AM Best Affirms Credit Ratings of Sun Life Financial Inc. and Certain Subsidiaries

AM Best Affirms Credit Ratings of Sun Life Financial Inc. and Certain Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of Sun Life Assurance Company of Canada (Sun Life) (Ontario, Canada) and Sun Life and Health Insurance Company (U.S.) (SLHIC) (Lansing, MI) – the core insurance subsidiaries of Sun Life Financial Inc. (SLF) (Ontario, Canada) (NYSE: SLF) (collectively referred to as Sun Life Group). Concurrently, AM Best has affirmed the Long-Term ICR of “a-” and existing Long-Term Issue Credit Ratings (Long-Term IR) of SLF.

Additionally, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb+” of Professional Insurance Company (Dallas, TX), an SLF run-off subsidiary. Lastly, AM Best has downgraded the FSR to B++ (Good) from A- (Excellent) and the Long-Term ICR to “bbb+” from “a-” of Independence Life & Annuity Company (Wilmington, DE), a strategic subsidiary of SLF, to reflect the run-off nature of the company’s operation. The outlook for all of these Credit Ratings (ratings) is stable. (Please below for a detailed listing of the Long-Term IRs.)

The ratings reflect Sun Life Group’s balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management. AM Best views the companies’ individual and consolidated risk-adjusted capitalization, strong financial flexibility, as measured by a favorable financial leverage and interest coverage ratio, as supportive of the companies’ rating level.

Sun Life’s leading positions in its core Canada markets – group life and health benefits, group pension and individual insurance – are further diversified through the company’s U.S. employee benefits business segment. SLF’s revenue stream is enhanced by its global asset management business, led by MFS Investment Management and through Sun Life Investment Management. Sun Life’s footprint continues to grow in Asia through local subsidiaries and partnerships, which are key contributors to the organization’s presence in this market.

While the group focuses its U.S. operations on markets and businesses that demonstrate reduced sensitivity to interest rates and equity market fluctuations, significant competition remains from established players in these markets. SLF is a market leader in the employee benefits market in Canada, with a growing profile in the U.S.-employee benefits market.

While the company maintains a diversified investment portfolio with a focus on high credit and strong liquidity profiles, the company retains exposure to real estate-linked assets through its investments in commercial mortgage loans, direct real estate and residential and commercial mortgage-backed securities, and may be subject to losses and liquidity exposure under a stressed economic scenario. Partially mitigating these liquidity concerns are the company’s reduction of volatility within the liability structure of their product offerings and focus on less capital-intensive businesses, which provide added diversification to the company’s earnings profile.

The following Long-Term IRs have been affirmed with a stable outlook:

Sun Life Financial Inc.—

-- “a-” on CAD 300 million 5.70% senior unsecured debentures, Series D, due 2019

-- “a-” on CAD 300 million 4.57% senior unsecured debentures, Series E, due 2021

-- “bbb+” on CAD 500 million 2.60% subordinated debentures, due 2025

-- “bbb+” on CAD 350 million 3.10% subordinated debentures, due 2026

-- “bbb+” on CAD 1,000 million 3.05% subordinated debentures, due 2028

-- “bbb+” on CAD 400 million 5.40% subordinated debentures, due 2042

-- “bbb+” on CAD 250 million 2.77% subordinated debentures, due 2024

-- “bbb+” on CAD 400 million 2.75% subordinated debentures, due 2027

-- “bbb” on CAD 400 million 4.75% Class A non-cumulative preferred shares, Series 1

-- “bbb” on CAD 325 million 4.80% Class A non-cumulative preferred shares, Series 2

-- “bbb” on CAD 250 million 4.45% Class A non-cumulative preferred shares, Series 3

-- “bbb” on CAD 300 million 4.45% Class A non-cumulative preferred shares, Series 4

-- “bbb” on CAD 250 million 4.50% Class A non-cumulative preferred shares, Series 5

-- “bbb” on CAD 130 million 2.275% Class A non-cumulative preferred shares, Series 8R

-- “bbb” on CAD 150 million floating rate Class A non-cumulative preferred shares, Series 9QR

-- “bbb” on CAD 173 million 3.90% Class A non-cumulative preferred shares, Series 10R

-- “bbb” on CAD 27 million Class A non-cumulative preferred shares, Series 11QR

-- “bbb” on CAD 300 million 4.25% Class A non-cumulative preferred shares, Series 12R (current rate 3.806%)

The following Long-Term IRs have been affirmed with a stable outlook:

Sun Life Assurance Company of Canada—

-- “a” on CAD 150 million 6.30% subordinated debentures, Series 2, due 2028*

* Securities originally issued by Clarica Life Insurance Company

Sun Life Capital Trust—

-- “a-” on CAD 200 million 7.09% non-cumulative Sun Life ExchangEable Capital Securities (SLEECS), due 2032

Sun Life Capital Trust II—

-- “a-” on CAD 500 million 5.863% non-cumulative Sun Life ExchangEable Capital Securities (SLEECS), due 2108

The following indicative Long-Term IRs under shelf registration have been affirmed with a stable outlook:

Sun Life Financial Inc.—

-- “a-” on senior unsecured debt

-- “bbb+” on subordinated debt

-- “bbb” on preferred shares

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Anthony McSwieney
Senior Financial Analyst
+1 908 439 2200, ext. 5715
anthony.mcswieney@ambest.com

Ken Johnson, CFA, CAIA, FRM
Senior Director
+1 908 439 2200, ext. 5056
ken.johnson@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

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