Senior Debentures and Innovative Capital Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Borrowed funds include the following:



As at December 31,	Currency of borrowing	Maturity	2019			2018
Encumbrances on real estate	Cdn. dollars	Current – 2033		$	320		$	177
Encumbrances on real estate	U.S. dollars	Current – 2020		—			11
Total borrowed funds				$	320		$	188

The following obligations are included in Senior debentures as at December 31:



	Interest rate		Earliest par call or redemption date	Maturity	2019			2018
SLF Inc. senior debentures:
Series D issued June 30, 2009⁽²⁾	5.70	%	n/a	2019		$	—		$	300
Series E issued August 23, 2011⁽²⁾	4.57	%	n/a	2021		300			299
Sun Life Assurance senior debentures:⁽³⁾
Issued to Sun Life Capital Trust (“SLCT I”)
Series B issued June 25, 2002	7.09	%	June 30, 2032⁽⁴⁾	2052		200			200
Issued to Sun Life Capital Trust II (“SLCT II”)
Series C issued November 20, 2009⁽⁵⁾	6.06	%	December 31, 2019	2108		—			500
Total senior debentures						$	500		$	1,299
Fair value						$	585		$	1,390


⁽¹⁾	All senior debentures are unsecured.

⁽²⁾

Redeemable in whole or in part at any time prior to maturity at a price equal to the greater of par and a price based on the yield of a corresponding Government of Canada bond plus 0.575% for the Series D debentures and 0.53% for the Series E debentures. On July 2, 2019, SLF Inc.’s Series D debentures matured and SLF Inc. repaid all of the outstanding $300 principal amount of such debentures together with all accrued and unpaid interest.


⁽³⁾	Redemption is subject to regulatory approval.


⁽⁴⁾	Redeemable in whole or in part on any interest payment date or in whole upon the occurrence of a Regulatory Event or Tax Event, as described in the debenture. Prior to June 30, 2032, the redemption price is the greater of par and a price based on the yield of a corresponding Government of Canada bond plus 0.32%; from June 30, 2032, the redemption price is par.


⁽⁵⁾

The following obligations are included in Subordinated debt as at December 31, and qualify as capital for Canadian regulatory purposes:



	Interest rate		Earliest par call or redemption date⁽¹⁾		Maturity	2019			2018
Sun Life Assurance:
Issued May 15, 1998⁽²⁾	6.30	%	n/a		2028		$	150		$	150
Sun Life Financial Inc.:
Issued May 29, 2007⁽³⁾	5.40	%	May 29, 2037	⁽⁴⁾	2042		398			398
Issued May 13, 2014⁽⁵⁾	2.77	%	May 13, 2019		2024		—			250
Issued September 25, 2015⁽⁶⁾	2.60	%	September 25, 2020		2025		500			499
Issued February 19, 2016⁽⁷⁾	3.10	%	February 19, 2021		2026		349			349
Issued September 19, 2016⁽⁸⁾	3.05	%	September 19, 2023	⁽⁴⁾	2028		996			995
Issued November 23, 2017⁽⁹⁾	2.75	%	November 23, 2022		2027		399			398
Issued August 7, 2019⁽¹⁰⁾	2.38	%	August 13, 2024		2029		746			—
Total subordinated debt							$	3,538		$	3,039
Fair value							$	3,727		$	3,129

⁽¹⁾The debentures issued by SLF Inc. in 2007 are redeemable at any time and the debentures issued by SLF Inc. in 2014, 2015, 2016, and 2017 are redeemable on or after the date specified. From the date noted, the redemption price is par and redemption may only occur on a scheduled interest payment date. Redemption of all subordinated debentures is subject to regulatory approval.

⁽²⁾6.30% Debentures, Series 2, due 2028, issued by The Mutual Life Assurance Company of Canada, which subsequently changed its name to Clarica Life Insurance Company (“Clarica”) and was amalgamated with Sun Life Assurance. These debentures are redeemable at any time. Prior to May 15, 2028, the redemption price is the greater of par and a price based on the yield of a corresponding Government of Canada bond plus 0.16%.

⁽³⁾Series 2007-1 Subordinated Unsecured 5.40% Fixed/Floating Debentures due 2042. From May 29, 2037, interest is payable at 1.00% over Canadian dollar offered rate for three-month bankers’ acceptances (“CDOR”).

⁽⁴⁾For redemption of the 2007 debentures prior to the date noted, and for redemptions of the September 19, 2016 debentures between September 19, 2021 and September 19, 2023, the redemption price is the greater of par and a price based on the yield of a corresponding Government of Canada bond plus 0.25% for the 2007 debentures and 0.52% for the September 19, 2016 debentures.

⁽⁵⁾Series 2014-1 Subordinated Unsecured 2.77% Fixed/Floating Debentures due 2024. On May 13, 2019, SLF Inc. redeemed all of the outstanding $250 principal amount of these debentures in accordance with the redemption terms attached to such debentures.

⁽⁶⁾Series 2015-1 Subordinated Unsecured 2.60% Fixed/Floating Debentures due 2025. From September 25, 2020, interest is payable at 1.43% over CDOR.

⁽⁷⁾Series 2016-1 Subordinated Unsecured 3.10% Fixed/Floating Debentures due 2026. From February 19, 2021, interest is payable at 2.20% over CDOR.

⁽⁸⁾Series 2016-2 Subordinated Unsecured 3.05% Fixed/Floating Debentures due 2028. From September 19, 2023, interest is payable at 1.85% over CDOR.

⁽⁹⁾Series 2017-1 Subordinated Unsecured 2.75% Fixed/Floating Debentures due 2027. From November 23, 2022, interest is payable at 0.74% over CDOR.

⁽¹⁰⁾Series 2019-1 Subordinated Unsecured 2.38% Fixed/Floating Debentures due 2029. From August 13, 2024, interest is payable at 0.85% over CDOR.

Schedule of Significant Terms and Conditions

The table below presents additional significant terms and conditions of the SLEECS:



Issuer	Issuance date	Distribution or interest payment dates	Annual yield		Redemption date at the issuer’s option		Conversion date at the holder’s option	Principal amount
Sun Life Capital Trust^(1)(2)(3)(4)
SLEECS B	June 25, 2002	June 30, December 31	7.093	%		June 30, 2007	Any time		$	200

⁽¹⁾

Subject to regulatory approval, the SL Capital Trusts may (i) redeem any outstanding SLEECS, in whole or in part, on the redemption date specified above or on any distribution date thereafter, or in the case of SLCT II, on any date thereafter, and (ii) may redeem all, but not part of any class of SLEECS upon occurrence of a Regulatory Event or a Tax Event, prior to the redemption date specified above.

⁽²⁾

The SLEECS B may be redeemed for cash equivalent to (i) the greater of the Early Redemption Price or the Redemption Price if the redemption occurs prior to June 30, 2032 or (ii) the Redemption Price if the redemption occurs on or after June 30, 2032. Redemption Price is equal to one thousand dollars plus the unpaid distributions, other than unpaid distributions resulting from a Missed Dividend Event, to the redemption date. Early Redemption Price for the SLEECS B is the price calculated to provide an annual yield, equal to the yield of a Government of Canada bond issued on the redemption date that has a maturity date of June 30, 2032, plus 32 basis points, plus the unpaid distributions, other than unpaid distributions resulting from a Missed Dividend Event, to the redemption date.


⁽³⁾	The non-cumulative perpetual preferred shares of Sun Life Assurance issued upon an Automatic Exchange Event in respect of the SLEECS B will become convertible, at the option of the holder, into a variable number of common shares of SLF Inc. on distribution dates on or after December 31, 2032.

⁽⁴⁾

Holders of SLEECS B may exchange, at any time, all or part of their SLEECS B units for non-cumulative perpetual preferred shares of Sun Life Assurance at an exchange rate for each SLEECS of 40 non-cumulative perpetual preferred shares of Sun Life Assurance. SLCT I will have the right, at any time before the exchange is completed, to arrange for a substituted purchaser to purchase SLEECS tendered for surrender to SLCT I so long as the holder of the SLEECS so tendered has not withheld consent to the purchase of its SLEECS. Any non-cumulative perpetual preferred shares issued in respect of an exchange by the holders of SLEECS B will become convertible, at the option of the holder, into a variable number of common shares of SLF Inc. on distribution dates on or after December 31, 2032.