SLF: DBRS Downgrades to Pfd-2

DBRS has announced that it:

has today downgraded Sun Life Financial Inc.’s (SLF or the Company) Senior Unsecured Debentures to “A” from A (high), its Subordinated Unsecured Debentures to A (low) from “A” and its Preferred Shares to Pfd-2 from Pfd-2 (high). DBRS has also assigned an Issuer Rating of “A” to the Company. At the same time, DBRS assigned a Financial Strength Rating (FSR) of AA (low) to Sun Life Assurance Company of Canada (Sun Life Assurance) and confirmed its Issuer Rating at AA (low) and its Subordinated Debt rating at A (high). DBRS withdrew the Claims Paying Ability rating of Sun Life Assurance, replacing it with the newly assigned FSR. All trends are Stable. All the rating actions are detailed in the table below. The rating actions taken today follow the publication of DBRS’s new methodology, “Global Methodology for Rating Life and P&C Insurance Companies and Insurance Organizations” (December 2015) (Global Insurance Methodology).

The downgrade of the holding company ratings results from the application of the Global Insurance Methodology under which there is typically a wider notch differential between holding company and operating company ratings than in prior methodologies.

The Stable trend considers the Company’s resilient fundamentals and its ability to adapt to the current challenging operating environment. Negative ratings pressure could arise if the Company’s fundamentals weaken, which may include a sustained decline in equity markets or significant deviations of experience from actuarial assumptions. A deterioration in regulatory capital ratios and loss of market share may also negatively affect ratings. Positive rating pressure could arise if the Company experiences solid earnings and growth resulting in increased market share, or displays consistently improved financial metrics and asset quality coupled with income stability.

The new methodology is discussed in the post DBRS Releases and Applies New Insurance Company Methodology.

Affected issues are: SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D, SLF.PR.E, SLF.PR.G, SLF.PR.H, SLF.PR.I and SLF.PR.J.

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