The company was formed by a group of Montréal’s leading businessmen as the Sun Insurance Company of Montreal. It was approved for operations by the Legislative Assembly of the Province of Canada on 18 March 1865. Due to the uncertainty of government at the time, and with Confederation occupying the businessmen’s attention, it was not until six years later that the company actually began operations. In 1871, Mathew H. Gault was appointed as the first managing director, and the company engaged its first agents to sell Sun Life insurance in Toronto. Sun Life issued its first insurance policy on 18 May 1871.
Early growth was consistent but slow. Poor trade and economic conditions for Canada also slowed the company’s growth (see Economic History). However, death claims under its issued life insurance policies were low, so the company survived.
The company’s first secretary, Robertson Macaulay (appointed in 1874), presented a plan for growth that included expanding the number of selling agents and introducing innovative insurance products. In 1880, the company introduced the first unconditional insurance policy in Canada, in which all restrictions, prohibitions and limitations in the insurance contracts were removed. This distinguished Sun Insurance from its competitors, and sales by agents began to increase more quickly.
Sun Insurance Company’s first international growth occurred in 1879–80 when it expanded into much of the West Indies. Due to this international growth, as well as growth across Canada, the name of the company was changed, in May 1882, to The Sun Life Assurance Company of Canada.
Sun Life faced its first crisis in 1882–83, when investments it had made into companies controlled by Mathew Gault (particularly the Exchange Bank of Canada, and the Montreal Loan and Mortgage Company) incurred considerable losses. This conflict of interest created particular distress for the company. As a result, Gault was asked to resign and Macaulay was made managing director and elected to the board.
The losses that Sun Life had taken on meant that the company barely escaped insolvency (where debts exceed a company’s assets). Macaulay attempted, unsuccessfully, to get the directors of Sun Life (those involved in the losing investments) to reimburse the company. In 1886, Macaulay again tried to recoup those losses by proposing to reduce shareholder profits for that year and the previous four years. To counter this, Mathew Gault’s son, Andrew Gault, attempted to acquire more shares in the company to fight Macaulay’s move. However, Macaulay successfully rallied the support of the agents and a few large shareholders, and his plan succeeded. Andrew Gault resigned and, in March 1887, he offered Macaulay his Sun Life shares at $30 per share.
When Macaulay was appointed president of Sun Life in 1889, he focused on international growth. The company expanded into Asia and Europe, increased its operations in the British West Indies, and moved into South America and parts of Africa. Sun Life opened an office in Great Britain in 1893, but had a fight about its name with the Sun Life Assurance Society (of England). The court settlement that followed required the company to add “of Canada” to its name in all of its material and marketing. It first entered into the United States in 1895 with an office in Detroit.
International growth was so spectacular that the Sun Life Assurance Company of Canada quickly became known as the world’s greatest international company. Its assets grew from $1.79 million in 1889 to $10.5 million in 1900, with half its income coming from outside of Canada (growing to 80 per cent by 1930). This international growth was driven by better profit margins on business in other countries, where death rates were low as well as the cost of living (hence commissions paid to agents were also low). As well, the lack of competition in these regions made business profitable.
Sun Life grew very quickly after the turn of the 20th century. This was due to the simple fact that it sold more insurance than the industry average, but also because it acquired other companies and their assets. Between 1900 and 1915, Sun Life tripled its underwritings (investments from other companies or individuals) and more than quadrupled the number of life insurance policies it issued. By comparison, Canadian insurance industry underwritings doubled and the number of life insurance policies more than doubled during the same period. In 1919, Sun Life became the first Canadian insurance company to offer group insurance plans, another source of product growth and competitive edge for the company.
Sun Life acquired 11 other insurance companies between 1890 and 1924, and was the first Canadian company to acquire a US life insurance company: Cleveland Life Insurance Company (1926). As a result of this acquisition, Sun Life became the largest Canadian insurance company with operations in the United States. It followed this acquisition by purchasing Western Union Life Insurance Company, of Spokane, Washington (1928).
To accommodate its growth, in 1909 Sun Life acquired land in Montréal to build a new head office. Construction began in 1914 and the Sun Life Building at Dominion Square (now Dorchester Square) opened in 1918.
The son of Robertson Macaulay, Thomas B. Macaulay, was appointed managing director of Sun Life in 1908, and appointed president on his father’s death in 1915. The Manufacturers Life Insurance Company and Sun Life attempted to merge in 1915, but the federal government resisted the merger, and Sun Life dropped the project the following year.
Sun Life achieved several milestones during this period. It became the largest life insurance company in Canada in 1908 (and would remain so until The Manufacturers Life Assurance Company exceeded it in 1985), and its assets exceeded $1 billion for the first time in 1925.
The Great Depression
Sun Life’s rapid growth came at a cost and presented the company with its second crisis, tied to the stock market crash in 1929 (see The Great Crash). Up to 1900, life insurance company investments were primarily in mortgages. This presented a challenge because better investment returns could be had by investing in emerging industrial sectors (such as electricity and railways). The company opened an investment department in 1906 to investigate these new areas. During the First World War (1914–18), insurance companies invested heavily in government bonds, which replaced mortgages as the largest area of investment. After the war, a sharp drop in interest rates encouraged the company to increase its investments in common stocks. By 1929, more than half of Sun Life’s investment portfolio was in common stocks (see Stock and Bond Markets).
With the stock market crash in 1929, the fall in stock prices meant that Sun Life in essence became insolvent: the value of its total assets fell below its debts. Other companies and individuals in the country were faced with similar financial conditions. To resolve this crisis, the chartered banks and stock brokerage firms allowed customers to assign minimum fixed prices to stocks in order to avoid lenders calling for loan payments. The federal Superintendent of Insurance complied with this policy to help prevent the crisis. Using these fictitious stock prices, the company was able to keep its total assets above its liabilities (see Great Depression).
Going forward, Sun Life drastically reduced the size of its investments in common stocks. By 1946, they had been reduced to only 6.3 per cent of Sun Life’s investment portfolio compared to a high of 52 per cent in 1929.
Mutualization and Investment Management: 1950s to 2000s
The degree of foreign ownership of the company became a particular aggravation between 1951 and 1955, when two private US investment firms (Allen & Co. and Nationwide Corporation) began accumulating large ownership positions in Sun Life. The two investors requested substantial changes in management and larger shareholder dividends on common stock. The federal government feared that the insurance industry would become owned by foreign entities, so it passed legislation near the end of 1957 that allowed insurance companies to convert from being owned by public shareholders to being owned by policyholders, a process known as mutualization. In this case, any potential buyer would have to purchase all of the outstanding insurance policies of the company, which policyholders would have to agree to sell — a highly unlikely event.
To resolve its particular situation, Sun Life’s banker and board representative, Bank of Montreal, agreed to acquire the shares owned by these two American investment firms, knowing in advance that the Sun Life Assurance Company would purchase the stock back from them in a subsequent mutualization. The company did so in 1962 when it mutualized, buying all of its shares from the public at a price of $325 per share.
In 1978, Sun Life (along with several other large Canadian corporations) caused considerable political angst when it announced that it was moving its headquarters from Montréal to Toronto due to increasing pressure it received from the Québec government. Sun Life was concerned that new provincial language laws (found in Bill 101) would require much of its business to function in French. Because many of its Montréal employees were English speaking, as were a majority of clients, Sun Life decided to move.
In 1982, Sun Life diversified into the investment management business when it bought the US institutional and fund management firm Massachusetts Financial Services (MFS). In 1987, it created its domestic asset management subsidiary, Spectrum Financial Mutual Fund Services. Then, in 1997, the company announced the acquisition of a majority stake in the institutional asset management firm McLean Budden, purchasing the remaining ownership stake in 2011 and combining the company with its MFS operations. The company added almost $50 billion in assets to its investment management operations when it bought three investment firms in 2015 — Bentall Kennedy, Ryan Labs, and Prime Advisors Inc.
In 2000, to mark its new beginnings and to reflect its global operations, the company changed its name to Sun Life Financial and adopted a logo that depicts the sun and the earth.
To maintain an acceptable growth rate for the company and to compete with other financial companies (such as the banks), Sun Life realized it would need to have better access to capital markets. Management decided, in 2000, to de-mutualize the company and, once again, be owned by public shareholders rather than its policyholders. It was the fifth Canadian insurance company to do so, after Clarica, Manulife, Canada Life and Industrial Alliance. Sun Life distributed shares in the company to all policyholders at a price of $12.50 per share, and made its initial public offering on 23 March 2000, trading on the Toronto, New York and Philippines stock markets (see Toronto Stock Exchange).
In 2002, Sun Life sold its mutual fund subsidiary, Spectrum Investment Management, to publicly traded mutual fund firm CI Fund Management in return for a 30 per cent stock investment in CI. This allowed the company to focus on insurance as the area of growth. In 2002, Sun Life Assurance Company merged with Clarica Life Insurance Company (the former Mutual Life Assurance Company), a transaction valued at over $7 billion.
The 2008 global financial liquidity crisis was a particularly challenging time for Canadian insurance companies. Sun Life met this challenge to its business in several ways. Firstly, in order to improve its capital position and allow for growth opportunities, it sold off its investment in CI Financial, near the end of 2008, to Scotiabank for $2.3 billion. In 2012, the company sold off its US annuity and life insurance business for US$1.35 billion to further bolster its capital position and reduce the company’s overall risk profile. Sun Life continued to grow internationally, with expansion and new ventures in China, the Philippines, Vietnam and Malaysia.