Sun Life Financial Reports Fourth Quarter and Full Year 2017 Results

The information in this document is based on the unaudited interim financial results of Sun Life Financial Inc. for the period ended December 31, 2017. Sun Life Financial Inc., its subsidiaries and, where applicable, its joint ventures and associates are collectively referred to as "the Company", "Sun Life Financial", "we", "our", and "us". Unless otherwise noted, all amounts are in Canadian dollars. Beginning in the first quarter of 2017, we stopped reporting operating net income and its related measures, operating earnings per share ("EPS") and operating return on equity ("ROE"). The adjustments previously used to derive operating net income will continue to be used to derive underlying net income.

TORONTO, Feb. 14, 2018 /CNW/ - Sun Life Financial Inc. (TSX: SLF) (NYSE: SLF) today announced its results for the fourth quarter ended December 31, 2017. Fourth quarter reported net income was $207 million and underlying net income⁽¹⁾ was $641 million.

• Minimum Continuing Capital and Surplus Requirements ("MCCSR")⁽⁴⁾ ratio for Sun Life Assurance Company of Canada of 221%. The MCCSR ratio for Sun Life Financial Inc. was 246%, which includes cash and other liquid assets of $2.0 billion for Sun Life Financial Inc. and its wholly-owned holding companies⁽³⁾
• Insurance sales⁽¹⁾ were $1,106 million in the fourth quarter of 2017 ($1,071 million in the fourth quarter of 2016) and $3,042 million in 2017 ($2,758 million in 2016). Wealth sales⁽¹⁾ were $35.3 billion in the fourth quarter of 2017 ($37.3 billion in the fourth quarter of 2016) and $145.3 billion in 2017 ($138.3 billion in 2016)
• Global assets under management of $975 billion compared to $903 billion as at December 31, 2016
• Common share dividend declared of $0.455 per share

"2017 was a year of strong financial performance for Sun Life. We grew underlying net income 9% in the year to over $2.5 billion, raised our common share dividend 8% in the year, and generated a 12.7% underlying return on equity," said Dean Connor, President & CEO, Sun Life Financial.

"Our fourth quarter capped off a year of continued momentum on a number of fronts," said Connor. "We launched new digital offerings in Canada, improved the profitability of our U.S. Group Benefits business, continued building out our wealth and asset management businesses, and invested to grow our distribution capabilities in Asia."

"The year was also defined by a relentless focus on doing more for Clients. Sun Life teams around the world implemented hundreds of Client-focused changes – big and small. Taken together, we are making a difference in our Clients' lives, and there is so much more to do to help them achieve lifetime financial security and live healthier lives. An exciting initiative is our new partnership in the U.S. with Collective Health, an innovative technology company that serves as an alternative to traditional health plans for self-funded employers. Leveraging their advanced health benefits platform, together we intend to transform the benefits experience for self-funded employers and their employees by integrating stop-loss protection into Collective Health's enterprise benefits platform and collaborating on enhanced data analytics to serve these Clients better."

Financial and Operational Highlights

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

Our reported net income in the quarter includes a net charge of $251 million ($444 million pre-tax) related to the U.S. Tax Cuts and Jobs Act ("U.S. tax reform") which reflects the net impact on actuarial liabilities, deferred tax assets and deferred tax liabilities, and a one-time tax charge on deemed repatriation of foreign earnings. Our reported net income also includes the previously announced restructuring charge of $44 million ($60 million pre-tax), related to actions to enhance business processes and organizational structures and capabilities. These impacts are excluded from underlying net income.

A Leader in Insurance and Wealth Solutions in our Canadian home market
SLF Canada's reported net income was $172 million in the quarter, down 57% compared to the same period in 2016, largely reflecting unfavourable market impacts driven predominantly by a decline in interest rates, as well as impacts from adverse assumption changes and management actions ("ACMA"). Underlying net income was $232 million, down 5% from the same period in 2016, due to the release of a litigation provision which increased 2016 underlying net income.

Insurance sales were down 26% mainly due to a decrease in individual insurance sales compared to strong sales in the fourth quarter in 2016 in anticipation of the Canadian life insurance tax legislation changes that came into effect on January 1, 2017, while Group Benefits sales were in line with fourth quarter of 2016, reaching $10 billion of business in-force driven by strong sales in 2017. Wealth sales were down 32% compared to the same quarter last year mainly due to a large-case sale in Group Retirement Services ("GRS") in 2016, while individual wealth sales were in line with the prior year.

In the quarter, we enhanced the my Sun Life mobile app by adding dental and vision providers to our growing network of paramedical healthcare providers, and we now have a network of over 3 million ratings of 110,000 providers where our Clients can locally search, view ratings by peers, and click to call for appointments. In the quarter SLGI⁽¹⁾ achieved $20 billion in assets under management ("AUM"), and subsequent to the quarter closed the acquisition of Excel Funds Management Inc. ("Excel"), adding approximately $800 million in AUM, expanding our product suite into emerging market funds. Excel's India fund had the highest return of any mutual fund or exchange-traded fund in Canada for the 15-year period ending December 31, 2017, according to data from Morningstar.

A Leader in U.S. Group Benefits and International high net worth solutions
Reported net loss was $25 million, down from the same quarter in the prior year, reflecting the unfavourable impact of the U.S. tax reform and unfavourable market related impacts primarily driven by interest rates. SLF U.S.'s underlying net income was $126 million, up 45% from the same quarter in the prior year. This reflects improved underwriting experience in Group Benefits, as our pricing actions, investments in claims management and expense initiatives, as well as progress on the integration of the U.S. employee benefits business acquired in 2016, continue to improve profitability. The after-tax profit margin for Group Benefits increased to 5.0%⁽¹⁾ in 2017.

Insurance sales increased by 22% compared to the same quarter in 2016, with increases in Group Benefits mainly driven by strong medical stop-loss sales, partially offset by lower group life and disability sales as a result of pricing discipline and fewer large cases. Insurance sales results also reflect strong International life sales.

In addition to partnering with CollectiveHealth Inc. during the quarter, we formed a stop-loss arrangement with Pareto Captive Services, providing captive solutions for employers seeking an alternative way to self-fund while pooling financial risks. In our dental and vision portfolio, we delivered more options for Clients by adding a new plan to our Vision offering and launching our new Sun Life Dental Network® which is the largest preferred provider ("PPO") dental network in the U.S.⁽²⁾

A Leader in global Asset Management
SLF Asset Management's reported net income of $114 million was down 42% from the fourth quarter of 2016 largely due to the unfavourable impact of the U.S. tax reform. Underlying net income was $226 million in the fourth quarter of 2017, up 20% from the fourth quarter of 2016, driven by higher average net assets resulting in a pre-tax operating profit margin ratio for MFS⁽¹⁾ of 40%.

SLF Asset Management ended the fourth quarter with $678 billion in assets under management consisting of $618 billion (US$492 billion) from MFS Investment Management ("MFS") and $59 billion from Sun Life Investment Management ("SLIM"). SLIM continued its momentum with net inflows of $1.6 billion while MFS net outflows of $5.0 billion (US$4.0 billion) in the quarter were primarily driven by institutional Client portfolio re-balancing. 

MFS long-term retail fund performance remained strong with 84%, 79% and 92% of MFS's U.S. retail mutual fund assets ranked in the top half of their Lipper categories based on three-, five-, and ten-year performance, respectively, as of December 31, 2017.

A Leader in Asia through Distribution Excellence in Higher Growth Markets
SLF Asia's reported net income was up 43% from the fourth quarter of 2016, reflecting the favourable impact of ACMA, partially offset by less favourable market related impacts primarily driven by interest rates. Underlying net income was $80 million, up 29% from the fourth quarter of 2016, reflecting continued growth in our wealth businesses and contributions from our joint ventures.

SLF Asia insurance sales were $203 million in the fourth quarter of 2017, largely in line with the fourth quarter of 2016, with growth across all markets except Hong Kong. SLF Asia wealth sales were $3.6 billion in the fourth quarter of 2017, compared to $3.1 billion in the fourth quarter of 2016. Strong wealth sales were led by continued growth in our Indian joint venture mutual fund company, and our asset management company in the Philippines, as well as our growing pension business in Hong Kong.

Sun Life Malaysia enhanced its new arrangement with U Mobile announced earlier in the year by launching GOLIFE in November, 2017. This first-of-its-kind telco-assurance product allows Clients to apply, subscribe and manage their life insurance policies entirely on their mobile device. In addition, Sun Life Hong Kong completed the acquisition of the Mandatory Provident Fund business and commenced an exclusive 15-year distribution agreement with FWD Life Insurance Company (Bermuda) Limited ("FWD"), in Hong Kong, in the quarter.

About Sun Life Financial

Sun Life Financial Inc. ("SLF Inc.") is a leading international financial services organization providing insurance, wealth and asset management solutions to individual and corporate Clients. Sun Life Financial 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, 2017, Sun Life Financial had total assets under management ("AUM") of $975 billion. For more information please visit www.sunlife.com.

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

A. How We Report Our Results

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

The information in this document is in Canadian dollars unless otherwise noted.

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 as alternatives to measures of financial performance determined in accordance with IFRS. Additional information concerning these non-IFRS financial measures and reconciliations to the closest IFRS measures are available in section J - Non-IFRS Financial Measures in this document. Non-IFRS Financial Measures and reconciliations are also included in our annual and interim MD&A and the Supplementary Financial Information packages that are available on www.sunlife.com under Investors – Financial results & 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 K - Forward-looking Statements in this document.

3. Additional Information
Additional information about SLF Inc. can be found in our Annual and Interim Consolidated Financial Statements, annual and interim MD&A and Annual Information Form ("AIF"). 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&As and Interim Consolidated Financial Statements are furnished to the SEC on Form 6-Ks and are available at www.sec.gov.

B. Financial Summary

C. Profitability

The following table reconciles our reported net income and underlying net income. The table also sets out the impact that other notable items had on our reported net income and underlying net income in 2017 and 2016. All factors discussed in this document that impact our underlying net income are also applicable to reported net income.

Q4 2017 vs. Q4 2016

Our reported net income was $207 million in the fourth quarter of 2017, a decrease compared to the same quarter in 2016, mainly driven by the unfavourable impact of the U.S. tax reform, the restructuring charge, and the impact from interest rates. The 14% increase in underlying net income compared to the same quarter in 2016, to $641 million, reflected the growth in our wealth businesses and favourable morbidity and mortality experience.

1.   Market related impacts⁽¹⁾
Market related impacts in the fourth quarter of 2017 compared to the fourth quarter of 2016 was primarily driven by unfavourable interest rate changes reflecting decreases in long term risk free rates in the fourth quarter of 2017 compared to increases in 2016, and flattening of the yield curve, partially offset by favourable changes in fair values of real estate.

2.  Assumption changes and management actions⁽¹⁾
During the fourth quarter of 2017, the net impact of ACMA resulted in a decrease of $34 million (excluding the impact of the U.S. tax reform) to reported net income which included updates to lapse and other policyholder behaviour, compared to an increase of $10 million in the fourth quarter of 2016.

3.  Other adjustments⁽¹⁾
Other adjustments decreased reported net income by $92 million in the fourth quarter of 2017, which compared to the fourth quarter of 2016, were primarily driven by the restructuring charge of $44 million ($60 million pre-tax), related to actions to enhance business processes and organizational structures and capabilities, and fair value adjustments on MFS's share-based payment awards.

4.  U.S. tax reform
The U.S. tax reform legislation signed into law on December 22, 2017, which took effect on January 1, 2018 includes a reduction to the U.S. corporate tax rate from 35% to 21% for tax years beginning after 2017, changes to the amount of reserves that are tax deductible, and a one-time tax on the deemed repatriation of foreign earnings. In addition, this legislation includes a number of base broadening measures including provisions limiting the deductibility of certain amounts including payments to related foreign taxpayers, and expanded rules impacting foreign source income of non-US affiliates.  

As a result of this legislation, the Company has booked a net charge of $251 million ($444 million pre-tax) in the fourth quarter of 2017. This reflects an after-tax charge of $288 million ($444 million pre-tax) to ACMA, and a one-time charge on the deemed repatriation of foreign earnings of $46 million. These are partially offset by a benefit of $83 million⁽¹⁾ relating to the revaluation of deferred tax balances from 35% to 21%.

5.  Experience related items
Experience related items in the fourth quarter of 2017 compared to the fourth quarter of 2016 reflected favourable morbidity and mortality experience primarily in SLF U.S. Group Benefits and improved expense experience. Expense experience in both periods included incentive compensation costs arising from overall strong business performance and investments in growing our businesses.

6.  Income taxes
In the fourth quarter of 2017, our effective income tax rates on reported net income and underlying net income⁽²⁾ were (36.7)% and 21.5%, respectively, compared to 19.5% and 16.5%, respectively, in the fourth quarter of 2016. Our effective tax rate on reported net income for the fourth quarter of 2017 is below our expected range, primarily due to the impacts of the U.S. tax reform. Our effective tax rate on underlying net income is within our expected range.

Our expected tax range for future years is revised to 15% to 20% as a result of the U.S. tax reform. 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 that are expected to decrease our effective tax rate. This new range is based on our current understanding of the base broadening measures referred to in section 4. above, which could impact our corporate structure and/or arrangements between our affiliates. There is also uncertainty surrounding the U.S. states' interpretation of the U.S. tax reform and the extent to which they will conform with the federal legislation. Note that we expect additional interpretive guidance on these provisions to be issued by the Internal Revenue Service, U.S. Treasury and state tax departments in the future. Such future guidance could impact this updated range.

7.  Impact of foreign exchange rates
During the fourth quarter of 2017, our reported net income and underlying net income decreased by $9 million and $22 million, respectively, as a result of the impact of the movement of the Canadian dollar in the fourth quarter of 2017 relative to the average exchange rates in the fourth quarter of 2016.

2017 vs. 2016

Our reported net income decreased to $2,149 million for 2017 compared to 2016, reflecting the unfavourable impact of the U.S. tax reform, the restructuring charge in the fourth quarter, integration costs, Fair value adjustments on MFS's share-based payment awards, and interest rates impacts. Underlying net income growth of 9% to $2,546 million reflected favourable mortality and morbidity experience, partially offset by a lower level of gains from investing activity, unfavourable lapse experience and the impact of foreign exchange rates.

1.  Market related impacts⁽¹⁾
Market related impacts in 2017 compared to 2016 was primarily driven by unfavourable changes in interest rates reflecting the flattening of the yield curve in 2017 as long term interest rates dropped compared to rising long term interest rates in 2016, and the unfavourable impact of significant increases in swap spreads. This was partially offset by favourable changes in the fair value of real estate.

2.  Assumption changes and management actions⁽¹⁾
ACMA increased reported net income by $81 million in 2017 (excluding the impact of the U.S. tax reform), compared to an increase of $45 million in 2016. See section D - Profitability - 2017 vs. 2016 - ii. Assumption changes and management actions in our 2017 annual MD&A for details on ACMA in 2017.

3.  Other adjustments⁽¹⁾
Other adjustments in 2017 decreased reported net income by $220 million, which compared to 2016 were primarily due to the impact of integration costs related to the U.S. employee benefits business acquired in 2016 of $68 million ($105 million pre-tax), the restructuring charge of $44 million ($60 million pre-tax) related to actions to enhance business processes and organizational structures and capabilities, and Fair value adjustments on MFS's share-based payment awards.

4.  U.S. tax reform
As a result of the U.S. tax reform legislation signed into law on December 22, 2017, which took effect on January 1, 2018, the Company has booked a net charge of $251 million in fourth quarter of 2017. See Q4 2017 vs. Q4 2016 for more information.

5.  Experience related items
Experience related items in 2017 compared to 2016 reflected favourable mortality and morbidity experience in the SLF U.S. Group Benefits business, improved mortality experience in SLF Canada and SLF U.K. and improved expense experience. Expense experience in both periods includes incentive compensation costs arising from overall strong business performance and investments in growing our businesses. Experience related items also reflected a lower level of gains from investing activity on insurance contract liabilities and unfavourable lapse and other policyholder behaviour experience.

6.  Income taxes
For 2017, our effective tax rates on reported and underlying net income⁽²⁾ were 10.8% and 20.5%, respectively, compared to 18.0% and 20.9%, respectively, for 2016. Our effective tax rate on reported net income for 2017 was most notably impacted by higher reported net income in jurisdictions with lower statutory income tax rates and losses in jurisdictions with higher statutory income tax rates, by the U.S. tax reform, ACMA in SLF U.S., as well as the finalization of prior years' tax filings, which have resulted in an unusually low effective tax rate on a reported basis for 2017. Our effective tax rate on underlying net income is within our expected range. See Q4 2017 vs. Q4 2016 for - 6 - Income Taxes for additional information on our expected effective tax rate range.

7.  Impact of foreign exchange rates
During 2017, our reported and underlying net income decreased by $53 million and $56 million, respectively, as a result of the impact of the movement of the Canadian dollar in 2017 relative to the average exchange rates in 2016.

D. Growth

1.  Sales

Total Company insurance sales were $1,106 million in the fourth quarter of 2017, up 3% (7% on a constant currency basis) compared to the same period in 2016.

• SLF Canada insurance sales decreased, mainly due to the strong individual life insurance sales in the fourth quarter in 2016 in anticipation of the Canadian life insurance tax legislation changes that came into effect on January 1, 2017
• SLF U.S. insurance sales increased mainly reflecting higher stop-loss sales, benefiting from strong market penetration, partially offset by lower employee benefits sales as part of the pricing actions this year and the currency impact from the change in the Canadian dollar
• SLF Asia insurance sales were up 3% on a constant currency basis, reflecting sales growth in all markets except Hong Kong

Total Company wealth sales were $35.3 billion in the fourth quarter of 2017, down 5% (1% on a constant currency basis) compared to the fourth quarter of 2016.

• SLF Canada wealth sales decreased, mainly due to lower sales in GRS reflecting a large case sale in the fourth quarter of 2016
• SLF Asia wealth sales were up, primarily led by higher sales in the Philippines, Hong Kong, and India, partially offset by lower sales in China and the currency impact from the change in the Canadian dollar
• SLF Asset Management gross sales were lower, largely attributable to the currency impact from the change in the Canadian dollar and lower mutual fund sales in MFS, partially offset by higher managed fund sales in MFS

2.  Premiums and Deposits

Net premium revenue was $4.1 billion, down $0.3 billion from the fourth quarter of 2016, primarily driven by decreases in GRS in SLF Canada, Hong Kong in SLF Asia and the currency impact from the change in the Canadian dollar, partially offset by higher premiums in International in SLF U.S. and GB in SLF Canada. Net premium revenue was $15.3 billion in 2017, up $0.3 billion from 2016, primarily driven by higher premiums in Individual and GB in SLF Canada and all business units in SLF U.S., partially offset by decreases in Hong Kong in SLF Asia and the currency impact from the change in the Canadian dollar.

Segregated fund deposits were $2.7 billion in the fourth quarter of 2017, compared to $3.7 billion in the fourth quarter of 2016. Segregated fund deposits were $10.9 billion in 2017, compared to $11.6 billion in 2016. In both cases, the decrease was primarily driven by GRS in SLF Canada and the currency impact from the change in the Canadian dollar, partially offset by increases in Individual Wealth in SLF Canada.

Sales of mutual funds were $21.3 billion in the fourth quarter of 2017, a decrease of $1.0 billion over the fourth quarter of 2016, largely reflected the currency impact from the change in the Canadian dollar and lower sales in MFS, partially offset by increased sales from the Philippines and India in SLF Asia. Sales of mutual funds were $87.5 billion in 2017, compared to $84.7 billion in 2016, primarily driven by the growth of sales in India and the Philippines in SLF Asia, partially offset by the currency impact from the change in the Canadian dollar and decreased sales from MFS.

Sales of managed funds were $11.2 billion in the fourth quarter of 2017 increased by $0.9 billion from the fourth quarter of 2016, primarily due to higher sales in MFS and Hong Kong in SLF Asia, partially offset by the currency impact from the change in the Canadian dollar and lower sales in SLIM. Sales of managed funds of $44.1 billion in 2017 increased $3.8 billion from 2016 primarily due to increases from SLIM, MFS, as well as Hong Kong in SLF Asia, partially offset by the currency impact from the change in the Canadian dollar.

ASO premium and deposit equivalents in the fourth quarter of 2017 and for 2017 were both up compared to the same periods in 2016. In both cases, the increase was attributable to increases in GRS and GB in SLF Canada, partially offset by decreases in Hong Kong in SLF Asia and the currency impact from the change in the Canadian dollar.

The currency impact for total premium and deposits for the fourth quarter of 2017 and for 2017 from the change in the Canadian dollar relative to average exchange rates in the fourth quarter of 2016 and in 2016 decreased total premiums and deposits by approximately $1.7 billion and $2.8 billion, respectively.

3.  Assets Under Management
AUM consist of general funds, segregated funds, and other AUM. Other AUM includes mutual funds and managed funds, which include institutional and other third-party assets managed by the Company.

AUM were $974.8 billion as at December 31, 2017, compared to AUM of $903.3 billion as at December 31, 2016. The increase in AUM of $71.5 billion between December 31, 2016 and December 31, 2017 resulted primarily from:

The net outflow of mutual, managed, and segregated funds of $14.7 billion in 2017 was predominantly driven by net outflows from MFS of $28.5 billion, which were partially offset by net inflows of $6.1 billion from each of SLIM and SLF Asia, and $2.6 billion from SLF Canada. For the fourth quarter of 2017, net outflows of mutual, managed and segregated funds were $2.5 billion, predominantly driven by net outflows from MFS of $5.0 billion, partially offset by net inflows of $1.6 billion from SLIM, $0.8 billion from SLF Asia and $0.5 billion from SLF Canada.

E. Financial Strength

As at December 31, 2017, SLF Inc.'s MCCSR ratio was 246%, compared to 253% as at December 31, 2016. The primary difference between the MCCSR ratio of SLF Inc. and Sun Life Assurance relates to cash and liquid assets held at the holding company level of $2,019 million as discussed below and capital related to certain insurance subsidiaries held directly by SLF Inc.

Our total capital consists of subordinated debt and other capital instruments, participating policyholders' equity, and total shareholders' equity which includes common shareholders' equity and preferred shareholders' equity. As at December 31, 2017, our total capital was $27.1 billion, compared to $26.9 billion as at December 31, 2016. The increase in total capital was primarily the result of common shareholders' net income of $2,205 million and the issuance of $400 million of subordinated debentures detailed below, partially offset by the foreign currency translation impact included in other comprehensive income (loss) of a loss of $737 million, the payment of $1,066 million of dividends on common shares, and the redemption of $800 million of subordinated debentures detailed below.

The legal entity, SLF Inc. (the ultimate parent company), and its wholly-owned holding companies had $2,019 million in cash and other liquid assets as at December 31, 2017 ($1,616 million as at December 31, 2016). The increase in cash and liquid assets in these holding companies in 2017 was primarily attributable to net cash generated from operations and the issuance of $400 million of subordinated debentures, which were partially offset by the redemption of $800 million of subordinated debt, shares purchases under the normal course issuer bid and other operational requirements. Liquid assets as noted above include cash and cash equivalents, short-term investments, and publicly traded securities.

As at December 31, 2017, Sun Life Assurance's MCCSR ratio was 221%, compared to 226% as at December 31, 2016. The decrease in Sun Life Assurance's MCCSR ratio over the period primarily resulted from a recapture of a reinsurance arrangement, partially offset by the contribution of reported net income net of dividends. 

On March 2, 2017, SLF Inc. redeemed all of its outstanding $800 million principal amount of Series 2012-1 Subordinated Unsecured 4.38% Fixed/Floating Debentures.

On November 21, 2017, SLF Inc. issued $400 million principal amount of Series 2017-1 Subordinated Unsecured 2.75% Fixed/Floating Debentures due 2027. The net proceeds will be used for general corporate purposes of Sun Life Financial, which may include investments in subsidiaries and repayment of indebtedness.

On January 30, 2018, SLF Inc. redeemed all of the outstanding $400 million principal amount of Series 2008-1 Subordinated Unsecured 5.59% Fixed/Floating Debentures at a redemption price equal to the principal amount together with accrued and unpaid interest to that date.

Life Insurance Capital Adequacy Test
The Office of the Superintendent of Financial Institutions ("OSFI") has implemented a revised regulatory capital framework referred to as the Life Insurance Capital Adequacy Test ("LICAT") in Canada effective January 1, 2018. OSFI's objective is to create a new capital framework that results in improved overall quality of available capital, greater risk sensitivity, better measurement of certain risks and closer alignment of risk measures with the economics of the life insurance business. LICAT is not expected to significantly change the level of excess capital in the industry, however capital requirements by company may change. Results as measured under LICAT are fundamentally different than under MCCSR and will not be directly comparable to MCCSR. OSFI released the final LICAT Guideline on November 24, 2017. 

We currently have a strong capital position under MCCSR and expect that to continue under LICAT.

Normal Course Issuer Bid
On August 14, 2017, SLF Inc. launched a normal course issuer bid under which it is authorized to purchase up to 11.5 million common shares between August 14, 2017 and August 13, 2018. During the fourth quarter of 2017, SLF Inc. purchased and cancelled approximately 1.7 million common shares at a total cost of $87 million. During 2017, SLF Inc. purchased and cancelled approximately 3.5 million common shares at a total cost of $175 million.

F. Performance by Business Group

Information describing the business groups and their respective business units is included in our 2017 annual MD&A. All factors discussed in this document that impact our underlying net income are also applicable to reported net income.

1.  SLF Canada

Profitability

Q4 2017 vs. Q4 2016
SLF Canada's reported net income was $172 million in the fourth quarter of 2017, compared to $398 million in the fourth quarter of 2016. Underlying net income in the fourth quarter of 2017 was $232 million, compared to $243 million in the fourth quarter of 2016.

Reported net income in the fourth quarter of 2017 compared to the fourth quarter of 2016 reflected unfavourable market related impacts primarily driven by interest rates and lower equity market gains partially offset by real estate appreciation, and the unfavourable impact of ACMA in the fourth quarter of 2017 within Individual Insurance & Wealth. Underlying net income in the fourth quarter of 2017 compared to the same period in 2016 decreased due to the release of a litigation provision which increased 2016 underlying net income.

2017 vs. 2016
Reported net income was $963 million in 2017, compared to $936 million in 2016. Underlying net income was $949 million in 2017, compared to $887 million in 2016.

Reported net income in 2017 compared to 2016 reflected less favourable market related impacts driven by the impact of interest rate and swap spreads partially offset by real estate gains. The impact of ACMA in 2017 was primarily in Individual Insurance & Wealth and favourable compared to the prior year. Underlying net income in 2017 compared to 2016 reflected higher new business gains, favourable mortality experience with GRS and Individual Wealth, and favourable credit experience, partially offset by lower investing activity gains.

Growth

Q4 2017 vs. Q4 2016
SLF Canada insurance sales were $227 million in the fourth quarter of 2017, compared to $308 million in the fourth quarter of 2016. Individual insurance sales of $120 million were 41% lower than the fourth quarter of 2016 following a strong fourth quarter in 2016 in anticipation of the Canadian life insurance tax legislation changes that came into effect on January 1, 2017. Sales in Group Benefits of $107 million increased 2% compared to fourth quarter 2016, continuing its sales momentum experienced over the first nine months of the year.

SLF Canada wealth sales of $3.2 billion in the fourth quarter of 2017 decreased compared to $4.7 billion in the fourth quarter of 2016, primarily due to GRS sales, largely reflecting a large Client sale in the fourth quarter of the prior year. Individual wealth sales of $1.5 billion were level compared to the same quarter of the prior year.

2017 vs. 2016
SLF Canada insurance sales were $1,125 million in 2017, compared to $950 million in 2016. Individual insurance sales of $451 million were down 5% from the same period in the prior year, driven by strong sales in the fourth quarter of the prior year in anticipation of the Canadian life insurance tax legislation changes that came into effect on January 1, 2017. Sales in Group Benefits of $674 million increased 42% compared to 2016 driven by several large case sales.

SLF Canada wealth sales were $15.0 billion in 2017, compared to $13.2 billion in 2016. Individual wealth sales of $5.9 billion were up 9% in 2017 compared to 2016, driven by continued growth in our wealth manufactured⁽¹⁾ products, including SLGI⁽²⁾ mutual funds and Sun GIF⁽³⁾ segregated funds. GRS sales of $9.1 billion were 16% ahead of 2016, due to increased renewal activity.

One of our key initiatives is to continue growing our Individual Wealth manufactured products, SLGI mutual funds and Sun Life Guaranteed Investment Funds segregated funds. AUM for our wealth businesses, including GRS, was $120.8 billion, increased from $111.5 billion in 2016.

2.  SLF U.S.

Profitability

Q4 2017 vs. Q4 2016
SLF U.S.'s reported net loss was US$19 million ($25 million) in the fourth quarter of 2017, compared to reported net income of US$80 million ($106 million) in the fourth quarter of 2016. Underlying net income was US$99 million ($126 million), compared to US$65 million ($87 million) in the fourth quarter of 2016. The impact from the movement of the Canadian dollar in the fourth quarter of 2017 relative to average exchange rates in the fourth quarter of 2016 decreased underlying net income by $6 million.

Reported net loss in the fourth quarter of 2017 compared to reported net income in the fourth quarter of 2016 reflected the unfavourable impact of the U.S. tax reform and market related impacts driven by interest rates, largely in In-force Management.

Underlying net income was up 52% in U.S. dollars from the fourth quarter 2016 resulting in after-tax profit margin for Group Benefits⁽¹⁾ to increase to 5.0% from 3.5% for the comparable period in 2016. This reflects our improved underwriting experience in the group life and disability businesses, as our pricing actions, investments in claims management and expense initiatives, as well as progress on the integration of the U.S. employee benefits business acquired in 2016, continue to progress. These results also reflected more favourable mortality experience in In-force Management, partially offset by lapse and other policyholder experience in In-force Management.

2017 vs. 2016
SLF U.S.'s reported net income was US$240 million ($308 million) in 2017, compared to reported net income of US$385 million ($508 million) in 2016. Underlying net income was US$392 million ($507 million) in 2017, compared to US$339 million ($447 million) in 2016. The impact from the movement of the Canadian dollar in 2017 relative to average exchange rates in 2016 decreased reported net income and underlying net income by $6 million and $11 million, respectively.

Reported net income in 2017 compared to 2016 reflected the adverse impact of the U.S. tax reform and less favourable market impacts primarily driven by interest rates. ACMA in 2017 (excluding the impact of the U.S. tax reform) were primarily driven by the impact in the second quarter of 2017 related to reinsurance and taxes⁽¹⁾.

Underlying net income in 2017 compared to 2016 reflected improved mortality and morbidity experience in Group Benefits, an increase in gains from investing activities on insurance contract liabilities, and a full twelve months of income from the employee benefits business purchased in the prior year. These items were partially offset by unfavourable policyholder behaviour in In-force Management and less favourable mortality experience in International.

Growth

Q4 2017 vs. Q4 2016
SLF U.S. insurance sales were US$532 million in the fourth quarter of 2017, compared to US$415 million in the fourth quarter of 2016. Group Benefit sales increased by 25% to US$494 million reflected strong medical stop-loss sales which almost doubled from the prior year quarter, partially offset by lower group life and disability sales. International life sales of US$38 million increased by 81% compared to the same quarter in 2016, including several large case sales, maintaining a leadership position in this market.

2017 vs. 2016
SLF U.S. insurance sales increased by US$93 million in 2017 compared to 2016, Group Benefits sales increased 9% compared to 2016 driven by increased sales of medical stop-loss insurance. International sales were up 34% in 2017 compared to the prior year.

3.  SLF Asset Management

Profitability

Q4 2017 vs. Q4 2016
SLF Asset Management's reported net income was $114 million in the fourth quarter of 2017, compared to $198 million in the fourth quarter of 2016. SLF Asset Management had underlying net income of $226 million in the fourth quarter of 2017, compared to $188 million in the fourth quarter of 2016. The impact from the movement of the Canadian dollar in the fourth quarter of 2017 relative to average exchange rates in the fourth quarter of 2016 decreased reported net income and underlying net income by $6 million and $11 million, respectively.

SLF Asset Management's reported net income decreased compared to the same quarter in 2016 primarily due to the impact of the U.S. tax reform, which is excluded from underlying net income.

In U.S. dollars, MFS's reported net income was US$72 million in the fourth quarter of 2017, compared to US$142 million in the fourth quarter of 2016. MFS's reported net income compared to the fourth quarter of 2016 reflects the charge related to the U.S. tax reform and the Fair value adjustments on MFS's share-based payment awards. MFS's underlying net income was US$174 million in the fourth quarter of 2017, compared to US$135 million in the fourth quarter of 2016, driven by higher average net assets and lower taxes. MFS's pre-tax operating profit margin ratio was 40% in the fourth quarter of 2017, up from 35% in the fourth quarter of 2016 due primarily to higher average net assets.

SLIM's reported net income was $23 million compared to $9 million in the fourth quarter of 2016, primarily due to a benefit related to the U.S. tax reform discussed above. SLIM's underlying net income was $6 million compared to $9 million in the fourth quarter of 2016.

2017 vs. 2016
SLF Asset Management's reported net income in 2017 was $653 million, compared to $729 million in 2016. Underlying net income was $812 million in 2017, compared to $699 million in 2016. The impact from the movement of the Canadian dollar in 2017 relative to average exchange rates in 2016 decreased reported net income and underlying net income by $14 million and $17 million, respectively.

MFS's reported net income in 2017 was US$471 million, compared to US$528 million in 2016. MFS's reported net income compared to 2016 reflects the Fair value adjustments on MFS's share-based payment awards and the impact related to the U.S. tax reform. MFS's underlying net income was US$610 million in 2017, compared to US$506 million in 2016. MFS's underlying net income in 2017 increased compared to prior year driven primarily by higher average net assets, expense management, and lower taxes.

SLIM's reported net income in 2017 was $41 million compared to $29 million in 2016, primarily due to a benefit related to the U.S. tax reform. SLIM's underlying net income was $24 million compared to $29 million in 2016.

Growth
SLF Asset Management's AUM was $677.6 billion as at December 31, 2017, compared to $624.8 billion as at December 31, 2016. The increase in AUM was primarily due to asset appreciation, partially offset by unfavourable currency impact and net outflows. MFS's AUM was US$491.6 billion ($618.3 billion) as at December 31, 2017, compared to US$425.6 billion ($571.6 billion) as at December 31, 2016. The increase of US$66.0 billion was primarily driven by asset appreciation of US$87.8 billion and gross sales of US$82.1 billion, partially offset by redemptions of US$103.9 billion. Net outflows at MFS were primarily driven by institutional Client portfolio re-balancing and the trend to passive investing. 84%, 79% and 92% of MFS's retail fund assets ranked in the top half of their Lipper categories based on three-, five-, and ten-year performance, respectively, as of December 31, 2017.

SLIM's AUM was $59.3 billion as at December 31, 2017, compared to $53.2 billion as at December 31, 2016. This increase was primarily due to net sales of $6.1 billion.

4.  SLF Asia

Profitability

Q4 2017 vs. Q4 2016
SLF Asia's reported net income was $83 million in the fourth quarter of 2017, compared to reported net income of $58 million in the fourth quarter of 2016. Underlying net income was $80 million, compared to $62 million in the fourth quarter of 2016. The impact from the movement of the Canadian dollar in the fourth quarter of 2017 relative to average exchange rates in the fourth quarter of 2016 reduced both reported net income and underlying net income by $5 million.

Reported net income in the fourth quarter of 2017 compared to the fourth quarter of 2016 reflected favourable impact of ACMA, partially offset by less favourable market related impacts, primarily driven by interest rate changes. Underlying net income in the fourth quarter of 2017, compared to the fourth quarter of 2016, reflected growth in fee income business and contribution from our joint ventures.

2017 vs. 2016
Reported net income was $326 million in 2017, compared to $309 million in 2016. Underlying net income in 2017 was $330 million, compared to $295 million in the prior year. The impact from the movement in the Canadian dollar in 2017 relative to average exchange rates in 2016 decreased reported net income and underlying net income by $18 million and $19 million, respectively.

Reported net income in 2017 compared to 2016 reflected favourable impact from ACMA, partially offset by higher unfavourable market related impacts, primarily driven by equity market changes. 2016 reflected the favourable impact of acquisition, integration and restructuring amounts related to remeasuring our existing investment to fair value upon acquiring control over the operations of Sun Life Vietnam Insurance Company Limited ("Sun Life Vietnam") and over the operations of Sun Life Financial Indonesia. Underlying net income in 2017 compared to 2016 reflected growth in fee income business and higher level of gains from available-for-sale ("AFS") assets.

Growth

Q4 2017 vs. Q4 2016
SLF Asia insurance sales were $203 million in the fourth quarter of 2017, compared to $208 million in the fourth quarter of 2016. Total individual insurance sales decreased 2% compared to the fourth quarter of 2016 due to the strengthening of the Canadian dollar and lower sales in Hong Kong. On a constant currency basis, individual insurance sales increased 3%. With the exception of lower sales in Hong Kong, all other markets achieved double-digit growth.

SLF Asia wealth sales were $3.6 billion in the fourth quarter of 2017, compared to $3.1 billion in the fourth quarter of 2016. Strong wealth sales were led by continued growth in equity and fixed income funds in our Indian joint venture mutual fund company, Aditya Birla Sun Life AMC Limited, and our asset management company in the Philippines, as well as our growing pensions business in Hong Kong.

2017 vs. 2016
SLF Asia insurance sales were $687 million in 2017, compared to $660 million in 2016. Total individual insurance sales in 2017 increased 5% from 2016. On a constant currency basis, individual insurance sales increased 9% driven by our increase in ownership in Indonesia, Vietnam and India, as well as organic growth in all markets except Hong Kong.

SLF Asia wealth sales were $13.1 billion in 2017, compared to $8.8 billion in 2016. Wealth sales grew by 49% on a constant currency basis over 2016, driven by exceptional growth in our mutual fund operations in India and the Philippines, as well as our Hong Kong pensions business.

5. Corporate

Profitability

Q4 2017 vs. Q4 2016
Corporate had reported net loss of $137 million in the fourth quarter of 2017, compared to reported loss of $32 million in the fourth quarter of 2016. Reported net loss in Corporate in the fourth quarter of 2017 reflected the unfavourable impact of acquisition, integration and restructuring amounts and the impact of the U.S. tax reform. Underlying net loss was $23 million, compared to underlying loss of $20 million in the fourth quarter of 2016.

SLF U.K.'s reported net income in the fourth quarter of 2017 decreased compared to the fourth quarter of 2016 which reflected impacts from the treatment of policyholder tax losses, ACMA, and a lower level of gains from investing activity on insurance contract liabilities, partially offset by favourable mortality.

Corporate Support had a reported net loss of $143 million in the fourth quarter of 2017, compared to a reported net loss of $58 million in the fourth quarter of 2016. The increase in loss was primarily due to the restructuring charge related to actions to enhance business processes and organizational structures and capabilities and the impact of the U.S. tax reform in Run-off reinsurance.

2017 vs. 2016
The reported net loss was $101 million in the Corporate segment in 2017, compared to a reported net income of $3 million in 2016, reflected the unfavourable impact of acquisition, integration and restructuring amounts and the impact of the U.S. tax reform, partially offset by the favourable impact of ACMA. Underlying net loss was $52 million in 2017, compared to an underlying net income of $7 million in the prior year. The impact from the movement of the Canadian dollar relative to average exchange rates in 2017 increased reported net loss by $15 million and increased underlying net loss by $9 million.

SLF U.K.'s reported net income in 2017 compared to 2016 reflected the favourable impact of ACMA, improved equity markets and favourable mortality experience, offset by lower level of gains from investing activity on insurance contract liabilities and impacts from the treatment of policyholder tax losses.

In Corporate Support, the reported net loss in 2017 was $282 million compared to a reported net loss of $181 million in 2016 primarily due to the impact of the U.S. tax reform and the restructuring charge related to actions to enhance business processes and organizational structures.

G. Investments

We had total general fund invested assets of $146.1 billion as at December 31, 2017, compared to $142.4 billion as at December 31, 2016. The increase in general fund invested assets was primarily due to changes in operating activity and net fair value growth, partially offset by the currency impact of the strengthening Canadian dollar and the net redemption of subordinated debt. Our general fund invested assets are well diversified across investment types, geographies and sectors with the majority of our portfolio invested in fixed income high quality assets.

The following table sets out the composition of our general fund invested assets.⁽¹⁾

1. Debt Securities
Our 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. 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 on our Consolidated Statements of Financial Position as at December 31, 2017.

The carrying value of FVTPL and AFS debt securities by geographic location is presented in the following table.

Our debt securities with a credit rating of "A" or higher represented 70.6% of the total debt securities as at December 31, 2017, compared to 69.6% as at December 31, 2016. Debt securities with a credit rating of "BBB" or higher represented 98.3% of total debt securities as at December 31, 2017, compared to 97.6% as at December 31, 2016.

Our gross unrealized losses as at December 31, 2017 for FVTPL and AFS debt securities were $0.3 billion and $0.1 billion, respectively, compared with $0.7 billion and $0.1 billion, respectively, as at December 31, 2016.

2. Mortgages and Loans
Mortgages and loans disclosures in this section are presented at their carrying value on our Consolidated Statements of Financial Position. Our mortgage portfolio consisted almost entirely of first mortgages and our loan portfolio consisted of private placement loans.

The carrying value of mortgages and loans by geographic location is presented in the following table.⁽¹⁾

Mortgages and Loans by Geography

As at December 31, 2017, we held $15.5 billion of mortgages, compared to $15.4 billion as at December 31, 2016. Our mortgage portfolio consists entirely of commercial mortgages, including retail, office, multi-family, industrial and land properties. As at December 31, 2017, 30% 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 55% as at December 31, 2017, consistent with December 31, 2016. 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 1.77 times. Of the $3.2 billion of multi-family residential mortgages in the Canadian commercial mortgage portfolio, 91% were insured by the CMHC.

As at December 31, 2017, we held $27.3 billion of loans, compared to $25.4 billion as at December 31, 2016. 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 sized corporate borrowers, securitized lease/loan obligations secured by a variety of assets, and project finance loans in sectors such as power and infrastructure.

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.

Our impaired mortgages and loans, net of allowance for losses, were $72 million as at December 31, 2017, compared to $16 million as at December 31, 2016. The increase of $56 million in impaired loans was primarily due to the addition of two creditors in the first quarter of 2017.

3. 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 not exchanged.

The total notional amount of our derivatives decreased to $54.1 billion as at December 31, 2017 from $54.4 billion as at December 31, 2016 reflecting a decline in interest rate contracts, partially offset by foreign currency contracts.

The net fair value of derivatives was a net liability of $278 million as at December 31, 2017, compared to a net liability of $904 million as at December 31, 2016. The increase in net fair value was primarily due to the impact of the strengthening of the Canadian dollar against the U.S. dollar on foreign exchange contracts, partially offset by upward shifts in the yield curve.

4. 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, 2017 was $2,288 million compared to $2,247 million as at December 31, 2016. The increase of $41 million was primarily due to increases in the provision for assets purchased, net of dispositions offset by strengthening of the Canadian dollar and the release of provisions on fixed income assets supporting our insurance contract liabilities.

H. Risk Management

The Company has established a Risk Management Framework to assist in identifying, measuring, managing, monitoring and reporting risks. The Risk Management Framework covers all risks and these have been grouped into six major categories: credit, market, insurance, business and strategic, operational and liquidity risks.

Through our enterprise risk management processes, we oversee the various risk factors identified in the Risk Management Framework and provide reports to senior management and to the Board Committees at least quarterly. Our enterprise risk management processes and risk factors are described in our annual MD&A and AIF.

When referring to segregated funds in this section, it is inclusive of segregated fund guarantees, variable annuities and investment products and includes Run-off reinsurance in our Corporate business segment.

1. 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 Annual 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 Annual Consolidated Financial Statements. Refer to Additional Cautionary Language and Key Assumptions Related to Sensitivities in this section for important additional information regarding these estimates.

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 (decreases) with rising (declining) equity markets. Changes in the market value of AFS assets flow through other comprehensive income ("OCI") and are only recognized in net income when realized upon sale, or when considered impaired. The amount of realized gains (losses) recorded in net income in any period is equal to the unrealized gains (losses) or OCI position at the start of the period plus the change in market value during the current period up to the point of sale for those securities that were sold during the period. The sale or impairment of AFS assets held in surplus can therefore have the effect of modifying our net income sensitivity.

We realized $41 million (pre-tax) in net gains on the sale of AFS assets during the fourth quarter of 2017 ($41 million pre-tax in the fourth quarter of 2016). The net unrealized gains or OCI position on AFS fixed income and equity assets were $171 million and $175 million, respectively, after-tax as at December 31, 2017 ($86 million and $125 million, respectively, after-tax as at December 31, 2016).

The following table sets out the estimated immediate impact on, or sensitivity of our net income and OCI, and Sun Life Assurance's MCCSR ratio to certain instantaneous changes in interest rates and equity market prices as at December 31, 2017 and December 31, 2016.

Interest Rate and Equity Market Sensitivities