Best’s News & Research Service - December 02, 2016 02:06 PM (EST)
A.M. Best Affirms Credit Ratings of Sun Life Financial Inc. and Its Subsidiaries
- December 02, 2016 02:06 PM (EST)
Oldwick //BestWire// - A.M. 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) (Windsor, CT) – the core insurance subsidiaries of Sun Life Financial Inc. (SLF) (Ontario, Canada) [NYSE: SLF]. Concurrently, A.M. Best has affirmed the Long-Term ICR of “a-” and existing Long-Term Issue Credit Ratings (Long-Term IR) of SLF.
Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of Independence Life and Annuity Company (Wilmington, DE), as well as the FSR of B++ (Good) and the Long-Term ICR of “bbb+” of Professional Insurance Company (Dallas, TX). The outlook of these Credit Ratings (ratings) is stable. (See link below for a detailed listing of the companies and ratings.)
The rating affirmations reflect SLF’s strong business profile, demonstrated by Sun Life’s leading positions in its core Canadian markets – group life and health benefits, group pension and individual insurance – and complemented by its renewed focus on the U.S. group insurance and voluntary benefits space, as demonstrated by its acquisition of the employee benefits business of Assurant, Inc. (Assurant) in March of this year. SLF’s diversified revenue stream is further enhanced by its global asset management business, led by MFS Investment Management, and bolstered by recent acquisitions in North America that have increased the asset base and broadened service capabilities through Sun Life Investment Management.
Sun Life continues to expand its footprint in Asia through local subsidiaries and partnerships, which are a key contributor to the organization’s results. Increased joint venture ownership in key regions of Asia has strengthened SLF’s presence in this market. Additionally, SLF maintains sound risk-adjusted capitalization, strong financial flexibility and a sophisticated enterprise risk management process, which A.M. Best views positively. In recent years, these disciplines have led to portfolio de-risking and less exposure to equity market volatility by focusing on less capital-intensive businesses.
SLF’s sales and earnings trends are favorable and continue to foster the group’s excellent financial flexibility. With a debt-to-capital ratio (including preferred shares) of roughly 25% and interest coverage of nine to 10 times, SLF is within A.M. Best’s guidelines for its current ratings.
While the group has focused its U.S. operations on markets and businesses that lack 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, and its acquisition from Assurant has significantly raised the profile of SLF in the U. S. employee benefits market. As the organization continues grow its core business segments in Canada, Asia and the United States, its results will remain subject to new business strain and lower investment returns due to the sale of the U. S. life and annuity business in 2013. Additionally, 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 significant losses should North American real estate market fundamentals deteriorate. Moreover, by reducing volatility and focusing on less capital-intensive businesses has made SLF more dependent on cash flows from its Canadian, global asset management businesses and growing Asian business segments.
For a complete listing of FSRs, Long-Term ICRs and Long-Term IRs for SLF and its life/health subsidiaries, please visit Sun Life Financial Inc.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. 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.
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