For the Year Ended December 31, 2020 - Sun Life Financial

AnnualInformationForm

SunLifeFinancialInc.FortheYearEndedDecember31,2020

February10,2021

TableofContents

AnnualInformationForm

Management'sDiscussion&Analysis(1)

ConsolidatedFinancialStatements

andNotes(1)

CorporateStructure 3

DevelopmentoftheBusiness 3 SectionB

BusinessofSunLife 5 SectionBFinancialPerformance SectionC Notes8-12Investments SectionH Note5RiskManagement SectionJ Note6

CapitalStructure 8 SectionI Note15

Dividends 12 SectionI Note15

SecurityRatings 12 SectionF

TransferAgentsandRegistrar 15

DirectorsandExecutiveOfficers 16

CodeofConduct 20

PrincipalAccountantFeesandServices 20

InterestsofExperts 21

RegulatoryMatters 21 SectionB

RiskFactors 35

LegalandRegulatoryProceedings 52

AdditionalInformation 52

AppendixA-CharteroftheAuditCommittee 53

(1) Asindicated,partsoftheCompany’sMD&A,consolidatedfinancialstatementsandaccompanyingnotesfortheyearendedDecember31,2020areincorporatedbyreferenceinthisAIF.The2020MD&A(asdefinedbelow)andthe2020ConsolidatedFinancialStatements(asdefinedbelow)maybeaccessedatwww.sedar.comandwww.sec.gov,respectively.

AnnualInformationForm2020

SunLifeFinancialInc.|sunlife.com 1

Thefollowingdefinedtermsareusedinthisdocument.

Abbreviation Description Abbreviation Description

AIF AnnualInformationForm OSFI OfficeoftheSuperintendentofFinancialInstitutions,Canada

Board TheBoardofDirectorsofSLFInc. SEC UnitedStatesSecuritiesandExchangeCommission

IFRS InternationalFinancialReportingStandards SunLifeAssurance SunLifeAssuranceCompanyofCanada

LICAT LifeInsuranceCapitalAdequacyTest SLFInc. SunLifeFinancialInc.

MD&A Management'sDiscussion&Analysis Superintendent TheSuperintendentundertheOfficeoftheSuperintendentofFinancialInstitutionsAct

NAIC NationalAssociationofInsuranceCommissioners,UnitedStates

PresentationofInformationInthisAIF,SLFInc.anditsconsolidatedsubsidiariesarecollectivelyreferredtoas“SunLife”,the“Company”,“we”,“us”or“our”andalsoincludes,whereapplicable,ourjointventuresandassociates.

Unlessotherwiseindicated,allinformationinthisAIFispresentedasatandfortheyearendedDecember31,2020,andamountsareexpressedinCanadiandollars.FinancialinformationispresentedinaccordancewithIFRSandtheaccountingrequirementsofOSFI.

DocumentsIncorporatedbyReferenceThefollowingdocumentsareincorporatedbyreferenceinandformpartofthisAIF:(i) SLFInc.'sMD&AfortheyearendedDecember31,2020(our“2020MD&A”),and(ii) SLFInc.'sConsolidatedFinancialStatementsandaccompanyingnotesfortheyearendedDecember31,2020(our“2020

ConsolidatedFinancialStatements”).

ThesedocumentshavebeenfiledwithsecuritiesregulatorsinCanadaandwiththeSECandmaybeaccessedatwww.sedar.comandwww.sec.gov,respectively.

Forward-lookingStatementsFromtimetotime,theCompanymakeswrittenororalforward-lookingstatementswithinthemeaningofcertainsecuritieslaws,includingthe"safeharbour"provisionsoftheUnitedStatesPrivateSecuritiesLitigationReformActof1995andapplicableCanadiansecuritieslegislation.CertainstatementsinthisAIFandthedocumentsincorporatedbyreferencehereinincluding,(i)statementsrelatingtoourstrategies,(ii)statementsthatarepredictiveinnature,(iii)statementsthatdependuponorrefertofutureeventsorconditions,and(iv)statementsthatincludewordssuchas“achieve”,“aim”,“ambition”,“anticipate”,“aspiration”,“assumption”,“believe”,"continue",“could”,“estimate”,“expect”,“goal”,"initiatives",“intend”,“may”,“objective”,“outlook”,“plan”,"potential",“project”,“seek”,“should”,“strategy”,“strive”,“target”,“will”andsimilarexpressionsareforward-lookingstatements.Forward-lookingstatementsincludeinformationconcerningourpossibleorassumedfutureresultsofoperations.Thesestatementsrepresentourcurrentexpectations,estimatesandprojectionsregardingfutureeventsandarenothistoricalfacts,andremainsubjecttochange,particularlyinlightoftheongoinganddevelopingCOVID-19pandemicanditsimpactontheglobaleconomyanditsuncertainimpactonourbusiness.Forward-lookingstatementsarenotaguaranteeoffutureperformanceandinvolverisksanduncertaintiesthataredifficulttopredict.Futureresultsandshareholdervaluemaydiffermateriallyfromthoseexpressedintheseforward-lookingstatementsdueto,amongotherfactors,theimpactoftheCOVID-19pandemicandrelatedeconomicconditionsonouroperations,liquidity,financialconditionsorresultsandthematterssetoutinthisAIFundertheheadingRiskFactorsandinourannualMD&AundertheheadingForward-LookingStatements,andthefactorsdetailedinourannualandinterimfinancialstatementsandotherfilingswithCanadianandU.S.securitiesregulators,whichareavailableforreviewatwww.sedar.comandwww.sec.gov,respectively.

Importantriskfactorsthatcouldcauseourassumptionsandestimates,andexpectationsandprojectionstobeinaccurateandouractualresultsoreventstodiffermateriallyfromthoseexpressedinorimpliedbytheforward-lookingstatementscontainedinthisdocument,aresetoutbelow.Therealizationofourforward-lookingstatements,essentiallydependsonourbusinessperformancewhich,inturn,issubjecttomanyrisks,whichhavebeenfurtherheightenedwiththecurrentCOVID-19pandemicgiventheuncertaintyofitsdurationandimpact.Factorsthatcouldcauseactualresultstodiffermateriallyfromexpectationsinclude,butarenotlimitedto:marketrisks-relatedtotheperformanceofequitymarkets;changesorvolatilityininterestratesorcreditspreadsorswapspreads;realestateinvestments;andfluctuationsinforeigncurrencyexchangerates;insurancerisks-relatedtopolicyholderbehaviour;mortalityexperience,morbidityexperienceandlongevity;productdesignandpricing;theimpactofhigher-than-expectedfutureexpenses;andtheavailability,costandeffectivenessofreinsurance;creditrisks-relatedtoissuersofsecuritiesheldinourinvestmentportfolio,debtors,structuredsecurities,reinsurers,counterparties,otherfinancialinstitutionsandotherentities;businessandstrategicrisks-relatedtoglobaleconomicandpoliticalconditions;thedesignandimplementationofbusinessstrategies;changesindistributionchannelsorClientbehaviourincludingrisksrelatingtomarketconductbyintermediaries



andagents;theimpactofmergers,acquisitions,strategicinvestmentsanddivestitures;theimpactofcompetition;theperformanceofourinvestmentsandinvestmentportfoliosmanagedforClients;changesinthelegalorregulatoryenvironment,includingcapitalrequirements;theenvironmentandsocial,environmentallawsandregulations;operationalrisks-relatedtobreachesorfailureofinformationsystemsecurityandprivacy,includingcyber-attacks;ourabilitytoattractandretainemployees;legal,regulatorycomplianceandmarketconduct,includingtheimpactofregulatoryinquiriesandinvestigations;ourinformationtechnologyinfrastructure;afailureofinformationsystemsandInternet-enabledtechnology;dependenceonthird-partyrelationships,includingoutsourcingarrangements;businesscontinuity;modelerrors;informationmanagement;liquidityrisks-thepossibilitythatwewillnotbeabletofundallcashoutflowcommitmentsastheyfalldue;andotherrisks-COVID-19matters,includingtheseverity,durationandspreadofCOVID-19,actionsbygovernments,monetaryauthoritiesandregulatorsinresponsetotheCOVID-19pandemic,itsimpactontheglobaleconomyanditsimpactonSunLife'sbusiness,financialconditionand/orresults;risksassociatedwithIFRS17and9;ourinternationaloperations,includingourjointventures;marketconditionsthataffectourcapitalpositionorabilitytoraisecapital;downgradesinfinancialstrengthorcreditratings;andtaxmatters,includingestimatesandjudgmentsusedincalculatingtaxes.

TheCompanydoesnotundertakeanyobligationtoupdateorreviseitsforward-lookingstatementstoreflecteventsorcircumstancesafterthedateofthisdocumentortoreflecttheoccurrenceofunanticipatedevents,exceptasrequiredbylaw.

CorporateStructureSLFInc.wasincorporatedundertheInsuranceCompaniesAct,Canada(the“InsuranceAct”)onAugust5,1999,tobecometheholdingcompanyofSunLifeAssuranceinconnectionwiththedemutualizationofSunLifeAssurance.

SunLifeAssurancewasincorporatedin1865asastockinsurancecompanyandwasconvertedintoamutualinsurancecompanyin1962.OnMarch22,2000,SunLifeAssuranceimplementedaplanofdemutualizationunderwhichitconvertedbacktoastockcompanypursuanttoLettersPatentofConversionissuedundertheInsuranceAct.Underthisplanofdemutualization,SunLifeAssurancebecameawholly-ownedsubsidiaryofSLFInc.

TheheadandregisteredofficeofSLFInc.islocatedat1YorkStreet,Toronto,Ontario,M5J0B6.

SLFInc.conductsitsbusinessworldwidethroughdirectandindirectoperatingsubsidiaries,jointventuresandassociates.SLFInc.’sprincipalsubsidiariesareincludedinthesubsidiarieslistedinSLFInc.’sannualreportandthatlistofsubsidiariesisincorporatedhereinbyreference.ThatlistincludesthepercentageofvotingsharesownedbySLFInc.,directlyorindirectly,andwherethosecompaniesareincorporated,continued,formedororganized.SLFInc.’scurrentannualreportisaccessibleonwww.sedar.com,www.sec.govandwww.sunlife.com.

Wemanageouroperationsandreportourfinancialresultsinfivebusinesssegments:Canada,UnitedStates(“U.S.”),AssetManagement,AsiaandCorporate.

DevelopmentoftheBusinessSunLifeisaleadinginternationalfinancialservicesorganizationprovidinginsurance,wealthandassetmanagementsolutionstoindividualandcorporateClients.SunLifehasoperationsinanumberofmarketsworldwide,includingCanada,theUnitedStates,theUnitedKingdom(“UK”),Ireland,HongKong,thePhilippines,Japan,Indonesia,India,China,Australia,Singapore,Vietnam,MalaysiaandBermuda.AsofDecember31,2020,SunLifehadtotalassetsundermanagementof$1.2trillion.

ThreeYearHistory:Acquisitions,Disposals,andOtherDevelopmentsWeassessourbusinessesandcorporatestrategiesonanongoingbasistoensurethatwemakeoptimaluseofourcapitalandprovidemaximumshareholdervalue.Thefollowingsummaryoutlinesourmajoracquisitions,dispositionsandotherdevelopmentsinthepastthreeyearsinourbusinesssegments.AdditionalinformationisprovidedinNote3toSLFInc.'s2020ConsolidatedFinancialStatements.

OnDecember2,2020,weannouncedthatourPresidentandChiefExecutiveOfficer,DeanConnor,intendstoretireonAugust6,2021.KevinStrain,ExecutiveVice-PresidentandChiefFinancialOfficer,willbeappointedasPresidentandamemberoftheBoardeffectiveFebruary15,2021.Mr.StrainwillassumetheChiefExecutiveOfficerroleuponMr.Connor'sretirementinAugust.Mr.ConnorwillalsoretirefromtheBoardinaccordancewithcompanypolicyinAugust2021.



Inearly2020,theworldwasimpactedbyCOVID-19,whichwasdeclaredapandemicbytheWorldHealthOrganization.TheCOVID-19pandemichasaffectedallareasofourbusinessandwearethereforourClients,advisors,employees,communitiesandshareholders.ThepathandimplicationsoftheCOVID-19pandemicarestilluncertainanddependentontheprogressionofthevirus,includinganyvariantstrains,potentialtreatmentsandtherapies,theavailabilityofvaccinesandonactionstakenbygovernments,businessesandindividuals,whichcouldvarybycountryandresultindifferingoutcomes.Giventheextentofthecircumstances,itisdifficulttoreliablymeasureorpredictthepotentialimpactofthisuncertaintyonourfuturefinancialresults.Additionalinformationcanbefoundinour2020MD&Aundertheheading"COVID19",whichsectionisincorporatedbyreferenceherein.

Canada

In2020,wecontinuedtomakestrategicinvestmentsandcollaborations,includingwithDialogue,aCanadiantelemedicineprovidersupportingourLuminoHealthvirtualhealthcareplatform,andwithGoRendezvous,anonlinebookingsoftwarecompanythatallowsClientstoconnectwithparamedicalserviceprovidersdigitallyandscheduleappointments.

InJanuary2018,weacquiredExcelFundsManagementInc.andExcelInvestmentCounselInc.,aCanadianfirmspecializingintheemergingmarketsassetclass.

U.S.InJune2018,weacquiredMaxwellHealth,aBostonbasedstart-upwithacomprehensiveemployeebenefitsplatform.

EffectiveJanuary1,2018,ourInternationalbusinessunitwastransferredfromtheU.S.toAsia.

AssetManagementOnJanuary5,2021,wecompletedtheacquisitionofamajoritystakeinCrescentCapitalGroupLP("Crescent"),aglobalalternativecreditinvestmentmanager,formingthealternativecreditinvestingpillarofSLCManagement.Foradditionalinformation,refertoNote28ofour2020ConsolidatedFinancialStatements.

OnJuly1,2020,weacquired80%ofInfraRedCapitalPartners("InfraRed"),aUK-basedglobalinfrastructureandrealestateinvestmentmanager,aswellastheabilitytoacquiretheremaininginterestinthefuture.Foradditionalinformation,refertoNote3ofour2020ConsolidatedFinancialStatements.

InJuly2019,wecompletedtheacquisitionofamajoritystakeinBentallGreenOak("BGO"),formingtherealestatepillarofSLCManagement.Foradditionalinformation,refertoNote3ofour2020ConsolidatedFinancialStatements.

AsiaInJanuary2020,wecombinedourInternationalbusinessandHongKongbusinessintoanewmanagementstructurecalled"InternationalHubs",toleveragethehigh-net-worthopportunitiesinAsiaandofferourClientsanddistributionpartnersbest-in-classproductandserviceofferingsacrossallgeographies."LocalMarkets"iscomprisedofthePhilippines,Indonesia,India,China,MalaysiaandVietnam."InternationalHubs"iscomprisedofInternationalandHongKong.

EffectiveJanuary1,2018,ourInternationalbusinessunitwastransferredfromtheU.S.toAsia.

VietnamEffectiveJanuary1,2021,welaunchedanexclusive15-yearbancassurancepartnershipwithAsiaCommercialJointStockBankfortheexclusivedistributionoflifeinsuranceproductsofSunLifeVietnamInsuranceCompanyLimited("SunLifeVietnam").

InFebruary2020,wesoldourownershipinterestinCrescentAsiaLimited,theholdingcompanyofGlobalOnlineFinancialSolutionsLimited,whichoperatesTIMO,Vietnam'sfirstdigitalbank.ThepreviouslydisclosedarrangementwithTIMOtoofferlifeandhealthinsuranceproductsofSunLifeVietnamtoTIMO'smembershipbaseisstillineffect.

InOctober2019,weenteredintoa15-yearbancassurancepartnershipwithTienPhongCommercialJointStockBank,adigitalleaderinVietnamesebanking,fortheexclusivedistributionoflifeinsuranceproductsofSunLifeVietnam.

InternationalHubsInDecember2018,wecompletedastrategicinvestmentinBowtieLifeInsuranceCompanyLimited("Bowtie").BowtieoffersinsuranceproductsinorfromHongKongthroughitsdigitaldistributionchannelswithouttheuseofanyconventionalchannelsinvolvinginsuranceagents,banksorinsurancebrokers.



BusinessofSunLifeInformationaboutourbusinessandoperatingsegments,ourstrategy,productsandmethodsofdistribution,riskmanagementpoliciesandinvestmentactivities,isincludedinthe2020MD&A,whichisincorporatedbyreferenceinthisAIF.

Theglobalfinancialservicesindustrycontinuestoevolveinresponsetodemographic,economic,andtechnologicaltrends.Specifictrendsthathaveanimpactonourbusinessesinclude:

Demographic• Majordemographicshiftsindevelopedmarketsincludetheagingofbabyboomersandthegrowthofmillennialsasaclient

segment.Agingbabyboomersaregeneratinggreaterdemandforretirementsolutionsandhealthsolutionsastheyretire,whilemillennialsseekholisticfinancialadviceandsolutions,includingprotectionandwealthaccumulationproductsinpreparationformajorlifeevents.

• ThenumberofHighNetWorthIndividuals("HNWI")andtheirpoolofwealthcontinuestoexpand.Withinthissegment,Asiahaswitnessedthefastestgrowth,surpassingNorthAmericaastheregionwiththelargestshareofwealthheldbyHNWIs.Asthissegmentcontinuestogrow,opportunitieswillexistforfinancialserviceproviders,withindividualsseekingsolutionsthatenablethemtooptimallytransferwealthtofuturegenerations.

• Thetrendofgovernmentsandemployersdownloadingresponsibilitytoindividualscontinues.Thishascreateddemandforprotection,groupbenefitsandgroupretirementsolutionsasindividualsseektofillthegaps.Tohelpthemmakesomeofthesedecisions,consumersareseekingfinancialadviceandassistancewithfinancialplanning.However,itisworthnotingthatthecurrentCOVID-19pandemicmaycausegovernmentsinsomejurisdictionstoreversethistrend.

• GrowingprosperityinAsiaisresultingintheriseoftheyoungmiddleclassinmanyAsiancountries,whichisincreasingthedemandforawidevarietyoffinancialproducts,includinginsurance,savingsandinvestmentvehicles.Lowfinancialliteracyhasalsoincreasedtheimportanceoffinancialeducationandadviceinthisregion.Thesemarketshavelowpenetrationratesandareexpectedtogrowmuchfasterthanindustrializedcountries.IncertainAsianmarkets,suchasHongKongandChina,theagingpopulationiscreatingagrowingopportunityforretirementandhealthsolutions.

• Changesinthenatureofworkandtheriseofthegigeconomy,whereworkistemporary,contractualorproject-based,hascreatedanopportunitytoprovidesolutionstoworkerswhoareleftunsupportedacrosskeylifeneeds(e.g.savings,benefits,andprotection).

• Consumersaremoreproactivelymanagingbothphysicalandmentalhealthandwellness,leadingtoanincreaseddemandforsolutionsinthisarea.Additionally,thecurrentCOVID-19pandemicishavinganegativeimpactonthementalhealthandwell-beingofpeoplearoundtheworld.Thismayleadtoincreaseddemandfortoolsandproductstosupportmentalhealthandwell-being.

• Desireforgreatertransparencyhascausedconsumerstoquestionthevalueexchangewithorganizations.Thishasresultedinanincreaseindemandforlow-costassetmanagementproducts,suchasindexfunds.

Economic• PriortotheCOVID-19pandemic,wehadseenanimprovementineconomicconditionsinrecentyearsacrossmanyofourmain

markets(includingCanada,U.S.andAsia).However,thecurrentCOVID-19pandemichasledtoaglobaleconomicdownturnaffectingmanyofourmarkets.Webelievethisperiodofincreasedeconomic,market,andgeo-politicalvolatilitywillcontinue.Additionally,weareawaretherewillbelong-termeffectsfromthefiscalandmonetarysupportgovernmentsenactedduringtheCOVID-19pandemic,whichmayincludeelevatedgovernmentdebttoGDPratiosandaprolongedperiodoflowinterestrates.Wearemonitoringthesituationcontinuouslyandarereadytotakeactionsasneededtominimizeimpact.

• TheCOVID-19pandemichascausedincreasedunemploymentandledtoanaccelerationofincomeandwealthinequality.Thismayleadtoaslow-downofgrowthforthemiddleclassinsomemarkets.

• Lowinterestratesareincreasingthedifficultyforinvestorstoachievehigheryieldwithrelativelylowerriskinvestments.Insearchforgreaterreturnsinvestorsareseekingalternatives,whichoffergreateryieldinexchangeforilliquidityinordertomeettheirtargetreturns.

• TheCOVID-19pandemichasacceleratedtheuseofdigitaltechnologytoallowforremotework.Companiesmayrelymoreheavilyonthesedigitaltoolsandshiftmoreoftheirworkforcetoremotework.This,inturn,mayhaveanimpactonthecommercialrealestatemarket.

Technological• Digitaladoptioncontinuestogrowrapidlyasconsumersspendanincreasingamountoftimeonlineforeverydayneeds(e.g.,

social,shopping,andbanking).Anincreaseinmobileusageisanespeciallyimportantpartofthisshift.TheCOVID-19pandemichasalsoacceleratedthisshifttodigitalinmanyindustries,includingfinancialservices.Omni-channelcapabilitieswillbecomemoreimportanttocreateaconsistentClientexperienceacrosschannelsandtoserveClientsintheirchannelofchoice.

• ThetrendofincreasingpersonalizationusingdataandanalyticsisallowingcompaniestocreateafrictionlessdigitaluserexperienceastheyareabletobetterengagewithClientsandmeettheirneeds.

• Consumerscontinuetotransferexpectationsfromtechnologycompaniestofinancialservices.AseamlessdigitalexperienceandpersonalizationofadviceandserviceswillbeincreasinglyimportantincreatingbetterexperiencesandoutcomesforClients.



• Consumersarebecomingmoreconcernedabouttheprotectionanduseoftheirdatainanenvironmentofincreasingcollectionanduseoftheirdata,anddatabreaches.MeetingthoseClientconcernsandexpectationswillbekeytomaintainingtheirtrust.

• TheCOVID-19pandemichasalsoacceleratedtheadoptionofdigitalhealthtechnologies,includingtelehealthandremotecare.

CompetitionThemarketsinwhichSunLifeparticipatesarehighlycompetitive.Wecompeteagainstotherinsurancecompanies,banks,assetmanagers,mutualfundcompanies,financialplannersandotherfinancialservicesproviders.Frequently,competitionisbasedonfactorsincludingprice,theabilitytoprovidevalue-addedproductsandservices,financialstrengthandconsistentdeliveryofanexcellentexperiencetodistributorsandClientsthroughbothtraditionalandmoreinnovativedigitalchannels.

Sustainedlowinvestmentyields(andtighteninginvestmentspreads)andevolvingregulatoryrequirementscontinuetobechallengesforourindustryandhaveforcedinsurersandfinancialservicesproviderstoreviewtheirbusinesses,re-focustheiroperationsand,insomecases,discontinueordivestnon-corelinesofbusiness,aswellasacquirebusinesseswithhighergrowthpotential.

Wealsofaceincreasingcompetitionfromnewmarketentrants,includingnon-traditionalserviceproviderssuchasinsurtechandfintechcompanies.TheaccelerationoftheshifttodigitalinteractionsbroughtbytheCOVID-19pandemicmayleadtoanincreaseinthistrend,andafurtherriseofnewmarketentrantswithdisruptivedigitalbusinessmodels.Inaddition,incumbentsareincreasinglypartneringwithstart-upstocompeteinnewandinnovativeways.Bothofthesetrendscouldchallengeexistinginsurance,assetmanagementandwealthmanagementbusinessmodels.Inaddition,bigtechnologycompaniesareenteringthefinancialservicesandhealthcaremarketsbyleveragingtheirlargecustomerbase,stronguserexperiencecapabilities,deeppoolsofdataanddigitalecosystemsofferinginterconnectedservices.Inresponsetothesetrends,SunLifecontinuestoexplorenewbusinessmodelsandseekstrategicpartnershipsthatwilldriveourbusinessesforward.

InCanada,thefederalgovernmentisexaminingthemeritsofopenbanking,whichisanexampleofdataportabilityforbankingtransactionsunderwhichclientsofbankscanasktheirfinancialinstitutiontosecurelytransferorprovideaccesstotheirpersonaldatatoanauthorizedthird-partyserviceprovider,suchasafintech.Anumberofcountrieshaveintroduced,oraremovingtointroduce,openbankingordataportabilityrightswiththeaimofincreasingcompetitionandinnovationinthefinancialservicessector.Wearecontinuingtomonitorhowdataportabilityandanyprivacyandsecurityissueswillaffectthefinancialservicesindustry.

Inadditiontocloselymonitoringpotentialbusinessdisruptors,wealsocontinuouslyadaptbymakinginvestmentsintechnologyandadvancedanalytics,buildingdigitalservicesandtools,andthroughtheextensionofourproductofferings.Belowaresomeexamplesofhowweareadaptinginthesekeyareas:• Digitizingcurrentinteractionsandprocesses:Webandmobilefunctionality(e.g.,e-Applications,e-claims);facilitatingvirtual

interactions(e.g.,videomeetings,e-signatures);digitalbenefitsenrollmentintheU.S.andforsmallbusinessesinCanada.• Usingdata&analyticstobepersonal,predictiveandproactive:DigitalBenefitsAssistantandEllainCanada;MaxwellHealth,a

digitalbenefitsmarketplaceintheU.S.• Buildingnewbusinessmodels:LuminoHealth,whichallowsallCanadianstoaccessprovidersearchanddiscoverinnovative

healthsolutions;workingwithbancassurancepartnersinAsiatoofferdigitalsales.• Buildingapartnershipecosystem:Makingstrategicinvestmentsandcollaborations(e.g.Dialogue,aleadingvirtualhealthcare

providerinCanada);investinginkeytechnologiestoconnectwithpartnersanddriveglobalgrowth.• Extendingouralternativeassetmanagementofferings,suchastheacquisitionofamajoritystakeineachofInfraRed,aglobal

infrastructureandrealestateinvestmentmanager,andCrescent,aglobalalternativecreditinvestmentmanager.

Themarketsinwhichwecompetearediverseandatdifferentstagesofdevelopment:• InCanada,thefinancialservicesindustryisrelativelymatureandthethreelargestlifeinsurancecompaniesservemorethan

two-thirdsoftheCanadianlifeinsuranceandgroupbenefitsmarkets.Inthewealthspace,wealsofacecompetitionfromCanadianretailbanksandinvestmentdealers,andalsofromemergingdisruptorssuchas“robo-advisors”.

• IntheUnitedStates,thelargestinsurancemarketintheworld,themarketismorefragmentedandcharacterizedbyalargenumberofcompetitors.Wefacestrongcompetitionfromestablishedplayersinthegrouplifeanddisability,dental,vision,stop-loss,andvoluntarymarkets,allofwhicharemarketswithanumberofcompetitors.Intheturnkeydisabilitymarket,therearetwootherprimarycompetitorsandcompetitionisexpectedtoremainstable.

• InAsia,thelifeinsurancemarketincountrieswhereweparticipatearestillevolving.ThegrowthpotentialforinsuranceinAsianmarketshascreatedstrongcompetitionfrombothdomesticandinternationalinsurers.Weareobservingthelargerpan-Asianinsurersgrowatthefastestrate,withconsolidationoccurringinmanymarkets.Additionally,someoftheAsianmarketsthatweoperateinhaveforeignownershiprestrictions,andthismayplaceconstraintsonourabilitytooperateorgrowinthesemarkets.Intheinternationalhighnetworthlifeinsurancemarket(whichforSunLifeoperatesoutofourAsiabusinessgroup),competitionisincreasingfromthemaincompetitorswhooperateinthisbusiness.

• InAssetManagement,despitesomeconsolidation,wefacestrongcompetitionfromavarietyofplayersincludinglargeglobalassetmanagers,smalllocalmanagersspecializinginnichemarkets/products,multi-nationalandlocalbanksaswellasotherinsurancecompanies.Inaddition,therehasbeenatrendamongretailandinstitutionalinvestorstowardslower-costpassive



investmentproducts,includingindexandothertypesofexchange-tradedfunds,whichhasledtoadecreasedallocationofinvestorassetstoactiveinvestmentstrategies.Atthesametime,therehasbeenanincreaseddemandforfixed-income,liability-driveninvestingandyield-orientedalternativeproductsamonginstitutionalandhighnetworthinvestors.Thistrendmayaccelerate,giventheprolongedperiodoflowinterestratesexacerbatedbytheCOVID-19pandemic.

SeasonalitySomeofourbusinessesaresubjecttoseasonalfactors.InCanada,salesofinvestmentproductsspikeduringthefirstquarteroftheyearduetoacontributiondeadlineforRegisteredRetirementSavingsPlans.TimingofsalescampaignsalsoinfluencessalesofindividualproductsinCanadaandAsia.IntheU.S.,thesalespatternofourgrouplifeandhealthbusinesslargelyreflectstherenewaltimingofemployeebenefitplansofourcorporateClients,manyofwhichbeginonJanuary1eachyear.Thisoftenresultsinhighersalesinthefourthquarter.InIndia,thesalesofindividualinsuranceproductsusuallypeakinthefirstquarterofeachyearduetotaxplanningbyClients.Overall,theimpactofseasonaltrendsisnotmaterialtoSunLife.

NumberofEmployeesAsatDecember31,2020,wehad23,816full-timeequivalentemployeesacrossouroperationsexcludingjointventuresandassociates.

BusinessSegment Employees(1)(2)

Canada 7,254U.S. 3,642AssetManagement 3,882Asia 4,434Corporate(3) 4,604

(1)AsatDecember31,2020,wehadapproximately42,100employeesacrossouroperations,includingourAsiajointventures.(2)Excludestemporarystaff.(3)CorporateincludestheoperationsofourUKbusinessunitandenterpriseservices.

SustainabilityCommitmentSustainabilityisacorestrategicprioritythatsupportsourPurpose.Weaspiretoleadtheglobalfinancialindustryinhelpingtocreateacleaner,moreinclusiveandmoresustainablefuture.Ourcommitmenttoleadrespondstoglobalchallengesandanincreasingpublicdesireforcorporationstosupportsustainability.StrongsustainabilityinitiativesandpracticessupportourPurposeofhelpingourClientsachievelifetimefinancialsecurityandlivehealthierlives.

Buildingfromalong-standingfoundationasatrustedandresponsiblebusiness,ourSustainabilityPlanfocusesonourareasofexpertisewherewecanhavethemostpositivesocialandenvironmentalimpact,whilecreatingcompetitiveadvantageforourbusiness:• Increasingfinancialsecurity,• Fosteringhealthierlives,and• Advancingsustainableinvesting.

We’readvancingfinancialsecuritybyhelpingClientstakepositivefinancialactions,increasingaccesstoaffordableinsuranceandincreasingfinancialeducationandengagement.In2020,welaunchedapodcastexaminingtheemotionalimpactofmoneyandhowitaffectsourlives.WeintroducedhospitalindemnityinsuranceintheU.S.tohelpoffsetthehighout-of-pocketcostsforlonghospitalstays,andweexpandedlow-costinsuranceoptionsforClientsinthePhilippinesandIndonesiathroughstrategicpartnershipswithMediCardandLinkAja.

WeaspiretoimprovehealthandwellnessoutcomesforClients,employeesandcommunities.InCanada,welaunchedLuminoHealthVirtualCarepoweredbyDialogue.523,000Clientsandtheirfamilymembersusedtheservicein2020.Wemaintainedourlong-standingfocusoncommunityhealthandwellness,investingininitiativesthatencouragehealthyandactivelivinginourcommunities.Since2012,wehavebeencommittedtothefightagainstdiabetes.Wefocusoncorporategivingondiabetesawareness,preventionandcare.In2020wealsoboostedourcharitablefundingforcommunitieshithardbythepandemicandfundedcommunitygroupsthatsupportunder-representedcommunities,withanemphasisonBlack/AfricanAmericancoalitionsandsocialjusticereform.



SunLifebuiltonitspositionasaleaderinsustainableinvestingin2020.MFSInvestmentManagement("MFS")continuedtoreceivetopenvironmental,socialandgovernance("ESG")assessmentsfromratingentities,andBGO'sglobalrealestateinvestmentplatformreceivedtoprankingsinthe2020GRESBRealEstateBenchmark.SLCManagementcompleteditsmajorityacquisitionofInfraRed,whichbroadensSLCManagement'sinvestmentsolutionsforinstitutionalClientstoincludesustainableinfrastructureequity.SunLifeCanada’sGroupRetirementServices("GRS")launchedanESGevaluationframeworktohelpClientsunderstandthelevelofESGintegrationforthefundsofferedintheirplans.SunLifeAssurancewasthefirstmajorCanadianlifeinsurertosignontotheUnitedNations-supportedPrinciplesforResponsibleInvestment("PRI").Inaddition,allcompaniesinourAssetManagementpillararealsosignatoriesandreceivetopgradesinPRIassessments.

SunLiferemainscommittedtogreenhousegas("GHG")emissionsreductiontargetsacrossourcorporaterealestateandrealestateinvestmentportfolios.In2019,oneyearaheadofschedule,weachievedourtargeted20%persquarefootcumulativeyear-over-yearGHGemissionsreduction,relativetoa2014baseline.Wearecontinuingtotargetareductionof30%persquarefootby2030,onthesamebasis.

SunLifeisasupporteroftheTaskForceonClimate-relatedFinancialDisclosures,andamemberoftheUnitedNationsEnvironmentProgrammeFinanceInitiativeandtheCanadianCouncilforCleanCapitalism.Wealsosupportandparticipateinseveralothersustainability-relatedforums,meetingsanddiscussionswitharangeofexternalstakeholders.SunLiferankedamongthe2020Global100MostSustainableCorporationsintheWorld.Thiswasthe11thconsecutiveyearSunLifewasnamedtotheranking,andweweretheonlyNorthAmericaninsurancecompanytoappearonthelist.SunLifewasalsoincludedontheDowJonesSustainabilityIndex-NorthAmerica,andcontinuestobeaconstituentintheFTSE4GoodIndex.

Tohavearesilient,sustainablebusiness,diversityandinclusionmustserveasacatalyst.In2020,SunLifereinforceditscommitmenttodiversity,equityandinclusionbytakingafirmstanceforequality,socialchangeandjusticetosupportunder-representedcommunities.InadditiontosettingnewgoalsforrepresentationofBlack,IndigenousandPeopleofColourinexecutiveroles,andatraininganddialogueprogramonracialequity,wesignedtheBlackNorthinitiative,anorganizationdedicatedtotheremovalofanti-BlacksystemicbarriersnegativelyaffectingBlackCanadians.Wealsoinvestedanadditional$1milliontodrivemeaningfulsocialchangebothwithinourorganizationandinthewidercommunity.

OurcommitmenttosustainabilityissetoutinourSustainabilityPolicyandinourCodeofConductwhichappliestoallemployeesanddirectors.TheGovernance,Investment&ConductReviewCommitteeoftheBoardprovidesoversightofsustainability,includingreviewingandapprovingourenterprisesustainabilitypolicyandannualsustainabilityreport.Atthemanagementlevel,ourInternationalSustainabilityCounciliscomposedofseniorrepresentativesfromadiverserangeofgeographicregions,businessgroupsandfunctions.ThisCouncilsupportstheimplementationofourSustainabilityPlanandisresponsibleforadvocacyandawarenessofsustainabilityacrosstheenterprise.TheCouncilworkscloselywiththeSustainabilityteamonstrategyandpolicydevelopmentandmonitoring,andriskescalation.TheCouncilmeetsregularlyandreportsprogresstoourseniorexecutivemanagementandtotheGovernance,InvestmentandConductReviewCommittee.

AdditionaldetailsonourSustainabilityPlan,andourmostrecentSustainabilityReport,canbefoundonourwebsiteatwww.sunlife.com/Sustainability.Additionalclimate-relateddisclosures,inlinewiththeTCFD'srecommendations,canbefoundundertheheading"EnvironmentalandSocialRisk"inour2020MD&A,whichisincorporatedbyreferenceherein.Formoreinformationonourcommitmenttopromotediversityandinclusion,pleasevisitwww.sunlife.com/en/sustainability/diversity-and-inclusion.

CapitalStructure

GeneralSLFInc.'sauthorizedcapitalconsistsofunlimitednumbersofCommonShares,ClassASharesandClassBShares,eachwithoutnominalorparvalue.

TheClassASharesandClassBSharesmaybeissuedinseriesasdeterminedbySLFInc.'sBoard.TheBoardisauthorizedtofixthenumber,considerationpershare,designationandrightsandrestrictionsattachedtoeachseriesofshares.TheholdersofClassASharesandClassBSharesarenotentitledtoanyvotingrightsexceptasdescribedbeloworasotherwiseprovidedbylaw.AdditionalinformationconcerningourcapitalstructureisincludedinSLFInc.'s2020MD&AundertheheadingCapitalandLiquidityManagementandinNotes13-15and21tothe2020ConsolidatedFinancialStatements.

CommonSharesSLFInc.’sCommonSharesarelistedontheToronto,NewYorkandPhilippinesstockexchanges,underthetickersymbol“SLF”.EachCommonShareisentitledtoonevoteatmeetingsoftheshareholdersofSLFInc.,exceptformeetingsatwhichonlyholdersofanotherspecifiedclassorseriesofsharesareentitledtovoteseparatelyasaclassorseries.



CommonSharesareentitledtoreceivedividendsifandwhendeclaredbytheBoard.DividendsmustbedeclaredandpaidinequalamountspershareonallCommonShares,subjecttotherightsofholdersoftheClassASharesandClassBShares.HoldersofCommonShareswillparticipateinanydistributionofthenetassetsofSLFInc.uponitsliquidation,dissolutionorwinding-uponanequalbasispershare,subjecttotherightsoftheholdersoftheClassASharesandClassBShares.Therearenopre-emptive,redemption,purchaseorconversionrightsattachingtotheCommonShares.

ClassASharesTheClassASharesofeachseriesrankonparitywiththeClassASharesofeachotherserieswithrespecttothepaymentofdividendsandthereturnofcapitalontheliquidation,dissolutionorwinding-upofSLFInc.TheClassASharesareentitledtopreferenceovertheClassBShares,theCommonSharesandanyothersharesrankingjuniortotheClassAShareswithrespecttothepaymentofdividendsandthereturnofcapital.ThespecialrightsandrestrictionsattachingtotheClassASharesasaclassmaynotbeamendedwithoutsuchapprovalasmaythenberequiredbylaw,subjecttoaminimumrequirementofapprovalbytheaffirmativevoteofatleasttwo-thirdsofthevotescastatameetingoftheholdersofClassASharesheldforthatpurpose.

ThefollowingtableprovidesinformationonSLFInc.'sissuedandoutstandingClassAShares(the“ClassAPreferredShares”).TheseClassAPreferredSharesarelistedontheTorontoStockExchange(“TSX”).

ClassAPreferredShares

Series

NumberofShares

Issued

TSXTicker

Symbol

QuarterlyDividend

($) RedemptionDate ProspectusDateSeries1 16,000,000 SLF.PR.A 0.296875 Anytime February17,2005Series2 13,000,000 SLF.PR.B 0.3 Anytime July8,2005Series3 10,000,000 SLF.PR.C 0.278125 Anytime January6,2006Series4 12,000,000 SLF.PR.D 0.278125 Anytime October2,2006Series5 10,000,000 SLF.PR.E 0.28125 Anytime January25,2007Series8R 6,217,331 SLF.PR.G 0.114063 June30,2025 May13,2010Series9QR 4,982,669 SLF.PR.J Floating June30,2025 May13,2010Series10R 6,919,928 SLF.PR.H 0.177625 September30,2021 August5,2011Series11QR 1,080,072 SLF.PR.K Floating September30,2021 August5,2011Series12R 12,000,000 SLF.PR.I 0.237875 December31,2021 November3,2011

ThesharesineachseriesofClassAPreferredShareswereissuedfor$25pershareandholdersareentitledtoreceivethenon-cumulativequarterlydividendsoutlinedintheprecedingtable.Subjecttoregulatoryapproval,SLFInc.mayredeem:(i)theSeries1,2,3,4or5sharesatanytime;(ii)theSeries8R,9QR,10R,11QRand12Rontheredemptiondatenotedaboveandeveryfiveyearsthereafterfor$25pershare;and(iii)theSeries9QRand11QRatanyothertimefor$25.50pershare,ineachcaseinwholeorinpart.AdditionalinformationconcerningthesesharesiscontainedintheInvestorRelationssectionofwww.sunlife.comandintheprospectusandprospectussupplementunderwhichtheshareswereissued,whichmaybeaccessedatwww.sedar.com.

ClassBSharesTheClassBSharesofeachseriesrankonaparitywiththeClassBSharesofeachotherserieswithrespecttothepaymentofdividendsandthereturnofcapitalontheliquidation,dissolutionorwinding-upofSLFInc.TheClassBSharesareentitledtopreferenceovertheCommonSharesandanyothersharesrankingjuniortotheClassBShareswithrespecttothepaymentofdividendsandthereturnofcapital,butaresubordinatetotheClassASharesandanyothersharesrankingseniortotheClassBShareswithrespecttothepaymentofdividendsandreturnofcapital.ThespecialrightsandrestrictionsattachingtotheClassBSharesasaclassmaynotbeamendedwithoutsuchapprovalasmaythenberequiredbylaw,subjecttoaminimumrequirementofapprovalbytheaffirmativevoteofatleasttwo-thirdsofthevotescastatameetingoftheholdersofClassBSharesheldforthatpurpose.NoClassBShareshavebeenissued.

ConstraintsonSharesTheInsuranceActcontainsrestrictionsonthepurchaseorotheracquisition,issue,transferandvotingofthesharesofSLFInc.andSunLifeAssurance.InformationonthoserestrictionscanbefoundinthisAIFundertheheadingRegulatoryMatters-Canada-RestrictionsonOwnership.



MarketforSecuritiesThefollowingtablessetoutthepricerangeandtradingvolumesofSLFInc.'sCommonSharesandClassAPreferredSharesontheTSXduring2020:

CommonShares

Price($) TradingvolumeHigh Low Close (thousands)

January 63.95 58.85 62.22 20,486February 66.44 56.87 57.99 33,379March 59.87 35.43 45.27 73,574April 49.57 42.01 47.71 31,705May 49.98 44.06 47.23 95,398June 53.32 47.28 49.89 45,163July 53.66 48.29 52.21 23,163August 57.56 51.66 54.44 60,715September 56.24 52.72 54.26 29,300October 56.78 51.59 53.01 19,861November 60.34 52.89 57.67 60,157December 58.43 54.71 56.60 35,392

ClassAPreferredShares

Series1 Series2Price($) Tradingvolume Price($) Tradingvolume

High Low Close (thousands) High Low Close (thousands)January 22.97 22.50 22.87 349 23.26 22.75 23.10 109February 23.45 21.83 21.99 138 23.55 22.22 22.22 87March 22.80 15.50 18.50 1,056 22.87 15.75 19.00 788April 21.39 18.00 21.31 135 21.55 18.40 21.55 95May 22.19 20.50 21.82 122 22.66 20.86 22.10 80June 22.80 21.71 22.42 474 23.33 22.10 23.00 122July 22.80 22.31 22.78 146 23.24 22.63 23.06 217August 23.42 22.58 23.34 102 23.77 22.96 23.77 245September 24.25 23.39 24.23 461 24.90 23.85 24.90 456October 24.99 23.51 24.56 529 25.20 24.26 24.89 122November 25.00 24.41 24.98 367 25.20 24.70 25.00 170December 25.00 24.51 24.76 499 25.44 24.53 24.85 131

Series3 Series4Price($) Tradingvolume Price($) Tradingvolume

High Low Close (thousands) High Low Close (thousands)January 21.69 21.21 21.63 89 21.74 21.22 21.66 102February 22.19 20.73 20.80 93 22.09 20.91 20.92 61March 21.40 14.25 17.24 159 21.40 14.20 17.51 248April 19.95 16.75 19.85 106 20.28 17.20 20.00 372May 20.90 19.31 20.54 74 21.00 19.61 20.52 77June 21.45 20.32 21.24 173 21.48 20.40 21.39 213July 21.47 21.14 21.28 307 21.50 21.27 21.33 173August 21.78 21.10 21.70 723 21.91 21.08 21.83 564September 23.07 21.86 23.02 246 23.11 21.85 23.00 382October 24.10 22.91 23.09 242 24.05 22.81 23.04 200November 24.41 23.06 24.34 327 24.50 23.05 24.25 174December 24.91 23.96 24.22 231 24.86 23.81 24.20 397



Series5 Series8RPrice($) Tradingvolume Price($) Tradingvolume


Series9QR Series10RPrice($) Tradingvolume Price($) Tradingvolume


Series11QR Series12RPrice($) Tradingvolume Price($) Tradingvolume


SalesofUnlistedSecuritiesSLFInc.hasissuedthefollowingunlistedsecuritiessinceJanuary1,2020:

OnMay8,2020,SLFInc.issued$1,000millionprincipalamountofSeries2020-1SubordinatedUnsecured2.58%Fixed/FloatingDebenturesdue2032.

OnOctober1,2020,SLFInc.issued$750millionprincipalamountofSeries2020-2SubordinatedUnsecured2.06%Fixed/FloatingDebenturesdue2035.



DividendsThedeclaration,amountandpaymentofdividendsbySLFInc.issubjecttotheapprovalofitsBoardandisdependentonourresultsofoperations,financialcondition,cashrequirements,regulatoryandcontractualrestrictionsandotherfactorsconsideredbytheBoard.

ThedividendsdeclaredbySLFInc.inthethreeyearsendedDecember31,2020aresetoutinthe2020MD&AundertheheadingCapitalandLiquidityManagement-ShareholderDividends,whichisincorporatedbyreferenceinthisAIF.

TheInsuranceActprohibitsthedeclarationorpaymentofdividendsonsharesofaninsurancecompanyiftherearereasonablegroundsforbelievingacompanydoesnothave,orthepaymentofthedividendwouldcausethecompanynottohave,adequatecapitalorliquidity,oruponanydirectionmadebytheSuperintendent.TheInsuranceActalsorequiresthataninsurancecompanynotifytheSuperintendentofthedeclarationofadividendatleastfifteendaysbeforethedividendpaymentdate.OnMarch13,2020,OSFIsettheexpectationforallfederallyregulatedfinancialinstitutionsthatdividendincreasesshouldbehaltedforthetimebeing.

Asaholdingcompany,SLFInc.dependsprimarilyonthereceiptoffundsfromitssubsidiariestopayshareholderdividends,interestpaymentsandoperatingexpenses.ThesourceofthesefundsisprimarilydividendsandcapitalrepaymentsthatSLFInc.receivesfromitssubsidiaries.TheinabilityofitssubsidiariestopaydividendsorreturncapitalinthefuturemaymateriallyimpairSLFInc.'sabilitytopaydividendstoshareholdersortomeetitscashobligations.AdditionalinformationconcerninglegislationregulatingtheabilityofSLFInc.'ssubsidiariesinCanada,theU.S.,theUKandAsiatopaydividendsorreturncapitalcanbefoundinthisAIFundertheheadingRegulatoryMatters.

SLFInc.andSunLifeAssurancehaveeachcovenantedthat,ifadistributionisnotpaidwhendueonanyoutstandingSunLifeExchangEableCapitalSecurities(“SLEECS”)issuedbySunLifeCapitalTrust,SunLifeAssurancewillnotpaydividendsonitsPublicPreferredShares,ifanyareoutstanding.IfSunLifeAssurancedoesnothaveanyPublicPreferredShares,thenSLFInc.willnotpaydividendsonitspreferredsharesorCommonSharesuntilthetwelfthmonthfollowingthefailuretopaytherequireddistributioninfull,unlesstherequireddistributionispaidtotheholdersoftheSLEECS.PublicPreferredSharesmeanspreferredsharesissuedbySunLifeAssurancewhich:(a)havebeenissuedtothepublic(excludinganypreferredsharesheldbeneficiallybyaffiliatesofSunLifeAssurance);(b)arelistedonarecognizedstockexchange;and(c)haveanaggregateliquidationentitlementofatleast$200million.SunLifeAssurancehasnotissuedanysharesthatqualifyasPublicPreferredSharesasatthedateofthisAIF.

ThetermsofSLFInc.'soutstandingClassAPreferredSharesprovidethatforsolongasSunLifeAssuranceisasubsidiary,nodividendsonsuchpreferredsharesmaybedeclaredorpaidifSunLifeAssurance’sminimumregulatorycapitalratiofallsbelowtheapplicablethreshold.

SecurityRatingsSLFInc.'sClassAPreferredShares,seniorunsecureddebentures,andsubordinatedunsecureddebenturesareratedbyindependentratingagencies.Securityratingsassignedtosecuritiesbytheratingagenciesmaybesubjecttorevisionorwithdrawalatanytimebytheapplicableratingagencyandarenotarecommendationtopurchase,holdorsellthesesecuritiesassuchratingsdonotcommentastomarketpriceorsuitabilityforaparticularinvestor.Securityratingsareintendedtoprovideinvestorswithanindependentmeasureofthecreditqualityofanissueofsecurities.



ThetablebelowprovidesthesecurityratingsforSLFInc.'ssecuritiesasatFebruary,10,2021.AllratingagenciescurrentlyhavestableoutlooksonSLFInc.issuercreditratings:

SecurityRatingsA.M.Best(1) DBRS(2) Fitch(3) Moody's(4) S&P(5)

Rating Rank Rating Rank Rating Rank Rating Rank Rating RankSeniorUnsecuredDebenturesSeriesE a 6of21 A(high) 5of26 A 6of21 NR(6) - A+ 5of22SubordinatedUnsecuredDebentures:Series2007-1,2016-1,2016-2,2017-1,2019-1,2020-1,and2020-2 a- 7of21 A 6of26 A- 7of21 NR(6) 0 A 6of22ClassAPreferredShares:Series1-5,8R,9QR,10R,11QRand12R bbb+ 8of21

Pfd-2(high) 4of16 BBB 9of21

Baa1(hyb) 8of21

P-1(low)/A-(7)

3of18/5of207

(1)A.M.BestCompany,Inc.(2)DBRSLimited,partofDBRSMorningstargroup,awholly-ownedsubsidiaryofMorningstar,Inc.(3)FitchRatings,Inc.,partofFitchGroup,ismajorityownedbyHearst.WedonotparticipateinFitch’sratingsprocess,orprovideadditionalinformationto

FitchRatings,beyondouravailablepublicdisclosures.(4)Moody'sInvestorsService,asubsidiaryofMoody'sCorporation(NYSE:MCO).Moody’sratePreferredSharesSeries2only.(5)S&PGlobal(NYSE:SPGI).(6)NotRated.(7)TheCanadianscalerating/globalscaleratingforpreferredshares.

SLFInc.hasmadepaymentsintheordinarycoursetoA.M.Best,DBRS,Moody’sandStandardandPoor's("S&P")inconnectionwiththeassignmentofratingsonthesecuritiesofSLFInc.Inaddition,SLFInc.hasmadecustomarypaymentsinrespectofcertainotherservicesprovidedtoSLFInc.bytheapplicableratingagenciesduringthelasttwoyears.

Thedescriptionsoftheratingsbelowaresourcedfrompublicinformationasdisclosedbyeachratingagency.

A.M.BestA.M.Best’sissuecreditrating(“IR”)providesanopinionofcreditqualityassignedtoissuesthatgaugestheabilitytomeetthetermsoftheobligationsandcanbeissuedonalong-orshort-termbasis.AnIRassignedtoaspecificissueisA.M.Best’sopinionoftheissuer’sabilitytomeettheongoingfinancialobligationstosecurityholderswhendue.Assuch,anIRisanopinionregardingtherelativefuturecreditrisk.Creditriskistheriskthatadebtissuermaynotmeetitscontractualfinancialobligationsastheycomedue.Theratingdoesnotaddressanyotherrisk,including,butnotlimitedto,liquidityrisk,marketvalueriskorpricevolatilityofratedobligations.

A.M.Bestassignslong-termIRinarangefrom“aaa”to“c”.Ratingsfrom“aa”to“ccc”maybeenhancedwitha“+”(plus)or“-”(minus)toindicatewhethercreditqualityisnearthetoporbottomofacategory.Theabsenceofeitheraplusorminusdesignationindicatestheratingisinthemiddleofthecategory.

SLFInc.’sSeniorUnsecuredDebenturesandSubordinatedUnsecuredDebentureshavebeenassigned“a”and“a-“ratings,respectively.An“a”ratingdenotesanissuer’sexcellentabilitytomeetthetermsoftheobligation.

SLFInc.’sClassAPreferredShareshavebeenassigned“bbb+”ratings.A“bbb”ratingdenotesanissuer’sgoodabilitytomeetthetermsoftheobligation,however,theissueismoresusceptibletochangesineconomicandotherconditions.

DBRSTheDBRSlong-termratingscaleprovidesanopinionontheriskofdefault.Thatis,theriskthatanissuerwillfailtosatisfyitsfinancialobligationsinaccordancewiththetermsunderwhichanobligationhasbeenissued.Ratingsarebasedonquantitativeandqualitativeconsiderationsrelevanttotheissuer,andtherelativerankingofclaims.DBRSassignslong-termratingsinarangefromAAAtoD,and“(high)”and“(low)”designationsindicatestandingwithinthemajorratingcategories.Theabsenceofeithera"(high)"or"(low)"designationindicatestheratingisinthemiddleofthecategory.Thereareno"(high)"or"(low)"designationsforAAAandDratings.

SLFInc.’sSeniorUnsecuredDebentureshavebeenassignedanA(high)rating.SLFInc.’sSubordinatedUnsecuredDebentureshavebeenassignedanArating.Aratings,reflectingagoodcreditquality,areassignedtoissueswhenthecapacityforthepaymentoffinancialobligationsissubstantial,butoflessercreditqualitythanAA,andtheissuemaybevulnerabletofutureevents,butqualifyingnegativefactorsareconsideredmanageable.



DBRSassignsratingsforpreferredsharesinarangefromPfd-1toD.Referenceto“high”and“low”designationsindicatestandingwithinthemajorratingcategories.Theabsenceofeithera"(high)"or"(low)"designationindicatestheratingisinthemiddleofthecategory.Thereareno"(high)"or"(low)"designationsforDratings.TheDBRSpreferredshareratingscaleisusedintheCanadiansecuritiesmarketandismeanttogiveanindicationoftheriskthataborrowerwillnotfulfillitsfullobligationsinatimelymanner,withrespecttobothdividendandprincipalcommitments.SLFInc.’sClassAPreferredShareshavebeenassignedaPfd-2(high)rating,thesecondhighestamongratingcategoriesusedbyDBRS.PreferredsharesratedPfd-2aregenerallyofgoodcreditquality.Protectionofdividendsandprincipalisstillsubstantial,butearnings,thebalancesheetandcoverageratiosarenotasstrongasPfd-1ratedcompanies.

FitchFitch’screditratingsprovideanopinionontherelativeabilityofanentitytomeetfinancialcommitments,suchasinterest,preferreddividends,repaymentofprincipal,insuranceclaimsorcounterpartyobligations.Fitch’screditratingsdonotdirectlyaddressanyriskotherthancreditrisk.Inparticular,ratingsdonotdealwiththeriskofamarketvaluelossonaratedsecurityduetochangesininterestrates,liquidityandothermarketconsiderations.

Fitchassignslong-termratingsfordebtandpreferredsharesinarangefromAAAtoC.Themodifiers+or-maybeappendedtoaratingtodenoterelativestatuswithinmajorratingcategories.Theabsenceofeitheraplusorminusdesignationindicatestheratingisinthemiddleofthecategory.SuchmodifiersarenotaddedtotheAAAratingortoratingsbelowCCC.

SLFInc.’sSeniorUnsecuredDebenturesandSubordinatedUnsecuredDebentureshavebeenassignedanAandA-ratings,respectively.AnAratingdenotesexpectationsoflowcreditriskandthecapacityforpaymentoffinancialcommitmentsisconsideredstrong.Thiscapacitymay,nevertheless,bemorevulnerabletoadversebusinessoreconomicconditionsthanisthecaseforhigherratings.SLFInc.’sClassAPreferredShareshavebeenassignedaBBBrating.ABBBratingindicatesthatexpectationsofcreditriskarecurrentlylowandthecapacityforpaymentoffinancialcommitmentsisconsideredadequatebutadversebusinessoreconomicconditionsaremorelikelytoimpairthiscapacity.

Moody'sMoody'slong-termobligationratingsareforward-lookingopinionsoftherelativecreditriskoffinancialobligationswithanoriginalmaturityofoneyearormore.Moody’sdefinescreditriskastheriskthatanentitymaynotmeetitscontractualfinancialobligationsastheycomedueandanyestimatedfinanciallossintheeventofdefaultorimpairment.

Moody’sassignslong-termobligationratingsinarangefromAaatoC.Moody'sappendsnumericalmodifiers1,2,and3toeachgenericratingclassificationfromAathroughCaa.Themodifier1indicatesthattheobligationranksinthehigherendofitsgenericratingcategory;themodifier2indicatesamid-rangeranking;andthemodifier3indicatesarankinginthelowerendofthatgenericratingcategory.Additionally,a“(hyb)”indicatorisappendedtoallratingsofhybridsecurities.

SLFInc.’sClassAPreferredSharesSeries2havebeenassignedaBaa1(hyb)rating.ObligationsratedBaaarejudgedtobemedium-gradeandsubjecttomoderatecreditriskandassuchmaypossesscertainspeculativecharacteristics.

Standard&Poor'sAnS&Pissuecreditratingisaforward-lookingopinionaboutthecreditworthinessofanobligorwithrespecttoaspecificfinancialobligation.TheopinionreflectsS&P'sviewoftheobligor'scapacityandwillingnesstomeetitsfinancialcommitmentsastheycomedue,andmayassessterms,suchascollateralsecurityandsubordination,whichcouldaffectultimatepaymentintheeventofdefault.

S&P’screditratingsforsecuritiesarebased,invaryingdegrees,onS&P'sanalysisofthefollowingconsiderations:• Likelihoodofpayment-capacityandwillingnessoftheobligortomeetitsfinancialcommitmentonanobligationinaccordance

withthetermsoftheobligation;• NatureofandprovisionsoftheobligationandthepromiseimputedbyS&P;and• Protectionaffordedby,andrelativepositionof,theobligationintheeventofbankruptcy,reorganization,orotherarrangement

underthelawsofbankruptcyandotherlawsaffectingcreditors'rights.

Theseratingsareanassessmentofdefaultrisk,butmayincorporateanassessmentofrelativeseniorityorultimaterecoveryintheeventofdefault.Juniorobligationsaretypicallyratedlowerthanseniorobligations,toreflectthelowerpriorityinbankruptcy.

S&Passignslong-termratingsinarangefromAAAtoD.TheratingsfromAAtoCCCmaybemodifiedbytheadditionofaplus(+)orminus(-)signtoshowrelativestandingwithinthemajorratingcategories.Theabsenceofeitheraplusorminusdesignationindicatestheratingisinthemiddleofthecategory.



SLFInc.’sSeniorUnsecuredDebenturesandSubordinatedUnsecuredDebentureshavebeenassignedA+andAratings,respectively.AnAratingcategoryindicatesthattheobligor’scapacitytomeetitsfinancialcommitmentontheobligationisstrong.S&PhasCanadianandglobalratingscalesforpreferredshares.S&PassignsratingsforCanadianpreferredsharesinarangefromP-1toDontheCanadianscaleandfromAAtoDontheglobalratingscale.S&Puses“high”and“low”designationstoindicatestandingwithinthemajorratingcategoriesontheCanadianratingscaleandplusorminusdesignationstoindicatetherelativestandingofsecuritieswithinaparticularratingcategoryontheglobalratingscale.Theabsenceofeithera“high”and“low”oraplusorminusdesignationindicatestheratingisinthemiddleofthecategory.Therearenoplusandminusor“high”and“low”designationsforCC,CandDratings,andnoplusdesignationforaAAratingcategory.

S&P’spreferredshareratingontheCanadianscaleisaforward-lookingopinionaboutthecreditworthinessofanobligorwithrespecttoaspecificpreferredshareobligationissuedintheCanadianmarket,relativetopreferredsharesissuedbyotherissuersintheCanadianmarket.ThereisadirectcorrespondencebetweenthespecificratingsassignedontheCanadianpreferredsharescaleandthevariousratinglevelsontheglobaldebtratingscaleofStandard&Poor's.S&Ppresentsanissuer'spreferredshareratingsonboththeglobalratingscaleandontheCanadiannationalscalewhenlistingtheratingsforaparticularissuer.

SLFInc.’sClassAPreferredShareshavebeenassignedaP-1(low)ratingontheCanadianscale,whichcorrespondstoaA-ratingontheglobalscale.AnAratingcategoryindicatesthattheobligor’scapacitytomeetitsfinancialcommitmentontheobligationisstrong.

TransferAgentsandRegistrars

CommonSharesASTTrustCompany(Canada)istheprincipaltransferagentandtheregistrarforSLFInc.'sCommonShares.ThecentralsecuritiesregisterismaintainedinToronto,Ontario,Canada.Thetransferagentandco-transferagentsforSLFInc.’sCommonSharesareasfollows(oppositetheirapplicablejurisdictions):

TransferAgent

Canada ASTTrustCompany(Canada)1TorontoStreet,Suite1200Toronto,OntarioCanadaM5C2V6

Co-TransferAgents

UnitedStates AmericanStockTransfer&TrustCompany,LLC620115thAvenueBrooklyn,NY11219UnitedStates

UnitedKingdom LinkAssetServices34BeckenhamRoadBeckenhamBR34TUKentUnitedKingdom

Philippines RizalCommercialBankingCorporationRCBCStockTransferProcessingSectionGroundFloor,WestWingGPL(Grepalife)Building221SenatorGilPuyatAvenueMakatiCity,Philippines

HongKong ComputershareHongKongInvestorServicesLimited17MFloor,HopewellCentre183Queen'sRoadEastWanchai,HongKong

PreferredSharesandDebenturesASTTrustCompany(Canada)isthetransferagentandtheregistrarforSLFInc.'sClassAPreferredShares,andBNYTrustCompanyofCanadaisthetrusteeandtheregistrarforSLFInc.'sseniorunsecureddebentures,SeriesE,anditssubordinatedunsecureddebentures,Series2007-1,2016-1,2016-2,2017-1,2019-1,2020-1and2020-2.TheregistersforthosesecuritiesaremaintainedinToronto,Ontario,Canada.



DirectorsandExecutiveOfficers

BoardofDirectorsAsofthedateofthisAIF,theBoardofSLFInc.hadfourstandingcommittees:AuditCommittee,Governance,Investment&ConductReviewCommittee,ManagementResourcesCommitteeandRiskCommittee.

ThefollowingtablesetsoutthedirectorsofSLFInc.asofthedateofthisAIFand,foreachdirector,theprovinceorstateandcountryofhisorherresidence,principaloccupation,yearsasadirector,andmembershiponBoardcommittees.ThetermofeachdirectorexpiresatthecloseofbusinessoftheAnnualMeetingin2021.EachdirectorofSLFInc.isanindependentdirectorasdefinedintheCompany'sDirectorIndependencePolicy,exceptMr.Connor,thePresident&ChiefExecutiveOfficerofSLFInc.(1)

NameandProvince/StateandCountryofResidence

PrincipalOccupation

DirectorSince BoardCommitteeMembership

WilliamD.AndersonOntario,Canada

ChairoftheBoard,SLFInc.andSunLifeAssurance 2010 None

DeanA.Connor(1)

Ontario,CanadaPresident&ChiefExecutiveOfficer,SLFInc.andSunLifeAssurance 2011 None

StephanieL.CoylesOntario,Canada

CorporateDirector 2017AuditGovernance,Investment&ConductReview

MartinJ.G.GlynnBritishColumbia,Canada

CorporateDirector 2010ManagementResourcesRisk

AshokK.GuptaLondon,England


M.MarianneHarrisOntario,Canada


SaraGrootwassinkLewisArizona,U.S.A. CorporateDirector 2014

AuditGovernance,Investment&ConductReview

JamesM.PeckTexas,U.S.A. CorporateDirector 2019 ManagementResources

Risk

ScottF.PowersMassachusetts,U.S.A. CorporateDirector 2015


HughD.Segal,OC,OONT,CDOntario,Canada CorporateDirector 2009


BarbaraG.StymiestOntario,Canada CorporateDirector 2012 Audit

Risk

(1)DeanA.ConnorintendstoretirefromtheBoardofSLFInc.onAugust6,2021.KevinD.Strain,ExecutiveVice-President&ChiefFinancialOfficer,willbecomePresidentandwillbeappointedasamemberoftheBoardofSLFInc.effectiveFebruary15,2021.

EachdirectorofSLFInc.hasbeenengagedformorethanfiveyearsinhisorherpresentprincipaloccupationorinothercapacitieswiththecompanyororganization(orpredecessorthereof)inwhichheorshecurrentlyholdshisorherprincipaloccupation,except:(i) Ms.Coyles,whofrom2012to2016wasanindependentstrategyconsultant;(ii) Mr.Peck,whofrom2012to2019wasPresident&ChiefExecutiveOfficer,TransUnion;and(iii) Mr.Segal,whofrom2014to2019wasPrincipalofMasseyCollege,UniversityofToronto.

AuditCommitteeTheresponsibilitiesanddutiesoftheAuditCommitteearesetoutinitscharter,acopyofwhichisattachedasAppendixA.TheBoardhasdeterminedthateachmemberofitsAuditCommitteeisindependentasdefinedintheCompany'sDirectorIndependencePolicyandisfinanciallyliterate.IntheBoard'sjudgment,amemberoftheCommitteeisfinanciallyliterateif,afterseekingandreceivinganyexplanationsorinformationfromseniorfinancialmanagementoftheCompanyortheauditorsoftheCompanythatthememberrequires,thememberisabletoreadandunderstandtheconsolidatedfinancialstatementsoftheCompanytotheextentsufficienttobeabletointelligentlyask,andtoevaluatetheanswersto,probingquestionsaboutthematerialaspectsofthosefinancialstatements.



ThemembersoftheAuditCommitteeasofthedateofthisAIFandtheirqualificationsandeducationaresetoutbelow:

SaraGrootwassinkLewis(Chair),isacorporatedirector,aCertifiedPublicAccountantandaCharteredFinancialAnalyst.Priorto2009,sheheldprogressivelyseniorpositionsduringherseven-yearcareerwithWashingtonRealEstateInvestmentTrust,apubliclytradedrealestateinvestmenttrust,includingExecutiveVice-President,andwasChiefFinancialOfficerfrom2002to2009.Ms.LewisjoinedtheBoard,andtheGovernance,Investment&ConductReviewCommittee(formerlytheGovernance,Nomination&InvestmentCommittee)andtheManagementResourcesCommitteeofSLFInc.andSunLifeAssuranceinDecember2014.ShewasamemberoftheManagementResourcesfromherappointmentuntilMay2016.ShebecameamemberoftheAuditCommittee(formerlytheAudit&ConductReviewCommittee)inMay2016andwasappointedChairoftheAuditCommitteeinMay2017.Ms.LewisisadirectorandChairoftheAuditCommitteeofWeyerhaeuserCompany.SheisadirectorandamemberoftheAuditCommitteeofHealthpeakProperties,Inc.Ms.LewisisalsoaTrustee,ViceChairoftheAuditCommittee,anExecutiveCommitteememberandtheChairoftheGovernanceStudiesProgramLeadershipCouncilofTheBrookingsInstitution.SheservesontheLeadershipBoardandGovernanceWorkingGroupfortheUnitedStatesChamberofCommerce-CenterforCapitalMarketsCompetitivenessandisamemberoftheCenterforAuditQuality’sAuditCommitteeCouncil.Ms.LewisisaNationalAssociationofCorporateDirectorsBoardLeadershipFellowandamemberoftheTapestryWestAuditCommitteeNetwork.Ms.LewiswasformerlyadirectorandamemberoftheAuditCommitteeofPSBusinessParks,Inc.from2010toApril2019,andwastheChairofitsAuditCommitteefrom2012toApril2019.ShewasadirectorandamemberoftheAuditCommitteeofAdamasPharmaceuticals,Inc.fromMarch2014toJune2016.SheservedasadirectorandamemberoftheAuditCommitteeofPlumCreekTimberCompany,Inc.fromNovember2013untilitsacquisitionbyWeyerhaeuserinFebruary2016.Ms.LewiswasalsoadirectorandamemberoftheAuditCommitteeofCapitalSource,Inc.from2004toApril2014,andwastheChairofitsAuditCommitteefromFebruary2013toApril2014.Ms.LewiswasnamedtotheNationalAssociationofCorporateDirectors("NACD")Directorship100in2017.

StephanieL.Coylesisacorporatedirector.HerbackgroundisasastrategicconsultantandadvisorwhohasworkedwithadiverseclienteleacrossNorthAmerica,includingretail,consumerdistribution,privateequityandbusinessconsultingorganizations.ShewaspreviouslyChiefStrategicOfficeratLoyaltyOneCo.from2008to2012.Priortothat,Ms.Coylesspent18yearswithMcKinsey&CompanyCanadawheresheheldprogressivelyseniorpositionsandwasapartnerforeightyearsfrom2000to2008.Ms.CoylesjoinedtheBoard,andtheAuditCommittee(formerlytheAudit&ConductReviewCommittee)ofSLFInc.andSunLifeAssuranceinJanuary2017.SheisamemberoftheGovernance,Investment&ConductReviewCommittee(formerlytheGovernance,Nomination&InvestmentCommittee)fromherappointmenttoMay2017,amemberoftheRiskCommittee(formerlyRisk&ConductReviewCommittee)fromMay2017toMay2019andbecameamemberoftheGovernance,Investment,&ConductReviewCommittee(formerlytheGovernance,Nomination&InvestmentCommittee)inMay2019.Ms.CoylesiscurrentlyadirectorandmemberoftheAuditCommitteeofCorusEntertainmentInc.SheisalsoadirectorandamemberoftheAuditCommitteeofMetroInc.Ms.CoyleswasadirectorandamemberoftheAuditCommitteeofHudson’sBayCompanyfrom2019toMarch2020.ShealsoservesontheboardofTheEarthRangersFoundation.Ms.CoylesholdsaMasterinPublicPolicydegreeandaBachelorofCommercedegree.ShealsoreceivedtheICD.DdesignationfromtheInstituteofCorporateDirectorsandtheCERTCertificateinCybersecurityOversight,issuedbytheCERTDivisionoftheSoftwareEngineeringInstituteatCarnegieMellonUniversity.

HughD.Segal,OC,OONT,CDisacorporatedirector.HeservedasPrincipalofMasseyCollege,UniversityofTorontofrom2014to2019.Beforethat,Mr.SegalwasaCanadiansenatorfrom2005to2014andPresident&ChiefExecutiveOfficeroftheInstituteforResearchonPublicPolicyfrom1999to2006.HewasformerlyChairoftheNATOAssociationofCanadaandVice-ChairoftheInstituteofCanadianAdvertising.Mr.SegaljoinedtheBoardofSLFInc.andSunLifeAssurancein2009.HewasamemberoftheGovernance,Investment,&ConductReviewCommittee(formerlytheGovernanceandConductReviewCommittee)fromhisappointmentto2011,theInvestmentOversightCommitteefromhisappointmentto2012,andtheManagementResourcesCommitteefrom2011to2016.Mr.SegalbecameamemberoftheAuditCommittee(formerlytheAudit&ConductCommittee)andtheGovernance,Investment&ConductReviewCommittee(formerlyGovernance&ConductReviewCommittee)inMay2016.HeservedasadirectorofJustEnergyGroupInc.from2001to2015andwasamemberofitsauditcommitteefrom2013to2015.Mr.SegalisaSeniorAdvisoratAird&BerlisLLP.HeisChairandaDistinguishedFellowoftheSchoolofPolicyStudiesExternalAdvisoryBoardandtheDonaldMatthewsFacultyFellowinGlobalPublicPolicy,Queen’sUniversity,aDistinguishedFellowattheMunkSchoolofGlobalAffairs,UniversityofTorontoandaSeniorFellowattheCanadianInstituteofGlobalAffairs.Mr.SegalisalsoanHonouraryCaptainoftheRoyalCanadianNavy,anHonoraryCaptainoftheCanadianForcesCollegeandHonoraryChairoftheNavyLeagueofCanada.HeisanofficeroftheOrderofCanadaandamemberoftheOrderofOntario.

ScottF.Powersisacorporatedirector.HewasPresidentandChiefExecutiveOfficerofStateStreetGlobalAdvisorsuntilhisretirementin2015.BeforejoiningStateStreetin2008,Mr.PowerswasPresidentandChiefExecutiveOfficerofOldMutualAssetManagementPlc,theU.S.-basedglobalassetmanagementbusinessofOldMutualplc.Priorto2008,heheldseniorexecutivepositionsatMellonInstitutionalAssetManagement,BNYMellon’sinvestmentmanagementbusiness,andatTheBostonCompanyAssetManagement,LLC.Mr.PowersjoinedtheBoard,theGovernance,Investment&ConductReviewCommittee(formerlytheGovernance,Nomination&InvestmentCommittee)andtheManagementResourcesCommitteeofSLFInc.andSunLifeAssuranceinOctober2015,andbecametheChairoftheGovernance,Investment&ConductReviewCommittee(formerlytheGovernance,Nomination&InvestmentCommittee)inMay2017.HeceasedtobeamemberoftheManagementResourcesCommitteeandbecameamemberoftheAuditCommitteeinSeptember2020.Mr.PowersiscurrentlyadirectorandmemberoftheAudit



CommitteeofAutomaticDataProcessing,Inc.,andisalsoadirectorofPulteGroup,Inc.HehasservedasamemberoftheSystemicRiskCouncilandtheAdvisoryBoardoftheU.S.InstituteofInstitutionalInvestors.

BarbaraG.StymiestisacorporatedirectorandaCharteredProfessionalAccountant.ShewasamemberoftheGroupExecutiveatRoyalBankofCanada,aninternationalbankingandfinancialservicesorganization,from2004to2011;RoyalBank’sGroupHead,Strategy,TreasuryandCorporateServicesfrom2010to2011;andChiefOperatingOfficerfrom2004to2009.PriortothatMs.StymiestheldseniorpositionsinthefinancialservicessectorincludingChiefExecutiveOfficer,TSXGroupInc.,ExecutiveVice-PresidentandChiefFinancialOfficer,BMONesbittBurns,andPartner,FinancialServicesGroup,Ernst&YoungLLP.ShejoinedtheBoard,andtheRiskCommittee(formerlytheRiskReviewCommittee)ofSLFInc.andSunLifeAssuranceinMay2012.Ms.StymiestwasamemeberoftheManagementResourcesCommitteefromherappointmentuntilMay2015.ShebecameamemberoftheAuditCommittee(formerlytheAudit&ConductReviewCommittee)andChairoftheRiskCommittee(formerlytheRiskReviewCommittee)inMay2015.SheisaFellowoftheCharteredProfessionalAccountantsofOntarioandreceivedanAwardofOutstandingMeritfromthatorganizationin2011.SheisadirectorandChairoftheauditandriskmanagementcommitteeofBlackBerryLimited,adirectorandChairoftheauditcommitteeofGeorgeWestonLimited,oneofNorthAmerica'slargestfoodprocessinganddistributiongroups.Ms.StymiestalsoservesasadirectorofPresident’sChoiceBankandViceChairofUniversityHealthNetwork.SheholdsanHonoursBusinessAdministrationdegree.Ms.StymiestwasnamedtotheNationalAssociationofCorporateDirectors("NACD")Directorship100in2018.

SLFInc.'sBoardhasdeterminedthateachofSaraGrootwassinkLewisandBarbaraG.StymiestisanAuditCommitteeFinancialExpertasdefinedbytheSEC.TheSEChasindicatedthatthedesignationofapersonasanAuditCommitteeFinancialExpertdoesnotmakethatpersonan“expert”foranypurpose,orimposeanyduties,obligationsorliabilitiesonthatpersonthataregreaterthanthoseimposedonmembersoftheauditcommitteeandtheBoardwhodonotcarrythisdesignationoraffecttheduties,obligationsorliabilitiesofanyothermemberoftheAuditCommitteeortheBoard.EachofMs.LewisandMs.Stymiestis“independent”withinthemeaningofthelistingstandardsoftheNewYorkStockExchangeandRule10A-3oftheU.S.SecuritiesExchangeActof1934,asamended.

ExecutiveOfficersThefollowingtablesetsouttheexecutiveofficersofSLFInc.asofthedateofthisAIF:

NameProvince/StateandCountryofResidence Position

DeanA.Connor(1) Ontario,Canada President&ChiefExecutiveOfficer

LindaM.Dougherty Ontario,Canada ExecutiveVice-President,CorporateStrategyandGlobalMarketing

DanielR.Fishbein Maine,USA President,SunLifeU.S.

ColmJ.Freyne Ontario,Canada ExecutiveVice-President&ChiefRiskOfficer

JacquesGoulet Ontario,Canada President,SunLifeCanada

LéoM.Grépin HongKong,China President,SunLifeAsia

MelissaJ.Kennedy Ontario,Canada ExecutiveVice-President,ChiefLegalOfficer&PublicAffairs

LauraA.Money Ontario,Canada ExecutiveVice-President&ChiefInformationOfficer

HelenaJ.Pagano Ontario,Canada ExecutiveVice-President,ChiefHumanResources&CommunicationsOfficer

StephenC.Peacher Massachusetts,USA President,SLCManagement

MarkS.Saunders(2) Ontario,Canada ExecutiveVice-President,EnterpriseServices

KevinD.Strain(3) Ontario,Canada ExecutiveVice-President&ChiefFinancialOfficer

(1)DeanA.ConnorwillceasetobePresidentofSLFInc.effectiveFebruary15,2021andwillcontinueasChiefExecutiveOfficeruntilheretiresonAugust,6,2021.

(2)MarkSaundersintendstoretireinApril,2021.(3)KevinStrainwillbeappointedasPresidentofSLFInc.effectiveFebruary15,2021andwillassumetheChiefExecutiveOfficerroleupon

Mr.Connor’sintendedretirementonAugust6,2021.



EachexecutiveofficerofSLFInc.hasheldhisorhercurrentpositionorotherseniorpositionswiththeCompanyduringthepastfiveyearswiththefollowingexceptions:(i) Mr.GouletwasPresident,HealthandWealth,Mercer(US)Inc.(“Mercer”),fromJanuary2017toDecember2017andPresident,

Retirement,HealthandBenefits,Mercer,fromOctober2014toDecember2016;(ii) Ms.MoneywasSeniorVice-PresidentandChiefInformationOfficerCorporateCentreTechnology,CanadianImperialBankof

Commerce(“CIBC”),fromNovember2018toMay2020,SeniorVicePresident,EnterprisePrograms&DeliverExcellence,CIBC,fromApril2016toOctober2018andSeniorVicePresident,StrategicInitiatives,Retail&BusinessBanking,CIBC,fromJune2012toApril2016;and

(iii) PriortoFebruary2017,Ms.PaganowasManagingDirector,HeadofHumanResources,RBCCapitalMarketsandInvestor&TreasuryServices,RoyalBankofCanada.

CeaseTradeOrders,Bankruptcies,PenaltiesandSanctionsTothebestofSLFInc.’sknowledge,asatthedateofthisAIF,exceptassetoutbelow,nodirectororexecutiveofficerofSLFInc.:(i) isorhasbeen,inthelasttenyears,adirector,chiefexecutiveofficerorchieffinancialofficerofacompany(includingSLFInc.)

that,whilethatpersonwasactinginthatcapacity,(a)wasthesubjectofaceasetradeorsimilarorderoranorderthatdeniedthecompanyaccesstoanyexemptionunder

Canadiansecuritieslegislation,foraperiodofmorethan30consecutivedays,or(b)wassubjecttoaneventthatresulted,afterthatpersonceasedtobeadirector,chiefexecutiveofficerorchieffinancial

officer,inthecompanybeingthesubjectofaceasetradeorsimilarorderoranorderthatdeniedthecompanyaccesstoanyexemptionunderCanadiansecuritieslegislation,foraperiodofmorethan30consecutivedays.

(ii)isorhasbeen,inthelasttenyears,adirectororexecutiveofficerofacompany(includingSLFInc.)that,whilethatpersonwasactinginthatcapacityorwithinayearofthatpersonceasingtoactinthatcapacity,becamebankrupt,madeaproposalunderanylegislationrelatingtobankruptcyorinsolvencyorwassubjecttoorinstitutedanyproceedings,arrangementorcompromisewithcreditorsorhadareceiver,receivermanagerortrusteeappointedtoholditsassets,

(iii)has,withinthelasttenyears,becomebankrupt,madeaproposalunderanylegislationrelatingtobankruptcyorinsolvency,orbecomesubjecttoorinstitutedanyproceedings,arrangementorcompromisewithcreditors,orhadareceiver,receivermanagerortrusteeappointedtoholdtheassetsofthedirectororexecutiveofficer;and

(iv)hasbeensubjectto(a)anypenaltiesorsanctionsimposedbyacourtrelatingtosecuritieslegislationorbyasecuritiesregulatoryauthorityorhasenteredintoasettlementagreementwithasecuritiesregulatoryauthorityor(b)anyotherpenalties

orsanctionsimposedbyacourtorregulatorybodythatwouldlikelybeconsideredimportanttoareasonableinvestorinmakinganinvestmentdecision.

Ms.CoyleswasadirectorofPostmediaNetworkCanadaCorp.whileitcompletedarestructuringfollowinganarrangementplanundertheCanadaBusinessCorporationActinOctober2016.Ms.CoylesisnolongeradirectorofPostmediaNetworkCanadaCorp.

Mr.GlynnwasadirectorofMFGlobalHoldingsLtd.whenitfiledavoluntarypetitionunderChapter11oftheBankruptcyCodeintheUnitedStatesinOctober2011.Mr.GlynnisnolongeradirectorofMFGlobalHoldingsLtd.

Mr.PeckwasadirectorandPresident&ChiefExecutiveOfficerofTransUnionwhenitagreedtosettleaCivilInvestigativeDemandbytheU.S.ConsumerFinancialProtectionBureau("CFPB")inDecember2016focusedoncommonindustrypracticesrelatingtotheadvertising,marketingandsaleofconsumerreports,creditscoresorcreditmonitoringproductstoconsumersbyTransUnion’sConsumerInteractivesegment.TransUnionexecutedaStipulationandConsenttotheIssuanceofaConsentOrderwhichwasissuedbytheCFPBinJanuary2017,whichrequiredthemtoimplementcertainpracticechangesinthewaytheyadvertise,marketandsellproductsandservicestoconsumers,developacomprehensivecomplianceplan,andpayapproximatelyUS$13.9millionforredresstoeligiblecustomersandacivilmoneypenaltytotheCFPBintheamountofUS$3.0million.

ShareholdingsofDirectorsandExecutiveOfficersTotheknowledgeofSLFInc.,asatDecember31,2020,SLFInc.'sdirectorsandexecutiveofficers,asagroup,owned,directlyorindirectly,orhadvotingcontrolordirectionover203,209CommonSharesofSLFInc.,orlessthan1%ofthetotalCommonSharesoutstanding.



CodeofConductWehavebuiltastrongcorporateculturefoundedonethicalbehaviour,highbusinessstandards,integrityandrespect.TheBoardestablishesthe“tonefromthetop”andmakeseveryefforttoensurethatSeniorManagementconsistsofpeopleofintegritywhocreateandsustainacultureofintegritythroughouttheorganization.QuestionsaboutintegrityareincludedinourBoard's,committeeandpeereffectivenesssurveys.

TheBoardhasestablishedourCodeofConduct(the"Code")thatappliestoeveryDirector,Officerandemployee,withnoexception.EachDirector,OfficerandemployeereceivesannualtrainingandisrequiredtocompleteadeclarationofcompliancewiththeCode.

OurCodepromotesspeakingupandoutlinesourcommitmentagainstretaliation.OurCodealsorequiresemployeesandBoardmemberstoreportallknownandsuspectedbreaches.OurEthicsHotlineempowersouremployeestoplayanactiveroleinprotectingtheorganization.TheymayusetheEthicsHotlinetoreportallegationsofmisconductanonymouslyoriftheyfeeltheirconcernshavenotbeenresolvedusingotherreportingmethods.

CommunicationsthataccompaniedtheCodein2020furtherreinforcedourexpectationsofbehavioursintheworkplace;emphasizingtheimportanceofspeakingup,fosteringaworkplacethatisfreeofharassmentofanykindandpromotingdiversity,equityandinclusion.

TheGovernance,Investment&ConductReviewCommitteeoftheBoardisresponsibleforreviewingtheeffectivenessoftheCode,monitoringcompliancewiththeCodeandreportingtheresultsofitsreviewtotheBoardannually.Onaquarterlybasis,theChiefComplianceOfficerreportsonbreachesoftheCodeandreviewsourcontrolsandcompliancewiththeGovernance,Investment&ConductReviewCommittee.NowaiversoftheCodeforDirectorsorExecutiveOfficershavebeengranted.

WecompletedourfulltriennialreviewoftheCodein2020.TheupdatedCodewasapprovedbytheBoardinAugust2020andformallypublishedinOctober2020.ThemostrecentcopyoftheCodeisavailableonourwebsite(www.sunlife.com).IthasbeenfiledwithsecuritiesregulatorsinCanadaandwiththeSECandmaybeaccessedatwww.sedar.comandwww.sec.gov,respectively.

PrincipalAccountantFeesandServicesThefollowingtableshowsthefeesrelatedtoservicesprovidedbytheCompany'sexternalauditors,DeloitteLLP,forthepasttwoyears:

FortheyearsendedDecember31($millions)2020 2019(1)

AuditServices 18.8 18.1Audit-RelatedServices 1.7 1.2TaxServices 0.5 0.3OtherServices 1.5 1.7

(1)Adjustmentto2019feesof$0.4millionforAuditServicesand($0.2)millionforOtherServices.

AuditfeesrelatetoprofessionalservicesrenderedbytheauditorsfortheauditofourAnnualConsolidatedFinancialStatements,thestatementsforoursegregatedfundsandservicesrelatedtostatutoryandregulatoryfilings.Auditfeesof$12.1million(2019:$12.9million)relatestotheauditoftheConsolidatedFinancialStatementsofSLFanditssubsidiariestosupporttheauditopinionsexpressedintheIndependentAuditor'sReport;theremainingAuditServicesfeesof$6.7million(2019:$5.6million)relatestoauditofthestatementsofsegregatedfundsandstatutoryandregulatoryfilings.

Audit-relatedfeesincludeassuranceservicesnotdirectlyrelatedtoperformingtheauditoftheAnnualConsolidatedFinancialStatementsoftheCompany.Theseincludeinternalcontrolreviews,specifiedprocedureauditsandemployeebenefitplanaudits.

Taxfeesrelatetotaxcompliance,taxadviceandtaxplanning.

Allotherfeesrelatetoproductsandservicesotherthanaudit,audit-relatedandtaxasdescribedabove.



Pre-ApprovalPoliciesandProceduresTheAuditCommitteeofSLFInc.andSunLifeAssurancehaveadoptedapolicyrestrictingtheuseoftheexternalauditor(the“Policy”).TheobjectiveofthePolicyistoensurethattheindependenceoftheexternalauditorisnotcompromisedbycertainengagements.ThePolicyisbasedonthefollowingprinciples,whichspecifythattheexternalauditorcannot:• functionintheroleofmanagementoftheCompany;• audititsownfirm’swork;or• serveinanadvocacyrolefortheCompany.

ThePolicyrequiresthatanyservicestobeprovidedbytheexternalauditorbepre-approvedbytheAuditCommitteesofSLFInc.and/orSunLifeAssurance,asapplicable,andtheauditcommitteeofanyaffectedsubsidiarythatisitselfdirectlysubjecttotheSarbanes-OxleyActof2002.Ifaservicehasnotbeenpre-approvedbytheAuditCommittee,specificapprovalmustbeobtainedfromthecommitteebeforeanengagementlettercanbeissuedandtherelatedworkcommenced.Thecommitteehas,subjecttocertainfeethresholdsandreportingrequirements,pre-approvedcertainaudit,audit-relatedandotherpermissiblenon-auditservicesthatareconsistentwithmaintainingtheindependenceoftheexternalauditor.Thesepre-approvedservicesarereviewedannuallybythecommittee.ThePolicyprohibitsengagingtheexternalauditortoprovidecertainservices,including:• bookkeepingorotherservicesrelatedtoaccountingrecordsorfinancialstatements;• financialinformationsystemsdesignorimplementationservices;• appraisalorvaluationservices,fairnessopinionsorcontributioninkindreports;• actuarialservices;• internalauditoutsourcingservices;• managementfunctionsorhumanresourcesservices;• brokerordealer,investmentadviser,underwriting,securitiesorinvestmentbankingservices;• legalservicesandexpertservicesunrelatedtoanaudit;• anyserviceforwhichnofeeispayableunlessaspecificresultisobtained;• anynon-audittaxservicesthatrecommendtheCompanyengageinconfidentialtransactionsoraggressivetaxposition

transactions,asdefinedbytheU.S.PublicCompanyAccountabilityOversightBoard;and• anyotherservicethatgoverningregulatorsorprofessionalbodiesdeterminetobeimpermissible.

FeespaidtoSLFInc.'sexternalauditorshavebeenapprovedbytheAuditCommitteeoftheBoardofSLFInc.orotherwiseinaccordancewiththePolicy.NoneoftheservicesprovidedbytheCompany'sexternalauditorsdescribedabovewereapprovedpursuanttoawaiverofpre-approvalprovisionsunderSECrules(paragraph(c)(7)(i)(C)ofRule2-01ofRegulationS-X).

InterestsofExpertsDeloitteLLPistheauditorofSLFInc.andisindependentofSLFInc.withinthemeaningoftheRulesofProfessionalConductoftheCharteredProfessionalAccountantsofOntarioandwithinthemeaningoftheU.S.SecuritiesActof1933,asamended,andtheapplicablerulesandregulationsthereunderadoptedbytheSecuritiesandExchangeCommission("SEC")andthePublicCompanyAccountingOversightBoard(UnitedStates)("PCAOB").

KevinMorrissey,theAppointedActuaryofSLFInc.,hasprovidedanopiniononthevalueofpolicyliabilitiesandreinsurancerecoverablesforSLFInc.'sstatementsoffinancialpositionasatDecember31,2020and2019andthechangeintheconsolidatedstatementofoperationsfortheyearsendedDecember31,2020and2019.Mr.Morrisseyownedbeneficially,directlyorindirectly,lessthan1%ofalloutstandingsecuritiesorotherpropertyofSLFInc.oritsaffiliateswhenhepreparedthatopinion,andafterthatopinionwasprepared,andhedoesnotexpecttoreceiveanysuchsecuritiesorotherpropertyinexcessofthatamountinthefuture.

RegulatoryMattersSunLifeissubjecttoregulationandsupervisionbygovernmentauthoritiesinthejurisdictionsinwhichitdoesbusiness.

VariousregulatorshaveintroducednewmeasuresoradjustmentstorespondtotheevolvingsituationwiththeCOVID-19pandemic.InformationontheimpactofCOVID-19andcertainotherregulatorydevelopmentsaffectingSunLifearedescribedinour2020MD&Aundertheheading"COVID-19"andisincorporatedhereinbyreference.



Canada

RegulationofInsuranceOperationsSLFInc.isincorporatedunderandgovernedbytheInsuranceAct.OSFIadministerstheInsuranceActandsupervisestheactivitiesofSLFInc.SLFInc.hasallthepowersandrestrictionsapplicabletolifeinsurancecompaniesgovernedbytheInsuranceAct,whichpermitsinsurancecompaniestooffer,directlyorthroughsubsidiariesornetworkingarrangements,abroadrangeoffinancialservices,including:• Insuranceandreinsurance;• Investmentcounsellingandportfoliomanagement;• Mutualfundsandsegregatedfunds;• Trustservices;• Bankingservices;• Realpropertybrokerageandappraisal;and• Merchantbankingservices.

TheInsuranceActrequiresthefilingofannualandotherreportsonthefinancialconditionofinsurancecompanies,providesforperiodicexaminationsofinsurancecompanies'affairs,imposesrestrictionsontransactionswithrelatedparties,andsetsoutrequirementsgoverningcertainaspectsofinsurancecompanies'businesses.

OSFIsupervisesSLFInc.onaconsolidatedbasistoensurethatithasanoverviewofactivitiesofSLFInc.anditsconsolidatedsubsidiaries.Thisconsolidatedsupervisionincludestheabilitytoreviewinsuranceandnon-insuranceoperationsofSLFInc.andsubsidiariesandsupervisorypowertobringaboutcorrectiveaction.OSFIhasextensivepowerstointerveneintheaffairsofregulatedinsurancecompanies,includingthepowertorequestinformationordocuments,toconductinvestigations,torequirethatappropriateactionsaretakentoaddressissuesidentifiedbyOSFIandtolevyfines.OSFImayinterveneandassumecontrolofaninsurancecompanygovernedbytheInsuranceActifOSFIdeemsthattheamountofthecompany’savailablecapitalisnotsufficient.

InvestmentPowersUndertheInsuranceAct,alifeinsurancecompanymustmaintainaprudentportfolioofinvestments,subjecttocertainoveralllimitationsontheamountitmayinvestincertainclassesofinvestments,suchascommercialloans,realestateandstocks.Additionalrestrictions(and,insomecases,theneedforregulatoryapprovals)limitthetypeofinvestmentswhichSLFInc.canmakeinexcessof10%ofthevotingrightsor25%oftheequityofanyentity.

CapitalandSurplusRequirementsSLFInc.andSunLifeAssurance,SLFInc.’sprincipaloperatinglifeinsurancesubsidiaryinCanada,aresubjecttoOSFI’sLifeInsuranceCapitalAdequacyTest("LICAT")capitalframework.

TheLICATGuidelineusesarisk-basedapproachformeasuringspecificlifeinsurerrisksandforaggregatingtheresultstocalculatetheamountofalifeinsurer’sregulatoryrequiredcapitaltosupporttheserisks.LICATmeasuresthecapitaladequacyofaninsurerusingaTotalRatioandaCoreRatioandisoneofseveralindicatorsusedbyOSFItoassessaninsurer’sfinancialcondition.TheTotalRatioistheAvailableCapitalplusSurplusAllowanceandEligibleDepositsdividedbyaBaseSolvencyBufferasdescribedbelow.

TheprincipalelementsincludedindeterminingQualifyingRegulatoryAvailableCapital(“AvailableCapital”)underLICATincludecommonshares,contributedsurplus,retainedearnings,theparticipatingaccount,accumulatedcurrencytranslationaccount,unrealizedgainsandlossesonavailableforsaleequityanddebtsecurities,qualifyingpreferredshares,innovativecapitalinstrumentsandsubordinateddebt.

ThecalculationoftheTotalRatiotakesintoconsiderationotheraspectsofthebalancesheetthatareavailableaslossabsorbingcapacity,includingtheSurplusAllowanceandEligibleDeposits.TheSurplusAllowanceincludestheprovisionsforadversedeviationsfornon-economicandrisk-freeinterestrateassumptions.TheEligibleDepositsconsistoftheexcessdepositsheldforunregisteredreinsurersandclaimsfluctuationreserves.

TheBaseSolvencyBufferincludesfiveriskcomponents:(1)creditrisk,(2)marketrisk,(3)insurancerisk,(4)segregatedfundsguaranteerisk,and(5)operationalrisk.Creditsareavailablefor:(1)qualifyingin-forceparticipatingandadjustableproducts,(2)otherriskmitigationandrisktransfer,and(3)riskdiversification.Thesumoftheriskcomponents,netofcredits,aremultipliedby1.05toarriveattheBaseSolvencyBuffer.



TheLICATGuidelinesetsaSupervisoryTargetTotalRatioof100%andaminimumTotalRatioof90%.Thesupervisorytargetprovidesacushionabovetheminimumrequirements,providesamarginforotherrisks,andfacilitatesOSFI’searlyinterventionprocess.Thesupervisorytargetisnotapplicabletoregulatedinsuranceholdingcompaniesandnon-operatinginsurancecompanies.TheCompanyhasestablishedcapitaltargetsinexcessofthesupervisorytargetsetbyOSFI.

RestrictionsonDividendsandCapitalTransactionsTheInsuranceActprohibitsthedeclarationorpaymentofdividendsonsharesofaninsurancecompanyiftherearereasonablegroundsforbelievingthecompanydoesnothave,orthepaymentofthedividendwouldcausethecompanynottohave,adequatecapitalorliquidity,oruponanydirectionmadebytheSuperintendent.TheInsuranceActalsorequiresthataninsurancecompanynotifytheSuperintendentofthedeclarationofadividendatleastfifteendaysbeforethedividendpaymentdate.

TheInsuranceActalsoprohibitsthepurchaseforcancellationofsharesissuedbyaninsurancecompanyortheredemptionofredeemablesharesorothersimilarcapitaltransactions,iftherearereasonablegroundsforbelievingthatthecompanydoesnothave,orthepaymentwouldcausethecompanynottohave,adequatecapitalorliquidity,oruponanydirectionmadebytheSuperintendent.Further,anyredemptionorpurchaseforcancellationofsharesissuedbyaninsurancecompanyorsimilarcapitaltransactionsareprohibitedwithoutthepriorapprovaloftheSuperintendent.

OnMarch13,2020,OSFIsettheexpectationforallfederallyregulatedfinancialinstitutionsthatdividendincreasesandsharebuybacksshouldbehaltedforthetimebeing.

RestrictionsonOwnershipTheInsuranceActcontainsrestrictionsonthepurchaseorotheracquisition,issue,transferandvotingofthesharesofaninsurancecompany.Pursuanttotheserestrictions:• NopersonispermittedtoacquireanysharesofSLFInc.iftheacquisitionwouldcausethepersontohavea“significantinterest”

inanyclassofsharesofSLFInc.,withoutthepriorapprovaloftheMinisterofFinanceofCanada;• SLFInc.isnotpermittedtorecordanytransferorissueofsharesofSLFInc.ifthetransferorissuewouldcausethepersonto

haveasignificantinterestinSLFInc.,unlesspriorapprovalisobtainedfromtheMinisterofFinanceofCanada;and• NopersonwhohasasignificantinterestinSLFInc.mayexerciseanyvotingrightsattachedtothesharesheldbythatperson,

unlesspriorapprovaloftheMinisterofFinanceofCanadaisobtained.

Apersonhasasignificantinterestinaclassofshareswheretheaggregateofanysharesofthatclassbeneficiallyownedbythatperson,anyentitycontrolledbythatpersonandanypersonactingjointlyorinconcertwiththatpersonexceeds10%ofalloftheoutstandingsharesofthatclassofshares.

UndertheInsuranceAct,theMinisterofFinanceofCanadamayapproveonlytheacquisitionofasignificantinterestofupto30%ofanyclassofnon-votingsharesandupto20%ofaclassofvotingshares,providedthatthepersonacquiringthosesharesdoesnothavedirectorindirectinfluenceoverSLFInc.that,ifexercised,wouldresultinthatpersonhavingcontrolinfactofSLFInc.Inaddition,theInsuranceActprohibitslifeinsurancecompanies,includingSLFInc.,fromrecordingatransferorissuingsharesofanyclasstoHerMajestyinrightofCanadaorofaprovince,anagentofHerMajesty,aforeigngovernmentoranagentofaforeigngovernment.

SLFInc.isrequiredtocontinuetocontrol,butnotwhollyown,SunLifeAssurance.AnysharesofSunLifeAssurancethatarenotownedbySLFInc.arerequiredtomeetthewidely-heldcriteria(noindividualmayownmorethan10%ofanyclassofshareswithoutpriorapprovaloftheMinisterofFinanceofCanada).The20%limitonvotingshareownershipand30%limitonnon-votingshareownershipapplytothedirectandindirectcumulativeownershipofSunLifeAssurance,withtheeffectthatnosingleinvestorwillbeabletousetheholdingcompanystructuretoexceedthoseownershiprestrictions.

AppointedActuaryInaccordancewiththeInsuranceAct,SLFInc.'sBoardhasappointedaFellowoftheCanadianInstituteofActuariesasits“AppointedActuary”.TheAppointedActuarymustprovideanopinionon:• ThevalueoftheCompany'sconsolidatedpolicyliabilitiesasattheendofeachfiscalperiodinaccordancewithaccepted

actuarialpractice,includingtheselectionofappropriateassumptionsandmethods;• Whethertheamountofpolicyliabilitiesmakesappropriateprovisionsforallobligationstopolicyholders;and• Whetherthevaluationofliabilitiesisfairlypresentedintheconsolidatedfinancialstatements.

RegulationsrequirethattheAppointedActuarymeetwiththeBoardoradelegatedCommitteeoftheBoardatleastonceineachfinancialyeartoreport,inaccordancewithacceptedactuarialpractice,ontheCompany'sfinancialpositionanditsexpectedfuturefinancialcondition.TheAppointedActuarymustreporttotheChiefExecutiveOfficerandtheChiefFinancialOfficerofSLFInc.anymattersthat,intheAppointedActuary'sopinion,couldhavematerialadverseeffectsonthefinancialconditionofSLFInc.



PrescribedSupervisoryInformationTheSupervisoryInformation(InsuranceCompanies)RegulationsmadeundertheInsuranceActprohibitregulatedinsurancecompanies,suchasSLFInc.andSunLifeAssurance,fromdisclosing,directlyorindirectly,“prescribedsupervisoryinformation”,asdefinedinthoseRegulations.Prescribedsupervisoryinformationincludesassessments,recommendations,ratingsandreportsconcerningtheCompanymadebyorattherequestoftheSuperintendent,ordersoftheSuperintendentwithrespecttocapitalandliquidity,certainregulatoryactionstakenwithrespecttotheCompany,prudentialagreementsbetweentheCompanyandtheSuperintendent,anddirectionsoftheSuperintendentthatweceaseorrefrainfromcommitting,orremedy,unsafeorunsoundpracticesinconductingourbusiness.

Provincial/TerritorialInsuranceRegulationInCanada,lifeinsuranceisalsosubjecttoprovincialregulationandsupervisionineachprovinceandterritoryinCanada.Provincialinsuranceregulationisprimarilyconcernedwithmarketconductmatters,therightsandobligationsunderinsurancecontracts,andthelicensingandoversightofinsuranceintermediaries.Inadditiontothoseregulations,guidelinesadoptedbytheCanadianLifeandHealthInsuranceAssociation(“CLHIA”)governseveralaspectsofourbusinessinCanada.

SLFInc.islicensedasaninsurancecompanyinCanadaundertheInsuranceActandistheholdingcompanyfortheSunLifegroupofcompanies.SLFInc.isnotlicensedtocarryonlifeinsurancebusinessinanyprovinceorterritoryinCanada.

SunLifeAssuranceandSunLifeInsurance(Canada)LimitedarelicensedtocarryonlifeinsuranceandaccidentandsicknessinsurancebusinessineachprovinceandterritoryinCanada.

RegulationofSecuritiesOperationsSeveralofSLFInc.'ssubsidiariesinCanadaareregisteredwithvariousCanadianSecuritiesAdministratorsasdealers,advisorsormanagersunderoneormoreofthefollowingcategoriesofregistration:mutualfunddealer,investmentfundmanager,commoditytradingmanager,investmentcounsel/portfoliomanagerandexemptmarketdealer.Theseentities,theirregisteredemployeesandtheirproductsand/orservicesareregulatedinCanadaunderprovincialandterritorialsecuritieslawswhichareadministeredandenforcedbythevariousCanadianSecuritiesAdministrators,andcertainentitiesarealsosubjecttotherulesoftheapplicableself-regulatoryorganization,suchastheMutualFundDealersAssociationofCanadaformutualfunddealers.TheseentitiesmaybesubjecttoexaminationsorproceedingsbythevariousCanadianSecuritiesAdministratorsandself-regulatoryorganizations.Theseexaminationsorproceedingscouldsubjectourregisteredsubsidiariestoarangeofregulatorysanctions,includingcensure,limitationsontheregistrant'sactivities,andterminationofregistration,andcouldsubjecttheseentitiestoacessationofsalesortherescissionofasaleofsecurities.

ClientProtectionforFinancialInstitutionFailureSunLifeAssurance’sCanadianpolicyholdersareprovidedprotectionfromaninsolvencythroughAssuris,anotforprofitorganizationthatisfundedbyitsmemberinsurancecompanies.EverylifeinsurancecompanyauthorizedtosellinsurancepoliciesinCanadaisrequired,bythefederal,provincialandterritorialregulators,tobecomeamemberofAssuris.Assurisprovidesseparateprotectionforindividual,group,registeredandnon-registered,lifeinsurancepoliciesandannuitypolicies.

TheMFDAInvestorProtectionCorporation(“IPC”)providesClientswithprotection,withindefinedlimits,intheeventoftheinsolvencyoftheirmutualfunddealer.TheIPCisfundedbyitsmembermutualfunddealers,includingSunLifeFinancialInvestmentServices(Canada)Inc.

TheCanadaDepositInsuranceCorporation(“CDIC”)isafederalcrowncorporationcreatedtoprotectdepositsmadewithmemberfinancialinstitutionsincaseoftheirfailure.CDICmemberinstitutions,includingSunLifeFinancialTrustInc.,funddepositinsurancethroughpremiumspaidontheinsureddepositsthattheyhold.

OtherRegulatoryMatters

PrivacyofClientInformationandAnti-SpamLegislationCanadianfederal,andsomeprovincial,lawsandregulationsrequireorganizations,includingfinancialinstitutions,toprotectthesecurityandconfidentialityofClientinformation.ThisincludesfinancialinstitutionsnotifyingClientsabouttheirpoliciesandpracticesrelatingtotheircollection,useanddisclosureofClientinformation,includingprotectionofthatinformation.Requirementsalsoincludeanobligationtonotifyindividualsandreporttoprivacyregulatorswhenthereisarealriskofsignificantharmtoaffectedindividualsresultingfromabreachofsecuritysafeguards.BoththefederalandQuebecgovernmentshaveintroduceddraftlegislationthatwouldsignificantlyalterprivacylegislationbyintroducingnewrightsforindividuals,additionalobligationsfororganizationsandexpansiveenforcementpowersandfinancialpenaltiesfornon-compliance.Canadiananti-spamlegislationimposescertainrestrictionsandformalitiesonthedeliveryofcommercialelectronicmessagestoexistingandprospectiveClients.Thisincludesobtainingconsentfromrecipientsandprovidingtheabilitytounsubscribefromsubsequentmessages.



Anti-MoneyLaunderingLegislationTheProceedsofCrime(MoneyLaundering)andTerroristFinancingAct,Canada,containsmeasurestoassistindetecting,deterring,andfacilitatingtheinvestigationofmoneylaunderingandterroristfinancingoffences.Thislegislationandtheassociatedregulationsimposereporting,recordkeepingand“knowyourClient”obligationsonSLFInc.andcertainofitssubsidiaries.

UnitedStatesIntheU.S.SLFInc.doesnotcarryonbusinessandisnotregulatedasaninsurancecompany.SunLifeAssuranceandseveralindirectU.S.subsidiariesofSLFInc.carryonbusinessandareregulatedasinsurancecompaniesintheUnitedStates.MichiganisSunLifeAssurance's“stateofentry”andistreatedasthestateofdomicileforSunLifeAssurance'sU.S.branch(the“U.S.Branch”).TheU.S.BranchislicensedtotransactbusinessineverystateintheUnitedStatesexceptNewYork,plusintheDistrictofColumbia,PuertoRico,andtheU.S.VirginIslands.SLFInc.'sU.S.lifeandhealthinsurancesubsidiariesare,collectively,licensedtotransactbusinessinallstates,theDistrictofColumbia,andPuertoRico.

CertainSLFInc.'sU.S.subsidiaries(includingMFSanditssubsidiaries,SunLifeCapitalManagement(U.S.)LLC,(1)BGOandcertainofitssubsidiaries,certainsubsidiariesofInfraRed,andCrescentandcertainofitssubsidiaries)andcertaincontracts,policiesandfundsissued,offeredormanagedbythemaresubjecttoregulationunderfederalsecuritieslawsadministeredbytheSECandundercertainstatesecuritieslaws.

RegulationofInsuranceOperations-StateLevelIntheUnitedStates,allstates,theDistrictofColumbia,andtheU.S.territoriesandpossessionshaveinsurancelawsthatapplytocompanieslicensedtocarryonaninsurancebusinessinthejurisdiction.Theprimaryregulatorofaninsurancecompany,however,isthestateinsurancedepartmentorequivalentbodylocatedinitsstateofdomicile.Mostjurisdictionshavelawsandregulationsgoverningthefinancialaspectsofinsurers,includingstandardsofsolvency,reserves,reinsurance,andcapitaladequacy,andthebusinessconductofinsurers.Inaddition,thelawsofthevariousstatesprovidestateinsuranceregulatorswithbroadadministrativepowerstoapprovepolicyformsandrelatedmaterialsandapproveratesforcertainlinesofinsurance,grantandrevokelicensestotransactbusiness,regulatetradepractices,licenseagents,andrequirestatutoryfinancialstatements.Theprimarypurposeofsuchregulationistheprotectionofpolicyholdersandconsumers,ratherthanshareholders.

TheNationalAssociationofInsuranceCommissioners(“NAIC”)istheU.S.standard-settingandregulatorysupportorganizationcreatedandgovernedbythechiefinsuranceregulatorsfromthe50states,theDistrictofColumbiaandfiveU.S.territories.ThroughtheNAIC,stateinsuranceregulatorsestablishstandardsandbestpractices,conductpeerreview,andcoordinatetheirregulatoryoversight.NAICmembers,togetherwiththecentralresourcesoftheNAIC,formthenationalsystemofstate-basedinsuranceregulationintheUnitedStates.

TheU.S.BranchandSLFInc.'sU.S.lifeandhealthinsurancesubsidiariesaresubjecttotheinsuranceholdingcompanylawsandregulationsinthestatesinwhichtheyaredomiciled(ordeemedtobecommerciallydomiciled).Moststates'insuranceholdingcompanylawsrequireeachinsurerthatisdomiciledthereinandthatisamemberofaholdingcompanysystemtoregisterwiththeinsuranceregulatoryauthorityofthatstateand,annually,tofurnishthoseauthoritieswithreportsthatincludeinformationconcerningcapitalstructure,ownership,financialcondition,certainintercompanytransactionsandgeneralbusinessoperations.Inaddition,undermoststates'holdingcompanylaws,transactionswithintheholdingcompanysystemtowhichthedomesticinsurerisapartymustbefairandequitableandtheinsurer'spolicyholdersurplusfollowinganysuchtransactionmustbebothreasonableinrelationtoitsoutstandingliabilitiesandadequateforitsneeds.Moststatesrequirepriorregulatoryapprovalofthechangeofcontrolofthedomesticinsureroranentitythatcontrolsthedomesticinsurerandpriornoticeorregulatoryapprovalofcertainintercompanytransfersofassetsorothermaterialaffiliatetransactionstowhichadomesticinsurerisaparty.Generally,undersuchlaws,astateinsuranceauthoritymustapproveinadvancethedirectorindirectacquisitionof10%ormoreofthevotingsecuritiesofaninsurancecompanydomiciledinthestate.

SLFInc.'sU.S.captiveinsurancecompaniesaresubjecttothelawsandregulationsapplicabletocaptiveinsurersintheirstatesofdomicile,aswellasthetermsofthebusinessplansapprovedby,andthelicensingordersissuedby,thecompanies'domesticregulators.Generally,acaptiveinsurancecompanyisrequiredtoseekregulatoryapprovalpriortotakinganyactionthatwoulddeviatefromtheactivitiesdescribedinitsapprovedbusinessplanorspecificallypermittedbythelicensingorderissuedbyitsdomesticregulator.

TheU.S.BranchandSLFInc.'sU.S.lifeandhealthinsurancesubsidiariesarerequiredtofiledetailedannualandquarterlyfinancialstatementswithstateinsuranceregulatorsineachofthestatesinwhichtheyarelicensed,andtheirbusinessandaccountsaresubjecttoexaminationbysuchregulatorsatanytime.Regulatorshaveauthoritytolimitorprohibittheabilitytoissuenewpoliciesif,intheirjudgment,aninsurerisnotmaintainingsufficientsurplusorcapitalorifthefurthertransactionofbusinesswouldbedetrimentaltopolicyholders.________(1)OnJanuary1,2020,RyanLabsAssetManagementInc.,PrimeAdvisorsInc.andSunLifeCapitalManagement(U.S.)LLCmerged,withtheresultingentity

beingSunLifeCapitalManagement(U.S.)LLC.



Aspartoftheiroversightprocess,stateinsurancedepartmentsconductdetailedexaminationsperiodically(generally,everythree-tofive-years)ofthefinancialconditionandmarketconductofinsurancecompaniesdomiciledintheirstates.ThelatestpublishedexaminationreportsoftheU.S.BranchandSLFInc.'sU.S.lifeandhealthinsurancecompaniesdidnotraiseanymaterialissuesoradjustments.Inadditiontotheperiodicexaminations,stateswillonoccasionperformtargetedmarketconductreviewsthatmaycover,amongotherthings,contentofdisclosures,advertising,salespracticesandcomplainthandling.Examinationsareperiodicallyconducted,incooperationwiththedepartmentsofotherstates,underguidelinespublishedbytheNAIC.

RestrictionsonDividendsTheamountofdividendsthataninsurancecompanymaypaytoitsparentwithoutpriorregulatoryapprovalisregulatedundertheU.S.stateinsuranceholdingcompanylawsandregulationsandunderthetermsoflicensingordersissuedbyvariousstates.

NAICIRISRatiosTheNAIChasdevelopedasetoffinancialrelationshipsor“tests”knownastheInsuranceRegulatoryInformationSystem(“IRIS”)toassiststateregulatorsinmonitoringthefinancialconditionofinsurancecompaniesandidentifyingcompaniesthatmayrequirespecialattentionoractionbyinsuranceregulatoryauthorities.Asecondsetofconfidentialratios,calledtheFinancialAnalysisSolvencyTrackingSystem,isalsousedformonitoring.InsurancecompaniesgenerallysubmitdatatotheNAIC,whichinturnanalyzesthedatausingprescribedfinancialdataratios,eachwithdefined“usualranges”.Havingratiosthatfalloutsidetheusualrangedoesnotnecessarilyindicatethatacompanyexperiencedunfavourableresults.Generally,iffourormoreofaninsurancecompany'sratiosfalloutsidetheusualranges,regulatorswillbegintoinvestigateormonitorthecompany.Regulatorshavetheauthoritytoimposeremedieswithvariousdegreesofsupervision,rangingfromincreasedmonitoringtocertainbusinesslimitations.Forthetwelve-monthperiodendedDecember31,2019,themostrecentperiodforwhichresultsareavailable,SLFInc.'sU.S.lifeandhealthinsurancesubsidiarieswerewithintheusualrangesformostoftheIRISratios.TheU.S.Branchhadfourratiosoutsideoftheusualranges,whichwasanticipatedinconnectionwithcertainplannedtransactionsthatwerereportedtoorapprovedbystateregulatorsasrequired.Theratiosthatwereoutsidetheusualrangesdidnotindicateanyadversesolvencyissues.

Risk-basedCapitalRatioRequirementsAllstateshaverisk-basedcapital(“RBC”)ratiorequirementsforinsurancecompanies.TheNAICRBCsystemwascreatedtoprovideacapitaladequacystandardthatisrelatedtorisk,raisesasafetynetforinsurers,isuniformamongthestates,andprovidesregulatoryauthorityfortimelyaction.TheRBCsystemrequiresaninsurertocalculateaminimumamountofcapitalthatitmustmaintaintosupportthevariousriskstowhichitisexposed.Aseparatefactorisusedacrosseachmajorriskcategory,andmayvarybyprimaryinsurancetype.RBCfocusesonthematerialrisksthatarecommonfortheparticularinsurancetype.Forlifeandhealthinsurance,RBCconsidersinvestmentrisk,insurancerisk,interestraterisk,andothermarketandbusinessrisks,byapplyingfactorstovariousamountspresentedinthecompany'sstatutoryfinancialstatements.TheRBCframeworkwasupdatedin2018toincorporatetheimpactsoftheTaxCutsandJobsActof2017.FortheyearendedDecember31,2020,theRBCratiofortheU.S.BranchandSLFInc.'sU.S.lifeandhealthinsurancesubsidiariesisexpectedtoexceedthelevelsunderwhichanyremedialorregulatoryactionwouldberequired.

StatutoryReservesStateinsurancelawsrequirelifeandhealthinsurancecompaniestoanalyzetheadequacyoftheirreservesannually.TheappointedactuaryfortheU.S.BranchandSLFInc.'sotherU.S.lifeandhealthinsurancesubsidiariesmustsubmitanopinionthatsuchreserves,whenconsideredinlightoftheassetsheldwithrespecttothosereserves,makeadequateprovisionfortheassociatedcontractualobligationsandrelatedexpensesoftheU.S.BranchandeachofSLFInc.’slifeandhealthinsurancesubsidiaries.Ifsuchopinioncannotbeprovided,theaffectedinsurermustsetupadditionalreserves.

UnderNAICrules,lifeandhealthinsurancecompaniesmustmaintainanassetvaluationreserve(“AVR”),whichisaprovisionforpotentialassetcreditdefaults.ThesizeoftheAVRdependsuponthecompositionandresultsofacompany’sinvestmentportfolio.Thesereservesarerecordedforpurposesofstatutoryaccountingpractices;theyarenotrecordedundertheprovisionsofIFRSandthereforehavenoimpactonSLFInc.'sreportedresultsofoperationsorfinancialposition.TheAVRaffectsthedeterminationofstatutorysurplus,andchangesinsuchreservesmayaffecttheabilityofSLFInc.'sU.S.lifeandhealthinsurancesubsidiariestopaydividendsorotherdistributionstotheirrespectiveparentsandalsomayaffecttheamountsrequiredtobemaintainedintrustbytheU.S.Branch(seediscussionbelowunderMinimumStatutorySurplusandCapital).

MinimumStatutorySurplusandCapitalTheU.S.BranchandSLFInc.'sU.S.lifeandhealthinsurancesubsidiariesarerequiredtohaveminimumstatutorysurplusandcapitalofvariousamounts,dependingonthestatesinwhichtheyarelicensedandthetypesofbusinessthattheytransact.

TheU.S.BranchisrequiredtomaintainacertainamountofassetsintrustwithafinancialinstitutionacceptabletotheDirectorofMichigan'sDepartmentofInsuranceandFinancialServices(the“MichiganDirector”)inanamountatalltimesatleastequaltothesumoftheU.S.Branch'sreservesandotherliabilities,theminimumrequiredcapitalandsurplus,andanyadditionalamountsconsiderednecessarybytheMichiganDirectortocovertheU.S.Branch'sliabilities.Generally,theseassetsareavailableonlytomeettheobligationsofSunLifeAssurancetoitsU.S.policyholders,claimantsandotherU.S.Branchcreditors.Amendmentstothe



trustagreementmustbeapprovedbytheMichiganDirector.AsatDecember31,2020,theU.S.BranchhadassetsintrustinexcessofMichigan’srequirements.

InvestmentsofInsuranceCompaniesTheU.S.BranchandSLFInc.'sotherU.S.lifeandhealthinsurancesubsidiariesaresubjecttostatelawsandregulationsthatrequirediversificationoftheirinvestmentportfoliosandlimittheamountofinvestmentsincertaininvestmentcategoriessuchasbelow-investment-gradefixedincomesecurities,equityrealestate,foreigninvestmentsandequityinvestments.Failuretocomplywiththeselawsandregulationswouldcauseinvestmentsexceedingregulatorylimitstobetreatedasnon-admittedassetsforpurposesofmeasuringsurplusand,insomeinstances,wouldrequiredivestitureofsuchnon-qualifyinginvestments.

StateGuarantyAssociationAssessmentsAllstates,theDistrictofColumbiaandPuertoRicorequireinsurerstoparticipateinthelocalinsuranceguarantyassociation.Theassociationmaylevyassessmentsforpolicyholderlossesincurredbyimpairedorinsolventinsurers.Generally,assessmentsuptocertainprescribedlimitsarebasedupontheproportionateshareofpremiumswrittenbymemberinsurersinthelinesofbusinessinwhichtheimpairedorinsolventinsurerisengaged.AlargepartoftheassessmentspaidbySLFInc.'sU.S.insurancesubsidiariespursuanttotheselawsmaybeusedascreditsforaportionofitsU.S.premiumtaxes.

RegulationofInsuranceOperations-FederalLevelAlthoughtheU.S.federalgovernmentdoesnotdirectlyregulatetheinsurancebusiness,federallegislationandadministrativepoliciesinseveralareasapplytotheconductoftheinsurancebusiness,includingageandsexdiscrimination,investmentcompanyregulation,financialservicesregulation,healthcareregulation,foreigncorruptpracticesregulationandfederaltaxation.Forexample,theU.S.Congresshas,fromtimetotime,consideredlegislationrelatedtolimitationsonantitrustimmunityandthealterationofthefederalincometaxstructure.

RegulationofSecuritiesOperationsTheinvestmentmanagementactivitiesofSLFInc.'sU.S.subsidiariesaresubjecttofederalandstatelawsandregulationsinthejurisdictionswheretheyconductbusiness.MFSandcertainofSLFInc.'sotherU.S.subsidiariesareregisteredasinvestmentadvisersundertheInvestmentAdvisersActof1940,asamended(the“AdvisersAct”),whichimposesvariousobligationsonregisteredinvestmentadvisers,includingfiduciaryduties,anddisclosure,operational,recordkeepingandreportingrequirements.

SeveralofSLFInc.'sU.S.subsidiariesissueorhaveissuedproductsthatareregisteredwiththeSECasinvestmentcompaniesundertheInvestmentCompanyActof1940,asamended(the“1940Act”)andwhichissuesecuritiesthatareregisteredundertheSecuritiesActof1933,asamended(the“1933Act”).CertainofSLFInc.'sU.S.subsidiariesprovideinvestmentmanagementservicestoaffiliatedfunds,whichsimilarlyareregisteredasinvestmentcompaniesunderthe1940Actandwhichissuesecuritiesthatareregisteredunderthe1933Act.The1940Actandthe1933Actimposevariousobligationsonregisteredinvestmentcompaniesandwithrespecttothesecuritiesthattheyissue,includingdisclosure,operational,recordkeepingandreportingrequirementsand,inthecaseofthe1940Act,prohibitionsorrestrictionsoncertaintransactionswithaffiliates.

RegisteredinvestmentcompaniesandinvestmentadvisersareregulatedbyandsubjecttoexaminationbytheSEC.TheSECisauthorizedtoinstituteproceedingsandimposesanctionsforviolationsoftheU.S.federalsecuritieslaws.FailuretocomplywithapplicablesecuritieslawscouldsubjectSLFInc.'sinvestmentcompaniesandinvestmentadvisersubsidiariestoarangeofregulatorysanctions,includingcensure,limitationsontheregistrant'sactivities,andterminationofregistration,andcouldsubjectitsregisteredinvestmentcompaniestoacessationofsalesorrescissionofsecuritiessold.

TotheextentthatanyproductsaredeemedtobesecuritiesunderU.S.federalorstatesecuritieslaws,theyarequalifiedforsaleasneededincertainstatesintheUnitedStatesandtheDistrictofColumbia.MarketingandsalesofsecuritiesproductsaresubjecttotheSecuritiesExchangeActof1934,asamended(the“1934Act”),andregulationspromulgatedbytheFinancialIndustryRegulatoryAuthority(“FINRA”).

CertainofSLFInc.'sU.S.subsidiariesareregisteredasbroker-dealersunderthe1934Actandaresubject,forexample,totheSEC'snetcapitalrules,andaremembersof,andsubjecttoregulationbyFINRA.CertainotherU.S.subsidiariesofSLFInc.areregisteredastransferagentsunderthe1934Act.

MFSalsoconductsbusinessintheEuropeanUnion(“EU”)thatisalsosubjecttosecuritieslawsandregulations.TherevisedMarketsinFinancialInstrumentsDirectiveandRegulation(together“MiFIDII”)becameeffectiveonJanuary3,2018andappliesacrosstheEUandmemberstatesoftheEuropeanEconomicArea("EEA").ImplementationofMiFIDIIishavingasignificantimpactonboththestructureandoperationofEUfinancialmarkets.SomeofthemainchangesintroducedunderMiFIDIIincludeapplyingenhanceddisclosurerequirements,enhancingconductofbusinessandgovernancerequirements,broadeningthescopeofpreandposttradetransparency,increasingtransactionreportingrequirements,transformingtherelationshipbetweenClientcommissionsandresearch,andfurtherregulationoftradingvenues.InresponsetoMiFIDII,MFSispayingforallexternalinvestmentresearchforallclients(includingnon-Europeanclients).



OtherU.S.RegulatoryMatters

U.S.TaxationInlightoftherecentU.S.presidentialelectionandsenateelections,acorporateincometaxrateincreasecouldbeintroducedintheU.S.,alongwithotherlegislativechangesaimedatcombatingbaseerosion.Ifenacted,suchchangescouldmateriallyimpactourtaxexpenseonprofitsearnedintheU.S.

TheDodd-FrankActTheWallStreetReformandConsumerProtectionAct(“Dodd-FrankAct”),whichwassignedintolawinJuly2010,enactednumerouslegalandregulatorychangesforthefinancialservicesindustry,whichhavebeengraduallyimplementedovertheensuingyears.

TheDodd-FrankActmandatedtheU.S.federalregulationoftheover-the-counter(“OTC”)derivativesmarketandgrantednewjointregulatoryauthoritytotheSECandtheU.S.CommodityFuturesTradingCommission(“CFTC”)overOTCderivatives.WhiletheSECandCFTCcontinuetopromulgateadditionalrules,certainofSLFInc.'s.derivativesoperationshavebecomesubjectto,amongotherthings,newrecordkeeping,reportinganddocumentationrequirements.Inaddition,certainnon-clearedderivativesenteredintoaspartofSLFInc.’sderivativesoperationshavebecomesubjecttotwo-wayvariationmarginrequirementsandmaybecomesubjecttotwo-wayinitialmarginrequirementsbeginningin2022.Thesemarginingrequirementsareexpectedtoincreasethecostandreducetheavailabilityofnon-clearedderivatives.Collectively,theDodd-FrankActrequirementshaveincreasedthedirectandindirectcostsoftheCompany'shedgingandrelatedactivitiesandwilllikelyincreasethemfurtherinthefuture.

LIBORUncertaintyrelatingtotheLIBORandotherInterbankOfferRates("IBORs")calculationprocessandtheanticipatedphasingoutofLIBORandotherIBORsmayadverselyaffectthevalueofSLFInc.’sderivativesandfloatingratesecuritiesinvestments(collectively,the“Investments”)thatareLIBORorIBOR-based.OnJuly27,2017,theUKFinancialConductAuthority,whichregulatesthepanelbanksthatsubmitquotestotheICEBenchmarkAdministration("IBA")(whichisresponsibleforcomputingLIBOR)forthepurposeofcalculatingLIBOR,announcedthatitwillnolongerrequireorcompelpanelbankstosubmitratesforthecalculationoftheLIBORratesafterDecember31,2021.OnNovember18,2020,theIBAannouncedthatitwillinitiateapublicconsultationprocessonitsintentiontoceasethepublicationofGBP,EUR,CHFandJPYLIBORafterDecember31,2021.Inafollow-upannouncementonNovember30,2020,theIBAannouncedthatitwillalsoseekpubliccommentonitsintentiontoceasethepublicationoftheone-weekandtwo-monthUSDLIBORsettingsimmediatelyfollowingtheLIBORpublicationonDecember31,2021,andtheremainingUSDLIBORsettingsimmediatelyfollowingtheLIBORpublicationonJune30,2023.Onthesameday,theFederalReserveBoardissuedsupervisoryguidanceencouragingU.S.bankstostopnewUSDLIBORissuancesbytheendof2021.RegulatoryandindustryinitiativesconcerningLIBORandotherIBORs,suchasachangeinthecompilingbody,sponsororadministratorofLIBORandotherIBORs,couldalsoresultinchangesormodificationsaffectingLIBORorIBOR-basedinvestmentsliketheInvestments.

IntheUnitedStates,theAlternativeReferenceRatesCommitteeoftheFederalReserveBoardhasidentifiedtheSecuredOvernightFinancingRate(“SOFR”)asthereplacementrateforUSDLIBOR.SOFRisabroadmeasureofthecostofborrowingcashovernightcollateralizedbyTreasurysecurities.Duringthethirdquarterof2018,certainmarketparticipantsbeganmovingtowardstheutilizationofSOFRasapossibleLIBORreplacementthroughtheissuanceofdebtsecuritiesindexedtoSOFR.Itisexpectedthatsomeofthese,andother,marketparticipantswillcontinueorbegintotransitiontoSOFRinanticipationofthecessationofUSDLIBOR.However,therecanbenoguaranteethatalternativerateswillbedeveloped,thatSOFRwillbecomethedominantalternativeratetoUSDLIBOR,orthatSOFRwillbewidelyused.AtransitiontoSOFRoranotherreplacementrate(whetherpriortoorafterDecember31,2021)mayadverselyaffectthetradingofUSDLIBOR-basedinvestments,includingtheInvestments,insofarastheirvalue,liquidity,return,andusefulnessforintendedpurposeareconcerned.WhileitmaybepossibletoconvertSOFRintoanapproximateUSDLIBOR-equivalentratebydevelopingatermrateorbyadding,subtractingorotherwiseincorporatingoneormoreinterestratespreads,orbymakingotherappropriateadjustmentstominimize,totheextentpossible,discrepanciesbetweenLIBORandSOFR,thefeasibilityandappropriatenessofsuchadjustmentswilldependonavarietyoffactors,includingmarketconditions,monetarypolicy,andfactorsaffectingSOFR’sorUSDLIBOR’sintegrityduringthetransition.

Similarbenchmarkreformisalsounderwayinseveralothercountries,whereworkinggroups(including,butnotlimitedto,theCanadianAlternativeReferenceRateWorkingGroupinCanadaandtheWorkingGrouponRisk-FreeReferenceRatesfortheEuroAreaintheEuropeanUnion)haveidentified,andareconsideringtheimplicationsofatransitionto,alternativesecuredorunsecured(dependinguponthejurisdiction)“riskfree”transaction-basedrates,whichmayormaynothavebeenpublishedatthetimeofthisdisclosure.Forexample,intheUK,theregulatorsareworkingwithmarketparticipantstocatalyseatransitionfromLIBORtotheSterlingOvernightIndexAverageastheprimaryinterestratebenchmarkinsterlingmarkets.

Atthistime,itisdifficulttopredicttheeffectofanychangestothemethodologyforcalculatingLIBORorotherIBORsorofanyotherbenchmarkreformthatmayhappenintheUnitedStatesorelsewhere.Uncertaintyastothenatureofpotentialchanges,alternativerates,accountingandtaxrelief,andotherrelatedreformsmayadverselyaffectouroperationsandcashflowsandthevalueofandreturnonourinvestments.Accordingly,wecontinuetobefocusedonimplementinganeffectivetransitionawayfromLIBORandotherIBORs.



CybersecurityandPrivacyofClientInformationU.S.regulatorsatthefederalandstatelevelareincreasingtheirfocusoncybersecurity.Inparticular,theNewYorkDepartmentofFinancialServiceshasadoptedregulationsdesignedtoenhancecybersecuritycontrolsoffinancialinstitutions,andotherU.S.insuranceregulatorshavebeguntoconsidersimilarlawsandregulationsdesignedtoaddressspecificcyberrisks.Theselawsandregulationsrequirelicensees,includingSLFInc.’sU.S.insurancesubsidiaries,toimplementrisk-basedinformationsecurityprograms;establishdetailedproceduresforinvestigatingcybersecurityevents,assessingrisk,andoverseeingthird-partyserviceproviders;andcomplywithincreasedregulatoryreportingrequirements.

Inaddition,U.S.federalandstatelawsrequirefinancialinstitutions,includinginsurers,investmentcompaniesandinvestmentdealers,toprotectthesecurityandconfidentialityofClientinformationandtonotifyClientsabouttheinstitution’spoliciesandpracticesrelatingtoitscollection,useanddisclosureofclientinformation.TheStateofCaliforniahasenactedlegislationdesignedtoenhanceconsumerprivacyrights,andotherstatesareconsideringsimilarconsumerfocusedprivacylawsthatwouldsignificantlychangedataprivacyrequirementsintheU.S.,imposegreaterpenaltiesfornon-compliance,andprovideforconsumerrightstoaccessanddeletetheirpersonalinformationandprivaterightsofaction.

TheselawsandregulationswillincreasethecostsandcomplianceobligationsassociatedwiththeCompany’sinformationsecurityandadministrationactivities.

TheAffordableCareActThePatientProtectionandAffordableCareAct(“AffordableCareAct”)enactedsignificantlegalandregulatorychangesforthehealthcareandinsuranceindustrieswithaprimarygoalofincreasingthenumberofAmericanswithhealthinsurancecoverage.Whilethelaw’schangesareprimarilydirectedattraditionalhealthinsuranceproductsnotofferedbytheU.S.BranchandSLFInc.’sU.S.lifeandhealthinsurancesubsidiaries,theAffordableCareActhasledtoanincreaseinthenumberofemployerschoosingtoselfinsuretheirhealthplans.Theexpansionoftheself-insuredhealthplanmarkethaspositivelyimpactedourmedicalstop-lossbusiness.

InNovember2020,theU.S.SupremeCourtheardoralargumentsinacasechallengingtheconstitutionalityoftheAffordableCareAct.Theoutcomeofthiscaseisnotexpectedtohaveamaterialimpactonourbusiness.

TheUSAPATRIOTActof2001TheUSAPATRIOTActof2001(the“PATRIOTAct”)seekstopromotecooperationamongfinancialinstitutions,regulatorsandlawenforcementagenciesinidentifyingpartiesthatmaybeinvolvedinterrorism,moneylaunderingorotherillegalactivities.Regulationsapplicabletotheinsuranceindustryrequireinsurancecompaniesissuing“coveredproducts”toimplementanti-moneylaunderingprogramsandfilesuspiciousactivityreportswiththeU.S.TreasuryDepartment.SLFInc.'sU.S.subsidiariesthatissuecoveredproductsanditsU.S.broker-dealersubsidiarieshaveimplementedanti-moneylaunderingprogramstocomplywiththePATRIOTActregulationsandwiththeOfficeofForeignAssetsControlrequirementswithrespecttoanti-terroristfinancing.

PaidFamilyandMedicalLeaveAgrowingnumberofstateshavepassedorareconsideringmandatedpaidfamilyandmedicalleave(“PFML”)programs.Theseprogramsgenerallyprovidepartialincomeprotectionforanemployeewhoisunabletoworkonaccountofhisorherownserioushealthconditionorforvariousfamilycarereasons.ThereareanumberofPFMLproposalsatthefederallevelaswell.WhilePFMLprogramsoverlapwithshorttermdisabilitycoverageand,asaresult,couldhaveanegativeimpactontheshorttermdisabilitymarketplaceinwhichtheU.S.BranchandSLFInc.’sU.S.lifeandhealthsubsidiariesoperate,theseprogramsalsoofferanopportunityforinsurerstobuildnewproductstoserveanemergingmarket.

UnitedKingdomSLFInc.doesnotcarry-onbusinessandisnotregulatedasaninsuranceorassetmanagementcompanyintheUK.However,itistheindirectownerofSunLifeAssuranceCompanyofCanada(U.K.)Limited("SLOCUK"),whichisauthorizedandregulatedasaninsurancecompanyintheUK,andsubjecttotheSolvencyIIinsuranceregime.InsurancesupervisionintheUKisperformedbytwofinancialservicesregulators,theFinancialConductAuthority(“FCA”)andthePrudentialRegulationAuthority(“PRA”).Inaddition,thereareseveralotherUKregulatorybodiesoffinancialserviceswithwhomSLOCUKisrequiredtomaintaincompliance.

FollowingtheendofthetransitionalphaseoftheUK'swithdrawalfromtheEUonDecember31,2020,SLOCUKwillcontinuetobesubjecttoSolvencyII.However,someofourpolicyholderscontinuetoberesidentsoftheEUandEEAjurisdictions.AsNationalCompetentAuthorities,individualEUandEEAregulatorsmayseekadditionalreturnsfromSLOCUKtomeettheirlocalrequirementsregardingcontinuityofservicetopolicyholdersresidentintheirjurisdictions.



InsuranceSupervisionandRegulationTheFCA'sstatutoryandoperationalobjectivesaretoprotectconsumers,ensuremarketintegrityandpromoteeffectivecompetition.ThePRA'sstatutoryobjectivesaretopromotethesafetyandsoundnessofitsregulatedfirmsandtoensurepolicyholdersareappropriatelyprotected.ItalsohasasecondaryobjectivetofacilitateeffectivecompetitioninthemarketsforservicesprovidedbyPRA-authorizedfirms.

BoththeFCAandPRAadoptaprinciplesratherthanarules-basedphilosophytosupervision.Withinthisapproach,theyusejudgment,areforwardlookingandfocusontheissuesthatposethegreatestriskstotheirrespectiveobjectives.Theyaimtosuperviseproportionatelyrelativetothenature,scaleandcomplexityofthebusiness.Bothregulatorsapplyaharmonizedapproachtotheirexpectationsofafirm'sgovernance-theSeniorManagersandCertificationRegime-whichplaceslegallyenforceablerequirementsondesignatedindividualsalongsideaConductRulesregimethatappliestomostemployeeswithinthebusiness.

BoththeFCAandthePRAhaveextensivepowerstointerveneintheaffairsofanauthorizedinsurancecompany.TheseincludethepowertofineanauthorizedcompanyandtovaryorcancelitspermissiontocarryonregulatedactivitiesintheUK,torequestinformationordocuments,toinvestigatethebusinessofthecompanyandtorequirethecompanytotakeappropriateactionstosatisfyrequiredthresholdconditionsforauthorization.

SLOCUKisregulatedasaStandardFormulafirmunderSolvencyIIandcarriesoutcertainregulatedactivitiesintheUKinrelationtolong-termcontractsofinsurance.ItisrequiredtomeetcertainThresholdConditionsandtoconductbusinessinaccordancewiththeprovisionssetoutintheFCAHandbookandthePRARulebook.Undertheserequirements,SLOCUKmustmaintainsystems,proceduresandcontrolsappropriatetothenature,scaleandcomplexityofitsbusiness,toconductitsbusinesswithdueregardtotheinterestsofitspolicyholders,andtotreatthemfairly.Itisalsorequiredtoholdcapitalappropriatetoitsriskprofile,andreporttotheregulatoritsongoingcomplianceinthatrespect.

SolvencyIIalsoincludesgroupasupervisionrequirementthatappliestoSLOCUK,itsultimateholdingcompany(SLFofCanadaUKLimited),andanumberofsmall,mostlyinactiveandun-regulatedentities.SLFInc.isexcludedfromthescopeofgroupsupervisionunderthetermsofarulemodificationgrantedbythePRAandscheduledforrenewalonDecember31,2022.Thisgroupsupervisionregimealsoplacessomefirm-specificrestrictionsondividendandcapitaltransactions,inadditiontotheprovisionsoftheCompaniesAct2006regardingthepaymentofdividends.

FinancialOmbudsmanServiceTheFinancialOmbudsmanService("FOS")providesconsumerswithafreeandindependentservicetoresolvedisputesbetweenconsumersandfinancialservicesfirms.TheFOSisempoweredtoorderfirmstopaycompensationforconsumerlossesandtotakestepstoremedyacomplaint.

FinancialServicesCompensationSchemeTheFinancialServicesCompensationSchemeprovidesfortheprotectionofconsumerswhomaybeaffectedbytheinabilityoffinancialservicescompanieswhocarryonregulatedbusinessintheUKtomeettheirliabilities.

ThePensionsRegulatorThePensionsRegulatoristheregulatorofworkplacepensionschemesandhasagreedajointstrategywiththeFCAthataimstodeliverbetteroutcomesforpensionsaversandthoseenteringretirement.

AsiaSunLifecarriesonbusinessthroughsubsidiaries,jointventuresorassociatesinthePhilippines,HongKong,Indonesia,India,China,VietnamandMalaysia.Theoperationsofoursubsidiaries,jointventuresandassociatesinAsiaaresubjecttothelocalregulatoryandsupervisoryschemesinthejurisdictionsinwhichtheyoperate,whichvariesfromcountrytocountry,buttheregulatorstypicallygrant(orrevoke)licensestooperateandcontroltheabilityofacompanytooperateaninsurancebusinessinthatcountry.Ingeneral,theapplicablelegislationinaparticularcountryincludesfeaturesgoverningtheregistrationofagents,regulationofproductfeaturesandproductapprovals,assetallocation,minimumcapital,thebasisforcalculatingsolvencyandreserves,thevaluationofpolicyholderliabilities,conditionsforoutsourcingcoreandnon-corefunctions,policyholderandinvestorprotection,changeofdirectorsorkeymanagementandmoneylaundering,know-your-Clientandterroristfinancingrequirements.Regulatoryauthoritiesmayalsoregulateaffiliationswithotherfinancialinstitutions,shareholderstructuresandmayimposerestrictionsondeclaringdividendsandtheabilitytoeffectcertaincapitaltransactionsandmanyjurisdictionsrequireinsurancecompaniestoparticipateinpolicyholderprotectionschemes.

PhilippinesOuroperationsinthePhilippines,establishedin1895,distributeadiverserangeofinsuranceandsavingsproductslargelythroughourcareeragencysalesforceandbancassurancechannel.Weofferindividualandgrouplifeandhealthinsuranceproductstoindividualsandbusinessesthroughourwholly-ownedsubsidiary,SunLifeofCanada(Philippines),Inc.(“SunLifePhilippines”),andourjointventurewiththeYuchengcoGroup,SunLifeGrepaFinancial,Inc.(“SunLifeGrepa”),inwhichwehavea49%ownership



stake.Inaddition,weoffermutualfundsandpre-needproductsrespectivelythroughSunLifePhilippines’wholly-ownedsubsidiaries,SunLifeAssetManagementCompany,Inc.(“SunLifeAssetManagement(Philippines)”)andSunLifeFinancialPlansInc.(“SLFPI”).Therearenoforeignownershiprestrictionsapplicabletolifeinsurance,mutualfunds,orpre-needbusinessesinPhilippines.

SunLifePhilippinesandSunLifeGrepaarelifeinsurancecompaniesincorporatedinthePhilippinesandgovernedbytheInsuranceCode.SunLifePhilippinesoffersindividualandgrouplifeandhealthinsuranceproductsthroughitsagencysalesforce.SunLifeGrepaoffersitsindividualandgrouplifeinsuranceproductsthroughanagencysalesforceandthroughbancassurancedistributionarrangements.TheInsuranceCommissionsupervisesandregulatestheoperationsoflife,non-life,andpre-needcompanies.

LifeinsurancecompaniesinthePhilippinesarerequiredatalltimestomaintaintheminimumnetworthrequirementsprescribedbyregulations.Currentminimumnetworthrequirementsare900millionPhilippinePesos("Php"),andwillincreasetoPhp1.3billionby2022.Inaddition,lifeinsurancecompaniesmustmaintainaminimumRBCratioof100%asprescribedintheRisk-BasedCapitalFramework.InsurancecompaniescompliantwiththenetworthrequirementsasofDecember31,2019thatareadverselyaffectedbytheCOVID-19pandemicarerequiredtocomplywiththeAmendedRiskBasedCapitalFrameworkandRevisedRegulatoryIntervention(RBCratio).TheAmendedRiskBasedCapitalFrameworkadoptsarisk-basedapproachtosolvency,includingquantitativecapitalrequirements,governmentandriskmanagementrequirements,anddisclosurerequirementstoencouragemarketdiscipline.TheRevisedRegulatoryInterventionRatioprovidesforthecorrespondingregulatoryaction/responsetospecificlevelsofRBCratios.DependingontheRBCratio,theregulatoryresponserangesfromarequiredsubmissionoflinearextrapolationsoftheratioforthenextperiodtoatake-overoftheinsurancecompanybytheInsuranceCommission.

SunLifeAssetManagement(Philippines)isamutualfundmanageranddistributorandisgovernedbytheSecuritiesRegulationCodeandtheInvestmentCompanyAct.SLFPIisgovernedbythePre-NeedCodeandofferspensionandeducationplansinthePhilippines,andissupervisedandregulatedbytheInsuranceCommission.

TheSecuritiesandExchangeCommissionsupervisesandregulatestheoperationsofinvestmentcompanyadvisersandmutualfundcompaniesandissueslicensestothesecompaniesandothersecuritiesmarketparticipants.

HongKongOurHongKongoperationsofferafullrangeofproductstoaddressinsuranceandsavingsneeds.Weofferindividuallifeandhealthinsurance,mandatoryprovidentfunds(thegovernment-legislatedpensionsystem)andpensionadministrationtoindividualsandbusinessesthroughacareersalesagencyforceandindependentfinancialadvisors.

SunLifeHongKongLimitedisauthorizedbytheHongKongInsuranceAuthority("IA")undertheInsuranceOrdinancetocarryoncertainclassesoflong-termbusinessinorfromHongKong.OnJune26,2017,theIAtookoverfromthepreviousgovernment-fundedregulator,theOfficeoftheCommissionerofInsurance,thefunctionsofoverseeingtheauthorizationandregulationofinsurancecompaniesinHongKong.OnSeptember23,2019,theIAtookovertheregulationofinsuranceintermediariesfromtheexistingself-regulatoryorganizationsthroughanewstatutorylicensingregime.Theofferofourinvestmentlinkedinsuranceproducts,pooledretirementfunds,approvedpoolinvestmentfunds,mandatoryprovidentfundschemesandoccupationalretirementschemesarealsoregulatedbyoneormoreofthefinancialservicesregulators,includingtheIA,theHongKongSecuritiesandFuturesCommissionand/ortheMandatoryProvidentFundSchemesAuthority.Ourtrusteesandintermediarieswhoadministeranddistributetheseproducts,fundsandschemesarealsosupervisedandregulatedbyoneormoreoftheaboveregulators.

InHongKong,long-terminsurancecompaniesarerequiredtomaintainatalltimesarequiredsolvencymargin.Therequiredsolvencymarginisthehigherof$2millionHongKongdollars("HKD")ortheaggregateoftwocomponents:apercentageofthemathematicalreservesandapercentageofthecapitalatriskasprescribedundertheInsurance(MarginofSolvency)Rules(whichisgenerally4%ofthemathematicalreservesand0.3%ofthecapitalatrisk).Foralong-terminsurer,thevalueofitsassetsmustbegreaterthantheamountofitsliabilitiesbyatleasttherequiredsolvencymargin.Theminimumpaid-upcapitalforinsurersinHongKongisHKD$10million.Theactualcapitalrequirementdependsonthebusinessundertakenbytheinsurer.Despitetheabove,inpractice,theIAwillalsoimposeadditionalsolvencyrequirementstoensureasoundandhealthyinsurancemarket.

IndonesiaInIndonesia,weofferindividuallifeandhealthinsurance,aswellascreditorlifeinsurancethroughourwholly-ownedsubsidiary,PTSunLifeFinancialIndonesia.

PTSunLifeFinancialIndonesiaislicensedtocarryoninsurancebusinessinIndonesiaandcandistributelifeinsuranceproducts.PTSunLifeFinancialIndonesiacanadditionallymanufactureanddistributeShariahproductsthroughitsShariahunit.

TheOtoritasJasaKeuangan(“OJK”)istheregulatorresponsibleforsupervisingtheinsuranceindustry.TheIndonesiaLifeInsuranceAssociation(“AAJI”)continuestoactasaconduitbetweeninsurersandtheMinistryofFinanceandtheOJKintermsofthedevelopmentofnewregulationsandguidelines.InsurancesalesforcesarelicensedbytheAAJI.TheIndonesiaShariaInsuranceAssociationactsinthesimilarcapacityasAAJIinrelationtotheShariahbusiness.Theimplementationofanti-moneylaunderingcontrolsintheinsuranceindustryismonitoredbytheIndonesianFinancialTransactionReportsandAnalysisCenter.



LifeinsurancecompaniesinIndonesiaarerequiredtomaintainaminimumsolvencyratioof120%oftheminimumrequiredcapitalandmusthaveminimumshareholderequityof100billionIndonesianRupiah.

InOctober2014,legislationwasenactedinIndonesiathatintroducedsignificantchangestotheinsurancesectorinIndonesia,includingestablishingsinglepresencerequirements,establishinglocalownershiprequirementstobeprescribedbyregulations,establishinganinsuranceguaranteeprogram,requiringthatShariah(Takaful)productsaredistributedthroughseparatestandaloneinsurancecompanieswithin10years,requiringtheappointmentofacontrollingentitythatwillberesponsibleforlossesoftheinsurancecompanyunderitscontrolandimposingstifferpenaltiesandsanctionsfornon-compliance.TheGovernmentRegulationwhichregulateslocal/foreignownershiprequirementswasissuedinApril2018andsincethenagrandfatheringprovisionhasbeenincludedtoallowexistingownershipbyaforeignshareholdertobemaintained(the"GrandfatheringProvision").TheGovernmentRegulationontheforeignownershiprequirementwasamendedinearly2020.Thekeyamendmentsintroducedinclude:(1)anexpansionoftheapplicabilityoftheGrandfatheringProvisionforstandaloneshariahinsurancecompaniesand(2)theremovalofrequirementsforlocalshareholdersinjointventureinsurancecompaniestoparticipateinatleast20%ofanycapitalinjection,suchthatlocalshareholdersarenowonlyrequiredtoparticipateinanamountatleastproportionatetotheircurrentshareholdings.

VietnamInVietnam,weofferadiverserangeofinsurance,savings,investmentandpensionproductsthroughourwhollyownedsubsidiarySunLifeVietnamInsuranceCompanyLimited(“SunLifeVietnam”).TherearenoforeignownershiprestrictionsapplicabletoSunLifeVietnam,however,atransferof10%ormoreofthechartercapitalofanylifeinsurermustbeapprovedbytheMinistryofFinanceofVietnam(“MOF”).

InsuranceoperationsinVietnamaremainlyregulatedbytheMOF,whichsetsthestandardsonallinsurancebusinessmatters,includingproductapprovals,limitsoncommissionratespayableoninsuranceproducts,actuarialliabilityvaluation,andsolvencyrequirements.LifeinsurershaveresponsibilityforminimumlegalcapitalofVietnameseDong("VND")600billionandthatasecuritydepositequalto2%ofthelegalcapitalbemaintainedatacommercialbankinVietnam.LifeinsurersthatsellpensionproductsarerequiredtohaveaminimumlegalcapitalofVND800billion.Lifeinsurersthatsellpensionandunit-linkedproductsarerequiredtohaveaminimumlegalcapitalofVND1,000billion.Theequityoftheownerofalifeinsurermustnotbelowerthantherequiredminimumlegalcapitalapplicabletothatinsurer.

TherequiredsolvencymarginisVND300billionovertheminimumsolvencymarginforinsurerssellingpension,unit-linkedanduniversallifeproducts.TheMOFalsorequireslifeinsurerstomaintain:(a)minimumreserves;(b)forunit-linkedpolicies,aminimumsolvencymarginof1.5%insurancereservesplus0.3%ofthesumsatrisk;(c)foruniversallifeproductsandpensionproducts,aminimumsolvencymarginof4%ofinsurancereservesplus0.3%ofthesumsatrisk;and(d)forotherlifeinsurancepoliciesandhealthpolicies,aminimumreservesandaminimumsolvencymarginof4%ofinsurancereservespluseither(i)0.1%ofsumsatriskforpolicieswithatermoffiveyearsorless,or(ii)0.3%ofthesumsatriskforpolicieswithatermoverfiveyears.Lifeinsurersmustalsoestablishareservefundtoensuretheirsolvency.Lifeinsurersaretodeduct5%ofannualprofitafter-taxtosetupacompulsoryreservefund,themaximumofwhichisequalto10%ofthechartercapital.

SunLifeVietnam’sproductsaregenerallydistributedthroughacareeragencysalesforce,includingindividualagency,corporateagencyandbankpartner,forindividualClientsandthroughacorporateagencyforcorporateClients.SunLifeVietnamhasanoptiontocontractwitheligibleinsuranceauxiliaryserviceproviderstosupportSunLifeVietnaminsellingSunLifeVietnam'sproductstoClients.Theinsuranceauxiliaryservicesincludeinsuranceconsultation,insuranceriskassessment,insurancecalculation,insurancelossassessmentandinsuranceclaimassistance.

IndiaAdityaBirlaSunLifeInsuranceCompanyLimited("ABSLI"),ourinsurancejointventurewiththeAdityaBirlaGroupinIndiainwhichwehavea49%stake,providesafullrangeofindividualandgroupinsurance,savingsandretirementproductsthroughamulti-channeldistributionnetwork,includinganagencysalesforce,bancassurancedistribution,brokersandworksitemarketing.

InsuranceoperationsinIndiaareregulatedbytheInsuranceRegulatory&DevelopmentAuthorityofIndia("IRDAI"),whosedutiesincludeissuingcertificatesofregistrationtoinsurancecompanies,protectingtheinterestsofpolicyholders,andregulating,promotingandensuringtheorderlygrowthoftheinsuranceindustry.Inrecentyears,anumberofregulatorychangeshavebeenintroduced,affectingmattersthatincludeproductdesignandstructureincludingcommissions,distribution,investments,expensemanagement,riskmanagement,corporategovernanceandgrievancehandling.

LifeinsurancecompaniesinIndiaareexpectedtomaintainaMinimumSolvencyRatio(TotalAssetsAvailableforSolvency/RequiredSolvencyMargin)of150%atalltimes,wheretheRequiredSolvencyMarginisanamountcalculatedbyapplyingspecifiedfactorstoreservesandamounts-at-risk.LifeinsurancecompaniesarerequiredtomaintaintheirAvailableSolvencyMarginatalevelwhichisnotlessthanthegreateroffiftypercentoftheamountofminimumrequiredcapitalandonehundredpercentofRequiredSolvencyMargin.TheMinimumPaid-upCapitalforlifeinsurersisINR1billion.



InlightoftheCOVID-19pandemic,theIRDAIhasurgedinsurerstorefrainfrommakingdividendpaymentsfromprofitspertainingtothefinancialyearendingMarch31,2020untilfurtherdirectionsareissued,inordertoconservecapitalandmaintainsolvency.ThispositionwastobereassessedbytheIRDAIbasedonthefinancialresultsofinsurersforthequarterendingSeptember30,2020.However,nofurtherdirectionshavebeenissuedinthisregard.TheIRDAIhasalsoadvisedtheinsurersthattheirrespectiveboardofdirectorsshouldcriticallyexaminetheircapitalavailabilityandsolvencymarginasrequiredinthefinancialyear2020-2021anddevisestrategiestoensurethattheyhaveadequatecapitalandresourcesavailable.Insurershavealsobeenadvisedtorationalizetheirexpensesforthefinancialyear2020-2021.

TheforeigninvestmentlimitintheinsurancesectorinIndiais49%oftheequitysharecapitalinanIndianinsurancecompanyandtheIndianinsurancecompanymustbeIndianownedandcontrolled.Inaddition,priorapprovalisrequiredfromtheIRDAIforanysaleofsharesover1%ofthetotalequitysharecapitalandanypurchaseofmorethan5%oftheequitysharecapitalandincreasesinforeigninvestmentinanIndianinsurancecompanymustcomplywiththepricingguidelinesspecifiedbytheReserveBankofIndiaandGuidelinesonIndianOwnedandControl.

AdityaBirlaSunLifePensionManagementLimited(“ABSLPML”)isawhollyownedsubsidiaryofABSLI.ABSLPML’sbusinessofferspensionsolutionsandactsasPensionFundManagerundertheNationalPensionSchemeTrustoftheNationalPensionSystem(“NPS”)tomanagepensionfundsintheprivatesectoraccordingtotheprovisionsoftheNPS,theschemes,andtheguidelinesissuedbythePensionFundRegulatoryandDevelopmentAuthority.

MutualfundsandportfoliomanagementservicesinIndiaareregulatedbytheguidelinesandregulationsissuedbytheSecuritiesandExchangeBoardofIndiaandvariousotherapplicablestatutes.

AdityaBirlaSunLifeAMCLimited(“ABSLAMC”),ourassetmanagementjointventureinIndiainwhichwehavea49%stake,offersmutualfundproductsandportfoliomanagementservices,andisregisteredwiththeSecuritiesandExchangeBoardofIndiatoactasaninvestmentmanagertothefundslaunchedunderAlternativeInvestmentFunds:CategoryIIIandCategoryII.ABSLAMCactsasaninvestmentmanagertotwooffshorefunds.ABSLAMChasalsosetupwhollyownedsubsidiariesinSingapore,DubaiandMauritius.

ChinaSunLifeEverbrightLifeInsuranceCompanyLimitedisadomestically-investedlifeinsurancecompanyinChina,inwhichwehavea24.99%ownershipstake.Itoperatesamulti-distributionmodelthatcombinesadirectcareeragency,financialconsultants,telemarketingandbancassurancealliancestosellindividuallifeandhealthinsuranceandsavingsproducts.

SunLifeEverbrightLifeInsuranceCompanyLimitedhasa99%ownershipstakeinSunLifeEverbrightAssetManagementCo.,Ltd,whichcarriesonbusinessinChinaasaninsuranceassetmanagementcompany.

TheinsuranceindustryinChinaisregulatedbytheChinaBankingandInsuranceRegulatoryCommission(“CBIRC”),whichisacentralgovernmentagencyundertheStateCouncilofthePeople’sRepublicofChina.TheCBIRChasauthorityto:(i)issueregulatoryrulesandothernormativedocumentsapplicabletotheinsuranceindustryandinsurancemarketparticipantstoimplementtherelevantlawsandadministrativeregulations;(ii)reviewandapprovetheestablishment,alterationandothersignificantmattersofinsuranceinstitutions(whichgenerallyincludeinsurancegroup(holding)companies,insurancecompaniesandinsuranceassetmanagementcompanies)andinsuranceintermediariesinChinaand,whereapplicable,theiroverseasactivities(e.g.,investment);(iii)reviewandapprovethepolicytermsandpremiumratesforinsuranceproducts;(iv)formulateandimplementstandardstomeasureandsupervisethecorporategovernance,riskmanagement,internalcontrol,financialsoundness,capitalsufficiency,solvency,operationalcomplianceandinformationdisclosureofinsuranceinstitutions;(v)requireinsuranceinstitutionstosubmitperiodicalandadhocreportsconcerningtheirbusinessoperationsandconditionofassets;and(vi)takenecessaryregulationmeasuresandimposecorrespondingregulatorysanctions(e.g.toorderthesuspensionofallorpartofaninsurancecompany'sbusiness,torestricttheexerciseofashareholder'srightsifthatshareholderfailstofulfillitsobligations).

Currently,insurancecompaniesestablishedinChina(includinglifeinsurancecompanies)areallowedtousetheirinsurancefunds(includingtheircapitalfunds,reservefunds,undistributedprofits,variousreservesandotherfunds,whetherdominatedinRMBoraforeigncurrency)toinvestinthefollowingassets(subjecttothesatisfactionofconditionsprescribedforeachformofinvestment):bankdeposits,variousnegotiablesecurities(suchasgovernmentbonds,corporatebonds,financialbonds,stocks,unitsofsecuritiesinvestmentfunds),realestate,equityinterest,financialderivativessuchasforwards,optionsandinterestrateswaps(providedthatinvestmentinanyfinancialderivativesmustnotbespeculativebutbeonlyintendedforriskhedgingandinvestmentinoffshorefinancialderivativesissubjecttoadditionalrequirementsoftheCBIRC),productsofinsuranceassetmanagementcompanies,certainqualifiedfinancialproductsofcommercialbanks,trustcompanies,securitiescompanies,securitiesinvestmentfundmanagementcompaniesandotherfinancialinstitutionsandotherinvestmentchannelsasapprovedbytheStateCouncil.

Theminimumpaid-upcapitalofaninsurancecompanyisRMB200million(incashonly)andthereareadditionalcapitalrequirementswhenadditionalbranchesareestablished.



InsuranceassetmanagementcompaniesarealsoregulatedbytheCBIRCandmayconductthefollowingbusinesses:(i)managingandutilizingfundsinRMBorforeigncurrenciesentrustedtothembytheirclients(includingbutnotlimitedtotheirshareholdersandtheinsurancecompaniescontrolledbytheirshareholders);(ii)managingandutilizingtheirownfundsinRMBorforeigncurrencies;(iii)privatelyofferinginsuranceassetmanagementproductstoqualifiedinvestors;and(iv)otherbusinessesapprovedbytheCBIRCorotherministriesordepartmentsoftheStateCouncil.

Themanagementandutilizationofinsurancefundsbyinsuranceassetmanagementcompaniesissubjecttorequirementsandlimitationsthataresimilartothoseapplicabletoinsurancecompanies.Currently,insuranceandassetmanagementcompaniesestablishedinChinaareallowedtousetheentrustedinsurancefundstoinvestinthefollowingassets:bankdeposits,governmentbonds,financialbonds,andotherinvestmentchannelsasapprovedbytheStateCouncil.Independentcustodiansaredesignatedforfundsmanagedbyinsuranceassetmanagementcompaniesandthosecustodiansmustbecommercialbanksorotherfinancialinstitutionsthatsatisfyregulatoryrequirements.TheregisteredcapitalofaninsuranceassetmanagementcompanymustnotbelessthanRMB100millionortheequivalentamountinafreelyconvertibleforeigncurrency.

Insurancecompaniesmay,eitherbythemselvesorbyentrustingqualifiedinvestmentmanagers,usetheirinsurancefundstomakeinvestments,andsuch"qualifiedinvestmentmanagers"includenotonlyinsuranceassetmanagementcompaniesandtheirsubsidiaries,butalsosecuritiescompanies,securitiesassetmanagementcompanies,securitiesinvestmentmanagementcompaniesandotherprofessionalinvestmentmanagementinstitutions.Insuranceassetmanagementcompaniesareallowedtomanageandutilizenotonlyentrustedinsurancefunds,butalsootherentrustedfundsofnon-insuranceclients.

InsuranceassetmanagementcompaniesarealsoallowedtocarryoutinsuranceassetmanagementproductbusinessinaccordancewiththeCBIRC'srulesandshouldcompletetheproductissuance,registration,custody,transaction,settlement,informationdisclosureandotherprocessesviaanassetregistrationandtransactionplatformasapprovedbytheCBIRC.TheCBIRCisresponsiblefordynamicallysupervisingthefullprocessoftheoperationandmanagementofsuchproductsandidentifyingtheultimateinvestors(beneficiaries)andtheunderlyingassets.

EffectiveJanuary1,2020,theCBIRCliftedtheprevious51%caponforeignownershipinlifeinsurancecompaniesestablishedinChina,whichmeansthataforeigninvestorisnowpermittedtowhollyownalifeinsurancecompanyinChina.InSeptember2019,theCBIRCalsoimplementedanamendmenttotheAdministrativeRegulationsonForeign-InvestedInsuranceCompanies,whichrelaxesmarketaccessbyremovingtherequirementthataforeigninsurancecompanymusthaveengagedininsurancebusinessformorethan30yearsandhavemaintainedarepresentativeofficeinChinaforatleasttwoyearsbeforeitcanestablishaforeigninvestedinsurancecompanyinChina.

MalaysiaOuroperationsinMalaysiaofferindividualandgroupinsuranceandtakafulproductsthroughSunLifeMalaysiaAssuranceBerhad("SLMA")andSunLifeMalaysiaTakafulBerhad("SLMT"),respectively,ourjointventureswithRenggisVenturesSdn.Bhd.(asubsidiaryofKhazanahNasionalBerhad),inwhichwehavea49%ownershipstakeineachcompany.SLMAhasanexclusivebancassuranceagreementwithCIMBBankBerhadtodistributeinsuranceproductsthroughitsnetworkacrossMalaysia,whileSLMThasanexclusivebancatakafulagreementwithCIMBIslamicBankBerhadtodistributetakafulproductsthroughitsnetworkacrossMalaysia.Thecompanieshaveexpandedtheirdistributionchanneltoincludeotherbancassuranceandbancatakafulpartners,agencydistribution,directmarketing,governmentandcorporatebusiness,telemarketing,onlineandtelco-assurance.

ThecentralbankofMalaysia,BankNegaraMalaysia("BNM"),regulatesentitiescarryingontheinsuranceandtakafulbusinessinMalaysiaandrequiresinsurersandtakafuloperatorstohaveaminimumpaid-upcapitalofRinggitMalaysia100million.BNMalsorequiresinsurersandtakafuloperatorstomaintainacapitaladequacylevelthatiscommensuratewiththeirriskprofilesundertherisk-basedcapitalframeworksandhassetaminimumSupervisoryTargetCapitalAdequacyLevelof130%.BasedoncurrentGovernmentpolicy,thereisa70%limitonforeignequityownershipininsurancecompaniesandtakafuloperatorsinMalaysia.

IneffortstominimizetheimpactofdisruptionscausedbytheCOVID-19pandemic,BNMhasintroducedvariousreliefmeasuresforaffectedpolicyholders,includinganoptiontodeferpaymentoflifeinsurancepremiumsandfamilytakafulcontributionsfor3monthsandsuchoptionisavailablefromApril1,2020untilDecember31,2020.BNMhasalsoreducedtheinterestrateandprofitratestressfactorcapsappliedundertherisk-basedcapitalframeworksfrom40%to30%witheffectfromMarch31,2020toreflectthechangesintheprevailingmarketconditionssincethestressfactorsweresetin2009.

BermudaSunLifeAssuranceandcertainSLFInc.subsidiariescarryoninsuranceandinvestmentbusinessinorfromBermudaandareregulatedasinsuranceorinvestmentcompanies,asthecasemaybe,inthatjurisdiction.TheBermudaMonetaryAuthority(“BMA”)istheprimaryregulatorofdomesticandinternationalinsuranceandinvestmentcompaniescarryingonbusinessinorfromBermuda,andhasregulatoryauthorityforlicensingandregistrationmatters.TheBMAhasbroadsupervisorypowerstoregulatelicenseesundertheInsuranceAct1978andtheInvestmentBusinessAct2003,andisalsothedesignatedsupervisoryauthorityoverthefinancialservicesindustryinrespectofBermuda’sProceedsofCrimeActanti-moneylaunderinglegislation.Inaccordancewith



theseandrelatedlaws,SunLifeAssuranceandcertainsubsidiariesofSLFInc.aresubjecttorequirementsgoverningtheirsolvency,financialreporting,privacyanddatasecurityandbusinessconduct.

OtherJurisdictionsIneachofthecountriesinwhichourothersubsidiaries,jointventuresandassociatesoperate,localregulatoryauthoritiessuperviseandmonitortheirbusinessandfinancialcondition.Inanumberofcountries,certaininsurancesubsidiaries,jointventuresandassociatesarerequiredtomeetspecificminimumworkingandregulatorycapitalrequirements.Certainofoursubsidiaries,includingMFSanditssubsidiaries,jointventuresandassociates,alsoconductbusinessinvariouscountries,includingSingapore,JapanandAustralia,thataresubjecttosecuritieslawsandregulations,whichvaryfromcountrytocountry.

RiskFactorsThissectionprovidesasummaryofsomeofthesignificantrisksthatcouldaffect(and,insomecases,areaffecting)ourbusiness,reputation,financialconditionorresultsofoperations.Asalargefinancialservicesorganizationoperatinginacomplexindustry,theCompanyencountersavarietyofrisksanduncertainties.Wefacerisksinformulatingourbusinessstrategyandbusinessobjectives,incarryingonourbusinessactivitiesinthepursuitofourstrategyandobjectives,andfromexternalfactorssuchaschangesintheeconomic,political,competitiveandregulatoryenvironments.Wearesubjecttofinancialandinsurancerisksthatareconnectedtoourliabilitiesandalsoinconnectionwiththemanagementandperformanceofourassets,includinghowwematchreturnsfromassetswiththepaymentofliabilitiestoourClients.Eachoftheserisksarealsoconsideredfromtheperspectiveofdifferenttypesofuncertaintiesunderwhicheithertheoutcomesand/ortheirprobabilitiesofoccurrenceareunknown.Uncertaintycanexistaroundexpectedfinancialresultsandfromvolatility,trendandextremeevents.Inaddition,riskcorrelation,interconnectedrisks,termsofexposureandtheriskhorizonareimportantelementstoconsiderwhileidentifyingrisks.

TheseriskfactorshavebeengroupedasoutlinedinourRiskManagementFrameworkintosixmajorcategories:market,insurance,credit,businessandstrategic,operationalandliquidityrisks.Otherrisks,notspecifiedbelow,mayexistbutarenotconsideredtobematerialatthepresenttimemayalsoimpactourbusinessinthefuture.ThisinformationshouldbeconsideredcarefullytogetherwithotherinformationinthisAIFandinthe2020MD&A,the2020ConsolidatedFinancialStatementsandotherreportsandmaterialsthatwefilewithsecuritiesregulators.

Theserisksmayoccurindependentlyorincombinations,andmayoccursimultaneouslyorinanenvironmentwhereoneormorerisksevolverapidly.Forexample,amajorpandemiccouldhaveamaterialadverseimpactonmortalityandmorbidityclaimsexperience.Suchaneventmayalsotriggeradverseglobalcapitalmarketsdevelopments,includingadownturninequitymarketlevelsandinterestrates,increasedmarketvolatilityandcreditdeterioration,andcouldalsoleadtooperationalriskssuchasdisruptionswithintheorganizationandinthirdpartyservicearrangements.

Whileanumberofrisksthataredescribedbelowprovideexamplesofinter-connectednessandrelationshipsbetweenrisks,thesedonotrepresentacompleteinventory.Itshouldbenotedthattheserelationshipscancontinuetodevelopandchangeovertime,andthecombinedadverseimpactonourprofitability,financialposition,andreputationcouldbesignificantlygreaterthanthesumoftheindividualparts.Ourassessmentoftheimpactandprobabilityoftheseriskschangesovertime.

AdescriptionofourriskmanagementapproachcanbefoundundertheheadingRiskManagementinour2020MD&A.Manyoftheriskfactorssetoutbelowcontainforward-lookingstatements.

MarketRiskWeareexposedtofinancialandcapitalmarketrisk,whichisdefinedastheriskthatthefairvalueorfuturecashflowsofaninsurancecontractorfinancialinstrumentwillfluctuatebecauseofchangesorvolatilityinmarketprices.Marketriskincludesequity,interestrateandspread,realestateandforeigncurrencyrisks.

EquityRiskEquityriskisthepotentialforfinanciallossarisingfromdeclinesorvolatilityinequitymarketprices.Weareexposedtoequityriskfromanumberofsources.Aportionofourexposuretoequityriskarisesinconnectionwithbenefitguaranteesonsegregatedfundproducts.Thesebenefitguaranteesmaybetriggeredupondeath,maturity,withdrawalorannuitization.Thecostofprovidingtheseguaranteesisuncertainanddependsuponanumberoffactors,includinggeneralcapitalmarketconditions,ourhedgingstrategies,policyholderbehaviourandmortalityexperience,eachofwhichmayresultinnegativeimpactsonnetincomeandcapital.

Whilealargepercentageofthesesegregatedfundproductsareincludedinourhedgingprogram,notallofthisexposureishedged.Forthosecontractsincludedinourhedgingprogram,wegenerallyhedgethevalueofexpectedfuturenetclaimscostsandassociatedmargins,asweareprimarilyfocusedonhedgingexpectedeconomiccostsassociatedwithprovidingtheguarantees.Sincethevalueofbenefitsbeinghedgedwillgenerallydifferfromthefinancialstatementvalue(duetodifferentvaluationmethodsandtheinclusionofvaluationmarginsinrespectoffinancialstatementvalues),thisapproachwillresultinresidualvolatilitytoequitymarketshocksinreportedincomeandcapital.Thegeneralavailabilityandcostofthesehedginginstrumentsmaybeadverselyimpactedbyanumberoffactors,includingchangesininterestrates,increasedvolatilityincapitalmarketsandchangesinthegeneralmarketandregulatoryenvironmentwithinwhichthesehedgingprogramsoperate.



Ourhedgingprogramsmaythemselvesexposeustootherriskssuchasbasisrisk(theriskthathedgesdonotexactlyreplicatetheunderlyingportfolioexperience),derivativecounterpartycreditrisk,increasedlevelsofliquidityrisk,modelriskandotheroperationalrisks.Thesefactorsmayadverselyimpacttheneteffectiveness,costsandfinancialviabilityofmaintainingourhedgingprogramsandthereforeadverselyimpactourprofitabilityandfinancialposition.Whileourhedgingprogramsareintendedtomitigatetheseeffects(forexample,hedgecounterpartycreditriskismanagedbymaintainingbroaddiversification,dealingprimarilywithhighlyratedcounterpartiesandtransactingthroughover-the-countercontractsclearedthroughcentralclearinghouses,exchange-tradedcontractsorbilateralover-the-countercontractsnegotiateddirectlybetweencounterpartiesthatincludeapplicablecreditsupportannexes),residualriskandpotentialreportedearningsandcapitalvolatilityremain.Inaddition,regulationsforover-the-counterderivativescouldimposeadditionalcostsandcouldaffectourhedgingstrategy.

Wegeneraterevenueinourassetmanagementbusinessesandfromcertaininsuranceandannuitycontractswherefeesareleviedonaccountbalancesthatareaffecteddirectlybyequitymarketlevels.Accordingly,wehavefurtherexposuretoequityriskasadversefluctuationsinthemarketvalueofsuchassetswillresultincorrespondingadverseimpactsonourrevenueandnetincome.Inaddition,decliningandvolatileequitymarketsmayhaveanegativeimpactonsalesandredemptions(surrenders)inthesebusinesses,andthismayresultinfurtheradverseimpactsonournetincomeandfinancialposition.

Wealsohavedirectexposuretoequitymarketsfromtheinvestmentssupportingothergeneralaccountliabilities,surplus,andemployeebenefitplans.Theseexposuresfallwithinourrisk-takingphilosophyandappetite,andarethereforegenerallynothedged.

InterestRateandSpreadRiskInterestrateandspreadriskisthepotentialforfinanciallossarisingfromchangesorvolatilityininterestratesorspreadswhenassetcashflowsandthepolicyobligationstheysupportarenotmatched.Thismayresultintheneedtoeithersellassetstomeetpolicypaymentsandexpensesorreinvestexcessassetcashflowsinunfavourableinterestrateorspreadenvironments.Theimpactofchangesorvolatilityininterestratesorspreadsisreflectedinthevaluationofourfinancialassetsandliabilitiesforinsurancecontracts.

Ourprimaryexposuretointerestrateandspreadriskarisesfromcertaingeneralaccountproductsandsegregatedfundcontractswhichcontaininvestmentguaranteesintheformofminimumcreditingrates,guaranteedpremiumrates,settlementoptionsandbenefitguarantees.Ifinvestmentreturnsfallbelowguaranteedlevels,wemayberequiredtoincreaseliabilitiesorcapitalinrespectofthesecontracts.Theguaranteesattachedtotheseproductsmaybeapplicabletobothpastpremiumscollectedandfuturepremiumsnotyetreceived.Segregatedfundcontractsprovidebenefitguaranteesthatarelinkedtounderlyingfundperformanceandmaybetriggeredupondeath,maturity,withdrawalorannuitization.Theseproductsareincludedinourasset-liabilitymanagementprogramandtheresidualinterestrateexposureismanagedwithinourriskappetitelimits.

Declinesininterestratesornarrowingspreadscanresultincompressionofthenetspreadbetweeninterestearnedoninvestmentsandinterestcreditedtopolicyholders.Declinesininterestratesornarrowingspreadsmayalsoresultinincreasedassetcalls,mortgageprepaymentsandnetreinvestmentofpositivecashflowsatloweryields,andthereforeadverselyimpactourprofitabilityandfinancialposition.Negativeinterestratesmayadditionallyresultinlossesonourcashdepositsandlowornegativereturnsonourfixedincomeassetsimpactingourprofitability.Incontrast,increasesininterestratesorawideningofspreadsmayhaveamaterialimpactonthevalueoffixedincomeassets,resultingindepressedmarketvalues,andmayleadtolowerLICATratiosorlossesintheeventoftheliquidationofassetspriortomaturity.

Significantchangesorvolatilityininterestratesorspreadscouldhaveanegativeimpactonsalesofcertaininsuranceandannuityproducts,andadverselyimpacttheexpectedpatternofredemptions(surrenders)onexistingpolicies.Increasesininterestratesorwideningspreadsmayincreasetheriskthatpolicyholderswillsurrendertheircontracts,potentiallyforcingustoliquidateassetsatalossandacceleraterecognitionofcertainacquisitionexpenses.Whilewehaveestablishedhedgingprogramsinplaceandourinsuranceandannuityproductsoftencontainsurrendermitigationfeatures,thesemaynotbesufficienttofullyoffsettheadverseimpactoftheunderlyinglosses.

Wealsohavedirectexposuretointerestratesandspreadsfrominvestmentssupportingothergeneralaccountliabilities,surplusandemployeebenefitplans.Lowerinterestratesoranarrowingofspreadswillresultinreducedinvestmentincomeonnewfixedincomeassetpurchases.Conversely,higherinterestratesorwiderspreadswillreducethevalueofourexistingassets.Theseexposuresfallwithinourrisk-takingphilosophyandappetiteandarethereforegenerallynothedged.

Wehaveimplementedasset-liabilitymanagementandhedgingprogramsinvolvingregularmonitoringandadjustmentofriskexposuresusingassets,derivativeinstrumentsandrepurchaseagreementstomaintaininterestrateexposureswithinourriskappetite.Thegeneralavailabilityandcostofthesehedginginstrumentsmaybeadverselyimpactedbyanumberoffactorsincludingchangesininterestrates,increasedvolatilityincapitalmarkets,andchangesinthegeneralmarketandregulatoryenvironmentwithinwhichthesehedgingprogramsoperate.Inparticular,regulationsforover-the-counterderivativescouldimposeadditionalcostsandcouldaffectourhedgingstrategy.Inaddition,theseprogramsmaythemselvesexposeustootherriskssuchasthosedescribedundertheheadingRiskFactors-MarketRisk-EquityRiskinthisAIF.



Asustainedlowinterestrateenvironmentmayadverselyimpactourearnings,regulatorycapitalrequirementsandourabilitytoimplementourbusinessstrategyandplansinseveralways,including:(i) Lowersalesofcertaininsuranceandwealthproducts,whichcaninturnpressureouroperatingexpenselevels;(ii) Shiftsintheexpectedpatternofredemptions(surrenders)onexistingpolicies;(iii) Highernewbusinessstrainreflectinglowernewbusinessprofitability;(iv) Reducedreturnonnewfixedincomeassetpurchases,andhigherhedgingcosts;(v) Theimpactofchangesinactuarialassumptions;(vi) Impairmentofgoodwill;and(vii) Additionalvaluationallowancesagainstourdeferredtaxassets.

Wehavetakenvariousmanagementactionstomitigatetheriskoflowlevelsofinterestratesincludingchangesinproductmix,productdesignandhedgingactivities.Iflowlevelsofinterestratescontinuetobepersistentoveranextendedperiodoftime,othereffectsmayalsosurfaceincludingchangesinpolicyholderbehaviourandactuarialassumptionsprescribedbytheregulatingbodies.

RealEstateRiskRealestateriskisthepotentialforfinanciallossarisingfromfluctuationsinthevalueof,orfuturecashflowsfrom,ourinvestmentsinrealestate.Weareexposedtorealestateriskandmayexperiencefinanciallossesresultingfromthedirectownershipofrealestateinvestmentsorindirectlythroughfixedincomeinvestmentssecuredbyrealestateproperty,leaseholdinterests,groundrents,andpurchaseandleasebacktransactions.Realestatepriceriskmayarisefromexternalmarketconditions,inadequatepropertyanalysis,inadequateinsurancecoverage,inappropriaterealestateappraisals,orfromenvironmentalriskexposures.Weholddirectrealestateinvestmentsthatsupportgeneralaccountliabilitiesandsurplus,andfluctuationsinvaluewillimpactourprofitabilityandfinancialposition.Amaterialandsustainedincreaseininterestratesmayleadtodeteriorationinrealestatevalues.

ForeignCurrencyRiskForeigncurrencyriskistheresultofmismatchesinthecurrencyofourassetsandliabilities(inclusiveofcapital),andcashflows.Thisriskmayarisefromavarietyofsourcessuchasforeigncurrencytransactionsandservices,foreigncurrencyhedging,investmentsdenominatedinforeigncurrencies,investmentsinforeignsubsidiariesandnetincomefromforeignoperations.Changesorvolatilityinforeignexchangerates,includingachangetocurrenciesthatarefixedinvaluetoanothercurrency,couldadverselyaffectourfinancialconditionandresultsofoperations.

Asaninternationalprovideroffinancialservices,weoperateinanumberofcountries,withrevenuesandexpensesdenominatedinseverallocalcurrencies.Ineachcountryinwhichweoperate,wegenerallymaintainthecurrencyprofileofassetstomatchthecurrencyofaggregateliabilitiesandrequiredsurplus.Thisapproachprovidesanoperationalhedgeagainstdisruptionsinlocaloperationscausedbycurrencyfluctuations.ForeigncurrencyderivativecontractssuchascurrencyswapsandforwardsareusedasariskmanagementtooltomanagethecurrencyexposureinaccordancewithourAssetLiabilityManagementPolicy.AsatDecember31,2020andDecember31,2019,theCompanydidnothaveamaterialforeigncurrencyriskexposureonafunctionalcurrencybasis.

ChangesinexchangeratescanaffectournetincomeandsurpluswhenfinancialresultsinfunctionalcurrenciesaretranslatedintoCanadiandollars.NetincomeearnedoutsideofCanadaisgenerallynotcurrencyhedgedandaweakeninginthelocalcurrencyofourforeignoperationsrelativetotheCanadiandollarcanhaveanegativeimpactonournetincomereportedinCanadiancurrency.AstrengtheninginthelocalcurrencyofourforeignoperationsrelativetotheCanadiandollarwouldhavetheoppositeeffect.Regulatorycapitalratioscouldalsobeimpactedbychangesinexchangerates.

InsuranceRiskInsuranceriskistheuncertaintyofproductperformanceduetoactualexperienceemergingdifferentlythanexpectedintheareasofpolicyholderbehaviour,mortality,morbidityandlongevity.Inaddition,productdesignandpricing,expenseandreinsurancerisksimpactmultipleriskcategories,includinginsurancerisk.

PolicyholderBehaviourRiskWecanincurlossesduetoadversepolicyholderbehaviourrelativetotheassumptionsusedinthepricingandvaluationofproductswithregardtolapseofpoliciesorexerciseofotherembeddedpolicyoptions.

Uncertaintyinpolicyholderbehaviourcanarisefromseveralsourcesincludingunexpectedeventsinthepolicyholder'slifecircumstances,thegenerallevelofeconomicactivity(whetherhigherorlowerthanexpected),changesinthefinancialandcapitalmarkets,changesinpricingandavailabilityofcurrentproducts,theintroductionofnewproducts,changesinunderwritingtechnologyandstandards,aswellaschangesinourfinancialstrengthorreputation.Uncertaintyinfuturecashflowsaffectedbypolicyholderbehaviourcanbefurtherexacerbatedbyirrationalbehaviourduringtimesofeconomicturbulenceoratkeyoptionexercisepointsinthelifeofaninsurancecontract.



Manyofourproductsincludesomeformofembeddedpolicyholderoption.Thesecouldrangefromsimpleoptionsrelatingtosurrenderortermination,tomorecomplexoptionsrelatingtopaymentofpremiumsorvariousotherbenefitandcoverageprovisions.Changesintherelativefrequencyorpatternwithwhichtheseoptionsareelected(relativetothoseassumedinthepricingandvaluationoftheseoptions)couldhaveanadverseimpactonourprofitabilityandfinancialposition.

Systemicformsofpolicyholderbehaviourriskcouldalsoarisewiththedevelopmentofinvestor-ownedandsecondarymarketsforlifeinsurancepolicies.

MortalityandMorbidityRiskMortalityandmorbidityriskistheriskthatfutureexperiencecouldbeworsethantheassumptionsusedinthepricingandvaluationofproducts.Mortalityandmorbidityriskcanariseinthenormalcourseofbusinessthroughrandomfluctuationinrealizedexperience,throughcatastrophes,asaresultofapandemic,orinassociationwithotherriskfactorssuchasproductdevelopmentandpricingormodelrisk.Adversemortalityandmorbidityexperiencecouldalsooccurthroughsystemicanti-selection,whichcouldariseduetopoorplandesign,orunderwritingprocessfailureorthedevelopmentofinvestor-ownedandsecondarymarketsforlifeinsurancepolicies.

Externalfactorscouldadverselyaffectourlifeinsurance,healthinsurance,criticalillness,disability,long-termcareinsuranceandannuitybusinesses.Morbidityexperiencecouldbeunfavourablyimpactedbyexternalevents,suchaspandemics,increasesindisabilityclaimsduringeconomicslowdownsandincreasesinhighmedicaltreatmentcostsandgrowthinutilizationofspecialtydrugs.Thisintroducesthepotentialforadversefinancialvolatilityinourfinancialresults.

Mortalityandmorbidityconcentrationriskistheriskofacatastrophicevent,suchasnaturalenvironmentaldisasters(forexample,earthquakes),human-madedisasters(forexample,actsofterrorism,militaryactions,andinadvertentintroductionoftoxicelementsintotheenvironment)aswellasepidemicsthatcouldoccuringeographiclocationswherethereissignificantinsurancecoverage.Certainfactorscouldadverselyaffectourmortalityormorbidityexperiencerelativetotheassumptionsusedinthepricingandvaluationofproducts,leadingtoamaterialadverseeffectonourprofitabilityandfinancialposition.

CurrentlegislationrestrictsinsurersfromrequiringClientstotakeorreleasetheresultsofgenetictests.IfClientshaveaccesstotheresultsofgenetictestsandwedonot,thiscreatesasymmetryofinformationbetweenClientsandinsurers,whichcouldadverselyimpactmortalityandmorbidityexperienceandpolicyholderbehaviour.Thisasymmetryofinformationmayincreaseasgenetictestingadvancesandbecomesmoreaccessible,givingrisetobetterdiagnosesofconditionswheretreatmentsareexpensiveornon-existent.Theasymmetryofinformationmayleadtoincreasedanti-selectioninnewbusinessunderwriting.TheremayalsobeanimpactonpolicylapserateswhereadversegenetictestingresultsmaymotivateClientstoretaintheirpoliciesresultinginhigherclaimspayoutsthanassumedinthepricingandvaluationofproducts,aswellasincreasedinsurancerateswhichmayresultinlossofnewandexistingClients.

LongevityRiskLongevityriskisthepotentialforeconomicloss,accountinglossorvolatilityinearningsarisingfromadversechangesinratesofmortalityimprovementrelativetotheassumptionsusedinthepricingandvaluationofproducts.Thisriskcanmanifestitselfslowlyovertimeassocioeconomicconditionsimproveandmedicaladvancescontinue.Itcouldalsomanifestitselfmorequickly,forexample,duetomedicalbreakthroughsthatsignificantlyextendlifeexpectancy.Longevityriskaffectscontractswherebenefitsorcostsarebaseduponthelikelihoodofsurvivalandhigherthanexpectedimprovementsinpolicyholderlifeexpectancycouldthereforeincreasetheultimatecostofthesebenefits(forexample,annuities,pensions,pureendowments,reinsurance,segregatedfunds,andspecifictypesofhealthcontracts).Additionally,ourlongevityriskexposureisincreasedforcertainannuityproductssuchasguaranteedannuityoptionsbyanincreaseinequitymarketlevels.

Manyofourproductsprovidebenefitsoverthepolicyholder'scontinuedlifetime.Higherthanexpectedimprovementsinpolicyholderlifeexpectancycouldthereforeincreasetheultimatecostofthesebenefits,therebyrequiringstrengtheningofpolicyholderliabilitiesandresultinginreductionsinnetincomeandcapital.Forlongevityrisks,externalfactorsincludingmedicaladvancescouldadverselyaffectourlifeinsurance,healthinsurance,criticalillness,disability,long-termcareinsuranceandannuitybusinesses.

ProductDesignandPricingRiskProductdesignandpricingriskistheriskaproductdoesnotperformasexpected,causingadversefinancialconsequences.Thisriskmayarisefromdeviationsinrealizedexperienceversusassumptionsusedinthepricingofproducts.Riskfactorsincludeuncertaintyconcerningfutureinvestmentyields,policyholderbehaviour,mortalityandmorbidityexperience,saleslevels,mixofbusiness,expensesandtaxes.Althoughsomeofourproductspermitustoincreasepremiumsoradjustotherchargesandcreditsduringthelifeofthepolicyorcontract,thetermsofthesepoliciesorcontractsmaynotallowforsufficientadjustmentstomaintainexpectedprofitability.Thiscouldhaveanadverseeffectonourprofitabilityandcapitalposition.



Productsthatoffercomplexfeatures,optionsorguaranteesrequireincreasinglycomplexpricingmodels,methodsorassumptions,leadingtoadditionallevelsofuncertainty.Theriskofmis-pricingincreaseswiththenumberandinherentuncertaintyofassumptionsneededtomodelaproduct.Pastexperiencedatasupplementedwithfuturetrendassumptionsmaybepoorpredictorsoffutureexperience.LackofexperiencedataonnewproductsornewClientsegmentsincreasestheriskthatfutureactualexperienceunfoldsdifferentlyfromexpectedassumptions.Externalenvironmentalfactorsmayintroducenewriskfactors,whichwereunanticipatedduringproductdesign,andhaveanadverseresultonthefinancialperformanceoftheproduct.Policyholdersophisticationandbehaviourinthefuturemayvaryfromthatassumedatthetimetheproductisdesigned,therebyadverselyaffectingtheproduct'sfinancialperformance.

ExpenseRiskExpenseriskistheriskthatfutureexpensesarehigherthantheassumptionsusedinthepricingandvaluationofproducts.Thisriskcanarisefromgeneraleconomicconditions,unexpectedincreasesininflation,slowerthananticipatedgrowth,orreductioninproductivityleadingtoincreasesinunitexpenses.ExpenseriskoccursinproductswherewecannotorwillnotpassincreasedcostsontotheClientandwillmanifestitselfintheformofaliabilityincreaseorareductioninexpectedfutureprofits.

Fromtimetotime,certainproductsorbusinesssegmentsmaybeclosedfornewsales(forexamplevariableannuitiesinourinternationalbusinessintheAsiapillar,ourbusinessintheUKandourindividualinsurancebusinessintheU.S.).Ourabilitytoeffectivelymanagetherun-offofbusinessintheseproductsorbusinesssegmentsintroducesadditionalrisks,suchaspolicyholderbehaviourandexpenseriskthatmayhaveanadverseeffectonouroperations,profitabilityandfinancialposition.

ReinsuranceRiskWepurchasereinsuranceforcertainrisksunderwrittenbyourvariousinsurancebusinesses.Reinsuranceriskistheriskoffinanciallossduetoadversedevelopmentsinreinsurancemarkets(forexample,discontinuanceordiminutionofreinsurancecapacity,oranincreaseinthecostofreinsurance),insolvencyofareinsurerorinadequatereinsurancecoverage.

Changesinreinsurancemarketconditions,includingactionstakenbyreinsurerstoincreaseratesonexistingandnewcoverageandourabilitytoobtainappropriatereinsurance,mayadverselyimpacttheavailabilityorcostofmaintainingexistingorsecuringnewreinsurancecapacity,withadverseimpactsonourbusinessstrategies,profitabilityandfinancialposition.Thereisanincreasedpossibilityofrateincreasesorrenegotiationoflegacyreinsurancecontractsbyourreinsurers,astheglobalreinsuranceindustrycontinuestoreviewandoptimizetheirbusinessmodels.Inaddition,changestotheregulatorytreatmentofreinsurancearrangementscouldhaveanadverseimpactonourcapitalposition.

CreditRiskCreditriskisthepossibilityoflossfromamountsowedbyourborrowersorfinancialcounterparties.Wearesubjecttocreditriskinconnectionwithissuersofsecuritiesheldinourinvestmentportfolio,debtors,structuredsecurities,reinsurers,counterparties(includingderivative,repurchaseagreementandsecuritieslendingcounterparties),otherfinancialinstitutionsandotherentities.Lossesmayoccurwhenacounterpartyfailstomaketimelypaymentspursuanttothetermsoftheunderlyingcontractualarrangementorwhenthecounterparty'screditratingorriskprofileotherwisedeteriorates.Creditriskcanalsoariseinconnectionwithdeteriorationinthevalueof,orabilitytorealize,anyunderlyingsecuritythatmaybeusedascollateralforthedebtobligation.Creditriskcanoccurasaresultofbroadeconomicconditions,challengeswithinspecificsectorsoftheeconomy,orfromissuesaffectingindividualcompanies.Eventsthatresultindefaults,impairmentsordowngradesofthesecuritiesinourinvestmentportfoliowouldcausetheCompanytorecordrealizedorunrealizedlossesandmaycauseanincreaseinourprovisionsforassetdefault,adverselyimpactingearnings.

Volatilityinthecapitalmarkets,includingdeterioratingcreditandnegativerealestateriskindicators,fluctuationsinglobalordomesticmacro-economicfactors,orlossgivendefaultexpectations,mayhaveasignificantimpactonthevalueofthefixedincomeassetsinourinvestmentportfolio.Forexample,ourasset-backedportfolioissensitivetofluctuationsinmacro-economicfactors,assumeddefaultratesfortheunderlyingcollateralpoolandlossgivendefaultexpectations.

Aspartofourriskmanagementstrategy,wemaintainhedgingprogramsthatmayemploytheuseofderivatives.Marketconditionsdeterminetheavailabilityandcostofthederivativeprotection.Althoughwedealprimarilywithhighlyratedcounterparties,aderivativecounterparty'sinsolvencyoritsinabilityorunwillingnesstomakepaymentsunderthetermsofaderivativeagreementcouldhaveanadverseeffectonourprofitabilityandfinancialposition.

Wepurchasereinsuranceforcertainrisksunderwrittenbyourvariousinsurancebusinesses.Reinsurancedoesnotrelieveusfromourdirectliabilitytopolicyholdersandaccordingly,webearcreditriskwithrespecttoourreinsurers.Althoughwedealprimarilywithhighlyratedreinsurers,deteriorationintheircreditratings,orreinsurerinsolvency,inabilityorunwillingnesstomakepaymentsunderthetermsofareinsuranceagreementcouldhaveanadverseeffectonourprofitabilityandfinancialposition.Theriskthatareinsurerisunableorunwillingtomakepaymentsmayoccurdueto,butisnotlimitedto,legaldisagreements,interpretationsbyacourtregardingthetermsofthereinsurancecontract,changesinlawsandregulationsorinterpretationofthosechanges.



BusinessandStrategicRiskBusinessandstrategicriskincludesrisksrelatedtochangesintheeconomicorpoliticalenvironment,distributionchannelsorClientbehaviour,environmentalandsocialrisks,competitive,legalorregulatoryenvironmentandrisksrelatingtothedesignorimplementationofourbusinessstrategy.

EconomicandPoliticalRiskWeoperateinvariousgeographiesandourbusinessandfinancialoperationsaresusceptibletoregionalandglobaleconomic,politicalandregulatorychanges.Wemaybeaffectedbyeconomicandcapitalmarketsconditionsandeconomicshocksaroundtheglobeasaresultofincreasinglyconnectedglobalmarkets.Factorssuchaschangesininterestrates,foreignexchangerates,marketvolatility,housingprices,consumerspending,savinganddebt,businessinvestmentandinflationaroundtheglobecanaffectthebusinessandeconomicenvironmentsinwhichweoperate.Continuedeconomicandpoliticaluncertaintymaygiverisetoincreasedbusinessandstrategicrisksincludingthoseassociatedwithindustryrestructuring,mergersandacquisitions,changingcompetitivedynamicsandchangesinthelegal,regulatoryandtaxregimesinwhichourbusinessesoperate.Inaddition,adverseeconomicconditionsoftenariseinconjunctionwithvolatileanddeterioratingcapitalmarketsconditions,whichcanhaveanadverseimpactonClientbehaviourandinturnonoursalesandprofitability,creditandfinancialstrengthratings,andcapitalandliquiditypositions.

Currently,therearevariousfactorsthatimpactcontinuingeconomicandpoliticalriskanduncertainty,includingthefollowingexamples:• thedurationandimpactoftheCOVID-19pandemicwhichhasalreadyhadanadverseimpactontheglobaleconomy,andmay

deepenifprolonged,addingtofinancialmarketvolatility,corporateinsolvencyrisksandhouseholdwealthimpacts;• theshifttoprotectionismleadingtoongoingtradeuncertaintiesand/orneworincreasedtariffs;• macro-economicuncertaintyandpotentialdisruptivepolicychangesduetoglobalpoliticalunrestasseenwithinHongKongand

strainedrelationsbetweencountries,suchasbetweentheUnitedStatesandRussiaorChina;• uncertaintyduetoEuroscepticisminvariousEuropeanUnioncountriesandtheimpactofBrexit;• increasedsupportforpopulistparties;and• risingincomeinequality.

Theseriskscanalsointersectwithotherriskconsiderationssuchasenvironmentalandsocialrisksincludingclimatechangeandinequality.Theimpactofthesefactorsincludethepossibilityofcontinuedlowgrowth,sustainedlowinterestrates,increasedvolatilityininterestratesandequitymarkets,andacontinuationofrelativelylowyetvolatilecreditspreads.Theimpactontheeconomicenvironmentfromanyoftheseeventsmaynotbeconsistentwithourassumptionsandexpectations,whichmayadverselyimpactourfinancialresultsandtheabilitytoimplementourbusinessstrategy.Market-relatedimpactsfromtheeconomicenvironment,legal,regulatoryorpolicychangesorothergovernmentalactionscouldcontinuetoplacepressureonourearnings,regulatorycapitalrequirements,profitability,liquidityandourabilitytoimplementourbusinessstrategiesandplans.Lowinterestratesandincreasedvolatilitycreateanumberofchallengesforusincludingincreasedhedgecosts,lowerinvestmentyields,adversepolicyholderbehaviourandlowerlevelsofnewbusinessprofitability.Otherimpactsofmacro-economicuncertaintyandvolatilitymayleadtootherfinancialandnon-financialimpactsincludinggoodwillimpairment,declineinoursharepriceandimpactonourcreditandfinancialstrengthratings.Theseriskscontinuetohavethepotentialtoinflictsignificantdamageonglobalandregionalmarkets.

StrategicExecutionRiskOurbusinessstrategiesandplansaredependentonthesuccessfulexecutionoforganizationalandstrategicinitiativesdesignedtosupportthegrowthofourbusiness.Ourabilitytomanagetheexecutionoftheseinitiativeseffectivelyandprioritizeinitiativesdirectlyaffectsourabilitytoexecuteourstrategies.Identifyingandimplementingtherightsetofinitiativesiscriticaltoachievingourbusinessplantargets.Failuretoidentifyandimplementtherightsetofinitiativescouldalsoleadtocoststructurechallengesandinabilitytoachieveourgrowthobjectives.

Ourfinancialperformanceisdependentuponourabilitytoimplementandexecuteourbusinessstrategiesandplansforgrowth.Thecurrenteconomic,regulatoryandcompetitiveenvironmentrequiresustoidentifyandadaptrapidlytonewopportunitiesandtorefineourstrategies.Ifwefailtoidentifynewopportunities,reviseourstrategiesonatimelybasisoradapttothechangingenvironment,wemaynotbeabletoachieveourgrowthobjectives.

Successfulexecutionofourbusinessstrategiesandplansimpactsanumberoffactors,includingourabilitytogeneratesufficientearningstomaintainanadequatelevelofcapital,ourabilitytogeneratesustainedinvestmentperformance,ourabilitytomeetregulatoryrequirements,ourabilitytomanageourriskexposureseffectively,ourabilitytoattractandretainClientsanddistributors,ourabilitytohavetherightsetofdiverseproductsandbusinessmix,andourabilitytoreduceoperatingexpenseswhilemaintainingourabilitytohire,retainandmotivatekeypersonnel.Thereisnocertaintythatwewillbesuccessfulinimplementingourbusinessstrategiesorthatthesestrategieswillachieveourobjectives.Ifourbusinessstrategiesarenotsuccessfulorarenotexecutedeffectively,wemaynotbeabletoachieveourgrowthobjectivesorreacttomarketopportunities,whichmayhaveanadverseimpactonourbusinessandfinancialresults.



DistributionRiskFailuretoachieveplanneddistributionscaleorappropriateandcompliantdistributionofproductscouldmateriallyimpactourfinancialandstrategicobjectives.ThisincludestheinabilitytoattractandretainintermediariesandagentsatacostthatisfinanciallyfeasibletotheCompany,ortodevelopdigitalsalesandClientsupportcapabilitiesandtechnologies.Distributionriskmayalsobeinfluencedwhereourdistributionorproductstrategyandrelatedservices(includingdigitalsalesandClientsupportcapabilitiesandtechnologies)arenotdeveloped,modifiedorexecutedinlinewithourstrategicobjectivesorinconsiderationofthechangesinClientbehaviourorourregulatoryenvironment.Inaddition,thelackofawell-diversifieddistributionmodelinthejurisdictionsinwhichwedobusinessmaycauseover-relianceonagencychannelorkeypartners.

Wedistributeourproductsthroughavarietyofdistributionchannels,includingdirectsalesagents,managinggeneralagents,independentgeneralagents,financialintermediaries,broker-dealers,banks,pensionandbenefitsconsultantsandotherthird-partymarketingorganizations.Wecompetewithotherfinancialinstitutionstoattractandretaintheseintermediariesandagentsonthebasisofproducts,compensation,supportservicesandfinancialposition.Wealsofacetheriskthatourkeydistributionpartnersmayundergoconsolidation,changeinownershipstructureorchangetheirdistributionmodelwhichcouldmateriallyimpactsalesandourgrowthtargets.Newdistributionchannelscouldemergethatmayimpacttheeffectivenessofourcurrentdistributionstrategy.Distributionchannelsaregrowingrapidlyinsomebusinessesincertaincountries,whichmayheightentherisksofmarketconductandchannelconflictsoroverlaps.ThecapabilitytoreachandretainClientsthroughuseofdigitaltechnologyanddataanalyticsisbecomingincreasinglyimportantintheinsuranceindustry.Whileuseofdigital-baseddistributionchannelsmayhelpusachieveorexpandscale,thesechannelsexposeustoregulatorycomplianceandinformationsecurityrelatedrisks.Oursalesandresultsofoperationscouldbemateriallyadverselyaffectedifwedonothavetherightdistributionorproductstrategyandrelatedtechnologyorifweareunsuccessfulinattractingandretainingintermediariesandagents.

RisksRelatingtoMergers,Acquisitions,DivestituresandStrategicInvestmentsWeregularlyexploreopportunitiestoselectivelyacquireotherbusinessesortodivestourselvesofallorpartofcertainbusinesses,insupportofourgrowthandstrategicobjectives.Anytransactionthatweenterintointroducesanumberofrisksassociatedwitheconomic,operational,strategic,financial,tax,legal,regulatory,compliance,andotherfactors.

Thereisariskthatwemaybeunabletomakeanappropriateacquisitioninadesiredmarketorbusinesslineorareunabletorealizethefinancialandstrategicbenefitsofthetransactionsduetocompetitivefactors,regulatoryrequirementsorotherfactors.Theseriskscouldadverselyimpactourabilitytoachieveourfinancialandstrategicobjectives.

Ourabilitytorealizethecontemplatedeconomic,financial,andstrategicbenefitofanytransactionthatweenterintoiscontingentontheeffectiveseparationandintegrationofthetransferredbusinesses,restructuringorreorganizationofrelatedbusinesses,andmotivatingandretainingpersonneltoeffectivelyexecutethesetransactions.Inaddition,theintegrationofoperationsanddifferencesinorganizationalculturemayrequirethededicationofsignificantmanagementresources,whichmaydistractmanagement’sattentionfromourday-to-daybusiness.Anticipatedcostsynergiesorotherexpectedbenefitsmaynotmaterializeduetoafailuretosuccessfullyintegratetheacquiredbusinesseswithourexistingoperations.Anyoftheserisks,ifrealized,couldpreventusfromachievingtheexpectedresultsfromatransactionorcouldimpactourfinancialandstrategicobjectives.

Althoughweundertakeextensiveduediligenceinconnectionwithpotentialacquisitions,theremaybeliabilitiesorassetimpairmentsthatwefailto,orareunabletodiscoverduringourduediligenceinvestigations.Therecouldalsobeunforeseenliabilitiesorassetimpairments,includinggoodwillimpairmentsthatariseinconnectionwithacquisitionsordivestituresofbusinesses.Thereisnoassurancethatwewillachieveourfinancialorstrategicobjectivesoranticipatedcostsavingsfollowinganacquisition.

Thepurchaseandsaleagreementsthatsupportacquisitiontransactionstypicallyincludeindemnificationsprovidedbythesellertothepurchaser.Theserightsaretypicallylimitedbysurvivalperiodsandlimitationsonthenatureandamountoflosseswemayrecoverandthereisariskthattheseindemnificationswillnotbecollectibleorbesufficienttofullyoffsetlossesarisingfromtheacquiredbusiness.Wewouldalsobeexposedtothecreditriskofthesellingpartywithrespecttoitsabilitytopayifanindemnificationprovisionistriggered.

CompetitiveEnvironmentCompetitionfrominsurancecompanies,banks,assetmanagers,mutualfundcompanies,financialplannersandotherserviceproviders(includingnewentrantsandnon-traditionalfinancialservicescompanies)isintense,andcouldadverselyaffectourbusinessincertaincountries.

Thebusinessesinwhichweengagearehighlycompetitiveandourabilitytosellourproductsisdependentonmanyfactors,includingscale,priceandyieldsoffered,distributionchannels,digitalcapabilities,financialstrengthratings,rangeofproductlinesandproductquality,brandstrength,investmentperformance,historicaldividendlevelsandtheabilitytoprovidevalueaddedservicestodistributorsandClients.Incertainmarkets,someofourcompetitorsmaybesuperiortousononeormoreofthesefactors.Ourcompetitorshavesignificantpotentialtodisruptourbusinessthroughtargetedstrategiestoreduceourmarketshare



whichmayincludetargetingourkeypeopleorbancassurancepartnersandotherdistributorsoraggressivelypricingtheirproducts.Ourabilitytoachieveourbusinessplansandstrategiesdependssignificantlyuponourcapacitytoanticipateandrespondquicklytothesecompetitivepressures.

Technologyisdrivingrapidchangeinthefinancialservicessectorandisenablingnewentrantstocompeteorofferservicestoourcompetitorstoenhancetheirabilitytocompeteincertainsegmentsoftheinsurance,wealthandassetmanagementmarkets.Theemergenceofnewtechnologiessuchasroboticprocessautomation,artificialintelligence,blockchainandadvancedanalyticsmayhaveanimpactonthefinancialservicessectorandhowcompaniesinteractwiththeirstakeholders.Ourcurrentcompetitorsornewentrantsmayusetheseorothernewtechnologiestoprovideservicesinvariousareassuchascustomizedpricing,proactiveoutreachtoClientsandtargetedmarketinginordertostrengthentheirClientrelationshipsandinfluenceClientbehaviour.Theimpactofdisruptionfromchangingtechnologyandinnovationbytraditionalandnon-traditionalcompetitorswhomayofferabetteruserexperience,functionalityorlowerpricedproductsandmayhavelowerdistributioncostswillrequireustoadaptatamorerapidpaceandmaycreatemarginpressures.Theriskofdisruptionmayalsoimpactourdistributionmodelsasnewandlowcostdigital-basedbusinessmodelsemergeinconnectionwiththedistributionoffinancialservicesandproducts,suchasinsurtechsandrobo-advisors.Theserisksareevolvingrapidlywithanincreasingnumberofdigitalusersandaredifficulttoanticipateandrespondtoproactively,andmayadverselyimpactourprofitabilityandfinancialposition.

Competitorsmayofferagreaterselectionoforlowercostproducts,whichmaycreatemarginpressureinsomeofourbusinessesandimpactourprofitabilityandmarketshare.Intheassetmanagementsector,therehasbeenatrendamonginvestorstowardslower-feepassiveinvestmentproductssuchasindex-andothertypesofexchange-tradedfunds,whichmayimpactourabilitytoattractandretainClientsinouractivelymanagedproducts.Productdevelopmentandproductlifecycleshaveshortenedinmanyproductsegments,leadingtomoreintensecompetitionwithrespecttoproductfeatures.Thisincreasesproductdevelopmentandadministrativecostsandreducesthetimeframeoverwhichcapitalexpenditurescanberecovered.Regulatoryandcompliancecostsalsogenerallyrisewithincreasesintherangeandcomplexityofourproductportfolio.

Wehavemanylargeandwell-capitalizedcompetitorswithaccesstosignificantfinancialresourcesandincertainjurisdictions,thesecompetitorshavesignificantmarketshareandestablisheddistributionrelationshipsandbrands.Amongotherthings,thecompetitionintheseindustriesthroughouttheworldhasresultedinatrendtowardstheglobalconsolidationofthefinancialservicesindustryincluding,inparticular,theinsurance,bankingandassetmanagementsectors.Totheextentthatconsolidationcontinues,wewillincreasinglyfacecompetitionfromlarge,well-capitalizedfinancialservicescompaniesinmanyofthejurisdictionsinwhichweoperate.TheselargercompanieshavetheabilitytoheavilyinvestinfundamentalactivitiesforsustainedprofitablegrowthandsuperiorClientserviceinthelifeinsuranceindustrysuchasbrandequity,productdevelopment,technology,riskmanagement,anddistributioncapability.Therecanbenoassurancethesedevelopmentswillnotadverselyaffectourbusinessesincertaincountries.

Manyofourinsuranceproducts,particularlythoseofferedbythegroupsegment,arerenewedannually.Giventhisrelativelyhighfrequencyofrenewalactivity,thisbusinessmaybeparticularlyexposedtoadversepersistencythroughcompetitivemarketpressures.

Differentaccountingbasesofreportingandregulatorycapitalrequirementsacrossmultiplejurisdictionsmaycauseustobeatadisadvantagecomparedtosomeofourcompetitorsduetodifferencesinreportedearningsandduetothesereportingandregulatorycapitalrequirements.

InvestmentPerformanceInvestmentperformanceriskisthepossibilitythatwefailtoachievethedesiredreturnobjectivesonourinvestmentportfolio,orthatourassetmanagementbusinessesfailtodesignorexecuteinvestmentstrategiesinordertoachievecompetitivereturnsontheproductsandmanagedaccountsofferedbythesebusinesses.FailuretoachieveinvestmentobjectivesmayadverselyaffectourrevenueandprofitabilitythroughslowergrowthprospectsandadverseimpactsonpolicyholderorClientbehaviour.

Forourinsurancebusinesses,theperformanceofourinvestmentportfoliodependsinpartuponthelevelofandchangesininterestrates,spreads,creditexperience,equityprices,realestatevalues,theperformanceoftheeconomyingeneral,theperformanceofthespecificobligorsincludedintheseportfoliosandotherfactorsthatarebeyondourcontrol.Thesechangescanaffectournetinvestmentincomesubstantiallyinanyperiod.

Inourassetmanagementbusinesses,investmentperformance,alongwithachievingandmaintainingsuperiordistributionandClientservices,iscritical.Ifinvestmentperformanceislessthanthatofourcompetitorsorapplicablebenchmarks,wecouldloseexistingandpotentialClients.Similarly,ashiftininvestingtrendsandClientpreferencetowardsproductsthatdifferfromourinvestmentproductsorstrategies,andinparticular,thetrendtowardspassiveoralternativeinvestmentportfolios,couldalsoleadtoincreasedoutflows.Accordingly,poorinvestmentperformancebyourassetmanagementoperationsorashiftininvestingtrendsandClientpreferencescouldadverselyaffectsales,increaseoutflows,reducethelevelofassetsundermanagementorleadtoadeclineinthefeemargin,whichcouldadverselyimpactourrevenues,incomeandcapitalposition.



ChangesinLegalandRegulatoryEnvironmentMostofourbusinessesaresubjecttoextensiveregulationandsupervision.Changestolegislation,regulationsorgovernmentpolicies,orthemannerinwhichtheyareinterpretedorenforced,mayrequirethatwemakesignificantchangestoourstrategy,mayresultinincreasedimplementationcostsanddiversionofresourcestomanagethechange,couldimpactfinancialreporting,accountingprocessesandcapitalrequirements,andcouldimpacttheabilityofsalesintermediariestodistributeourproducts,allofwhichcouldhaveanadverseeffectonourbusinessandoperations.Ourfailuretocomplywithexistingandevolvingregulatoryrequirementscouldalsoresultinregulatorysanctionsandcouldaffectourrelationshipswithregulatoryauthoritiesandourabilitytoexecuteourbusinessstrategiesandplans.

Thesechangescouldimpactourcapitalrequirements,theregulatoryframeworkforourproductsandservices,theregulationofsellingpractices,salesintermediaries(suchasbancassurance)andproductofferings(suchascoverageforprescriptiondrugs),solvencyrequirements,executivecompensation,corporategovernancepracticesandcouldimposerestrictionsonourforeignoperations,whichmayincludechangestothelimitsonforeignownershipoflocalcompanies.

CurrentlythereareanumberofregulatorydevelopmentsinCanadaandgloballywhichcouldimpactourbusinessandthewayweareregulatedorsupervisedinvariousjurisdictions,whichincludethefollowing:• OSFIisconsideringalternativesforin-forcevariableannuityandsegregatedfundcapitalrequirements,whichmaymaterially

changethecapitalrequiredtosupportourin-forcevariableannuityandsegregatedfundbusiness.• InCanada,therehasbeenincreasedfocusonenhancingtheaffordabilityofandaccessibilitytoprescriptiondrugs,including

pressurefromsomeprovincialgovernments,themediaandadvocacygroupsonthefederalgovernmenttoimplementaformofnationalizedpharmacareprogram.Ifimplemented,anationalpharmacareplancouldimpactourbusinessinseveralways,includingpremiumincome,ourabilitytoofferprescriptiondrugcoverage,thepriceandlevelofcoverageofotherbenefitsweofferorareabletoofferthroughourCanadiangroupbenefitsbusiness,whichinturncouldimpactplanrenewalsandretentionofgroupClients,planmemberinteractionandthevalueofothercoverageofferedbythatbusiness.

• Insuranceandsecuritiesregulatorscontinuetofocusonclientfairness,advisorconductandrelatedpracticesandareassessingproductfees,compensationpractices,salespracticesandconflictsofinterest.Regulatorsarealsoimposinghigherstandardsthatrelatetointeractingwithclientsinordertoincreasedisclosureobligationsrelatedtofees;imposeprohibitionsorrestrictionsonthepaymentofcertaintypesofcommissionsandservicefeestoagents,advisorsandthird-partydistributors;resultinginchangestoproductfeaturesandsalesandmarketpracticesbyagents,advisors,productmanufacturersanddistributors.ExamplesofthesechangesincludetheClientFocusedReformsreleasedbytheCanadianSecuritiesAdministratorsandexpectedtocomeintoeffectinstagesthroughout2021,theCanadianSecuritiesAdministrators'banondeferredsalescharges(inallprovincesexceptOntario)adoptedin2020andexpectedtotakeeffectinJune2022andtheimplementationoftheFinancialServicesRegulatoryAuthorityofOntario.

• IntheU.S.,stateshaveadoptedanumberofmodellawsandregulationsthathavetransformedthewaystateregulatorsevaluateandmonitorinsurancecompanies.Theselawsandregulations,whichmoststateshaveenacted,requireinsurerstoincreasetheirlevelofregulatoryreportingaroundriskmanagement,solvency,andgovernancepractices,andallowtheU.S.regulatorstoleadorparticipateinthegroup-widesupervisionofcertaininternationalinsurancegroups.TheseregulatorydevelopmentshaveincreasedthecomplexityofensuringcomplianceandcouldresultinchangestothecapitalstandardsassociatedwithourU.S.business.TheNAICrecentlyadoptedagroupcapitalcalculation,whichcouldleadtoincreasedreportingandcapitalrequirementsforinsurancegroupsoperatingintheU.S.Thefullimpactofthegroupcapitalcalculationonourbusinesshasnotyetbeendetermined.

• InJune2020,ChinapassedtheHongKongNationalSecurityLaw,whichisnowinforceinHongKong.InJuly2020,theU.S.tookstepstoterminatethepreferentialtreatmentaffordedtoHongKongunderthe1992HongKongPolicyAct.Additionally,then-U.S.PresidentTrumpsignedintolawtheHongKongAutonomyAct(the“Act”)andissuedanExecutiveOrder,providingauthoritytoimposeprimarysanctionsagainstentitiesandindividualsdeterminedtohavemateriallycontributedtotheunderminingofHongKong’sautonomy.TheActalsoprovidesauthoritytoimposesecondarysanctionsagainstnon-U.S.financialinstitutionsdeterminedtohaveconductedasignificanttransactionforanyindividualorentitysubjecttoprimarysanctionsundertheAct.TheU.S.TreasuryDepartmenthasimposedprimarysanctionsonChineseindividualsundertheExecutiveOrder.ChinahassimilarlyimposedsanctionsonmembersoftheU.S.Congress,headsofNGOsandformerU.S.officials.TheremaybeheightenedrisksanduncertaintiestoourbusinessinHongKongasaresultofthesedevelopments.

• Regulatorsareincreasingtheirfocusoncybersecurityandnewlaws,regulations,directivesandexpectationshavebeguntoemergethatwillrequiretheCompanytocontinuetoenhanceitsinformationsecurityprograms,increaseregulatoryreportingobligationsandhaveanimpactonthecostsandresourcesassociatedwiththeCompany’sinformationsecurityactivities.

• TheUKconcludeditstransitionalperiodforleavingtheEUonDecember31,2020.TheEU-UKTradeandCooperationAgreementsignedinDecember2020doesnotsetoutanydetailedarrangementsforfinancialservicesorregulatoryequivalence,althoughthisisexpectedtobeagreedbetweenthepartiesduring2021.Inthemeantime,SLOCUKisnowunilaterallysubjecttoUKlawandregulations.However,SLOCUKdoesretaintheriskthatindividualEUregulatorsmayregardthepaymentofaround14,000clientsresidentintheEUasbeingnon-compliantwiththeirregulations.SLOCUKhasdetermineditwillbeabletocontinuetopayitsclientslegallybecausesuchpaymentswillbeinsatisfactionofcontractsenteredintobeforetheendofthetransitionalperiod,afterwhichnonewbusinesswillbewrittenbySLOCUKtoclientsresidentintheEU.



• IBORs,includingLIBOR,measuretheaveragecostthatbankspaytoborrowfromeachotheronanunsecuredbasisonashort-termbasis.Theyarecommonlyusedasabenchmarkorreferencerateforcertainfinancialproductsandcontracts.Atthistime,itisnotclearwhethercertainIBORswillbediscontinued,butthesuspension,discontinuanceorunavailabilityofsomeIBORsisanticipated.Uncertaintyastothenatureofpotentialchanges,alternativerates,accountingandtaxrelief,andotherrelatedreformsmayadverselyaffectouroperationsandcashflowsandthevalueofourderivativesandfloatingrateinvestmentsthatareIBOR-based.

SeetheheadingRegulatoryMattersaboveforadescriptionofourregulatoryenvironmentinCanada,theU.S.,theUK,AsiaandBermudaandotherexamplesofchangesinregulationthatmayaffectourbusinessandoperations.AsummaryofadditionalregulatorychangesinstitutedbygovernmentsgloballyandbyOSFIduring2020inresponsetotheCOVID-19pandemicareincludedinour2020MD&Aundertheheadings"COVID-19"and"RiskManagement-RiskCategories-OtherRisks".Seealsotheheading"RisksrelatingtotheCOVID-19Pandemic"inthisAIF.

EnvironmentalandSocialRiskOurfinancialperformance,operations,andreputationmaybeadverselyaffectedifwedonotadequatelyprepareforthedirectorindirectnegativeimpactsofenvironmentalandsocialrisks.Environmentalriskincludesenvironmentaldamageonpropertiesownedormanagedbyusandclimatechangerelatedphysicalandtransitionrisks.Theseeventsanddevelopmentsmayincludeincreasedfrequencyandseverityofnaturalorhuman-madeenvironmentaldisasters,longer-termshiftsinclimatepatterns,emergingregulatoryandpublicpolicydevelopments,andtheirimpactsonouroperations,investedassets,suppliers,Clientsandreputation.Externalfactorssuchasstakeholderexpectationsaroundenvironmentalperformance,resourceconstraintsandcostsassociatedwithadaptationarealsopotentialsourcesofenvironmentalrisk.RisksthataffectourClientsandoursupplierscouldhaveanegativeimpactonouroperationsandperformance.Socialriskincludesbutisnotlimitedtopublichealthissuesandissuesofinequality.Theserisksareconsideredinourkeyriskassessments.Anenvironmentalissueonapropertyownedoroperatedbyuscouldhavefinancialorreputationalimpacts.

Atransitiontoalowercarboneconomycouldaffectpublicandprivatefixedincomeandnon-fixedincomeassetvalues.Existingportfolioinvestmentsincoal,conventionaloilandoilsandsproducers,utilitiesandrelatedfossilfuelindustries,railwaysandpipelines,aswellasmarketsthatdependontheseindustries,maybesubjecttoadditionalfinancialriskasaresultofchangesinregulation,costofcapital,consumerpreferencesandcompetitionfromrenewableenergycompaniesleadingtoloweroverallprofitabilityand/orstrandedassets.

Similarly,ifourClients,shareholdergroups,orotherkeystakeholdersdeemthatourenvironmental,social,climatechangeorothersustainability-relatedpracticesareinadequate,ourreputationandoperationscouldbenegativelyaffected.FailuretocomplywithanexistingorpotentialClient'spoliciesintheseareascoulddisqualifyusfrombiddingon,orearningbusinessopportunities,orretainingexistingbusiness.Wemayalsoexperiencereducedaccesstocapitalmarketsifsustainabilityindicesand/orinvestorsfindthatourpracticesfallshortoftheircriteria,whichinturncouldresultinbeingremovedfromoneormoreoftheseindicesorasanappropriateinvestmentbyinvestors.

Asanowner/lessorof,investorinrealestate,wemaybeimpactedwhereenvironmentaleventsdamageordisruptourunderlyingproperties.Ourbusinessesandthepropertiesunderlyingourinvestmentsaresubjecttoenvironmentallawsandregulationsinallkeyjurisdictionswherewecarryonbusinessorholdinvestments.Consequently,wemayexperienceenvironmentalimpactsorliabilitiesthatcouldadverselyaffectthevalueofthosebusinessesandproperties,theirabilitytogenerateincome,andcostsrelatedtoanyrequiredcompliancerequirementsorremediation.Throughotherinvestedassets,suchasloans,bondsorequityinvestments,wecouldbesubjecttotheseimpactsandnegativeconsequencesfromenvironmentalissuesarisingattheleveloftheissuerand/orspecificasset.Ourreputationandoperationsmaybeadverselyaffectedifweorourtenants,borrowers,orotherassociatedpartiesviolateenvironmentalregulationsorbestpractices.

AsnotedaboveunderInsuranceRisk-MortalityandMorbidityRisk,environmentalrisks,includingclimatechangeriskshaveimplicationsinareassuchascatastrophicriskandtheconcentrationriskpresentedbynaturalandhuman-madeenvironmentaldisasters,whichcouldimpactourmortalityandmorbidityexperienceandourpricingandmodelingassumptionsastheseeventsincrease.Forexample,inourgroupbenefitsbusinesses,alocalizedeventthataffectstheworkplaceofoneormoreofourClientscouldcauseasignificantlossrelatedtoaconcentrationofclaimsundergrouppolicies.Inadditiontotheimpactsnotedabove,failuretoadequatelyprepareforthepotentialimpactsofenvironmentalrisks,includingthoseassociatedwithclimatechange,mayhaveotherdirectandindirectnegativeimpacts.Thesemayincludebusinesslossesordisruption,includingashiftinClientpreferencesordemands,resultingfrom:• extremeweatherconditionsorotherenvironmentaldisasters,• longer-termshiftsandimpactsrelatedtowarmingtemperatures,theavailabilityoffoodandwaterandotherongoingclimate

changeimpacts,• widerand/ormorerapidtransmissionofnewandexistingdiseasesthroughpandemicsorotherwise,and• otherunforeseenhumanconsequences.



Significantenvironmentalchangesanddisastersmayalsoreducetheoveralllevelofeconomicactivityinaffectedareaswhichcouldhurtourbusinesses,thevalueofourinvestments,ourabilitytoofferproductsandservices,orserviceourexistingClients.

Theseriskscouldalsoharmthefinancialconditionofourreinsurersandinsurersofpropertywhichweown,lease,haveinvestedinormanagewhichmayincreasetheriskofdefaultonrecoveriesfromthesereinsurersandinsurers,mayincreasethecostofreinsuringourbusinessorthecostofinsurance,andmayresultinreinsuranceorinsurancecoveragebeingunavailable.

OperationalRiskOperationalriskistheriskofloss(financialandnon-financial)resultingfrominadequateorfailedinternalprocesses,peopleandsystemsorfromexternalevents.Operationalriskispresentinallofourbusinessactivitiesandencompassesabroadrangeofrisksasdescribedbelow.Operationalriskisembeddedinthepracticesutilizedtomanageotherrisksand,therefore,ifnotmanagedeffectively,operationalriskcanimpactourabilitytomanageotherkeyrisks.

InformationSecurityandPrivacyRisksInformationandtechnologyareusedinalmostallaspectsofourbusinessandoperations.AspartofourClientstrategy,wecontinuetoenhancethedigitalsideofourbusinesstosupportandenablenewbusinessmodelsandprocesses,thataremorepersonal,proactiveandpredictive.

OurbusinessandthesuccessfulimplementationofourdigitalstrategyaredependentonvariousfactorsincludingmaintainingasecureenvironmentforourClients,employeesandotherparties'information.Thisrequirestheeffectiveandsecureuse,managementandoversightofinformationandphysicalassets.Weengagewithvariousstakeholdersandleverageemergingtechnologies,includingdigital,mobileapplications,cloudcomputing,artificialintelligenceandroboticprocessautomation.Thesetechnologiesareusedtocollect,processandmaintaininformationrelatingtobusinesstransactionsandfinancialreporting,aswellasthepersonalinformationofourClientsandemployees.Wealsoobtainservicesfromawiderangeofthird-partyserviceprovidersandhaveoutsourcedsomebusinessandinformationtechnologyfunctionsinvariousjurisdictions.

Therecontinuestobeincreasedinformationsecurityandprivacyattacksacrossallindustrysectors,includingfinancialinstitutions,retailersandgovernmentsandthescopeofthesethreatscontinuestoincreaseinsizeandcomplexity.Thisincreasinglevelofmaliciousactivityposesasignificantrisktooursystemsandtheserisksmaybeexacerbatedbythebreadthofouroperations,ourgeographicfootprintandthecomplexityofourtechnologysystems.Aserioussecurityorprivacybreachofeitheraninternalorthird-partyserviceprovider’scomputersystemthatcontainssensitivebusiness,Clientand/oremployeeinformationmayresultinbusinessinterruption,theftormisuseofconfidentialinformation,regulatorypenaltiesandscrutiny,litigation,reputationaldamageandmayhaveanadverseimpactoncurrentandfuturebusinessopportunitieswithourClients,employeesandbusinessrelationships.

Inparticular,privacybreachescouldoccurandmayresultinunauthorizedaccessanddisclosureoruseofpersonalinformation.Manyjurisdictionsinwhichwedobusinessaredevelopingandimplementingreportingrequirementsrelatingtocybersecurityandmorestringentconsumerprivacylegislation.Socialmediariskcouldalsosignificantlyimpactourreputationduetothebroadreachandreal-timeinteractionofsuchmedia.

Wehaveestablishedsecuritycontrolsandprocessesthatareintendedtoprotectinformationandcomputersystemsincludinginformationsecurityriskassessmentsandprivacyimpactassessments.Notwithstandingthesemeasures,thethreatenvironmentisrapidlyandconstantlychanging,andthereremainsapossibilitythatourprocessesandcontrolscouldbeunsuccessfulindetectingorpreventingasecuritybreach.Weremainvulnerable,andworkwiththirdpartieswhomayalsobevulnerable,tocomputervirusesandothertypesofmalicioussoftware,cyber-attacksandhackingattemptsfromunauthorizedpersons,thephysicaltheftofcomputersystems,internalprogrammingorhumanerrors,fraud,orotherdisruptiveproblemsorevents.Thereisalsoariskthatcertaininternalcontrolsfail,whichcouldalsoexacerbatetheconsequencesfromsuchevents.



HumanResourcesRiskOurabilitytoachievebusinessobjectivescanbeadverselyaffectedifweareunabletoattract,retainoreffectivelydeployresourceswiththein-depthknowledgeandnecessaryskillsrequired,orareunabletodesigncompensationprogramsthateffectivelydriveemployeebehaviour.FailuretomanageHumanResourcesriskcanalsoleadtodirectfinancialandreputationallossincludinglossesarisingfromactivitythatisinconsistentwithHumanRightsoremploymentlawsorhealthandsafetyregulations.

RegulatoryCompliance,LegalandConductRiskWearesubjecttoextensiveregulatoryoversightbyinsuranceandfinancialservicesregulatorsinthejurisdictionsinwhichweconductbusiness.Inrecentyears,therehasbeenanincreasedfocusbyregulatorsgloballyonClientfairness,conduct,anti-moneylaundering,privacyanddatagovernance.Failuretocomplywithapplicablelawsortoconductourbusinessconsistentwithchangingregulatoryorpublicexpectationscouldadverselyimpactourreputationandmayleadtoregulatoryinvestigations,examinations,proceedings,settlements,penalties,fines,restrictionsonourbusiness,litigationoraninabilitytocarryoutourbusinessstrategy.

OurbusinessisbasedonpublictrustandconfidenceandanydamagetothattrustorconfidencecouldcauseClientsnottobuy,ortoredeem,ourproducts.Wealsofaceasignificantriskoflitigationintheordinarycourseofoperatingourbusinessincludingtheriskofclassactionlawsuits.Inaddition,wealsofacetheriskofreputationaldamageorlossduetointentional,malicious,illegalorunethicalactssuchasfraud,misappropriationorcircumventionofthelawbyinternaland/orexternalpartiesincludingouremployees,Clients,distributors,serviceprovidersorotherthirdparties.Evenwithcontrolsinplace,thesepartiesmaybehaveinwaysthatcouldharm,injureorotherwisenegativelyimpactourClientsandotherstakeholders.Forinstance,wemaynotbeabletofullymonitororcontrolthemannerofdistributionofourproductsbythirdpartyfirmsorthesubmissionoffalsifiedapplicationsorclaims,despitethetrainingprogramandcompliancetestinginplace.Wemaysufferfinancial,reputationorotherharmtoourbusinessifourproductsaredistributedbysuchfirmsinaninappropriatemannerortoClientsforwhomsuchproductsareunsuitable.Wearesubjecttoanti-briberyandanti-corruptionlaws,includingtheU.S.ForeignCorruptPracticesAct,theCanadianCorruptionofForeignPublicOfficialsAct,andtheUKBriberyAct,eachofwhichincludesignificantcivilandcriminalpenaltiesifbreached.Ourpolicies,includingourCodeofBusinessConduct,requirestrictadherencetotheselaws.Inthecourseofbusiness,we,orourjointventures,distributorsorothernon-controlledbusinesspartners,mayfromtimetotimetransactwithgovernmententities.Asaconsequence,wemaybeatriskofcensureunderanti-briberyandanti-corruptionlawsifourorourpartners'duediligenceorotherprocessandprocedureswhentransactingwithgovernmententitiesaredeemedinadequate.

Insuranceandsecuritiesregulatoryauthoritiesandothergovernmentagenciesinjurisdictionsweoperateregularlymakeinquiries,conductinvestigationsandadministermarketconductexaminationswithrespecttocompliancewithapplicableanti-moneylaundering,bribery,corruptpractices,insurance,privacyandsecuritieslawsandregulations.Aswell,regulatoryandgovernmentalauthorities,industrygroupsandratingagencieshavedevelopedinitiativesregardingmarketconduct.Inrecentyears,financialservicesregulatorsandothergovernmentalauthoritiesinmanyofthecountriesinwhichweoperatehaveraisedissuesandcommencedregulatoryinquiries,investigationsandproceedingswithrespecttocurrentandpastbusinesspracticesinthefinancialservicesindustry,andhavegivengreateremphasistotheinvestigationofthosepractices.Forexample,regulatoryreviewsandinvestigationshavebeenmadeconcerningsuitabilityofsalesofcertainproducts,paymentofcommissionsandotherfeestointermediaries,markettimingandlatetradingininvestmentfunds,governancepractices,allegationsofimproperlifeinsurancepricing,salesandcompensationpracticesbylifeandannuityinsurersandmutualfunddealers,includingrelatedconflictsofinterestandanti-moneylaunderingcontrolsandprocedures.Currentandfutureregulatoryinvestigations,examinations,proceedings,andcivilactionsarisingoutofsuchmatterscouldadverselyaffectourreputation,andmayresultinsettlements,penalties,fines,restrictionsonourbusiness,litigationoraninabilitytocarryoutourbusinessstrategyormaycauseustomakechangestoourbusinessandcompliancepractices,policiesandprocedures,whichinturncouldimpactourprofitabilityandfuturefinancialresultsandincreaseourlitigationrisk.

UndertheInsuranceActandtheSupervisoryInformation(Insurance)Regulations(Canada)andpursuanttosimilarrestrictionsinotherjurisdictions,weareprohibitedfromdirectlyorindirectlydisclosinganysupervisoryinformationrelatingtoSLFInc.,SunLifeAssuranceandtheiraffiliates.

InformationTechnologyRiskTheuseoftechnologyandcomputersystemsisessentialinsupportingandmaintainingbusinessoperations.Weusetechnologytosupportvirtuallyallaspectsofourbusinessandoperations.Therapidlychangingbusinessenvironmentincreasestheriskofourtechnologystrategynotbeingagileenoughtoadapttonewbusinessdemandsinatimelymannerleadingtofinanciallosses,increasedcostsandtheinabilitytomeetClientneeds.

Initiativessupportingourbusinessstrategyrelyondevelopinginnovativeinformationtechnologysolutionsandupgradingourexistingsystemsonatimelybasistomeetbusinessneeds.Althougheveryreasonableprecautionistakentoensureinformationtechnologysystemsremainavailable,stableandcurrent,itisnotpossibletofullyeliminateallrisk.Somechangesandupgradesareextremelycomplexandthereisachancethatanundetectedtechnicalflawmayexist,which,whenimplemented,stopsordisruptscriticalinformationtechnologysystemsorbusinessapplicationsorleadstooperationalerrorssuchasincorrectfinancialreporting.



Third-PartyRiskWeengageinavarietyofthird-partyrelationships,includingwithdistributors,independentcontractors,outsourcingserviceprovidersandsuppliers.Ourprofitabilityorreputationcouldbeimpactedifthesethirdpartiesareunabletomeettheirongoingservicecommitmentsorfailtoperformtoexpectedstandards.

Aninterruptioninourrelationshipwithcertainthirdpartiesorotherpartiesengagedbysuchthirdparties,theimpairmentoftheirreputationorcreditworthiness,theirfailuretoprovidecontractedservicesinthemanneragreedorinaccordancewithapplicablelawsandregulationscouldmateriallyandadverselyaffectourbusinessobjectivesorexposeustoregulatoryfinesand/orreputationalharm.Evenwithcontingencyplansdevelopedforourmaterialthirdpartyarrangements,therecanbenoassurancethatwewouldbeabletotransitiontoalternatesourcesforthesearrangementsinatimelymanner,atreasonablecost,orwithminimaldisruptiontoourstakeholders.

BusinessDisruptionRiskOurbusinessesaredependentontheavailabilityoftrainedemployees,physicallocationstoconductoperationsandaccesstotechnology.Asignificantbusinessdisruptiontoouroperationscanresultifoneormoreofthesekeyelementsarenegativelyimpacted.

Althoughwehaveimplementedandperiodicallytestourbusinesscontinuity,crisismanagementanddisasterrecoveryplans,asustainedfailureofoneormoreofourkeybusinessprocessesorsystemscouldmateriallyandadverselyimpactourbusiness,operationsandemployees.Thesefailurescanresultfromdisruptionofourprocessesandsystemsduetoutilityoutages,fires,floods,severestorms,cyber-attacks,terrorismandotherhuman-madeattacks,naturaldisastersandotherevents.Wehaveexperiencedincreasedincidencesandimpactsofdisruptionduetoweathereventssuchastropicalstormsandfloodinginthegeographiesinwhichweoperate,aswellasearthquakesandpandemicrisks.Inadditiontothesekeybusinessprocessesandsystemdisruptions,theseunanticipatedevents,includingdiseasepandemics,canalsonegativelyaffectstaff,preventingthemfromgettingtoworkorfromoperatingbusinessprocesses.BusinessdisruptionscanalsooccurduetochangesinenvironmentalriskandrelatedimpactshavebeenhighlightedaboveundertheheadingEnvironmentalandSocialRisk.Also,becausesomeofourbusinessprocessesareperformedbythirdpartiesandsomeofoursystemsinterfacewithoraredependentonthird-partysystems,wecouldexperienceserviceinterruptionsifthesethird-partyoperationsorsystemsfail.

ModelRiskWeusecomplexmodelstosupportmanybusinessfunctionsincludingproductdevelopmentandpricing,capitalmanagement,valuation,financialreporting,planning,hedging,asset-liabilitymanagement,riskmanagementandadvancedanalytics(suchasartificialintelligence,predictivemodelinganddecisionmakingalgorithms).Modelriskistheriskofloss,eitherintheformoffinancialloss,inappropriateorpoorbusinessdecisions,damagetoreputation,orotheradverseimpact,arisingfrominaccuratemodeloutputsorincorrectuseorinterpretationofmodeloutputs.

Modelriskcanarisefrommanysourcesincludinginappropriatemethodologies,assumptionsorparameters,incorrectuseofsourcedata,inaccurateoruntimelysourcedata,incorrectapplicationoroperatorerrors,increasingproductcomplexityandregulatoryexpectations.Ifthemodels'methodologiesandassumptionsarenotappropriatelysetorwellcontrolled,ordataorimplementationerrorsoccurinthemodels,thiscouldresultinanegativeimpactonourresultsandfinancialposition.

Manyofourmethodsandmodelsformanagingriskandexposuresarebasedupontheuseofobservedhistoricalprecedentsforfinancialmarketbehaviour,creditexperienceandinsurancerisks.Asaresult,thesemethodsmaynotfullypredictfutureriskexposures,whichcanbesignificantlygreaterthanourhistoricalmeasuresindicate.Otherriskmanagementmethodsdependupontheevaluationofinformationregardingmarkets,Clients,catastrophicoccurrenceorothermattersthatarepubliclyavailableorotherwiseaccessibletous.However,thisinformationmaynotalwaysbeaccurate,complete,up-to-date,properlyevaluatedornecessarilyindicativeofultimaterealizedexperience.Aswereviewandupdateourmodels,changesmightbemadetovaluationmethodsandassumptions,whichmayimpactourresults.

InformationManagementRiskAsaninternationalprovideroffinancialservices,wedealwithextensiveinformationacrossanumberofcountries.Informationmanagementriskistheinabilitytocapture,manage,retainandappropriatelydisposeofbusinessrecords,theinabilitytoprovidedatathatisfitforpurpose,accurate,completeortimelytosupportbusinessdecisions,andtheinabilitytomanagedatalocationandcross-borderappropriately.Failuretomanagetheseriskscouldhavefinancialorreputationalimpacts,andmayleadtoregulatoryproceedings,penaltiesandlitigation.

AdditionalinformationonoperationalriskcanbefoundintheRiskFactorssectionofthisAIF.



LiquidityRiskLiquidityriskisthepossibilitythatwewillnotbeabletofundallcashoutflowcommitmentsandcollateralrequirementsastheyfalldue.Thisincludestheriskofbeingforcedtosellassetsatdepressedpricesresultinginrealizedlossesonsale.Thisriskalsoincludesrestrictionsonourabilitytoefficientlyallocatecapitalamongoursubsidiariesduetovariousmarketandregulatoryconstraintsonthemovementoffunds.Ourfundingobligationsariseinconnectionwiththepaymentofpolicyholderbenefits,expenses,reinsurancesettlements,assetpurchases,investmentcommitments,interestondebt,anddividendsoncommonandpreferredshares.Sourcesofavailablecashflowincludegeneralfundpremiumsanddeposits,investmentrelatedinflows(suchasmaturities,principalrepayments,investmentincomeandproceedsofassetsales),proceedsgeneratedfromfinancingactivities,anddividendsandinterestpaymentsfromsubsidiaries.Wehavevariousfinancingtransactionsandderivativecontractsunderwhichwemayberequiredtopledgecollateralortomakepaymentstoourcounterpartiesforthedeclineinmarketvalueofspecifiedassets.Theamountofcollateralorpaymentsrequiredmayincreaseundercertaincircumstances(suchaschangestointerestrates,creditspreads,equitymarketsorforeignexchangerates),whichcouldadverselyaffectourliquidity.

Understressconditions,increasesinfundingobligationscanoccurinconjunctionwithreductionsincosteffectivesourcesofavailablecashinflow.Inparticular,adversestressscenarioscouldinvolveincreasesinpolicyholdercashsurrendersandterminationsanddecreasesintheamountsofpremiumsanddepositsbeinggeneratedbyexistingandnewClients.Adversecapitalmarketconditionsmayalsobeassociatedwithareductioninavailablemarketliquidityandclearingpricesforexpectedassetsales,andreductionsinthelevelofcashinflows(dividends,interestpaymentsandexpectedmaturities)oncontinuingportfolioinvestments.Thesedevelopmentscouldhaveanadverseeffectonourfinancialpositionandresultsofoperations.

Weengageinvarioustransactionsincludingrepurchaseagreementsandothercapitalmarketstransactionstomeetshort-termcashrequirements.Thecostandourabilitytoexecutethesetransactionsmaybenegativelyimpactedbyilliquidorvolatilemarkets.Disruptioninthefinancialmarketsmaylimitouraccesstocapitalintheeventwearerequiredtoseekadditionalliquiditytooperateourbusinesses.Thiswillresultinincreasedcoststoraisecapitalcoupledwithlessdesirabletermsormaturitieswhichwoulddecreasefutureprofitabilityandfinancialflexibility.

SLFInc.isaholdingcompanyforitsinsurance,wealthandassetmanagementsubsidiariesanddoesnothavesignificantoperationsofitsown.Dividendsandinterestpaymentsfromitssubsidiariesareitsprincipalsourcesofcash.Ifthecashreceivedfromitssubsidiariesisinsufficient,thenitmayberequiredtoraisedebtorequityexternallyorsellsomeofitsassets.Wearesubjecttovariousregulationsinthejurisdictionsinwhichweoperate.TheabilityofSLFInc.'ssubsidiariestopaydividendsandtransferfundsisregulatedincertainjurisdictionsandmayrequirelocalregulatoryapprovalsandthesatisfactionofspecificconditionsincertaincircumstances.

Inaddition,ratingagenciespublishcreditratingsofsecuritiesissuedbySLFInc.anditssubsidiaries,whichhaveanimpactontheinterestratespaidbythosecompaniesonborrowedfunds.Amaterialdowngradeintheissuercreditratingscouldlimitouraccesstocapitalorincreasethecostofborrowingandmayhaveanadverseeffectonourfinancialcondition.

WehaveestablishedfinancingarrangementsthatsupportNAICstatutoryreservesforuniversallifepoliciesissuedbySunLifeAssuranceintheU.S.Ourabilitytosupportthesereserveswiththesefinancingstructurescanbenegativelyimpactedbymarketconditionsandregulatorychanges.Further,thesefinancings,inallorinpart,aretreatedasoperatingleveragebytheratingagencies.If,duetoachangeinratingagencymethodologyorposition,theratingagenciesceasetotreatthesefinancingsasoperatingleverage,withoutprovidinganygrandfatheringprovisions,theremaybeanadverseimpactonourcreditandfinancialstrengthratings.



OtherRisks

RisksrelatingtotheCOVID-19PandemicPandemics,epidemicsoroutbreaksofaninfectiousdiseasecouldhaveanadverseimpactonourresults,business,financialconditionorliquidity,andcouldresultinchangestothewayweoperate.TheCOVID-19pandemicandthemeasuresimposedbygovernmentsaroundtheworldtolimititsspreadincludingtravelrestrictions,businessclosures,socialdistancingprotocols,schoolclosures,quarantines,andrestrictionsongatheringsandevents,havedisruptedtheglobaleconomy,financialmarkets,supplychains,businessactivityandproductivityinunprecedentedways.ThedurationandimpactsoftheCOVID-19pandemicinthecountriesinwhichweoperatearevariedandcannotcurrentlybedetermined.Containmentmeasurescontinuetoimpactglobaleconomicactivity,includingthepaceandmagnitudeofrecoveryaswellascontributingtoincreasedmarketvolatilityandchangestothemacroeconomicenvironment.Governments,monetaryauthorities,regulatorsandfinancialinstitutions,havetaken,andcontinuetotake,actionsinsupportoftheeconomyandfinancialsystem.Theseactionsincludefiscal,monetaryandotherfinancialmeasurestoincreaseliquidity,andtoprovidefinancialaidtoindividualsandbusinesses.IftheCOVID-19pandemicisprolonged,theadverseimpactontheglobaleconomycoulddeepen,augmentingfinancialmarketdeclinesorvolatility,corporateinsolvencyrisksandnegativehouseholdwealthimpacts.ThecontinuingorworseningoftheeconomicandmarketconditionscausedbytheCOVID-19pandemic,andimpactonClients,industriesandindividualcountriescouldhaveamaterialadverseeffectonourbusinessesincludingsales,feeincome,investmentperformance,resultsofoperations,corporatereputationandfinancialcondition.Sustainedadverseeffectscouldalsomakeitdifficultforustoaccesscapitalmarkets,couldimpactourliquidityandcapitalposition,ormayresultindowngradesinourcreditratings.TotheextenttheCOVID-19pandemicadverselyaffectsourbusiness,resultsofoperations,corporatereputationandfinancialcondition,itmayalsohavetheeffectofheighteningmanyoftheotherrisksdescribedinthesectionentitled"RiskFactors"inthisdocumentand"J-RiskManagement"inour2020MD&A.Thisincludes,butisnotlimitedto:

• Marketrisks,suchasequity,interestratesandspread,realestate,andforeigncurrencyrisks,includingimpactonfeeincome;

• Insurancerisk,includinghigherthanexpectedmortalityand,morbidityclaimsandadversepolicyholderbehaviourincludingbutnotlimitedtohigherthanexpectedpolicylapses,withdrawals,andsurrenders;

• Creditrisk,includingdefaults,impairmentsanddowngrades;• Businessandstrategicriskincludingeconomicandpoliticalrisk,businessstrategyimplementationrisk,distributionrisk,

expenserisk,changesinClientbehaviour,sales,investmentperformance,andchangesinlegalandregulatoryenvironment;

• Operationalrisk,includinginformationsecurityandprivacyrisk,humanresourcesrisks,regulatorycompliance,legalandconductrisk,informationtechnologyrisk,processingrisk,third-partyrisk,andbusinessdisruptionrisk,andchangemanagementriskwiththeneedtoquicklyimplementandexecutenewprogramsandprocedurestosupportClients,advisors,employees,products,andservices;and

• Liquidityriskincludingcollateral,andpaymentdeferralsoninvestedassetsorpolicyholderinsurancepremiumimpacts.

TheoverallimpactoftheCOVID-19pandemicisstilluncertainanddependentontheprogressionofthevirus,includingmutations,thetimingofmassvaccineproduction,distribution,publicacceptanceandthesubsequentreductioninratesofinfectionandtheactionstakenbygovernments,monetaryauthorities,regulators,financialinstitutions,businessesandindividuals,whichcouldvarybycountryandresultindifferingoutcomes.Giventheextentofthecircumstances,itisdifficulttoreliablymeasureorpredictthepotentialimpactofthisuncertaintyonourfuturefinancialresults.



IFRS17and9IFRS17InsuranceContracts("IFRS17")andIFRS9FinancialInstruments("IFRS9")areeffectiveforCanadianinsurancecompaniesforannualperiodsbeginningonorafterJanuary1,2023.

IFRS17willreplaceIFRS4InsuranceContractsandestablishestheprinciplesfortherecognition,measurement,presentationanddisclosureofinsurancecontracts.

IFRS9willreplaceIAS39FinancialInstruments:RecognitionandMeasurementandincludesguidanceontheclassificationandmeasurementoffinancialinstruments,impairmentoffinancialassetsandhedgeaccounting.

RisksrelatedtoIFRS17and9include:• Operationalrisk-thestandardsrequiresamoreexpansivesetofdata,introducescomplexestimationtechniques,

computationalrequirementsanddisclosures,whichnecessitateamajortransformationtovariousactuarialandfinancialreportingprocesses,tools,andsystems.

• Businessandstrategicrisk-thestandardsmaycreateadditionalvolatilityinourfinancialresultsandcapitalposition.Volatilityofreportedresultsmayrequirechangestobusinessstrategiesandtheintroductionofnewormodifiednon-GAAPmeasurestoexplainourresults.Theimpacttobusinessstrategycouldincludechangestohedgingandinvestmentstrategy,productstrategyandtheuseofreinsuranceand,asaresult,couldimpactourexposurestootherriskssuchascounterpartyriskandliquidityrisk.

• RegulatoryCapitalrisk-theregulatorycapitalframeworkinCanadacurrentlybasedonIFRS4willalignwithIFRS17effectiveJanuary1,2023.TheimpacttoSunLifefromthischangeiscurrentlyuncertain.WhileOSFIhasstatedthatitintendstomaintaincapitalframeworksconsistentwithcurrentcapitalpoliciesandtominimizepotentialcapitalimpactsattheindustrylevel,theimpactforindividualcompaniesmayvary.OSFIwillmakechangestotheLICATguidelinetoreflectIFRS17andisconsultingdirectlywithaffectedstakeholders.LICATguidelinechangesforSegregatedFundGuaranteecapitalarealsoplannedtotakeeffectJanuary1,2023.OSFIhasbeenengagingtheindustryintestingofnewSegregatedFundGuaranteecapitalrequirements,andtheimpactwillnotbeknownuntilthefinalcalibrationsarecompleted.

• Impactontax-incertainjurisdictions,includingCanada,theimplementationofIFRS17mayimpacttaxpositionsandotherfinancialmetricsthataredependentuponIFRSaccountingvalues.

InternationalOperationsThefuturesuccessofourbusinessesinourinternationaloperationsdependsinlargepartonourabilitytogrowandcompeteinthemarketswhereweoperate.Challengesinthesemarketsposestrategicandexecutionriskincludingourabilitytoattractandretainqualifiedemployeesandexecutiveswithlocalexperienceandcriticalskills,political,legal,economic,competitionorotherrisks,risksassociatedwithjointventureoperations,developingandexecutingourriskmanagementpractices,andourabilitytoattract,retain,expandanddiversifydistributionchannels.

Ifweareunabletoattract,retainandengagequalifiedemployeesandexecutiveswithrelevantexperienceandcriticalbusinessskills,ourabilitytogrowourbusinessinourinternationaloperationsasquicklyasplannedmaybelimited.Competitionforqualifiedemployeesanddistributionpartnersinourinternationaloperations,inparticulartheAsianmarkets,continuestobestrongandcouldadverselyimpactourabilitytoattractandretaintalent.

Ourinternationaloperationsmayfacepolitical,legalandregulatory,economic,competitive,operationalorotherrisksthatwemaynotfaceinourdomesticoperations.Examplesofthistypeofriskaretheriskofchangesinregulation,politicalrisksduetochangesingovernment,discriminatoryregulation,politicalinstability,nationalizationorexpropriationofassets,changestothemaximumlevelofnon-domesticownership,pricecontrolsandexchangecontrolsorotherrestrictionsthatcouldpreventusfromtransferringfundsfromtheseoperationsoutofthecountriesinwhichtheyoperateorconvertinglocalcurrenciesweholdintoCanadiandollarsorothercurrencies.

Capitalmarketsincertaininternationalmarketsmaynothavethesamedepth,liquidityorrangeofinvestmentoptionsgenerallyavailableinothermarketsinwhichweoperate.Inparticular,themorelimitedavailabilityoflong-durationassetsexposesourAsianoperationstohigherasset-liabilitymanagementcostsandpotentialrisk.

WehaveenteredintojointventurearrangementsincertainmarketsinAsia,wherewemayhavealesserdegreeofcontroloverthesebusinessesthatmayexposeustoadditionaloperational,financial,complianceandlegalrisks.Wemaybedependentonourjointventurecounterpartyforcapital,productdistribution,localmarketknowledge,orotherresources.Ourabilitytoexercisemanagementcontrolorinfluenceoverthesejointventuresandthesuccessofourinvestmentsinthemwilldependonthecooperationbetweenthejointventureparticipantsandthetermsofthejointventureagreements,whichallocatecontrolamongthejointventureparticipants.Ifweareunabletoeffectivelymanagethesejointventures,oranyjointventurecounterpartyfailstomeetitsobligationsunderthejointventurearrangement,encountersfinancialdifficulty,electstoalter,modifyorterminatetherelationship,orajointventuredoesnotcomplywithlocallegislationorregulations,wemaybeunabletoachieveourobjectivesandourresultsofoperationsandbrandmaybenegativelyimpacted.



CapitalAdequacyCapitaladequacyriskistheriskthatourcapitalpositionisnotorwillnotbesufficienttowithstandadverseeconomicconditions,tomaintainourfinancialstrength,toallowusandoursubsidiariestosupportongoingoperationsandtotakeadvantageofopportunitiesforexpansion,andtosupporttherisktakingactivityinpursuitofourbusinessobjectives.

Thestrengthofourcapitalpositiondependsinpartuponthelevelofandchangesininterestratesandequityprices,creditexperience,mortalityandmorbidityexperience,currencyratefluctuationsandouroverallprofitability.

Variousfactorssuchasdecliningequitymarkets,downgradesinratings,changesininterestrates,changesincreditspreadsoncorporatebondsandassetbackedsecurities,lowerearningsandinabilitytoaccesscapitalmarketsonatimelybasismaynegativelyimpactourcapitalratios,andmayimpairourfinancialpositionandourabilitytoexecuteourbusinessstrategiesandplans.Inaddition,regulatorychangesbeingconsideredbyotherregulatorsworld-widemayadverselyimpactthecapitalratiosofSLFInc.anditsinsurancesubsidiaries.Thesefactorsmayimpairourfinancialpositionandourabilitytoexecuteourbusinessstrategy.

CreditandFinancialStrengthRatingsFinancialstrengthratingsrepresenttheopinionsofratingagenciesregardingthefinancialabilityofaninsurancecompanytomeetitsobligationsunderinsurancepolicies.Creditratingsindicatetheopinionsofratingagenciesregardinganissuer'sabilitytomeetthetermsofdebt,preferredshareandTier1hybridcapitalobligationsinatimelymanner,andareimportantfactorsinacompany’soverallfundingprofileandabilitytoaccessexternalcapital.AdowngradebyaratingagencyinthecreditratingsofsecuritiesissuedbySLFInc.anditssubsidiariesorthefinancialstrengthratingsofSLFInc.'sinsurancecompanysubsidiariescouldadverselyaffectourfinancialconditionandresultsofoperations.

Thefinancialstrengthratingofaninsurancecompanyisakeycompetitivefactorinmarketingitsproductsandinattractingandretainingagentsanddistributors.Ifourcreditorfinancialstrengthratingsaredowngraded,ourfinancialcondition,competitivepositionandresultsofoperationscouldbenegativelyimpactedinmanyways,including:• Reducingnewsalesofinsuranceproducts,annuitiesandinvestmentproducts;• Higherlevelofsurrendersandwithdrawals;• Higherreinsurancecosts;• Requiringustoreducepricesforproductsandservicestoremaincompetitive;• Increasingourcostofcapitalandlimitingouraccesstothecapitalmarkets,thusreducingourfinancialflexibility;• Reducingourabilitytoenterintonormalcoursederivativeorhedgingtransactionsandincreasingthecostsassociatedwith

suchtransactions;and• Adverselyaffectingourrelationshipswithouradvisorsandthird-partydistributorsofourproducts.

Inaddition,downgradesinourcreditorfinancialstrengthratingsbelowthresholdsspecifiedincertainofourderivativeagreements,reinsuranceagreementsandotheragreementscouldresultinthecounterpartiestothoseagreementshavingtherighttoterminatethoseagreementsortorequirethatweprovidesupportforthoseagreementsintheformofcollateralorlettersofcredit.

Changesinmethodologiesandcriteriausedbyratingagenciescouldalsoresultindowngradesthatdonotreflectchangesinthegeneraleconomicconditionsorourfinancialcondition.

AdditionalinformationconcerningourratingsisprovidedinthisAIFundertheheadingSecurityRatingsandinour2020MD&AundertheheadingFinancialStrength.

TaxMattersThevalidityandmeasurementoftaxbenefitsassociatedwithvarioustaxpositionstakenorexpectedtobetakeninourtaxfilingsareamatteroftaxlawandaresubjecttointerpretation.Taxlawsarecomplexandtheirinterpretationrequiressignificantjudgment.Theprovisionforincometaxesreflectsmanagement’sinterpretationoftherelevanttaxlawsanditsbestestimateofincometaximplicationsofthetransactionsandeventsduringtheperiod.Therecanbeariskthattaxauthoritiescoulddifferintheirinterpretationoftherelevantlawsandcouldassertthattaxpositionstakenbythecompanygiverisetoaneedforreassessment,includingreassessmentunderspecificorgeneralanti-avoidancerulesortransferpricingprovisions.

Theassessmentofadditionaltaxes,interestandpenaltiesordamagetotheCompany’sreputationcouldbemateriallyadversetoourfutureresultsofoperationsandfinancialposition.

Undertheliabilitymethodofaccountingforincometaxes,deferredtaxassetsarerecognizedforthecarryforwardofunusedtaxlossesandtaxcredits,aswellasamountsthathavealreadybeenrecordedinthefinancialstatements,butwillnotresultindeductibleamountsindeterminingtaxableincomeuntilfutureperiods.Deferredtaxassetsarerecognizedonlytotheextentoftheprobabilitythattaxableprofitwillbeavailableagainstwhichthefuturetaxdeductionsandunusedtaxlossescanbeutilized.



Attheendofeachreportingperiod,wemustassessthevalueofourdeferredtaxassets.Thedeterminationofourdeferredtaxassetsisdependentuponprojectionsoffuturetaxableprofits.Ourprojectionsrequiresignificantjudgmentsandestimatesaboutfutureevents,includingglobaleconomicconditionsandthefutureprofitabilityofourbusinesses.Iftheprofitabilityofourbusinessesislowerthanourprojectionsorifouroutlookdiminishessignificantly,wemayberequiredtoreducethevalueofourdeferredtaxassets.Anychangetoourdeferredtaxassetscouldhaveamaterialadverseimpactonourfutureresultsofoperationsandfinancialposition.

Wearealsosubjecttochangingincometaxregulations.WecurrentlyhaveaneffectiveincometaxratethatislowerthantheCanadianstatutoryincometaxrateforcorporations.TheCompanyreflectsfavourabletaximpactsinitsfinancialstatementsfromcertaintaxbenefits,includingbutnotlimitedtotax-exemptinvestmentincome,dividendsreceiveddeductions,taxcredits(fromcertaininvestmentsorfromtaxespaidonforeignsourceincome),andfavourabletaxratesincertainjurisdictionsinwhichweoperate.Inaddition,manyofourlifeinsuranceproductsbenefitClientswithpreferredtaxtreatmentundervarioustaxregimes.ForexamplelifeinsurancepoliciesandannuitycontractsintheU.S.andCanadaallowforthedeferraloreliminationoftaxationonearnings(insidebuildup)accruedunderthepolicy.Thereisariskthattaxlegislation,administrativeguidanceorlegislativedevelopmentscouldlessenoreliminatesomeofthebenefitscurrentlyavailabletotheCompanyoritspolicyholders.Thisriskcouldresultinlowerproductsalesorincreasedlapsesofpolicies,andcouldhaveamaterialadverseeffectonourfutureresultsofoperationsandfinancialposition.

Fromtimetotime,governmentsincountriesinwhichweoperateenactchangestostatutorycorporateincometaxrates.Achangeinincometaxraterequiresustoreviewandre-measureourdeferredtaxassetsandliabilitiesasofthedateofsubstantiveenactment.AsofDecember31,2020,theCompanyreporteda$1,251millionnetdeferredtaxassetinitsConsolidatedStatementsofFinancialPosition,primarilyinCanada.Anyfuturetaxratereductionsinjurisdictionswherewecarryanetdeferredtaxassetcouldresultinareductioninthecarryingvalueofthedeferredtaxassetandacorrespondingincometaxexpenseatthetimeofsubstantiveenactmentofaratereduction.

InlightofsignificantdeficitsincurredduetotheCOVID-19pandemic,governmentsmayseektoraisecorporatetaxratesorintroducefurtherbase-broadeningmeasures,whichcouldmateriallyimpactourtaxexpense.

LegalandRegulatoryProceedingsWeareregularlyinvolvedinlegalactions,bothasadefendantandasaplaintiff.InformationonlegalandregulatoryproceedingsisprovidedinNote23ofour2020ConsolidatedFinancialStatementsandisincorporatedhereinbyreference.

SinceJanuary1,2020,(i)nopenaltiesorsanctionshavebeenimposedagainstSunLifebyacourtorregulatorybodythatwouldlikelybeconsideredimportanttoareasonableinvestorinmakinganinvestmentdecision;(ii)SunLifehasnotenteredintoanysettlementagreementswithacourtrelatingtoCanadiansecuritieslegislationorwithaCanadiansecuritiesregulatoryauthorityand(iii)nopenaltiesorsanctionshavebeenimposedagainstSunLifebyaCanadiansecuritiesregulatoryauthority,otherthannominallatefilingfees,orbyacourtrelatingtoCanadiansecuritieslegislation.

AdditionalInformationAdditionalinformationincludingdirectors'andofficers'remunerationandindebtedness,principalholdersofSLFInc.'ssecurities,securitiesauthorizedforissuanceunderequitycompensationplansandinterestsofinformedpersonsinmaterialtransactions,ifapplicable,iscontainedinSLFInc.'sinformationcircularforitsmostrecentannualmeetingofsecurityholdersthatinvolvedtheelectionofdirectors.AdditionalfinancialinformationisprovidedinSLFInc.'sMD&Aandconsolidatedfinancialstatementsforitsmostrecentlycompletedfinancialyear.

RequestsforcopiesofthesedocumentsmaybesenttotheCorporateSecretaryofSLFInc.at1YorkStreet,31stFloor,Toronto,Ontario,M5J0B6.CopiesofthesedocumentsandotheradditionalinformationrelatedtoSLFInc.areavailableatwww.sunlife.com,www.sedar.comandwww.sec.gov.



SUNLIFEFINANCIALINC.AND

SUNLIFEASSURANCECOMPANYOFCANADA("THECORPORATION")CHARTEROFTHEAUDITCOMMITTEE

PurposeTheAuditCommittee(the“Committee”)isastandingcommitteeoftheBoardofDirectors(the“Board”)whoseprimaryfunctionsaretoassisttheBoardwithitsoversightrolewithrespectto:

1. Theintegrityoffinancialstatementsandrelatedinformationprovidedtoshareholdersandothers;2. TheCorporation’scompliancewithfinancialregulatoryrequirements;3. Theadequacyandeffectivenessoftheinternalcontrolenvironmentimplementedandmaintainedbymanagement;and4. Thequalifications,independenceandperformanceoftheExternalAuditorwhoisaccountabletotheCommittee,theBoardand

theshareholders.

MembershipTheCommittee iscomposedofnot less thanthreeDirectors, includingaCommitteeChair,appointedbytheBoardonanannualbasisfollowingeachannualmeeting.

EachmemberoftheCommitteeshallbeindependentasdefinedintheDirectorIndependencePolicyandfinanciallyliterate.IntheBoard’sjudgment,amemberoftheCommitteeisfinanciallyliterateif,afterseekingandreceivinganyexplanationsorinformationfromseniorfinancialmanagementortheExternalAuditoroftheCorporationthatthememberrequires,thememberisabletoreadandunderstandtheconsolidatedfinancialstatementsoftheCorporationtotheextentsufficienttobeabletointelligentlyask,andtoevaluatetheanswersto,probingquestionsaboutthematerialaspectsofthosefinancialstatements.Inaddition,theCommitteeshallhaveatleastonememberthattheBoardhasdeterminedisanauditcommitteefinancialexpert.

Committee membership is reviewed in connection with appointments to the Committee and annually by the Governance,Investment&ConductReviewCommitteetoensuretheCommitteeasawholeincludesmemberswiththeexperienceandexpertiserequiredtofulfilltheCommittee’smandateandthatthefinancialliteracyandtheauditcommitteefinancialexpertrequirements(asdefinedbytheSecuritiesandExchangeCommission)aremet.

Anymemberof theCommitteemaybe removedor replacedat any timeby theBoard and theBoard shall fill vacancieson theCommittee.

StructureandOperationsAmeetingof theCommitteemaybe calledat any timeby theChairof theBoard (the “BoardChair”) orby anymemberof theCommittee.TheCommitteemeetsasfrequentlyasnecessary,butnotlessthanfourtimesayear.AquorumatanymeetingoftheCommitteeshallbethreemembers.TheChairoftheCommitteereportstotheBoardaftereachCommitteemeeting.

TheChairoftheCommitteeisconsultedinadvanceinconnectionwiththeappointment,reassignment,replacementordismissalofthe Chief Actuary, Chief Auditor and Chief Financial Officer, and annually on the performance assessment and compensationawardedtothoseindividuals.

TheExternalAuditorreportstotheCommittee.TheExternalAuditorreceivesnoticeof,andmayattendallCommitteemeetings.

TheCommitteeholds a private session at each regularly scheduledmeetingwith eachof theChiefActuary, ChiefAuditor, ChiefFinancial Officer and representatives of the External Auditor, and with the Chief Risk Officer and Chief Compliance Officer, asappropriate, and those individuals have unrestricted access to Committeemembers betweenmeetings. The Committee holds aprivatesessionateachmeetingoftheCommitteeformembersonly.TheCommitteehasfullaccesstotheCorporation’srecordsandinformationand,inconsultationwiththeBoardChair,mayengageanyspecialadvisorsitdeemsnecessarytoprovideindependentadviceattheexpenseoftheCorporation.

APPENDIXA

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TheCommitteewill review itsForwardAgenda,as required,andonanannualbasis, theCommitteewill reviewthisCharterand,wherenecessary,recommendchangestotheBoardforapproval.ThisCharterwillbepostedontheCorporation’swebsiteandtheCommitteewillprepareareportonitsactivitiesfor inclusionintheannualmeetingmaterial.TheCommitteeshallundertakeandreviewwiththeBoardanannualperformanceevaluationoftheCommittee.

DutiesandResponsibilitiesoftheCommitteeFinancial Reporting1. ReviewswithmanagementandtheExternalAuditorandmakesrecommendationstotheBoardontheapprovalof:

a. the interim unaudited consolidated financial statements, including the notes thereto, Management’s Discussion andAnalysisandrelatednewsrelease;and

b. theannualauditedconsolidatedfinancialstatements,includingthenotesthereto,Management’sDiscussionandAnalysisandrelatednewsrelease.

2. Inconductingitsreviewofthequarterlyandannualfinancialstatements:a. reviewstheunderlyingearnings;b. discusseswith theExternalAuditoranysignificantchanges thatwererequired in theexternalauditplan,anysignificant

issuesraisedwithmanagementduringthecourseoftheauditorreview,includinganyrestrictionsonthescopeofactivitiesoraccesstoinformation,andthosemattersthatarerequiredtobediscussedundergenerallyacceptedauditingstandards;

c. receivesareportfrommanagementonitsreviewofthefinancialstatements,Management’sDiscussionandAnalysisandrelated news release, and discusses with the President & Chief Executive Officer and the Chief Financial Officer anysignificantissuesraisedinconnectionwiththecertificationsrelatingtofinancialdisclosureandcontrolsthatthoseofficersarerequiredtofilewithsecuritiesregulatoryauthorities;

d. assures itselfthattheExternalAuditor issatisfiedthattheaccountingestimatesand judgementsmadebymanagement,and management’s selection of accounting principles, reflect an appropriate application of International FinancialReportingStandards;

e. seeksassurances fromtheExternalAuditor that the financial statements, including thenotes thereto, fairlypresent thefinancialposition,resultsofoperationsandcashflowsoftheCorporation;

f. discusseswiththeChiefActuarythepartsofthequarterlyandannualauditedconsolidatedfinancialstatementspreparedbythatofficer;

g. reviews withmanagement and the External Auditor the Corporation’s principal accounting and actuarial practices andpolicies;and

h. considersemergingindustry,regulatoryandaccountingstandardsandthepossibleimpactontheCorporation’sprincipalaccountingpracticesandpolicies,includingconsiderationoftheuseofnon-IFRSmeasures.

External Auditor3. Reviewsthe independenceoftheExternalAuditor, includingtherequirementsrelatingtosuchindependenceunderthe laws

governing the Corporation, the applicable rules of stock exchanges on which the Corporation’s securities are listed, andregulatorybodieswith responsibility for establishing auditor independence requirements andpolicies.At least annually, theCommittee receives from and reviews with the External Auditor its written statement delineating relationships with theCorporation and, if necessary, recommends that theBoard take appropriate action to satisfy itself of the External Auditor’sindependenceandaccountabilitytotheCommittee,theBoardandshareholders.

4. Appraisestheskills,resourcesandperformanceoftheExternalAuditorandrecommendstotheBoardtheappointment,orifsodeterminedbytheCommitteethereplacement,oftheExternalAuditor,subjecttotheapprovaloftheshareholders.

5. ReviewsandapprovesthescopeandtermsoftheExternalAuditor’sengagement,andreviewsandrecommendsforapprovalbytheBoardtheengagementletterandremunerationoftheExternalAuditor.

6. ReviewsandapprovestheRestrictingUseofExternalAuditorPolicywhichoutlinestheservicesforwhichtheExternalAuditorcanbeengaged,theapprovalprocessforsuchservicesandthepolicyregardingtheemploymentofformeremployeesoftheExternalAuditor.

7. Determines,reviewsandapprovestheservicestobeperformedbytheExternalAuditorandthefeestobepaidtotheExternalAuditor for audit, audit-related and other services permitted by law and in accordancewith the RestrictingUse of ExternalAuditorPolicy,withsuchapprovalstobegivenbytheCommittee,throughtheexerciseofauthoritydelegatedtooneormoreoftheCommittee’sindependentmembersorpursuanttopre-approvalproceduresadoptedbytheCommitteeinaccordancewithapplicablerequirements.

8. ReviewswiththeExternalAuditorandmanagementtheoverallscopeoftheexternalauditplan,qualitycontrolproceduresandtheresourcesthattheExternalAuditorwilldevotetotheaudit.

9. ReviewswiththeExternalAuditoranyregulatorymattersthatpertaintotheExternalAuditor.

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Internal Control and Audit10. Requires management to implement and maintain appropriate internal control procedures, reviews and evaluates the

effectivenessofsuchprocedures,andensuresthatappropriateaction isbeingtakentoaddressanymaterial internalcontroldeficiencies.

11. Reviews at least annually andmakes recommendations to the Board on the approval of the Corporation’s Internal ControlFramework.

12. Reviewsmanagement’s reportson theeffectivenessof theCorporation’sdisclosure controlsandproceduresand its internalcontroloverfinancialreporting.

13. ReviewsandapprovestheannualinternalauditplanandoverseesitscoordinationwiththeExternalAuditor’sauditplan.14. ReviewswithmanagementandtheChiefAuditortheeffectivenessoftheinternalcontrolprocedures,includingaquarterly

reportthereonreceivedfromtheChiefAuditorthatincludesdisclosureofanysignificantchangesthatwererequiredintheinternalauditplanandanysignificantissuesraisedwithmanagementduringthecourseofanyinternalauditwork,includinganyrestrictionsonthescopeofactivitiesoraccesstoinformation.

Governance15. ReviewsandapprovestheorganizationalstructureoftheActuarial,FinanceandInternalAuditfunctionsonanannualbasis.16. Reviews, at least annually, and approves changes to the statements of mandate, responsibility and authority of the Chief

Actuary,ChiefAuditorandChiefFinancialOfficer.17. Reviews,atleastannually,theadequacyoftheauthority,independenceandresourcesoftheChiefActuary,ChiefAuditorand

ChiefFinancialOfficer.18. EstablishesthescopeandfrequencyoftheindependentreviewsoftheActuarial,FinanceandInternalAuditfunctions.19. ApprovestheobjectivesandreviewstheeffectivenessoftheChiefActuary,ChiefAuditorandChiefFinancialOfficerandthe

Actuarial,InternalAuditandFinancefunctionsannually.20. Requires the Chief Actuary, Chief Auditor and Chief Financial Officer to report on any material disagreements with other

membersofseniormanagementrelatingtothebusiness,andreviewshowsuchmattersarebeingaddressed.21. Reviews successionplans for the rolesofChiefActuary, ChiefAuditor, Chief FinancialOfficer andother seniormanagement

rolesoverseenbytheCommittee.22. Reviewsmatterswithinitsmandatethatareaddressedintheregularexaminationandsimilarreportsreceivedfromregulatory

agencies,includingmanagement’sresponsesandrecommendations.23. DiscusseswiththeExternalAuditorthefinancialandcontrol-relatedaspectsofmaterialtransactionsthatarebeingproposedby

theCorporation.24. ReviewsanddiscusseswiththeExternalAuditorandChiefActuarysuchreportsandregulatoryreturnsoftheCorporationas

maybespecifiedbylaw.25. DiscussesthequalificationsforanddetermineswhetheramemberoftheCommitteeisafinancialexpert,andinconjunction

withtheGovernance,Investment&ConductReviewCommittee,ensurestheongoingfinancialliteracyofCommitteemembers.

Other26. Reviewstheannualreportonlitigationorotherreports,asrequired.27. Performs such other duties and exercises such other powers as may, from time to time, be assigned to or vested in the

CommitteebytheBoard,andsuchotherfunctionsasmayberequiredoftheCommitteebylaw,regulationorstockexchangerule.

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