Dividend policy for participating policies of Sun Life Assurance Company of Canada
Sun Life Assurance Company of Canada (“Sun Life”) is a company governed by the Insurance Companies Act (Canada) that was converted from a mutual company into a company with common shares in 2000. (Such a transaction is referred to as a “Conversion”.) Clarica Life Insurance Company (“Clarica”) was converted from a mutual company into a company with common shares in 1999 and was amalgamated with Sun Life in 2002. (The amalgamated company, named Sun Life Assurance Company of Canada, is referred to as the “Company”.)
This Dividend Policy applies to participating policies of the Company.
Participating policyholders of the Company are eligible to receive distributions in respect of their policies, commonly referred to as policy dividends, as declared from time to time at the discretion of the Board of Directors of the Company in accordance with applicable law.
Participating policies issued by Sun Life before its Conversion are accounted for separately, by territory, from policies issued by Sun Life after its Conversion. Similarly, participating policies issued by Clarica before its Conversion are accounted for separately from policies issued by Clarica after its Conversion.
The assets and earnings of the pre-Conversion blocks of participating business that are specified by the terms of the Conversion plans of Sun Life and Clarica are exclusively for the benefit of the participating policies in the applicable pre-Conversion block. (These blocks of participating business are referred to as “Closed Blocks”.) Earnings include all sources of gain and loss including those related to experience factors such as investment returns, mortality, policy surrender, expenses, and taxes (these and other applicable factors are referred to as “Experience Factors”). The amount of dividends distributed generally reflects changes in experience, by Closed Block, over time, as adjusted to maintain consistency in distribution from one period to another. This is done with the objectives of ensuring no unnecessary build-up or deficiency in surplus and exhausting the assets in the Closed Block over the lifetime of the business in the Closed Block.
Dividends on pre-Conversion participating policies that are not in Closed Blocks are determined as required by the terms of the Conversion plans or are determined in the same manner as dividends on participating policies issued after Conversion.
Dividends on participating policies issued after Conversion are distributed from the earnings of the post-Conversion participating business consisting of those policies. Earnings include all sources of gain and loss including those related to Experience Factors. The amount of dividends distributed generally reflects changes in the experience of the post-Conversion participating business, over time, as adjusted to maintain consistency in distribution from one period to another, the growth of that business, the need to retain a portion of earnings to support the business, and the overall capital adequacy position of the Company.
Any distribution of funds from the participating accounts to shareholders of the Company is limited by the provisions of the Insurance Companies Act (Canada) and the Conversion plans of Sun Life and Clarica.
The dividend allocation process followed by the Company in respect of participating policies recognizes the contributions made by the policies to the pre-Conversion or post-Conversion participating business to which they belong. Not all policies contribute to the same extent or at the same time, and there are certain practical limits, legal constraints and prevailing local practices that apply to the allocation in some circumstances. This process seeks to achieve reasonable equity between classes of policies and between generations of policies over time. In order to determine the contribution of policies, policies are grouped into classes with common Experience Factors.
The dividend scales of the Company are established by the Board of Directors of the Company from time to time, and reviewed at least once each year based on a recommendation from the Appointed Actuary that is required to be in compliance with all relevant standards of the Canadian Institute of Actuaries. If any significant deviation from the recommendation is approved, it will be documented in Board minutes and with the final dividend recommendation.
Dividends are credited to policies on the anniversary date or as otherwise specified by the policy. For certain groups of policies, dividends may vary according to the amount of any policy loan. Other dividends called terminal or special maturity dividends may be credited to a policy upon surrender or maturity of the policy, or upon death of the insured. The type of policy, the amount of time it has been in force and the manner of its termination will affect eligibility for, and the amount of, the terminal or special maturity dividend, if any.
The Company may, from time to time, acquire participating business from other insurers. This Dividend Policy is intended to apply to such acquired business, subject to the terms and conditions applying to the acquisition.
This Dividend Policy is subject to change from time to time at the discretion of the Board of Directors of the Company, subject to applicable law. The principal factors that might cause the Board of Directors of the Company to review this policy include legislative or regulatory changes, significant corporate restructuring, significant unforeseen events, or a desire to clarify this policy.
Approved by the Board on February 15, 2012, effective immediately.
Minor changes were approved by the Appointed Actuary on November 6, 2013 and were effective immediately.