SLF : S&P Improves Outlook to Positive

Standard & Poor’s has announced:

  • •We are revising our outlook on Sun Life Financial to positive, reflecting our belief that the company will maintain AAA capital adequacy post-LICAT rollout, which would lead to an upgrade within the next 24 months.
  • •We also expect the company to maintain modestly growing net income over the next two years.
  • •At the same time, we affirmed our ‘AA-‘ratings on SLF and its core subsidiaries.

“Over the last five years, the company has successfully executed its four-pillar strategy, focusing on its Canadian, Asian, Investment Management and US group benefits businesses.” said S&P Global Ratings credit analyst Peggy Poon. Given the significantly de-risked business risk profile following the successful sale of the U.S. individual annuity business in 2013 and our forecast for Canada’s macroeconomic environment, we believe the company will maintain ‘AAA’ capital adequacy as measured by our model prospectively in addition to modestly growing its net income over the next few years.

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, SLF.PR.J and SLF.PR.K.

The FixedResets of the company exhibit an Implied Volatility of 18% … which is higher than the high-single-digits I would consider normal for an investment-grade company, but lower than I would expect if the market fully subscribed to my theory that these issues will eventually be subject to a Deemed Retraction.

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