DBRS Confirms Ratings on Sun Life Financial Inc. and Affiliates

DBRS Limited (DBRS) has today confirmed the ratings for Sun Life Financial Inc. (Sun Life or the Company) and its affiliates. The Claims Paying Ability rating of IC-1 assigned to Sun Life Assurance Company of Canada (SLA) has also been confirmed. All ratings have a Stable trend.

Sun Life’s Canadian franchise is the dominant operation for this global company. The Canadian franchise has successfully obtained, over its long tenure, a Canadian market standing as one of the top three players dominating the market and produces the majority of the profits for the company. The U.S. operations include MFS Investment Management, a top-tier asset manager in the United States which has an expanding global reach in attracting assets. The company is active in the Asian markets and has adapted to create effective distribution networks in the markets in which it has chosen to operate.

Compared to its peers, the Company has a high proportion of BBB and lower-rated bonds to total bonds, at 33.2%. With the Company’s sizable business in the Philippines, it has invested local premium in Philippine government bonds to avoid currency risks.

Return on equity and EBIT fixed-charge coverage ratios are expected to improve with the Company’s efforts to improve profitability toward meeting its 2015 targets. This focus on profitability should have lasting benefits. The five-year historical averages are below the rating level, but improvements are expected.

Financial leverage has declined to near 24% with improved retained earnings and with the Company using the proceeds of the sale of the U.S. business to repay maturing debt. This improved leverage is noted by DBRS, as the Company has had financial leverage ratios above 30%.

The Canadian regulatory capital ratio for SLA is a satisfactory 218% as at September 30, 2014.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Rating Companies in the Canadian Life and Health Insurance Industry, Rating Holding Companies and Their Subsidiaries, and Preferred Share and Hybrid Criteria for Corporate Issuers, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

DBRS will publish a report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report or for more information on this industry, visit www.dbrs.com or contact us at info@dbrs.com.