Our strategy places the Client at the centre of everything we do. Our enterprise strategy, as described below, reflects both our priorities and our diversified business mix. We believe by effectively executing on our strategy, we can fulfill our Purpose, create a positive impact for our Clients, and achieve our goal to be a leader in each of our four pillars.

Our Purpose: Help Clients achieve lifetime financial security and live healthier lives

Four pillars

- AM A global leader in both public and alternative asset classes through MFS and SLC Management
- CAN A leader in health, wealth, and insurance
- US A leader in health and benefits
- ASIA A regional leader focused on fast-growing markets

Client Impact

![img-0.jpeg](img-0.jpeg)

Priorities to accelerate growth and competitive position

- 01 Think and act like a digital company
- 02 Realize synergies between Asset Management and Insurance businesses
- 03 Build scale and capabilities through M&A and strategic partnerships
- 04 Deliver on our Health strategy in Canada, the U.S., and Asia

Our Ambition: To be One of the Best Asset Management and Insurance companies in the world

### Purpose and Ambition

Our Purpose is to help our Clients achieve lifetime financial security and live healthier lives.

We seek to provide outstanding value and impact for our Clients in three ways:

#### Driving positive financial actions by:

- Helping Clients build and protect their wealth.
- Providing quality products and solutions that meet the needs of our Clients.
- Delivering timely and expert advice through consistently superior Client experiences.

#### Delivering solid long-term Client investment returns by:

- Leveraging our collective expertise to make better investment decisions.
- Sourcing broad investment capabilities to serve global Client needs.
- Actively engaging with our Clients to think and act sustainably.

#### Driving positive health actions by:

- Being a trusted payer of benefits.
- Helping Clients access, navigate, manage, and receive the care they need.
- Improving health outcomes, including physical and mental well-being, by providing health solutions.

Our Ambition is "to be one of the best asset management and insurance companies in the world". We aim to achieve our ambition by maintaining our balanced business mix and leading positions across our pillars, delivering on our Purpose and Client Impact strategy, and focusing on strong execution to meet our medium-term financial objectives(1)(2):

- Underlying Earnings Per Share growth: 8-10%.
- Underlying Return on Equity: 16%+.
- Underlying Dividend Payout Ratio: 40%-50%.

(1) For more information about our medium-term financial objectives, see section B - Overview - 2 - Financial Objectives in this document. Underlying earnings per share, underlying ROE and underlying dividend payout ratio are Non-IFRS financial measures. See section L - Non-IFRS Financial Measures in this document.

(2) Our medium-term financial objectives following the adoption of IFRS 17 and IFRS 9 remain consistent for underlying earnings per share and underlying dividend payout ratio. Our underlying ROE medium-term financial objective will change to 18%+ following the adoption of both standards, an increase from 16%+ prior to transition. We continue to assess the impact that the adoption of IFRS 17 and IFRS 9 will have on our Consolidated Financial Statements and estimates of the financial impacts are subject to change. For more information, see Section J - Risk Management - 9 - Risk Categories - vii - Other Risks in this document.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

11

## Our Four Pillars

Our four pillars define the businesses and markets in which we operate. In each of these pillars, we focus on creating value and positively impacting our Clients through businesses that have strong growth prospects, favourable return on equity ("ROE"), and strong capital generation in attractive global markets. We are well-positioned across each of our pillars.

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

We deliver value and drive positive Client impact through our offering of quality investment products:

- MFS Investment Management ("MFS") is a long-standing premier active investment manager offering a comprehensive set of asset management products and services to retail and institutional investors around the world.
- SLC Management is an institutional investment manager delivering alternative fixed income, private credit, infrastructure and global real estate solutions to institutional investors.

### Canada: A leader in health, wealth, and insurance

We deliver value and impact to over 6.6 million Clients via our group and individual businesses, helping Clients achieve lifetime financial security and live healthier lives by:

- Providing a wide range of asset management, wealth, health and protection solutions to retail Clients.
- Continuing to build a health business that focuses on helping Canadians live healthy lives, both as a major provider of group benefits and through a growing focus on innovative products and services that lead to better health outcomes.
- Remaining a market leader in group retirement services in the workplace, including defined contribution pensions, and defined benefit pension de-risking.

### U.S.: A leader in health and benefits

We have deep expertise in the health care market, and help our Clients get the coverage they need while improving health outcomes. We are:

- The largest independent medical stop-loss provider in the U.S., offering protection against large medical claims for employers who self-insure their employee health plans and health care navigation services to help members improve outcomes.
- The second largest dental benefits provider in the U.S.(1), serving more than 37 million members(2) through government programs and commercial group dental and vision solutions for employers of all sizes.
- A top ten group life and disability provider in the U.S., offering a broad portfolio of group insurance products and services, as well as turnkey risk management solutions for health plans and other insurance carriers.

### Asia: A regional leader focused on fast-growing markets

We are well-positioned in growing markets in Asia, with operations in key ASEAN markets (Philippines, Vietnam, Indonesia, and Malaysia), Hong Kong, India, China, and High-Net-Worth ("HNW") (International and Singapore). These markets account for approximately 65% of Asia's GDP with high potential for future growth(3). We are:

- A provider of individual life and health insurance that delivers Client value across all of our markets.
- A provider, in select markets, of asset management and group retirement products and services.
- Among the global leaders in providing life insurance solutions to HNW Clients.

## Our Client Impact Strategy

Our Client Impact strategy has seven areas of focus that we are pursuing across our four pillars. These areas of focus define how we compete in our markets, extend our competitive advantages, fulfill our Purpose and support our ambition to be one of the best asset management and insurance companies in the world.

**Client Impact:** Our Clients are at the centre of everything we do. Whether it is helping to navigate health concerns, save and plan for retirement or provide financial security for their families, our focus is on the positive impact we have on our Clients' lives. We believe this allows us to develop and offer the right solutions and experiences, build lasting and trusted Client relationships, and create value for Clients that also deliver better business outcomes for Sun Life. We are committed to helping Clients by driving positive health and financial actions, and delivering solid long-term investment returns.

**Distribution Excellence:** We have established an omni-channel approach to distribution that makes it easier for Clients to do business with us across all markets. To excel at distribution, we prioritize exceptional service, connecting with our Clients when and how they want to engage, and providing personalized and holistic solutions. We are focused on meeting our Clients' needs by being an exceptional distribution partner that empowers our advisors and partners to harness digital solutions to provide seamless Client experiences.

**Digital Leadership:** We are accelerating our digital, data and analytics capabilities and seek to think and act like a digital company. Our Digital Enterprise strategy brings our businesses and technology teams closer together and transforms how we work. Business and technology are working together in an agile way to deliver digital experiences, products, and solutions that meet our Clients' needs and drive positive outcomes. We continue to adopt Client-centric solutions that incorporate our Clients' perspectives in every stage of their lives, creating long-term relationships.

Our Digital Enterprise strategy is focused on:

- Creating deep Client relationships enabled by leading digital capabilities and analytics.
- Delivering personalized Client experiences harnessing our data to provide insights.
- Evolving how we work together to drive faster decisions that are made closer to the Client.

(1) Based on number of members as of December 31, 2021. Ranking based on data disclosed by competitors.

(2) Includes members who also have a Sun Life Group coverage.

(3) Source: International Monetary Fund, 2022.

12 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

**Financial Discipline:** Our strategy is underpinned by a continued commitment to strong financial performance and risk management, coupled with a focus on capital management. Sustained focus across these areas support our medium-term financial objectives and our aim of top quartile total shareholder returns. Specific areas of focus include:

- Delivering strong, stable earnings growth and disciplined expense management.
- Managing our capital to protect our policyholders and to maintain strong financial flexibility, to generate shareholder value.
- Disciplined investment and a programmatic M&A[1] approach focused on building scale and capabilities to drive future growth.

**Sustainability Driven:** Sustainability is essential to our long-term business success. We embed sustainability into our strategy, culture, and operations, to drive meaningful social and economic outcomes for our Clients, employees, advisors, investors and communities. We believe our actions will contribute to a healthier, more financially resilient, environmentally secure, and economically prosperous world. See Section B - Overview - 3 - Sustainability Plan in this document for more information about our approach to sustainability.

**Empowered People and Inclusive Culture:** Delivering on our strategy will require us to attract, retain, and develop the best talent, and to empower our people to drive results. It will also require us to preserve and strengthen our strong culture of Client focus, integrity, collaboration and inclusivity. Specifically, our focus is to:

- Empower employees and advisors to take action, make decisions, and be accountable.
- Develop talent that combines strong leadership skills with technological savvy, to support our transformation to a leading digital organization.
- Maintain momentum on our diversity, equity and inclusion ("DE&I") commitment, embedding DE&I into our decision-making to reflect our values.
- Design our Future of Work with intent, offering employees choice and flexibility in how and where we work.
- Be the employer of choice for top talent.

**Trusted Brand:** Preserving our long standing reputation of being a trusted brand is paramount in an increasingly complex and digitized world. Over the last 150 years, we have built and enjoyed strong, trusted relationships with our Clients in all Sun Life markets and through our distribution partnerships. Our brand informs the differentiated Sun Life experiences we create, the products and service experiences we deliver, and the culture we live by, to achieve our Purpose. Our forward-looking brand strategy will maintain focus on future competitive advantage and brand appeal with both new and existing Clients.

## Key Strategic Priorities

Together with the strong foundation of our four pillars and key strategic areas of focus, our strategy emphasizes four key strategic priorities to accelerate growth and improve competitive positioning:

1. Think and act like a digital company.
2. Realize synergies between asset management and insurance businesses.
3. Build scale and capabilities through M&A and strategic partnerships.
4. Deliver on our health strategy in Canada, the U.S., and Asia.

We believe we are well-positioned to execute on each of these strategic priorities and that by doing so we will create positive Client Impact.

Our balanced four pillars, holistic Client Impact strategy, and focus on our strategic priorities combine elements that have been core to our success. Looking ahead, we are confident that our strategy will allow us to deliver on our Purpose, drive positive Client outcomes, create meaningful value for our shareholders, and support our ambition to be one of the best asset management and insurance companies in the world.

[1] Mergers & Acquisitions ("M&A").

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

13

## 2. Financial Objectives

Our medium-term financial objectives are outlined as follows:

| Measure (1)(2) | Medium-term financial objectives (3) | 5-Year (4) | 2022 results |
| --- | --- | --- | --- |
| Underlying EPS growth Growth in EPS reflects the Company's focus on generating sustainable earnings for shareholders. | 8%-10% | 9% | 4% |
| Underlying Return on Equity ('ROE') ROE is a significant driver of shareholder value and is a major focus for management across all businesses. | 16%+ | 14.7% | 15.1% |
| Underlying dividend payout ratio Payout of capital versus shareholder value, based on underlying net income. | 40%-50% | 41% | 44% |

$^{(1)}$ Underlying earnings per share ('EPS'), underlying ROE and underlying dividend payout ratio are non-IFRS financial measures. See section L - Non-IFRS Financial Measures in this document. Underlying dividend payout ratio represents the ratio of common shareholders' dividends to diluted underlying EPS. See section I - Capital and Liquidity Management - 3 - Shareholder Dividends in this document for further information regarding dividends.

$^{(2)}$ Our medium-term financial objectives following the adoption of IFRS 17 and IFRS 9 remain consistent for underlying earnings per share and underlying dividend payout ratio. Our underlying ROE medium-term financial objective will change to 18%+ following the adoption of both standards, an increase from 16%+ prior to transition. We continue to assess the impact that the adoption of IFRS 17 and IFRS 9 will have on our Consolidated Financial Statements and estimates of the financial impacts are subject to change. For more information, see Section J - Risk Management - 9 - Risk Categories - vii - Other Risks in this document.

$^{(3)}$ Although considered reasonable, we may not be able to achieve our medium-term financial objectives as our assumptions may prove to be inaccurate. Accordingly, our actual results could differ materially from our medium-term financial objectives as described above. Our medium-term financial objectives do not constitute guidance. Our medium-term financial objectives are forward-looking non-IFRS financial measures and additional information is provided in this MD&A in section O - Forward-looking Statements - Medium-Term Financial Objectives.

$^{(4)}$ Underlying EPS growth is calculated using a compound annual growth rate. Underlying ROE and dividend payout ratio are calculated using an average.

In the year and over the medium-term, we have performed well against our medium-term financial objectives in a challenging operating environment reflecting economic and geopolitical uncertainties and global health concerns.

## 3. Sustainability Plan

Our sustainability plan is aligned directly with our Purpose of helping our Clients achieve lifetime financial security and live healthier lives, and is integrated into our enterprise strategy. We focus on three areas where we have the greatest opportunity to have a positive impact on society, while creating a competitive advantage for our business.

**Increasing Financial Security:** We provide Clients and employees with innovative solutions and services that increase their lifetime financial security. We empower and educate Clients to take positive financial action, improving access to and use of wealth and protection products, helping to build long-term wealth and close insurance coverage gaps.

**Fostering Healthier Lives:** We offer Clients and employees products, services and tools to help them live healthier lives. We positively impact health and wellness outcomes in society through our focus on increasing access to health care and health and disability insurance. Our investments in community health complement these efforts.

**Advancing Sustainable Investing:** We aspire to deliver sustainable returns for our Clients and drive the transition to a low-carbon, inclusive economy. We embed ESG factors in our investment processes, offering Clients sustainable investing opportunities. In addition, we invest our own assets in ways that support a low-carbon and more inclusive economy.

Our sustainability plan builds from our foundation as a **Trusted and Responsible Business**. We prioritize foundational sustainability considerations that are important to stakeholders: climate change, diversity, equity & inclusion, data security & privacy, talent management, governance & ethics, risk management, and reporting & disclosure. We recognize climate change as one of the defining issues of our time and commit to working together across industries, with our Clients, investees and other stakeholders to contribute to solving this global challenge. We are committed to the goal of achieving net zero greenhouse gas emissions by 2050, for our operations and investments.

Our sustainability plan is guided by the United Nations Sustainable Development Goals ('SDGs'). We focus primarily on supporting the five SDGs where we believe we can have the greatest impact. These are: #3 Good health & well-being, #5 Gender equality, #7 Affordable and clean energy, #8 Decent work and economic growth and #13 Climate action.

For additional information on our sustainability plan and recent progress, refer to www.sunlife.com/sustainability and the headings '2022 Highlights' throughout section G - Performance by Business Segment in this document. For more information on our approach to climate change, refer to the heading 'Environmental and Social Risk Section' in section J - Risk Management - 9 - Business and Strategy Risks of this document, which includes our disclosure based on the recommendations of the Task Force on Climate-related Financial Disclosures ('TCFD').

14 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## 4. Acquisitions and Other

The following developments occurred since January 1, 2022. Additional information concerning acquisitions and dispositions is provided in our 2022 Annual Consolidated Financial Statements.

On April 5, 2022, we announced an expansion to our existing bancassurance partnership with PT Bank CIMB Niaga Tbk ('CIMB Niaga') in Indonesia, which also extends our existing agreement by six years to 2039. Under the new agreement, for a term of 15 years effective January 2025, Sun Life will be the provider of insurance solutions to CIMB Niaga customers across all distribution channels, accelerating our growth ambitions in the country.

On June 1, 2022, we completed the acquisition of DentaQuest Group, Inc. ('DentaQuest'), the second-largest dental benefits provider in the U.S.$^{(1)}$ for approximately $3.3 billion (US$2.6 billion). DentaQuest is included in our U.S. business segment as part of the new 'Dental' business unit, along with our existing dental and vision business, formerly within Group Benefits. DentaQuest is the largest provider of U.S. Medicaid dental benefits, with growing Medicare Advantage, commercial, and U.S. Affordable Care Act exchange businesses. The acquisition advances our strategy of being a leader in health and benefits in the U.S. while contributing to fee-based earnings and businesses which generate higher ROE.

On August 4, 2022, we entered into an agreement to sell SLF of Canada UK Limited ('Sun Life UK') to Phoenix Group Holdings plc ('Phoenix Group') for approximately $385 million (£248 million). Sun Life UK manages life and pension policies as well as payout annuities for UK Clients. Sun Life UK is closed to new sales and has operated as a run-off business since 2001. Under the agreement, we will retain our economic interest in the payout annuities business through a reinsurance treaty. Phoenix Group is the UK's largest long-term savings and retirement business, with £270 billion$^{(2)}$ of assets under administration and approximately 13 million customers. As part of the sale, we will establish a long-term partnership to become a strategic asset management partner to Phoenix Group. Our asset management companies, MFS and SLC Management, will continue to manage approximately $9 billion of Sun Life UK's general account upon the close of the sale. In addition, Phoenix Group has set a goal to invest approximately US$25 billion in North American public and private fixed income and alternative investments over the next five years. MFS and SLC Management will be material partners to Phoenix Group in achieving this goal. In Q3'22, we recognized an impairment charge of $170 million (£108 million) pertaining to the attributed goodwill that is not expect to be recovered for through the sale. The transaction is expected to close in the first half of 2023, subject to regulatory approvals and customary closing conditions.

### Subsequent Events

For additional information, refer to Note 28 of our 2022 Annual Consolidated Financial Statements.

On January 20, 2023, we announced a 15-year exclusive bancassurance partnership in Hong Kong with Dah Sing Bank ('Dah Sing'). Under this partnership, Sun Life will be the exclusive provider of life insurance solutions to Dah Sing's 570,000 retail banking customers, helping to fulfill their savings and protection needs at different life stages. This is Sun Life's first exclusive bancassurance partnership in Hong Kong and will be a valuable complement to our existing network of over 2,500 expert insurance advisors. Hong Kong is a thriving life insurance hub in Asia and bancassurance is a key distribution channel, accounting for more than 50% of the life insurance distribution mix. Following the completion of regulatory processes and approvals, distribution of Sun Life products is anticipated to start in July 2023.

On February 1, 2023, we completed the acquisition of a 51%$^{(3)}$ interest in Advisors Asset Management, Inc. ('AAM'), a leading independent U.S. retail distribution firm. AAM provides access to U.S. retail distribution for SLC Management, Sun Life's institutional fixed income and alternatives asset manager. This allows SLC Management to meet the growing demand among U.S. HNW investors for alternative assets. AAM provides a range of solutions and products to financial advisors at wirehouses, registered investment advisors and independent broker-dealers, overseeing US$40.5 billion (approximately C$55 billion) in assets as at December 31, 2022, with 10 offices across nine U.S. states.

On February 1, 2023, we completed the sale of our sponsored markets business from Sun Life Assurance Company of Canada ('SLA'), a wholly owned subsidiary of SLF Inc., to Canadian Premier Life Insurance Company ('Canadian Premier'). Sponsored markets include a variety of association & affinity, and group creditor clients.

$^{(1)}$ Based on number of members as of December 31, 2021. Ranking based on data disclosed by competitors.

$^{(2)}$ As at June 30, 2022.

$^{(3)}$ On a fully diluted basis.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

15

## C. Financial Summary

($ millions, unless otherwise noted)

| Profitability | 2022 | 2021 |
| --- | --- | --- |
| Net income (loss) |  |  |
| Reported net income (loss) - Common shareholders | 3,060 | 3,934 |
| Underlying net income (loss) (1) | 3,674 | 3,533 |
| Diluted earnings per share ('EPS') ($) |  |  |
| Reported EPS (diluted) | 5.21 | 6.69 |
| Underlying EPS (diluted) (1) | 6.27 | 6.03 |
| Reported basic EPS ($) | 5.22 | 6.72 |
| Return on equity ('ROE') (%) |  |  |
| Reported ROE (1) | 12.5% | 17.1% |
| Underlying ROE (1) | 15.1% | 15.4% |

| Growth | 2022 | 2021 |
| --- | --- | --- |
| Sales |  |  |
| Insurance sales (1) | 4,321 | 3,674 |
| Wealth sales and asset management gross flows (1) | 204,113 | 228,408 |
| Value of new business ('VNB') (1) | 1,253 | 1,346 |
| Assets under management (1) |  |  |
| General fund assets | 205,614 | 205,374 |
| Segregated funds | 125,292 | 139,996 |
| Other AUM (1) | 994,953 | 1,099,358 |
| Total AUM (1) | 1,325,859 | 1,444,728 |

| Financial Strength | 2022 | 2021 |
| --- | --- | --- |
| LICAT ratios (2) |  |  |
| Sun Life Financial Inc. | 130% | 145% |
| Sun Life Assurance (3) | 127% | 124% |
| Financial leverage ratio (1)(4) | 25.1% | 25.5% |
| Dividend |  |  |
| Dividend payout ratio (1) | 44% | 38% |
| Dividends per common share ($) | 2.760 | 2.310 |
| Capital |  |  |
| Subordinated debt (4) | 6,676 | 6,425 |
| Innovative capital instruments (5) | 200 | 200 |
| Participating policyholders' equity | 1,837 | 1,700 |
| Non-controlling interest equity | 90 | 59 |
| Preferred shares and other equity instruments | 2,239 | 2,239 |
| Common shareholders' equity (6) | 25,211 | 24,075 |
| Total capital (4) | 36,253 | 34,698 |
| Weighted average common shares outstanding for basic EPS (millions) | 586 | 586 |
| Closing common shares outstanding (millions) | 586 | 586 |

$^{(1)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

$^{(2)}$ Life Insurance Capital Adequacy Test ('LICAT') ratio. Our LICAT ratios are calculated in accordance with OSFI-mandated guideline, Life Insurance Capital Adequacy Test.

$^{(3)}$ Sun Life Assurance Company of Canada ('Sun Life Assurance') is SLF Inc.'s principal operating life insurance subsidiary.

$^{(4)}$ For 2021, amount included $2.0 billion of proceeds from the subordinated debt offerings completed in November 2021, of which $1.5 billion did not qualify as LICAT capital at issuance as it was subject to contractual terms requiring us to redeem the underlying securities in full, if the closing of the DentaQuest acquisition did not occur. We completed the acquisition of DentaQuest on June 1, 2022.

$^{(5)}$ Innovative capital instruments consist of Sun Life Exchangeable Capital Securities ('SLEECS'), which qualify as regulatory capital. However, under IFRS they are reported as Senior debentures in the Consolidated Financial Statements. For additional information, see section I - Capital and Liquidity Management in this document.

$^{(6)}$ Common shareholders' equity is equal to Total shareholders' equity less Preferred shares and other equity instruments.

16 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## D. Profitability

The following table reconciles our Common shareholders' net income ('reported net income') and underlying net income. The table also sets out the impacts that other notable items had on reported net income and underlying net income. All factors discussed in this document that impact underlying net income are also applicable to reported net income.

| ($ millions, after-tax) | 2022 | 2021 |
| --- | --- | --- |
| Reported net income - Common shareholders | 3,060 | 3,934 |
| Less: Market-related impacts (1) | (410) | 627 |
| Assumption changes and management actions (1) | 62 | 74 |
| Other adjustments (1)(2) | (266) | (300) |
| Underlying net income (3) | 3,674 | 3,533 |
| Reported ROE (3) | 12.5% | 17.1% |
| Underlying ROE (3) | 15.1% | 15.4% |
| Experience-related items attributable to reported and underlying net income (3)(4) |  |  |
| Impacts of investment activity on insurance contract liabilities ('investing activity') | 247 | 144 |
| Credit | 81 | 114 |
| Mortality | (97) | (111) |
| Morbidity | 141 | 39 |
| Lapse and other policyholder behaviour ('policyholder behaviour') | (30) | (31) |
| Expenses | 22 | (170) |
| Other experience | (71) | (56) |
| Total of experience-related items (3)(4) | 293 | (71) |

$^{(1)}$ Represents an adjustment made to arrive at a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment, including pre-tax amounts.

$^{(2)}$ Other adjustments to arrive at a non-IFRS financial measure include other items that are unusual or exceptional in nature. See section L - Non-IFRS Financial Measures L - Non-IFRS Financial Measures in this document.

$^{(3)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

$^{(4)}$ Experience-related items reflect the difference between actual experience during the reporting period and best estimate assumptions used in the determination of our insurance contract liabilities. Experience-related items are a part of the Sources of Earnings framework, and are calculated in accordance with OSFI Guideline D-9, Sources of Earnings Disclosures. Experience-related items from our India, China and Malaysia joint ventures and associates are recorded within other experience.

### 2022 vs. 2021

Reported net income of $3,060 million decreased $874 million or 22%, reflecting unfavourable market-related impacts, a prior year gain on the IPO of our India asset management joint venture, a $170 million charge related to the sale of Sun Life UK$^{(1)}$ and DentaQuest acquisition and integration costs, partially offset by fair value changes on MFS$^{(2)}$ share-based payment awards and the impact of the Canada Tax Rate Change$^{(3)}$.

Underlying net income of $3,674 million$^{(4)}$ increased $141 million or 4%, driven by business growth and experience in protection and health, contribution from the DentaQuest acquisition, and lower incentive compensation expenses. This was partially offset by lower wealth and asset management earnings reflecting declines in global equity markets, a higher effective tax rate compared to prior year and lower available-for-sale ('AFS') gains.

Foreign exchange translation led to an increase of $67 million and $52 million in reported net income and underlying net income, respectively.

#### 1. Market-related impacts

Market-related impacts resulted in a decrease of $410 million to reported net income (2021 - an increase of $627 million), reflecting interest rate movements and lower equity markets, partially offset by an increase in the value of real estate investments. See section L - Non-IFRS Financial Measures in this document for a breakdown of the components of market-related impacts.

$^{(1)}$ On August 4, 2022, we entered into an agreement to sell SLF of Canada UK Limited ('Sun Life UK') to Phoenix Group Holdings plc ('Phoenix Group'). In Q3'22, we recognized an impairment charge of $170 million (£108 million) pertaining to the attributed goodwill that is not expected to be recovered through the sale ('sale of Sun Life UK'). For more details, see section B - Overview - 4 - Acquisitions and Other in this document.

$^{(2)}$ MFS Investment Management ('MFS').

$^{(3)}$ On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurers' taxable income in excess of $100 million was enacted in Canada ('Canada Tax Rate Change'). This legislation applies retroactively to the Federal Budget date of April 7, 2022. As a result, reported net income increased by $127 million in the fourth quarter, reflected in Assumption changes and management actions ('ACMA') and Other adjustments. Refer to section D - Profitability - 5 - Income taxes in this document for more information.

$^{(4)}$ Refer to section L - Non-IFRS Financial Measures in this document for a reconciliation between reported net income and underlying net income.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

17

## 2. Assumption changes and management actions

Due to the long-term nature of our business, we make certain judgments involving assumptions and estimates to value our obligations to policyholders. The valuation of these obligations is recorded in our financial statements as insurance contract liabilities and investment contract liabilities and requires us to make assumptions about equity market performance, interest rates, asset default, mortality and morbidity rates, policyholder behaviour, expenses and inflation and other factors over the life of our products. We review assumptions each year, generally in the third quarter, and revise these assumptions if appropriate. We consider our actual experience in current and past periods relative to our assumptions as part of our annual review.

The net impact of ACMA was an increase of $62 million to reported net income (2021 - an increase of $74 million). See section L - Non-IFRS Financial Measures in this document for more details.

### Assumption Changes and Management Actions by Type

The following table sets out the impacts of ACMA on our reported net income in 2022.

As at December 31, 2022

| ($ millions, after-tax) | Impacts on reported net income (1) | Comments |
| --- | --- | --- |
| Mortality / morbidity | 90 | Updates to reflect mortality/morbidity experience in all jurisdictions. The largest items were favourable mortality impacts in the UK in Corporate and in Group Retirement Services ("GRS") in Canada offset partially by adverse morbidity impacts in Sun Life Health in Canada. |
| Policyholder behaviour | (65) | Updates to lapse and policyholder behaviour in all jurisdictions. The largest item was an adverse lapse impact in Vietnam in Asia. |
| Expenses | (11) | Updates to reflect expense experience. |
| Investment returns | (10) | Updates to various investment-related assumptions. |
| Model enhancements and other | 58 | Various enhancements and methodology changes. |
| Total impacts on reported net income (2) | 62 |  |

(1) ACMA is included in reported net income and is presented as an adjustment to arrive at underlying net income.

(2) In this table, ACMA represents the shareholders' reported net income impacts (after-tax) including management actions. In Note 10.A of our 2022 Consolidated Financial Statements for the period ended December 31, 2022, the impacts of method and assumptions changes represents the change in shareholders' and participating policyholders' insurance contract liabilities net of reinsurance assets (pre-tax) and does not include management actions. Further information can be found in section L - Non-IFRS Financial Measures in this document.

Additional information on estimates relating to our policyholder obligations, including the methodology and assumptions used in their determination, can be found in this MD&A under section M - Accounting and Control Matters - 1 - Critical Accounting Policies and Estimates and Note 10 of our 2022 Annual Consolidated Financial Statements.

## 3. Other adjustments

Other adjustments decreased reported net income $266 million (2021 - a decrease of $300 million), reflecting a $170 million charge related to the sale of Sun Life UK(1), DentaQuest acquisition and integration costs, an increase in SLC Management's acquisition-related liabilities(2) and a charge reflecting the resolution of a matter related to reinsurance pricing for our U.S. In-force Management business, partially offset by fair value changes on MFS' share-based payment awards, an increase in the value of deferred tax assets related to the Canada Tax Rate Change(3), and a gain on the sale-leaseback of the Wellesley office in the U.S.

## 4. Experience-related items

The notable experience-related items, which impact current year reported and underlying net income, are as follows:

- Favourable investing activity gains across the businesses;
- Favourable credit across the businesses;
- Unfavourable mortality which primarily included COVID-19-related experience;
- Favourable morbidity driven by U.S. medical stop-loss;
- Unfavourable policyholder behaviour primarily in Asia;
- Favourable expense experience, driven by lower corporate expenses and incentive compensation costs; and
- Unfavourable other experience reflecting higher project spend.

(1) On August 4, 2022, we entered into an agreement to sell SLF of Canada UK Limited ("Sun Life UK") to Phoenix Group Holdings plc ("Phoenix Group"). In Q3'22, we recognized an impairment charge of $170 million (£108 million) pertaining to the attributed goodwill that is not expected to be recovered through the sale ("sale of Sun Life UK"). For more details, see section B - Overview - 4 - Acquisitions and Other in this document.

(2) Reflects the changes in estimated future payments for acquisition-related contingent considerations and options to purchase remaining ownership interests of SLC Management affiliates.

(3) On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurers' taxable income in excess of $100 million was enacted in Canada ("Canada Tax Rate Change"). This legislation applies retroactively to the Federal Budget date of April 7, 2022. As a result, reported net income increased by $127 million in the fourth quarter, reflected in ACMA and Other adjustments. Refer to section D - Profitability - 5 - Income taxes in this document for more information.

18 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## 5. Income taxes

The effective tax rate is impacted by various tax benefits, such as lower taxes on income subject to tax in foreign jurisdictions, a range of tax-exempt investment income, and other sustainable tax benefits.

On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurers' taxable income in excess of $100 million was enacted in Canada. This legislation applies retroactively to the Federal Budget date of April 7, 2022. As a result, reported net income increased by $127 million in the fourth quarter, reflected in ACMA and Other adjustments. The increase was comprised of after-tax income of $22 million ($31 million pre-tax) in ACMA in Canada, and income of $115 million on the remeasurement of deferred tax assets, partially offset by the impact of the retroactive increase in the tax rate of $10 million in Canada and Corporate in Other adjustments.

The effective tax rates on reported net income and underlying net income$^{(1)}$ were 15.8% and 16.8%, respectively (2021 - 14.3% and 13.5%, respectively). In 2022, the effective tax rate on underlying net income was within our expected range of 15% to 20%. In 2021, the effective tax rate on underlying net income was slightly below the expected range primarily due to higher tax-exempt investment income and resolutions of prior years' tax matters. For additional information, refer to Note 20 of our 2022 Annual Consolidated Financial Statements.

## 6. Impacts of foreign exchange translation

We operate in many 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, and generate revenues and incur expenses in local currencies in these jurisdictions, which are translated to Canadian dollars.

Items impacting our Consolidated Statements of Operations are translated into Canadian dollars using average exchange rates for the respective period. For items impacting our Consolidated Statements of Financial Position, period end rates are used for currency translation purposes.

The following table provides the foreign exchange rates for the U.S. dollar, which generates the most significant impact of foreign exchange translation, over the past four quarters and two years.

| Exchange rate | Quarterly |  |  |  | Full year |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Q4'22 | Q3'22 | Q2'22 | Q1'22 | 2022 | 2021 |
| U.S. Dollar - Average | 1.358 | 1.304 | 1.276 | 1.267 | 1.301 | 1.254 |
| U.S. Dollar - Period end | 1.355 | 1.383 | 1.287 | 1.250 | 1.355 | 1.263 |

The relative impacts of foreign exchange translation in any given period are driven by the movement of foreign exchange rates as well as the proportion of earnings generated in our foreign operations. In general, net income benefits from a weakening Canadian dollar and is adversely affected by a strengthening Canadian dollar as net income from the Company's international operations is translated back to Canadian dollars. Conversely, in a period of losses, the weakening of the Canadian dollar has the effect of increasing losses in foreign jurisdictions. We generally express the impacts of foreign exchange translation on net income on a year-over-year basis.

The impacts of foreign exchange translation led to an increase of $67 million and $52 million in reported net income and underlying net income, respectively.

$^{(1)}$ Our effective income tax rate on reported net income is calculated using Total income (loss) before income taxes, as detailed in Note 20 in our 2022 Consolidated Financial Statements for the period ended December 31, 2022. Our effective income tax rate on underlying net income is calculated using pre-tax underlying net income, as detailed in section L - Non-IFRS Financial Measures in this document, and the associated income tax expense.

MANAGEMENT'S DISCUSSION & ANALYSIS

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19

## E. Growth

### 1. Sales, Gross Flows and Value of New Business

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Insurance sales by business segment (1) |  |  |
| Canada | 1,029 | 852 |
| U.S. | 1,948 | 1,564 |
| Asia | 1,344 | 1,258 |
| Total insurance sales (1) | 4,321 | 3,674 |
| Wealth sales and gross flows by business segment (1) |  |  |
| Canada | 20,092 | 19,854 |
| Asia | 11,140 | 15,491 |
| Total wealth sales | 31,232 | 35,345 |
| Asset Management gross flows (1) | 172,881 | 193,063 |
| Total wealth sales and asset management gross flows (1) | 204,113 | 228,408 |
| Value of New Business (1) | 1,253 | 1,346 |

$^{(1)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

Total insurance sales increased $647 million or 18% from prior year ($548 million or 15%$^{(1)}$, excluding foreign exchange translation).

- Canada insurance sales increased 21%, driven by large case group benefits sales in Sun Life Health.
- U.S. insurance sales increased 18%$^{(1)}$, driven by growth in dental$^{(2)}$ and employee benefit sales partially offset by lower medical stop-loss sales.
- Asia insurance sales increased 8%$^{(1)}$, driven by higher sales in India, Vietnam, the Philippines, Singapore and Malaysia, partially offset by lower sales in Hong Kong and International.

Total wealth sales and asset management gross flows decreased $24,295 million or 11% from prior year ($29,330 million or 13%$^{(1)}$, excluding foreign exchange translation).

- Canada wealth sales were in line with prior year as higher defined contribution$^{(3)}$ sales in GRS were mostly offset by lower individual wealth sales.
- Asia wealth sales decreased 26%$^{(1)}$, reflecting lower sales in India, Hong Kong and the Philippines.
- Asset Management gross flows decreased 13%$^{(1)}$, reflecting lower retail gross flows in MFS and lower institutional gross flows in SLC Management.

Total VNB of $1,253 million decreased 7% from prior year, driven by lower wealth sales.

$^{(1)}$ This percentage change excludes the impacts of foreign exchange translation. For more information about these non-IFRS financial measures, see section L - Non-IFRS Financial Measures in this document.

$^{(2)}$ Dental sales include sales from DentaQuest, acquired on June 1, 2022.

$^{(3)}$ Defined contribution sales include retained business sales.

20 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## 2. Assets Under Management

AUM consists of general funds, the investments for segregated fund holders ("segregated funds") and other AUM, which is comprised of other third-party assets managed by the Company.

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Assets under management (1) |  |  |
| General fund assets | 205,614 | 205,374 |
| Segregated funds | 125,292 | 139,996 |
| Other assets under management (1) |  |  |
| Retail (2)(3) | 527,617 | 623,611 |
| Institutional and managed funds (2)(3) | 507,673 | 517,591 |
| Consolidation adjustments and other | (40,337) | (41,844) |
| Total other AUM (1) | 994,953 | 1,099,358 |
| Total assets under management (1) | 1,325,859 | 1,444,728 |

(1) Represents a non-IFRS financial measure. See section L - Non-IFRS Financial Measures in this document.

(2) Effective January 1, 2022, these components were renamed to Retail and Institutional and managed funds. Previously, these components of Other AUM were referred to as Mutual funds and Managed funds, respectively, in our interim and annual MD&A.

(3) Effective October 1, 2022, the classification of a MFS fund has changed from Institutional and managed funds to Retail. Other retail and trust accounts have also been reclassified from Institutional and managed funds to Retail. Prior periods have been restated.

AUM decreased $118.9 billion or 8% from December 31, 2021, primarily driven by:

- (i) unfavourable market movements on the value of segregated, retail, institutional and managed funds of $159.9 billion;
- (ii) net outflows from segregated, retail, institutional and managed funds of $21.5 billion; and
- (iii) Client distributions of $4.6 billion; partially offset by
- (iv) an increase of $57.3 billion from foreign exchange translation (excluding the impacts of general fund assets); and
- (v) an increase of $9.5 billion from other business activities.

Segregated, retail, institutional and managed fund net outflows of $21.5 billion in 2022 were largely driven by net outflows of $43.4 billion in MFS, partially offset by net inflows of $21.5 billion in SLC Management.

Retail, Institutional and managed funds and other AUM decreased by $104.4 billion or 9% from December 31, 2021, primarily driven by:

- (i) unfavourable market movements of $144.6 billion;
- (ii) net outflows of $23.5 billion; and
- (iii) Client distributions of $4.6 billion; partially offset by
- (iv) foreign exchange translation of $57.6 billion; and
- (v) other business activities of $10.7 billion.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

21

## F. Financial Strength

| ($ millions, unless otherwise stated) | 2022 | 2021 |
| --- | --- | --- |
| LICAT ratio (1) |  |  |
| Sun Life Financial Inc. | 130% | 145% |
| Sun Life Assurance | 127% | 124% |
| Financial leverage ratio (2)(3) | 25.1% | 25.5% |
| Dividend |  |  |
| Underlying dividend payout ratio (2) | 44% | 38% |
| Dividends per common share ($) | 2.760 | 2.310 |
| Capital |  |  |
| Subordinated debt (3) | 6,676 | 6,425 |
| Innovative capital instruments (4) | 200 | 200 |
| Participating policyholders' equity | 1,837 | 1,700 |
| Non-controlling interests | 90 | 59 |
| Preferred shares and other equity instruments | 2,239 | 2,239 |
| Common shareholders' equity (5) | 25,211 | 24,075 |
| Total capital (3) | 36,253 | 34,698 |

$^{(1)}$ Our LICAT ratios are calculated in accordance with OSFI-mandated guideline, Life Insurance Capital Adequacy Test.

$^{(2)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

$^{(3)}$ For 2021, amount included $2.0 billion of proceeds from the subordinated debt offerings completed in November 2021, of which $1.5 billion did not qualify as LICAT capital at issuance as it was subject to contractual terms requiring us to redeem the underlying securities in full, if the closing of the DentaQuest acquisition did not occur. We completed the acquisition of DentaQuest on June 1, 2022.

$^{(4)}$ Innovative capital instruments consist of SLEECS and qualify as regulatory capital. However, under IFRS they are reported as Senior debentures in our Consolidated Financial Statements. For additional information, see section I - Capital and Liquidity Management - 1 - Capital in this document.

$^{(5)}$ Common shareholders' equity is equal to Total shareholders' equity less Preferred shares and other equity instruments.

### Life Insurance Capital Adequacy Test

The Office of the Superintendent of Financial Institutions has developed the regulatory capital framework referred to as the Life Insurance Capital Adequacy Test for Canada. LICAT measures the capital adequacy of an insurer using a risk-based approach and includes elements that contribute to financial strength through periods when an insurer is under stress as well as elements that contribute to policyholder and creditor protection wind-up.

SLF Inc. is a non-operating insurance company and is subject to the LICAT guideline. As of December 31, 2022, SLF Inc.'s LICAT ratio was 130%, 15 percentage points lower than December 31, 2021, primarily reflecting the DentaQuest acquisition, market-related impacts and dividend payments, partially offset by reported net income, net subordinated debt issuance, net management actions and the smoothing impact of the interest rate scenario switch in North America for participating businesses.

Sun Life Assurance, SLF Inc.'s principal operating life insurance subsidiary, is also subject to the LICAT guideline. As of December 31, 2022, Sun Life Assurance's LICAT ratio was 127%, 3 percentage points higher than December 31, 2021, primarily reflecting reported net income, net management actions and the smoothing impact of the interest rate scenario switch in North America for participating businesses, partially offset by market-related impacts and dividend payments to SLF Inc.

The Sun Life Assurance LICAT ratio at the end of 2022 and 2021 was well above OSFI's supervisory ratio of 100% and regulatory minimum ratio of 90%.

### Capital

Our total capital consists of subordinated debt and other capital instruments, participating policyholders' equity and total shareholders' equity which includes common shareholders' equity, preferred shares and other equity instruments, and non-controlling interests. As at December 31, 2022, our total capital was $36.3 billion, an increase of $1.6 billion compared to December 31, 2021. The increase to total capital included reported net income of $3,060 million, the favourable impacts of foreign exchange translation of $934 million included in other comprehensive income (loss) ('OCI'), and the issuance of $650 million principal amount of Series 2022-1 Subordinated Unsecured 4.78% Fixed/Floating Debentures, which is detailed below. This was partially offset by net unrealized losses on AFS assets of $1,290 million, the payment of $1,614 million of dividends on common shares of SLF Inc. ('common shares'), and the redemption of $400 million principal amount of Series 2017-1 Subordinated Unsecured 2.75% Fixed/Floating Debentures, which is detailed below.

Our capital and liquidity positions remain strong with a LICAT ratio of 130% at SLF Inc., a financial leverage ratio of 25.1%$^{(1)(2)}$ and $1.1 billion in cash and other liquid assets$^{(1)(2)}$ as at December 31, 2022 in SLF Inc. (the ultimate parent company), and its wholly-owned holding companies (December 31, 2021 - $4.7 billion).

$^{(1)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

$^{(2)}$ For 2021, amount included $2.0 billion of proceeds from the subordinated debt offerings completed in November 2021, of which $1.5 billion did not qualify as LICAT capital at issuance as it was subject to contractual terms requiring us to redeem the underlying securities in full, if the closing of the DentaQuest acquisition did not occur. We completed the acquisition of DentaQuest on June 1, 2022.

22 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Capital Transactions

On August 10, 2022, SLF Inc. issued $650 million principal amount of Series 2022-1 Subordinated Unsecured 4.78% Fixed/Floating Debentures due 2034. The net proceeds will be used for general corporate purposes of the Company, which may include investments in subsidiaries, repayment of indebtedness and other strategic investments.

On November 23, 2022, SLF Inc. redeemed all of the outstanding $400 million principal amount of Series 2017-1 Subordinated Unsecured 2.75% Fixed/Floating Debentures, in accordance with the redemption terms attached to such debentures. The redemptions were funded from existing cash and other liquid assets in SLF Inc.

During the fourth quarter, a matter related to reinsurance pricing for our U.S. In-force Management business was resolved. Sun Life recaptured the reinsurance treaty, which resulted in a net reduction to the SLF Inc. LICAT ratio of approximately two percentage points.

## Financial Strength Ratings

Independent rating agencies assign credit ratings to securities issued by companies and assign financial strength ratings to financial institutions such as Sun Life Assurance.

The financial strength ratings assigned by rating agencies are intended to provide an independent view of the creditworthiness and financial strength of a financial institution. Each rating agency has developed its own methodology for the assessment and subsequent rating of life insurance companies.

Rating agencies do not assign a financial strength rating for SLF Inc., however, credit ratings are assigned to the securities issued by SLF Inc. and its subsidiaries and are described in SLF Inc.'s AIF under the heading Security Ratings.

The following table summarizes the financial strength ratings for Sun Life Assurance as at January 31, 2023 and January 31, 2022.

|  | A.M. Best | DBRS | Moody's | Standard & Poor's |
| --- | --- | --- | --- | --- |
| January 31, 2023 | A+ | AA | Aa3 | AA |
| January 31, 2022 | A+ | AA | Aa3 | AA |

Most recent rating agency actions on the financial strength rating of Sun Life Assurance:

- March 23, 2022 - Standard and Poor's ("S&P") affirmed the financial strength rating with a stable outlook.
- April 1, 2021 - Moody's affirmed the financial strength rating with a stable outlook.
- October 27, 2022 - DBRS affirmed the financial strength rating with a stable outlook.
- January 28, 2022 - A.M. Best affirmed the financial strength rating with a stable outlook.

## Subsequent Events

For additional information, refer to Note 28 of our 2022 Annual Consolidated Financial Statements.

On January 20, 2023, we announced a 15-year exclusive bancassurance partnership in Hong Kong with Dah Sing Bank ("Dah Sing"). Under this partnership, Sun Life will be the exclusive provider of life insurance solutions to Dah Sing's 570,000 retail banking customers, helping to fulfill their savings and protection needs at different life stages. This is Sun Life's first exclusive bancassurance partnership in Hong Kong and will be a valuable complement to our existing network of over 2,500 expert insurance advisors. Hong Kong is a thriving life insurance hub in Asia and bancassurance is a key distribution channel, accounting for more than 50% of the life insurance distribution mix. Following the completion of regulatory processes and approvals, distribution of Sun Life products is anticipated to start in July 2023.

On February 1, 2023, we completed the acquisition of a 51% interest in Advisors Asset Management, Inc. ("AAM"), a leading independent U.S. retail distribution firm. AAM provides access to U.S. retail distribution for SLC Management, Sun Life's institutional fixed income and alternatives asset manager. This allows SLC Management to meet the growing demand among U.S. HNW investors for alternative assets. AAM provides a range of solutions and products to financial advisors at wirehouses, registered investment advisors and independent broker-dealers, overseeing US$40.5 billion (approximately C$55 billion) in assets as at December 31, 2022, with 10 offices across nine U.S. states.

On February 1, 2023, we completed the sale of our sponsored markets business from Sun Life Assurance Company of Canada ("SLA"), a wholly owned subsidiary of SLF Inc., to Canadian Premier Life Insurance Company ("Canadian Premier"). Sponsored markets include a variety of association & affinity, and group creditor clients.

(1) On a fully diluted basis.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

23

## G. Performance by Business Segment

Sun Life's business is well-diversified across geographies and business types, supported by our four pillar strategy and diversified offerings of wealth and insurance products.

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Reported net income (loss) - Common shareholders |  |  |
| Canada | 1,000 | 1,558 |
| U.S. | 586 | 499 |
| Asset Management | 1,141 | 892 |
| Asia | 515 | 1,075 |
| Corporate | (182) | (90) |
| Total reported net income (loss) - Common shareholders | 3,060 | 3,934 |
| Underlying net income (loss) (1) |  |  |
| Canada | 1,266 | 1,131 |
| U.S. | 728 | 518 |
| Asset Management | 1,204 | 1,346 |
| Asia | 627 | 586 |
| Corporate | (151) | (48) |
| Total underlying net income (loss) (1) | 3,674 | 3,533 |

$^{(1)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

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

### 1. Canada

Our Canada business segment is a leading provider of protection, health, asset management and wealth solutions, providing products and services that deliver value to over 6.6 million Clients. We are the largest provider of benefits and pensions in the workplace, and offer a wide range of products to individuals via retail channels. We are focused on helping Canadians achieve lifetime financial security and live healthier lives.

|  | Business Units |  |
| --- | --- | --- |
| • Individual Insurance & Wealth | • Sun Life Health | • Group Retirement Services |

### 2022 Highlights

#### *Putting Client Impact at the centre of everything we do, driving positive financial and health actions and outcomes*

- As part of the Net Zero Asset Manager's$^{(1)}$("NZAM") Initiative, SLGI Asset Management Inc. supports the goal of net zero greenhouse gas ("GHG") emissions by 2050, and set out an initial target to have, by 2030, 24% of total AUM$^{(2)}$ to be net zero aligned or aligning$^{(3)}$. This will be achieved by executing on investment strategies that drive long-term sustainable outcomes while helping our Clients build wealth and secure their financial futures.
- Expanded our suite of sustainable wealth and asset management product offerings including our first green bond fund$^{(4)}$, which seeks to provide members a direct way to participate in the transition to a low-carbon economy and our first Shariah-based pool fund$^{(5)}$, which gives members an option that reflects Islamic principles.
- Created over 65,000 financial roadmaps using our Sun Life One Plan digital tool, contributing to our ambition for all Canadians to have a financial plan. We also enhanced our tools with a digital navigation portal, making it easier for Clients to track progress and build flexible scenarios into financial plans.
- Advanced our *Diabetes Signature Solutions* program helping address a major health concern in Canada. The program helps Canadians with type 2 diabetes get access to affordable life insurance coverage. In addition, access to a specialized diabetes clinic and wellness platform for some regions in Canada provides content to help Clients achieve their health goals.
- Recognizing that Canadians build families in different ways, Sun Life Health launched a new *Family Building Program* as an optional benefit that will provide plan members medical and non-medical coverage for fertility treatments, surrogacy arrangements and adoption.

$^{(1)}$ An international group of asset managers committed to supporting the goal of achieving net zero greenhouse gas emissions by 2050 or sooner.

$^{(2)}$ The target assumes the mix of AUM will not materially change.

$^{(3)}$ Aligning towards or aligned to a net zero pathway as defined by criteria set out in the Net Zero Investment Framework. Criteria are asset class-specific. Pathways is the term used to describe the emissions, technologies and investment trajectories that will be needed to deliver net zero. (Paris Aligned Investment Initiative. "Net Zero Investment Framework: Implementation Guide". 2021).

$^{(4)}$ AlphaFixe Green Bond Fund.

$^{(5)}$ BlackRock MSCI ACWI Islamic Equity Index Fund.

24 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

### **Shaping the market and driving growth**

- Maintained our leading position in the group retirement market(1) with defined contribution assets under administration of over $133 billion. We extended our digital leadership in this space with innovations like our Sun Life One Plan and an enhanced mobile experience. In the pension risk transfer business, Defined Benefit Solutions, we achieved $2.1 billion in sales, assisting Canadian employers to de-risk their pension plans.
- Sun Life Health maintained its market leadership position in group benefits(2), with over $12.8 billion of business-in-force, continuing to proactively advance our focus on mental health in workplaces across Canada. We introduced *Lumino Health Virtual Care's Stress Management and Well-Being* program providing members access to mental health and medical specialists 24/7.
- In Individual Wealth, broadened the product shelf, expanded distributor access, deepened advisor relationships, and attracted strong talent.
- In a challenging year for mutual fund industry net sales, SLGI Asset Management Inc. improved market share rank by six places to 9th(3). We also launched a sustainable credit private pool fund(4), providing Clients access to an alternative investment strategy.
- Recognized as one of the 2022 Best Workplaces in Canada by Great Place to Work® Canada, celebrating our commitment to our people. We maintain an equitable environment where diversity is championed, as well as offer resources and flexibility to support mental, physical and professional well-being.

### **Thinking and acting like a digital company**

- Launched *Prosper by Sun Life*, a hybrid advice solution combining a best-in-class digital platform with a team of licensed advisors, to meet Canadians' personalized and holistic financial planning needs. *Prosper by Sun Life* makes it easier for Canadians to select, prioritize and track their financial goals all in one place.
- Launched Employee Assistance Program ("EAP") platform through *Lumino Health Virtual Care*. This all-in-one solution provides members access to professional support, the ability to get a personalized assessment within minutes and 24/7 access to online Cognitive Behavioural Therapy ("CBT").
- Positively engaged Clients over 27 million times through *Ella*, our digital coach, an increase of 34% over prior year. *Ella* delivers proactive and personalized interactions to help our Clients achieve their health and financial goals.
- Made it easier for Clients to do business with us by digitally processing 93% of our retail insurance applications, 85% of retail wealth transactions and 96% of group benefits health and dental claims throughout the year.
- Introduced a new Voluntary Benefit eApp which consolidates our voluntary benefit products into a single resource, reducing the application process time for Clients by up to 50%.

### **Strategy and Outlook**

Canada is a growth market for Sun Life. We have a unique opportunity to address health, wealth and protection holistically with our diversified products and services. We will continue to shape the market and deliver on our Purpose through an integrated approach that helps Canadians achieve lifetime financial security and live healthier lives. We aspire to achieve our strategic ambition and further our market differentiation by focusing on Client impact, enabled by digital leadership and distribution excellence. We look to incorporate sustainability into our culture and decision making to deliver a positive social impact, increase Client and employee engagement, and introduce new, innovative products. Our focus for the Canadian businesses will be to:

#### **Advance our One Sun Client strategy**

- Offer customized solutions for our Clients to help them achieve their health, wealth, and protection goals.
- Build and scale an omni-channel advice and service model to meet all Client needs and expand our reach in the market. This includes combining face-to-face advisors and best-in-class digital platforms to offer Clients flexibility to move across channels seamlessly, including direct access through self-serve platforms and capabilities.

#### **Accelerate our wealth strategy**

- Scale and accelerate SLGI Asset Management Inc. as a growth engine within Canada, empowering Clients with more convenient access to investment solutions and a holistic product suite to meet their asset management needs.
- Accelerate progress towards being the retirement income provider of choice by leveraging our scale and understanding Client goals while providing member and sponsor tools.
- Provide Clients with seamless planning, asset consolidation capabilities, and a unified experience across our wealth channels.
- Continue to be a market leader in the growing Canadian pension risk transfer market, with customized solutions to meet employers' needs in managing and de-risking their defined benefit pension plans.

#### **Strengthen and expand our health business**

- Offer innovative solutions by leveraging our relationships with millions of group and retail Clients, to empower Canadians to act earlier to prevent and mitigate physical and mental health risks.
- To promote early intervention for mental disorders, we will engage at-risk group benefits plan members by prompting access to care through our virtual Mental Health Coach.
- Expand our virtual care options, powered by *Lumino Health* provider platform, to help members digitally access virtual primary care, employee assistance program, and stress management and well-being programs so that they can achieve better health outcomes, and reduce costs.
- Develop targeted insurance solutions for Canadians living with chronic conditions, for example diabetes, to improve insurability.
- Leveraging the Toronto Raptors' health and wellness experts and Sun Life's health ecosystem, we will motivate fans and communities to focus on their health and wellness through Sun Life's health offerings.

(1) Fraser Pension Universe Report, year-ended December 2021.

(2) Revenue for year ended December 2021 from 2022 Group Benefits Provider Report.

(3) ISS Market Intelligence Simfund, September 2022.

(4) Sun Life Crescent Specialty Private Pool Fund.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

25

### Transform retail distribution

- Strengthen and modernize our dedicated face-to-face advice model by updating digital tools and enhancing financial planning capabilities.
- Effectively integrate our direct-to-consumer distribution channels under *Prosper by Sun Life* to offer Clients the flexibility to move across channels seamlessly, based on their individual needs.

### Sustain financial discipline

- Enhance advisor and Client experiences and drive operational efficiencies through digital initiatives such as straight-through processing and data consolidation.
- Continue to augment predictive underwriting models, utilizing advanced data analytics and predictive modelling to enhance our Client experience with easier access to products, while minimizing underwriting risk.
- Seek low-cost, innovative opportunities focusing on capital and risk optimization.

### Outlook

Our diversified business, which address Clients' needs in asset and wealth management, as well as life and health protection and multi-channel distribution, positions us well to deepen Client relationships and capture opportunities as they arise. We expect to continue to reach more Clients through investing in enhancements to our products, systems, distribution and digital capabilities. We will meet our Clients' needs by providing diverse offerings, holistic advice and a personalized plan throughout their wealth and health journeys. We are confident that our leadership position in Canada will continue to generate value and positive outcomes for Clients.

We are well positioned to manage through macroeconomic uncertainty, including equity market downturn and rising inflation and interest rates, through pricing discipline, diversified Client centric businesses, and prudent risk management.

## Business Units

| Business | Description | Market position |
| --- | --- | --- |
| Individual Insurance & Wealth | Provides holistic advice to individuals to help them and their families achieve lifetime financial security, and live healthier lives, leveraging a broad suite of life and health insurance and investment products. Products distributed via multi-channel distribution model consisting of the SLFD network (1) , third-party channels, including independent brokers and broker-dealers, and direct-to-consumer. | A leader in the market by premiums within the individual life and health market and 2 nd place for Individual Critical Illness Insurance based on premiums (2) 2 nd in fixed product sales (2) and 4 th place market position by total wealth deposits and premiums (2) |
| Sun Life Health | Provides Clients with personalized and on-demand digital health experiences that will empower them to take action on their health earlier, ultimately improving their health outcomes. Offers group insurance products in Canada, including life, dental, extended health care, disability and critical illness, to employers of all sizes. Leverages our worksite advantage to offer voluntary benefits solutions to individual plan members, including post-employment life and health plans. Products distributed by sales representatives in collaboration with independent advisors, benefits consultants and the SLFD network. | Leading group benefits provider in Canada for the 10 th consecutive year (3) |
| Group Retirement Services | Provides defined contribution pension plans and defined benefit solutions in Canada to employers of all sizes. Leverages our worksite advantage to offer voluntary savings plans, including post-employment plans, to those members exiting their employer-sponsored plans. Defined Benefit Solutions offers an expanding range of innovative de-risking solutions for defined benefit pension plans. Products distributed by sales representatives in collaboration with a multi-channel distribution network of pension consultants and advisors. Planning and asset consolidation capabilities for current and former plan members to benefit from a simplified and seamless experience with a single provider. | Ranked 1 st in the defined contribution market based on total Capital Accumulation Plan assets for the 20 th consecutive year (4) Ranked 2 nd in the defined benefit solutions annuity market (2) |

(1) Sun Life Financial Distribution ("SLFD") is our proprietary career advisory network.

(2) LIMRA Market Share as of Q3'22, on a year-to-date basis.

(3) Based on revenue for year ended December 2021 from 2022 Group Benefits Provider Report.

(4) Fraser Pension Universe Report, based on year-ended December 2021.

26 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Financial and Business Results

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Individual Insurance & Wealth | 287 | 911 |
| Sun Life Health (1) | 352 | 271 |
| Group Retirement Services | 361 | 376 |
| Reported net income - Common shareholders | 1,000 | 1,558 |
| Less: Market-related impacts (2) | (387) | 474 |
| Assumption changes and management actions (2) | 70 | 40 |
| Acquisition, integration and restructuring (2) | (3) | (2) |
| Other (2)(3) | 54 | (85) |
| Underlying net income (4) | 1,266 | 1,131 |
| Reported ROE (%) (4) | 12.0% | 19.8% |
| Underlying ROE (%) (4) | 15.2% | 14.4% |
| Insurance sales (4) | 1,029 | 852 |
| Wealth sales (4) | 20,092 | 19,854 |

$^{(1)}$ Effective Q4'21, we began reporting on the performance and results of Sun Life Health, which brings our Group Benefits business and Lumino Health platform together.

$^{(2)}$ Represents an adjustment made to arrive at a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment, including pre-tax adjustments.

$^{(3)}$ Other adjustments to arrive at a non-IFRS financial measure include other items that are unusual or exceptional in nature. See section L - Non-IFRS Financial Measures in this document.

$^{(4)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

## Profitability

### 2022 vs. 2021

Canada reported net income of $1,000 million decreased $558 million or 36%, reflecting lower equity markets and interest rate movements, partially offset by the impact of the Canada Tax Rate Change$^{(1)}$ and the increase in underlying net income. Prior year reported net income also included larger increases in the value of real estate investments, partially offset by a Q3'21 par allocation adjustment$^{(2)}$.

Underlying net income of $1,266 million increased $135 million or 12%, driven by business growth, investment gains and favourable morbidity.

## Growth

### 2022 vs. 2021

Canada insurance sales increased $177 million or 21%, driven by large case group benefits sales in Sun Life Health.

Canada wealth sales were in line with the prior year as higher defined contribution$^{(3)}$ sales in GRS were mostly offset by lower individual wealth sales.

AUM for wealth businesses, including GRS, was $152.4 billion as at December 31, 2022, which decreased $12.8 billion or 7.8%, reflecting market movements, partially offset by net inflows.

## Profitability and Growth by Business Unit

### 2022 vs. 2021

#### Individual Insurance & Wealth

Individual Insurance & Wealth's reported net income of $287 million decreased $624 million or 68%, reflecting unfavourable market-related impacts, partially offset by investment gains, the impact of the Canada Tax Rate Change$^{(1)}$, a prior year par allocation adjustment$^{(2)}$ and ACMA.

Individual life and health insurance product sales of $496 million were in line with the prior year. Individual wealth product sales were $7.3 billion, a decrease of $1.7 billion or 19%, reflecting lower mutual fund sales.

$^{(1)}$ On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurers' taxable income in excess of $100 million was enacted in Canada ('Canada Tax Rate Change'). This legislation applies retroactively to the Federal Budget date of April 7, 2022. As a result, reported net income increased by $76 million in the fourth quarter, reflected in ACMA and Other adjustments. Refer to section D - Profitability in this document for more information.

$^{(2)}$ An adjustment of investment income and expense allocations between participating policyholders and shareholders for prior years recorded in Q3'21 ('par allocation adjustment').

$^{(3)}$ Defined contribution sales include retained business sales.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

27

## Sun Life Health

Sun Life Health's reported net income of $352 million increased $81 million or 30%, driven by business growth and morbidity experience, partially offset by unfavourable ACMA impacts.

Sun Life Health sales of $533 million, increased $170 million or 47%, driven by higher large case group benefits sales.

## Group Retirement Services

GRS's reported net income of $361 million decreased $15 million or 4%, reflecting unfavourable market-related impacts.

GRS sales were $12.8 billion, an increase of $1.9 billion or 18%, driven by higher defined contribution(1) sales. Assets under administration was $133.2 billion as at December 31, 2022, a decrease of $8.9 billion or 6%, reflecting market movements, partially offset by net inflows.

## 2. U.S.

Sun Life U.S. is one of the largest providers of employee and government benefits in the U.S., serving more than 50 million Americans with disability, life, supplemental health, medical stop-loss insurance, and dental and vision benefits through employers, industry partners and government programs such as Medicaid, Medicare Advantage, and the Children's Health Insurance Program ("CHIP"). Services include absence management, dental care, and healthcare navigation. In addition, our U.S. business manages an in-force block of approximately 85,000 individual life insurance policies.

• Group Benefits

# Business Units

• Dental

• In-force Management

## 2022 Highlights

### Growing our business

- On June 1, 2022 we completed our acquisition of DentaQuest Group, Inc. ("DentaQuest"), the second largest dental benefits provider in the U.S.(2), positioning Sun Life as a leader in the U.S. dental benefits market. DentaQuest is the largest provider of U.S. Medicaid dental benefits, with growing Medicare Advantage, commercial, CHIP, and U.S. Affordable Care Act ("ACA") exchange businesses. The transaction advances our strategy of being a leader in health and benefits in the U.S.
- Sun Life U.S. delivered strong double-digit growth in earnings, sales, and revenue in 2022, driven by the successful execution of our strategy to help Clients access the health care and coverage they need as well as contributions from the DentaQuest acquisition and significant increases in membership.

### Helping Clients access the health care and coverage they need

- As the largest Medicaid dental benefits provider, DentaQuest added approximately three million total members in 2022, increasing access for low-income American families and children who typically have not had access to dental care.
- Expanded DentaQuest's Advantage Dental+ practices with four new offices in Florida. These practices are located in areas where members have few alternative options, helping to increase access to dental care in underserved communities.
- DentaQuest announced a new program with Partners Health Plan, a non-profit managed care organization serving individuals with intellectual and other developmental disabilities. This partnership will increase access to oral health care and help improve outcomes for this underserved community, contributing to our goal of increasing health equity for all.
- PinnacleCare's personalized care navigation solutions helped members get timely access to high quality healthcare and armed them with the knowledge to make confident decisions about their health. In 2022, more than half of PinnacleCare's expert second opinions identified a more appropriate treatment plan or a change in the original diagnosis, and member satisfaction was 95%.
- Expanded our clinical approach to support long-term disability members dealing with Long COVID diagnoses, creating a specialized team to help Clients manage physical symptoms and behavioural health needs.
- Partnered with AbleTo, a leading provider of high-quality, evidence-based virtual mental health therapy and coaching solutions, to offer convenient mental health services supporting Sun Life disability and critical illness members with a cancer diagnosis.

### Making care and benefits easier through digital solutions

- With the expanded launch of Sun Life Onboard, our fully digital benefits implementation process for employers and brokers, we have reduced the median onboarding time from 33 days to 24 days and significantly improved the onboarding experience.
- Continued to expand our digital connectivity capabilities through Application Programming Interfaces ("APIs"), which alleviate manual administrative tasks, automate processes, improve accuracy and provide real-time updates. For example, we've made it easier to apply for life insurance through this new digital functionality and members now complete the process online 97% of the time, compared to 50% for those without this capability.
- Launched Benefits Explorer, an interactive platform designed to provide employees with personalized, live educational content and customized tools to help them make well-informed benefits decisions.
- Partnered with Teledentistry.com to offer members 24/7 virtual access to dental providers, making it easier to get dental care and advice in emergencies while travelling or during evenings and weekends, complementing DentaQuest's mission to make oral health accessible to all.

(1) Defined contribution sales include retained business sales.

(2) Based on number of members as of December 31, 2021. Ranking based on data disclosed by competitors.

28 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Strategy and Outlook

Sun Life U.S. has significantly advanced our strategy of being a leader in health and benefits by transforming our business from one focused on traditional benefits to one now focused on health and related benefits and services, with over 70% of our revenue now coming from health care products. With health as our core strategy and a focus on helping people with the increasing challenge of accessing care and benefits, we will be a differentiated provider whose offerings complement core health insurance offerings from large U.S. health insurers. Health care staffing shortages and increasing demand are reducing capacity in the U.S. health care system and are expected to make accessing care more challenging. With our recent DentaQuest and PinnacleCare acquisitions, and the addition of clinical support in our disability business, we are already well-positioned to play a role in helping members get access to care as our competitive differentiator in the complex, growing and rapidly changing US$4 trillion U.S. health and benefits ecosystem. We are also part of the large and growing government programs market that covers more than 160 million Americans. As a result, we now have three leading businesses: medical stop-loss, dental, and our top-10 group life and disability benefits business.

Through our digital tools and support services, we are also making it easier to do business with us and close coverage gaps. We continue to leverage our unique partnership capabilities to drive growth by delivering solutions to our more than 100 health and insurance industry partners to support their members.

### Helping Clients access the health care and coverage they need

- Extend our leadership position in medical stop-loss and innovative risk management solutions for self-funded employers by expanding into complementary health-adjacent offerings including *Health Navigator* powered by PinnacleCare, to help members with serious conditions get the care they need, achieve better health outcomes, and reduce costs.
- Leverage DentaQuest's scale and expertise to provide quality oral health to all and help Americans live healthier lives, continue to grow in government programs, and become a leader in commercial dental through our leading capabilities.
- Focus employee benefits offerings on health and productivity through expanded and enhanced offerings across disability, absence, life, and supplemental health to provide income protection, fill gaps in coverage, and help Clients get the care they need so they can recover and get back to work and life.
- Help employers comply with complex regulations and provide more Americans access to paid family and medical leave.
- Drive growth in FullscopeRMS by leveraging our expertise, scale, and suite of turnkey solutions for insurance carriers and health plan partners.

### Making care and benefits easier through digital solutions

- Expand our ability to integrate with other major platforms in the health and benefits ecosystem, delivering a better Client experience.
- Drive digital expansion through new capabilities and partnerships while leveraging existing assets to deliver predictive and personalized analytics to help Clients make decisions that are right for them.
- Leverage digital tools to increase Client interactions and virtual engagement, enhancing selling effectiveness and delivering deeper insights for brokers and employers.

### Help In-force Management policy-owners achieve lifetime financial security, while effectively managing our operations

- Continue to provide excellent service to our individual insurance policy-owners.
- Optimize the value of the business by implementing opportunities to improve profitability, including expense efficiencies and alternative investment strategies.
- Effectively manage risk and capital through reinsurance and via product offerings for converting or maturing policies.

### Outlook

With the pandemic stabilizing, the strength of our underlying U.S. business is evident as reflected by growth in sales, revenues, and net income in 2022. Significant enhancements to our products, systems and digital capabilities over the past several years have contributed to our growth, in addition to our recent acquisitions. While ongoing COVID-related challenges, inflation and a potential recession may continue to impact the U.S. group benefits industry, we have a diversified business that helps to mitigate some of these headwinds. We have also adjusted pricing to account for the future environment.

The U.S. health and employee benefits ecosystem is large and growing, with Clients becoming increasingly aware of the value of protection products and services. These markets remain competitive, and we are committed to growing profitably by leveraging our leadership positions, deep expertise and new capabilities to extend further into the health benefits and services space while helping Americans live healthier lives. With the acquisition of DentaQuest, more than 70% of our U.S. business is now in health care products and services, including medical stop-loss insurance, health care navigation services, clinical disability support, supplemental health products, and now a leading dental benefits business. The DentaQuest integration remains on track and we are committed to providing enhanced offerings and a positive integration experience for Clients and plan members.

We continue to work with state and federal elected officials to increase access to benefits for our Clients. In addition to our focus on paid family and medical leave, we have increased our advocacy to expand dental coverage for beneficiaries of Medicaid and other government programs, and to keep employer-sponsored dental benefits affordable. We continue to monitor possible legislative and regulatory changes to key areas that impact our business, such as data security and privacy, minimum loss ratios for employer-sponsored dental insurance plans, and state government contractor requirements.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

29

## Business Units

| Business | Description | Market position |
| --- | --- | --- |
| Group Benefits | Employee Benefits provides group insurance products and services, including life, long-term and short-term disability, absence management, and voluntary and supplemental health insurance such as hospital indemnity, accident and critical illness. Includes our FullscopeRMS business, which provides turnkey risk management solutions for insurers and health plans. Health and Risk Solutions provides protection against large medical claims for employers who self-insure their employee health plans through medical stop-loss and health care navigation services to help members access care and improve health outcomes. Products distributed through more than 32,000 independent brokers and benefits consultants, supported by approximately 175 employed sales representatives. Serves nearly 60,000 employers in small, medium and large workplaces across the U.S. and approximately 17 million members (1) . | Largest independent medical stop-loss provider (3) Top 10 group life and disability benefits provider, including the leading turnkey disability provider (4) |
| Dental | Provides Medicaid and Medicare Advantage products and services, as well as commercial group dental and vision solutions for employers of all sizes. Serves approximately 37 million members (2) . Supports preventative dental care through its innovative Preventistry® model, which focuses on early and quality care, access, and measurable outcomes. More than 70 Advantage Dental+ practices, which are located in underserved communities to help increase access to dental care. | Second largest Dental benefits provider in the U.S. (5) Largest Medicaid dental benefits provider (6) The commercial Sun Life Dental Network® includes more than 130,000 unique providers and offers easy access to care with in-network cost benefits (7) |
| In-force Management | Manages approximately 85,000 individual life insurance policies, primarily universal life and participating whole life insurance. In-force Management is a run-off block with no new sales. |  |

$^{(1)}$ Includes members who also have a commercial Sun Life Dental and/or Vision coverage.

$^{(2)}$ Includes members who also have a Sun Life Group coverage.

$^{(3)}$ Ranking compiled by Sun Life based on data contained in the 2021 Accident and Health Policy Experience Report from the National Association of Insurance Commissioners ('NAIC'). An independent stop-loss carrier is defined as a stop-loss carrier that does not also sell medical claim administration services.

$^{(4)}$ LIMRA 2021 Annual Sales & In-force Reports for Group Life & Disability. Long-term disability results exclude reserve buy outs. Group Term Life, long-term disability and short-term disability results exclude business sold through associations; includes BIF managed by Sun Life for insurance carrier partners.

$^{(5)}$ Based on number of members as of December 31, 2021. Ranking based on data disclosed by competitors.

$^{(6)}$ Based on membership numbers as of September 2022, calculated using publicly available data from state Medicaid agencies and other sources, and information disclosed by competitors.

$^{(7)}$ Sun Life's commercial dental networks include its affiliate, Dental Health Alliance®, L.L.C. (DHA®), and dentists under access arrangements with other dental networks.

30 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Financial and Business Results

| (US$ millions) | 2022 | 2021 |
| --- | --- | --- |
| Group Benefits (1) | 347 | 243 |
| Dental (1) | (36) | 4 |
| In-force Management | 142 | 152 |
| Reported net income - Common shareholders | 453 | 399 |
| Less: Market-related impacts (2) | 3 | 74 |
| Assumption changes and management actions (2) | (11) | (80) |
| Acquisition, integration and restructuring (2)(3) | (115) | (8) |
| Other (2)(4) | 19 | - |
| Underlying net income (5) | 557 | 413 |
| Reported ROE (%) (5) | 10.3% | 13.6% |
| Underlying ROE (%) (5) | 12.7% | 14.0% |
| After-tax profit margin for Group Benefits (%) (1)(5)(6) | 8.4% | 6.0% |
| Insurance sales (5) | 1,464 | 1,244 |
| (C$ millions) |  |  |
| Reported net income - Common shareholders | 586 | 499 |
| Less: Market-related impacts (2) | - | 93 |
| Assumption changes and management actions (2) | (14) | (101) |
| Acquisition, integration and restructuring (2)(3) | (152) | (11) |
| Other (2)(4) | 24 | - |
| Underlying net income (5) | 728 | 518 |

$^{(1)}$ Effective Q2'22, we began reporting on the performance and results of our Dental business unit, which represents our existing dental and vision business within Group Benefits together with DentaQuest Group, Inc. ('DentaQuest'), acquired on June 1, 2022. We have updated prior periods to reflect this change in presentation.

$^{(2)}$ Represents an adjustment made to arrive at a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment, including pre-tax amounts.

$^{(3)}$ Amounts in 2022 mostly relate to DentaQuest acquisition and integration costs.

$^{(4)}$ Other adjustments to arrive at a non-IFRS financial measure include other items that are unusual or exceptional in nature. See section L - Non-IFRS Financial Measures in this document.

$^{(5)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

$^{(6)}$ Based on underlying net income, on a trailing four-quarter basis. For more details, see section L - Non-IFRS Financial Measures in this document.

## Profitability

### 2022 vs. 2021

U.S. reported net income of US$453 million ($586 million) increased US$54 million ($87 million), driven by an increase in underlying net income, favourable ACMA impacts and a gain on the sale-leaseback of the Wellesley office, partially offset by DentaQuest acquisition and integration costs, market-related impacts and a charge reflecting the resolution of a matter related to reinsurance pricing for our In-force Management business.

Underlying net income of US$557 million ($728 million) increased US$144 million ($210 million), driven by growth across all businesses, the contribution from the DentaQuest acquisition and experience-related items, partially offset by lower AFS gains. Year-to-date experience included favourable medical stop-loss margins, investment gains and favourable credit, partially offset by mortality experience. For 2022, COVID-19 impacts were largely reflected in Q1 group life mortality.

Foreign exchange translation led to an increase of $22 million and $31 million in reported net income and underlying net income, respectively.

## Growth

### 2022 vs. 2021

U.S. insurance sales increased US$220 million or 18%, reflecting growth in dental$^{(1)}$ and employee benefit sales partially offset by lower medical stop-loss sales.

## Acquisition of DentaQuest

On June 1, 2022, we completed the acquisition of DentaQuest, the second-largest dental benefits provider in the U.S.$^{(2)}$ for approximately $3.3 billion (US$2.6 billion). DentaQuest is included in our U.S. business segment as part of the new 'Dental' business unit, along with our existing dental and vision business, formerly within Group Benefits. DentaQuest is the largest provider of U.S. Medicaid dental benefits, with growing Medicare Advantage, commercial, and U.S. Affordable Care Act exchange businesses. The acquisition advances our strategy of being a leader in health and benefits in the U.S. while contributing to fee-based earnings which generate higher ROE.

$^{(1)}$ Dental sales include sales from DentaQuest, acquired on June 1, 2022.

$^{(2)}$ Based on number of members as of December 31, 2021. Ranking based on data disclosed by competitors.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

31

## Profitability by Business Unit

2022 vs. 2021

### Group Benefits

Group Benefits' reported net income of US$347 million increased US$104 million or 43%, driven by business growth, favourable medical stop-loss margins and improved group life mortality, partially offset by unfavourable market-related impacts and ACMA.

### Dental

Dental's reported net loss was US$36 million, compared to reported net income of US$4 million in the prior year, reflecting acquisition and integration costs partially offset by the contribution from the DentaQuest acquisition and favourable morbidity experience.

### In-force Management

In-force Management's reported net income of US$142 million decreased US$10 million or 7%, driven by a charge reflecting the resolution of a matter related to reinsurance pricing, unfavourable mortality and market-related impacts, partially offset by ACMA impacts.

## 3. Asset Management

Our Asset Management business group is comprised of MFS and SLC Management. MFS is a premier global asset manager offering a comprehensive selection of financial products and services that deliver superior value, actively managing assets for retail and institutional investors around the world. SLC Management is a global asset manager with capabilities across fixed income and alternative asset classes including public and private fixed income, real estate equity and debt, and infrastructure equity.

### Business Units

• MFS Investment Management

• SLC Management

## 2022 Highlights

- We ended 2022 with $952.0 billion in assets under management consisting of $742.3 billion (US$547.9 billion) from MFS and $209.6 billion from SLC Management.
- Total Asset Management net outflows of $22.0 billion for 2022 reflected net outflows of $43.4 billion (US$34.6 billion) from MFS partially offset by new inflows of $21.5 billion from SLC Management.
- We entered into an agreement with Phoenix Group Holdings plc ("Phoenix Group"), establishing a long-term strategic asset management partnership through MFS and SLC Management, in conjunction with the intended sale of our Sun Life UK(1) business. Phoenix Group is the UK's largest long-term savings and retirement business, with £270 billion(2) of assets under administration and approximately 13 million customers. Phoenix Group has set a goal to invest approximately US$25 billion in North American public and private fixed income and alternative investments over the next five years and Sun Life will be a material partner to them in achieving this goal.

### MFS

- MFS generated solid net income and sustained a strong pre-tax net operating profit margin(3) of 39% despite challenging market conditions.
- Delivered strong long-term investment performance with 97% of MFS' U.S. retail mutual fund assets ranked in the top half of their Morningstar categories based on ten- and five-year performance, and 48% ranked in the top half of their Morningstar categories based on three-year performance, as at December 31, 2022.
- MFS continued to deliver on a consistent long-term track record as a top-performing active asset manager. MFS ranked in the top 10(4) for 5- and 10-year performance categories across U.S. funds, marking the 13th time in the last 14 years that MFS has achieved this recognition.
- As part of the NZAM Initiative, MFS has set its net zero GHG emissions interim targets. MFS' targets are for 90% of in-scope AUM(5) to be considered net zero aligned or aligning(6) by 2030 and 100% to be aligned by 2040.

(1) SLF of Canada UK Limited.

(2) As at June 30, 2022.

(3) Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

(4) Barron's 2021 Fund Family rankings.

(5) In-scope assets include all equity and corporate bonds, comprising approximately 90% of MFS' global AUM as at December 31, 2022.

(6) Aligning towards or aligned to a net zero pathway as defined by criteria set out in the Net Zero Investment Framework. Criteria are asset class-specific. Pathways is the term used to describe the emissions, technologies and investment trajectories that will be needed to deliver net zero. (Paris Aligned Investment Initiative. "Net Zero Investment Framework: Implementation Guide". 2021).

32 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## SLC Management

- On February 1, 2023, we completed the acquisition of a 51%[1] interest in Advisors Asset Management, Inc. ("AAM"), a leading independent retail distribution firm in the U.S., with the option to acquire the remaining interest starting in 2028. AAM provides access to U.S. retail distribution, allowing SLC Management to meet the growing demand for alternative assets among U.S. HNW investors. For additional information, refer to Note 3 of our 2022 Consolidated Financial Statements.
- Crescent closed its third U.S. Direct Lending Fund, raising approximately US$6 billion, more than double the size of the predecessor fund.
- We continued to build on our commitment to sustainable investing through the NZAM Initiative:
  - InfraRed Capital Partners ("InfraRed") published its net zero GHG emissions interim targets, in-line with its commitment to the NZAM Initiative. This is the latest milestone for InfraRed as it seeks to reach net zero GHG emissions across its entire portfolio and to have a long-term, positive impact on societies and the environment. InfraRed's three interim targets are for:
    - 70%[2] of in-scope assets[3] to be considered net zero, aligned or aligning[4] by 2030;
    - 50%[5] of assets to be allocated in climate solutions by 2025; and
    - Engaging with the portfolio companies responsible for 90% of InfraRed's financed emissions by 2030.
  - We announced that our investment grade fixed income business ("SLC Fixed Income") joined the NZAM initiative in 2022, pledging to achieve net zero GHG emissions for portfolios by 2050. Interim targets for SLC Fixed Income are expected to be published in 2023.
- We also demonstrated our commitment to sustainable investing through the following achievements:
  - BentallGreenOak ("BGO") was awarded the 2022 ENERGY STAR Partner of the Year - Sustained Excellence Award by the U.S. Environmental Protection Agency and the U.S. Department of Energy ("DOE") for the 12th consecutive year and received Gold Recognition in the 2022 Green Lease Leaders program organized by the Institute for Market Transformation and the DOE's Better Buildings Alliance.
  - WELPUT[6], a fund managed by BGO, won the 2022 Pension Real Estate Association ("PREA") Closed-End Fund ESG Award.
  - For the 12th consecutive year, BGO achieved top performance scores for its global real estate platform in the annual GRESB Real Estate Assessment, demonstrating its leadership in sustainable investing.
  - InfraRed received a five-star rating in the latest Principles for Responsible Investment ("PRI") assessment[7] for the Direct - Infrastructure module. This marks the seventh consecutive assessment where InfraRed has achieved the highest possible PRI rating for this module, demonstrating the integration of ESG throughout its investment practices. InfraRed also received a five-star rating for Investment and Stewardship Policy module, which was also above the median score.
  - SLC Management, and its affiliates, BGO and Crescent, have become founding signatories to the CFA Institute's recently launched Diversity, Equity, and Inclusion ("DEI") Code in the U.S. and Canada.

## Strategy and Outlook

Our strategy is to provide investment products through MFS and SLC Management that will deliver growth in active asset management as well as fixed income and alternative asset classes. MFS competes primarily in the global institutional, U.S. retail and select non-U.S. retail markets. SLC Management competes primarily in the global institutional market, offering a broad and deep fixed income and real assets platform through affiliate managers. SLC Management leverages Sun Life's long-standing expertise in private asset class investments, augmented by the specialized alternative capabilities of SLC Management's affiliate managers, to offer customized investment solutions to investors.

### MFS: Continue to deliver superior investment performance while allocating capital responsibly for our Clients

MFS' active management strategy focuses on delivering value to our Clients over the long term. Our relative performance provides us with a strong competitive position over other asset managers:

- With our strong long-term performance, MFS is well-positioned to attract flows from all Client sectors that are seeking risk-managed capital appreciation over the long term based on our disciplined, long-term approach. We are engaging Clients to align with MFS to focus on longer investment horizons, to leverage our proven ability to deliver over benchmark performance through a market cycle.
- Our strong leadership on ESG is embedded in our overall investment approach of allocating capital responsibly on behalf of our Clients.
- Our continued strategic focus to build out institutional fixed income product and sales capabilities and broaden our non-U.S. retail initiatives enables us to meet Clients' unique and local needs.
- MFS strives to maintain margins in the top quartile of active managers while maintaining our commitment to provide long-term value to Clients.
- We continue to focus on diversity at all levels and promoting an inclusive culture.

[1] On a fully diluted basis.

[2] From the baseline of 8% of AUM as of December 31, 2021.

[3] In-scope assets comprise approximately 83% of InfraRed's global AUM as at June 30, 2022. Funds where assets are currently being sold or transferred in line with the original fund strategy have been excluded from the commitment.

[4] Aligning towards or aligned to a net zero pathway as defined by criteria set out in the Net Zero Investment Framework. Criteria are asset class-specific. Pathways is the term used to describe the emissions, technologies and investment trajectories that will be needed to deliver net zero. (Paris Aligned Investment Initiative. "Net Zero Investment Framework: Implementation Guide". 2021).

[5] From a baseline of 45% in 2021.

[6] West End of London Property Unit Trust.

[7] InfraRed PRI Transparency and Assessment Reports are available at https://www.ircp.com/sustainability#documents.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

33

# **SLC Management: Help investors meet their investment objectives by offering a broad suite of alternative asset classes and fixed income strategies**

We are well-positioned to take advantage of key trends in our target markets:

- Growing demand for alternative investments, including demand among U.S. HNW retail investors
- An increasing focus by investors on ESG and sustainable investing
- Outsourcing of asset management by insurance companies, and
- Consolidation of investment manager relationships by institutional investors.

Our strategy is to continue to deliver superior investment performance, expand and deepen our distribution relationships and build out our product lineup. SLC Management is positioned for growth over the medium-term; our objectives(1) are to achieve AUM of $225 billion, operating margin of 30%-35%, and underlying net income of $235 million by 2025. We offer our Clients a compelling suite of investment capabilities to meet their needs, including:

- Leading public and private fixed income capabilities, spanning both investment grade and alternative credit
- Global real estate expertise across both equity and debt investments, and
- Global infrastructure capabilities.

# **Outlook**

# **MFS**

As the prospects of a global recession increase, companies may face significant top line and expense pressures. This will create a more challenging environment to generate value in the short to medium-term. Companies who can operate successfully in this more challenging, higher cost environment will be rewarded by investors due to scarcity of profits. This could create greater opportunities for active managers to outperform benchmarks that have not been present. MFS employs an investment philosophy that involves a long-term approach and looks across the complete business cycle. Our scale, proven long-term track record and broad product portfolios, coupled with our investment philosophy, position us well to deliver strong results over a market cycle. Our expense structure leverages significant variable costs based on assets, sales or profitability, and as a result a majority of our expense base adjusts with market dynamics. In addition, we will continue to be diligent with discretionary spending while investing in strategic initiatives that help grow the business over the long-term.

# **SLC Management**

With current economic and geopolitical uncertainty, we expect to see more volatility in equity markets, rising interest rates and elevated levels of inflation. These macroeconomic headwinds are expected to moderate our ability to raise capital as investors rebalance their portfolios, or defer committing further capital. However, we expect to see continued demand for yield-orientated fixed income and alternative assets classes, as these asset types continue to provide an opportunity for portfolio diversification, a potential hedge against inflation, and a reduction in overall risk exposure across investments. We believe we are well positioned to meet this demand with our platform of world-class investment capabilities, complimentary businesses that drive product and distribution opportunities, and leveraging of global resources, including those from Sun Life. The acquisition of a majority stake in AAM provides further momentum to SLC Management to grow and expand our retail HNW business. The investment capabilities we use for our Clients are the same capabilities that we use in managing the general account of Sun Life; this facilitates co-investment opportunities that result in an alignment of interest with our Clients and enables SLC Management's speed to market for products.

# **Business Units**

| Business | Description | Market position |
| --- | --- | --- |
| MFS | Actively manages assets for retail and institutional investors, including pension plans, sovereign wealth funds, monetary authorities, and endowments and foundations. Retail products are distributed through financial advisors, brokerages and other professionals. Institutional products are distributed by an internal sales force, which is aided by a network of independent consultants. | US$548 billion in AUM The 10th largest U.S. Retail funds manager(1) |
| SLC Management | SLC Management delivers public and private credit, fixed income, real estate and infrastructure solutions to Clients through a group of affiliate managers, including: BentallGreenOak, a global real estate investment manager. InfraRed Capital Partners, a global infrastructure and real estate investment manager headquartered in London, UK. Crescent Capital Group, a U.S.-based global alternative credit investment manager. SLC Management, a North American institutional asset manager specializing in investment grade public and private fixed income portfolios. Institutional products are distributed by an internal sales force, which is aided by a network of independent consultants. The acquisition of a majority stake in AAM will provide access to U.S. retail distribution and will allow SLC Management to meet the growing demand for alternative assets among U.S. HNW investors. | $210 billion in AUM |

(1) As reported by ISS Market Intelligence Simfund based on AUM as at December 31, 2022.

(1) Although considered reasonable, we may not be able to achieve our medium-term financial objectives as our assumptions may prove to be inaccurate. Accordingly, our actual results could differ materially from our medium-term financial objectives as described above. Our medium-term financial objectives do not constitute guidance. Our medium-term financial objectives are forward-looking non-IFRS financial measures and additional information is provided in this MD&A in section O - Forward-looking Statements - Medium-Term Financial Objectives.

34 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Financial and Business Results

| Asset Management (C$ millions) | 2022 | 2021 |
| --- | --- | --- |
| Reported net income - Common shareholders | 1,141 | 892 |
| Less: Fair value adjustments on MFS' share-based payment awards (1) | 106 | (186) |
| Acquisition, integration and restructuring (1)(2)(3) | (176) | (247) |
| Other (1)(4) | 7 | (21) |
| Underlying net income (5) | 1,204 | 1,346 |
| Assets under management (C$ billions) (5) | 952.0 | 1,059.2 |
| Gross flows (C$ billions) (5) | 172.9 | 193.1 |
| Net flows (C$ billions) (5) | (22.0) | 21.1 |
| MFS (C$ millions) |  |  |
| Reported net income - Common shareholders | 1,195 | 1,049 |
| Less: Fair value adjustments on MFS' share-based payment awards (1) | 106 | (186) |
| Underlying net income (5) | 1,089 | 1,235 |
| Assets under management (C$ billions) (5)(6) | 742.3 | 875.2 |
| Gross flows (C$ billions) (5) | 140.6 | 150.1 |
| Net flows (C$ billions) (5) | (43.4) | (11.4) |
| MFS (US$ millions) |  |  |
| Reported net income - Common shareholders | 919 | 836 |
| Less: Fair value adjustments on MFS' share-based payment awards (1) | 81 | (149) |
| Underlying net income (5) | 838 | 985 |
| Pre-tax net operating margin (5) | 39% | 41% |
| Average net assets (US$ billions) (5) | 584.8 | 657.8 |
| Assets under management (US$ billions) (5)(6) | 547.9 | 692.8 |
| Gross flows (US$ billions) (5) | 108.4 | 119.7 |
| Net flows (US$ billions) (5) | (33.1) | (9.2) |
| Asset appreciation (depreciation) (US$ billions) | (111.9) | 91.7 |
| SLC Management (C$ millions) |  |  |
| Reported net income - Common shareholders | (54) | (157) |
| Less: Acquisition, integration and restructuring (1)(2)(3) | (176) | (247) |
| Other (1)(4) | 7 | (21) |
| Underlying net income (5) | 115 | 111 |
| Fee-related earnings (5) | 237 | 197 |
| Pre-tax fee-related earnings margin (5)(7) | 24% | 22% |
| Pre-tax net operating margin (5)(7) | 21% | 22% |
| Assets under management (C$ billions) (5) | 209.6 | 183.9 |
| Gross flows - AUM (C$ billions) (5) | 32.3 | 43.0 |
| Net flows - AUM (C$ billions) (5) | 21.5 | 32.5 |
| Fee earning assets under management ('FE AUM') (C$ billions) (5) | 164.4 | 147.9 |
| Gross flows - FE AUM (C$ billions) (5) | 33.0 | 37.3 |
| Net flows - FE AUM (C$ billions) (5) | 25.2 | 29.7 |
| Capital raising (C$ billions) (5) | 18.2 | 27.4 |
| Deployment (C$ billions) (5) | 30.2 | 36.6 |

$^{(1)}$ Represents an adjustment made to arrive at a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment, including pre-tax adjustments.

$^{(2)}$ Amounts relate to acquisition costs for our SLC Management affiliates, BentallGreenOak, InfraRed Capital Partners and Crescent Capital Group LP, which include the unwinding of the discount for Other financial liabilities of $64 million in 2022 (2021 - $59 million).

$^{(3)}$ Reflects the changes in estimated future payments for acquisition-related contingent considerations and options to purchase remaining ownership interests of SLC Management affiliates of $80 million in 2022 and $153 million in 2021.

$^{(4)}$ Other adjustments to arrive at a non-IFRS financial measure include other items that are unusual or exceptional in nature. See section L - Non-IFRS Financial Measures in this document.

$^{(5)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

$^{(6)}$ Monthly information on AUM is provided by MFS in its Corporate Fact Sheet, which can be found at www.mfs.com/CorpFact. The Corporate Fact Sheet also provides MFS' U.S. GAAP assets and liabilities as at December 31, 2022.

$^{(7)}$ Based on a trailing 12-month basis.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

35

## Profitability

### 2022 vs. 2021

Asset Management reported net income of $1,141 million increased $249 million or 28%, driven by fair value changes on MFS' share-based payment awards and a lower increase in SLC Management's acquisition-related liabilities$^{(1)}$, partially offset by a decline in underlying net income.

Underlying net income of $1,204 million decreased $142 million or 11%, driven by lower MFS earnings.

Foreign exchange translation led to an increase of $41 million and $39 million in reported net income and underlying net income, respectively.

## Growth

### 2022 vs. 2021

Asset Management AUM decreased $107.2 billion or 10%, reflecting net asset value changes of $80.7 billion, net outflows of $22.0 billion, and Client distributions of $4.6 billion.

## Profitability and Growth by Business Unit

### 2022 vs. 2021

#### MFS

MFS reported net income of US$919 million increased US$83 million or 10%, reflecting fair value changes on MFS' share-based payment awards. Underlying net income of US$838 million decreased US$147 million or 15%, reflecting declines in global equity markets which contributed to lower ANA ('average net assets'), partially offset by lower variable compensation expenses and higher net investment returns.

MFS AUM decreased US$144.9 billion or 21%, reflecting asset value changes of US$111.9 billion and net outflows of US$33.1 billion. In Q4'22, 97% of MFS' U.S. retail mutual fund assets ranked in the top half of their Morningstar categories based on ten- and five-year performance, and 48% ranked in the top half of their Morningstar categories based on three-year performance.

#### SLC Management

SLC Management reported net loss of $54 million improved $103 million or 66%, primarily reflecting a lower increase in acquisition-related liabilities$^{(1)}$. Underlying net income of $115 million increased $4 million or 4%, driven by higher fee-related earnings reflecting strong capital raising and capital deployment across the platform, and lower fundraising sales incentives, partially offset by real estate investment losses. The fee-related earnings margin$^{(2)}$ and the pre-tax net operating profit margin$^{(2)}$ for 2022 was 24% and 21%, respectively (2021 - 22% and 22%, respectively).

SLC Management AUM increased $25.7 billion or 14%, driven by net inflows of $21.5 billion and asset value changes of $8.8 billion, partially offset by Client distributions of $4.6 billion. Net inflows were comprised of capital raising and Client contributions, totaling $32.3 billion, partially offset by outflows of $10.9 billion.

SLC Management FE AUM increased $16.5 billion or 11%, driven by net inflows of $25.2 billion, partially offset by Client distributions of $6.9 billion and asset value changes of $1.8 billion. Net inflows were comprised of capital deployment and Client contributions, totaling $33.0 billion, partially offset by outflows of $7.8 billion.

$^{(1)}$ Reflects the changes in estimated future payments for acquisition-related contingent considerations and options to purchase remaining ownership interests of SLC Management affiliates.

$^{(2)}$ Based on a trailing 12-month basis.

36 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## 4. Asia

Our Asia presence provides us with a strong footprint to take advantage of the high growth prospects in the region. We operate in eight Asian markets, delivering value to over 25 million Clients. Local Markets provides asset management, wealth, protection and health solutions through a multi-channel distribution approach in China, India, Philippines, Vietnam, Malaysia and Indonesia. International Hubs offers leading insurance and wealth products through agency and broker distribution, including life insurance solutions to HNW families and individuals, with operations in Hong Kong, Singapore and Bermuda.

# Business Units

• Local Markets

• International Hubs

## 2022 Highlights

### Growing our scale and distribution

- We retained our second position ranking(1) for net flows in Hong Kong Mandatory Provident Fund ("MPF") despite declines in equity markets driving lower flows across the industry.
- In India, Aditya Birla Sun Life AMC Limited ("ABSLAMC") partnered with BGO, an affiliate of SLC Management, to form a real estate-focused investment vehicle. This collaboration brings together two leading investment managers with extensive track records in both the domestic and international markets to create new investment opportunities for Clients.
- Strong insurance sales momentum with growth of 8% and total weighted premium income ("TWPI")(2) of $4.9 billion up 12% over prior year driven by investments made in bancassurance and agency, and Asia's emergence from the pandemic.
- Bancassurance is an essential distribution channel in Asia to deliver on our Purpose. In January 2023, we announced a 15-year exclusive bancassurance partnership in Hong Kong with Dah Sing Bank ("Dah Sing"), with sales expected to start in July 2023, subject to regulatory processes and approvals. Under this partnership, Sun Life will be the exclusive provider of life insurance solutions to Dah Sing's 570,000 retail banking customers to fulfill their savings and protection needs at different life stages. In Indonesia, we expanded and deepened our existing bancassurance partnership with CIMB Niaga, Indonesia's second largest privately-owned bank(3). Sun Life will be the provider of all life insurance solutions to the bank's seven million customers, across all channels, starting in 2025 through 2039. CIMB is an important regional partner for Sun Life, also contributing to sales in Malaysia, which showed strong growth of 33%(4) over prior year.
- In the Philippines, our joint venture, Sun Life Grepa Financial, renewed its bancassurance partnership with Rizal Commercial Banking Corporation ("RCBC"), one of the country's leading commercial banks. The 10-year renewal, through to 2033, allows more Filipinos to access financial protection products, leveraging the strength of RCBC's extensive sales network of over 430 branches and nearly 2 million customers.
- We continue to build out a sustainable high quality agency force. In Vietnam, we launched a full-time advisor agency channel enabled by more selective and diversified advisor recruitment and comprehensive advisor training, providing holistic advice to meet the needs of Clients.
- We continued to enhance our product offerings for HNW Clients to diversify, protect, and grow their assets. We launched Sun Global Aurora, a savings-oriented indexed universal life product. Sun Global Aurora provides Clients the flexibility to customize premium payments to meet their wealth accumulation goals, while offering stable returns and exposure to equity markets. Strong demand for our protection products in the HNW space contributed to sales growth of over four times the prior year in Singapore.

### Putting Client Impact at the centre of everything we do

- As part of our aspiration to deliver meaningful impact to Clients through their life journey, we are continuing to improve their digital service experience to make it easier for them to do business with us. We made substantial progress in 2022, with 83% of applications and 38% of claims submitted digitally, up 12 and 17 percentage points from prior year, respectively.

### Embedding sustainability into our business to drive value creation and align with our Purpose

- To enable our Clients to achieve lifetime financial security in a more sustainable manner, we expanded our range of ESG products. We introduced Stellar, the first ESG-focused savings plan in the Hong Kong market that actively integrates ESG concepts into investment strategies(5). Following strong reception, we enhanced our suite of Stellar offerings to include additional cost-effective, flexible options that allow for broader Client access to sustainable long-term savings products.
- We were the first Malaysian insurance company to launch a Shariah-based investment-linked Takaful ESG Fund(6), partnering with Nomura Asset Management, giving Clients an option that reflects Islamic principles.
- We achieved 100% rollout of internal ESG plus(7) ratings for our Asia fixed income General Account, and are continuing the rollout to our Asia equities investments, demonstrating the integration of ESG into our investment practices.

(1) Based on market share measured by net flows from Mercer MPF Market Share Report, as at September 30, 2022.

(2) Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

(3) Based on total assets, as at September 30, 2022.

(4) This percentage change excludes the impacts of foreign exchange translation. For more information about these non-IFRS financial measures, see section L - Non-IFRS Financial Measures in this document.

(5) This is based on market conditions as of April 12, 2022 and comparison among other savings plans for new Composite and Long Term Businesses as defined by the Insurance Authority in the Register of Authorized Insurers.

(6) Sun Life Malaysia Islamic Global Sustainable Fund.

(7) ESG plus is SLC Fixed Income's proprietary ESG rating methodology which is designed to assess the relative ESG risk of issuers within an industry or asset type.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

37

## Strategy and Outlook

To achieve our ambitious growth objectives for strategic positioning and driving scale in all our markets, we will continue to capitalize on new opportunities. We are dedicated to building distribution excellence and offering a seamless, digital experience for Clients and advisors to deliver Client impact. We will continue to foster our strong and distinctive culture, while attracting, developing and empowering high calibre talent. We will embed sustainability into our business, as we engage Clients along their journeys towards lifetime financial security and healthier lives. Our areas of focus for Asia are to:

### *Leverage distribution excellence to diversify our mix, build scale and deliver Client Impact*

- Create a trusted brand for Sun Life in Asia to facilitate lead generation, relationship building with Clients, and recruitment of advisors.
- Build sustainable scale through a diversified mix of high performing, quality-focused distribution channels that enhance Client impact by offering holistic sales advice delivered through our expanding range of life, wealth and health solutions.
- Build on our Most Respected Advisor ("MRA") program, including Brighter Academy, our proprietary agency incubator program, and become the partner of choice for advisors to develop active and sustainable agency talent.
- Continue to effectively collaborate with existing bancassurance partners to unlock the potential of recent deals, while selectively considering new bank relationships that provide purpose-aligned solutions to a wider range of Clients.

### *Be a digital leader, enhancing the digital experience to transform the Client and advisor experience, and enable greater efficiency and scalability*

- Digitize our business and leverage common tools and technology platforms across the region to make it easier for Clients and advisors to do business with us.
- Increase engagement of prospective and existing Clients by being more personal, proactive and predictive. Create personalized experiences to deepen our relationship and improve retention with Clients.
- Empower advisors, including bancassurance distribution, by building best-in-class digital and data capabilities that enable more engaging experiences, create Client impact, and enhance prospect conversion, advisor productivity, and recruitment and training.

### *Embed sustainability into our business to drive value creation, positive impact, and align with our Purpose*

- Provide quality advice and offer relevant financial solutions to enable Clients to plan and protect themselves from adverse financial events and invest for their future.
- Become a partner in our Clients' health journeys, by offering a wider set of valued health solutions and deepen the level of engagement across the Client relationship.
- Strive to make insurance, health and wealth solutions more affordable and accessible, while considering market trends and societal needs.
- Fully embed ESG into our investment processes and introduce ESG investment opportunities for our Clients.

## Outlook

Our diversified business, with a multi-country presence and multi-channel distribution, positions us well to deepen Client relationships, capture opportunities as they arise, and protect our business against adverse economic cycles and regulatory changes in any one market. Despite the uncertainties and short-term headwinds from market volatility, we expect that the region's economic growth will continue, and rapid wealth creation, coupled with low insurance penetration rates, will result in sustained growth across all markets over the medium-term. In addition, we expect to continue to reach more Clients by expanding and deepening our high-quality agency force, diverse network of bancassurance partners and broker partnerships. Our position among the global leaders in the international HNW space will continue to generate value and positive outcomes for Clients.

Economic and geopolitical uncertainty, as well as intense competition, equity market downturn, rise in interest rates and inflation continue to pose challenges to our businesses. However, our steadfast dedication to our Purpose and our Clients, strengthening market positions, key strategic relationships, investments in digital and analytics, and our ability to leverage Sun Life's global expertise position us well for the future. As local governments continue to push responsibility down to their people in both the retirement and health spaces, we are well-equipped to offer current and prospective Clients a diverse range of products and solutions.

38 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Business Markets

| Business | Description | Market Position |
| --- | --- | --- |
| Local Markets |  |  |
| Philippines (1) | Individual and group life and health insurance products to individuals and businesses through a multi-channel distribution network. Asset management for individual and institutional Clients through agency, brokerage, bancassurance and digital partners. | #1 ranked insurance company based on total premium (2) #2 mutual fund operation in the country (3) |
| Indonesia | Individual life and health insurance through agency, telco arrangements and banks, including a bancassurance partnership with CIMB Niaga, Indonesia's 2nd largest bank | 10 th ranked insurance company (4) |
| Vietnam | Individual insurance and pensions distributed through agency, corporate sales, and digital distribution channels and partnerships, including exclusive bancassurance agreements with TPBank (5) and ACB (6) . | 5 th in bancassurance sales, 6 th ranked insurance company (6) |
| Malaysia (7) | Individual and group insurance through banks and telco arrangements, including an exclusive bancassurance agreement with CIMB Bank, Malaysia's 2 nd largest bank, and a growing agency force. | 1 st in bancatakaful sales and 3 rd in bancassurance sales, 7 th overall (8) |
| India (9) | Individual and group insurance, savings and retirement products through agency, brokerage and bancassurance channels. Asset management for both individual and institutional investors through independent financial advisors, banks, and direct distribution channels. | 7 th largest life insurance company in India (10) 6 th largest mutual fund operation in the country (11) |
| China (12) | Individual and group life and health insurance and savings products distributed through agency, brokerage, bancassurance and digital channels. Institutional asset management, passive third-party asset management and debt financing business through direct distribution. | 9 th ranked life insurance company in China among multinationals (13) |
| International Hubs |  |  |
| Hong Kong | Mandatory Provident Fund (MPF) and pension administration to individuals and businesses through agency and brokerage distribution. Individual and group life and health insurance through agency and brokerage distribution, including life insurance solutions for HNW Clients. | 3 rd largest provider based on AUM, 2 nd based on net inflows (14) Top 10 in Agency for Life Insurance (15) |
| International | Individual life insurance solutions for HNW Clients residing outside the U.S. and Canada Manages a block of International wealth investment products closed to new sales. | A leader in international HNW life insurance business |
| Singapore | Individual life insurance solutions for HNW Clients in Asia. | New entrant to the market in 2021 |

$^{(1)}$ Philippines: Includes a joint venture with the Yuchengco Group - Sun Life Grepa Financial, Inc. (49%).

$^{(2)}$ Insurance Commission of the Philippines, based on Q3'22 year-to-date total premium income for Sun Life of Canada (Philippines).

$^{(3)}$ Philippine Investment Funds Association, based on December 2022 ending AUM.

$^{(4)}$ Indonesia Life Insurance Association industry report, based on Q3'22 year-to-date first year premiums.

$^{(5)}$ Tien Phong Commercial Bank ('TPBank') and Asia Commercial Joint Stock Bank ('ACB').

$^{(6)}$ November 2022 year-to-date annualized first year premiums based on data shared among industry players.

$^{(7)}$ Malaysia: Joint ventures with Khazanah Nasional Berhad and CIMB Group Holdings Berhad - Sun Life Malaysia Assurance Berhad (49%), Sun Life Malaysia Takaful Berhad (49%).

$^{(8)}$ Life Insurance Association of Malaysia and Insurance Services Malaysia Berhad, based on Q3'22 year-to-date annualized first year premium for conventional and takaful business.

$^{(9)}$ India: Joint venture with Aditya Birla Group - Aditya Birla Sun Life Insurance Company Limited (49%) and Aditya Birla Sun Life Asset Management Company Limited (36.5% indirect ownership).

$^{(10)}$ Insurance Regulatory Authority of India, based on Q3'22 year-to-date first year premiums among private players.

$^{(11)}$ Association of Mutual Funds in India, based on average AUM for the quarter ended December 31, 2022.

$^{(12)}$ China: Joint ventures with the China Everbright Group: Sun Life Everbright Life Insurance Company Limited (24.99%), Sun Life Everbright Asset Management Co., Ltd (24.74%).

$^{(13)}$ China: based on gross premiums for Q3'22 (excluding universal life insurance deposits and pension companies) amongst foreign multinationals.

$^{(14)}$ Mercer MPF Market Shares Report, September 2022.

$^{(15)}$ Insurance Authority of Hong Kong, Provisional Statistics on Hong Kong Long Term Insurance Business, based on Q3'22 year-to-date annualized first year premiums.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

39

## Financial and Business Results

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Local Markets | 210 | 608 |
| International Hubs | 305 | 467 |
| Reported net income - Common shareholders | 515 | 1,075 |
| Less: Market-related impacts (1) | (82) | 61 |
| Assumption changes and management actions (1) | (40) | 135 |
| Acquisition, integration and restructuring (1)(2) | (7) | 293 |
| Other (1)(3) | 17 | - |
| Underlying net income (loss) (4) | 627 | 586 |
| Reported ROE (%) (4) | 7.7% | 17.4% |
| Underlying ROE (%) (4) | 9.3% | 9.5% |
| Insurance sales (4) | 1,344 | 1,258 |
| Wealth sales (4) | 11,140 | 15,491 |

$^{(1)}$ Represents an adjustment made to arrive at a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment, including pre-tax amounts.

$^{(2)}$ Prior year amount includes a realized gain of $297 million on the Initial Public Offering of Aditya Birla Sun Life Asset Management Company.

$^{(3)}$ Other adjustments to arrive at a non-IFRS financial measure include other items that are unusual or exceptional in nature. See section L - Non-IFRS Financial Measures in this document.

$^{(4)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

## Profitability

### 2022 vs. 2021

Asia reported net income of $515 million decreased $560 million, reflecting a gain from the IPO of the India asset management joint venture and favourable ACMA impacts in the prior year, and unfavourable market-related impacts in the current year.

Underlying net income of $627 million increased $41 million or 7%, driven by improved mortality, including from joint ventures$^{(1)}$, compared to prior year which included COVID-19-related claims, and expense experience, partially offset by lower fee-based income reflecting equity market declines, and policyholder behaviour experience primarily in Vietnam. Higher new business strain in Hong Kong was mostly offset by new business gains in International, Vietnam and Malaysia.

Foreign exchange translation led to decline of $5 million and $9 million in reported net income and underlying net income, respectively.

## Growth

### 2022 vs. 2021

Asia insurance sales increased 8%$^{(2)}$, driven by higher sales in India, Vietnam, the Philippines, Singapore and Malaysia, partially offset by lower sales in Hong Kong and International.

Asia wealth sales decreased 26%$^{(2)}$, reflecting lower sales in India, Hong Kong and the Philippines.

## Expansion of PT Bank CIMB Niaga Tbk Partnership

On April 5, 2022, we announced an expansion to the existing bancassurance partnership with PT Bank CIMB Niaga Tbk ('CIMB Niaga') in Indonesia, which also extends our existing agreement by six years to 2039. Under the new agreement, for a term of 15 years effective January 2025, Sun Life will be the provider of insurance solutions to CIMB Niaga customers across all distribution channels, accelerating our growth ambitions in the country. For additional information, refer to Note 3 in our Consolidated Financial Statements for the period ended December 31, 2022.

## Dah Sing Bank Bancassurance Partnership

On January 20, 2023, we announced a 15-year exclusive bancassurance partnership in Hong Kong with Dah Sing Bank ('Dah Sing'). Under this partnership, Sun Life will be the exclusive provider of life insurance solutions to Dah Sing's 570,000 retail banking customers, helping to fulfill their savings and protection needs at different life stages. This is Sun Life's first exclusive bancassurance partnership in Hong Kong and will be a valuable complement to our existing network of over 2,500 expert insurance advisors. Hong Kong is a thriving life insurance hub in Asia and bancassurance is a key distribution channel, accounting for more than 50% of the life insurance distribution mix. Following the completion of regulatory processes and approvals, distribution of Sun Life products is anticipated to start in July 2023.

$^{(1)}$ Experience-related items from the India, China and Malaysia joint ventures are recorded within other experience.

$^{(2)}$ This percentage change excludes the impacts of foreign exchange translation. For more information about these non-IFRS financial measures, see section L - Non-IFRS Financial Measures in this document.

40 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Profitability by Business Unit and Growth by Business Market

2022 vs. 2021

### Local Markets

Local Markets' reported net income of $210 million decreased $398 million or 65%, reflecting a prior year gain from the IPO of our India asset management joint venture, market-related impacts and policyholder behaviour experience, partially offset by improved mortality, including from our joint ventures$^{[1]}$, compared to prior year which included COVID-19-related claims, favourable expense experience and higher new business gains.

We continued to maintain a strong Client focus, build our agency and strengthen bancassurance channels, leverage a more balanced product portfolio and increase productivity.

**Philippines** - On a local currency basis, individual insurance sales increased 12%. Mutual and managed fund AUM was $2.3 billion as at December 31, 2022, a decrease of 47%, measured in local currency, reflecting lower money market sales.

Agency headcount reached approximately 23,500 at the end of 2022, 5% higher than 2021.

**Indonesia** - On a local currency basis, individual life insurance sales increased 4%, with growth in the bancassurance channel, partially offset by lower sales in agency and telemarketing channel.

Agency headcount was at approximately 3,700 in 2022, a decrease of 36% from the previous year-end.

**Vietnam** - On a local currency basis, individual insurance sales increased 41%, driven by the bancassurance channel and growth in the agency channel.

Agency headcount was approximately 8,100 at the end of 2022, 42% higher than 2021.

**Malaysia** - On a local currency basis, individual insurance sales increased 33%, with higher sales in the bancassurance channel.

Malaysia's agency force was at approximately 1,200 agents as at the end of 2022, 43% higher than 2021.

**India** - On a local currency basis, individual life insurance sales increased 22%, with growth in all channels. On a local currency basis, gross sales of equity and fixed income funds decreased 36%.

India's agency headcount of 53,100 at the end of 2022 was 24% lower than 2021.

Total AUM as at December 31, 2022 was $46.8 billion, of which $17.0 billion is reported in our AUM based on Sun Life's 36.49% share, 4% lower than 2021, on a local currency basis.

**China** - On a local currency basis, individual insurance sales decreased 9%, reflecting lower sales in agency and online channels, partially offset by bancassurance and broker channels.

Agency headcount of 2,600 at the end of 2022 was 69% lower than 2021 due to focus on quality.

### International Hubs

International Hubs' reported net income of $305 million decreased $162 million or 35%, reflecting favourable ACMA impacts in the prior year, lower fee-based income reflecting equity market declines and higher new business strain in Hong Kong, partially offset by new business gains in International and higher investment gains.

**Hong Kong** - On a local currency basis, individual insurance sales decreased 22%, reflecting lower sales in the agency and broker channel. AUM in the pension business was $21.3 billion as at December 31, 2022, 7% lower than prior year measured on a local currency basis, reflecting equity declines, and lower pension net flows.

Agency headcount in 2022 remained flat at approximately 2,500 relative to 2021.

**International** - On a local currency basis, individual life insurance sales decreased 26%, due to the closing of a product in 2021.

**Singapore** - On a local currency basis, individual insurance sales are gaining momentum, primarily reflecting sales from an expanded suite of products.

$^{[1]}$ Experience-related items from the India, China and Malaysia joint ventures are recorded within other experience.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

41

## 5. Corporate

Corporate includes the results from the UK business and Corporate Support.

### Business Units

| Business | Description |
| --- | --- |
| UK | UK has a run-off block of business consisting of approximately 460,000 in-force life and pension policies, with approximately £8.2 billion of AUM. Since December 2010, UK has been closed to new business and focuses on supporting existing Clients. Most administrative functions have been outsourced to external service providers which are managed by an in-house management team. We entered into an agreement to sell Sun Life UK (1) to Phoenix Group Holdings plc. Under the agreement, Sun Life will retain economic interest in the payout annuities business through a reinsurance treaty. The transaction is expected to close in the first half of 2023, subject to regulatory approvals and customary closing conditions. |
| Corporate Support | Corporate Support operations consist of the certain expenses, debt charges, investment income, capital and other items, pertaining to monitoring and oversight of enterprise activities and Corporate treasury functions, which are not allocated to business segments. Corporate Support also includes our Run-off reinsurance business. Coverage in our Run-off reinsurance business includes medical, guaranteed minimum income and death benefit coverage. The block also includes group long-term disability and personal accident policies which are 100% retroceded. |

$^{(1)}$ SLF of Canada UK Limited.

### Financial and Business Results

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| UK | (14) | 141 |
| Corporate Support | (168) | (231) |
| Reported net income (loss) - Common shareholders | (182) | (90) |
| Less: Market-related impacts (1) | 59 | (1) |
| Assumption changes and management actions (1) | 46 | - |
| Acquisition, integration and restructuring (1)(2) | - | (51) |
| Other (1)(3) | (136) | 10 |
| Underlying net income (loss) (4) | (151) | (48) |

$^{(1)}$ Represents an adjustment made to arrive at a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment, including pre-tax amounts.

$^{(2)}$ The restructuring charge of $57 million in 2021 related to our strategy for our workspace and redefining the role of the office.

$^{(3)}$ Other adjustments to arrive at a non-IFRS financial measure include other items that are unusual or exceptional in nature. See section L - Non-IFRS Financial Measures in this document.

$^{(4)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

### Profitability

#### 2022 vs. 2021

Corporate reported net loss was $182 million, compared to a net loss of $90 million in the prior year, reflecting a $170 million charge related to the sale of Sun Life UK as well as the change in underlying net loss. This was partially offset by the net impact of tax-related matters$^{(1)}$, a restructuring charge of $57 million in the first quarter of 2021, and favourable ACMA impacts.

Underlying net loss was $151 million, compared to a net loss of $48 million in the prior year, reflecting a higher effective tax rate and AFS losses, partially offset by lower expenses primarily for incentive compensation.

### Profitability by Business Unit

#### 2022 vs. 2021

#### UK

UK's reported net loss was $14 million, compared to reported net income of $141 million in the prior year, reflecting a $170 million charge related to the sale of Sun Life UK, partially offset by favourable ACMA impacts.

#### Corporate Support

Corporate Support's reported net loss of $168 million improved $63 million or 27%, driven by a restructuring charge of $57 million in the first quarter of 2021 and lower expenses primarily for incentive compensation, partially offset by the net impact of tax-related matters$^{(2)}$ and AFS losses.

$^{(1)}$ Tax related matters include tax-exempt investment income in reported net income and the impact of the Canada Tax Rate Change. On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurers' taxable income in excess of $100 million was enacted in Canada ('Canada Tax Rate Change'). This legislation applies retroactively to the Federal Budget date of April 7, 2022. As a result, Corporate reported net income increased by $51 million in the fourth quarter, reflected in Other adjustments. Refer to section D - Profitability in this document for more information.

$^{(2)}$ Tax related matters include a higher effective tax rate compared to the prior year, partially offset by the impact of the Canada Tax Rate Change.

42 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## H. Investments

The Company strives to ensure that general fund investments are aligned with business objectives including meeting policyholder obligations and maintaining adequate liquidity at all times. Consideration is given to a wide range of factors in our investment process, including ensuring attractive risk and return profiles, appropriate diversification by asset type, credit exposure and sector, financial condition and ESG profile of issuers and borrowers, quality and value of underlying security and macro- and micro-economic developments and trends including prospects for specific industry sectors. The Risk Committee of the Board of Directors ('Risk Committee') approves policies that contain prudent standards and procedures for the investment of our general fund assets. These policies include requirements, restrictions and limitations for interest rate, credit, equity market, real estate market, liquidity, concentration, currency, and derivative risks. Compliance with these policies is monitored on a regular basis and reported annually to the Risk Committee. The Governance, Investment & Conduct Review Committee of the Board of Directors monitors the Company's Investment Plan and investment performance, oversees practices, procedures and controls related to the management of the general fund investment portfolio, and reviews corporate governance guidelines and processes.

### 1. Investment Profile

Total general fund invested assets of $177.3 billion as at December 31, 2022, were down $7.2 billion from December 31, 2021. The decrease was primarily due to declines in net fair value from rising interest rates and widening credit spreads, partially offset by favourable impacts from foreign exchange translation. Our general fund invested assets are well-diversified across investment types, geographies and sectors with the majority of our portfolio invested in high quality fixed income assets.

The following table sets out the composition of our general fund invested assets:$^{(1)}$

| ($ millions) | December 31, 2022 |  |  | December 31, 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Carrying value | Fair value | % of Total fair value | Carrying value | Fair value | % of Total fair value |
| Cash, cash equivalents and short-term securities | 11,219 | 11,219 | 7% | 12,278 | 12,278 | 6% |
| Debt securities | 75,902 | 75,902 | 44% | 88,727 | 88,727 | 47% |
| Equity securities | 7,148 | 7,148 | 4% | 9,113 | 9,113 | 5% |
| Mortgages and loans | 56,261 | 51,850 | 30% | 51,692 | 55,756 | 29% |
| Derivative assets | 2,095 | 2,095 | 1% | 1,583 | 1,583 | 1% |
| Other invested assets - financial assets | 9,582 | 9,418 | 5% | 7,081 | 7,071 | 4% |
| Policy loans | 3,350 | 3,350 | 2% | 3,261 | 3,261 | 2% |
| Total financial assets | 165,557 | 160,982 | 93% | 173,735 | 177,789 | 94% |
| Investment properties | 10,102 | 10,102 | 6% | 9,109 | 9,109 | 5% |
| Other invested assets - non-financial assets | 1,633 | 1,633 | 1% | 1,678 | 1,678 | 1% |
| Total invested assets | 177,292 | 172,717 | 100% | 184,522 | 188,576 | 100% |

$^{(1)}$ The values and ratios presented are based on the fair value of the respective asset categories. Generally, the carrying values for invested assets are equal to their fair values; however our mortgages and loans are generally carried at amortized cost. For invested assets supporting insurance contracts, in the event of default, if the amounts recovered are insufficient to satisfy the related insurance contract liability cash flows that the assets are intended to support, credit exposure may be greater than the carrying value of the assets.

### 2. Debt Securities

The debt securities portfolio is actively managed through a regular program of purchases and sales aimed at optimizing yield, quality and liquidity, while ensuring that it remains well-diversified and duration-matched to insurance contract liabilities. As at December 31, 2022, with the exception of certain countries where we have business operations, including Canada, the United States, the United Kingdom and the Philippines, our exposure to debt securities from any single country did not exceed 1% of total invested assets.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

43

## Debt Securities by Issuer and Industry Sector

| ($ millions) | December 31, 2022 |  | December 31, 2021 |  |
| --- | --- | --- | --- | --- |
|  | Total | % of Total | Total | % of Total |
| Debt securities issued or guaranteed by: |  |  |  |  |
| Canadian federal government | 5,611 | 8% | 7,101 | 8% |
| Canadian provincial and municipal government | 13,665 | 18% | 17,079 | 19% |
| U.S. government and agency | 1,537 | 2% | 2,413 | 3% |
| Other foreign government | 4,624 | 6% | 5,511 | 6% |
| Total government issued or guaranteed debt securities | 25,437 | 34% | 32,104 | 36% |
| Corporate debt securities by industry sector: (1) |  |  |  |  |
| Financials | 11,355 | 15% | 11,948 | 14% |
| Utilities | 6,676 | 9% | 8,192 | 9% |
| Industrials | 5,575 | 7% | 6,596 | 7% |
| Energy | 3,342 | 4% | 4,279 | 5% |
| Communication services | 3,329 | 4% | 3,886 | 4% |
| Real estate | 2,506 | 3% | 2,688 | 3% |
| Health care | 2,034 | 3% | 2,427 | 3% |
| Consumer staples | 1,978 | 3% | 2,278 | 3% |
| Consumer discretionary | 1,836 | 2% | 2,120 | 2% |
| Information technology | 1,384 | 2% | 1,635 | 2% |
| Materials | 1,295 | 2% | 1,517 | 2% |
| Total corporate debt securities | 41,310 | 54% | 47,566 | 54% |
| Asset-backed securities | 9,155 | 12% | 9,057 | 10% |
| Total debt securities | 75,902 | 100% | 88,727 | 100% |

$^{(1)}$ Our grouping of debt securities by sector is based on the Global Industry Classification Standard and S&P Dow Jones Indices.

## Debt Securities by Geography

The carrying value of our debt securities by geographic location is presented in the following table.

| ($ millions) | December 31, 2022 |  |  |  | December 31, 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | FVTPL debt securities | AFS debt securities | Total | % of Total | FVTPL debt securities | AFS debt securities | Total | % of Total |
| Debt securities by geography: |  |  |  |  |  |  |  |  |
| Canada | 27,816 | 4,861 | 32,677 | 43% | 33,028 | 5,135 | 38,163 | 43% |
| United States | 21,412 | 5,058 | 26,470 | 35% | 26,678 | 4,552 | 31,230 | 35% |
| Europe | 6,210 | 1,393 | 7,603 | 10% | 8,289 | 1,337 | 9,626 | 11% |
| Asia | 4,761 | 752 | 5,513 | 7% | 5,249 | 622 | 5,871 | 7% |
| Other | 2,558 | 1,081 | 3,639 | 5% | 2,754 | 1,083 | 3,837 | 4% |
| Total debt securities | 62,757 | 13,145 | 75,902 | 100% | 75,998 | 12,729 | 88,727 | 100% |

Our gross unrealized losses as at December 31, 2022 for FVTPL and AFS debt securities were $9,522 million and $1,382 million, respectively (December 31, 2021 - $405 million and $122 million, respectively). The increase in gross unrealized losses was largely due to the impact from rising interest rates.

## Debt Securities by Credit Rating

Debt securities with a credit rating of 'A' or higher represented 72% of the total debt securities as at December 31, 2022 (December 31, 2021 - 73%). Debt securities with a credit rating of 'BBB' or higher represented 99% of total debt securities as at December 31, 2022, consistent with December 31, 2021.

44 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

The credit risk ratings in the following table were established in accordance with the internal rating process described in this MD&A under the heading J - Risk Management - 9 - Risk Categories - Credit Risk Management Governance and Control.

| ($ millions) | December 31, 2022 |  |  |  | December 31, 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | FVTPL debt securities | AFS debt securities | Total debt securities | % of Total debt securities | FVTPL debt securities | AFS debt securities | Total debt securities | % of Total debt securities |
| Debt securities by credit rating: |  |  |  |  |  |  |  |  |
| AAA | 10,400 | 4,862 | 15,262 | 20% | 12,811 | 5,294 | 18,105 | 20% |
| AA | 9,545 | 1,765 | 11,310 | 15% | 11,510 | 1,502 | 13,012 | 15% |
| A | 24,144 | 3,552 | 27,696 | 37% | 29,984 | 3,282 | 33,266 | 38% |
| BBB | 17,947 | 2,721 | 20,668 | 27% | 20,710 | 2,484 | 23,194 | 26% |
| BB and lower | 721 | 245 | 966 | 1% | 983 | 167 | 1,150 | 1% |
| Total debt securities | 62,757 | 13,145 | 75,902 | 100% | 75,998 | 12,729 | 88,727 | 100% |

### 3. Equities

The equity portfolio is well-diversified with approximately 59% of the portfolio invested in exchange-traded funds as at December 31, 2022 (December 31, 2021 - 64%). Exchange-traded fund holdings are primarily in the SPDR S&P 500 ETF Trust and Tracker Fund of Hong Kong Ltd. The carrying value of equities by issuer geography as at December 31, 2022 is set out in the following table.

#### Equities by Issuer Geography

| ($ millions) | December 31, 2022 |  |  |  | December 31, 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | FVTPL equities | AFS equities | Total | % of Total | FVTPL equities | AFS equities | Total | % of Total |
| Equity securities: |  |  |  |  |  |  |  |  |
| Canada | 2,981 | 57 | 3,038 | 42% | 3,301 | 62 | 3,363 | 37% |
| United States | 1,732 | 192 | 1,924 | 27% | 2,010 | 1,405 | 3,415 | 37% |
| Europe | 361 | 4 | 365 | 5% | 449 | 6 | 455 | 5% |
| Asia | 1,717 | 71 | 1,788 | 25% | 1,768 | 102 | 1,870 | 21% |
| Other | 33 | - | 33 | 1% | 10 | - | 10 | -% |
| Total equity securities | 6,824 | 324 | 7,148 | 100% | 7,538 | 1,575 | 9,113 | 100% |

Excluding exchange-traded funds and mutual funds, there were no issuers exceeding 1% of the equity portfolio as at December 31, 2022.

### 4. Mortgages and Loans

Mortgages and loans are presented at their carrying value in our 2022 Annual Consolidated Financial Statements. Our mortgage portfolio consisted almost entirely of first mortgages and our loan portfolio consisted of private placement loans.

#### Mortgages and Loans by Geography

The carrying value of mortgages and loans by geographic location is presented in the following table.$^{(1)}$

| ($ millions) | December 31, 2022 |  |  |  | December 31, 2021 |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Mortgages | Loans | Total | % of Total | Mortgages | Loans | Total | % of Total |
| Canada | 9,892 | 13,143 | 23,035 | 41% | 9,569 | 12,885 | 22,454 | 43% |
| United States | 5,439 | 17,238 | 22,677 | 40% | 5,907 | 14,596 | 20,503 | 40% |
| Europe | 29 | 7,716 | 7,745 | 14% | 9 | 6,093 | 6,102 | 12% |
| Asia | - | 556 | 556 | 1% | - | 532 | 532 | 1% |
| Other | - | 2,248 | 2,248 | 4% | - | 2,101 | 2,101 | 4% |
| Total mortgages and loans | 15,360 | 40,901 | 56,261 | 100% | 15,485 | 36,207 | 51,692 | 100% |
| % of Total Invested Assets | 9% | 23% | 32% |  | 8% | 20% | 28% |  |

$^{(1)}$ The geographic location for mortgages is based on the location of the property and for loans it is based on the country of the creditor's parent.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

45

## Mortgage Portfolio

As at December 31, 2022, we held $15.4 billion of mortgages (December 31, 2021 - $15.5 billion). Our mortgage portfolio consists entirely of commercial mortgages, as presented in the following table.

| ($ millions) | December 31, 2022 |  |  | December 31, 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Insured | Uninsured | Total | Insured | Uninsured | Total |
| Mortgages: |  |  |  |  |  |  |
| Retail | - | 3,001 | 3,001 | - | 3,388 | 3,388 |
| Office | - | 3,284 | 3,284 | - | 3,531 | 3,531 |
| Multi-family residential | 3,724 | 1,546 | 5,270 | 3,870 | 1,857 | 5,727 |
| Industrial and land | - | 2,883 | 2,883 | - | 2,035 | 2,035 |
| Other | 450 | 472 | 922 | 348 | 456 | 804 |
| Total mortgages | 4,174 | 11,186 | 15,360 | 4,218 | 11,267 | 15,485 |
| % of Total mortgages | 27% | 73% | 100% | 27% | 73% | 100% |

Our mortgage portfolio consists entirely of commercial mortgages, including retail, office, multi-family, industrial and land properties. As at December 31, 2022, 34% of our commercial mortgage portfolio consisted of multi-family residential mortgages; there are no single-family residential mortgages. Our uninsured commercial portfolio had a weighted average loan-to-value ratio of approximately 53% as at December 31, 2022 (December 31, 2021 - 58%). While we generally limit the maximum loan-to-value ratio to 75% at issuance, we may invest in mortgages with a higher loan-to-value ratio in Canada if the mortgage is insured by the Canada Mortgage and Housing Corporation ('CMHC'). The estimated weighted average debt service coverage for our uninsured commercial portfolio is 1.72 times. Of the $4.0 billion of multi-family residential mortgages in the Canadian commercial mortgage portfolio, 92% were insured by the CMHC.

The following tables summarize our mortgages by credit quality indicator:

| ($ millions) | December 31, 2022 | As % of Total Mortgages | December 31, 2021 | As % of Total Mortgages |
| --- | --- | --- | --- | --- |
| Mortgages by credit rating: |  |  |  |  |
| Insured | 4,174 | 27% | 4,218 | 27% |
| AAA | - | -% | - | -% |
| AA | 1,769 | 12% | 1,640 | 11% |
| A | 5,917 | 38% | 4,979 | 32% |
| BBB | 2,911 | 19% | 3,814 | 25% |
| BB and lower | 589 | 4% | 822 | 5% |
| Impaired | - | -% | 12 | -% |
| Total mortgages | 15,360 | 100% | 15,485 | 100% |

## Loan Portfolio

As at December 31, 2022, we held $40.9 billion of loans (December 31, 2021 - $36.2 billion). Private placement loans provide diversification by type of loan, industry segment and borrower credit quality. The private placement loan portfolio consists of senior secured and unsecured loans to large- and mid-market corporate borrowers, securitized lease/loan obligations secured by a variety of assets, and project finance loans in sectors such as power and infrastructure.

The credit risk ratings in the following table were established in accordance with the internal rating process described in this MD&A under the heading J - Risk Management - 9 - Risk Categories - Credit Risk Management Governance and Control. As at December 31, 2022, 95% of our total loan portfolio is investment grade (December 31, 2021 - 94%).

| ($ millions) | December 31, 2022 | As % of Total Loans | December 31, 2021 | As % of Total Loans |
| --- | --- | --- | --- | --- |
| Loans by credit rating: |  |  |  |  |
| AAA | 274 | 1% | 192 | 1% |
| AA | 5,712 | 14% | 4,994 | 14% |
| A | 16,891 | 41% | 14,231 | 39% |
| BBB | 15,920 | 39% | 14,632 | 40% |
| BB and lower | 2,071 | 5% | 2,139 | 6% |
| Impaired | 33 | -% | 19 | -% |
| Total loans | 40,901 | 100% | 36,207 | 100% |

46 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

The following tables summarize our loans by sector:

| ($ millions) | December 31, 2022 | As % of Total Loans | December 31, 2021 | As % of Total Loans |
| --- | --- | --- | --- | --- |
| Loans by Sector: |  |  |  |  |
| Corporate issued loans | 29,217 | 71% | 24,852 | 69% |
| Canadian provincial & municipal government | 7,154 | 18% | 7,041 | 19% |
| U.S. government & agency | 3,022 | 7% | 2,783 | 8% |
| Other foreign government | 1,451 | 4% | 1,470 | 4% |
| Canadian federal government | 57 | -% | 61 | -% |
| Total loans | 40,901 | 100% | 36,207 | 100% |

## Mortgages and Loans Past Due or Impaired

The gross carrying value and allowance for mortgages and loans past due or impaired are presented in the following table.

| ($ millions) | Gross carrying value |  |  | Allowance for losses |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Mortgages | Loans | Total | Mortgages | Loans | Total |  |
|  | Not past due | 15,360 | 40,868 | 56,228 | - | - | - |
| Past due: |  |  |  |  |  |  |  |
| Past due less than 90 days | - | - | - | - | - | - |  |
| Past due 90 days or more | - | - | - | - | - | - |  |
| Impaired | 80 | 145 | 225 | 80 | 112 | 192 |  |
| Total | 15,440 | 41,013 | 56,453 | 80 | 112 | 192 |  |

| ($ millions) | Gross carrying value |  |  | Allowance for losses |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Mortgages | Loans | Total | Mortgages | Loans | Total |  |
|  | Not past due | 15,473 | 36,188 | 51,661 | - | - | - |
| Past due: |  |  |  |  |  |  |  |
| Past due less than 90 days | - | - | - | - | - | - |  |
| Past due 90 days or more | - | - | - | - | - | - |  |
| Impaired | 92 | 71 | 163 | 80 | 52 | 132 |  |
| Total | 15,565 | 36,259 | 51,824 | 80 | 52 | 132 |  |

As at December 31, 2022, our impaired mortgages and loans, net of allowances for losses, were $33 million (December 31, 2021 - $31 million).

## 5. Derivatives

The fair value of derivative assets held by the Company was $2,095 million, while the fair value of derivative liabilities was $2,351 million as at December 31, 2022 (December 31, 2021 - $1,583 million and $1,392 million, respectively).

We use derivative instruments to manage risks related to interest rate, equity market and currency fluctuations and in replication strategies to reproduce permissible investments. Use of derivatives in these risk mitigation strategies does not mitigate all risk exposure; rather, they are used to keep us within our risk tolerance limits.

In addition to the general policies and monitoring, we use a variety of tools in counterparty risk management. Over-the-counter ('OTC') derivative transactions are executed under International Swaps and Derivatives Association ('ISDA') Master Agreements. A Credit Support Annex accompanies most of the ISDAs, which establish requirements for collateral.

## Derivative Financial Instruments

The values associated with our derivative instruments are presented in the following table. Notional amounts serve as the basis for payments calculated under derivatives contracts and are generally not exchanged.

| ($ millions) | December 31, 2022 | December 31, 2021 |
| --- | --- | --- |
| Net fair value asset (liability) | (256) | 191 |
| Total notional amount | 69,768 | 65,966 |
| Credit equivalent amount (1) | 1,173 | 1,179 |
| Risk-weighted credit equivalent amount (1) | 26 | 28 |

$^{(1)}$ Amounts presented are net of collateral received.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

47

The net fair value of derivatives was a liability of $256 million as at December 31, 2022 (December 31, 2021 - asset of $191 million). The decrease in net fair value was driven by a decrease in interest rate contracts due to upward shifts in yield curves, a decrease in foreign exchange contracts due to the weakening of the Canadian dollar against the U.S. dollar, partially offset by gains on foreign exchange contracts due to swap spread differentials between the U.S. and Canadian dollar.

The total notional amount of our derivatives increased to $69.8 billion as at December 31, 2022 (December 31, 2021 - $66.0 billion). The change in notional amount is mainly attributable to an increase in foreign exchange contracts used for hedging foreign currency assets.

Certain of our derivatives are designated in qualifying hedging relationships for accounting purposes, and represented $1.4 billion, or 1.9% of the total notional amount. Derivatives are designated in hedging relationships for accounting purposes to minimize accounting mismatches. These hedging relationships are documented at inception and hedge effectiveness is assessed on a quarterly basis.

Derivatives designated in qualifying hedging relationships for accounting purposes include interest rate swaps, foreign exchange agreements and equity forwards. We designate certain interest rate swaps in fair value hedging relationships to hedge interest rate exposure on AFS assets. We also designate certain foreign exchange agreements in fair value and cash flow hedging relationships to manage foreign currency fluctuations associated with AFS assets. Additionally, we designate certain equity forwards in cash flow hedging relationships for anticipated payments of awards under certain stock-based compensation plans.

## Credit Equivalent Amount

As the regulator of the Canadian insurance industry, OSFI provides guidelines to quantify the use of derivatives. The credit equivalent amount, a measure used to approximate the potential credit exposure, is determined as the replacement cost of the derivative contracts with a positive fair value plus an amount representing the potential future credit exposure.

The risk-weighted credit equivalent amount is a measure used to determine the amount of capital necessary to support derivative transactions for certain Canadian regulatory purposes. It is determined by weighting the credit equivalent amount according to the nature of the derivative and the creditworthiness of the counterparties.

| ($ millions) | December 31, 2022 |  | December 31, 2021 |  |
| --- | --- | --- | --- | --- |
|  | Credit equivalent amount ('CEA') (1) | Risk weighted CEA (1) | Credit equivalent amount ('CEA') (1) | Risk weighted CEA (1) |
| Foreign exchange contracts | 1,049 | 24 | 1,024 | 24 |
| Interest rate contracts | 73 | 1 | 90 | 2 |
| Equity and other contracts | 51 | 1 | 65 | 2 |
| Total | 1,173 | 26 | 1,179 | 28 |

$^{(1)}$ Amounts presented are net of collateral received.

## Credit Default Swaps By Underlying Financial Instrument Credit Rating

Credit default swaps ('CDS') are derivative contracts that transfer credit risk related to an underlying referenced financial instrument from one counterparty to another. The purchaser receives protection against the decline in the value of the referenced financial instrument as a result of specified credit events such as default or bankruptcy. The Company sells credit protection through CDS to replicate credit exposure of an underlying reference security and enhance investment returns. The credit risk ratings of the underlying reference securities for single name contracts were established in accordance with the internal rating process described in section J - Risk Management - 9 - Risk Categories - Credit Risk Management Governance and Control.

The following table provides a summary of the credit default swap protection sold by credit rating of the underlying reference security.

| ($ millions) | December 31, 2022 |  | December 31, 2021 |  |
| --- | --- | --- | --- | --- |
|  | Notional amount | Fair value | Notional amount | Fair value |
| Single name credit default swap contracts |  |  |  |  |
| AA | 20 | - | 38 | 1 |
| A | 587 | 4 | 347 | 4 |
| BBB | 706 | 5 | 431 | 9 |
| BB | 47 | 7 | 19 | - |
| Total single name credit default swap contracts | 1,360 | 16 | 835 | 14 |
| Credit default swap index contracts | - | - | - | - |
| Total credit default swap contracts sold | 1,360 | 16 | 835 | 14 |

Additional detail on our derivative portfolio by derivative type is provided in Note 6.A.iv of our 2022 Annual Consolidated Financial Statements.

48 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## 6. Investment Properties

Office, retail and industrial properties are the major components of our investment properties portfolio, representing approximately 81% as at December 31, 2022. The increase in our investment property portfolio is predominantly driven by market appraisal gains, net purchases, and impacts of foreign exchange translation in the year.

### Investment Properties by Type and Geography

| ($ millions) | December 31, 2022 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Office | Industrial | Retail | Multi-family residential | Other | Total | % of Total by Geography |
| Canada | 1,747 | 3,434 | 926 | 1,322 | 612 | 8,041 | 79% |
| United States | 647 | 1,105 | 263 | - | 1 | 2,016 | 20% |
| Europe | 12 | 16 | 17 | - | - | 45 | 1% |
| Total | 2,406 | 4,555 | 1,206 | 1,322 | 613 | 10,102 | 100% |
| % of Total by Type | 24% | 45% | 12% | 13% | 6% | 100% |  |

| ($ millions) | December 31, 2021 |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Office | Industrial | Retail | Multi-family residential | Other | Total | % of Total by Geography |
| Canada | 1,784 | 2,481 | 971 | 1,396 | 750 | 7,382 | 81% |
| United States | 665 | 600 | 260 | 73 | 66 | 1,664 | 18% |
| Europe | 19 | 20 | 24 | - | - | 63 | 1% |
| Total | 2,468 | 3,101 | 1,255 | 1,469 | 816 | 9,109 | 100% |
| % of Total by Type | 27% | 34% | 14% | 16% | 9% | 100% |  |

## 7. Impaired Assets

Financial assets that are classified as FVTPL, which represented 42% of our invested assets as at December 31, 2022, do not have allowances for losses since changes in the fair value of these assets are recorded to income and the assets are recorded at fair value in our 2022 Annual Consolidated Financial Statements. In the event of default, if the amounts recovered are insufficient to satisfy the related insurance contract liability cash flows that the assets are intended to support, credit exposure may be greater than the carrying value of the asset.

In the absence of objective evidence of impairment, impairment losses are not recognized on AFS debt securities, equity securities and other invested assets. If the cost of these assets is greater than their fair values, unrealized losses are recognized in other comprehensive income (loss). Unrealized losses may be due to interest rate fluctuations or depressed fair values in sectors which have experienced strong negative market performance. Additional detail on our impairment policy is provided in Note 1.iii of our 2022 Annual Consolidated Financial Statements.

## 8. Asset Default Provision

We make provisions for possible future credit events in the determination of our insurance contract liabilities. The amount of the provision for asset default included in insurance contract liabilities is based on possible reductions in future investment yields that vary by factors such as type of asset, asset credit quality (rating), duration and country of origin. To the extent that an asset is written off, or disposed of, any amounts that were set aside in our insurance contract liabilities for possible future asset defaults in respect of that asset are released.

Our asset default provision reflects the provision relating to future credit events for fixed income assets currently held by the Company that support our insurance contract liabilities. Our asset default provision as at December 31, 2022 was $2,457 million (December 31, 2021 - $2,992 million). The decrease of $535 million was primarily due to yield curve movements and the release of provisions on fixed income assets supporting our insurance contract liabilities, partially offset by currency impacts and increases in the provisions for assets purchased net of dispositions. This asset default provision represents 2.1% of the fixed income assets supporting insurance contract liabilities reported on our Consolidated Statements of Financial Position as at December 31, 2022.

A one-notch downgrade of 25% of our fixed income investment portfolio$^{(1)}$ would result in a $125 million (post-tax) increase in insurance contract liabilities from ratings and a corresponding decrease to common shareholders' net income. This excludes the impact from the release of best estimate credit provision and fixed income investments not impacting shareholders net income, for example assets supporting participating policyholders. Of this total amount, approximately 60% is related to our BBB portfolio.

$^{(1)}$ Excluding federal and provincial securities, asset-backed securities, mortgage-backed securities, and CMHC mortgages.

MANAGEMENT'S DISCUSSION & ANALYSIS

Sun Life Financial Inc. Annual Report 2022

49

The following table sets out the changes in our asset default provision for existing fixed income investments.

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Opening balance | 2,992 | 3,127 |
| Purchases, dispositions and net asset movement (1) | (294) | 251 |
| Changes in assumptions and methodologies | - | - |
| Changes in ratings | (10) | (25) |
| Release of provisions (2) | (317) | (339) |
| Currency | 86 | (22) |
| Closing balance | 2,457 | 2,992 |

$^{(1)}$ Net movement reflects the fluctuation in the value of FVTPL assets arising from movements in interest rates, credit spreads and other factors that impact the market value of fixed income investments.

$^{(2)}$ This amount represents the orderly release of provisions for future credit events held in insurance contract liabilities.

## I. Capital and Liquidity Management

Capital and liquidity management is core to our business as an insurance company. We ensure adequate capital for the protection of our policyholders, Clients and creditors, while managing capital adequacy and allocation across our businesses for the benefit of our shareholders. In addition, we maintain strong financial flexibility by ensuring that sufficient liquid assets are available to cover our anticipated payment obligations and funding requirements. We invest in various types of assets with a view to matching them with liabilities of various durations.

The regulatory environments in which we operate are expected to evolve as governments and regulators work to develop the appropriate level of financial regulation required to ensure that capital, liquidity and risk management practices are sufficient to withstand severe economic downturns.

### 1. Capital

We have a capital risk policy designed to maintain a strong capital position and to provide the flexibility necessary to take advantage of growth opportunities, to support the risk associated with our businesses and to optimize shareholder return. Our capital risk policy is also intended to provide an appropriate level of risk management over capital adequacy risk, which is defined as the risk that capital is not or will not be sufficient to withstand adverse economic conditions, to maintain financial strength, or to allow the Company and its subsidiaries to take advantage of opportunities for expansion. Our capital base is structured to exceed minimum regulatory and internal capital targets and to maintain strong credit and financial strength ratings, while maintaining a capital-efficient structure. Capital is managed both on a consolidated basis under principles that consider all the risks associated with the business as well as at the business group level under the principles appropriate to the jurisdictions in which we operate. The capital of our foreign subsidiaries is managed on a local statutory basis in a manner commensurate with their individual risk profiles.

Sun Life, including all of its business groups, engages in a capital planning process annually in which capital deployment options, capital raising and dividend recommendations are presented to the Board of Directors ('Board'). Capital reviews are regularly conducted which consider the potential impacts under various business, interest rate and equity market scenarios. Relevant components of these capital reviews, including dividend recommendations, are presented to the Risk Committee on a quarterly basis. The Board is responsible for the approval of our annual capital plan and quarterly shareholder dividends.

The Company's capital risk policy establishes policies, operating guidelines and procedures that govern the management of capital. The capital risk policy is reviewed annually by the Risk Committee and any changes are approved by the Board. Our Corporate Capital and Risk Management functions are responsible for the development and implementation of the capital risk policy.

The Company's capital base consists mainly of common shareholders' equity. Other sources of capital include preferred shares and other equity instruments, non-controlling interests, participating policyholders' equity, subordinated debt issued by SLF Inc. and Sun Life Assurance, and certain other capital securities that qualify as regulatory capital. For Canadian regulatory purposes, our capital also includes innovative capital instruments issued by Sun Life Capital Trust.

50 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

The following table summarizes the sources of our capital and our capital position over the past two years. Notes 13, 14, 15 and 21 of our 2022 Annual Consolidated Financial Statements include additional details on our capital.

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Subordinated debt (1) | 6,676 | 6,425 |
| Innovative capital instruments (2) | 200 | 200 |
| Equity |  |  |
| Preferred shares and other equity instruments | 2,239 | 2,239 |
| Common shareholders' equity (3) | 25,211 | 24,075 |
| Participating policyholders' equity | 1,837 | 1,700 |
| Non-controlling interests' equity | 90 | 59 |
| Total equity | 29,377 | 28,073 |
| Total capital (1) | 36,253 | 34,698 |
| Financial leverage ratio (1)(4) | 25.1% | 25.5% |

$^{(1)}$ For 2021, amount included $2.0 billion of proceeds from the subordinated debt offerings completed in November 2021, of which $1.5 billion did not qualify as LICAT capital at issuance as it was subject to contractual terms requiring us to redeem the underlying securities in full, if the closing of the DentaQuest acquisition did not occur. We completed the acquisition of DentaQuest on June 1, 2022.

$^{(2)}$ Innovative capital instruments are presented net of associated transaction costs and consist of SLEECS, which were issued by Sun Life Capital Trust. SLEECS qualify as capital for Canadian regulatory purposes. However, under IFRS they are reported as Senior debentures in our Annual and Interim Consolidated Financial Statements.

$^{(3)}$ Common shareholders' equity is equal to Total shareholders' equity less Preferred shares and other equity instruments.

$^{(4)}$ Represents a non-IFRS financial measure. See section L - Non-IFRS Financial Measures in this document.

Our total capital consists of subordinated debt and other capital instruments, participating policyholders' equity, non-controlling interests and total shareholders' equity, which includes common shareholders' equity, preferred shares and other equity instruments.

Common shareholders' equity was $25.2 billion as at December 31, 2022 (December 31, 2021 - $24.1 billion). The increase of $1.1 billion was due to common shareholders' net income and other comprehensive income, partially offset by dividends.

MANAGEMENT'S DISCUSSION & ANALYSIS

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51

The table below provides the earliest par call and maturity dates for our subordinated debt, innovative capital instruments, preferred shares and other equity instruments outstanding as at December 31, 2022.

| Description | Interest Rate | Earliest Par Call Date/ Redemption Date (1) | Maturity | Principal/ Face Amount ($ millions) |
| --- | --- | --- | --- | --- |
| Subordinated Debt Issued by Sun Life Assurance |  |  |  |  |
| 6.30% Debentures, Series 2 | 6.30% | n/a | 2028 | 150 |
| Subordinated Debt Issued by SLF Inc. |  |  |  |  |
| Series 2007-1 | 5.40% | May 29, 2037 | 2042 | 400 |
| Series 2016-2 | 3.05% | September 19, 2023 | 2028 | 1,000 |
| Series 2019-1 | 2.38% | August 13, 2024 | 2029 | 750 |
| Series 2020-1 | 2.58% | May 10, 2027 | 2032 | 1,000 |
| Series 2020-2 | 2.06% | October 1, 2030 | 2035 | 750 |
| Series 2021-1 | 2.46% | November 18, 2026 | 2031 | 500 |
| Series 2021-2 | 2.80% | November 21, 2028 | 2033 | 1,000 |
| Series 2021-3 | 3.15% | November 18, 2031 | 2036 | 500 |
| Series 2022-1 | 4.78% | August 10, 2029 | 2034 | 650 |
| Trust Units Issued by Sun Life Capital Trust |  |  |  |  |
| SLEECS - Series B | 7.093% | June 30, 2032 | Perpetual | 200 |
| Class A Preferred Shares and Other Equity Instruments Issued by SLF Inc. |  |  |  |  |
| Series 3 | 4.45% | Any time | Perpetual | 250 |
| Series 4 | 4.45% | Any time | Perpetual | 300 |
| Series 5 | 4.50% | Any time | Perpetual | 250 |
| Series 8R (2) | 1.825% | June 30, 2025 | Perpetual | 155 |
| Series 9QR (3) | Floating | June 30, 2025 (5) | Perpetual | 125 |
| Series 10R (2) | 2.967% | September 30, 2026 | Perpetual | 171 |
| Series 11QR (4) | Floating | September 30, 2026 (5) | Perpetual | 29 |
| Series 2021-1 - LRCN (6) | 3.600% | June 30, 2026 | 2081 | 1,000 |

$^{(1)}$ The earliest date on which the Company has the option, but not the obligation, to call securities for redemption at their par value. Redemption of these securities is subject to regulatory approval.

$^{(2)}$ On the earliest redemption date and every five years thereafter, the dividend rate will reset to an annual rate equal to the 5-year Government of Canada bond yield plus a spread specified for each series. The specified spread for Class A shares is: Series 8R - 1.41% and Series 10R - 2.17%. On the earliest redemption date and every five years thereafter, holders will have the right, at their option, to convert their shares into the series that is one number higher than their existing series.

$^{(3)}$ Holders of Series 9QR Shares will be 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%. 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, 2025, and on June 30 every five years thereafter.

$^{(4)}$ Holders of Series 11QR Shares will be 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 2.17%. Holders of the Series 11QR Shares will have the right, at their option, to convert their Series 11QR Shares into Series 10R Shares on September 30, 2026, and on September 30 every five years thereafter.

$^{(5)}$ Redeemable on the redemption date and every five years thereafter, in whole or in part, at par, and on any other date at $25.50 per share.

$^{(6)}$ Series 2021-1 Notes bear interest at a fixed rate of 3.60% payable semi-annually until June 30, 2026. On June 30, 2026, and every five years thereafter until June 30, 2076, the interest rate on the Series 2021-1 Notes will be reset at an interest rate equal to the five-year Government of Canada yield, as defined in the prospectus, plus 2.604%. In case of non-payment of interest on or principal of the Series 2021-1 Notes when due, the recourse of each noteholder will be limited to that holder's proportionate share of the Limited Recourse Trust's assets. For more information about the LRCN, see Note 15.B of the 2022 Annual Consolidated Financial Statements.

52 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

The following table shows the number of common shares and stock options outstanding of SLF Inc. for the last two years.

#### Number of Common Shares Outstanding

| (in millions) | 2022 | 2021 |
| --- | --- | --- |
| Balance, beginning of year | 586 | 585.1 |
| Stock options exercised | 0.4 | 0.9 |
| Common shares repurchased and cancelled | - | - |
| Balance, end of year | 586.4 | 586 |

#### Number of Stock Options Outstanding

| (in millions) | 2022 | 2021 |
| --- | --- | --- |
| Balance, beginning of year | 3.0 | 3.2 |
| Options issued | 0.7 | 0.8 |
| Options exercised, forfeited or expired | (0.2) | (0.9) |
| Balance, end of year | 3.6 | 3.0 |

Under our Canadian Dividend Reinvestment and Share Purchase Plan ('DRIP'), Canadian-resident common and preferred shareholders may choose to have their dividends automatically reinvested in common shares of SLF Inc. and may also purchase common shares through our DRIP with cash. For dividend reinvestments, we may, at our option, issue common shares of SLF Inc. from treasury at a discount of up to 5% to the volume-weighted average trading price or direct that common shares be purchased on behalf of participants on the open market through the TSX and alternative Canadian trading platforms (collectively, the 'Exchanges') at the market price. Common shares of SLF Inc. acquired by participants through optional cash purchases may also be issued from treasury or purchased through the Exchanges at SLF Inc.'s option, in either case at no discount. Commencing with the dividends payable on March 31, 2016 and until further notice, common shares purchased under the Plan were purchased on the open market. There are no applicable discounts because the common shares are being purchased on the open market and are not being issued from treasury.

SLF Inc. grants stock options to certain employees. These options are granted at the closing price of SLF Inc.'s common shares on the TSX on the grant date.

As at January 27, 2023, SLF Inc. had 586,397,074 common shares, 3,588,520 options to acquire SLF Inc. common shares and 52,200,000 Class A Shares outstanding.

## 2. Capital Adequacy

OSFI has indicated that it will review the effectiveness of the LICAT guideline and update it to keep abreast of development in the life insurance industry and evolving risk measurement and management practices.

### SLF Inc.

SLF Inc. is a non-operating insurance company and was subject to OSFI's LICAT guideline as at December 31, 2022. 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. As at December 31, 2022, SLF Inc.'s LICAT ratio was 130%. For additional information, refer to section F - Financial Strength in this document.

### Sun Life Assurance

Sun Life Assurance, SLF Inc.'s principal operating life insurance subsidiary in Canada, was subject to OSFI's LICAT guideline as at December 31, 2022. With a LICAT ratio of 127% as at December 31, 2022, Sun Life Assurance's capital ratio is well above OSFI's supervisory ratio of 100% and regulatory minimum ratio of 90%. The LICAT guideline uses a risk-based approach for measuring specific life insurer risks and for aggregating the results to calculate the amount of a life insurer's regulatory required capital to support these risks. Certain of these risk components, along with available capital, are sensitive to changes in equity markets and interest rates as outlined in the section J - Risk Management of this document. For additional information, refer to section F - Financial Strength in this document.

MANAGEMENT'S DISCUSSION & ANALYSIS

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53

The following table shows the components of Sun Life Assurance's LICAT ratio for 2022 and 2021.

### Sun Life Assurance LICAT Ratio

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Capital resources |  |  |
| Retained earnings and contributed surplus | 18,130 | 15,934 |
| Adjusted accumulated other comprehensive income | 354 | 811 |
| Common and preferred shares | 7,285 | 7,285 |
| Innovative capital instruments and subordinated debt | 350 | 350 |
| Other | 269 | 252 |
| Less: |  |  |
| Goodwill | 2,292 | 2,370 |
| Non-life investments and other | 3,326 | 2,826 |
| Available capital | 20,770 | 19,436 |
| Surplus allowance and eligible deposits | 9,137 | 10,383 |
| Total Capital resources | 29,907 | 29,819 |
| Capital requirements |  |  |
| Credit, market and insurance risks | 23,787 | 24,292 |
| Less: Diversification and other credits | 4,481 | 4,446 |
| Segregated fund guarantee risk | 963 | 872 |
| Operational risk | 2,103 | 2,101 |
| Total before scalar | 22,372 | 22,819 |
| Base solvency buffer (Total before scalar x 1.05) | 23,491 | 23,960 |
| LICAT ratio | 127% | 124% |

### Foreign Life Insurance Companies

Foreign subsidiaries and foreign operations of SLF Inc. must comply with local capital or solvency requirements in the jurisdictions in which they operate. Our operations maintained capital levels above the minimum local regulatory requirements during 2022 and 2021. Additional information on capital and regulatory requirements for our foreign subsidiaries and foreign operations is provided in SLF Inc.'s AIF under the heading Regulatory Matters.

As at December 31, 2022, we have two internal reinsurance arrangements with affiliated reinsurance companies, in Delaware and Michigan, relating to our closed block of individual universal life insurance products with no-lapse guarantee benefits issued in the U.S. The Delaware reinsurance structure was established in 2013 and finances excess U.S. statutory reserves for certain universal life policies issued between January 2000 and February 2006. The financing of U.S. statutory reserve requirements in excess of those required under IFRS for the Delaware reinsurance company is supported by a guarantee from SLF Inc. The Michigan reinsurance structure was established in 2007 for certain policies issued between March 2006 and December 2008. The entity was redomesticated from Vermont to Michigan in 2020. Under the Michigan reinsurance structure, the related excess U.S. statutory reserve requirements are similarly supported by a guarantee from SLF Inc.

### 3. Shareholder Dividends

The declaration, amount and payment of dividends by SLF Inc. is subject to the approval of our Board and is dependent on our results of operations, our reported net income, financial condition, cash requirements and contractual restrictions. Capital management activities, as well as regulatory considerations and macro-economic factors including the economic outlook for the jurisdictions in which we do business, are also considered along with other factors. The Board reviews the level of dividends on a quarterly basis.

A regular and appropriate level of dividend payout and growth provides a stable source of return to common shareholders.

We target an underlying dividend payout ratio of between 40% and 50% based on underlying EPS.

During 2022, our dividend payout ratio to common shareholders based on our reported EPS was 53% and on an underlying EPS basis was 44%.

Total common shareholder dividends declared in 2022 were $2.76 per share, compared to $2.31 in 2021.

On March 13, 2020, OSFI set the expectation for all federally regulated financial institutions that dividend increases and share buybacks should be halted. On November 4, 2021, OSFI lifted this restriction on the basis that these restrictions were no longer considered necessary and Sun Life has subsequently increased its dividend.

54 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Dividends declared

| Amount per share | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| Common shares | 2.76 | 2.31 | 2.20 |
| Class A preferred shares |  |  |  |
| Series 1 (1) | - | 0.890625 | 1.187500 |
| Series 2 (1) | - | 0.900000 | 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 8R (2)(3) | 0.456250 | 0.456250 | 0.512500 |
| Series 9QR (4) | 0.701122 | 0.382421 | 0.583985 |
| Series 10R (2)(5) | 0.741750 | 0.718313 | 0.710500 |
| Series 11QR (6) | 0.891122 | 0.572421 | 0.774505 |
| Series 12R (7) | - | 0.951500 | 0.951500 |

$^{(1)}$ Series 1 and 2 Shares were redeemed on September 30, 2021.

$^{(2)}$ On the earliest redemption date and every five years thereafter, the dividend rate will reset to an annual rate equal to the 5-year Government of Canada bond yield plus a yield specified for each series. The specified yield for Class A shares is: Series 8R - 1.41% and Series 10R - 2.17%. On the earliest redemption date and every five years thereafter, holders will have the right, at their option, to convert their shares into the series that is one number higher than their existing series.

$^{(3)}$ The dividend rate was reset on June 30, 2020 to a fixed annual dividend rate of 1.825% until the earliest redemption date June 30, 2025.

$^{(4)}$ 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%. 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, 2025 and on June 30 every five years thereafter.

$^{(5)}$ The dividend rate was reset on September 30, 2021 to a fixed annual dividend rate of 2.967% until the earliest redemption date September 30, 2026.

$^{(6)}$ Holders of the Series 11QR 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 2.17%. Holders of the Series 11QR Shares will have the right, at their option, to convert their Series 11QR Shares into Series 10R Shares on September 30, 2026 and on September 30 every five years thereafter.

$^{(7)}$ The dividend rate was reset on December 31, 2016 to a fixed annual dividend rate of 3.806% until the earliest redemption date December 31, 2021. Series 12R Shares were redeemed on December 31, 2021.

## 4. 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, 2022, we maintained net cash, cash equivalents and short-term securities totaling $11.2 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 decreased by $0.9 billion. The table below outlines our principal sources and uses of cash.

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Net cash and cash equivalents, beginning of period | 7,693 | 10,648 |
| Cash flows provided by (used in): |  |  |
| Operating activities | 4,311 | (1,857) |
| Investing activities | (2,863) | (803) |
| Financing activities | (71) | (260) |
| Changes due to fluctuations in exchange rates | 302 | (35) |
| Increase (decrease) in cash and cash equivalents | 1,679 | (2,955) |
| Net cash and cash equivalents, end of period | 9,372 | 7,693 |
| Short-term securities, end of period | 1,841 | 4,452 |
| Net cash, cash equivalents and short-term securities, end of period | 11,213 | 12,145 |

MANAGEMENT'S DISCUSSION & ANALYSIS

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55

## 5. 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.

SLF Inc. and its wholly-owned holding companies had $1.1 billion in cash and other liquid assets(1) as at December 31, 2022. See section F - Financial Strength in this document for more information.

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, 2022 |  |  | December 31, 2021 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
| Credit Facility | Amount | Utilized | Expiry | Amount | Utilized | Expiry |
| Committed | US $400 | US $11 | 2025 | US $400 | US $12 | 2025 |
| Committed | US $1,950 | US $1,358 | 2024 | US $1,000 | US $349 | 2023 |
| Committed | $500 | $500 | 2025 | $ - | $ - | n/a |
| Uncommitted | US $100 | US $ - | n/a | US $100 | US $ - | n/a |
| Uncommitted | $227 | $89 | n/a | $225 | $81 | n/a |
| Uncommitted | US $25 | US $5 | n/a | US $25 | US $7 | n/a |

The agreements relating to our committed credit facilities contain typical covenants for investment grade companies regarding solvency, credit ratings and financial strength, all of which were met as at December 31, 2022. These covenants include, but are not limited to, the maintenance of total equity by SLF Inc. of at least $12 billion, tested as of the last day of each fiscal quarter. SLF Inc.'s total equity was $29.4 billion as at December 31, 2022.

Our failure to comply with the covenants under the committed credit facility would, subject to grace periods in the case of certain covenants, result in an event of default. This could require us to repay any outstanding borrowings or to cash collateralize letters of credit under the facility. A failure by SLF Inc. (or any of its subsidiaries) to pay an obligation due for an amount exceeding $250 million would also result in an event of default under the committed credit facility described above.

Based on our historical cash flows and liquidity management processes, we believe that the cash flows from our operating activities will continue to provide sufficient liquidity for us to satisfy debt service obligations and to pay other expenses as they fall due.

(1) This is a non-IFRS financial measure. See section L - Non-IFRS Financial Measures in this document.

56 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## J. Risk Management

### 1. Risk Management Framework

The Company has an established Risk Management Framework ("Risk Framework") approved by the Board that prescribes a comprehensive set of protocols and programs that need to be followed in conducting business activities. The risks that arise when providing products and services to Clients, which are in line with our Purpose to help our Clients achieve lifetime financial security and live healthier lives, are managed within these protocols and programs. Effective risk management is critical to the overall profitability, competitive market positioning and long-term financial viability of the Company. While all risks cannot necessarily be eliminated or known with certainty, the Risk Framework seeks to ensure that risks to a business undertaking are appropriately managed to achieve the Company's business objectives over time and are not expected to exceed pre-established boundaries for risk taking. The Risk Framework, corporate strategy and business objectives are all aligned and risk management protocols and programs are embedded within every business segment.

![img-0.jpeg](img-0.jpeg)

MANAGEMENT'S DISCUSSION & ANALYSIS

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57

## 2. Risk Governance and Accountabilities

Our Risk Framework sets out lines of responsibility and authority for risk-taking, governance and control. These governance requirements are summarized below.

### Risk Management Governance Structure

The Board and Management Committees as well as the risks that they oversee are highlighted below.

| Board Governance and Oversight |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
| Business and Strategic Risk | Credit Risk | Market Risk | Insurance Risk | Liquidity Risk | Operational Risk |
| Board of Directors |  |  |  |  |  |
| Risk Committee | Risk Committee Governance, Investment & Conduct Review Committee | Risk Committee | Risk Committee | Risk Committee | Risk Committee Audit Committee Management Resources Committee Governance, Investment & Conduct Review Committee |
| Senior Management Committee Governance and Oversight |  |  |  |  |  |
| Business and Strategic Risk | Credit Risk | Market Risk | Insurance Risk | Liquidity Risk | Operational Risk |
| Executive Risk Committee |  |  |  |  |  |
| Executive Risk Committee | Investment & Credit Risk Committee | Corporate Asset Liability Management Committee | Insurance Risk Committee | Corporate Asset Liability Management Committee | Operational Risk & Compliance Committee |
| Business Group Risk and Oversight |  |  |  |  |  |

#### Board of Directors

The Board is responsible for ensuring the governance of all risks across the enterprise and has primary responsibility for taking action to ensure risk management policies, programs and practices are in place. By approving our Risk Framework and the Risk Appetite Policy and providing ongoing oversight of the risk management programs, the Board monitors that significant risks are appropriately identified and managed. The Board oversees business and strategic risk through review and approval of the business and strategic plans, and regularly discusses key themes, issues and risks emerging in connection with the design or implementation of these plans.

The Risk Committee is a standing committee of the Board whose primary functions are to assist the Board with oversight of the management of current and emerging risks enterprise-wide, and of the risk management function to ensure that management has in place programs, frameworks, policies, processes and controls designed to identify and effectively manage the significant risks to which the Company is exposed and has sufficient capital to underpin those risks. It reviews and approves all risk management frameworks, policies and reviews compliance with those frameworks and policies. In addition, where the Board has delegated risk oversight to other committees of the Board ("Board Committees"), the Risk Committee provides the Board with an integrated view of oversight of risk management across all Board committees. The Risk Committee regularly monitors the Company's risk profile to ensure it is within the agreed risk appetite and that the Company's capital position exceeds regulatory capital requirements, monitors and recommends to the Board for approval, the specific risk limits allocated to the businesses and the annual Capital Plan. The Risk Committee also oversees risk management activities of our subsidiaries and risks posed to the Company through its joint ventures.

The Governance, Investment & Conduct Review Committee ("GICRC") of the Board is responsible for assisting the Board in developing effective corporate governance guidelines and processes, including processes to assess the effectiveness of the Board and its committees. It reviews and monitors the Company's Investment Plan and investment performance, and oversees investment practices, procedures and controls related to the management of the general fund investment portfolio. The Committee assists the Board with its oversight over the Corporation's sustainability reporting and Sustainability Plan. In addition, the GICRC meets with the senior business and functional leaders who have first-line responsibility for compliance and compliance management programs, oversees the effectiveness of the second-line compliance function, oversees compliance with legal and regulatory requirements and the identification and management of compliance risk, and oversees the development of policies and processes to sustain ethical behaviour.

The Audit Committee of the Board is responsible for assisting the Board in overseeing the integrity of financial statements and related information provided to shareholders and other stakeholders, compliance with financial regulatory requirements, adequacy and effectiveness of the internal controls implemented and maintained by management, and assessing the qualifications, independence and performance of the external auditor.

The Management Resources Committee of the Board is responsible for assisting the Board with oversight of succession planning for senior executive positions and programs to effectively attract, retain, develop and reward employees. It provides guidance to management on advancing the talent

58 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

agenda to achieve strategic objectives and foster Sun Life's culture. The Committee reviews incentive designs and governance of material incentive programs against alignment with business objectives and avoiding excessive risk taking. It reviews the implications of key enterprise risks, including human resources risks pertaining to compensation design and human resources practices. In addition, the Committee reviews compensation matters, including the remuneration of executives who have a material impact on the risk exposure of the Company.

## Senior Management Committees

The Executive Risk Committee ('ERC') provides executive management oversight of the Company's enterprise risk management activities. This includes the review and articulation of the risk appetite, overseeing that the risk profile is within the agreed risk appetite, and overseeing that there are policies, processes and controls are in place to identify and effectively manage the significant risks, in accordance with the risk appetite and the overall objective of promoting a balanced business and product model to achieve agreed upon risk-adjusted returns and allocate capital accordingly.

The Investment & Credit Risk Committee is responsible for reviewing critical matters related to the on-going management of the Company's General Fund. Accordingly, the Committee is responsible for overseeing, monitoring and reviewing current and potential credit and investment risk exposures, other credit and investment risk management issues and future credit and investment risk management strategies.

The Corporate Asset Liability Management Committee is responsible for providing oversight and input on the Asset Liability Management framework, policies, guidelines, limits, measurement and performance assessment applicable to the management of market and liquidity risks in the design and operation of general fund investment strategies for efficiently discharging the Company's general fund liabilities.

The Operational Risk & Compliance Committee is responsible for providing oversight of the Company's operational and compliance risk management practices, current and emerging operational risk exposures, and the processes to ensure ongoing identification of major operational and compliance risks facing the Company.

The Insurance Risk Committee is responsible for providing oversight and direction on insurance risk exposures facing the Company and to ensure that effective insurance risk management practices and controls are in place. This includes reviewing the current and projected insurance risk profile against limits; engaging in review of topical insurance, reinsurance and underwriting risk issues; and reviewing and recommending changes to the insurance risk measurement methodology to the ERC.

## Accountabilities

Primary accountability for risk management is delegated by the Board to our Chief Executive Officer ('CEO'). The CEO further delegates responsibilities throughout the Company through management authorities and responsibilities. The CEO delegates accountability for the various classes of risk management to our executive officers, who are accountable for ensuring that the management of risk in the scope of their business accountability is in accordance with the Board approved Risk Framework, Risk Appetite Policy and risk management policies.

## 3. Risk Universe

As a large financial services organization operating in a complex industry, the Company encounters a variety of risks and uncertainties. We face risks in formulating our business strategy and business objectives, in carrying on our business activities in the pursuit of our strategy and objectives, and from external factors such as changes in the economic, political, competitive, regulatory, social and environmental landscapes. We are subject to financial and insurance risks that are connected to our liabilities and with the management and performance of our assets, including how we match returns from assets with the payment of liabilities to our Clients. Each of these risks is also considered from the perspective of different types of uncertainties under which either the outcomes and/or their probabilities of occurrence are unknown. The Risk Framework covers all risks and these have been grouped into six major categories: credit, market, insurance, business and strategic, operational and liquidity risks. The Risk Framework sets out the key risk management processes in the areas of risk: appetite, identification, measurement, management, monitoring and reporting. The Risk Framework sets out both qualitative and quantitative measures and processes to control the risk the Company will bear in respect of each of these categories of risk and in aggregate.

## 4. Risk Appetite

Our Risk Appetite Policy defines the amount and type of risk we are willing to accept in pursuit of our business objectives, and is approved by the Board. It is forward-looking and our strategic plan, capital plan, business plan and business objectives are established within its boundaries.

The Company's risk appetite seeks to balance the various needs, expectations, risk and reward perspectives and investment horizons of key stakeholders. In particular, our risk appetite supports the pursuit of shareholder value while ensuring that the Company's ability to pay claims and fulfill policyholder commitments is not compromised.

The Company's risk appetite is the primary mechanism to operationalize its risk philosophy and the boundaries of permissible risk-taking across the enterprise. It ensures that business activities are assessed against performance criteria that are appropriately risk-adjusted. Our risk appetite supports the objective of maintaining adequate capital, managing return on equity, managing earnings volatility, managing operational risk and managing liquidity. To accomplish this, our risk appetite includes a wide array of qualitative and quantitative standards that reflect the Company's overall risk management principles and values.

We generally accept diversifiable risks and utilize risk pooling to create portfolios with relatively low liability volatility. We take risk where we have internal expertise such as actuarial, underwriting, claims management, investment or distribution or where reinsurance partners are able to supplement our internal expertise. We prefer risks where it is possible to diversify across various segments including products, geographies, distribution channels or asset classes in order to maximize diversification opportunities.

Our Risk Appetite Policy sets out specific constraints which define the aggregate level of risk that the Company is willing to accept. We translate our risk appetite constraints into specific risk limits by risk class and business segment. Our risk profile is measured, managed and monitored regularly to

MANAGEMENT'S DISCUSSION & ANALYSIS

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ensure that we operate within our risk appetite. Our risk appetite limits are reviewed periodically to reflect the risks and opportunities inherent in our evolving business strategies and operating environment.

## 5. Risk Management Policies

In order to support the effective communication, implementation and governance of our Risk Framework, we have codified our processes and operational requirements in a comprehensive series of risk management frameworks, policies and operating guidelines. These frameworks, policies and guidelines promote the application of a consistent approach to managing risk exposures across our global business platform. The Board and Board Committees regularly review and approve significant changes to the risk management framework and policies and regularly review management's reporting and attestation on compliance to these policies.

## 6. Risk Management Process

The risk management process as set out in our Risk Framework is described below:

### Risk Identification and Measurement

All business segments employ a common approach to identify and measure risks. Business segments have accountability for identifying and managing risks facing their business. We have a process to identify and monitor key and emerging risks that may have a material impact on our finances, operations or reputation. We evaluate potential correlations and inter-connections between various risk events and categories, and monitor key and emerging risks, regulatory and rating agency requirements, and industry developments.

Risk measurement involves determining and evaluating potential risk exposures and includes a number of techniques, such as monitoring key risk indicators, probability-severity assessments, stress testing (including sensitivity and scenario analysis), reverse stress testing and stochastic modelling. Risk measures are expressed in quantitative and qualitative terms.

A robust stress testing program is an essential component of the Company's Risk Framework used to measure, monitor and mitigate the Company's risk exposures and to ensure ongoing capital adequacy under plausible stress events. Stress testing is performed on key metrics such as earnings, regulatory capital ratios and liquidity to identify and monitor potential vulnerabilities to key risk drivers and ensure that the Company is operating within its risk appetite.

We develop and test a range of scenarios based on our internal assessment and regulatory guidance. Emerging risks are one of the inputs to determine stress test scenarios. Sensitivity testing is conducted on a regular basis and measures the earnings and regulatory capital impact from changes in underlying risk factors, assuming that there are no changes to any of the other risk factors. Sensitivity testing is performed for individual risks and for consolidated risk exposures at different levels of stress and at various levels of aggregation. Scenario testing involves changes to a number of risk factors to assess the impact of and interaction between these risk factors. These scenarios include integrated scenario testing, reverse scenario testing and key assumption sensitivity testing. We also use the Financial Condition Testing ("FCT") process, as prescribed by the Canadian Institute of Actuaries, to satisfy requirements under the Canadian Insurance Company Act, and OSFI regulations, to annually stress test capital.

### Risk Management, Monitoring and Reporting

Risk management decisions are formed by evaluating whether the assessed risk for a business activity aligns to our risk appetite and meets the objective of risk-adjusted returns.

Monitoring processes include oversight by the Board, which is exercised through Board Committees and Senior Management committees described in the Risk Governance and Accountabilities section in this document.

Senior Management committees, Board Committees and the Board regularly review reports that summarize our risk profile against the Board approved risk appetite, including the exposures across our principal risks, any changes in risk trends, forward-looking view of risks and emerging risks. These committees also review the effectiveness of the risk management strategies presented in the reports. On a regular basis, the Board and the Board Committees review and approve any significant changes to risk management frameworks and policies for the management of risk and review compliance with these frameworks and policies.

## 7. Three Lines of Defence

The Company has adopted the Three Lines of Defence ("LOD") model to provide a consistent, transparent and clearly documented allocation of accountability and segregation of functional responsibilities. This segregation of responsibility helps to establish a robust control framework that promotes transparent and independent challenge of all risk taking activities, and that encourages all functions to engage in self-critical examination to foster continuous improvement of the management of risk in our business.

The **first line of defence** is represented by the business segment management who own the risks that are intrinsic to the business and have the primary responsibility to identify, measure, manage, monitor and report these risks. Some of the first LOD risk related responsibilities include:

- Identification of key and emerging risks;
- Manage, measure, monitor and report on risk within their business operations;
- Accountability for business results and the risks taken to achieve business results and the resulting impact of those risks; and
- Operating within risk appetite and according to risk management policies.

The **second line of defence** includes the Chief Risk Officer ("CRO") and heads of the oversight functions who are responsible for providing independent oversight of our Company-wide risk management programs. The CRO is responsible for developing our Risk Framework and Risk Appetite Policy, and for overseeing the development and implementation of risk management strategies aimed at optimizing the risk-return profile

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of the Company. The CRO is supported by a network of business segment risk officers. The functional heads support the CRO in the implementation and communication of our Risk Framework and Risk Appetite Policy. Some of the key second LOD risk related responsibilities include:

- Establishment of the risk management framework and policies;
- Providing oversight and effective independent challenge of first line; and
- Independent reporting to Senior Management committees and the Board on the level of risk against risk appetite.

The **third line of defence** responsibilities are distinct from first and second LOD responsibilities. The Internal Audit function is the third LOD and is responsible for providing independent assurance to Senior Management and the Board and/or Board Committees on the design and operational effectiveness of the risk management practices and internal controls carried out by first LOD and second LOD. Internal Audit provides a quarterly opinion on the effectiveness of internal controls, risk management and governance processes to the Audit Committee of the Board. In addition, the Risk Committee may engage third-party independent reviews to supplement the third LOD review of the effectiveness of the Company's risk management programs.

## 8. Risk Culture and Philosophy

We have built a strong corporate culture on a foundation of ethical behaviour, high business standards, integrity and respect. The Board establishes the "tone from the top" and is accountable to ensure that the CEO and Senior Management create and sustain a culture of integrity throughout the organization. We work together through our focus on diversity, equity and inclusion and sustainability to fulfill our Purpose of helping our Clients to achieve lifetime financial security and to live healthier lives.

Risk culture relates to how we behave and respond, in addition to the requirements we set. It enables and rewards taking the right risks in an informed manner. It enables effective challenge and transparency regarding risks and outcomes without fear of reprisal. It drives us to understand Client needs and preferences so that we can act in their best interests. In order to support employees in fulfilling their role, we have taken action to ensure our risk protocols and procedures are well defined and embedded in our day-to-day business activities, assess that appropriate resources and training are provided, establish and communicate a common risk philosophy and a high bar for integrity and conduct, and encourage every employee to openly identify risk exposures and communicate escalating risk concerns. The following six elements support our Risk Culture:

- Establishing tone from the top;
- Encouraging transparency in risk-taking;
- Performing effective challenge in conducting business decisions;
- Aligning incentives and risk management practices;
- Effectively communicating the risk culture expectations; and
- Establishing clear accountabilities.

A key premise of our culture is that all employees have an important role to play in managing the Company's risks. Risk Management is embedded in the Company's culture, which encourages ownership and responsibility for risk management at all levels. Our compensation programs are aligned to the organization's risk management practices through our governance structure for the design and approval of incentive compensation plans and processes used to support the alignment of compensation and risk management. We continuously reinforce and embed the culture through communication and training on risk culture elements at various forums and across various levels through training on the Code of Conduct annually, reinforcing accountability through performance reviews and compensation, and through defining roles, responsibilities and expectations in the risk management policies.

The Company's risk philosophy includes the following core principles:

### Strategic Alignment

Our corporate strategy and business objectives are required to be established within the boundaries set out in the Risk Framework and the Risk Appetite Policy. This requires us to consider whether a business activity, intended to achieve the business and financial objectives, will result in a risk profile that we are willing to accept and which we are prepared to manage. We have established a range of explicit risk appetite constraints for credit, market, insurance, operational and liquidity risks. Business and strategic risk is managed through our strategic and business planning process and through controls over the implementation of these strategic and business plans. Risks associated with activities outside our risk appetite or outside the acceptable defined risks are avoided.

### Stakeholder Interests

Our Risk Appetite Policy considers the interests of a large number of key stakeholders, including Clients, shareholders, debt-holders, employees, regulators, distributors, rating agencies and other capital markets participants. The policy describes how to balance the needs, expectations, risk and reward perspectives, and investment horizons of these different stakeholders.

Effective risk management requires that objectives and incentives be aligned to ensure management's decisions are consistent with the Company's risk philosophy and risk appetite. To ensure this, the business plans and strategies are independently tested to ensure that they operate within the boundaries and requirements set out in the Risk Framework and the Risk Appetite Policy, and the results of this testing are reported to the Board. Compensation programs for employees are approved by the Board and the Board Committees and are aligned with the Company's risk philosophy, values, business and risk management strategies, and the long-term interests of stakeholders. In establishing annual performance objectives, we consider risk management goals to ensure that business decisions are consistent with the desired risk and return profile of the Company.

### Capability Alignment

We seek out profitable risk-taking opportunities in those areas where we have established risk management skills and capabilities. Conversely, we endeavour to avoid or transfer risks that are beyond our risk-taking capability. Our ability to measure and evaluate risks, the quality of our risk governance and control environment, the depth and quality of our risk responses and the robustness of our pricing strategies are particularly important capabilities that we assess.

MANAGEMENT'S DISCUSSION & ANALYSIS

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## Portfolio Perspective

In evaluating a particular risk, consideration is given to a portfolio perspective of risk and return including the explicit recognition of the impacts of diversification and concentration and how different risks interact with each other. This perspective is extended to the development of risk mitigation and pricing strategies, recognizing that often the most cost-effective way of managing risk involves utilizing available relationships already inherent in our businesses.

## Risk-Adjusted Returns

Financial return metrics used to assess business activities are developed in consideration of the constraints set out in the Risk Appetite Policy, and reflect the expected costs of mitigation and the cost of risk capital required to support the risk taking activity.

## Culture

Culture is the sum of the shared assumptions, values and beliefs that create the unique character of an organization. Our culture encourages behaviour aligned with goals for long-term value creation. It defines the appropriate behaviour for any given situation, governs the interaction with Clients and affects how employees identify with the organization. Our culture has significant potential to impact our risk profile. An organization's culture impacts its ability to create value and to protect value. Maintaining the right balance of risk-taking and risk control activities is a key organizational capability and fundamental to our long-term sustainable success.

## 9. Risk Categories

The shaded text and tables in the following section of this MD&A represent our disclosure on credit, market and liquidity risks in accordance with IFRS 7 *Financial Instruments - Disclosures* and includes a discussion on how we measure risk and our objectives, policies and methodologies for managing these risks. The shaded text and tables represent an integral part of our audited annual Consolidated Financial Statements for the year ended December 31, 2022. The shading in this section does not imply that these disclosures are of any greater importance than non-shaded tables and text, and the Risk Management disclosure should be read in its entirety. This information should be considered carefully together with other information in this MD&A and in the 2022 AIF, our Consolidated Financial Statements and other reports and materials that we file with securities regulators.

In this section, segregated funds include segregated fund guarantees, variable annuities and investment products, and includes Run-off reinsurance in Corporate.

Our Risk Framework groups all risks into six major risk categories: market, insurance, credit, business and strategic, operational and liquidity risks.

### i. Market Risk

#### Risk Description

We are exposed to financial and capital market risk, which is defined as the risk that the fair value or future cash flows of an insurance contract or financial instrument will fluctuate because of changes or volatility in market prices. Market risk includes equity, interest rate and spread, real estate, foreign currency, and inflation risks.

#### Market Risk Management Governance and Control

We employ a wide range of market risk management practices and controls as outlined below:

- • Market risk governance practices are in place, including independent monitoring and review and reporting to senior management and the Risk Committee.
- • Risk appetite limits have been established for equity, interest rate, real estate and foreign currency risks.
- • Income and regulatory capital sensitivities are monitored, managed and reported against pre-established risk limits.
- • Comprehensive asset-liability management and hedging policies, programs and practices are in place.
- • Regulatory solvency requirements include risk-based capital requirements and are monitored regularly.
- • Product Design and Pricing Policy requires a detailed risk assessment and pricing provisions for material risks.
- • Stress-testing techniques, such as FCT, are used to measure the effects of large and sustained adverse market movements.
- • Insurance contract liabilities are established in accordance with Canadian actuarial standards of practice.
- • Internal capital targets are established at an enterprise level to cover all risks and are above minimum regulatory and supervisory levels. Actual capital levels are monitored to ensure they exceed internal targets.

Specific market risks and our risk management strategies are discussed below in further detail.

#### Equity Risk

Equity risk is the potential for financial loss arising from declines or volatility in equity market prices. We are exposed to equity risk from a number of sources. A portion of our exposure to equity risk arises in connection with benefit guarantees on segregated fund products. These benefit guarantees may be triggered upon death, maturity, withdrawal or annuitization. The cost of providing these guarantees is uncertain and depends upon a number of factors, including general capital market conditions, our hedging strategies, policyholder behaviour and mortality experience, each of which may result in negative impacts on net income and capital.

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We generate revenue in our asset management businesses and from certain insurance and annuity contracts where fees are levied on account balances that are affected directly by equity market levels. Accordingly, we have further exposure to equity risk as adverse fluctuations in the market value of such assets will result in corresponding adverse impacts on our revenue and net income. In addition, declining and volatile equity markets may have a negative impact on sales and redemptions (surrenders) in these businesses, and this may result in further adverse impacts on our net income and financial position.

We also have direct exposure to equity markets from the investments supporting other general account liabilities, surplus, and employee benefit plans. These exposures fall within our risk-taking philosophy and appetite, and are therefore generally not hedged.

#### **Interest Rate and Spread Risk**

Interest rate and spread risk is the potential for financial loss arising from changes or volatility in interest rates or spreads when asset cash flows and the policy obligations they support are not matched. This may result in the need to either sell assets to meet policy payments and expenses or reinvest excess asset cash flows in unfavourable interest rate or spread environments. The impact of changes or volatility in interest rates or spreads is reflected in the valuation of our financial assets and liabilities for insurance contracts.

Our primary exposure to interest rate and spread risk arises from certain general account products and segregated fund contracts which contain investment guarantees in the form of minimum crediting rates, guaranteed premium rates, settlement options and benefit guarantees. If investment returns fall below guaranteed levels, we may be required to increase liabilities or capital in respect of these contracts. The guarantees attached to these products may be applicable to both past premiums collected and future premiums not yet received. Segregated fund contracts provide benefit guarantees that are linked to underlying fund performance and may be triggered upon death, maturity, withdrawal or annuitization. These products are included in our asset-liability management program and the residual interest rate exposure is managed within our risk appetite limits.

Declines in interest rates or narrowing spreads can result in compression of the net spread between interest earned on investments and interest credited to policyholders. Declines in interest rates or narrowing spreads may also result in increased asset calls, mortgage prepayments, and net reinvestment of positive cash flows at lower yields, and therefore adversely impact our profitability and financial position. Negative interest rates may additionally result in losses on our cash deposits and low or negative returns on our fixed income assets impacting our profitability. In contrast, increases in interest rates or a widening of spreads may have a material impact on the value of fixed income assets, resulting in depressed market values, and may lead to lower LICAT ratios or losses in the event of the liquidation of assets prior to maturity.

Significant changes or volatility in interest rates or spreads could have a negative impact on sales of certain insurance and annuity products, and adversely impact the expected pattern of redemptions (surrenders) on existing policies. Increases in interest rates or widening spreads may increase the risk that policyholders will surrender their contracts, potentially forcing us to liquidate assets at a loss and accelerate recognition of certain acquisition expenses. While we have established hedging programs in place and our insurance and annuity products often contain surrender mitigation features, these may not be sufficient to fully offset the adverse impact of the underlying losses.

We also have direct exposure to interest rates and spreads from investments supporting other general account liabilities, surplus and employee benefit plans. Lower interest rates or a narrowing of spreads will result in reduced investment income on new fixed income asset purchases. Conversely, higher interest rates or wider spreads will reduce the value of our existing assets. These exposures fall within our risk-taking philosophy and appetite and are therefore generally not hedged.

A sustained low interest rate environment may adversely impact our earnings, regulatory capital requirements and our ability to implement our business strategy and plans in several ways, including:

- Lower sales of certain insurance and wealth products, which can in turn pressure our operating expense levels;
- Shifts in the expected pattern of redemptions (surrenders) on existing policies;
- Higher new business strain reflecting lower new business profitability;
- Reduced return on new fixed income asset purchases, and higher hedging costs;
- The impact of changes in actuarial assumptions;
- Impairment of goodwill; and
- Additional valuation allowances against our deferred tax assets.

#### **Market Risk Sensitivities**

Our net income(1) is affected by the determination of policyholder obligations under our annuity and insurance contracts. These amounts are determined using internal valuation models and are recorded in our Consolidated Financial Statements, primarily as Insurance contract liabilities. The determination of these obligations requires management to make assumptions about the future level of equity market performance, interest rates, credit and swap spreads and other factors over the life of our products. Differences between our actual experience and our best estimate assumptions are reflected in our Consolidated Financial Statements. Refer to Additional Cautionary Language and Key Assumptions Related to Sensitivities in this section for important additional information regarding these estimates.

(1) Net income in section J - Risk Management in this document refers to common shareholders' net income.

MANAGEMENT'S DISCUSSION & ANALYSIS

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The market value of our investments in fixed income and equity securities fluctuates based on movements in interest rates and equity markets. The market value of fixed income assets designated as AFS that are held primarily in our surplus segment increases with declining interest rates and decreases with rising interest rates. The market value of equities designated as AFS and held primarily in our surplus segment increases with rising equity markets and decreases with declining equity markets. Changes in the market value of AFS assets flow through OCI and are only recognized in net income when realized upon sale, or when considered impaired. The sale or impairment of AFS assets held in surplus can therefore have the effect of modifying our net income sensitivity.

In 2022, we realized $20 million (pre-tax), in net gains on the sale of AFS assets (2021 - $146 million). The net unrealized gains (losses) within our Accumulated OCI position on AFS fixed income and equity assets were $(1,098) million and $73 million, respectively, net of tax, as at December 31, 2022 (December 31, 2021 - $137 million and $129 million, respectively).

During the fourth quarter of 2022, we realized $9 million (pre-tax), in net losses on the sale of AFS assets (net gains of $5 million pre-tax in the fourth quarter of 2021).

## Equity Market Sensitivities

The following table sets out the estimated immediate impact on, or sensitivity of, our net income and OCI and Sun Life Assurance's LICAT ratio to certain instantaneous changes in equity market prices as at December 31, 2022 and December 31, 2021.

It is important to note that these estimates are illustrative and performance of our segregated fund dynamic hedging program may differ as actual equity-related exposures vary from broad market indices (the impact of active management, basis risk, and other factors) and higher or lower volatility level than assumed.

| ($ millions, unless otherwise noted) | As at December 31, 2022 |  |  |  |
| --- | --- | --- | --- | --- |
| Change in Equity Markets (1) | 25% decrease | 10% decrease | 10% increase | 25% increase |
| Potential impact on net income (2)(3) | $(300) | $(100) | $100 | $250 |
| Potential impact on OCI (3) | $(100) | $(50) | $50 | $100 |
| Potential impact on LICAT (2)(4) | 1.0% point decrease | 0.0% point change | 0.5% point decrease | 0.5% point decrease |

| ($ millions, unless otherwise noted) | As at December 31, 2021 |  |  |  |
| --- | --- | --- | --- | --- |
| Change in Equity Markets (1) | 25% decrease | 10% decrease | 10% increase | 25% increase |
| Potential impact on net income (2)(3) | $(400) | $(150) | $150 | $350 |
| Potential impact on OCI (3) | $(150) | $(50) | $50 | $150 |
| Potential impact on LICAT (2)(4) | 0.5% point decrease | 0.0% point change | 0.0% point change | 0.5% point increase |

$^{(1)}$ Represents the respective change across all equity markets as at December 31, 2022 and December 31, 2021. 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).

$^{(2)}$ The market risk sensitivities include the estimated mitigation impact of our hedging programs in effect as at December 31, 2022 and December 31, 2021, and include new business added and product changes implemented prior to such dates.

$^{(3)}$ Net income and OCI sensitivities have been rounded in increments of $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.

$^{(4)}$ The LICAT sensitivities illustrate the impact on Sun Life Assurance as at December 31, 2022 and December 31, 2021. The sensitivities assume that a scenario switch does not occur in the quarter. LICAT ratios are rounded in increments of 0.5%.

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## Interest Rate Sensitivities

The following table sets out the estimated immediate impact on, or sensitivity of, our net income and OCI and Sun Life Assurance's LICAT ratio to certain instantaneous changes in interest rates as at December 31, 2022 and December 31, 2021.

Our LICAT sensitivities may be non-linear and can change due to the interrelationship between market rates and spreads, actuarial assumptions and our LICAT calculations.

| ($ millions, unless otherwise noted) | As at December 31, 2022 |  | As at December 31, 2021 |  |
| --- | --- | --- | --- | --- |
| Change in Interest Rates (1) | 50 basis point decrease | 50 basis point increase | 50 basis point decrease | 50 basis point increase |
| Potential impact on net income (2)(3)(4) | $ - | $ - | $(50) | $50 |
| Potential impact on OCI (3) | $250 | $(250) | $250 | $(250) |
| Potential impact on LICAT (2)(5) | 1.0% point increase | 1.5% point decrease | 1.5% point increase | 0.5% point decrease |

(1) Interest rate sensitivities assume a parallel shift in assumed interest rates across the entire yield curve as at December 31, 2022 and December 31, 2021 with no change to the Actuarial Standards Board ('ASB') promulgated URR. 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).

(2) The market risk sensitivities include the estimated mitigation impact of our hedging programs in effect as at December 31, 2022 and December 31, 2021, and include new business added and product changes implemented prior to such dates.

(3) Net income and OCI sensitivities have been rounded in increments of $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.

(4) 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.

(5) The LICAT sensitivities illustrate the impact on Sun Life Assurance as at December 31, 2022 and December 31, 2021. The sensitivities assume that a scenario switch does not occur in the quarter. The extent to which actual LICAT ratio movements differ from the indicative sensitivities may increase when we are close to a scenario switch. LICAT ratios are rounded in increments of 0.5%.

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, 2022. We have also disclosed the impact of a 25% change in equity markets to illustrate that significant changes in equity market levels may result in other than proportionate impacts on our sensitivities.

## Credit Spread and Swap Spread Sensitivities

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.

The following table sets out the estimated immediate impact on, or sensitivity of, our net income and Sun Life Assurance's LICAT ratio attributable to certain instantaneous changes in credit and swap spreads as at December 31, 2022 and December 31, 2021.

| ($ millions, unless otherwise noted) | As at December 31, 2022 |  | As at December 31, 2021 |  |
| --- | --- | --- | --- | --- |
| Change in Credit Spreads (1) | 50 basis point decrease | 50 basis point increase | 50 basis point decrease | 50 basis point increase |
| Potential impact on net income (2) | $(25) | $25 | $(75) | $50 |
| Potential impact on LICAT (3) | 1.0% point increase | 1.0% point decrease | 0.5% point decrease | 0.5% point increase |

(1) In most instances, credit spreads are assumed to revert to long-term insurance contract liability assumptions generally over a five-year period.

(2) Sensitivities have been rounded in increments of $25 million.

(3) The LICAT sensitivities illustrate the impact on Sun Life Assurance as at December 31, 2022 and December 31, 2021. The sensitivities assume that a scenario switch does not occur in the quarter. The extent to which actual LICAT ratio movements differ from the indicative sensitivities may increase when we are close to a scenario switch. LICAT ratios are rounded in increments of 0.5%.

| ($ millions, unless otherwise noted) | As at December 31, 2022 |  | As at December 31, 2021 |  |
| --- | --- | --- | --- | --- |
| Change in Swap Spreads | 20 basis point decrease | 20 basis point increase | 20 basis point decrease | 20 basis point increase |
| Potential impact on net income (1) | $ - | $ - | $25 | $(25) |

(1) Sensitivities have been rounded in increments of $25 million.

The credit and swap spread sensitivities assume a parallel shift in the indicated spreads across the entire term structure. Variations in realized spread changes based on different terms to maturity, geographies, asset classes and derivative types, underlying interest rate movements, and ratings may result in realized sensitivities being significantly different from those provided above. The credit spread sensitivity estimates exclude any credit spread impact that may arise in connection with asset positions held in segregated funds. Spread sensitivities are provided for the consolidated entity and may not be proportional across all reporting segments. Refer to Additional Cautionary Language and Key Assumptions Related to Sensitivities in this section for important additional information regarding these estimates.

MANAGEMENT'S DISCUSSION & ANALYSIS

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## LICAT Interest Rate Scenario Switch

The LICAT interest rate risk is assessed under four different interest rate scenarios, and the scenario leading to the highest capital requirement is chosen as the worst scenario for each geographic region as defined by the LICAT guideline. Changes and interaction between the level and term movements in interest rates and credit spreads can shift the interest rate scenario applied in the LICAT calculation causing a discontinuity where capital requirements change materially. In 2020, OSFI updated the LICAT guideline for interest rate risk requirements for participating businesses to be smoothed over six quarters. As a result, the actual impact to the LICAT ratio from participating businesses in any quarter will reflect the scenarios from current quarter as well as the prior five quarters and switching between the scenarios would have the effect of offsetting the previous impacts over time. As per OSFI's communication, this treatment will remain in place until at least December 31, 2023. The switching of the scenario can also change the direction of our sensitivities.

SLF Inc. and Sun Life Assurance experienced multiple scenario switches in the year. The scenario switches did not materially change the six-quarter smoothing impact that has been previously disclosed.

For SLF Inc., the six-quarter smoothing resulted in a one percentage point increase to the LICAT ratio in the year. Assuming no further scenario switches, the LICAT ratio is expected to increase by one percentage point over the next five quarters.

For Sun Life Assurance, the six-quarter smoothing resulted in a three percentage point increase to the LICAT ratio in the year. Assuming no further scenario switches, the LICAT ratio is expected to increase by one percentage point over the next five quarters.

## Market Risk Management Strategies

Market risk is managed at all stages during the product life cycle including product design and development, ongoing review and positioning of our suite of products, and ongoing asset-liability management and hedge re-balancing.

We have implemented asset-liability management and hedging programs involving regular monitoring and adjustment of market risk exposures using assets, derivative instruments and repurchase agreements to maintain market risk exposures within our risk appetite. The general availability and cost of these hedging instruments may be adversely impacted by a number of factors including changes in interest rates, increased volatility in capital markets, and changes in the general market and regulatory environment within which these hedging programs operate. In particular, regulations for OTC derivatives could impose additional costs and could affect our hedging strategy. In addition, these programs may themselves expose us to other risks.

Our market risk management strategies are developed based on policies and operating guidelines at the enterprise level, business segment level and product level. Liabilities having a similar risk profile are grouped together and a customized investment and hedging strategy is developed and implemented to optimize return within our risk appetite limits.

In general, market risk exposure is mitigated by the assets supporting our products. This includes holdings of fixed income assets such as bonds and mortgages. Derivative instruments may supplement these assets to reduce the risk from cash flow mismatches and mitigate the market risk associated with liability features and optionality. The following table sets out the use of derivatives across a number of our products as at December 31, 2022.

## Asset-Liability Management Applications for Derivative Usage

The primary uses of derivatives are set out in the table below.

| Products/Application | Uses of Derivative | Derivatives Used |
| --- | --- | --- |
| General asset-liability management - interest rate risk exposure for most insurance and annuity products | To manage the sensitivity of the duration gap between assets and liabilities to interest rate changes | Interest rate swaps, swaptions, floors and bond futures |
| Guarantees on insurance and annuity contracts - minimum interest rate guarantees, guaranteed surrender values and guaranteed annuitization options | To limit potential financial losses from significant reductions in asset earned rates relative to contract guarantees | Interest rate swaps, swaptions, floors and bond futures |
| Segregated fund guarantees | To manage the exposure of product guarantees sensitive to movement in equity market and interest rate levels and currency fluctuations | Put options, call options, futures and swaps on equity indices, interest rate swaps, bond futures, and foreign exchange forwards |
| Currency exposure in relation to asset-liability management | To reduce the sensitivity to currency fluctuations by matching the value and cash flows of specific assets denominated in one currency with the value and cash flows of the corresponding liabilities denominated in another currency | Currency swaps and forwards |
| Credit exposure | To replicate credit exposures and enhance investment returns | Credit default swaps |

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## General Account Insurance and Annuity Products

Most of our expected sensitivity to changes in interest rates and about three-quarters of our expected sensitivity to changes in equity markets are derived from our general account insurance and annuity products. We have implemented market risk management strategies to mitigate a portion of the market risk related to our general account insurance and annuity products.

Individual insurance products include universal life and other long-term life and health insurance products. Major sources of market risk exposure for individual insurance products include the reinvestment risk related to future premiums on regular premium policies, asset reinvestment risk on both regular premium and single premium policies and the guaranteed cost of insurance. Interest rate risk for individual insurance products is typically managed on a duration basis, within tolerance ranges set out in the applicable investment policy or guidelines. Targets and limits are established so that the level of residual exposure is commensurate with our risk appetite. Exposures are monitored frequently, and assets are re-balanced as necessary to maintain compliance within prescribed tolerances using a combination of assets and derivative instruments. A portion of the longer-term cash flows are backed with equities and real estate.

For participating insurance products and other insurance products with adjustability features, the investment strategy objective is to provide a total rate of return given a constant risk profile over the long term.

Fixed annuity products generally provide the policyholder with a guaranteed investment return or crediting rate. Interest rate risk for these products is typically managed on a duration basis, within tolerance ranges set out in the applicable investment guidelines. Targets and limits are established so that the level of residual exposure is commensurate with our risk appetite. Exposures are monitored frequently, and assets are re-balanced as necessary to maintain compliance within prescribed tolerances using a combination of fixed income assets and derivative instruments.

Certain insurance and annuity products contain minimum interest rate guarantees. Market risk management strategies are implemented to limit potential financial loss due to reductions in asset earned rates relative to contract guarantees. These typically involve the use of hedging strategies utilizing interest rate derivatives such as interest rate floors, swaps and swaptions.

Certain insurance and annuity products contain features which allow the policyholders to surrender their policy at book value. Market risk management strategies are implemented to limit the potential financial loss due to changes in interest rate levels and policyholder behaviour. These typically involve the use of dynamic hedging strategies and the purchase of interest rate swaptions.

Certain products have guaranteed minimum annuitization rates. Market risk management strategies are implemented to limit the potential financial loss and typically involve the use of fixed income assets, interest rate swaps, and swaptions.

## Segregated Fund Guarantees

Approximately one-quarter of our equity market sensitivity and a small amount of interest rate risk sensitivity as at December 31, 2022 are derived from segregated fund products. These products provide benefit guarantees, which are linked to underlying fund performance and may be triggered upon death, maturity, withdrawal or annuitization. The cost of providing these guarantees is uncertain and depends upon a number of factors including general capital market conditions, our hedging strategies, policyholder behaviour and mortality experience, each of which may result in negative impacts on net income and capital.

The following table provides information with respect to the guarantees provided for our segregated fund products by business group.

### Segregated Fund Risk Exposures

As at December 31, 2022

| ($ millions) | Fund value | Amount at Risk (1) | Value of guarantees (2) | Insurance contract liabilities (3) |
| --- | --- | --- | --- | --- |
| Canada | 11,573 | 755 | 10,808 | 68 |
| Asia | 1,289 | 328 | 1,560 | 67 |
| Corporate (4) | 2,167 | 204 | 890 | 156 |
| Total | 15,029 | 1,287 | 13,258 | 291 |

As at December 31, 2021

| ($ millions) | Fund value | Amount at Risk (1) | Value of guarantees (2) | Insurance contract liabilities (3) |
| --- | --- | --- | --- | --- |
| Canada | 13,751 | 183 | 11,210 | 350 |
| Asia | 1,728 | 166 | 1,711 | 69 |
| Corporate (4) | 2,672 | 137 | 892 | 184 |
| Total | 18,151 | 486 | 13,813 | 603 |

(1) The Amount at Risk represents the excess of the value of the guarantees over fund values on all policies where the value of the guarantees exceeds the fund value. The Amount at Risk is not currently payable as the guarantees are only payable upon death, maturity, withdrawal or annuitization if fund values remain below guaranteed values.

(2) For guaranteed lifetime withdrawal benefits, the value of guarantees is calculated as the present value of the maximum future withdrawals assuming market conditions remain unchanged from current levels. For all other benefits, the value of guarantees is determined assuming 100% of the claims are made at the valuation date.

(3) The insurance contract liabilities represent management's provision for future costs associated with these guarantees and include a provision for adverse deviation in accordance with Canadian actuarial standards of practice.

(4) Corporate includes Run-off reinsurance, a closed block of reinsurance. The Run-off reinsurance business includes risks assumed through reinsurance of variable annuity products issued by various North American insurance companies between 1997 and 2001.

MANAGEMENT'S DISCUSSION & ANALYSIS

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The movement of the items in the table above from December 31, 2021 to December 31, 2022 primarily resulted from the following factors:

- (i) the total fund values decreased due to decreases in equity markets and increases in interest rates;
- (ii) the total amount at risk increased due to decreases in equity markets;
- (iii) the total value of guarantees decreased due to net redemptions from products closed to new business; and
- (iv) the total insurance contract liabilities decreased due to increases in interest rates, partially offset by decreases in equity markets.

## Segregated Fund Hedging

Our hedging programs use derivative instruments to mitigate the interest and equity-related exposure of our segregated fund contracts. As at December 31, 2022, over 90% of our segregated fund contracts, as measured by associated fund values, were included in a hedging program. While a large percentage of contracts are included in the hedging program, not all of our market risk exposure related to these contracts is hedged. For those segregated fund contracts included in the hedging program, we generally hedge the value of expected future net claims costs and associated margins.

The following table illustrates the impact of our hedging program related to our sensitivity to a 50 basis point decrease in interest rates and a 10% and 25% decrease in equity markets for segregated fund contracts as at December 31, 2022 and December 31, 2021.

It is important to note that these estimates are illustrative and performance of our segregated fund dynamic hedging program may differ as actual equity-related exposures vary from broad market indices (the impact of active management, basis risk, and other factors) and higher or lower volatility level than assumed.

### Impact of Segregated Fund Hedging

December 31, 2022

| ($ millions) | Changes in interest rates (3) | Changes in equity markets (4) |  |
| --- | --- | --- | --- |
|  | 50 basis point decrease | 10% decrease | 25% decrease |
| Net income sensitivity (1)(2) |  |  |  |
| Before hedging | (100) | (150) | (350) |
| Hedging impact | 100 | 100 | 300 |
| Net of hedging | - | (50) | (50) |

December 31, 2021

| ($ millions) | Changes in interest rates (3) | Changes in equity markets (4) |  |
| --- | --- | --- | --- |
|  | 50 basis point decrease | 10% decrease | 25% decrease |
| Net income sensitivity (1)(2) |  |  |  |
| Before hedging | (150) | (150) | (350) |
| Hedging impact | 150 | 100 | 250 |
| Net of hedging | - | (50) | (100) |

(1) Net income sensitivities have been rounded in increments of $50 million.

(2) Since the fair value of benefits being hedged will generally differ from the financial statement value, this will result in residual volatility to interest rate and equity market shocks in net income and capital. The general availability and cost of these hedging instruments may be adversely impacted by a number of factors, including volatile and declining equity and interest rate market conditions.

(3) Represents a parallel shift in assumed interest rates across the entire yield curve as at December 31, 2022 and December 31, 2021, with no change to the ASB promulgated URR. 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).

(4) Represents the change across all equity markets as at December 31, 2022 and December 31, 2021. 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).

Our hedging strategy is applied both at the line of business or product level and at the Company level using a combination of dynamic hedging techniques (i.e., frequent re-balancing of short-dated interest rate and equity derivative contracts) and longer-dated put options. We actively monitor our overall market exposure and may implement tactical hedge overlay strategies in order to align expected earnings sensitivities with risk management objectives.

68 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Real Estate Risk

Real estate risk is the potential for financial loss arising from fluctuations in the value of, or future cash flows from, our investments in real estate. We are exposed to real estate risk and may experience financial losses resulting from the direct ownership of real estate investments or indirectly through fixed income investments secured by real estate property, leasehold interests, ground rents, and purchase and leaseback transactions. Real estate price risk may arise from external market conditions, inadequate property analysis, inadequate insurance coverage, inappropriate real estate appraisals, or from environmental risk exposures. We hold real estate investments that support general account liabilities and surplus, and fluctuations in value will impact our profitability and financial position. A material and sustained increase in interest rates may lead to deterioration in real estate values. An instantaneous 10% decrease in the value of our real estate investments as at December 31, 2022 would decrease net income$^{(1)}$ by approximately $450 million (December 31, 2021 - decrease of $375 million). Conversely, an instantaneous 10% increase in the value of our real estate investments as at December 31, 2022 would increase net income by approximately $450 million (December 31, 2021 - increase of $350 million).

## Foreign Currency Risk

Foreign currency risk is the result of mismatches in the currency of our assets and liabilities (inclusive of capital), and cash flows. This risk may arise from a variety of sources such as foreign currency transactions and services, foreign currency hedging, investments denominated in foreign currencies, investments in foreign subsidiaries and net income from foreign operations. Changes or volatility in foreign exchange rates, including a change to currencies that are fixed in value to another currency, could adversely affect our financial condition and results of operations.

As an international provider of financial services, we operate in a number of countries, with revenues and expenses denominated in several local currencies. In each country in which we operate, we generally maintain the currency profile of assets to match the currency of aggregate liabilities and required surplus. This approach provides an operational hedge against disruptions in local operations caused by currency fluctuations. Foreign currency derivative contracts such as currency swaps and forwards are used as a risk management tool to manage the currency exposure in accordance with our Asset Liability Management Policy. As at December 31, 2022 and December 31, 2021, the Company did not have a material foreign currency risk exposure on a functional currency basis.

Changes in exchange rates can affect our net income and surplus when financial results in functional currencies are translated into Canadian dollars. Net income earned outside of Canada is generally not currency hedged and a weakening in the local currency of our foreign operations relative to the Canadian dollar can have a negative impact on our net income reported in Canadian currency. A strengthening in the local currency of our foreign operations relative to the Canadian dollar would have the opposite effect. Regulatory capital ratios could also be impacted by changes in exchange rates.

## Inflation Risk

Inflation risk is the potential for financial loss arising from changes in inflation rates. This risk results from insurance contract liabilities that are linked to market measures of inflation such as the Consumer Price Index. The primary sources for this risk exposure are from certain group and retail annuity contracts and group long term disability contracts. In these contracts, the annuity and disability benefit payments may be linked to an indexing formula containing an inflation price index. Benefit payments linked to inflation indices may also include various caps, floors and averaging mechanisms that vary across product designs.

Exposure to inflation risk is managed within our asset-liability management program, primarily by investing in inflation linked assets to match liability exposures. The resulting net income exposure to changes in inflation rates arising from benefit payments is not material.

The impact of inflation on expenses is discussed in Expense Risk section under section 9 - ii Insurance risk in this document.

## Additional Cautionary Language and Key Assumptions Related to Sensitivities

The market risk sensitivities are measures of estimated changes in net income and OCI for changes in interest rates and equity market price levels described above, based on interest rates, equity market prices and business mix in place as at the respective calculation dates. These sensitivities are calculated independently for each risk factor, generally assuming that all other risk variables stay constant. The sensitivities do not take into account indirect effects such as potential impacts on goodwill impairment or valuation allowances on deferred tax assets. The sensitivities are provided for the consolidated entity and may not be proportional across all reporting segments. Actual results can differ materially from these estimates for a variety of reasons, including differences in the pattern or distribution of the market shocks, the interaction between these risk factors, model error, or changes in other assumptions such as business mix, effective tax rates, policyholder behaviour, currency exchange rates and other market variables relative to those underlying the calculation of these sensitivities. The extent to which actual results may differ from the indicative ranges will generally increase with larger capital market movements. Our sensitivities as at December 31, 2021 have been included for comparative purposes only.

We have also provided measures of our net income sensitivity to instantaneous changes in credit spreads, swap spreads, real estate price levels, and capital sensitivities to changes in interest rates and equity price levels. The real estate sensitivities are non-IFRS financial measures. For additional information, see section L - Non-IFRS Financial Measures in this document. The cautionary language which appears in this section is also applicable to the credit spread, swap spread, real estate, and LICAT ratio sensitivities. In particular, these sensitivities are based on interest rates, credit and swap spreads, equity market, and real estate price levels as at the respective calculation dates and assume that all other risk variables remain constant. Changes in interest rates, credit and swap spreads, equity market, and real estate prices in excess of the ranges illustrated may result in other-than-proportionate impacts.

$^{(1)}$ Sensitivities have been rounded in increments of $25 million.

MANAGEMENT'S DISCUSSION & ANALYSIS

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As these market risk sensitivities reflect an instantaneous impact on net income, OCI and Sun Life Assurance's LICAT ratio, they do not include impacts over time such as the effect on fee income in our asset management businesses.

The sensitivities reflect the composition of our assets and liabilities as at December 31, 2022 and December 31, 2021, respectively. Changes in these positions due to new sales or maturities, asset purchases/sales, or other management actions could result in material changes to these reported sensitivities. In particular, these sensitivities reflect the expected impact of hedging activities based on the hedge programs in place as at the respective calculation dates. The actual impact of hedging activity can differ materially from that assumed in the determination of these indicative sensitivities due to ongoing hedge re-balancing activities, changes in the scale or scope of hedging activities, changes in the cost or general availability of hedging instruments, basis risk (i.e., the risk that hedges do not exactly replicate the underlying portfolio experience), model risk, and other operational risks in the ongoing management of the hedge programs or the potential failure of hedge counterparties to perform in accordance with expectations.

The sensitivities are based on methods and assumptions in effect as at December 31, 2022 and December 31, 2021, as applicable. Changes in the regulatory environment, accounting or actuarial valuation methods, models, or assumptions after those dates could result in material changes to these reported sensitivities. Changes in interest rates and equity market prices in excess of the ranges illustrated may result in other than proportionate impacts.

The market risk sensitivities reflect the IFRS 4 and IAS 39 accounting standards in effect as at December 31, 2022 and December 31, 2021. Adoption of IFRS 17 and IFRS 9 may result in changes to the magnitude or direction of the reported net income, OCI, and LICAT ratio sensitivities. The impact on CSM will be disclosed as part of the IFRS 17 market risk sensitivities, as changes related to financial risk are first recorded through the CSM for insurance contracts measured using the VFA.

Our hedging programs may themselves expose us to other risks, including basis risk, volatility risk, and increased levels of derivative counterparty credit risk, liquidity risk, model risk and other operational risks. These factors may adversely impact the net effectiveness, costs, and financial viability of maintaining these hedging programs and therefore adversely impact our profitability and financial position. While our hedging programs are intended to mitigate these effects, residual risk, potential reported earnings and capital volatility remain. Hedge counterparty credit risk is managed by maintaining broad diversification, dealing primarily with highly-rated counterparties, and transacting through over-the-counter ('OTC') contracts cleared through central clearing houses, exchange-traded contracts or bilateral OTC contracts negotiated directly between counterparties that include credit support annexes.

For the reasons outlined above, our sensitivities should only be viewed as directional estimates of the underlying sensitivities of each factor under these specialized assumptions, and should not be viewed as predictors of our future net income, OCI, and capital. Given the nature of these calculations, we cannot provide assurance that actual impacts will be consistent with the estimates provided.

Information related to market risk sensitivities and guarantees related to segregated fund products should be read in conjunction with the information contained in section M - Accounting and Control Matters - 1 - Critical Accounting Policies and Estimates in our 2022 annual MD&A. Additional information on market risk can be found in Note 6 of our 2022 Annual Consolidated Financial Statements and the Risk Factors section in the 2022 AIF.

## ii. Insurance Risk

### Risk Description

Insurance risk is the uncertainty of product performance due to actual experience emerging differently than expected in the areas of policyholder behaviour, mortality, morbidity and longevity. In addition, product design and pricing, expense and reinsurance risks impact multiple risk categories, including insurance risk.

### Insurance Risk Management Governance and Control

We employ a wide range of insurance risk management practices and controls, as outlined below:

- • Insurance risk governance practices are in place, including independent monitoring and review and reporting to senior management and the Risk Committee.
- • Income and regulatory capital sensitivities are monitored, managed and reported against pre-established risk appetite limits for policyholder behaviour, mortality, morbidity and longevity risks.
- • Comprehensive Insurance Risk Policy, guidelines and practices are in place.
- • The global underwriting manual aligns underwriting practices with our corporate risk management standards and ensures a consistent approach in insurance underwriting.
- • Board-approved maximum retention limits are in place. Amounts issued in excess of these limits are reinsured.
- • Detailed procedures, including criteria for approval of risks and for claims adjudication are established and monitored for each business segment.
- • Underwriting and risk selection standards and procedures are established and overseen by the corporate underwriting and claims risk management function.
- • Diversification and risk pooling is managed by aggregation of exposures across product lines, geography and distribution channels.
- • We use reinsurance to limit losses, minimize exposure to significant risks and to provide additional capacity for growth.
- • The Insurance Risk Policy and Investment & Credit Risk Policy establish acceptance criteria and protocols to monitor the level of reinsurance ceded to any single reinsurer or group of reinsurers.
- • Reinsurance counterparty risk is monitored, including annual reporting of reinsurance exposure to the Risk Committee.
- • Concentration risk exposure is monitored on group policies in a single location to avoid a catastrophic event occurrence resulting in a significant impact.
- • Various limits, restrictions and fee structures are introduced into plan designs in order to establish a more homogeneous policy risk profile and limit potential for anti-selection.

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- Regulatory solvency requirements include risk-based capital requirements and are monitored regularly.
- The Product Design and Pricing Policy requires detailed risk assessment and pricing provision for material risks.
- Company specific and industry level experience studies and sources of earnings analysis are monitored and factored into valuation, renewal and new business pricing processes.
- Stress-testing techniques, such as FCT, are used to measure the effects of large and sustained adverse movements in insurance risk factors.
- Insurance contract liabilities are established in accordance with Canadian actuarial standards of practice.
- Internal capital targets are established at an enterprise level to cover all risks and are above minimum regulatory and supervisory levels. Actual capital levels are monitored to ensure they exceed internal targets.

Our Insurance Risk Policy sets maximum global retention limits and related management standards and practices that are applied to reduce our exposure to large claims. Amounts in excess of the Board-approved maximum retention limits are reinsured. On a single life or joint-first-to-die basis retention limit is $40 million in Canada and US$40 million outside of Canada. For survivorship life insurance, our maximum global retention limit is $50 million in Canada and US$50 million outside of Canada. In certain markets and jurisdictions, retention levels below the maximum are applied. Reinsurance is utilized for numerous products in most business segments, and placement is done on an automatic basis for defined insurance portfolios and on a facultative basis for individual risks with certain characteristics.

Our reinsurance coverage is well diversified and controls are in place to manage exposure to reinsurance counterparties. Reinsurance exposures are monitored to ensure that no single reinsurer represents an undue level of credit risk. This includes performing periodic due diligence on our reinsurance counterparties as well as internal credit assessments on counterparties with which we have material exposure. While reinsurance arrangements provide for the recovery of claims arising from the liabilities ceded, we retain primary responsibility to the policyholders.

Specific insurance risks and our risk management strategies are discussed below in further detail.

## Policyholder Behaviour Risk

We can incur losses due to adverse policyholder behaviour relative to the assumptions used in the pricing and valuation of products with regard to lapse of policies or exercise of other embedded policy options.

Uncertainty in policyholder behaviour can arise from several sources including unexpected events in the policyholder's life circumstances, the general level of economic activity (whether higher or lower than expected), changes in the financial and capital markets, changes in pricing and availability of current products, the introduction of new products, changes in underwriting technology and standards, as well as changes in our financial strength or reputation. Uncertainty in future cash flows affected by policyholder behaviour can be further exacerbated by irrational behaviour during times of economic turbulence or at key option exercise points in the life of an insurance contract.

Various types of provisions are built into many of our products to reduce the impact of uncertain policyholder behaviour. These provisions include:

- Surrender charges that adjust the payout to the policyholder by taking into account prevailing market conditions.
- Limits on the amount that policyholders can surrender or borrow.
- Restrictions on the timing of policyholders' ability to exercise certain options.
- Restrictions on both the types of funds Clients can select and the frequency with which they can change funds.
- Policyholder behaviour risk is also mitigated through reinsurance on some insurance contracts.

Internal experience studies are used to monitor, review and update policyholder behaviour assumptions as needed which could result in updates to policy liabilities.

## Mortality and Morbidity Risk

Mortality and morbidity risk is the risk that future experience could be worse than the assumptions used in the pricing and valuation of products. Mortality and morbidity risk can arise in the normal course of business through random fluctuation in realized experience, through catastrophes, as a result of a pandemic, or in association with other risk factors such as product development and pricing or model risk. Adverse mortality and morbidity experience could also occur through systemic anti-selection, which could arise due to poor plan design, or underwriting process failure or the development of investor-owned and secondary markets for life insurance policies.

External factors could adversely affect our life insurance, health insurance, critical illness, disability, long-term care insurance and annuity businesses. Morbidity experience could be unfavourably impacted by external events, such as pandemics, increases in disability claims during economic slowdowns and increases in high medical treatment costs and growth in utilization of specialty drugs. This introduces the potential for adverse financial volatility in our financial results.

Detailed uniform underwriting procedures have been established to determine the insurability of applicants and to manage exposure to large claims. These underwriting requirements are regularly scrutinized against industry guidelines and oversight is provided through a corporate underwriting and claim management function.

Mortality and morbidity concentration risk is the risk of a catastrophic event, such as natural environmental disasters (for example, earthquakes), human-made disasters (for example, acts of terrorism, military actions, and inadvertent introduction of toxic elements into the environment) as well as epidemics that could occur in geographic locations where there is significant insurance coverage. We do not have a high degree of concentration risk to single individuals or groups due to our well-diversified geographic and business mix. The largest portion of mortality risk within the Company is in North America. Individual and group insurance policies are underwritten prior to initial issue and renewals, based on risk selection, plan design, and rating techniques.

The Insurance Risk Policy approved by the Risk Committee includes limits on the maximum amount of insurance that may be issued under one policy and the maximum amount that may be retained. These limits vary by geographic region and amounts in excess of limits are reinsured to ensure there is no exposure to unreasonable concentration of risk.

MANAGEMENT'S DISCUSSION & ANALYSIS

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## Longevity Risk

Longevity risk is the potential for economic loss, accounting loss or volatility in earnings arising from adverse changes in rates of mortality improvement relative to the assumptions used in the pricing and valuation of products. This risk can manifest itself slowly over time as socioeconomic conditions improve and medical advances continue. It could also manifest itself more quickly, for example, due to medical breakthroughs that significantly extend life expectancy. Longevity risk affects contracts where benefits or costs are based upon the likelihood of survival and higher than expected improvements in policyholder life expectancy could therefore increase the ultimate cost of these benefits (for example, annuities, pensions, pure endowments, reinsurance, segregated funds, and specific types of health contracts). Additionally, our longevity risk exposure is increased for certain annuity products such as guaranteed annuity options by an increase in equity market levels.

To improve management of longevity risk, we monitor research in the fields that could result in a change in expected mortality improvement. Stress-testing techniques are used to measure and monitor the impact of extreme mortality improvement on the aggregate portfolio of insurance and annuity products as well as our own pension plans.

## Product Design and Pricing Risk

Product design and pricing risk is the risk a product does not perform as expected, causing adverse financial consequences. This risk may arise from deviations in realized experience versus assumptions used in the pricing of products. Risk factors include uncertainty concerning future investment yields, policyholder behaviour, mortality and morbidity experience, sales levels, mix of business, expenses and taxes. Although some of our products permit us to increase premiums or adjust other charges and credits during the life of the policy or contract, the terms of these policies or contracts may not allow for sufficient adjustments to maintain expected profitability. This could have an adverse effect on our profitability and capital position.

Our Product Design and Pricing Policy, approved by the Risk Committee, establishes the framework governing our product design and pricing practices and is designed to align our product offerings with our strategic objectives and risk-taking philosophy. Consistent with this policy, product development, design and pricing processes have been implemented throughout the Company. New products follow a stage-gate process with defined management approvals based on the significance of the initiative. Each initiative is subject to a risk assessment process to identify key risks and risk mitigation requirements, and is reviewed by multiple stakeholders. Additional governance and control procedures are listed below:

- Pricing models, methods, and assumptions are subject to periodic internal peer reviews.
- Experience studies, sources of earnings analysis, and product dashboards are used to monitor actual experience against those assumed in pricing and valuation.
- On experience rated, participating, and adjustable products, emerging experience is reflected through changes in policyholder dividend scales as well as other policy adjustment mechanisms such as premium and benefit levels.
- Limits and restrictions may be introduced into the design of products to mitigate adverse policyholder behaviour or apply upper thresholds on certain benefits.

## Expense Risk

Expense risk is the risk that future expenses are higher than the assumptions used in the pricing and valuation of products. This risk can arise from general economic conditions, unexpected increases in inflation, slower than anticipated growth, or reduction in productivity leading to increases in unit expenses. Expense risk occurs in products where we cannot or will not pass increased costs onto the Client and will manifest itself in the form of a liability increase or a reduction in expected future profits.

We closely monitor expenses through an annual budgeting process and ongoing monitoring of any expense gaps between unit expenses assumed in pricing and actual expenses.

## Reinsurance Risk

We purchase reinsurance for certain risks underwritten by our various insurance businesses. Reinsurance risk is the risk of financial loss due to adverse developments in reinsurance markets (for example, discontinuance or diminution of reinsurance capacity, or an increase in the cost of reinsurance), insolvency of a reinsurer or inadequate reinsurance coverage.

Changes in reinsurance market conditions, including actions taken by reinsurers to increase rates on existing and new coverage and our ability to obtain appropriate reinsurance, may adversely impact the availability or cost of maintaining existing or securing new reinsurance capacity, with adverse impacts on our business strategies, profitability and financial position. There is a possibility of rate increases or renegotiation of some of the legacy reinsurance contracts by a few of our reinsurers, as they continue to review and optimize their business models. In addition, changes to the regulatory treatment of reinsurance arrangements could have an adverse impact on our capital position.

We have an Insurance Risk Policy and an Investment & Credit Risk Policy approved by the Risk Committee, which set acceptance criteria and processes to monitor the level of reinsurance ceded to any single reinsurer. These policies also set minimum criteria for determining which reinsurance companies qualify as suitable reinsurance counterparties having the capability, expertise, governance practices and financial capacity to assume the risks being considered. Additionally, these policies require that all agreements include provisions to allow action to be taken, such as recapture of ceded risk (at a potential cost to the Company), in the event that the reinsurer loses its legal ability to carry on business through insolvency or regulatory action. Periodic due diligence is performed on the reinsurance counterparties with which we do business and internal credit assessments are performed on reinsurance counterparties with which we have material exposure. Reinsurance counterparty credit exposures are monitored closely and reported annually to the Risk Committee.

New sales of our products can be discontinued or changed to reflect developments in the reinsurance markets. Rates for our in-force reinsurance treaties can be either guaranteed or adjustable for the life of the ceded policy. In order to diversify reinsurance risk, there is generally more than one reinsurer supporting a reinsurance pool.

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Additional information on insurance risk can be found in Note 7 of our 2022 Annual Consolidated Financial Statements and in the Risk Factors section in the AIF.

### iii. Credit Risk

#### Risk Description

Credit risk is the possibility of loss from amounts owed by our borrowers or financial counterparties. We are subject to credit risk in connection with issuers of securities held in our investment portfolio, debtors, structured securities, reinsurers, counterparties (including derivative, repurchase agreement and securities lending counterparties), other financial institutions and other entities. Losses may occur when a counterparty fails to make timely payments pursuant to the terms of the underlying contractual arrangement or when the counterparty's credit rating or risk profile otherwise deteriorates. Credit risk can also arise in connection with deterioration in the value of, or ability to realize, any underlying security that may be used as collateral for the debt obligation. Credit risk can occur as a result of broad economic conditions, challenges within specific sectors of the economy, or from issues affecting individual companies. Events that result in defaults, impairments or downgrades of the securities in our investment portfolio would cause the Company to record realized or unrealized losses and may cause an increase in our provisions for asset default, adversely impacting earnings.

#### Credit Risk Management Governance and Control

We employ a wide range of credit risk management practices and controls, as outlined below:

- • Credit risk governance practices are in place, including independent monitoring and review and reporting to senior management and the Risk Committee.
- • Risk appetite limits have been established for credit risk.
- • Income and regulatory capital sensitivities are monitored, managed and reported against pre-established risk limits.
- • Comprehensive Investment and Credit Risk Management Policy, guidelines and practices are in place.
- • Specific investment diversification requirements are in place, such as defined investment limits for asset class, geography, and industry.
- • Risk-based credit portfolio, counterparty, and sector exposure limits have been established.
- • Mandatory use of credit quality ratings for portfolio investments has been established and is reviewed regularly. These internal rating decisions for new fixed income investments and ongoing review of existing rating decisions are independently adjudicated by Corporate Risk Management.
- • Comprehensive due diligence processes and ongoing credit analyses are conducted.
- • Regulatory solvency requirements include risk-based capital requirements and are monitored regularly.
- • Comprehensive compliance monitoring practices and procedures including reporting against pre-established investment limits are in place.
- • Reinsurance exposures are monitored to ensure that no single reinsurer represents an undue level of credit risk.
- • Stress-testing techniques, such as FCT, are used to measure the effects of large and sustained adverse credit developments.
- • Insurance contract liabilities are established in accordance with Canadian actuarial standards of practice.
- • Internal capital targets are established at an enterprise level to cover all risks and are above minimum regulatory and supervisory levels. Actual capital levels are monitored to ensure they exceed internal targets.

Our core principles of credit risk management include asset diversification, fundamental research and analysis of cash flows, proactive and continuous risk monitoring, active management and relative value assessment, all with the objective of optimizing risk-adjusted returns, with due consideration for the impacts of capital and taxation.

We rate fixed income investments primarily through the use of internally developed scorecards which combine an estimated probability of default and loss given default to determine an expected loss and credit risk rating. This rating is expressed using a 22-point scale that is generally consistent with those used by external rating agencies, and is based on detailed examination of the borrower's, or issuer's, credit quality and the characteristics of the specific instrument. The probability of default assessment is based on borrower-level or issuer-level analysis, which encompasses an assessment of industry risk, business strategy, competitiveness, strength of management and other financial information. The loss given default assessment is based on instrument-level analysis, which considers the impact of guarantees, covenants, liquidity and other structural features. These scorecards provide input to stochastic value-at-risk models and are used to stress test the portfolio, which provide insight into the distribution and characteristics of credit risk within our portfolios. In accordance with our policies and under normal circumstances, our ratings cannot be higher than the highest rating provided by certain Nationally Recognized Statistical Rating Organizations ('NRSROs'). Certain assets, including those in our sovereign debt and asset-backed securities portfolios, are assigned a rating based on ratings provided by NRSROs using a priority sequence order of Standard & Poor's, Moody's, Fitch and DBRS Limited.

Additional information on credit risk can be found in Note 6 of our 2022 Annual Consolidated Financial Statements and in the Risk Factors section in the AIF.

### iv. Business and Strategic Risk

#### Risk Description

Business and strategic risk is the risk of loss from the inability to adequately identify, plan or implement an appropriate strategy to achieve strategic and business objectives or adapt to changes in Client behaviours or the external business, economic, political, regulatory or environmental and social landscape or when assumptions made in strategy are not realized as expected.

#### Business and Strategic Risk Management Governance and Control

We employ a wide range of business and strategic risk management practices and controls, as outlined below:

- Business and strategic risk governance practices are in place, including independent monitoring, review and reporting to senior management, the Board and the Board Committees.

MANAGEMENT'S DISCUSSION & ANALYSIS

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- • Business and strategic risk is managed through our strategic and business planning process and controls over the implementation of these plans. These plans are reviewed and discussed at the executive level and the key themes, issues and risks emerging are discussed by the Board and the Board Committees.
- • Our business and strategic plans are subject to approval by the Board, which also receives regular reviews of implementation progress against key business plan objectives.
- • Comprehensive policies including the Risk Management Framework, Risk Appetite Policy, Product Design and Pricing Policy, Mergers and Acquisition Policy, Capital and Liquidity Management Framework and Capital Risk Policy are in place.
- • Our corporate strategy and business objectives are established within the boundaries of the Risk Appetite Policy. Our business strategies and plans are designed to align with our risk appetite, our capital position and our financial performance objectives.
- • Our risk appetite is periodically assessed, taking into consideration the economic and regulatory environments in which we operate.
- • Merger, acquisition, strategic investments and divestiture transactions are governed by a Board-approved Merger and Acquisition Risk Management Policy and significant transactions require the approval of the Board.
- • Stress-testing techniques, such as FCT, are used to measure the effects of large and sustained adverse scenarios.
- • Key and emerging risks are identified, monitored and reported, including emerging regulatory changes that may have a material impact on our finances, operations or reputation.
- • Internal capital targets are established at an enterprise level to cover all risks and are above minimum regulatory and supervisory levels. Actual capital levels are monitored to ensure they exceed internal targets.

We regularly review and adapt our business strategies and plans to take account of changes in the external business, economic, political and regulatory environments in which we operate. Our business strategies and plans are designed to align with our risk appetite, our capital position and our financial performance objectives. We periodically reassess our risk appetite taking into consideration the economic, regulatory and competitive environment in which we operate.

Specific business and strategic risks are discussed below in further detail.

## Economic and Political Risk

We operate in various geographies and our business and financial operations are susceptible to regional and global economic, political and regulatory changes. We may be affected by economic and capital markets conditions and economic shocks around the globe as a result of increasingly connected global markets. Factors such as changes in interest rates, foreign exchange rates, market volatility, housing prices, consumer spending, saving and debt, business investment and inflation around the globe can affect the business and economic environments in which we operate. Continued economic and political uncertainty may give rise to increased business and strategic risks including those associated with industry restructuring, mergers and acquisitions, changing competitive dynamics and changes in the legal, regulatory and tax regimes in which our businesses operate. In addition, adverse economic conditions often arise in conjunction with volatile and deteriorating capital markets conditions, which can have an adverse impact on Client behaviour and in turn on our sales and profitability, credit and financial strength ratings, and capital and liquidity positions.

## Strategic Execution Risk

Our business strategies and plans are dependent on the successful execution of organizational and strategic initiatives designed to support the growth of our business. Our ability to manage the execution of these initiatives effectively and prioritize initiatives directly affects our ability to execute our strategies. Identifying and implementing the right set of initiatives is critical to achieving our business plan targets. Failure to identify and implement the right set of initiatives could also lead to cost structure challenges and inability to achieve our growth objectives.

## Distribution Risk

Failure to achieve planned distribution scale could materially impact our financial and strategic objectives. This includes the inability to attract and retain intermediaries and agents at a cost that is financially feasible to the Company, or to develop digital sales and Client support capabilities and technologies. Distribution risk may also be influenced where our distribution or product strategy and related services (including digital sales and Client support capabilities and technologies) are not developed, modified or executed in line with our strategic objectives or in consideration of the changes in Client behaviour or our regulatory environment. In addition, the lack of a well-diversified distribution model in the jurisdictions in which we do business may cause over-reliance on agency channel or key partners.

## Risks Relating to Mergers, Acquisitions, Divestitures and Strategic Investments

We regularly explore opportunities to selectively acquire other businesses or to divest ourselves of all or part of certain businesses, in support of our growth and strategic objectives. Any transaction that we enter into introduces a number of risks associated with economic, operational, strategic, financial, tax, legal, regulatory, compliance, and other factors.

There is a risk that we may be unable to make an appropriate acquisition in a desired market or business line or are unable to realize the financial and strategic benefits of the transactions due to competitive factors, regulatory requirements or other factors. There is a risk that the capital utilized to finance any transaction could limit our ability to deploy further capital to pursue other opportunities and initiatives. These risks could adversely impact our ability to achieve our financial and strategic objectives.

Our ability to realize the contemplated economic, financial, and strategic benefit of any transaction that we enter into is contingent on several factors, which include the effective separation and/or integration of the transferred businesses, restructuring and/or reorganization of related businesses, and incentivizing and/or retaining personnel to effectively execute these transactions. In addition, the integration of operations and harmonization of any differences in organizational culture may require the dedication of significant management resources, which may distract management's attention from our day-to-day business. Anticipated synergies and other expected benefits may not materialize due to a failure to successfully integrate the acquired businesses with our existing operations. Any of these risks, if realized, could prevent us from achieving the expected results from a transaction or could impact our financial and strategic objectives.

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To mitigate these risks, we have established procedures to govern the evaluation, execution and integration of merger and acquisition transactions. Regular updates on execution and integration risks relating to these transactions are provided to the Board, Board Committees and senior management committees, as appropriate, along with any mitigants developed to address such risks.

## Competitive Environment

Competition from insurance companies, banks, asset managers, mutual fund companies, financial planners and other service providers (including new entrants and non-traditional financial services companies) is intense, and could adversely affect our business in certain countries.

The businesses in which we engage are highly competitive and our ability to sell our products is dependent on many factors, including scale, price and yields offered, distribution channels, digital capabilities, financial strength ratings, range of product lines and product and service quality, brand strength, investment performance, historical dividend levels and the ability to provide value added services to distributors and Clients. In certain markets, some of our competitors may be superior to us on one or more of these factors. Our competitors have significant potential to disrupt our business through targeted strategies to reduce our market share which may include targeting our key people or bancassurance partners and other distributors or aggressively pricing their products. Our ability to achieve our business plans and strategies depends significantly upon our capacity to anticipate and respond quickly to these competitive pressures.

Technology is driving rapid change in the financial services sector and is enabling new entrants to compete or offer services to our competitors to enhance their ability to compete in certain segments of the insurance, wealth and asset management markets. The emergence of new technologies such as robotic process automation, artificial intelligence, blockchain and advanced analytics may have an impact on the financial services sector and how companies interact with their stakeholders. Our current competitors or new entrants may use these or other new technologies to provide services in various areas such as customized pricing, proactive outreach to Clients and targeted marketing in order to strengthen their Client relationships and influence Client behaviour. The impact of disruption from changing technology and innovation by traditional and non-traditional competitors who may offer a better user experience, functionality or lower priced products and may have lower distribution costs will require us to adapt at a more rapid pace and may create margin pressures. The risk of disruption may also impact our distribution models as new and low cost digital-based business models emerge in connection with the distribution of financial services and products, such as insurtechs and robo-advisors. These risks are evolving rapidly with an increasing number of digital users and are difficult to anticipate and respond to proactively, and may adversely impact our profitability and financial position.

## Investment Performance

Investment performance risk is the possibility that we fail to achieve the desired return objectives on our investment portfolio, or that our asset management businesses fail to design or execute investment strategies in order to achieve competitive returns on the products and managed accounts offered by these businesses. Failure to achieve investment objectives may adversely affect our revenue and profitability through slower growth prospects and adverse impacts on policyholder or Client behaviour.

## Changes in Legal and Regulatory Environment

Most of our businesses are subject to extensive regulation and supervision. Changes to legislation, regulations or government policies, or the manner in which they are interpreted or enforced, may require that we make significant changes to our strategy and may result in increased implementation costs and diversion of resources to manage the change. These changes could impact financial reporting, accounting processes, capital requirements, the regulatory framework for our products and services, the regulation of selling practices, sales intermediaries and product offerings, solvency requirements, executive compensation, and corporate governance practices and could impose restrictions on our foreign operations (such as limits on foreign ownership of local companies). All of these changes could have an adverse effect on our business and operations. Our failure to comply with existing and evolving regulatory requirements could also result in regulatory sanctions and could affect our relationships with regulatory authorities and our ability to execute our business strategies and plans.

## Environmental and Social Risk

Our financial performance, operations, and reputation may be adversely affected if we do not adequately prepare for the direct or indirect impacts of environmental and social risks. Environmental and social risks include but are not limited to environmental damage on properties owned or managed by us and climate change-related physical and transition risks, public health issues and issues of inequality. These risks may occur in our direct operations, investing activities or other areas of our value chain.

Business units in our Asset Management pillar integrate environmental, social and governance (ESG) considerations in their investment decision-making for Sun Life assets and Client assets. Existing and potential ESG risks are incorporated, subject to data availability, into initial and ongoing reviews and assessments of public equities and fixed income, private fixed income, real estate, infrastructure and commercial mortgage investments, among others. In addition, we monitor our third-party managers in the asset management, general account and fund platform businesses through our International Investment Centre. This centre functions as an investment research and consulting group. In the due diligence and monitoring of third-party managers, it assesses each manager's incorporation of ESG into its investment processes, as well as other relevant sustainability factors, and monitors them on an ongoing basis. These activities may be undertaken on behalf of, or in partnership with, the relevant Sun Life businesses. These businesses may also undertake their own due diligence activities.

We engage in and monitor environmental, social and broader sustainability developments in part through our participation as a signatory to the United Nations-supported Principles for Responsible Investment ('PRI'), United Nations Environment Programme - Finance Initiative ('UNEP FI'), Climate Action 100+, Climate Engagement Canada and CDP (formerly the Carbon Disclosure Project).

Our Chief Sustainability Officer leads enterprise-wide efforts to embed sustainable practices across our businesses and help drive further actions that create a cleaner, more inclusive, and sustainable future, in line with our enterprise strategy and our Purpose. Our International Sustainability Council, composed of senior executives from each of our businesses, key functions and regions convenes on broad sustainability issues. Members are responsible for implementation of our sustainability plan, through the areas of focus that align with their business or function. They champion,

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influence and drive action. We report on sustainability performance, including reporting related to climate change, environmental and social issues, in our annual Sustainability Report, which is published on the same date as our Annual Report and is available at sunlife.com/sustainability.

## Climate Change

Climate change is one of the defining issues of our time. The scientific community has demonstrated that the world is warming. Governments, regulators, investors, clients and other stakeholders are increasing efforts to tackle this global issue. We believe that it is incumbent upon us to respond and to take actions that support the goal of the Paris Agreement to limit the global temperature increase in this century to well below 2 degrees Celsius compared to pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels.

The commitments we make to our Clients may extend decades into the future. For this reason, risks related to climate change impacts that could occur in the future exist within the solutions we are providing to our Clients today. Our Purpose of helping our Clients achieve lifetime financial security and live healthier lives cannot be achieved without a sound approach to climate change that supports the transition to a lower-carbon future. Our Purpose can best be realized through the integration of this mindset across our businesses, and through working collaboratively with other stakeholders towards a common goal of avoiding the worst effects of climate change. We have set a goal to achieve net-zero GHG emissions by 2050. (Refer to Metrics and Targets for additional details).

Our climate strategy includes the following elements:

- • We recognize that as a long-term investor, we have the opportunity to be part of the solution to this global challenge and invest proactively in assets and businesses that support a transition to a lower-carbon economy.
- • We assess climate-related impacts on our businesses and investments with the aim of prudently managing them to realize our commitments, while acknowledging the challenges of uncertainty and imperfect data to inform such decisions.
- • We are committed to advocacy and collaboration with governments, regulators, investors and industry leaders to develop supportive net-zero programs and policies that pave a path towards decarbonization.
- • We advocate for better data and disclosures, so we can make better-informed assessments of climate-related risks. We support the actions of regulators to require reporting aligned to the recommendations of the Financial Stability Board's Task Force on Climate-Related Financial Disclosures ('TCFD'), and welcome ongoing efforts to improve disclosure standards.
- • We commit to continuously improving our climate-related measurement, monitoring and reporting.
- • We are focused on reducing climate impact and strengthening the resilience of our own operations around the world, as well as the properties that we own in our investment portfolio.

We commit to working together across industries, with our Clients, investees and other stakeholders to contribute to solving this global challenge. We recognize that we do not yet have the answers to this complex topic.

Our strategy will evolve over time, building on our experience and external developments.

## TCFD Disclosures

The following sets out our climate-related disclosures in line with TCFD recommendations, which are structured around four themes that represent core elements of how organizations operate: strategy, governance, risk management, and metrics and targets.

### Strategy

Climate change has potential implications for us as an insurance and asset management company. Climate change is impacting the life and health of people worldwide. The increased severity and frequency of extreme weather events and the chronic shift towards higher temperatures could have meaningful impacts on health. Heat-related deaths and hospitalizations have increased over the last decade and will continue to increase as temperatures rise. Lower air quality from pollutants, warming temperatures and wildfires could have long-term implications on respiratory health. Also negatively impacting our mental health is the emotional distress, anxiety and trauma caused by extreme weather events.

Changing precipitation and ensuing floods, droughts and wildfires directly impact food crops and can lead to food insecurity and malnutrition. Changing precipitation and warming temperatures also increase the proliferation of pests, causing direct damage to food crops, while also spreading disease like dengue fever and Zika. It is expected that warming temperatures will expand the geographic region and lengthen the duration of the transmission season for diseases spread by mosquitoes and other pests.

A focus of our Financial Condition Testing ('FCT')$^{(1)}$ has been climate-related investment risks which we believe are larger and a more immediate concern. The scope and scale of climate related life and health risks for Sun Life are relatively small at this point in time, although still a significant longer-term concern we are monitoring. In addition to using climate scenarios in FCT, our experience with climate scenario analysis includes participation in a pilot project between the Bank of Canada, OSFI, and a small group of Canadian financial institutions in 2021. The pilot focused on transition risks and was designed to capture a range of potential outcomes and illustrate the kinds of stresses on the financial system and economy that could occur as the world transitions to a lower-carbon future. The findings of the pilot were broadly consistent with our past understanding of sectors that are most likely to be affected by potential climate change transition impacts and the implications of delaying policy action.

$^{(1)}$ Financial Condition Testing is a stress testing exercise to assess the future financial condition of Sun Life under adverse scenarios.

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A transition to a lower carbon economy could affect asset values. Among other impacts, portfolio investments in coal, conventional oil and oil sands producers, utilities and related fossil fuel industries, railways and pipelines, as well as markets that depend on these industries, may be subject to additional financial risk as a result of changes in regulation, cost of capital, consumer preferences and competition from renewable energy companies. This may lead to lower overall profitability and/or stranded assets (assets for which the investment costs cannot be recovered as intended).

Physical climate impacts could affect investments in real assets such as real estate, commercial mortgages, and infrastructure, as well as our own operations, and operations and revenues of our Clients and businesses across our portfolios. Risks may result from increased severity and frequency of extreme weather events and from longer-term shifts in climate patterns.

For further discussion of potential climate-related risks, please refer to Environmental and Social Risk in our 2022 AIF under Risk Factors - Business and Strategic Risk.

From an investments perspective, climate change presents both risks and opportunities.

Climate-related opportunities include those related to sustainability and green bonds, investments in developing resilient and adaptive real estate and infrastructure as well as renewable energy and other assets and businesses that support or benefit from a transition to a low-carbon economy. Many companies and industries are benefiting from climate change-related tailwinds, such as mobility (vehicle electrification), energy efficiency services, battery technology and renewables. Through our ESG integration efforts, we seek to identify these investment opportunities in both public and private markets, including opportunities in securitized investments and direct investments (real estate, traditional public infrastructure, and other types of public infrastructure such as sustainable agriculture). We were the first life insurer globally to issue a sustainability bond. Sustainability bonds can play a role in supporting the transition to a lower-carbon economy. Through our Asset Management pillar, we are well-positioned to invest in this transition. Asset management is delivered by SLC Fixed Income, Infrared, BGO and Crescent, all of which operate under the SLC Management brand, as well as by MFS. Climate-related investing strategies for our asset management businesses are highlighted below:

- SLC Management invests in sustainable infrastructure around the world through its platform of public and private fixed income investments. Sustainable infrastructure categories include renewable energy, energy efficiency, and clean transportation.
- InfraRed invests in and manages social infrastructure and energy efficiency, low-carbon generation, and renewable energy projects, which advances our sustainable investment options for institutional Clients while complementing our focus on sustainable investing and climate change.
- BGO proactively addresses climate risks at the property and portfolio levels through strategic planning that assesses and mitigates critical vulnerabilities and builds adaptive capacity. BGO utilizes its award-winning proprietary resilience tool that combines industry research with predictive climate modeling to deliver tailor-made climate resilience adaptation plans across our portfolios. These efforts help BGO to drive for long-term returns for Clients and investors.
- Crescent's investment decisions are guided by Clients' long-term interests, which are served through the incorporation of ESG considerations, including those related to climate change. Where possible, Crescent seeks to engage collaboratively with portfolio companies on topics such as carbon emissions measurement and reporting and energy efficiency.
- As long-term investors in public issuers, MFS assesses climate change as a key investment decision factor at both the issuer level and portfolio level. MFS also regularly engages with companies to encourage better disclosure and management of climate-related risks and opportunities. MFS' Climate Manifesto outlines its beliefs and purpose as an investor with regard to the risks and opportunities associated with climate change and the goal of achieving net-zero emissions by 2050.

As longer-term investors, we believe that integrating climate change as a key element of investment decision-making can be a source of competitive advantage for two reasons: it should lead to stronger risk-adjusted returns for Clients over time, and stronger ESG investment ratings from groups such as PRI, Morningstar, GRESB and others, which are increasingly key decision factors for Clients. As participants in Climate Engagement Canada and Climate Action 100+ investor initiatives, we engage some of the world's largest corporate GHG emitters with whom we have investments, to encourage them to align their climate related goals and objectives with those of the Company and our Clients.

The same principles are used in the selection and monitoring of third-party investment managers that we engage to invest assets on behalf of our Clients in group retirement savings plans, private pools, Guaranteed Investment Funds (GIFs) and mutual funds. We recognize that our Clients are increasingly bringing a sustainable investment lens to our solutions. Our GRS business's proprietary ESG integration evaluation framework helps sponsors of Sun Life Canada group retirement plans make informed decisions about the investment options they make available to their employees in their workplace plans. The evaluation framework uses detailed criteria in three key areas: Firm Policies, Investment Process and Active Ownership. SLGI similarly evaluates its managers on firm commitment, investment strategy and active ownership. This approach provides deeper insights into its managers' direction on ESG matters and their ability to embed these considerations across all aspects of the investment decision process.

We engage on emerging climate regulation and policy impacting our business directly and through industry associations, such as the Canadian Life and Health Insurance Association, the American Council of Life Insurers and the Canadian Chamber of Commerce. We have advocated for improved climate-related financial disclosure and data and harmonization of emerging standards and regulations. Better and more consistent data across industries would allow for better decision making and ultimately for capital to flow to those companies that are working to develop real solutions for the transition to a low-carbon economy. In addition, we advocate for improving Canada's sustainable finance market and expanding opportunities to invest in green buildings and sustainable infrastructure. We disclose our lobbying activities in compliance with regulatory obligations as determined by jurisdiction.

## Governance

Three Board Committees have oversight over aspects of climate change:

- The GICRC provides oversight of our enterprise-wide Sustainability Policy and sustainability program, including reviewing and recommending approval of the annual Sustainability Report and Sustainability Plan to the Board. The GICRC monitors progress on the Sustainability Plan's implementation, goals and targets, including GHG emissions performance.

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- The Risk Committee provides enterprise-wide oversight of the management of current and emerging risks, including of climate-related risks and, broadly, environmental risks. For more detail on the Risk Committee's role, refer to Risk Management in this section.
- The Audit Committee has oversight of all financial disclosures in the financial statements and MD&A, including those related to climate change.

The Board has ultimate oversight of climate change issues, and uses reports from the Board Committee Chairs noted above, and other direct presentations by management and external experts, to decide on the nature and extent of its input and to provide challenge, advice and guidance to senior management on the enterprise approach to climate change. In 2022, climate-related topics were reviewed by the Board or a Committee of the Board at each of the quarterly meetings and the annual board strategy meeting either as part of dedicated agenda topics on Sun Life's Business and Strategic Plans, including Sun Life's sustainability strategy, or as part of various committee, officer and business group reports.

At the management level, the Chief Sustainability Officer, Chief Risk Officer, and Chief Investment Officer play key roles in assessing and managing climate-related risks and opportunities.

- Our Chief Sustainability Officer has overall accountability for sustainability, including climate change, across the enterprise. This accountability includes setting strategy and the governance framework for our organization. As stated above, the Chief Sustainability Officer chairs our International Sustainability Council. Sun Life's Vice-President of Climate Change and Environmental Impact, a newly-created role in 2022 reporting directly to the Chief Sustainability Officer, oversees the development and implementation of the enterprise-wide climate change strategy, climate risk and decarbonization performance and reporting functions.
- Our Chief Risk Officer is responsible for leading the Risk Management function (as noted above in Risk Management sections 2 and 7). Key and emerging risks are monitored and reported to the Risk Committee of the Board.
- The Chief Investment Officer chairs the Sustainability Committee and Sustainable Investment Council within SLC Management. The Sustainability Committee is responsible for setting strategic direction related to sustainability and ESG matters and sets priorities on key sustainability initiatives across SLC Management. The Sustainable Investment Council oversees the integration of material ESG factors, including climate change, into the investment process.
- MFS has established oversight committees to provide strategic leadership and support the effective integration of sustainability across MFS. The MFS Sustainability Executive Group provides strategic leadership concerning MFS' sustainability strategy. It includes various senior leaders responsible for the integration of sustainability across the firm. MFS has also established committees that are a part of its existing committee governance structure. These committees are devoted to the implementation of specific aspects of MFS' sustainability strategy, including ESG integration strategy and policies, engagement, proxy voting and ESG client and corporate strategies and policies.

## Risk Management

Climate risk management is integrated into our Risk Framework, Governance, and supporting processes (as noted in preceding sections 1 through 8 and under Governance above).

Our definition of climate risk includes physical impacts of climate change and impacts of the transition to a lower-carbon economy. These impacts can include, but are not limited to, damage to owned and operated real assets including real estate and infrastructure, a reduction in the values of investments in public and private fixed income and non-fixed income assets tied to fossil fuels and carbon intensive industries, litigation risk to a company or sector in which we invest, health impacts to affected populations, and socio-economic, geopolitical and regulatory changes.

From an investment perspective, climate-related risks (where material to an industry or asset class) are integrated into the risk management process as we look to make long-term investments that are better positioned to withstand issues related to climate change. We incorporate a number of different analyses into our assessment of climate risks through both stand-alone analysis of physical risks by geographic region and through the assessment of business model and carbon transition risks. Climate-related risk categories monitored may include acute and chronic physical risks and transition risks related to current and emerging laws and regulation, changing technology, market and reputation risks or consumer preferences.

Each of the Company's asset management businesses takes its own approach to identifying, assessing, monitoring and responding to climate-related risks and opportunities, based on the asset classes it invests in. Approaches are refined periodically. Examples of approaches include:

- Proprietary climate risk surveys to identify, assess and respond to climate-related risks and opportunities;
- Portfolio and asset level risk analysis to inform investment decisions and resilience plans;
- Scoring methodologies that look to standardize the assessment of transition risks. For example, when considering a longer-term investment in fossil fuel related companies, SLC Fixed Income reviews the companies' carbon reduction plans and ability to transition to a lower-carbon future;
- Emissions data analysis;
- Stranded asset modeling;
- Carbon intensity monitoring and benchmarking; and
- Individual as well as collaborative engagements on topics such as decarbonization.

Additionally, an environmental issue, whether caused by climate change or other factors, on a property owned or operated by us could have financial or reputational impacts. We maintain an environmental risk management program to help monitor and manage real estate investment assets from losses due to environmental issues and to ensure compliance with applicable laws. We maintain insurance policies to cover certain environmental risks on owned assets. We have implemented a business continuity program to facilitate the recovery of critical business operations if an environmental issue affects a location where we conduct operations. The Company's corporate real estate group, together with our building owners and property managers, assesses the potential effects of climate change-related hazards and examines ways to improve the ability of our buildings to withstand these hazards. These hazards include tornadoes, flash floods, ice storms and coastline flooding.

## Metrics and Targets

The Company has set a goal to achieve net-zero GHG emissions by 2050 for both its investments and operations, and is continuing progress on its climate commitments with a focus on setting interim targets. Our asset management businesses that are members of the Net Zero Asset Managers

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(NZAM) initiative have been communicating their interim targets following their finalization. The NZAM initiative is an international group of asset managers committed to supporting the goal of net-zero emissions by 2050 or sooner. NZAM members include MFS, SLGI and SLC Management businesses SLC Fixed Income, InfraRed and BGO. As an asset owner, the Company plans to achieve net-zero GHG emissions in its general account. We are using the Partnership for Carbon Accounting Financials ('PCAF') methodology for determining our financed emissions. Our approach for achieving net-zero emissions in the General Account will focus on asset classes where we have access to quality data, net-zero emissions methodologies are established, and where we believe we can have the biggest real-world impact in reducing emissions. Updated interim targets and a summary of our other commitments and progress towards net-zero emissions are available at www.sunlife.com/sustainability.

For our operations, we have set an interim target of a 50% absolute reduction of GHG emissions by 2030, relative to 2019. This target includes emissions reductions from our offices and corporate travel$^{(1)}$. While we continue our efforts to reduce GHG emissions, we purchase high-quality carbon offsets to compensate for the remaining emissions in our operations that we have yet to reduce. This approach of purchasing offsets is not part of our enterprise decarbonization strategy, but is one way to help manage the climate impact of our operations today, while we work towards our interim 2030 operational target and enterprise-wide goal of net-zero GHG emissions by 2050.

The Company is continuing progress towards its target of $20 billion in new sustainable investments from 2021 to 2025 across its general account and Client investments, which are managed by SLC Management. Investments include, but are not limited to, renewable energy, energy efficiency, sustainable buildings, clean transportation, water management, and social infrastructure projects. We report our progress in our annual Sustainability Report available at www.sunlife.com/sustainability.

Sun Life and majority-owned affiliate companies report global Scope 1 and 2 emissions from company-occupied real estate, data centres and real estate investments under our financial control (as defined in the GHG Protocol Corporate Accounting and Reporting Standard) as well as Scope 3 emissions$^{(2)}$ associated with corporate travel and real estate-related sources (where Scope 3 data is available) in our annual Sustainability Report available at www.sunlife.com/sustainability. DentaQuest corporate offices are excluded for the 2022 reporting cycle. All emissions reporting is aligned to the GHG Protocol Corporate Accounting and Reporting Standard using the financial control approach.

Please refer to Environmental and Social Risk in our AIF for additional climate-related risk discussion.

## v. Operational Risk

### Risk Description

Operational risk is the risk of loss (financial and non-financial) resulting from inadequate or failed internal processes, people and systems or from external events. Operational risk is present in all of our business activities and encompasses a broad range of risks as described below. Operational risk is embedded in the practices utilized to manage other risks and, therefore, if not managed effectively, operational risk can impact our ability to manage other key risks.

### Operational Risk Management Governance and Control

We employ a wide range of operational risk management practices and controls, as outlined below:

- • Operational risk governance practices are in place, including independent monitoring and review and reporting to senior management and the Board Committees.
- • Risk appetite limits have been established in Operational Risk.
- • Comprehensive Operational Risk Management Framework, Policies, guidelines and practices are in place.
- • Our governance practices, corporate values, Code of Conduct and Company-wide approach to managing risk set the foundation for mitigating operational risks.
- • Our Code of Conduct sets the tone for a strong ethical culture, and we regularly review and update the Code of Conduct to ensure that it continues to meet the expectations of regulators and other stakeholders. All our directors and employees must reconfirm annually their understanding of and commitment to comply with the Code of Conduct.
- • We have established appropriate internal controls and systems for talent acquisition, rewards and development programs that attract, build and retain top talent and create strong succession plans as well as compensation programs, and we provide ongoing training to our people.
- • We conduct regular monitoring of employee engagement to ensure we create and maintain a work environment where all employees are welcome and able to contribute effectively.
- • Stress-testing techniques, such as FCT, are used to measure the effects of large and sustained adverse scenarios.
- • We mitigate a portion of our operational risk exposure through our corporate insurance program by purchasing insurance coverage that seeks to provide insurance against unexpected material losses resulting from events such as criminal activity, property loss or damage and liability exposures, or that satisfies legal requirements and contractual obligations.
- • Internal capital targets are established at an enterprise level to cover all risks and are above minimum regulatory and supervisory levels. Actual capital levels are monitored to ensure they exceed internal targets.

Specific operational risks and our risk management strategies are discussed below in further detail and in the Risk Factor section in the AIF.

$^{(1)}$ Emissions resulting from global corporate offices and data centres as well as from corporate travel, inclusive of majority-owned Sun Life affiliate companies. DentaQuest corporate offices are excluded for the 2022 reporting cycle. All emissions reporting is aligned to the GHG Protocol Corporate Accounting and Reporting Standard using the financial control approach.

$^{(2)}$ Scope 3 emissions are related to global corporate travel (air, rail, car-rental and employee-claimed mileage), utilities for company-occupied real estate that are not under our financial control, as well as water consumption and waste generated at real estate investments.

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## Information Security and Privacy Risks

Information and technology are used in almost all aspects of our business and operations. As part of our Client strategy, we continue to enhance the digital side of our business to support and enable new business models and processes, that are more personal, proactive and predictive.

Our business and the successful implementation of our digital strategy are dependent on various factors including maintaining a secure environment for our Clients, employees and other parties' information. This requires the effective and secure use, management and oversight of information and physical assets. We engage with various stakeholders and leverage emerging technologies, including digital, mobile applications, cloud computing, artificial intelligence and robotic process automation. These technologies are used to collect, process and maintain information relating to business transactions and financial reporting, as well as the personal information of our Clients and employees. We also obtain services from a wide range of third-party service providers and have outsourced some business and information technology functions in various jurisdictions.

There continues to be an increasing number of information security compromises and privacy breaches across industry sectors, governments and individuals. The increasing scope and complexity of malicious activity poses a significant risk to our systems and these risks may be exacerbated by the breadth of our operations, our geographic footprint and the complexity of our technology systems. The risk of information security compromises and privacy breaches continued during the COVID-19 pandemic as individuals extending remote working arrangements. A serious security or privacy breach of either an internal or third-party service provider's computer system that contains sensitive business, Client and/or employee information may result in business interruption, theft or misuse of confidential information, regulatory penalties and scrutiny, litigation, reputational damage and may have an adverse impact on current and future business opportunities with our Clients, employees and business relationships. We continue to monitor for increases in malicious activity due to the conflict in Ukraine.

We continue investing in people, processes and technology to strengthen our abilities to respond to the evolving threat landscape. Our Information Security framework is overseen by the Chief Information Security Officer, supported by senior leadership and by our Operational Risk Management Framework. Our information security framework and governance controls (policies, procedures, training) are aligned with recognized industry standards and are compliant with applicable laws and regulations.

Our well-established security controls and processes are intent on protecting our information and computer systems and the information entrusted to us by our Clients and employees. Our protection strategy leverages information security risk assessments and privacy impact assessments to evaluate potential risks. The security framework also includes technology and process safeguards and regularly promotes secure behavioural practices. As part of our layered security approach, we deliver general security awareness training sessions to all employees every year that is reinforced with regular awareness resources and activities.

Many jurisdictions in which we do business are developing and implementing cyber security reporting requirements and more stringent consumer privacy legislation, many with greater enforcement powers for regulators and higher fines and penalties. Our global privacy program monitors adherence to our global privacy commitments, local laws and local privacy policies. We have also established a network of privacy officers across the Company who monitor emerging privacy legislation and provide guidance on handling personal information and help manage, report and resolve any privacy incidents that may occur. We also conduct privacy training, provide regular monitoring and reporting and carry cyber risk insurance to help mitigate the impact of privacy incidents.

## Human Resources Risk

Our ability to achieve business objectives can be adversely affected if we are unable to attract, retain or effectively deploy resources with the in-depth knowledge and necessary skills required, or are unable to design compensation and talent programs that effectively drive employee behaviour and shape corporate culture. Failure to manage Human Resources risk can also lead to direct financial and reputational loss including losses arising from activity that is inconsistent with Human Rights or employment laws or health and safety regulations.

To mitigate this risk, we have comprehensive Human Resource policies, practices and programs in place to ensure compliance with employment legislation, minimize the risk of employee misconduct, and proactively develop employee skills, capabilities and behaviours to meet future business needs.

## Regulatory Compliance, Legal and Conduct Risk

We are subject to extensive regulatory oversight by financial services regulators in the jurisdictions in which we conduct business. Failure to comply with applicable laws or to conduct our business consistent with changing regulatory or public expectations could adversely impact our reputation and may lead to regulatory investigations, examinations, proceedings, settlements, penalties, fines, restrictions on our business, litigation or an inability to carry out our business strategy.

Our Chief Compliance Officer oversees our comprehensive Enterprise-wide compliance framework, which is consistent with regulatory guidance from OSFI and other regulators. This framework promotes proactive, risk-based management of compliance and regulatory risk, and includes Enterprise-wide and business segment policies, standards and operating guidelines, programs to promote awareness of laws and regulations that impact us, ongoing monitoring of emerging legal issues and regulatory changes and training programs. The employee training programs include anti-money laundering and anti-terrorist financing, anti-bribery and corruption, privacy and information security risk management. Effective governance, oversight and implementation is a coordinated effort between first and second lines of defence functions. Second line oversight relies on a network of compliance officers. In addition to the second line, the general counsel in each business segment provides advice. The Chief Compliance Officer reports regularly to the Board and Board Committees on the state of compliance, key compliance risks, emerging regulatory trends, escalation of key issues and key risk indicators.

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MANAGEMENT'S DISCUSSION & ANALYSIS

## Information Technology Risk

The use of technology and computer systems is essential in supporting and maintaining business operations. We use technology to support virtually all aspects of our business and operations. The rapidly changing business environment increases the risk of our technology strategy not being agile enough to adapt to new business demands in a timely manner leading to financial losses, increased costs and the inability to meet Client needs. To manage the risks associated with our technology infrastructure and applications, we have implemented a number of policies, directives and controls through our technology approval and risk governance model to ensure ongoing systems availability, stability and currency.

## Third-Party Risk

We engage in a variety of third-party relationships, including with distributors, independent contractors, outsourcing service providers and suppliers. Our profitability or reputation could be impacted if these third parties are unable to meet their ongoing service commitments or fail to perform to expected standards.

To manage these risks, we have established Company-wide policies and guidelines which are consistent with OSFI's and other local regulatory requirements, and which set out our requirements to identify, assess, manage, monitor and report on third-party risks. Our program includes third-party risk assessments and enhanced due diligence if a supplier will have access to any personal data and/or confidential information or access to non-public systems. The key elements and risks associated with the third party are documented in the form of a written agreement, and the company monitors performance of its third parties in a manner that is commensurate to the size, risk, scope and complexity of the third-party relationship.

## Business Disruption Risk

To conduct operations, our businesses are dependent on the availability of trained employees, physical locations and access to technology. A significant business disruption to our operations can result if one or more of these key elements are negatively impacted. System disruptions as well as unanticipated events, including pandemics, can negatively affect staff, preventing them from getting to work or from operating business processes.

To manage this risk, we have implemented a business continuity program to facilitate the recovery of critical business operations. This program encompasses business continuity, crisis management and disaster recovery planning. Our policy, guidelines and operating procedures establish consistent processes designed to ensure that key business functions can continue and normal operations can resume effectively and efficiently should a major disruption occur. In addition, to regularly update and test business continuity plans for critical business operations, we conduct mandatory business continuity awareness training for all employees annually and have off-site backup facilities and failover capability designed to minimize downtime and accelerate recovery time in the event of a major disruption.

## Model Risk

We use complex models to support many business functions including product development and pricing, capital management, valuation, financial reporting, planning, hedging, asset-liability management, risk management and advanced analytics (such as artificial intelligence, predictive modeling and decision making algorithms). Model risk is the risk of loss, either in the form of financial loss, inappropriate or poor business decisions, damage to reputation, or other adverse impact, arising from inaccurate model outputs or incorrect use or interpretation of model outputs.

To manage model risk, we have established robust, Company-wide model risk management procedures over the models' life cycle with respect to building, using, changing and retiring models. The policy and operating guidelines set out minimum, risk-based requirements to ensure that models are effectively controlled, maintained and appropriately understood by users.

## Information Management Risk

As an international provider of financial services, we deal with extensive information across a number of countries. Information management risk is the a) inability to capture, manage, retain and appropriately dispose of business records, b) the inability to provide data that is valid, complete, accurate, consistent, unique, or timely to support business decisions, and c) the inability to manage data location and cross-border appropriately. Failure to manage these risks could have financial or reputational impacts, and may lead to regulatory proceedings, penalties and litigation. To manage and monitor information management risk, we have an internal control framework, data governance and record management practices in place. Additional information on operational risk can be found in the Risk Factors section in the AIF.

## vi. Liquidity Risk

### Risk Description

Liquidity risk is the possibility that we will not be able to fund all cash outflow commitments and collateral requirements as they fall due. This includes the risk of being forced to sell assets at depressed prices resulting in realized losses on sale. This risk also includes restrictions on our ability to efficiently allocate capital among our subsidiaries due to various market and regulatory constraints on the movement of funds. Our funding obligations arise in connection with the payment of policyholder benefits, expenses, reinsurance settlements, asset purchases, investment commitments, interest on debt, and dividends on common and preferred shares. Sources of available cash flow include general fund premiums and deposits, investment related inflows (such as maturities, principal repayments, investment income and proceeds of asset sales), proceeds generated from financing activities, and dividends and interest payments from subsidiaries. We have various financing transactions and derivative contracts under which we may be required to pledge collateral or to make payments to our counterparties for the decline in market value of specified assets. The amount of collateral or payments required may increase under certain circumstances (such as changes to interest rates, credit spreads, equity markets or foreign exchange rates), which could adversely affect our liquidity.

MANAGEMENT'S DISCUSSION & ANALYSIS

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## Liquidity Risk Management Governance and Control

We generally maintain a conservative liquidity position and employ a wide range of liquidity risk management practices and controls, which are described below:

- • Liquidity risk governance practices are in place, including independent monitoring and review and reporting to senior management and the Risk Committee.
- • Liquidity is managed in accordance with our Asset Liability Management Policy and operating guidelines.
- • Liquidity contingency plans are maintained for the management of liquidity in a liquidity event.
- • Stress testing is performed by comparing liquidity coverage risk metrics under a one-month stress scenario to our policy thresholds. These liquidity coverage risk metrics are measured and managed at the enterprise and legal entity levels.
- • Stress testing of our collateral is performed by comparing collateral coverage ratios to our policy thresholds.
- • Cash Management and asset-liability management programs support our ability to maintain our financial position by ensuring that sufficient cash flow and liquid assets are available to cover potential funding requirements. We invest in various types of assets with a view of matching them to our liabilities of various durations.
- • Internal capital targets are established at an enterprise level to cover all risks and are above minimum regulatory and supervisory levels. Actual capital levels are monitored to ensure they exceed internal targets.
- • We actively manage and monitor our capital and asset levels, and the diversification and credit quality of our investments.
- • Various credit facilities for general corporate purposes are maintained.

82 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

The following table summarizes the contractual maturities of our significant financial liabilities and contractual commitments as at December 31, 2022 and 2021:

#### Financial Liabilities and Contractual Obligations

| December 31, 2022 ($ millions) | Within 1 year | 1 year to 3 years | 3 years to 5 years | Over 5 years | Total |
| --- | --- | --- | --- | --- | --- |
| Insurance and investment contract liabilities (1) | $16,743 | $8,421 | $8,775 | $391,172 | $425,111 |
| Senior debentures and unsecured financing (2) | 14 | 28 | 28 | 548 | 618 |
| Subordinated debt (2) | 208 | 416 | 416 | 7,856 | 8,896 |
| Bond repurchase agreements | 2,725 | - | - | - | 2,725 |
| Accounts payable and accrued expenses | 8,619 | - | - | - | 8,619 |
| Lease liabilities (3) | 168 | 297 | 211 | 324 | 1,000 |
| Secured borrowings from mortgage securitization | 87 | 767 | 757 | 762 | 2,373 |
| Borrowed funds (2) | 210 | 26 | 38 | 170 | 444 |
| Credit facilities | 2,339 | - | - | - | 2,339 |
| Total liabilities | $31,113 | $9,955 | $10,225 | $400,832 | $452,125 |
| Contractual commitments: (4) |  |  |  |  |  |
| Contractual loans, equities and mortgages | $1,134 | $1,202 | $375 | $2,359 | $5,070 |
| Total contractual commitments | $1,134 | $1,202 | $375 | $2,359 | $5,070 |
| December 31, 2021 ($ millions) | Within 1 year | 1 year to 3 years | 3 years to 5 years | Over 5 years | Total |
| Insurance and investment contract liabilities (1) | $14,781 | $8,271 | $8,383 | $344,533 | $375,968 |
| Senior debentures and unsecured financing (2) | 14 | 28 | 28 | 555 | 625 |
| Subordinated debt (2) | 188 | 375 | 375 | 7,587 | 8,525 |
| Bond repurchase agreements | 2,324 | - | - | - | 2,324 |
| Accounts payable and accrued expenses | 7,284 | - | - | - | 7,284 |
| Lease liabilities (3) | 151 | 276 | 188 | 335 | 950 |
| Secured borrowings from mortgage securitization | 150 | 377 | 869 | 817 | 2,213 |
| Borrowed funds (2) | 116 | 94 | 51 | 229 | 490 |
| Credit facilities | 441 | - | - | - | 441 |
| Total liabilities | $25,449 | $9,421 | $9,894 | $354,056 | $398,820 |
| Contractual commitments: (4) |  |  |  |  |  |
| Contractual loans, equities and mortgages | $1,184 | $1,023 | $407 | $1,597 | $4,211 |
| Total contractual commitments | $1,184 | $1,023 | $407 | $1,597 | $4,211 |

$^{(1)}$ These amounts represent the undiscounted estimated cash flows of insurance and investment contract liabilities on our Consolidated Statements of Financial Position. These cash flows include estimates related to the timing and payment of death and disability claims, policy surrenders, policy maturities, annuity payments, minimum guarantees on segregated fund products, policyholder dividends, amounts on deposit, commissions and premium taxes offset by contractual future premiums and fees on in-force contracts. These estimated cash flows are based on the best estimated assumptions used in the determination of insurance and investment contract liabilities. Due to the use of assumptions, actual cash flows will differ from these estimates.

$^{(2)}$ Payments due based on maturity dates and include expected interest payments. Actual redemption of certain securities may occur sooner as some include an option for the issuer to call the security at par at an earlier date.

$^{(3)}$ Lease liabilities are included on the Consolidated Statements of Financial Position due to the implementation of IFRS 16 *Leases* ('IFRS 16').

$^{(4)}$ Contractual commitments and operating lease commitments are not reported on our Consolidated Financial Statements. Additional information on these commitments is included in Note 23 of our 2022 Annual Consolidated Financial Statements.

Additional information on liquidity risk can be found in Note 6 of our 2022 Annual Consolidated Financial Statements and the Risk Factors section in the 2022 AIF.

## vii. Other Risks

### Risks relating to the COVID-19 Pandemic

Pandemics, epidemics or outbreaks of an infectious disease could have an adverse impact on our results, business, financial condition or liquidity, and could result in changes to the way we operate. The COVID-19 pandemic and the measures imposed by governments around the world have disrupted the global economy, financial markets, supply chains, business activity and productivity in unprecedented ways. Additional risks are emerging around governments' withdrawal of COVID-19 pandemic support measures, and how they will seek to finance the unprecedented level of support. The worsening of the economic and market conditions caused by the COVID-19 pandemic, and impact on Clients, industries and individual countries could have a material adverse effect on our businesses including sales, fee income, investment performance, expenses, results of operations, corporate reputation and financial condition. Sustained adverse effects could negatively impact profitability and also make it difficult for us to access capital markets, could impact our liquidity and capital position, or may result in downgrades in our credit ratings. These actions may also have the effect of heightening many of the other risks described in the Risk Factors section in our AIF and section J - Risk Management in this document. This includes, but is not limited to:

MANAGEMENT'S DISCUSSION & ANALYSIS

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• Market risks, such as equity, interest rates and spread, real estate, and foreign currency risks, including impact on fee income;
• Insurance risk, including higher than expected mortality and, morbidity claims and adverse policyholder behaviour including but not limited to higher than expected policy lapses, withdrawals, and surrenders;
• Credit risk, including defaults, impairments and downgrades;
• Business and strategic risk including economic and political risk, business strategy implementation risk, distribution risk, expense risk, changes in Client behaviour, sales, investment performance, and changes in legal and regulatory environment;
• Operational risk, including information security and privacy risk, human resources risks, regulatory compliance, legal and conduct risk, information technology risk, processing risk, third-party risk, and business disruption risk, and change management risk with the need to quickly implement and execute new programs and procedures to support Clients, advisors, employees, products, and services; and
• Liquidity risk including collateral, and payment deferrals on invested assets or policyholder insurance premium impacts.

The overall impact of the COVID-19 pandemic is still uncertain and dependent on the progression of the virus, including variants, vaccine efficacy, public acceptance of containment measures and vaccine adoption, the subsequent reduction in rates of infection and the actions taken by governments, monetary authorities, regulators, financial institutions, businesses and individuals, and could vary by country and result in differing outcomes. The longer-term impacts of COVID-19 on morbidity and mortality are unknown and are being monitored. 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. Consistent with the protocols and programs established in our Risk Management Framework, we continue to manage the risks that arise when providing products and services to Clients, which are in line with our Purpose to help Client achieve lifetime financial security and live healthier lives.

## IFRS 17 Insurance Contracts ("IFRS 17") and IFRS 9 Financial Instruments ("IFRS 9") to be Adopted in 2023

For periods beginning on or after January 1, 2023, we will be adopting IFRS 17, which replaces IFRS 4 Insurance Contracts. IFRS 17 establishes the principles for the recognition, measurement, presentation, and disclosure of insurance contracts. Effective January 1, 2023, we will also be adopting IFRS 9, which replaces IAS 39 Financial Instruments: Recognition and Measurement.

The adoption of IFRS 17 and IFRS 9 requires significant changes to accounting and reporting process. To ensure readiness, we have invested to modernize our finance and actuarial technology platforms, including the centralization of actuarial models and the enablement of self-service reporting and analysis to produce management information and enhance business insights. During the year ended December 31, 2022, we performed parallel reporting which allowed for the analysis of results based on both current and future reporting requirements.

As part of our implementation, we have dedicated significant resources to execute and oversee the multi-year cross functional plan to manage operational, regulatory, and business and strategic risks associated with the implementation of these standards.

• Operational risk - IFRS 17 and IFRS 9 requires a more expansive set of data, introduces complex estimation techniques, computational requirements and disclosures, which necessitate a major transformation to various actuarial and financial reporting processes, tools, and systems.
• Business and strategic risk - the standards may create additional volatility in our financial results and capital position. Volatility of reported results may require changes to business strategies and the introduction of new or modified non-GAAP measures to explain our results. The impact to business strategy could include changes to hedging and investment strategy, product strategy and the use of reinsurance and, as a result, could impact our exposures to other risks such as counterparty risk and liquidity risk.
• Regulatory Capital risk - In addition to IFRS 17 changes, LICAT Guideline changes for Segregated Fund Guarantee capital are also planned to take effect January 1, 2025. OSFI has been engaging the industry in testing of new Segregated Fund Guarantee capital requirements.

The adoption of IFRS 17 and IFRS 9 is not expected to have a material impact on our overall business strategies. However, upon transition at January 1, 2022, the changes in measurement of insurance contract liabilities and timing of recognition of earnings, in combination with IFRS 9, are expected to have the following impacts:

• A net transfer of $4.5 billion from Shareholders' equity, primarily driven by the establishment of the contractual service margin ("CSM") on the balance sheet, among other items.
• A high single digit decrease(1) in 2022 underlying net income as we restate the comparative year.

On July 21, 2022, OSFI finalized the LICAT guidelines to reflect the IFRS 17 adoption, effective January 1, 2023. The CSM balance will qualify as Tier 1 available capital. We expect a high single digit increase to the LICAT ratio on adoption and we also expect capital generation and capital sensitivities to be relatively unchanged under the new regime(2).

Our medium-term financial objectives(3), following the adoption of IFRS 17 and 9 as at January 1, 2023, will be:

• Underlying EPS growth: 8-10%
• Underlying ROE: 18%+ (an increase from 16%+ under IFRS 4)
• Underlying Dividend payout ratio: 40-50%

Additional information on other risks can be found in the Risk Factor section in our 2022 AIF and Note 2 in the Consolidated Financial Statements for the year ended December 31, 2022.

(1) The amount can be impacted by changes in certain experience-related items that are dependent on economic and/or operating environment factors. This statement is a forward-looking statement within the meaning of applicable securities laws. For more information, see section O - Forward-looking Statements in this document.

(2) This statement is a forward-looking statement within the meaning of applicable securities laws. For more information, see the Forward-looking statements section in this document.

(3) Although considered reasonable, we may not be able to achieve our medium-term financial objectives as our assumptions may prove to be inaccurate. Accordingly, our actual results could differ materially from our medium-term financial objectives as described above. Our medium-term financial objectives do not constitute guidance. Our medium-term financial objectives are forward-looking non-IFRS financial measures and additional information is provided in section O - Forward-looking Statements of this document.

84 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## K. Additional Financial Disclosure

### 1. Selected Annual Information

| ($ millions, after-tax, unless otherwise stated) | 2022 | 2021 | 2020 |
| --- | --- | --- | --- |
| Total revenue | 23,322 | 35,688 | 43,337 |
| Common shareholders' net income (loss) | 3,060 | 3,934 | 2,404 |
| Reported basic earnings per share ($) | 5.22 | 6.72 | 4.11 |
| Reported earnings per share (diluted) ($) | 5.21 | 6.69 | 4.10 |
| Total assets | 330,906 | 345,370 | 323,011 |

### 2. Items related to Statement of Operations

#### i. Business Group Summary Statements of Operations

| ($ millions, after-tax) | 2022 |  |  |  |  |  | 2021 |
| --- | --- | --- | --- | --- | --- | --- | --- |
|  | Canada | U.S. | Asset Management | Asia | Corporate | Total | Total |
| Net premiums | 15,121 | 8,309 | - | 3,374 | 59 | 26,863 | 23,053 |
| Net investment income (loss) | (4,864) | (2,306) | 28 | (3,242) | (1,203) | (11,587) | 4,633 |
| Fee income | 1,610 | 297 | 5,729 | 620 | (210) | 8,046 | 8,002 |
| Revenue | 11,867 | 6,300 | 5,757 | 752 | (1,354) | 23,322 | 35,688 |
| Gross claims and benefits paid | 11,935 | 7,645 | - | 1,982 | 482 | 22,044 | 18,722 |
| Changes in insurance contract liabilities, investment contract liabilities and reinsurance assets | (4,395) | (3,810) | - | (3,401) | (1,708) | (13,314) | 2,150 |
| Operating expenses, commissions and premium taxes | 3,918 | 2,316 | 4,120 | 1,731 | 279 | 12,364 | 11,817 |
| Reinsurance expenses (recoveries) | (1,315) | (654) | - | (168) | (3) | (2,140) | (2,425) |
| Interest expense | 201 | 74 | 95 | 74 | 1 | 445 | 327 |
| Total benefits and expenses | 10,344 | 5,571 | 4,215 | 218 | (949) | 19,399 | 30,591 |
| Income tax expense (benefit) | 363 | 143 | 345 | 63 | (293) | 621 | 727 |
| Dividends on preferred shares and distributions on other equity instruments | - | - | - | - | 70 | 70 | 101 |
| Non-controlling interests and participating policyholders' income in net income of subsidiaries | 160 | - | 56 | (44) | - | 172 | 335 |
| Reported net income (loss) - Common shareholders | 1,000 | 586 | 1,141 | 515 | (182) | 3,060 | 3,934 |

#### 2022 vs. 2021

##### Canada

Canada's revenue decreased $7.0 billion or 37% in 2022, reflecting net investment losses from fair value changes of assets, partially offset by higher net premiums in Sun Life Health and Individual Insurance & Wealth.

##### U.S.

U.S.'s revenue increased $0.3 billion or 5% in 2022, driven by higher net premiums across all businesses, largely offset by net investment losses from fair value changes of assets.

##### Asset Management

Asset Management's revenue decreased $0.1 billion or 2% in 2022, reflecting lower fee income in MFS, partially offset by higher fee income in SLC Management.

##### Asia

Asia's revenue decreased $4.3 billion or 85% in 2022, reflecting net investment losses from fair value changes of assets.

##### Corporate

Corporate's loss increased $1.2 billion in 2022, reflecting higher net investment losses from fair value changes of assets.

MANAGEMENT'S DISCUSSION & ANALYSIS

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## ii. Revenue

Revenue includes: (i) premiums received on life and health insurance policies and fixed annuity products, net of premiums ceded to reinsurers; (ii) net investment income comprised of income earned on general fund assets, realized gains and losses on AFS assets and changes in the value of derivative instruments and assets designated as FVTPL and foreign exchange translation on assets and liabilities; and (iii) fee income received for services provided. Premium and deposit equivalents from administrative services only ('ASO'), as well as deposits received by the Company on investment contracts such as segregated funds, mutual funds and managed funds are not included in revenue; however, the Company does receive fee income from these contracts, which is included in revenue. Fee income and ASO premium and deposit equivalents are an important part of our business and as a result, revenue does not fully represent sales and other activity taking place during the respective periods.

Net investment income can experience volatility arising from the quarterly fluctuation in the value of FVTPL assets and foreign currency changes on assets and liabilities, which may in turn affect the comparability of revenue from period to period. The change in fair value of FVTPL assets is driven largely by market-related factors such as interest rates, credit spreads and equity returns. The debt and equity securities that support insurance contract liabilities are generally designated as FVTPL and changes in fair values of these assets are recorded in net investment income in our Consolidated Statements of Operations. Changes in the fair values of the FVTPL assets supporting insurance contract liabilities are largely offset by a corresponding change in the liabilities.

|  | Year-to-date |  |
| --- | --- | --- |
| ($ millions) | 2022 | 2021 |
| Premiums |  |  |
| Life insurance | 11,395 | 10,925 |
| Health insurance | 13,820 | 10,664 |
| Annuities | 3,945 | 3,917 |
| Gross | 29,160 | 25,506 |
| Life insurance | (1,329) | (1,563) |
| Health insurance | (701) | (611) |
| Annuities | (267) | (279) |
| Less: Ceded | 2,297 | 2,453 |
| Net premiums | 26,863 | 23,053 |
| Net investment income (loss) |  |  |
| Interest and other investment income | 6,152 | 6,272 |
| Fair value (1) and foreign currency changes on assets and liabilities | (17,759) | (1,785) |
| Net gains (losses) on available-for-sale assets | 20 | 146 |
| Net Investment income (loss) | (11,587) | 4,633 |
| Fee income | 8,046 | 8,002 |
| Total revenue | 23,322 | 35,688 |

$^{(1)}$ Represents the change in FVTPL assets and liabilities.

Revenue decreased by $12.4 billion or 35% in 2022 compared to the prior year, reflecting lower net investment income from fair value changes of assets, partially offset by higher net premium revenue. Foreign exchange translation increased revenue by $614 million.

Gross premiums increased by $3.7 billion or 14% in 2022 compared to the prior year, driven by increases in the U.S and Canada.

Ceded premiums of $2.3 billion decreased $0.2 billion or 6% in 2022 compared to the prior year reflecting decreases in the U.S partially offset by increases in Canada.

Net investment income decreased by $16.2 billion in 2022 compared to the prior year, mainly from fair value changes of assets reflecting the impact of interest rates, credit spreads, and equity markets.

Fee income was in line with prior year.

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MANAGEMENT'S DISCUSSION & ANALYSIS

### iii. Benefits and Expenses

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Benefits and Expenses |  |  |
| Gross claims and benefits paid | 22,044 | 18,722 |
| Changes in insurance contract liabilities, investment contract liabilities and reinsurance assets (1) | (13,314) | 2,150 |
| Operating expenses, commissions and premium taxes | 12,364 | 11,817 |
| Reinsurance expenses (recoveries) | (2,140) | (2,425) |
| Interest expense | 445 | 327 |
| Total benefits and expenses | 19,399 | 30,591 |

$^{(1)}$ Includes changes in insurance contract liabilities, investment contract liabilities, reinsurance assets and segregated funds. For more information, see Note 10.E in our 2022 Annual Consolidated Financial Statements.

Total benefits and expenses decreased by $11.2 billion or 37% in 2022 compared to the prior year, primarily reflecting decreases in insurance contract liabilities, partially offset by gross claims and benefits paid.

Gross claims and benefits paid of $22.0 billion increased $3.3 billion or 17.7% in 2022 compared to the prior year, primarily driven by increases in Canada and the U.S.

Changes in insurance contract liabilities, investment contract liabilities and reinsurance assets decreased by $15.5 billion in 2022 compared to the prior year, driven by Canada, Asia and the U.S.

Operating expenses, commissions and premium taxes increased $0.5 billion or 5% in 2022 compared to the prior year, reflecting higher project spend, partially offset by $151 million of favourable foreign exchange translation. For additional information, see Note 18 of our 2022 Annual Consolidated Financial Statements.

Reinsurance recoveries of $2.1 billion decreased by $0.3 billion or 11.8% and interest expense of $0.4 billion increased $0.1 billion or 36% in 2022 compared to the prior year.

### iv. Taxes

#### Income Taxes

In 2022, we had an income tax expense of $621 million on reported net income before taxes of $3,923 million, which resulted in an effective income tax rate of 15.8%. This compares to an income tax expense of $727 million on reported net income before taxes of $5,097 million and an effective income tax rate of 14.3% in 2021.

On an underlying basis$^{(1)}$, in 2022, we had an income tax expense of $765 million on our underlying net income before taxes of $4,565 million, representing an effective income tax rate of 16.8% which is within our expected range of 15% to 20%. This compares to an income tax expense of $578 million on our underlying net income before taxes of $4,275 million and an effective income tax rate of 13.5% in 2021, which was slightly below our expected range of 15% to 20%.

See section D - Profitability - 5 - Income taxes in this document for additional information on our effective tax rates.

#### Other Taxes

In addition to income taxes, we pay various indirect taxes in jurisdictions in which we carry on business. Indirect taxes include premium taxes, investment income tax, payroll related taxes, property taxes, sales taxes, business taxes and other taxes, as follows:

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Income tax expense | 621 | 727 |
| Indirect taxes |  |  |
| Premium taxes (net of premium taxes on ceded business) (1) | 453 | 396 |
| Payroll taxes | 221 | 202 |
| Property taxes | 130 | 126 |
| Goods and services tax ('GST'), harmonized tax ('HST') and other sales taxes | 130 | 125 |
| Business taxes and other | 50 | 58 |
| Total indirect taxes | 984 | 907 |
| Total taxes | 1,605 | 1,634 |
| Reported effective income tax rate | 15.8% | 14.3% |
| Total taxes as a percentage of net income before deduction of total taxes | 32.7% | 27.2% |

$^{(1)}$ Premium taxes include investment income tax.

$^{(1)}$ Our effective income tax rate on underlying net income is calculated using underlying net income and income tax expense associated with underlying net income, which excludes amounts attributable to participating policyholders.

MANAGEMENT'S DISCUSSION & ANALYSIS

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### 3. Items related to Statements of Financial Position

#### i. Changes in Liabilities and Shareholders' Equity

Insurance contract liabilities balances before Other policy liabilities of $131.4 billion as at December 31, 2022 (December 31, 2021 - $139.7 billion), reflect changes in balances on in-force policies (which include fair value changes on FVTPL assets supporting insurance contract liabilities) and foreign exchange translation.

Total shareholders' equity, including preferred share capital, is $27.5 billion as at December 31, 2022 (December 31, 2021 - $26.3 billion). The change reflects:

- (i) total shareholders' net income of $3,130 million, before preferred share dividends of $70 million; and
- (ii) an increase of $934 million from the impacts of foreign exchange translation; partially offset by
- (iii) common share dividend payments of $1,614 million; and
- (iv) net unrealized losses on AFS assets in OCI of $1,290 million.

As at January 27, 2023, SLF Inc. had 586,397,074 common shares, 3,588,520 options to acquire SLF Inc. common shares, and 52,200,000 Class A Shares outstanding.

#### ii. Off-Balance Sheet Arrangements

In the normal course of business, we are engaged in a variety of financial arrangements. The principal purposes of these arrangements are to earn management fees and additional spread on a matched book of business and to reduce financing costs.

While most of these activities are reflected on our balance sheet with respect to assets and liabilities, certain of them are either not recorded on our balance sheet or are recorded on our balance sheet in amounts that differ from the full contract or notional amounts. The types of off-balance sheet activities we undertake primarily include asset securitizations and securities lending. For more information, see Note 5 in our 2022 Annual Consolidated Financial Statements.

#### iii. Goodwill and Intangibles Impairment

The Company completed its annual goodwill and indefinite life intangible asset impairment testing in the fourth quarter of 2022. Impairment charges on goodwill of $170 million were recognized in 2022 and there were no goodwill impairment charges in 2021. Impairment charges on intangible assets of $18 million were recognized in 2022 and there were impairment charges of $9 million in 2021.

#### iv. Commitments, Guarantees, Contingencies and Reinsurance Matters

In the normal course of business, we enter into leasing agreements, outsourcing arrangements and agreements involving indemnities to third parties. We are also engaged in arbitration proceedings from time to time with certain companies that have contracts to provide reinsurance to the Company. Information regarding our commitments, guarantees and contingencies are summarized in Note 23 of our 2022 Annual Consolidated Financial Statements. A table summarizing our significant financial liabilities and contractual obligations can be found in this MD&A in the section J - Risk Management - 9 - Risk Categories - vi - Liquidity Risk.

88 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## 4. Fourth Quarter 2022 Profitability

The following table reconciles our reported net income and underlying net income. The table also sets out the impacts of experience-related items attributable to reported net income and underlying net income in the fourth quarter of 2022 and 2021. All factors discussed in this document that impact our underlying net income are also applicable to reported net income.

|  | Q4'22 | Q4'21 |
| --- | --- | --- |
| ($ millions, after-tax) |  |  |
| Reported net income - Common shareholders | 951 | 1,078 |
| Less: Market-related impacts (1) | (136) | 156 |
| Assumption changes and management actions (1) | 54 | (19) |
| Other adjustments (1)(2) | 43 | 43 |
| Underlying net income (3) | 990 | 898 |
| Reported ROE (3) | 15.1% | 18.0% |
| Underlying ROE (3) | 15.7% | 15.0% |
| Experience-related items attributable to reported net income and underlying net income (3)(4) |  |  |
| Investing activity | 59 | 14 |
| Credit | 18 | 32 |
| Mortality | (47) | (71) |
| Morbidity | 92 | (34) |
| Policyholder behaviour | (2) | (10) |
| Expenses | (28) | (47) |
| Other experience | (4) | (1) |
| Total of experience-related items (3)(4) | 88 | (117) |

$^{(1)}$ Represents an adjustment made to arrive at a non-IFRS financial measure. See section L - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment, including pre-tax amounts.

$^{(2)}$ Other adjustments to arrive at a non-IFRS financial measure include other items that are unusual or exceptional in nature. See section L - Non-IFRS Financial Measures in this document.

$^{(3)}$ Represents a non-IFRS financial measure. See section L - Non-IFRS Financial Measures in this document.

$^{(4)}$ Experience-related items reflect the difference between actual experience during the reporting period and best estimate assumptions used in the determination of our insurance contract liabilities. Experience-related items are a part of the Sources of Earnings framework, and are calculated in accordance with OSFI Guideline D-9, Sources of Earnings Disclosures. Experience-related items from our India, China and Malaysia joint ventures and associates are recorded within other experience.

MANAGEMENT'S DISCUSSION & ANALYSIS

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89

## Quarterly Comparison - Q4'22 vs. Q4'21

Reported net income of $951 million decreased $127 million or 12%, primarily reflecting unfavourable market-related impacts and DentaQuest integration costs, partially offset by the impact of the Canada Tax Rate Change(1), fair value changes on MFS' share-based payment awards and ACMA. Prior year reported net income included a gain on the IPO of our India asset management joint venture partially offset by an increase to SLC Management's acquisition-related liabilities(2).

Underlying net income of $990 million increased $92 million or 10%, driven by business growth and experience in protection and health and contribution from the DentaQuest acquisition. This was partially offset by lower wealth and asset management earnings reflecting declines in global equity markets, and a higher effective tax rate compared to prior year.

Foreign exchange translation led to an increase of $32 million and $36 million in reported net income and in underlying net income, respectively.

Our Q4'22 effective income tax/(income tax recovery) rate(3) on reported net income and underlying net income(3) were (1.0)% and 16.1%, respectively (Q4'21 - 4.2% and 4.8%, respectively). In the fourth quarter of 2022, the tax recovery on reported net income was primarily due to the Canada Tax Rate Change, while the effective tax rate on underlying net income was within the expected range of 15% to 20%. In the fourth quarter of 2021, the effective tax rate on underlying net income was below the expected range primarily due to higher tax-exempt investment income and resolutions of prior years' tax matters. For additional information, refer to Note 20 in our Consolidated Financial Statements for the period ended December 31, 2022.

## Performance by Business Group - Fourth Quarter

We manage our operations and report our financial results in five business segments. The following section describes the operations and financial performance of Canada, U.S., Asset Management, Asia and Corporate.

The following table sets out the differences between our reported net income (loss) and underlying net income (loss) by business group.

| ($ millions, after-tax) | Q4'22 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Canada | U.S. | Asset Management | Asia | Corporate | Total |
| Reported net income (loss) - Common shareholders | 367 | 110 | 322 | 98 | 54 | 951 |
| Less: Market-related impacts(1) | (44) | (63) | - | (88) | 59 | (136) |
| Assumption changes and management actions(1) | 34 | 3 | - | 17 | - | 54 |
| Other adjustments(1) | 53 | (70) | 9 | 17 | 34 | 43 |
| Underlying net income (loss)(2) | 324 | 240 | 313 | 152 | (39) | 990 |

| ($ millions, after-tax) | Q4'21 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Canada | U.S. | Asset Management | Asia | Corporate | Total |
| Reported net income (loss) - Common shareholders | 356 | 85 | 140 | 446 | 51 | 1,078 |
| Less: Market-related impacts(1) | 90 | 40 | - | 23 | 3 | 156 |
| Assumption changes and management actions(1) | 2 | (19) | - | (2) | - | (19) |
| Other adjustments(1) | (2) | (8) | (242) | 295 | - | 43 |
| Underlying net income (loss)(2) | 266 | 72 | 382 | 130 | 48 | 898 |

(1) Represents an adjustment made to arrive at a non-IFRS financial measure. See section L - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment, including pre-tax amounts.

(2) Represents a non-IFRS financial measure. See section L - Non-IFRS Financial Measures in this document.

## Quarterly Comparison - Q4'22 vs. Q4'21

### Canada

Canada's reported net income of $367 million increased $11 million or 3%, mainly driven by the impact of the Canada Tax Rate Change(1) and an increase in underlying net income, partially offset by a decrease in the value of real estate investments and lower equity market gains.

Underlying net income of $324 million increased $58 million or 22%, primarily driven by experience-related items and higher investment-related earnings. Growth in protection and health was mostly offset by lower wealth results reflecting declines in equity markets. Experience in the fourth quarter included favourable morbidity mainly reflecting lower claims volumes and higher margins in Sun Life Health, and investment gains.

(1) On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurers' taxable income in excess of $100 million was enacted in Canada. This legislation applies retroactively to the Federal Budget date of April 7, 2022. As a result, total Company and Canada reported net income increased by $127 million, and $76 million, respectively, in the fourth quarter, reflected in ACMA and Other adjustments. Refer to section D - Profitability in this document for more information.

(2) Reflects the changes in estimated future payments for acquisition-related contingent considerations and options to purchase remaining ownership interests of SLC Management affiliates.

(3) Our effective income tax rate on underlying net income is calculated using underlying net income and income tax expense associated with underlying net income, which excludes amounts attributable to participating policyholders.

90 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## U.S.

U.S.'s reported net income of US$81 million ($110 million) increased US$13 million ($25 million) or 29%, driven by the increase in underlying net income, partially offset by market-related impacts and DentaQuest integration costs.

Underlying net income of US$177 million ($240 million) increased US$121 million ($168 million), driven by growth across all businesses, contribution from the DentaQuest acquisition and favourable experience-related items. Experience in the quarter included favourable morbidity mainly reflecting lower medical stop-loss and group disability claims volumes, and investment gains, partially offset by mortality due to higher value claims. Compared to prior year, mortality experience in Group Benefits improved significantly due to lower COVID-19-related claims

Foreign exchange translation led to an increase of $9 million in reported net income and $17 million in underlying net income.

## Asset Management

Asset Management's reported net income of $322 million increased $182 million, which included a charge for the increase in SLC Management's acquisition-related liabilities$^{(1)}$ in the fourth quarter of 2021. Q4'22 reported net income also reflects a decline in the fair value of MFS' share-based payment awards, mostly offset by the decline in underlying net income.

Underlying net income of $313 million decreased $69 million or 18%, primarily due to lower MFS earnings.

Foreign exchange translation led to an increase of $21 million in reported net income and $20 million in underlying net income.

MFS reported net income of US$223 million decreased US$11 million or 5%, reflecting fair value changes on MFS' share-based payment awards. Underlying net income of US$202 million decreased US$70 million or 26%, largely reflecting declines in global equity markets which contributed to lower ANA, partially offset by lower variable compensation expenses and higher net investment returns. Pre-tax net operating profit margin was 40%, (Q4'21 - 43%), driven by the decline in ANA.

SLC Management reported net income was $19 million, compared to reported net loss of $155 million in the prior year, which included a charge for the increase in SLC Management's acquisition-related liabilities$^{(1)}$ in the fourth quarter of 2021. Underlying net income of $38 million decreased $2 million or 5%. Higher fee-related earnings reflecting strong capital raising and capital deployment across the platform were mostly offset by real estate investment losses.

## Asia

Asia's reported net income of $98 million decreased $348 million or 78%, reflecting a prior year gain from the IPO of our India asset management joint venture and unfavourable market-related impacts in the current year.

Underlying net income of $152 million increased $22 million or 17%, driven by business growth and experience in protection and health, including improved mortality compared to prior year which included COVID-19-related claims, partially offset by lower fee-based income reflecting equity market declines. Higher new business strain in Hong Kong was offset by new business gains in International and Vietnam.

Foreign exchange translation led to an increase of $5 million and $1 million in reported net income and underlying net income, respectively.

## Corporate

Corporate reported net income of $54 million increased $3 million or 6%, reflecting the net impact of tax related matters$^{(2)}$ largely offset by the change in underlying net income.

Underlying net loss was $39 million, compared to net income of $48 million in the prior year, reflecting a higher effective tax rate, partially offset by lower expenses.

## 5. Fourth Quarter 2022 Growth

Revenue of $12,301 million decreased $694 million or 5% compared to the same period in 2021, reflecting fair value changes of assets driven by higher interest rates, partially offset by net premium growth. Foreign exchange translation increased revenue by $369 million.

$^{(1)}$ Reflects the changes in estimated future payments for acquisition-related contingent considerations and options to purchase remaining ownership interests of SLC Management affiliates.

$^{(2)}$ Tax related matters include tax-exempt investment income in reported net income and the impact of the Canada Tax Rate Change. On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurers' taxable income in excess of $100 million was enacted in Canada. This legislation applies retroactively to the Federal Budget date of April 7, 2022. As a result, reported net income increased by $51 million in the fourth quarter, reflected in Other adjustments. Refer to section D - Profitability in this document for more information.

MANAGEMENT'S DISCUSSION & ANALYSIS

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## 6. Quarterly Financial Results

The following table provides a summary of our results for the eight most recently completed quarters. A more complete discussion of our historical quarterly results can be found in our Interim and Annual MD&A for the relevant periods.

| ($ millions, unless otherwise noted) | Quarterly results |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Q4'22 | Q3'22 | Q2'22 | Q1'22 | Q4'21 | Q3'21 | Q2'21 | Q1'21 |
| Total revenue | 12,301 | 8,630 | 2,011 | 380 | 12,995 | 8,510 | 12,669 | 1,514 |
| Common shareholders' net income (loss) |  |  |  |  |  |  |  |  |
| Reported net income | 951 | 466 | 785 | 858 | 1,078 | 1,019 | 900 | 937 |
| Less: Market-related impacts (1) | (136) | (160) | (152) | 38 | 156 | 171 | 91 | 209 |
| Assumption changes and management actions (1) | 54 | 7 | - | 1 | (19) | 95 | 2 | (4) |
| Other adjustments (1)(2) | 43 | (330) | 45 | (24) | 43 | (149) | (76) | (118) |
| Underlying net income (3) | 990 | 949 | 892 | 843 | 898 | 902 | 883 | 850 |
| Diluted EPS ($) |  |  |  |  |  |  |  |  |
| Reported | 1.62 | 0.80 | 1.34 | 1.46 | 1.83 | 1.74 | 1.53 | 1.59 |
| Underlying (3) | 1.69 | 1.62 | 1.52 | 1.44 | 1.53 | 1.54 | 1.50 | 1.45 |
| Basic reported EPS ($) |  |  |  |  |  |  |  |  |
| Reported | 1.62 | 0.80 | 1.34 | 1.46 | 1.84 | 1.74 | 1.54 | 1.60 |
| Reported net income (loss) by segment - Common shareholders |  |  |  |  |  |  |  |  |
| Canada | 367 | 210 | 160 | 263 | 356 | 393 | 404 | 405 |
| U.S. | 110 | 94 | 213 | 169 | 85 | 46 | 157 | 211 |
| Asset Management | 322 | 215 | 296 | 308 | 140 | 301 | 221 | 230 |
| Asia | 98 | 125 | 131 | 161 | 446 | 288 | 143 | 198 |
| Corporate | 54 | (178) | (15) | (43) | 51 | (9) | (25) | (107) |
| Total reported net income (loss) - Common shareholders | 951 | 466 | 785 | 858 | 1,078 | 1,019 | 900 | 937 |
| Less: Market-related impacts (pre-tax) (1) | (273) | (212) | (109) | 193 | 153 | 231 | 85 | 380 |
| ACMA (pre-tax) (1) | 67 | 15 | - | 1 | (23) | 93 | 2 | (6) |
| Other adjustments (pre-tax) (1)(4) | (88) | (362) | 57 | (26) | 67 | (179) | (64) | (144) |
| Tax expense (benefit) on above items (4) | 255 | 76 | (55) | (153) | (17) | (28) | (6) | (143) |
| Underlying net income (loss) by segment (3) |  |  |  |  |  |  |  |  |
| Canada | 324 | 300 | 344 | 298 | 266 | 290 | 290 | 285 |
| U.S. | 240 | 216 | 154 | 118 | 72 | 110 | 165 | 171 |
| Asset Management | 313 | 295 | 270 | 326 | 382 | 362 | 311 | 291 |
| Asia | 152 | 175 | 148 | 152 | 130 | 145 | 152 | 159 |
| Corporate | (39) | (37) | (24) | (51) | 48 | (5) | (35) | (56) |
| Total underlying net income (loss) (3) | 990 | 949 | 892 | 843 | 898 | 902 | 883 | 850 |

$^{(1)}$ Represents an adjustment made to arrive at a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document for a breakdown of components within this adjustment.

$^{(2)}$ Other adjustments to arrive at a non-IFRS financial measure include other items that are unusual or exceptional in nature. See section L - Non-IFRS Financial Measures in this document.

$^{(3)}$ Represents a non-IFRS financial measure. For more details, see section L - Non-IFRS Financial Measures in this document.

$^{(4)}$ Effective January 1, 2022, there was a change in presentation for the fair value adjustments on MFS' share-based payment awards. We have updated prior periods to reflect this change in presentation. The post-tax basis presentation was not affected.

### Third Quarter 2022

Reported net income of $466 million decreased $553 million or 54% from prior year, primarily reflecting unfavourable market-related impacts, a $170 million charge related to the sale of Sun Life UK, less favourable ACMA impacts, and an increase in SLC Management's acquisition-related liabilities, partially offset by fair value changes on MFS' share-based payment awards. Underlying net income of $949 million increased $47 million or 5%, driven by business growth and experience in protection and health including a strong contribution from the DentaQuest acquisition. This was partially offset by lower fee-based income in wealth and asset management, mainly driven by declines in global equity markets.

### Second Quarter 2022

Q2'22 reported net income of $785 million decreased $115 million or 13%, reflecting unfavourable market-related impacts and DentaQuest acquisition costs, partially offset by fair value changes on MFS' share-based payment awards and a gain on the sale-leaseback of our Wellesley office in the U.S. Underlying net income of $892 million was up slightly driven by business growth, new business gains, contribution from the DentaQuest acquisition, and lower incentive compensation expenses. This was largely offset by Asset Management results reflecting a decline in global equity markets driving lower average net assets, lower available-for-sale gains and morbidity experience in the U.S. Foreign exchange translation led to an increase of $16 million and $12 million in reported net income and underlying net income, respectively.

92 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

#### **First Quarter 2022**

Q1'22 reported net income of $858 million decreased $79 million or 8%, driven by less favourable market-related impacts, partially offset by a Q1'21 restructuring charge and lower fair value changes on MFS' share-based payment awards. Underlying net income of $843 million was down slightly, driven by broad-based business growth, favourable expense experience and investment gains, offset by unfavourable mortality and morbidity experience, and lower AFS gains.

#### **Fourth Quarter 2021**

Q4'21 reported net income of $1,078 million increased $334 million or 45% compared to the prior year, driven by a $297 million gain on the Initial Public Offering of our India asset management joint venture and an increase in the value of our real estate investments, partially offset by a $153 million increase in SLC Management's acquisition-related liabilities. Underlying net income of $898 million increased $36 million or 4%, driven by broad-based business growth across our pillars, with particular strength in asset management and wealth. Underlying net income also benefited from a lower effective tax rate in the quarter, largely offset by $113 million of ongoing COVID-19-related mortality and morbidity experience. Foreign exchange translation led to a decline of $33 million in reported net income and $22 million in underlying net income.

#### **Third Quarter 2021**

Q3'21 reported net income of $1,019 million increased $269 million or 36% compared to the prior year, driven by favourable market-related impacts from changes in the fair value of investment properties, and ACMA, partially offset by a par allocation adjustment. Underlying net income of $902 million increased by $60 million or 7%, driven by business growth, favourable credit experience and higher tax-exempt investment income. This was partially offset by morbidity and expense experience, and the unfavourable impacts of foreign exchange translation. Mortality experience was elevated in the U.S. and Asia, but relatively in line with the prior year. During the Q3'21, the impacts of foreign exchange translation led to a decline of $41 million in reported net income and $36 million in underlying net income.

#### **Second Quarter 2021**

Q2'21 reported net income increased by $381 million compared to the prior year, driven by favourable market-related impacts, primarily from changes in interest rates. Underlying net income increased by $144 million or 19%, driven by business growth, a lower effective tax rate, and favourable credit experience. These factors were partially offset by the unfavourable impacts of foreign exchange translation, lower investing activity and unfavourable expense experience. During Q2'21, the impacts of foreign exchange translation decreased reported net income and underlying net income by $70 million and $75 million, respectively.

#### **First Quarter 2021**

Q1'21 reported net income increased by $546 million compared to the prior year, driven by market-related impacts, reflecting favourable equity markets and interest rate changes, partially offset by unfavourable credit spread movements. This was partially offset by higher fair value adjustments on MFS' share-based payment awards and higher restructuring costs. An after-tax restructuring charge of $57 million was recorded in Q1'21 that related to our strategy for our workspace and redefining the role of the office. Underlying net income increased by $80 million or 10%, driven by business growth, favourable morbidity experience in the U.S. and favourable credit experience in Canada, partially offset by lower investing activity gains in Canada and the U.S. During Q1'21, the impacts of foreign exchange translation decreased reported net income and underlying net income by $33 million and $31 million, respectively.

MANAGEMENT'S DISCUSSION & ANALYSIS

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# L. Non-IFRS Financial Measures

# i. Underlying Net Income and Underlying EPS

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

(a) market-related impacts that differ from our best estimate, 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 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; (iii) the impacts of changes in the fair value of investment properties in the reporting period; and (iv) tax-exempt investment income(1);
(b) 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 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:
  i. fair value adjustments on MFS' share-based payment awards that are settled with MFS' own shares and accounted for as liabilities and measured at fair value each reporting period until they are vested, exercised and repurchased - this adjustment enhances the comparability of MFS' results with publicly traded asset managers in the United States;
  ii. acquisition, integration and restructuring costs - this adjustment enhances comparability of our results from period to period, by removing the impacts of costs, including the unwinding of the discount for certain liabilities related to acquisitions, that are not ongoing in nature and are incurred with the intent to generate benefits in future periods;
  iii. certain hedges in Canada that do not qualify for hedge accounting - this adjustment enhances the comparability of our results from period to period, as it reduces volatility to the extent it will be offset over the duration of the hedges; and
  iv. other items that are unusual or exceptional in nature.

All factors discussed in this document that impact our underlying net income are also applicable to reported net income. All EPS measures in this document refer to fully diluted EPS, unless otherwise stated. As noted below, underlying EPS excludes the dilutive impacts of convertible instruments.

**Underlying EPS (diluted).** This measure is used in comparing the profitability across multiple periods and is calculated by dividing underlying net income by weighted average common shares outstanding for diluted EPS, excluding the dilutive impact of convertible instruments. For additional information about the underlying net income, see above. For additional information about the composition of the EPS, please refer to Note 26 of our 2022 Annual Consolidated Financial Statements. For additional information about the SLEECS, please refer to Note 13 of our 2022 Annual Consolidated Financial Statements.

(1) The removal of tax-exempt investment income differing from our best estimate has been applied prospectively, effective Q4'22.

94 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

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

#### Reconciliations of Select Net Income Measures

| ($ millions, unless otherwise noted) | 2022 | 2021 |
| --- | --- | --- |
| Reported net income - Common shareholders | 3,060 | 3,934 |
| Market-related impacts |  |  |
| Equity market impacts |  |  |
| Impacts from equity market changes | (294) | 278 |
| Basis risk impacts | 51 | 24 |
| Equity market impacts | (243) | 302 |
| Interest rate impacts (1) |  |  |
| Impacts of interest rate changes | (296) | 74 |
| Impacts of credit spread movements | 50 | (11) |
| Impacts of swap spread movements | (2) | 8 |
| Interest rate impacts | (248) | 71 |
| Impacts of changes in the fair value of investment properties | 81 | 254 |
| Less: Market-related impacts | (410) | 627 |
| Less: Assumption changes and management actions | 62 | 74 |
| Other adjustments |  |  |
| Fair value adjustments on MFS' share-based payment awards | 106 | (186) |
| Acquisition, integration and restructuring (2)(3)(4)(5)(6) | (338) | (18) |
| Other (7)(8)(9)(10)(11)(12)(13) | (34) | (96) |
| Less: Total of other adjustments | (266) | (300) |
| Underlying net income | 3,674 | 3,533 |
| Reported EPS (diluted) ($) | 5.21 | 6.69 |
| Less: Market-related impacts ($) | (0.70) | 1.06 |
| Assumption changes and management actions ($) | 0.10 | 0.12 |
| Fair value adjustments on MFS' share-based payment awards ($) | 0.18 | (0.32) |
| Acquisition, integration and restructuring ($) | (0.56) | (0.03) |
| Other ($) | (0.06) | (0.16) |
| Impact of convertible securities on diluted EPS ($) | (0.02) | (0.01) |
| Underlying EPS (diluted) ($) | 6.27 | 6.03 |

$^{(1)}$ Our exposure to interest rates varies by product type, line of business, 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.

$^{(2)}$ Amounts relate to acquisition costs for our SLC Management affiliates, BentallGreenOak, InfraRed Capital Partners and Crescent Capital Group LP, which include the unwinding of the discount for Other financial liabilities of $64 million in 2022 (2021 - $59 million).

$^{(3)}$ The restructuring charge of $57 million in 2021 related to our strategy for our workspace and redefining the role of the office.

$^{(4)}$ Reflects acquisition and integration costs associated with DentaQuest, acquired on June 1, 2022.

$^{(5)}$ Reflects the changes in estimated future payments for acquisition-related contingent considerations and options to purchase remaining ownership interests of SLC Management affiliates of $80 million in 2022 and $153 million in 2021.

$^{(6)}$ Reflects a realized gain of $297 million on the Initial Public Offering of Aditya Birla Sun Life Asset Management Company in Q4'21.

$^{(7)}$ Q3'22 reflects an impairment charge of $170 million (£108 million) pertaining to the attributed goodwill that is not expected to be recovered through the Sun Life UK sale. For more details, see section B - Overview - 4 - Acquisitions and Other in this document.

$^{(8)}$ Includes a charge of $55 million in Q3'22 reflecting the resolution of a matter related to reinsurance pricing for our U.S. In-force Management business.

$^{(9)}$ Q2'22 reflects a gain on the sale-leaseback of our Wellesley office in the U.S.

$^{(10)}$ Q3'21 reflects an adjustment for investment income and expense allocations between participating policyholders and shareholders for prior years.

$^{(11)}$ Q2'21 reflects the UK Finance Act that was signed into law on June 10, 2021, increasing the corporate tax rate from 19% to 25%, which will take effect for future tax periods beginning April 1, 2023. As a result, reported net income decreased by $11 million.

$^{(12)}$ On December 15, 2022, legislation implementing an additional surtax of 1.5% applicable to banks and life insurers' taxable income in excess of $100 million was enacted in Canada ('Canada Tax Rate Change'). This legislation applies retroactively to the Federal Budget date of April 7, 2022. As a result, reported net income increased by $127 million in the fourth quarter, reflected in ACMA and Other adjustments. Refer to section D - Profitability in this document for more information.

$^{(13)}$ Q4'22 includes the unwinding of an internal reinsurance agreement.

MANAGEMENT'S DISCUSSION & ANALYSIS

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95

The following table shows the pre-tax amount of underlying net income adjustments:

| ($ millions, unless otherwise noted) | 2022 | 2021 |
| --- | --- | --- |
| Reported net income - Common shareholders (after-tax) | 3,060 | 3,934 |
| Underlying net income adjustments (pre-tax): |  |  |
| Less: Market-related impacts | (401) | 849 |
| Assumption changes and management actions | 83 | 66 |
| Other adjustments (1) | (419) | (320) |
| Total underlying net income adjustments (pre-tax) | (737) | 595 |
| Less: Taxes related to underlying net income adjustments (1) | 123 | (194) |
| Underlying net income (after-tax) | 3,674 | 3,533 |

$^{(1)}$ Effective January 1, 2022, there was a change in presentation for the fair value adjustments on MFS' share-based payment awards. We have updated prior periods to reflect this change in presentation. The post-tax basis presentation was not affected.

Taxes related to underlying net income adjustments may vary from the expected effective tax rate range reflecting the mix of business based on the Company's international operations.

## ii. Additional Non-IFRS Financial Measures

Management also uses the following non-IFRS financial measures:

**After-tax profit margin for U.S. Group Benefits.** This ratio expresses U.S. Group Benefits underlying net income as a percentage of net premiums. It assists in explaining our results from period to period and measures profitability. This ratio is calculated by dividing underlying net income (loss) by net premiums for the trailing four quarters. There is no directly comparable IFRS measure.

**Assets under management.** AUM is a non-IFRS financial measure that indicates the size of our company's asset management, wealth, and insurance assets. There is no standardized financial measure under IFRS. In addition to the most directly comparable IFRS measures, which are the balance of General funds and Segregated funds on our Statements of Financial Position, AUM also includes Other AUM.

**Assumption changes and management actions.** In this document the impacts of ACMA on shareholders' net income (after-tax) is included in reported net income and is excluded from underlying net income, as described in section D - Profitability - 2 - Assumption changes and management actions in this document for details on ACMA.

Note 10.A of the Consolidated Financial Statements for the period ended December 31, 2022 shows the pre-tax impacts of method and assumption changes on shareholders' and participating policyholders' insurance contract liabilities net of reinsurance assets, excluding changes in other policy liabilities and assets. The view in this document of ACMA is the impacts on shareholders' reported net income (after-tax). The Consolidated Financial Statements view is a component of the change in total company liabilities.

The following table provides a reconciliation of the differences between the two measures.

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Impacts of method and assumption changes on insurance contract liabilities (pre-tax) | 57 | (273) |
| Less: Participating policyholders (1) | 3 | (9) |
| Less: Other items (2) | (20) | - |
| Impacts of method and assumption changes excluding participating policyholders (pre-tax) | 74 | (264) |
| Less: Tax | 19 | (93) |
| Impacts of method and assumption changes excluding participating policyholders (after-tax) | 55 | (171) |
| Add: Management actions (after-tax) (3) | 7 | 247 |
| Other (after-tax) (4) | - | (2) |
| Assumption changes and management actions (after-tax) (5)(6) | 62 | 74 |

$^{(1)}$ Adjustment to remove the pre-tax impacts of method and assumption changes on amounts attributed to participating policyholders.

$^{(2)}$ Other includes a charge reflecting the resolution of a matter related to reinsurance pricing for our U.S. In-force Management business.

$^{(3)}$ Adjustment to include the impacts of management actions on insurance contract liabilities and investment contract liabilities 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, on an after-tax basis. The pre-tax impact of management actions to Method and assumption changes on insurance contract liabilities was an increase of $9 million in 2022 (2021 - an increase of $331 million).

$^{(4)}$ Adjustments to include the impacts of method and assumption changes on investment contracts and other policy liabilities, on an after-tax basis. The pre-tax impact to Method and assumption changes on insurance contract liabilities was $nil in 2022 (2021 - a decrease of $2 million).

$^{(5)}$ Includes the tax impacts of ACMA on insurance contract liabilities and investment contract liabilities, reflecting the tax rates in the jurisdictions in which we do business.

$^{(6)}$ ACMA is included in reported net income and is excluded in calculating underlying net income, as described in section D - Profitability in this document.

**AUM not yet earning fees.** This measure represents the committed uninvested capital portion of total AUM not currently earning management fees. The amount depends on the specific terms and conditions of each fund. There is no directly comparable IFRS measure.

96 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

**Capital raising.** This measure consists of increases in SLC Management's commitments from fund raising activities for all real estate, infrastructure and alternative credit Clients excluding leverage. Investment-grade fixed income capital raising consists of sales made to new Clients. There is no directly comparable IFRS measure.

**Cash and other liquid assets.** This measure is comprised of cash, cash equivalents, short-term investments, and publicly traded securities, net of loans related to acquisitions that are held at SLF Inc. (the ultimate parent company), and its wholly owned holding companies. This measure represents available funds for capital re-deployment to support business growth.

| ($ millions) | As at December 31, 2022 | As at December 31, 2021 |
| --- | --- | --- |
| Cash and other liquid assets (held at SLF Inc. and its wholly owned holding companies): |  |  |
| Cash, cash equivalents & short-term securities | 423 | 2,383 |
| Debt securities (1) | 1,408 | 1,421 |
| Equity securities (2) | 102 | 861 |
| Sub-total (3) | 1,933 | 4,665 |
| Less: Loans related to acquisitions (held at SLF Inc. and its wholly owned holding companies) (4) | (883) | - |
| Cash and other liquid assets (held at SLF Inc. and its wholly owned holding companies) (5) | 1,050 | 4,665 |

$^{(1)}$ Includes publicly traded bonds.

$^{(2)}$ Includes ETF Investments.

$^{(3)}$ Q4'21 amounts included $2.0 billion of proceeds from the subordinated debt offerings completed in November 2021, of which $1.5 billion did not qualify as LICAT capital at issuance as it was subject to contractual terms requiring us to redeem the underlying securities in full if the closing of the DentaQuest acquisition did not occur. We completed the acquisition of DentaQuest on June 1, 2022.

$^{(4)}$ Loans related to acquisitions have been included as an adjustment to Cash and other liquid assets, as they reflect funding for the DentaQuest acquisition.

$^{(5)}$ Represents available funds for capital re-deployment.

**Constant currency.** We remove the impacts of foreign exchange translation from certain IFRS and non-IFRS measures to assist in comparing our results from period to period. The impacts of foreign exchange translation is approximated by using the foreign exchange rates in effect during the comparative period, using the average or period end foreign exchange rates, as appropriate.

**Deployment.** This measure represents the amount of capital that has been invested in the period, including leverage where applicable. Deployment also includes capital committed in infrastructure deals to be invested in specific assets. There is no directly comparable IFRS measure.

**Earnings on Surplus.** This component of the Sources of Earnings ('SOE') represents the net income earned on a company's surplus funds. Earnings on Surplus is comprised of realized gains on available-for-sale assets, as well as net investment returns on surplus, such as investment income, gains (losses) on seed investments, investment properties mark-to-market, and interest on debt.

**Expected profit.** The portion of the consolidated pre-tax net income on business in-force at the start of the reporting period that was expected to be realized based on the achievement of the best estimate assumptions made at the beginning of the reporting period. Expected profit for asset management companies is set equal to their pre-tax net income.

**Experience-related items attributable to reported net income and underlying net income.** Pre-tax gains and losses that are due to differences between the actual experience during the reporting period and the best estimate assumptions at the start of the reporting period. Experience-related items are a part of the Sources of Earnings framework, and are calculated in accordance with OSFI Guideline D-9, Sources of Earnings Disclosures.

**Fee earning AUM.** FE AUM consists of assets managed by SLC Management, which are beneficially owned by Clients, to which we provide investment management, property management or advisory-related services on the basis of which we earn management fees pursuant to management or other fee agreements. There is no directly comparable IFRS measure.

**Fee-related earnings and Operating income.** **Fee-related earnings** represent profitability of SLC Management's fee-related portfolios, and is calculated as Fee-related revenue less Fee-related expenses. **Operating income** represents profit realized from our business operations, and is calculated as the sum of Fee-related earnings, Investment income (loss) and performance fees, and Interest and other. **Fee-related revenue** represents all fee income, with the exception of performance fees, generated from third-party investors. **Fee-related expenses** represent all expenses directly related to generating fee revenue from third-party investors. **Investment income (loss) and performance fees** represent total income or loss from our seed investments, net of the related expenses. **Interest and other** represents performance fee compensation, our net interest income or expense and income from managing the General Account assets.

**Fee-related earnings and Operating income** are non-IFRS financial measures within SLC Management's Supplemental Income Statement, which enhances the comparability of SLC Management's results with publicly traded alternative asset managers. For more details, see our Supplementary Financial Information package for the quarter.

MANAGEMENT'S DISCUSSION & ANALYSIS

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The following table provides a reconciliation from Fee-related earnings and Operating income to SLC Management's Fee income and Total expenses based on IFRS.

| SLC Management |  |  |
| --- | --- | --- |
| ($ millions) | 2022 | 2021 |
| Fee income (per IFRS) | 1,412 | 1,099 |
| Less: Non-fee-related revenue adjustments (1)(2) | 435 | 231 |
| Fee-related revenue | 977 | 868 |
| Total expenses (per IFRS) | 1,405 | 1,271 |
| Less: Non-fee-related expense adjustments (2)(3) | 665 | 600 |
| Fee-related expenses | 740 | 671 |
| Fee-related earnings | 237 | 197 |
| Add: Investment income (loss) and performance fees (4) | 24 | 34 |
| Add: Interest and other (5) | (50) | (35) |
| Operating income | 211 | 196 |

$^{(1)}$ Includes Interest and other - fee income, Investment income (loss) and performance fees - fee income, and Other - fee income.

$^{(2)}$ Excludes the income and related expenses for certain property management agreements to provide more accurate metrics on our fee-related business.

$^{(3)}$ Includes Interest and other, Placement fees - other, Amortization of intangibles, Acquisition, integration and restructuring, and Other - expenses.

$^{(4)}$ Investment income (loss) and performance fee in SLC Management's Supplemental Income Statement relates to our seed investments, and as such, we have excluded the gains or losses of certain non-seed hedges that are reported under Net investment income (loss) under IFRS as follows (amounts have been adjusted for rounding):

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Net investment income (loss) (per IFRS) | 1 | 19 |
| Less: Other - Investment income (loss) | (15) | (3) |
| Add: Investment income (loss) and performance fees - fee income | 8 | 12 |
| Investment income (loss) and performance fees | 24 | 34 |

$^{(5)}$ Includes Interest and other reported under Fee income under IFRS, net of Interest and other reported under Total expenses under IFRS.

**Financial leverage ratio.** This total debt to total capital ratio is ratio of debt plus preferred shares to total capital, where debt consists of all capital qualifying debt securities. Capital qualifying debt securities consist of subordinated debt and innovative capital instruments. The ratio is an indicator of the Company's capital adequacy measured by its proportion of capital qualifying debt in accordance with OSFI guidelines.

**Impacts of foreign exchange translation.** To assist in comparing our results from period-to-period, the favourable or unfavourable impacts of foreign exchange translation are approximated using the foreign exchange rates, in effect during the comparative period, for several IFRS and Non-IFRS financial measures using the average or period end foreign exchange rates, as appropriate. Items impacting a reporting period, such as Revenue, Benefits and expenses, and Reported net income (loss) in our Consolidated Statements of Operations, as well as underlying net income (loss), and sales, are translated into Canadian dollars using average exchange rates for the appropriate daily, monthly, or quarterly period. For items as at a point in time, such as Assets and Liabilities in our Consolidated Statements of Financial Position, as well as the AUM and Expected profit component of our Sources of Earnings disclosure, period-end rates are used for currency translation purposes.

**Impact of new business.** The point-of-sale impact on pre-tax net income of writing new business during the reporting period. Issuing new business may produce a gain or loss at the point-of-sale, primarily because valuation assumptions are different than pricing assumptions and/or actual acquisition expenses may differ from those assumed in pricing.

**Other AUM.** Other AUM is composed of retail, institutional and other-third party assets, as well as general fund and segregated fund assets managed by our joint ventures. In Canada, other AUM includes Client assets in retail mutual fund products of Sun Life Global Investments. In Asia, other AUM includes Client assets in Hong Kong managed fund products, International wealth products, Philippines mutual and managed fund products, Aditya Birla Sun Life AMC Limited equity and fixed income mutual fund products, Sun Life Everbright Asset Management products and our joint ventures' general fund and segregated fund assets based on our proportionate equity interest. In Asset Management, other AUM includes Client assets for retail and institutional Clients, as well as capital raising, such as uncalled commitments and fund leverage in SLC Management. There is no directly comparable IFRS financial measure.

Effective January 1, 2022, certain components of Other AUM were renamed to 'Retail' and 'Institutional and managed funds' to align with market naming conventions. Previously, these components were referred to as Mutual funds and Managed funds, respectively, in our interim and annual MD&A. While labeling changes have modified certain terminology, the composition of these components has not been affected.

**Pre-tax fee related earnings margin.** This ratio is a measure of SLC Management's profitability in relation to funds that earn recurring fee revenues, while excluding investment income and performance fees. The ratio is calculated by dividing fee-related earnings by fee-related revenues and is based on the last twelve months. There is no directly comparable IFRS measure.

**Pre-tax net operating margin.** This ratio is a measure of the profitability and there is no directly comparable IFRS measure. For MFS, this ratio is calculated by excluding the impact of fair value adjustments on MFS' share-based payment awards and certain commission expenses that are offsetting. These commission expenses are excluded in order to neutralize the impact these items have on the pre-tax net operating margin and have no impact on the profitability of MFS. For SLC Management, the ratio is calculated by dividing the total operating income by fee-related revenue plus investment income (loss) and performance fees, and is based on the last twelve months.

98 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

Effective January 1, 2022, this measure was renamed to 'Pre-tax net operating margin' to improve naming consistency within our Asset Management business. Previously, this measure was referred to as 'Pre-tax net operating profit margin ratio for MFS' in our interim and annual MD&A. While labeling changes has modified certain terminology, the composition of the measure has not been affected.

The following table provides a reconciliation to calculate MFS' pre-tax net operating margin:

| MFS | Year-to-date |  |
| --- | --- | --- |
| (US$ millions) | 2022 | 2021 |
| Revenue |  |  |
| Fee income (per IFRS) | 3,323 | 3,779 |
| Less: Commissions | 433 | 509 |
| Less: Other (1) | (53) | (42) |
| Adjusted revenue | 2,943 | 3,312 |
| Expenses |  |  |
| Expenses (per IFRS) | 2,162 | 2,650 |
| Net investment (income)/loss (per IFRS) | (17) | - |
| Less: Gross fair value adjustments on share-based payment awards (2) | (38) | 216 |
| Less: Commissions | 433 | 509 |
| Less: Other (1) | (53) | (42) |
| Adjusted expenses | 1,803 | 1,967 |
| Pre-tax net operating margin | 39% | 41% |

$^{(1)}$ Other includes accounting basis differences, such as sub-advisory expenses and product allowances.

$^{(2)}$ For more information on this adjustment made to arrive at a non-IFRS financial measure, see the heading Underlying Net Income and Underlying EPS.

**Real estate market sensitivities.** Real estate market sensitivities are non-IFRS financial measures for which there are no directly comparable measures under IFRS so it is not possible to provide a reconciliation of these amounts to the most directly comparable IFRS measures.

**Return on equity.** IFRS does not prescribe the calculation of ROE and therefore a comparable measure under IFRS is not available. To determine reported ROE and underlying ROE, respectively, reported net income (loss) and underlying net income (loss) is divided by the total weighted average common shareholders' equity for the period. The ROE provides an indication of the overall profitability of the Company. The quarterly ROE is annualized.

**Sales and gross flows.** In Canada, insurance sales consist of sales of individual insurance and Sun Life Health products; wealth sales consist of sales of individual wealth products and sales in GRS. In the U.S., insurance sales consist of sales by Group Benefits. In Asia, insurance sales consist of the individual and group insurance sales by our subsidiaries and joint ventures and associates, based on our proportionate equity interest, in the Philippines, Indonesia, India, China, Malaysia, Vietnam, International, Hong Kong and Singapore; wealth sales consist of Hong Kong wealth sales, Philippines mutual fund sales, wealth sales by our India and China insurance joint ventures and associates, and Aditya Birla Sun Life AMC Limited's equity and fixed income mutual fund sales based on our proportionate equity interest, including sales as reported by our bank distribution partners. Asset Management gross flows includes funds from retail and institutional Clients; SLC Management gross flows include capital raising, such as uncalled capital commitments and fund leverage. In Canada and in Asia, net sales consist of gross wealth sales less redemptions. Asset Management net flows consist of gross flows less gross outflows; SLC Management's net flows do not include Client distributions from the sale of underlying assets in closed-end funds. To provide greater comparability across reporting periods, we exclude the impacts of foreign exchange translation from sales and gross flows. There is no directly comparable IFRS measure.

**Sources of Earnings ('SOE').** The SOE is prepared in accordance with the OSFI Guideline D-9, *Sources of Earnings Disclosures* and is therefore not prescribed under IFRS. The preparation for the document and its components does not have a standard for preparation as it depends on the methodology, estimates, and assumptions used. The components of the SOE are: expected profit, impact of new business, experience gains and losses, management actions and changes in assumptions, and earnings on surplus. On a comparative period-over-period basis, this document refers to the change in expected profit as business growth.

**Total weighted premium income ('TWPI').** This measure consists of 100% renewal premiums, 100% of first year premiums, and 10% of single premiums. In contrast to sales, which only includes premiums from new business, TWPI includes renewal premiums, reflecting the strength of the in-force block and providing a better understanding of both new and existing business.

MANAGEMENT'S DISCUSSION & ANALYSIS

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The following table provides a reconciliation to calculate Total weighted premium income for Asia:

| ($ millions) | 2022 | 2021 |
| --- | --- | --- |
| Gross premiums | 3,563 | 3,595 |
| Less: Pension premiums | 28 | 31 |
| Adjustment for single premiums | 1,268 | 1,605 |
| Add: Premiums from segregated fund deposits | 935 | 997 |
| Premiums from joint ventures | 1,696 | 1,434 |
| Other adjustments (1) | (14) | (28) |
| Total weighted premium income (TWPI) | 4,884 | 4,362 |

$^{(1)}$ Other includes small presentation adjustments.

**Underlying dividend payout ratio.** This is the ratio of dividends paid per share to diluted underlying EPS for the period. The ratio is utilized during the capital budgeting process to ensure that we are able to achieve our payout targets after factoring in our planned capital initiatives. We target an underlying dividend payout ratio of between 40% and 50% based on underlying EPS. For more information, see Section I - Capital and Liquidity Management in this document.

**Underlying effective tax rate.** This measure is calculated using the pre-tax underlying net income and the income tax expense associated with it. Our statutory tax rate is normally reduced by various tax benefits, such as lower taxes on income subject to tax in foreign jurisdictions, a range of tax-exempt investment income, and other sustainable tax benefits. Our effective tax rate helps in the analysis of the income tax impacts in the period.

**Value of New Business.** VNB represents the present value of our best estimate of future distributable earnings, net of the cost of capital, from new business contracts written in a particular time period, except new business in our Asset Management pillar. The assumptions used in the calculations are generally consistent with those used in the valuation of our insurance contract liabilities except that discount rates used approximate theoretical return expectations of an equity investor. Capital required is based on the higher of Sun Life Assurance's LICAT operating target and local (country specific) operating target capital. VNB is a useful metric to evaluate the present value created from new business contracts. There is no directly comparable IFRS measure.

### iii. Reconciliations of Select Non-IFRS Financial Measures

#### Reported Net Income to Underlying Net Income Reconciliation - Pre-tax by Business Group

| ($ millions) | Q4'22 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | Canada | U.S. | Asset Management | Asia | Corporate | Total |
| Reported net income (loss) - Common shareholders | 367 | 110 | 322 | 98 | 54 | 951 |
| Less: Market-related impacts (pre-tax) (1) | (110) | (79) | - | (87) | 3 | (273) |
| ACMA (pre-tax) | 47 | 4 | - | 16 | - | 67 |
| Other adjustments (pre-tax) (1)(2) | (1) | (96) | 9 | 17 | (17) | (88) |
| Tax expense (benefit) on above items (2) | 107 | 41 | - | - | 107 | 255 |
| Underlying net income (loss) | 324 | 240 | 313 | 152 | (39) | 990 |
| Q4'21 |  |  |  |  |  |  |
| Reported net income (loss) - Common shareholders | 356 | 85 | 140 | 446 | 51 | 1,078 |
| Less: Market-related impacts (pre-tax) (1) | 71 | 51 | - | 29 | 2 | 153 |
| ACMA (pre-tax) | 2 | (23) | - | (2) | - | (23) |
| Other adjustments (pre-tax) (1)(2) | (3) | (10) | (273) | 353 | - | 67 |
| Tax expense (benefit) on above items (2) | 20 | (5) | 31 | (64) | 1 | (17) |
| Underlying net income (loss) | 266 | 72 | 382 | 130 | 48 | 898 |

$^{(1)}$ For a breakdown of this adjustment made to arrive at a non-IFRS financial measure, see the heading Underlying Net Income and Underlying EPS.

$^{(2)}$ Effective January 1, 2022, there was a change in presentation for the fair value adjustments on MFS' share-based payment awards. We have updated prior periods to reflect this change in presentation. The post-tax basis presentation was not affected.

100 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

|  | 2022 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
| ($ millions) | Canada | U.S. | Asset Management | Asia | Corporate | Total |
| Reported net income (loss) - Common shareholders | 1,000 | 586 | 1,141 | 515 | (182) | 3,060 |
| Less: Market-related impacts (pre-tax) (1) | (300) | 2 | - | (82) | (21) | (401) |
| ACMA (pre-tax) | 98 | (18) | - | (41) | 44 | 83 |
| Other adjustments (pre-tax) (1)(2) | (3) | (172) | (67) | 10 | (187) | (419) |
| Tax expense (benefit) on above items (2) | (61) | 46 | 4 | 1 | 133 | 123 |
| Underlying net income (loss) | 1,266 | 728 | 1,204 | 627 | (151) | 3,674 |

|  | 2021 |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- |
| ($ millions) | Canada | U.S. | Asset Management | Asia | Corporate | Total |
| Reported net income (loss) - Common shareholders | 1,558 | 499 | 892 | 1,075 | (90) | 3,934 |
| Less: Market-related impacts (pre-tax) (1) | 669 | 117 | - | 67 | (4) | 849 |
| ACMA (pre-tax) | 52 | (126) | - | 135 | 5 | 66 |
| Other adjustments (pre-tax) (1)(2) | (118) | (14) | (470) | 352 | (70) | (320) |
| Tax expense (benefit) on above items (2) | (176) | 4 | 16 | (65) | 27 | (194) |
| Underlying net income (loss) | 1,131 | 518 | 1,346 | 586 | (48) | 3,533 |

$^{(1)}$ For a breakdown of this adjustment made to arrive at a non-IFRS financial measure, see the heading Underlying Net Income and Underlying EPS.

$^{(2)}$ Effective January 1, 2022, there was a change in presentation for the fair value adjustments on MFS' share-based payment awards. We have updated prior periods to reflect this change in presentation. The post-tax basis presentation was not affected.

#### Reported Net Income to Underlying Net Income Reconciliation - Pre-tax by Business Unit - Asset Management

|  | Q4'22 |  | Q4'21 |  |
| --- | --- | --- | --- | --- |
| ($ millions) | MFS | SLC Management | MFS | SLC Management |
| Reported net income (loss) - Common shareholders | 303 | 19 | 295 | (155) |
| Less: Other adjustments (pre-tax) (1)(2) | 33 | (24) | (48) | (225) |
| Tax expense (benefit) on above items (2) | (5) | 5 | 1 | 30 |
| Underlying net income (loss) | 275 | 38 | 342 | 40 |

$^{(1)}$ For a breakdown of this adjustment made to arrive at a non-IFRS financial measure, see the heading Underlying Net Income and Underlying EPS.

$^{(2)}$ Effective January 1, 2022, there was a change in presentation for the fair value adjustments on MFS' share-based payment awards. We have updated prior periods to reflect this change in presentation. The post-tax basis presentation was not affected.

|  | 2022 |  | 2021 |  |
| --- | --- | --- | --- | --- |
| ($ millions) | MFS | SLC Management | MFS | SLC Management |
| Reported net income (loss) - Common shareholders | 1,195 | (54) | 1,049 | (157) |
| Less: Other adjustments (pre-tax) (1)(2) | 123 | (190) | (188) | (282) |
| Tax expense (benefit) on above items (2) | (17) | 21 | 2 | 14 |
| Underlying net income (loss) | 1,089 | 115 | 1,235 | 111 |

$^{(1)}$ For a breakdown of this adjustment made to arrive at a non-IFRS financial measure, see the heading Underlying Net Income and Underlying EPS.

$^{(2)}$ Effective January 1, 2022, there was a change in presentation for the fair value adjustments on MFS' share-based payment awards. We have updated prior periods to reflect this change in presentation. The post-tax basis presentation was not affected.

MANAGEMENT'S DISCUSSION & ANALYSIS

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# **Reported Net Income to Underlying Net Income Reconciliation - Pre-tax in U.S. dollars**

|  | Q4'22 |  | Q4'21 |  |
| --- | --- | --- | --- | --- |
| (US$ millions) | U.S. | MFS | U.S. | MFS |
| Reported net income (loss) - Common shareholders | 81 | 223 | 68 | 234 |
| Less: Market-related impacts (pre-tax) (1) | (58) | - | 42 | - |
| ACMA (pre-tax) | 3 | - | (19) | - |
| Other adjustments (pre-tax) (1)(2) | (71) | 24 | (8) | (39) |
| Tax expense (benefit) on above items (2) | 30 | (3) | (3) | 1 |
| Underlying net income (loss) | 177 | 202 | 56 | 272 |

$^{(1)}$ For a breakdown of this adjustment made to arrive at a non-IFRS financial measure, see the heading Underlying Net Income and Underlying EPS.

$^{(2)}$ Effective January 1, 2022, there was a change in presentation for the fair value adjustments on MFS' share-based payment awards. We have updated prior periods to reflect this change in presentation. The post-tax basis presentation was not affected.

|  | 2022 |  | 2021 |  |
| --- | --- | --- | --- | --- |
| (US$ millions) | U.S. | MFS | U.S. | MFS |
| Reported net income (loss) - Common shareholders | 453 | 919 | 399 | 836 |
| Less: Market-related impacts (pre-tax) (1) | 4 | - | 94 | - |
| ACMA (pre-tax) | (13) | - | (101) | - |
| Other adjustments (pre-tax) (1)(2) | (129) | 94 | (11) | (150) |
| Tax expense (benefit) on above items (2) | 34 | (13) | 4 | 1 |
| Underlying net income (loss) | 557 | 838 | 413 | 985 |

$^{(1)}$ For a breakdown of this adjustment made to arrive at a non-IFRS financial measure, see the heading Underlying Net Income and Underlying EPS.

$^{(2)}$ Effective January 1, 2022, there was a change in presentation for the fair value adjustments on MFS' share-based payment awards. We have updated prior periods to reflect this change in presentation. The post-tax basis presentation was not affected.

# **Reported Net Income to Underlying Net Income Reconciliation - U.S. Group Benefits - Pre-tax in U.S. dollars**

The following table sets out the amounts that were excluded from our underlying net income (loss) for U.S. Group Benefits, which is used to calculate the trailing four-quarter after-tax profit margin for U.S. Group Benefits.

| (US$ millions) | Q4'22 | Q4'21 |
| --- | --- | --- |
| Reported net income (loss) - Common shareholders (1) | 110 | 6 |
| Less: Market-related impacts (pre-tax) (2) | (5) | 8 |
| ACMA (pre-tax) | - | - |
| Other adjustments (pre-tax) (2) | (1) | (1) |
| Tax expense (benefit) on above items | 1 | (1) |
| Underlying net income (loss) for U.S. Group Benefits | 115 | - |

$^{(1)}$ Effective Q2'22, we began reporting on the performance and results of our Dental business unit, which represents our existing dental and vision business within Group Benefits together with DentaQuest, acquired on June 1, 2022. We have updated prior periods to reflect this change in presentation.

$^{(2)}$ For a breakdown of this adjustment made to arrive at a non-IFRS financial measure, see the heading Underlying Net Income and Underlying EPS.

The following table sets out the amounts that were excluded from our underlying net income (loss) for U.S. Group Benefits, which is used to calculate the trailing four-quarter after-tax profit margin for U.S. Group Benefits.

| (US$ millions) | 2022 | 2021 |
| --- | --- | --- |
| Reported net income (loss) - Common shareholders (1) | 347 | 243 |
| Less: Market-related impacts (pre-tax) (2) | (12) | 17 |
| ACMA (pre-tax) | (8) | (4) |
| Other adjustments (pre-tax) (2) | (3) | (4) |
| Tax expense (benefit) on above items | 5 | (2) |
| Underlying net income (loss) for U.S. Group Benefits | 365 | 236 |

$^{(1)}$ Effective Q2'22, we began reporting on the performance and results of our Dental business unit, which represents our existing dental and vision business within Group Benefits together with DentaQuest, acquired on June 1, 2022. We have updated prior periods to reflect this change in presentation.

$^{(2)}$ For a breakdown of this adjustment made to arrive at a non-IFRS financial measure, see the heading Underlying Net Income and Underlying EPS.

102 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## M. Accounting and Control Matters

### 1. Critical Accounting Policies and Estimates

Our significant accounting and actuarial policies are described in Notes 1, 2, 3, 5, 10, 11 and 20 of our 2022 Annual Consolidated Financial Statements. Management must make judgments involving assumptions and estimates, some of which may relate to matters that are inherently uncertain, under these policies. The estimates described below are considered particularly significant to understanding our financial performance. As part of our financial control and reporting, judgments involving assumptions and estimates are reviewed by the independent auditor and by other independent advisors on a periodic basis. Accounting policies requiring estimates are applied consistently in the determination of our financial results.

#### Benefits to Policyholders

##### *General*

The liabilities for insurance contracts represent the estimated amounts which, together with estimated future premiums and net investment income, will provide for outstanding claims, estimated future benefits, policyholders' dividends, taxes (other than income taxes), and expenses on in-force insurance contracts.

In determining our liabilities for insurance contracts, assumptions must be made about mortality and morbidity rates, lapse and other policyholder behaviour, interest rates, equity market performance, asset default, inflation, expenses, and other factors over the life of our products. Most of these assumptions relate to events that are anticipated to occur many years in the future. Assumptions require significant judgment and regular review and, where appropriate, revision.

We use best estimate assumptions for expected future experience and apply margins for adverse deviations to provide for uncertainty in the choice of the best estimate assumptions. The amount of insurance contract liabilities related to the application of margins for adverse deviations to best estimate assumptions is called a provision for adverse deviations.

##### *Best Estimate Assumptions*

Best estimate assumptions are intended to be current, neutral estimates of the expected outcome as guided by Canadian actuarial standards of practice. The choice of best estimate assumptions takes into account current circumstances, past experience data (Company and/or industry), the relationship of past to expected future experience, anti-selection, the relationship among assumptions, and other relevant factors. For assumptions on economic matters, the assets supporting the liabilities and the expected policy for asset-liability management are relevant factors.

##### *Margins for Adverse Deviations*

The appropriate level of margin for adverse deviations on an assumption is guided by Canadian actuarial standards of practice. For most assumptions, the standard range of margins for adverse deviations is 5% to 20% of the best estimate assumption, and the actuary chooses from within that range based on a number of considerations related to the uncertainty in the determination of the best estimate assumption. The level of uncertainty, and hence the margin chosen, will vary by assumption and by line of business and other factors. Considerations that would tend to indicate a choice of margin at the high end of the range include:

- The statistical credibility of the Company's experience is too low to be the primary source of data for choosing the best estimate assumption.
- Future experience is difficult to estimate.
- The cohort of risks lacks homogeneity.
- Operational risks adversely impact the ability to estimate the best estimate assumption.
- Past experience may not be representative of future experience and the experience may deteriorate.

Provisions for adverse deviations in future interest rates are included by testing a number of scenarios of future interest rates, some of which are prescribed by Canadian actuarial standards of practice, and determining the liability based on the range of possible outcomes. A scenario of future interest rates includes, for each forecast period between the statement of financial position date and the last liability cash flow, interest rates for risk-free assets, premiums for asset default, rates of inflation, and an investment strategy consistent with the Company's investment policy. The starting point for all future interest rate scenarios is consistent with the current market environment. If few scenarios are tested, the liability would be at least as great as the largest of the outcomes. If many scenarios are tested, the liability would be within a range defined by the average of the outcomes that are above the 60th percentile of the range of outcomes and the corresponding average for the 80th percentile.

Provisions for adverse deviations in future equity returns are included by scenario testing or by applying margins for adverse deviations. In blocks of business where the valuation of liabilities uses scenario testing of future equity returns, the liability would be within a range defined by the average of the outcomes that are above the 60th percentile of the range of outcomes and the corresponding average for the 80th percentile. In blocks of business where the valuation of liabilities does not use scenario testing of future equity returns, the margin for adverse deviations on common share dividends is between 5% and 20%, and the margin for adverse deviations on capital gains would be 20% plus an assumption that those assets reduce in value by 20% to 50% at the time when the reduction is most adverse. A 30% reduction is appropriate for a diversified portfolio of North American common shares and, for other portfolios, the appropriate reduction depends on the volatility of the portfolio relative to a diversified portfolio of North American common shares.

In choosing margins, we ensure that, when taken one at a time, each margin is reasonable with respect to the underlying best estimate assumption and the extent of uncertainty present in making that assumption, and also that, in aggregate, the cumulative impact of the margins for adverse deviations is reasonable with respect to the total amount of our insurance contract liabilities. Our margins are generally stable over time and are generally only revised to reflect changes in the level of uncertainty in the best estimate assumptions. Our margins tend to be at the mid-range, with the higher range used where there is greater uncertainty. When considering the aggregate impact of margins, the actuary assesses the consistency of margins for each assumption across each block of business to ensure there is no double counting or omission and to avoid choosing margins that

MANAGEMENT'S DISCUSSION & ANALYSIS

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might be mutually exclusive. In particular, the actuary chooses similar margins for blocks of business with similar characteristics, and also chooses margins that are consistent with other assumptions, including assumptions about economic factors. The actuary is guided by Canadian actuarial standards of practice in making these professional judgments about the reasonableness of margins for adverse deviations.

The best estimate assumptions and margins for adverse deviations are reviewed at least annually and revisions are made when appropriate. The choice of assumptions underlying the valuation of insurance contract liabilities is subject to external actuarial peer review.

## Critical Accounting Estimates

Significant factors affecting the determination of policyholders' benefits, the methodology by which they are determined, their significance to the Company's financial condition and results of operations are described below.

### Non-fixed Income Market Movements

We are exposed to equity markets through our segregated fund products (including variable annuities) that provide guarantees linked to underlying fund performance and through insurance products where the insurance contract liabilities are supported by non-fixed income assets.

For segregated fund products (including variable annuities), we have implemented hedging programs involving the use of derivative instruments to mitigate a large portion of the equity market risk associated with the guarantees. The cost of these hedging programs is reflected in the liabilities. The equity market risk associated with anticipated future fee income is not hedged.

The majority of non-fixed income assets that are designated as FVTPL support our participating and universal life products where investment returns are passed through to policyholders through routine changes in the amount of dividends declared or in the rate of interest credited. In these cases, changes in non-fixed income asset values are largely offset by changes in insurance contract liabilities.

### Interest Rates

We generally maintain distinct asset portfolios for each major line of business. In the valuation of insurance contract liabilities, the future cash flows from insurance contracts and the assets that support them are projected under a number of interest rate scenarios, some of which are prescribed by Canadian actuarial standards of practice. Reinvestments and disinvestments take place according to the specifications of each scenario, and the liability is set based on the range of possible outcomes.

For certain products, including participating insurance and certain forms of universal life policies and annuities, policyholders share investment performance through routine changes in the amount of dividends declared or in the rate of interest credited. These products generally have minimum interest rate guarantees.

Hedging programs are in place to help mitigate the impact of interest rate movements.

### Mortality

Mortality refers to the rates at which death occurs for defined groups of people. Life insurance mortality assumptions are generally based on the past five to ten years of experience. Our experience is combined with industry experience where our own experience is insufficient to be statistically valid. Assumed mortality rates for life insurance and annuity contracts include assumptions about future mortality improvement based on recent trends in population mortality and our outlook for future trends.

### Morbidity

Morbidity refers to both the rates of accident or sickness and the rates of recovery therefrom. Most of our disability insurance is marketed on a group basis. We offer critical illness policies on an individual basis in Canada and Asia, long-term care on an individual basis in Canada, and medical stop-loss insurance is offered on a group basis in the U.S. In Canada, group morbidity assumptions are based on our five-year average experience, modified to reflect any emerging trend in recovery rates. For long-term care and critical illness insurance, assumptions are developed in collaboration with our reinsurers and are largely based on their experience. In the U.S., our experience is used for both medical stop-loss and disability assumptions, with some consideration of industry experience.

### Policy Termination Rates

Policyholders may allow their policies to lapse prior to the end of the contractual coverage period by choosing not to continue to pay premiums or by surrendering their policy for the cash surrender value. Assumptions for lapse experience on life insurance are generally based on our five-year average experience. Lapse rates vary by plan, age at issue, method of premium payment, and policy duration.

### Premium Payment Patterns

For universal life contracts, it is necessary to set assumptions about premium payment patterns. Studies prepared by industry or the actuarial profession are used for products where our experience is insufficient to be statistically valid. Premium payment patterns usually vary by plan, age at issue, method of premium payment, and policy duration.

### Expense

Future policy-related expenses include the costs of premium collection, claims adjudication and processing, actuarial calculations, preparation and mailing of policy statements, and related indirect expenses and overhead. Expense assumptions are mainly based on our recent experience using an internal expense allocation methodology. Inflationary increases assumed in future expenses are consistent with the future interest rates used in scenario testing.

104 Annual Report 2022 Sun Life Financial Inc.

MANAGEMENT'S DISCUSSION & ANALYSIS

## Asset Default

As required by Canadian actuarial standards of practice, insurance contract liabilities include a provision for possible future default of the assets supporting those liabilities. The amount of the provision for asset default included in the insurance contract liabilities is based on possible reductions in future investment yield that vary by factors such as type of asset, asset credit quality (rating), duration, and country of origin. The asset default assumptions are comprised of a best estimate plus a margin for adverse deviations, and are intended to provide for loss of both principal and income. Best estimate asset default assumptions by asset category and geography are derived from long-term studies of industry experience and the Company's experience. Margins for adverse deviation are chosen from the standard range (of 25% to 100%) as recommended by Canadian actuarial standards of practice based on the amount of uncertainty in the choice of best estimate assumption. The credit quality of an asset is based on external ratings if available (public bonds) and internal ratings if not (mortgages and loans). Any assets without ratings are treated as if they are rated below investment grade.

In contrast to asset impairment provisions and changes in FVTPL assets arising from impairments, both of which arise from known credit events, the asset default provision in the insurance contract liabilities covers losses related to possible future (unknown) credit events. Canadian actuarial standards of practice require the asset default provision to be determined taking into account known impairments that are recognized elsewhere on the statement of financial position. The asset default provision included in the insurance contract liabilities is reassessed each reporting period in light of impairments, changes in asset quality ratings, and other events that occurred during the period.

## Sensitivities to Best Estimate Assumptions

The sensitivities presented below are forward-looking statements. They include measures of our estimated shareholders' net income sensitivity to changes in the best estimate assumptions in our insurance contract liabilities based on a starting point and business mix as at December 31, 2022 and as at December 31, 2021, reflecting the update of actuarial method and assumption changes described in this MD&A under the heading Assumption Changes and Management Actions and, where appropriate, taking into account hedging programs in place as at December 31, 2022 and December 31, 2021 described in this MD&A under the heading Market Risk. Different starting points best estimate assumptions and business mix will result in different estimated sensitivities. These sensitivities represent the Company's estimate of changes in best estimate assumptions that are reasonably likely based on the Company's and/or the industry's historical experience and industry standards and best practices as at December 31, 2022 and December 31, 2021.

The best estimate assumption sensitivities shown below reflect the IFRS 4 accounting standards. Adoption of IFRS 17 may result in changes to the magnitude or direction of the reported net income sensitivities. The sensitivities to insurance risk assumptions will include an impact on CSM, where applicable, in addition to net income.

The following table sets out the estimated immediate impact on, or sensitivity of, our common shareholders' net income attributable to certain changes in best estimate assumptions as at December 31, 2022 and December 31, 2021:

| Critical Accounting Estimate | Sensitivity | 2022 | 2021 |
| --- | --- | --- | --- |
| ($ millions, after-tax) |  |  |  |
| Mortality | 2% increase in the best estimate assumption for insurance products | (75) | (25) |
|  | 2% decrease in the best estimate assumption for annuity products | (120) | (150) |
| Morbidity | 5% adverse change in the best estimate assumption | (265) | (255) |
| Policy Termination Rates | 10% decrease in the termination rate - where fewer terminations would be financially adverse | (270) | (270) |
|  | 10% increase in the termination rate - where more terminations would be financially adverse | (235) | (225) |
| Operating Expenses and Inflation | 5% increase in unit maintenance expenses | (175) | (165) |

## Fair Value of Assets and Liabilities

Debt securities, equity securities and certain other invested assets are designated as FVTPL or AFS and are recorded at fair value in our Consolidated Statements of Financial Position. Changes in fair value of assets designated as FVTPL, and realized gains and losses on sale of FVTPL assets are recorded in income. Changes in fair value of AFS assets are recorded in OCI. For foreign currency translation, exchange differences calculated on the amortized cost of AFS debt securities are recognized in income and other changes in carrying amount are recognized in OCI. The exchange differences from the translation of AFS equity securities and other invested assets are recognized in OCI. Net impairment losses and realized gains and losses on sale of AFS assets are reclassified from OCI to income.

The fair value of government and corporate debt securities is determined using quoted prices in active markets for identical or similar securities. When quoted prices in active markets are not available, fair value is determined using market standard valuation methodologies, which include discounted cash flow analysis, consensus pricing from various broker dealers that are typically the market makers, or other similar techniques. The assumptions and valuation inputs in applying these market standard valuation methodologies are determined primarily using observable market inputs, which include, but are not limited to, benchmark yields, reported trades of identical or similar instruments, broker-dealer quotes, issuer spreads, bid prices, and reference data including market research publications. In limited circumstances, non-binding broker quotes are used.

The fair value of asset-backed securities is determined using quoted prices in active markets for identical or similar securities, when available, or valuation methodologies and valuation inputs similar to those used for government and corporate debt securities. Additional valuation inputs include structural characteristics of the securities, and the underlying collateral performance, such as prepayment speeds and delinquencies. Expected prepayment speeds are based primarily on those previously experienced in the market at projected future interest rate levels. In instances where there is a lack of sufficient observable market data to value the securities, non-binding broker quotes are used.

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The fair value of equity securities is determined using quoted prices in active markets for identical securities or similar securities. When quoted prices in active markets are not available, fair value is determined using equity valuation models, which include discounted cash flow analysis and other techniques that involve benchmark comparison. Valuation inputs primarily include projected future operating cash flows and earnings, dividends, market discount rates, and earnings multiples of comparable companies.

Mortgages and loans are carried at amortized cost. The fair value of mortgages and loans, for disclosure purposes, is determined by discounting the expected future cash flows using a current market interest rate applicable to financial instruments with a similar yield, credit quality and maturity characteristics. Valuation inputs typically include benchmark yields and risk-adjusted spreads from current lending activities or loan issuances. The risk-adjusted spreads are determined based on the borrower's credit and liquidity, as well as term and other loan-specific features. Long-term mortgages and loans are generally categorized in Level 3 of the fair value hierarchy. The significant unobservable input is a portion of these risk adjusted spreads at or beyond the 20 year point for mortgages and at or beyond the 10 year point for loans.

The fair value of other financial liabilities is determined by using the discounted cash flow methodology at the incremental borrowing rate or the effective interest rate. Other financial liabilities categorized as Level 3 represent the present value of the estimated price we would pay to acquire any remaining outstanding shares upon exercise of a put option and any mandatory income distributions. The fair value of the liabilities is based on the average earnings before income tax, depreciation and amortization ('EBITDA') for the preceding years before the options' exercise dates and EBITDA multiples in accordance with the put agreements as well as the expected amount of any mandatory income distributions. A change in EBITDA would impact the fair value of other financial liabilities and our net income (loss).

Derivative financial instruments are recorded at fair value with changes in fair value recorded in income unless the derivative is part of a qualifying hedging relationship for accounting purposes. The fair value of derivative financial instruments depends upon derivative types. The fair value of exchange-traded futures and options is determined using quoted prices in active markets, while the fair value of OTC derivatives is determined using pricing models, such as discounted cash flow analysis or other market standard valuation techniques, with primarily observable market inputs. Valuation inputs used to price OTC derivatives may include swap interest rate curves, foreign exchange spot and forward rates, index prices, the value of underlying securities, projected dividends, volatility surfaces, and in limited circumstances, counterparty quotes. The fair value of OTC derivative financial instruments also includes credit valuation adjustments to reflect the credit risk of both the derivative counterparty and ourselves as well as the impact of contractual factors designed to reduce our credit exposure, such as collateral and legal rights of offset under master netting agreements. Inputs into determining the appropriate credit valuation adjustments are typically obtained from publicly available information and include credit default swap spreads when available, credit spreads derived from specific bond yields, or published cumulative default experience data adjusted for current trends when credit default swap spreads are not available.

The fair value of other invested assets is determined using quoted prices in active markets for identical securities or similar securities. When quoted prices in active markets are not available, fair value is determined using equity valuation models, which include discounted cash flow analysis and other techniques that involve benchmark comparison. Valuation inputs primarily include projected future operating cash flows and earnings, dividends, market discount rates, and earnings multiples of comparable companies.

Investment properties are recorded at fair value with changes in fair value recorded in income. The fair value of investment properties is generally determined using property valuation models that are based on expected capitalization rates and models that discount expected future net cash flows at current market interest rates reflective of the characteristics, location, and market of each property. Expected future net cash flows include contractual and projected cash flows and forecasted operating expenses, and take into account interest, rental and occupancy rates derived from market surveys. The estimates of future cash inflows, in addition to expected rental income from current leases, include projected income from future leases based on significant assumptions that are consistent with current market conditions. The future rental rates are estimated based on the location, type and quality of the properties, and take into account market data and projections at the valuation date. The fair values are typically compared to market-based information for reasonability, including recent transactions involving comparable assets. The methodologies and inputs used in these models are in accordance with real estate industry valuation standards. Valuations are prepared externally or internally by professionally accredited real estate appraisers.

The fair value of short-term securities is approximated by their carrying amount adjusted for credit risk where appropriate.

Due to their nature, the fair value of policy loans and cash are assumed to be equal to their carrying values, which is the amount these assets are recorded at in our Consolidated Statements of Financial Position.

Investments for accounts of segregated fund holders are recorded at fair value with changes in fair value recorded in net realized and unrealized gains (losses) within the segregated fund and are not recorded in our Consolidated Statements of Operations. The fair value of investments for accounts of segregated fund holders is determined using quoted prices in active markets or independent valuation information provided by investment managers. The fair value of direct investments within investments for accounts of segregated fund holders, such as short-term securities and government and corporate debt securities, is determined according to valuation methodologies and inputs described above in the respective asset type sections. The fair value of the secured borrowings from mortgage securitization is based on the methodologies and assumptions as described above for asset-backed securities.

The methodologies and assumptions for determining the fair values of investment contract liabilities are included in Note 10.B of our 2022 Annual Consolidated Financial Statements.

We categorize our assets and liabilities carried at fair value, based on the priority of the inputs to the valuation techniques used to measure fair value, into a three-level fair value hierarchy as follows:

Level 1: Fair value is based on the unadjusted quoted prices for identical assets or liabilities in an active market. The types of assets and liabilities classified as Level 1 generally include cash and cash equivalents, certain U.S. government and agency securities, exchange-traded equity securities, and certain segregated and mutual fund units held for account of segregated fund holders.

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MANAGEMENT'S DISCUSSION & ANALYSIS

Level 2: Fair value is based on quoted prices for similar assets or liabilities traded in active markets, or prices from valuation techniques that use significant observable inputs, or inputs that are derived principally from or corroborated with observable market data through correlation or other means. The types of assets and liabilities classified as Level 2 generally include Canadian federal, provincial and municipal government, other foreign government and corporate debt securities, certain asset-backed securities, OTC derivatives, and certain segregated and mutual fund units held for account of segregated fund holders.

Level 3: Fair value is based on valuation techniques that require one or more significant inputs that are not based on observable market inputs. These unobservable inputs reflect our expectations about the assumptions market participants would use in pricing the asset or liability. The types of assets and liabilities classified as Level 3 generally include certain corporate bonds, certain other invested assets, and investment properties.

As pricing inputs become more or less observable, assets are transferred between levels in the hierarchy. Total gains and losses in income and OCI are calculated assuming transfers into or out of Level 3 occur at the beginning of the period. For a financial instrument that transfers into Level 3 during the reporting period, the entire change in fair value for the period is included in the Level 3 reconciliation schedule in Note 5 of our 2022 Annual Consolidated Financial Statements. For transfers out of Level 3 during the reporting period, the change in fair value for the period is excluded from the Level 3 reconciliation schedule in Note 5 of our 2022 Annual Consolidated Financial Statements. Transfers into Level 3 occur when the inputs used to price the financial instrument lack observable market data and as a result, no longer meet the Level 1 or 2 criteria at the reporting date. Transfers out of Level 3 occur when the pricing inputs become more transparent and satisfy the Level 1 or 2 criteria at the reporting date.

Transfers into and out of Level 3 for financial assets were $nil and $123 million for the year ended December 31, 2022, respectively, (December 31, 2021 - $nil and $140 million, respectively). The total amount of the net realized/unrealized gains (losses) related to financial instruments transferred out of Level 3 during the period, which were excluded from the Level 3 reconciliation, was a loss of $18 million as at December 31, 2022 (December 31, 2021 - gain of $1 million).

Additional information on the fair value measurement of investments can be found in Note 5 of our 2022 Annual Consolidated Financial Statements.

## Impairment

Management assesses debt and equity securities, mortgages and loans and other invested assets for objective evidence of impairment at each reporting date. Financial assets are impaired and impairment losses are incurred if there is objective evidence of impairment as a result of one or more loss events that have an impact on the estimated future cash flows that can be reliably estimated. Objective evidence of impairment generally includes significant financial difficulty of the issuer, including actual or anticipated bankruptcy or defaults and delinquency in payments of interest or principal or disappearance of an active market for the financial assets. All equity instruments in an unrealized loss position are reviewed to determine if objective evidence of impairment exists. Objective evidence of impairment for an investment in an equity instrument or other invested asset also includes, but is not limited to, the financial condition and near-term prospects of the issuer, including information about significant changes with adverse effects that have taken place in the technological, market, economic or legal environment in which the issuer operates, and a significant or prolonged decline in the fair value of an equity instrument or other invested asset below its cost.

Additional information on the impairment of financial assets can be found in Notes 1 and 10 of our 2022 Annual Consolidated Financial Statements.

## Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable tangible and intangible assets of the acquired businesses. Goodwill is carried at original cost less any impairment subsequently incurred. Goodwill is assessed for impairment annually or more frequently if events or circumstances occur that may result in the recoverable amount of a cash generating unit ('CGU') falling below its carrying value. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of cash inflows from other groups of assets. The goodwill balances are allocated to either individual or groups of CGUs that are expected to benefit from the synergies of the business combination. Goodwill impairment is quantified by comparing a CGU's or a group of CGU's carrying value to its recoverable amount, which is the higher of fair value less cost to sell and value in use. Impairment losses are recognized immediately and cannot be reversed in future periods.

Impairment charges on goodwill of $170 million were recognized in 2022. We had a carrying value of $8,705 million in goodwill as at December 31, 2022. Additional information on goodwill can be found in Note 9 of our 2022 Annual Consolidated Financial Statements.

## Intangible Assets

Intangible assets consist of finite life and indefinite life intangible assets. Finite life intangible assets are amortized on a straight-line basis or using a units-of-production method, over the useful economic lives which are varying periods of up to 40 years. Amortization is charged through operating expenses. The useful lives of finite life intangible assets are reviewed annually, and the amortization is adjusted as necessary. Indefinite life intangibles are not amortized, and are assessed for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. Impairment is assessed by comparing the carrying values of the indefinite life intangible assets to their recoverable amounts. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. If the carrying values of the indefinite life intangibles exceed their recoverable amounts, these assets are considered impaired, and a charge for impairment is recognized in our Consolidated Statements of Operations. The recoverable amount of intangible assets is determined using various valuation models, which require management to make certain judgments and assumptions that could affect the estimates of the recoverable amount. Impairment charges on intangible assets of $18 million were recognized in 2022 (2021 - $9 million).

As at December 31, 2022, our finite life intangible assets had a carrying value of $3.6 billion, which reflected the value of the field force, asset administration contracts, and Client relationships acquired as part of the Clarica, CMG Asia, Genworth EBG, Ryan Labs, Prime Advisors, Bentall Kennedy, DentaQuest and the U.S. employee benefits business acquisitions, the ACB bancassurance partnership, and Crescent, as well as software costs. Our indefinite life intangible assets had a carrying value of $1.1 billion as at December 31, 2022. The value of the indefinite life intangible assets reflected fund management contracts of MFS, BGO, InfraRed and Crescent.

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## Income Taxes

Income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. Deferred income tax is provided using the liability method. Our provision for income taxes is calculated based on the tax rates and tax laws that have been enacted or substantially enacted by the end of the reporting period.

As a multinational organization, we are subject to taxation in numerous jurisdictions. We seek to operate in a tax efficient manner while ensuring that we are in compliance with all laws and regulations. The determination of the required provision for current and deferred income taxes requires that we interpret tax legislation in the jurisdictions in which we operate and that we make assumptions about the expected timing of realization of deferred income tax assets and liabilities. Tax laws are complex and their interpretation requires significant judgment. The provision for income taxes reflects management's interpretation of the relevant tax laws and its best estimate of the income tax implications of the transactions and events during the period. We believe that our provisions for uncertain tax positions appropriately reflect the risk of tax positions that are under audit, dispute or appeal with tax authorities, or which are otherwise considered to involve uncertainty. The adequacy of our tax provision is reviewed at the end of each reporting period. To the extent that our interpretations differ from those of tax authorities or the timing of realization is not as expected, the provision for income taxes may increase or decrease in future periods to reflect actual experience. The amount of any increase or decrease cannot be reasonably estimated.

Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the temporary differences, unused tax losses and unused tax credits can be utilized. At each reporting period, we assess all available evidence, both positive and negative, to determine the amount of deferred income tax assets to be recorded. If it is probable that the benefit of tax losses and tax deductions will not be realized, a deferred income tax asset is not recognized. The assessment requires significant estimates and judgment about future events based on the information available at the reporting date.

From time to time, local governments, in countries in which we operate, enact changes to statutory corporate income tax rates. These changes require us to review and re-measure our deferred tax assets and liabilities as of the date of enactment. As at December 31, 2022, our net deferred tax asset in the Consolidated Statements of Financial Position was $1,652 million, primarily in Canada. Any future tax rate reductions in jurisdictions where we carry a net deferred tax asset, could result in a reduction in the carrying value of the deferred tax asset and a corresponding income tax expense at the time of substantial enactment of a rate reduction.

The Organisation for Economic Co-operation and Development's (OECD's) base erosion and profit shifting (BEPS) project has prompted governments around the world, including Canada, to consider wide-ranging tax reforms to address BEPS and transparency issues. The proposals include introducing a global minimum tax rate of 15% to ensure that large multinational enterprises pay a minimum level of tax on the income arising in each jurisdiction where they operate. The rules are expected to become effective in 2023; however, at this time, none of the jurisdictions where Sun Life has significant operations has enacted or substantively enacted tax legislation implementing these global minimum taxes. These changes to the global tax landscape could materially impact our tax expense. We are actively monitoring future developments on these proposals and their impact on Sun Life.

## Pension Plans and Other Post-Retirement Benefits

The Company sponsors defined benefit pension plans and defined contribution plans for eligible employees. All of our material defined benefit plans worldwide are closed to new entrants with new hires participating in defined contribution plans. Our defined benefit pension plans offer benefits based on length of service and final average earnings and certain plans offer some indexation of benefits. We maintain certain supplementary non-contributory defined benefit pension arrangements for eligible employees, which are primarily for benefits which are in excess of local tax limits. In addition to these plans, in some countries the Company sponsors certain post-retirement benefit plans (for medical, dental and/or life insurance benefits) for eligible qualifying employees and their dependents who meet certain requirements.

In Canada, since January 1, 2009, all new employees participate in a defined contribution plan, while existing employees continue to accrue future benefits in the prior plan which provides a defined benefit plan and an optional contributory defined contribution plan.

With the closure of the Canadian defined benefit plans to new entrants, the volatility associated with future service accruals for active members has been limited and will decline over time. As at December 31, 2022, there are no active members in the UK and no active employees accruing future service benefits in the U.S. defined benefit plans.

The major risks remaining in relation to past service obligations are increases in liabilities due to a decline in discount rates, greater life expectancy than assumed and adverse asset returns. We have significantly de-risked the investments of our material defined benefit pension plans Company-wide by systematically shifting the pension asset mix towards liability matching investments. The target for our significant plans is to minimize volatility in funded status arising from changes in discount rates and exposure to equity markets.

Due to the long-term nature of these defined benefit plans, the calculation of benefit expenses and accrued benefit obligations depends on various assumptions, including discount rates, rates of compensation increases, health care cost trend rates, retirement ages, mortality rates and termination rates. Based upon consultation with external pension actuaries, management determines the assumptions used for these plans on an annual basis. The discount rate used for our material defined benefit plans is determined with reference to market yields of high-quality corporate bonds that are denominated in the same currency in which the benefits will be paid, and that have terms to maturity approximating the terms of obligations.

Actual experience may differ from that assumed, which would impact the valuation of defined benefit plans and the level of benefit expenses recognized in future years. Details of our pension and post-retirement benefit plans and the key assumptions used for the valuation these plans are included in Note 25 of our 2022 Annual Consolidated Financial Statements.

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## 2. Changes in Accounting Policies

We have included in this section a summary of changes in accounting policies. Where there are references to Notes, these are part of our 2022 Annual Consolidated Financial Statements.

### 2.A New and Amended International Financial Reporting Standards Adopted in 2022

We adopted the following amendments on January 1, 2022:

In May 2020, the IASB issued *Reference to the Conceptual Framework*, which includes amendments to IFRS 3 *Business Combinations*. The amendments update an outdated reference to the Conceptual Framework in IFRS 3 without significantly changing the requirements in the standard. The adoption of this amendment did not have a material impact on our Consolidated Financial Statements.

In May 2020, the IASB issued *Property, Plant and Equipment - Proceeds before Intended Use*, which includes amendments to IAS 16 *Property, Plant and Equipment*. The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The amendments apply retrospectively to assets ready for use in the comparative period. The adoption of this amendment did not have a material impact on our Consolidated Financial Statements.

In May 2020, the IASB issued *Onerous Contracts - Cost of Fulfilling a Contract*, which includes amendments to IAS 37 *Provisions, Contingent Liabilities and Contingent Assets*. The amendments specify that the 'cost of fulfilling' a contract comprises the 'costs that relate directly to the contract'. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract or an allocation of other costs that relate directly to fulfilling contracts. The adoption of this amendment did not have a material impact on our Consolidated Financial Statements.

In May 2020, the IASB issued *Annual Improvements to IFRS Standards 2018-2020*, which includes minor amendments to three IFRS standards applicable to our Consolidated Financial Statements. These amendments apply prospectively. The adoption of these amendments did not have a material impact on our Consolidated Financial Statements.

#### Interest Rate Benchmark Reform - Phase 2 Amendments

In August 2020, the IASB issued the Interest Rate Benchmark Reform Phase 2, which includes amendments to IFRS 9, IAS 39, IFRS 7 *Financial Instruments: Disclosures* ('IFRS 7'), IFRS 4 and IFRS 16 *Leases* ('IFRS 16'). These amendments address issues that arise from the implementation of the reforms, including the replacement of a benchmark with an alternative one. The adoption of these amendments did not have a material impact on our Consolidated Financial Statements.

Effective December 31, 2021, the publication of London Inter-Bank Offered Rate ('LIBOR') settings has ceased for all sterling, Japanese yen, Swiss franc, and euro settings as well as for the one-week and two-month USD LIBOR settings. The remaining USD LIBOR settings will cease to be provided or lose their representativeness immediately after June 30, 2023.

On May 16, 2022, Refinitiv Benchmark Services (UK) Limited ('RBSL'), the administrator of the Canadian Dollar Offered Rate ('CDOR'), announced that it will permanently cease the publication and calculation of all tenors of CDOR after June 28, 2024. Concurrently, Office of the Superintendent of Financial Institutions ('OSFI') published their expectation that Federally Regulated Financial Institutions ('FRFI's') transition all new derivatives and securities to an alternative benchmark rate by June 30, 2023, with no new CDOR exposure after that date, with limited exceptions for risk management requirements. OSFI also expects loans referencing CDOR to transition by June 28, 2024. FRFI's are also expected to prioritize system and model updates to accommodate the use of the Canadian Overnight Repo Rate Average prior to June 28, 2024.

We have created an Interbank Offered Rate ('IBOR') Transition Program (the 'Program') to manage the transition from IBOR benchmarks (such as LIBOR and CDOR) to Alternative Reference Rates ('ARRs'). The Program is cross-functional in nature and comprises key stakeholders across our organization and operates with executive oversight. The Program is on track in executing its transition plan, and is mindful of incorporating market developments as they arise. We also actively participate in industry associations and incorporate best practice guidance from these industry associations, as well as regulatory bodies into the transition plan, such as reviewing all existing and new LIBOR contracts for appropriate fallback language. The Program addresses the risk and uncertainty relating to the transition to ARRs, the use of fallback language, and other factors relating to reform that could otherwise adversely affect our operations and cash flows and the value of and return on our investments that are LIBOR or IBOR-based. Our affiliated entities with IBOR exposure related to derivatives have adhered to the International Swaps and Derivatives Association IBOR Fallbacks Protocol facilitating the transition of legacy derivative contracts to ARRs, and all of our GBP LIBOR exposure has been transitioned to Sterling Overnight Index Average.

As at December 31, 2022, our exposure to USD LIBOR consists of non-derivative financial assets of $2,750 million (December 31, 2021 - $3,849 million), non-derivative financial liabilities of $77 million (December 31, 2021 - $70 million), and derivative notional of $1,683 million (December 31, 2021 - $9,417 million) that have not yet transitioned to an ARR, excluding financial instruments maturing by June 30, 2023. Our exposure to CDOR consists of non-derivative assets of $396 million (June 30, 2022 - $387 million), non-derivative financial liabilities of $5,892 million (June 30, 2022 - $6,286 million), and derivative notional of $11,725 million (June 30, 2022 - $10,748 million) that have not yet transitioned to an ARR, excluding financial instruments maturing by June 28, 2024.

### 2.B New and Amended International Financial Reporting Standards to be Adopted in 2023

The following new and amended IFRS were issued by the IASB. We expect to adopt these in 2023:

#### IFRS 17 and IFRS 9

In May 2017, the IASB issued IFRS 17 *Insurance Contracts* ('IFRS 17'). This standard is to be applied using a retrospective approach, with at least one year of comparative results provided. If retrospective application to a group of insurance contracts is impracticable, a modified retrospective or fair

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value approach may be used. We have elected to use a fair value approach in instances where retrospective application is impracticable. IFRS 17 replaces IFRS 4 and impacts how we recognize, measure, present, and disclose our insurance contracts in our Consolidated Financial Statements.

In July 2014, the IASB issued the final version of IFRS 9 which replaces IAS 39. IFRS 9 includes guidance on the classification and measurement of financial instruments, impairment of financial assets and hedge accounting, and does not require restatement of comparative periods.

In June 2020, an amendment was issued to defer the effective date of IFRS 17 to annual periods beginning on or after January 1, 2023. Eligible insurers were also permitted the option of deferring the adoption of IFRS 9 to coincide with the adoption of IFRS 17. We have elected to apply this deferral option, and the effective date of both IFRS 17 and IFRS 9 will be January 1, 2023.

In December 2021, the IASB issued an amendment to IFRS 17 to allow for a transition option that permits insurers to present comparative information on financial assets as if IFRS 9 were applicable during the comparative period ("classification overlay"). We have elected to apply the classification overlay to our financial assets and their comparative period results as if IFRS 9 had been effective since January 1, 2022.

IFRS 17 establishes principles for the recognition, measurement, presentation, and disclosure of insurance contracts. The key principles of IFRS 17 are as follows:

- Insurance contracts are those under which an entity accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.
- Insurance contracts issued and reinsurance contracts held are divided into groups that will be separately recognized and measured.
- Groups of insurance contracts are recognized and measured as the total of the following measurement components: a) the present value of future cash flows; b) a risk adjustment for non-financial risk; and c) the contractual service margin ("CSM"), an amount that represents the unearned profit of the group of contracts. These measurement components apply to groups of insurance contracts measured using the general measurement approach ("GMA") and the variable fee approach ("VFA"). The VFA applies to insurance contracts issued with direct participation features, which are substantially investment-related service contracts under which the policyholder is promised an investment return based on underlying items, such as segregated funds and certain participating insurance contracts. For short duration contracts, such as most of our group life and health business, a simplified measurement approach (the premium allocation approach or "PAA") is applied. Under the PAA, insurance contracts are measured based on unearned profits and do not include a CSM.
- The profit from a group of insurance contracts is recognized into income over the period that insurance contract services are provided and as our risks related to servicing the contracts diminish over time.
- Insurance revenue, insurance services expenses and insurance finance income or expenses are presented separately.
- Disclosures are intended to enhance transparency and comparability of results.

The measurement of insurance contracts under IFRS 17 differs from the Canadian Asset Liability Method currently applied under IFRS 4. The most significant differences by measurement component are as follows:

Present value of future cash flows:

- The discount rates used to present value future cash flows under IFRS 17 are based on the characteristics of the insurance contracts. Under IFRS 4, discount rates are based on the portfolio of assets supporting the insurance contract liabilities.
- Estimates under IFRS 17 include the prevailing market view of the cost of financial guarantees, which requires a valuation consistent with market option prices. Under IFRS 4, the cost of financial guarantees is based on the amount required to fulfill the obligation.
- Expense cash flows under IFRS 17 are limited to those directly attributable to fulfillment of the obligations under insurance contracts.
- Future income taxes are excluded from future cash flows under IFRS 17.

Risk adjustment:

- Measures the compensation required for uncertainty related to non-financial risk, such as mortality, morbidity, surrender and expenses under IFRS 17.
- Provisions for uncertainty related to financial risk are included in the present value of future cash flows under IFRS 17.
- No amount is provided for asset-liability mismatch risk under IFRS 17.
- Under IFRS 4, amounts provided for the risks listed above are reflected in a provision for adverse deviations included in insurance contract liabilities.

Contractual service margin:

- This is a new component of liabilities and necessitates the "grouping" of insurance contracts, which is not required under IFRS 4.
- The CSM represents unearned profits, which is discussed in more detail below.

The measurement approach under IFRS 17 and IFRS 4 is similar for insurance contracts measured using the PAA, such as our group life and health contracts. Differences arise mainly in the measurement of the Liability for Incurred Claims, where the discount rate and risk adjustment changes noted above apply.

We have highlighted in the following section certain impacts on our financial performance as a result of the differences between IFRS 17 and IFRS 4 described above:

- New business gains (unearned profits) are measured differently under IFRS 17, reflecting measurement differences on insurance contracts as discussed above. In addition, new business gains under IFRS 17 are deferred and recorded in the CSM and amortized into income as insurance contract services are provided. Losses on new business are also measured differently, but continue to be recognized in income immediately. Under IFRS 4, new business gains and losses are both recognized in income immediately.
- Discount rates used in calculating the present value of insurance contract liabilities are based on the characteristics of the insurance contracts rather than the assets supporting the liabilities. Amongst other differences, this results in changes in the timing of when investment-related income emerges.
- Under IFRS 17, changes related to financial risk (e.g. changes in the discount rate) continue to be recognized in income immediately, except for insurance contracts measured using the VFA, where the changes are recorded through the CSM. Assumption changes for non-

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financial risk, such as mortality, are reflected in the CSM and amortized into income as insurance contract services are provided. Under IFRS 4, assumption changes for both financial and non-financial risk variables are recognized in income immediately.

IFRS 9 includes guidance on the classification and measurement of financial instruments, impairment of financial assets, and hedge accounting. The classification of financial assets is based on the cash flow characteristics and the business model within which an asset is managed, and determines how the financial asset is measured. The classification and measurement of financial liabilities remain generally unchanged from IAS 39. IFRS 9 also introduces an impairment model for financial assets not measured at FVTPL. The model requires the recognition of an allowance for 12-month expected losses at the initial recognition of a financial asset, and the recognition of an allowance for lifetime expected losses if certain criteria are met. In addition, IFRS 9 introduces a new model for hedge accounting to better align with risk management activities.

Under IFRS 17, we are electing to recognize all insurance finance income or expense in income rather than other comprehensive income. Consequently, to avoid an accounting mismatch, we are electing under IFRS 9 to classify most of our fixed income assets supporting insurance contracts as FVTPL.

The adoption of IFRS 17 and IFRS 9 is expected to have a significant impact on our Consolidated Financial Statements, and estimates of the financial impacts are subject to change as we continue to finalize the implications of adopting both standards. The establishment of the CSM and other measurement changes upon transition at January 1, 2022, including the impacts of reflecting IFRS 9 as at the same date, would reduce total equity.

For more information, refer to Note 2 in our 2022 Consolidated Financial Statements for the period ended December 31, 2022.

### Other New and Amended Standards

In May 2021, the IASB issued amendments to IAS 12 *Income Taxes* ('IAS 12'). The amendments, *Deferred Tax related to Assets and Liabilities arising from a Single Transaction*, narrow the scope of the recognition exemption in IAS 12 so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The amendment to IAS 12 will be effective for annual reporting periods beginning on or after January 1, 2023, with early application permitted. We do not expect the adoption of these amendments to have a material impact on our Consolidated Financial Statements.

In February 2021, the IASB issued amendments to IAS 1 *Presentation of Financial Statements* ('IAS 1') and IFRS Practice Statement 2 *Making Materiality Judgments* ('IFRS Practice Statement 2'). The amendments to IAS 1 require companies to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures. The amendment to IAS 1 will be effective for annual reporting periods beginning on or after January 1, 2023, with early application permitted. We do not expect the adoption of these amendments to have a material impact on our Consolidated Financial Statements.

In February 2021, the IASB issued amendments to IAS 8 *Accounting Policies, Changes in Accounting Estimates and Errors* ('IAS 8'). The amendments clarify how companies should distinguish changes in accounting policies from changes in accounting estimates. The amendment to IAS 8 will be effective for annual reporting periods beginning on or after January 1, 2023, with early application permitted. We do not expect the adoption of these amendments to have a material impact on our Consolidated Financial Statements.

## 2.C New and Amended International Financial Reporting Standards to be Adopted in 2024 or Later

We are currently assessing the impact that these amendments will have on our Consolidated Financial Statements:

In September 2022, the IASB issued amendments to IFRS 16 *Leases* ('IFRS 16') to add subsequent measurement requirements for sale and leaseback transactions that satisfy the requirements in IFRS 15 *Revenue from Contracts with Customers* to be accounted for as a sale. The amendments require a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that it does not recognize any amount of the gain or loss that relates to the right of use it retains. The amendments to IFRS 16 will be effective for annual reporting periods beginning on or after January 1, 2024. The amendments apply retrospectively, with early application permitted.

## 3. Disclosure Controls and Procedures

The Company has established disclosure controls and procedures that are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company's President and CEO, Executive Vice-President and Chief Financial Officer ('CFO'), and Executive Vice-President, Chief Legal Officer and Public Affairs, on a timely basis so that appropriate decisions can be made regarding public disclosure.

An evaluation of the effectiveness of our disclosure controls and procedures, as defined under rules adopted by the Canadian securities regulatory authorities and the SEC, as at December 31, 2022, was carried out under the supervision of and with the participation of the Company's management, including the CEO and the CFO. Based on our evaluation, the CEO and the CFO concluded that the design and operation of these disclosure controls and procedures were effective as at December 31, 2022.

### Management's Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements in accordance with IFRS.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis. Projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We conducted an assessment of the effectiveness of our internal control over financial reporting, as of December 31, 2022, based on the framework and criteria established in *Internal Control-Integrated Framework (2013)*, issued by the Committee of Sponsoring Organizations of the Treadway

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Commission. Based on that assessment, we have concluded that our internal control over financial reporting was effective as of December 31, 2022. Management excluded from its assessment the internal control over financial reporting for DentaQuest, acquired on June 1, 2022, whose total assets, net assets, revenues and net income constitute approximately 1%, 9%, 9% and 2%, respectively, of our Annual Consolidated Financial Statement amounts as of and for the year ended December 31, 2022.

Our internal control over financial reporting, as of December 31, 2022, has been audited by the Company's external auditor, Deloitte LLP, Independent Registered Public Accounting Firm, who also audited our Annual Consolidated Financial Statements for the year ended December 31, 2022. As stated in the Report of Independent Registered Public Accounting Firm, they have expressed an unqualified opinion on our internal control over financial reporting as of December 31, 2022.

## Changes in Internal Control over Financial Reporting

No changes were made in our internal control over financial reporting for the period which began on January 1, 2022 and ended December 31, 2022 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

As described above, we excluded an assessment of the internal control over financial reporting of DentaQuest, acquired on June 1, 2022, from the assessment of our internal control over financial reporting as at December 31, 2022. We continue to integrate DentaQuest into our existing internal control over financial reporting, which may require modifications and additions as a result of this integration in future periods.

We will require modifications and additions to our existing internal control over financial reporting as a result of the adoption of IFRS 17 and IFRS 9, effective for periods beginning on or after January 1, 2023. The necessary technology and modifications implemented to our actuarial and accounting processes to comply with requirements under IFRS 17 and IFRS 9 significantly impact our internal controls over financial reporting.

For transition opening balances as at January 1, 2022 and for the year ended December 31, 2022, we have reviewed the governance framework and controls over the following implementation-related activities:

- Process of adopting new accounting policies and its impact on stakeholders;
- Reconciliation between the January 1, 2022 opening balances prior to and after the adoption of IFRS 17 and IFRS 9;
- Parallel-reporting processes for the 2022 reporting periods on an IFRS 17 and IFRS 9 basis; and
- The implementation of new systems and automated processes.

Going forward into 2023, we expect to modify and add to our internal controls over financial reporting as follows:

- Modify our risk assessment to fully address the impact of IFRS 17 and IFRS 9 requirements and their associated risks; and
- Implement controls over new or modified processes that address risks associated with the implementation of IFRS 17 and IFRS 9, including those related to the use of new technology.

## N. Legal and Regulatory Proceedings

Information concerning legal and regulatory matters is provided in our Annual Consolidated Financial Statements and the AIF, in each case for the year ended December 31, 2022.

## O. Forward-looking Statements

From time to time, the Company makes written or oral 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. Forward-looking statements contained in this document include statements (i) relating to our strategies; (ii) relating to our intention to divest Sun Life UK; (iii) relating to the distribution of our products under our bancassurance partnership in Hong Kong with Dah Sing Bank; (iv) relating to the expected impacts of the adoption of IFRS 17 and IFRS 9; (v) relating to our growth initiatives and other business objectives; (vi) relating to our targets and commitments (including with respect to our sustainability plan and net zero emissions); (vii) relating to the plans we have implemented in response to the COVID-19 pandemic and related economic conditions and their impact on the Company; (viii) relating to our expected tax range for future years; (ix) set out in this document under the heading J - Risk Management - Market Risk Sensitivities - Interest Rate Sensitivities; (x) that are predictive in nature or that depend upon or refer to future events or conditions; and (xi) 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 information concerning our possible or assumed future results of operations. These statements represent our current expectations, estimates, and projections regarding future events and are not historical facts, and remain subject to change, particularly in light of the ongoing and developing COVID-19 pandemic and its impact on the global economy and its uncertain impact on our business.

Forward-looking statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. Future results and shareholder value may differ materially from those expressed in these forward-looking statements. In addition, as Sun Life works to advance its climate goals, external factors outside of Sun Life's reasonable control may act as constraints on their achievement, including varying decarbonization efforts across economies, the need for thoughtful climate policies around the world, more and better data, reasonably supported methodologies, technological advancements, the evolution of consumer behaviour, the challenges of balancing interim emissions goals with an orderly and just transition, and other significant considerations such as legal and regulatory obligations. Other factors that may cause actual results and shareholder value to differ materially from those expressed in the forward-looking statements include the impact of the COVID-19 pandemic and related economic conditions on our operations, liquidity, financial conditions or results and the matters set out in this document under the headings D - Profitability - S - Income taxes, F - Financial Strength and J - Risk Management and in SLF Inc.'s 2022 AIF under the heading Risk Factors,

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and the factors detailed in SLF Inc.'s other filings with Canadian and U.S. securities regulators, which are available for review at www.sedar.com and www.sec.gov, respectively.

## Medium-Term Financial Objectives

The Company's medium-term financial objectives set out in B - Overview - 2 - Financial Objectives are forward-looking non-IFRS financial measures. Our ability to achieve those objectives is dependent on our success in achieving growth initiatives and business objectives and on certain key assumptions that include: (i) no significant changes in the level of interest rates; (ii) average total equity market return of approximately 8-10% per annum; (iii) credit experience in line with best estimate actuarial assumptions; (iv) no significant changes in the level of our regulatory capital requirements; (v) no significant changes to our effective tax rate; (vi) no significant increase in the number of shares outstanding; (vii) other key assumptions include: no material changes to our hedging program, hedging costs that are consistent with our best estimate assumptions, no material assumption changes including updates to the economic scenario generator and no material accounting standard changes; and (viii) our best estimate actuarial assumptions used in determining our insurance and investment contract liabilities. Our underlying ROE is dependent upon capital levels and options for deployment of excess capital. Our medium-term financial objectives do not reflect the indirect effects of interest rate and equity market movements including the potential impacts on goodwill or the current valuation allowance on deferred tax assets as well as other items that may be non-operational in nature.

Our target dividend payout ratio of 40%-50% of our underlying net income assumes that economic conditions and our results will enable us to maintain our payout ratio in the target range, while maintaining a strong capital position. The declaration, amount and payment of dividends is subject to the approval of SLF Inc.'s Board of Directors and our compliance with the capital requirements in the *Insurance Companies Act* (Canada). Additional information on dividends is provided in the section I - Capital and Liquidity Management - 3 - Shareholder Dividends in this MD&A.

Although considered reasonable by the Company, we may not be able to achieve our medium-term financial objectives as the assumptions on which these objectives were based may prove to be inaccurate. Accordingly, our actual results could differ materially from our medium-term financial objectives as described in the section B - Overview - 2 - Financial Objectives in this MD&A. Our medium-term financial objectives do not constitute guidance.

## Risk Factors

Important risk factors that could cause our assumptions and estimates, and expectations and projections to be inaccurate and our actual results or events to differ materially from those expressed in or implied by the forward-looking statements contained in this document, are set out below. The realization of our forward-looking statements, essentially depends on our business performance which, in turn, is subject to many risks. Factors that could cause actual results to differ materially from expectations include, but are not limited to: **market risks** - related to the performance of equity markets; changes or volatility in interest rates or credit spreads or swap spreads; real estate investments; fluctuations in foreign currency exchange rates; and inflation; **insurance risks** - related to policyholder behaviour; mortality experience, morbidity experience and longevity; product design and pricing; the impact of higher-than-expected future expenses; and the availability, cost and effectiveness of reinsurance; **credit risks** - related to issuers of securities held in our investment portfolio, debtors, structured securities, reinsurers, counterparties, other financial institutions and other entities; **business and strategic risks** - related to global economic and political conditions; the design and implementation of business strategies; changes in distribution channels or Client behaviour including risks relating to market conduct by intermediaries and agents; the impact of competition; the performance of our investments and investment portfolios managed for Clients such as segregated and mutual funds; shifts in investing trends and Client preference towards products that differ from our investment products and strategies; changes in the legal or regulatory environment, including capital requirements and tax laws; the environment, environmental laws and regulations; **operational risks** - related to breaches or failure of information system security and privacy, including cyber-attacks; our ability to attract and retain employees; legal, regulatory compliance and market conduct, including the impact of regulatory inquiries and investigations; the execution and integration of mergers, acquisitions, strategic investments and divestitures; our information technology infrastructure; a failure of information systems and Internet-enabled technology; dependence on third-party relationships, including outsourcing arrangements; business continuity; model errors; information management; **liquidity risks** - the possibility that we will not be able to fund all cash outflow commitments as they fall due; and **other risks** - COVID-19 matters, including its impact on the global economy, and its impact on Sun Life's business, financial condition and or results; risks associated with IFRS 17 *Insurance Contracts* and IFRS 9 *Financial Instruments*; our international operations, including our joint ventures; market conditions that affect our capital position or ability to raise capital; downgrades in financial strength or credit ratings; and tax matters, including estimates and judgements used in calculating taxes.

The following risk factors are related to our intention to divest Sun Life UK that could have a material adverse effect on our forward-looking statements: (1) the ability of the parties to complete the transaction; (2) the failure of the parties to obtain necessary consents and approvals or to otherwise satisfy the conditions to the completion of the transaction in a timely manner, or at all; (3) our ability to realize the financial and strategic benefits of the transaction; and (4) the impact of the announcement of the transaction and the dedication of our resources to completing the transaction. Each of these risks could have an impact on our business relationships (including with future and prospective employees, Clients, distributors and partners) and could have a material adverse effect on our current and future operations, financial conditions and prospects.

The Company does not undertake any obligation to update or revise its forward-looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, except as required by law.

MANAGEMENT'S DISCUSSION & ANALYSIS

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# CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

FINANCIAL REPORTING RESPONSIBILITIES 115

APPOINTED ACTUARY'S REPORT 116

INDEPENDENT AUDITOR'S REPORT 117

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 120

CONSOLIDATED FINANCIAL STATEMENTS 123

Consolidated Statements of Operations 123

Consolidated Statements of Comprehensive Income (Loss) 124

Consolidated Statements of Financial Position 125

Consolidated Statements of Changes in Equity 126

Consolidated Statements of Cash Flows 127

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 128

Significant Accounting Policies Note 1 128

Changes in Accounting Policies Note 2 138

Acquisitions and Other Note 3 141

Segmented Information Note 4 143

Total Invested Assets and Related Net Investment Income Note 5 146

Financial Instrument Risk Management Note 6 153

Insurance Risk Management Note 7 165

Other Assets Note 8 168

Goodwill and Intangible Assets Note 9 168

Insurance Contract Liabilities and Investment Contract Liabilities Note 10 171

Reinsurance Note 11 177

Other Liabilities Note 12 178

Senior Debentures and Innovative Capital Instruments Note 13 179

Subordinated Debt Note 14 181

Share Capital Note 15 182

Interests in Other Entities Note 16 184

Fee Income Note 17 186

Operating Expenses, Commissions, and Premium Taxes Note 18 186

Share-Based Payments Note 19 187

Income Taxes Note 20 189

Capital Management Note 21 191

Segregated Funds Note 22 192

Commitments, Guarantees and Contingencies Note 23 193

Related Party Transactions Note 24 196

Pension Plans and Other Post-Retirement Benefits Note 25 196

Earnings (Loss) Per Share Note 26 199

Accumulated Other Comprehensive Income (Loss) Note 27 200

Subsequent Events Note 28 200

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Consolidated Financial Statements

# Financial Reporting Responsibilities

Management is responsible for preparing the Consolidated Financial Statements. This responsibility includes selecting appropriate accounting policies and making estimates and other judgments consistent with International Financial Reporting Standards. The financial information presented elsewhere in the annual report to shareholders is consistent with these Consolidated Financial Statements.

The Board of Directors ("Board") oversees management's responsibilities for financial reporting. An Audit Committee of non-management directors is appointed by the Board to review the Consolidated Financial Statements and report to the Board prior to their approval of the Consolidated Financial Statements for issuance to shareholders. Other key responsibilities of the Audit Committee include reviewing the Company's existing internal control procedures and planned revisions to those procedures, and advising the Board on auditing matters and financial reporting issues.

Management is also responsible for maintaining systems of internal control that provide reasonable assurance that financial information is reliable, that all financial transactions are properly authorized, that assets are safeguarded, and that Sun Life Financial Inc. and its subsidiaries, collectively referred to as "the Company", adhere to legislative and regulatory requirements. These systems include the communication of policies and the Company's Code of Business Conduct throughout the organization. Internal controls are reviewed and evaluated by the Company's internal auditors.

Management conducted an assessment of the effectiveness of the Company's internal control over financial reporting, as of December 31, 2022, based on the framework and criteria established in *Internal Control - Integrated Framework (2013)*, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2022.

The Audit Committee also conducts such review and inquiry of management and the internal and external auditors as it deems necessary towards establishing that the Company is employing appropriate systems of internal control, is adhering to legislative and regulatory requirements and is applying the Company's Code of Business Conduct. Both the internal and external auditors and the Company's Appointed Actuary have full and unrestricted access to the Audit Committee with and without the presence of management.

The Office of the Superintendent of Financial Institutions, Canada conducts periodic examinations of the Company. These examinations are designed to evaluate compliance with provisions of the *Insurance Companies Act* (Canada) and to ensure that the interests of policyholders, depositors, and the public are safeguarded. The Company's foreign operations and foreign subsidiaries are examined by regulators in their local jurisdictions.

The Company's Appointed Actuary, who is a member of management, is appointed by the Board to discharge the various actuarial responsibilities required under the *Insurance Companies Act* (Canada), and conducts the valuation of the Company's actuarial liabilities. The role of the Appointed Actuary is described in more detail in Note 10. The report of the Appointed Actuary accompanies these Consolidated Financial Statements.

The Company's external auditor, Deloitte LLP, Independent Registered Public Accounting Firm, has audited the Company's internal control over financial reporting as of December 31, 2022, in addition to auditing the Company's Consolidated Financial Statements for the years ended December 31, 2022 and December 31, 2021. Its reports to the Board and shareholders express unqualified opinions and accompany these Consolidated Financial Statements. Deloitte LLP meets separately with both management and the Audit Committee to discuss the results of its audit.

Kevin Strain, CPA, CA
President and Chief Executive Officer

Manjit Singh, CPA, CA
Chief Financial Officer

Toronto, Ontario, Canada
February 8, 2023

Consolidated Financial Statements

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# Appointed Actuary's Report

## THE SHAREHOLDERS AND DIRECTORS OF SUN LIFE FINANCIAL INC.

I have valued the policy liabilities and reinsurance recoverables of Sun Life Financial Inc. and its subsidiaries for its Consolidated Statements of Financial Position at December 31, 2022 and December 31, 2021 and their change in the Consolidated Statements of Operations for the year ended December 31, 2022 in accordance with accepted actuarial practice in Canada, including selection of appropriate assumptions and methods.

In my opinion, the amount of policy liabilities net of reinsurance recoverables makes appropriate provision for all policy obligations and the Consolidated Financial Statements fairly present the results of the valuation.

Kevin Morrissey
Fellow, Canadian Institute of Actuaries

Toronto, Ontario, Canada
February 8, 2023

116 Sun Life Financial Inc. Annual Report 2022

Appointed Actuary's Report

# Independent Auditor's Report

To the Shareholders and the Board of Directors of Sun Life Financial Inc.

## Opinion

We have audited the consolidated financial statements of Sun Life Financial Inc. (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2022 and 2021, and the consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the "financial statements").

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2022 and 2021, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS").

## Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Our responsibilities under those standards are further described in the *Auditor's Responsibilities for the Audit of the Financial Statements* section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

## Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2022. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

## Insurance Contract Liabilities - Refer to Notes 1 and 10 to the Financial Statements

### Key Audit Matter Description

The Company has significant insurance contract liabilities representing the majority of its total liabilities. Application of different assumptions may result in different measurement of the insurance contract liabilities. There is insurance risk from the uncertainty of product performance due to differences between the actual experience and expected experience. The Company uses various actuarial models to determine insurance contract liabilities, some of which involve high levels of complexity.

While there are many assumptions which management makes, the assumptions with the greatest uncertainty are those related to mortality, including the impact, if any, of the COVID-19 pandemic, and lapse and other policyholder behaviour ("policyholder behaviour"). These assumptions required subjective and complex auditor judgment in certain circumstances, including where (i) there is limited Company and industry experience data, (ii) the historical experience may not be a good indicator of the future, and (iii) the policyholder behaviour may be irrational. Auditing of certain actuarial models and mortality and policyholder behaviour assumptions required a high degree of auditor judgment and an increased extent of audit effort, including the need for the integral involvement of actuarial specialists.

### How the Key Audit Matter Was Addressed in the Audit

Our audit procedures related to actuarial models and assumptions of mortality and policyholder behaviour included the following, among others:

- We evaluated and tested the effectiveness of controls over actuarial models and the determination of the mortality and policyholder behaviour assumptions used in the calculation of insurance contract liabilities as well as access and change management controls over those actuarial models.
- With the assistance of actuarial specialists, we tested the reasonableness of key mortality and policyholder behaviour assumptions, by:
  - Evaluating management's methods and assumptions in accordance with actuarial principles and practices under the Canadian actuarial standards of practice.
  - Testing experience studies and other inputs used in the determination of the mortality and policyholder behaviour assumptions.
  - Analyzing management's interpretation of its experience study results, evaluating triggers and drivers for revisions of assumptions, assessing reasonably possible alternative assumptions, and considering industry and other external sources of data, where applicable.
- With the assistance of actuarial specialists, we tested the appropriateness of actuarial models used in the estimation process by:
  - Calculating an independent estimate of the insurance contract liability for a sample of insurance policies and comparing the results to the Company's results.
  - Testing the accuracy of a sample of actuarial models for changes in key assumptions.

## Valuation of Investment Properties - Refer to Notes 1 and 5 to the Financial Statements

### Key Audit Matter Description

Investment properties are accounted for at fair value. The fair values of investment properties are generally determined using property valuation models and are based on expected capitalization rates and models that discount expected future net cash flows at current market expected rates of return reflective of the characteristics, location, and market of each property. Expected future net cash flows include contractual and projected cash flows and forecasted operating expenses, and take into account discount, rental, and occupancy rates derived from market surveys. The estimates of future cash inflows in addition to expected rental income from current leases, include projected income from future leases based on significant assumptions that are consistent with current market conditions.

The assumptions with the greatest uncertainty are the discount rates, terminal capitalization rates, and future rental rates. Performing audit procedures to assess inputs required a high degree of auditor judgment and an increased extent of audit effort, including the need for the integral involvement of valuation specialists.

Independent Auditor's Report

Sun Life Financial Inc. Annual Report 2022 117

#### **How the Key Audit Matter Was Addressed in the Audit**

Our audit procedures related to valuation models and assumptions including discount rates, terminal capitalization rates, and future rental rates included the following, among others:

- We evaluated and tested the effectiveness of controls over the fair value process for investment properties. These controls include an assessment and approval by senior management of the discount rates, terminal capitalization rates, and future rental rates assumptions used in the determination of the valuation of investment properties and the valuation conclusions relative to comparable properties.
- With the assistance of valuation specialists, we evaluated on a sample basis the reasonableness of management's discount rates, terminal capitalization rates, and future rental rates assumptions and valuation conclusions by comparing them to the discount rates, terminal capitalization rates, and future rental rates of market surveys and transactions in comparable properties.

#### **IFRS 17, Insurance Contracts to be Adopted in 2023 - Refer to Note 2 to the Financial Statements**

##### **Key Audit Matter Description**

For the period beginning on January 1, 2023, the Company will be adopting IFRS 17, *Insurance Contracts* ("IFRS 17") which will impact how the Company recognizes, measures, presents and discloses insurance contracts. In accordance with IAS 8, *Accounting Policies, Changes in Accounting Estimates and Errors* ("IAS 8"), the Company disclosed the expected impacts of transition to the new standard, which remain subject to change as the Company continues to finalize its adoption of IFRS 17. The disclosures in the Company's 2022 consolidated financial statements are more limited than the disclosures to be included in the first year of adoption, being 2023.

Management was required to make certain judgments and estimates in determining the expected impacts of transition to IFRS 17 on the Company's Consolidated Statement of Financial Position at transition. This resulted in an increased extent of audit effort, including the involvement of various specialists.

#### **How the Key Audit Matter Was Addressed in the Audit**

Our audit procedures related to the disclosures in the 2022 consolidated financial statements included the following, among others:

- We evaluated and tested the effectiveness of controls over the disclosures;
- With the assistance of various specialists, we evaluated management's key judgments to determine the accounting treatment at transition by analyzing the disclosures against IFRS 17 accounting guidance;
- With the assistance of various specialists, we assessed the appropriateness and reasonableness of key models and valuation methodologies, significant assumptions and other key inputs used in determining the estimated impacts at transition;
- We evaluated the disclosures against relevant accounting guidance.

When additional IFRS 17 disclosures are required in the December 31, 2023 consolidated financial statements, further procedures on the impacts of transition will be performed.

#### **Other Information**

Management is responsible for the other information. The other information comprises:

- Management's Discussion and Analysis
- The information, other than the financial statements and our auditor's report thereon, in the Annual Report.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.

The Annual Report is expected to be made available to us after the date of the auditor's report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.

#### **Responsibilities of Management and Those Charged with Governance for the Financial Statements**

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company's financial reporting process.

118 Sun Life Financial Inc. Annual Report 2022

Independent Auditor's Report

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