AM Best Affirms Credit Ratings of Sun Life Financial Inc. and Its Subsidiaries; Revises Outlooks to Positive for Independence Life and Annuity Company

Rhea-AI Summary

AM Best has affirmed the Financial Strength Rating (FSR) of A+ and the Long-Term Issuer Credit Ratings (ICR) of 'aa' for Sun Life Assurance Company of Canada and Sun Life and Health Insurance Company. The outlook for these ratings is stable. Additionally, AM Best revised the outlook for Independence Life and Annuity Company to positive, maintaining its FSR of A- and ICR of 'a-'. The ratings reflect Sun Life Group's strong balance sheet, operating performance, and enterprise risk management. However, Sun Life Group's earnings are moderately exposed to equity market volatility and interest rate changes.

Positive

• Financial Strength Rating of A+ affirmed by AM Best.
• Long-Term ICR of 'aa' indicates superior creditworthiness.
• Outlook for primary ratings is stable, indicating solid financial health.
• Independence Life and Annuity Company has a revised outlook to positive, suggesting improving performance.

Negative

• Earnings exposed to equity market volatility and interest rate changes.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” (Superior) of Sun Life Assurance Company of Canada (Sun Life) (Ontario, Canada) and Sun Life and Health Insurance Company (U.S.) (Lansing, MI). These companies are 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” (Excellent) and the Long-Term Issue Credit Ratings (Long-Term IRs) of SLF. The outlook of these Credit Ratings (ratings) is stable. (Please see below for a detailed listing of the Long-Term IRs.)

Additionally, AM Best has revised the outlooks to positive from stable for Independence Life and Annuity Company (Independence) (Wilmington, DE), a strategic subsidiary of SLF, and affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent). Lastly, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of Professional Insurance Company (Dallas, TX), an SLF runoff subsidiary. The outlook of these ratings is stable.

The ratings reflect Sun Life Group’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and very strong enterprise risk management. The group maintains a very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet is supported further by overall favorable operating earnings, strong liquidity metrics and a holding company that can provide additional financial flexibility.

While Sun Life Group has focused on reducing volatility within the liability structure of its product offerings, its earnings remain moderately exposed to equity market volatility and changes in interest rates. Partially mitigating these risks is the extensive array of sensitivity and stress testing being conducted by the group, which goes beyond what is required by regulators and includes impacts on earnings, regulatory capital and liquidity. This provides protection to the group’s global risk profile.

The ratings of Independence reflect its balance sheet strength, which AM Best assesses as very strong as well as its marginal operating performance, very limited business profile and very strong enterprise risk management. The company’s strategic importance to the Sun Life Group has increased in recent years since it began writing stop-loss insurance in 2020. AM Best believes that Independence will continue to benefit from its parent company’s significant experience in the stop-loss insurance market as it continues to grow in the space.

The ratings also reflect Professional Insurance Company’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, very limited business profile and very strong enterprise risk management. The company has operated as a runoff since 2010 and has been successful over that timeframe in maintaining profitability, and more recently, in returning capital to the parent as insurance in force declines.

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

Sun Life Financial Inc.—
-- “a-” (Excellent) on CAD 1 billion 3.05% subordinated debentures, due 2028
-- “a-” (Excellent) on CAD 750 million 2.38% subordinated debentures, due 2029
-- “a-” (Excellent) on CAD 1 billion 2.58% subordinated debentures, due 2032
-- “a-” (Excellent) on CAD 750 million 2.06% subordinated debentures, due 2035
-- “a-” (Excellent) on CAD 400 million 5.40% subordinated debentures, due 2042
-- “bbb+” (Good) on CAD 250 million 4.45% Class A non-cumulative preferred stock, Series 3
-- “bbb+” (Good) on CAD 300 million 4.45% Class A non-cumulative preferred stock, Series 4
-- “bbb+” (Good) on CAD 250 million 4.50% Class A non-cumulative preferred stock, Series 5
-- “bbb+” (Good) on CAD 155 million 1.825% Class A non-cumulative preferred stock, Series 8R
-- “bbb+” (Good) on CAD 125 million floating rate Class A non-cumulative preferred stock, Series 9QR
-- “bbb+” (Good) on CAD 171 million 2.967% Class A non-cumulative preferred stock, Series 10R
-- “bbb+” (Good) on CAD 29 million floating rate Class A non-cumulative preferred shares, Series 11QR

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

Sun Life Assurance Company of Canada—
--“a+” (Excellent) on CAD 150 million 6.30% subordinated debentures, Series 2, due 2028 (originally issued by Clarica Life Insurance Company)

Sun Life Capital Trust—
-- “a” (Excellent) on CAD 200 million 7.093% non-cumulative Sun Life ExchangEable Capital Securities, call date 2032

The following indicative Long-Term IRs have been affirmed with stable outlooks:

Sun Life Financial Inc.—
-- “a” (Excellent) on senior unsecured debt
-- “a-” (Excellent) on subordinated debt
-- “bbb+” (Good) on preferred stock

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 Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230217005247/en/

Kevin Varvaro

Senior Financial Analyst

+1 908 439 2200, ext. 5487

kevin.varvaro@ambest.com

Michael Adams

Associate Director

+1 908 439 2200, ext. 5133

michael.adams@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best

FAQ

What is the current Financial Strength Rating of Sun Life Financial Inc. (SLF)?

AM Best has affirmed a Financial Strength Rating of A+ for Sun Life Financial Inc.

What is the Long-Term Issuer Credit Rating of SLF?

The Long-Term Issuer Credit Rating of SLF is 'aa' (Superior).

What was the outlook for Independence Life and Annuity Company according to AM Best?

AM Best revised the outlook for Independence Life and Annuity Company to positive.

What rating does AM Best assign to the balance sheet strength of Sun Life Group?

AM Best assesses the balance sheet strength of Sun Life Group as strongest.

How is Sun Life Group's exposure to market volatility described?

Sun Life Group's earnings are moderately exposed to equity market volatility and changes in interest rates.