PrefBlog

Standard & Poor’s has announced that it has:

lowered its ratings on Toronto-based Sun Life Financial Inc. (TSX: SLF; Sun Life Financial) and its rated Canadian and U.S. operating companies by one notch. These operating subsidiaries now have long-term counterparty credit and financial strength ratings of ‘AA’ and include: Sun Life Assurance Co. of Canada; Sun Life Assurance Co. of Canada (U.S.); and Sun Life Insurance & Annuity Co. of New York (collectively known as Sun Life). The long- and short-term counterparty credit ratings on Sun Life Financial are ‘A+/A-1’. At the same time, we removed the ratings from CreditWatch with negative implications, where they were placed Feb. 17, 2009. The outlook is negative. The ratings and outlook on Sun Life’s Hong Kong subsidiary, Sun Life Hong Kong Ltd. (A+/Stable/–) remain unchanged.

“The downgrade reflects our assessment of the deteriorating business and macroeconomic conditions that in our opinion have placed increased pressure on Sun Life Financial’s earnings, investments, and capital adequacy position,” said Standard & Poor’s credit analyst Donald Chu. More specifically, we expect the deterioration within the global equity and credit markets will likely result in a lower level of fee generation by Sun Life Financial’s significant wealth management and asset management operations, increased hedging and borrowing cost, and added pressure on the investment portfolio in the next 12-18 months.
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The negative outlook reflects our view that further deterioration could occur within the group’s investment portfolio. We could lower the ratings if our assessment of the company’s investment portfolio and its ability to absorb future losses within its existing capital cushion weakens, if improvement is not seen within the U.S. operations and/or if the global equity markets remain in a deep and prolonged decline. We could revise the outlook to stable if we believe that the group’s core after-tax operating earnings are likely to remain above C$1.75 billion on a normal run rate basis, the fixed charge ratio is likely to remain better than 8x, and asset quality issues will be less significant than its North American peers

The SunLife preferreds outstanding (SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D and SLF.PR.E) were downgraded to A- on the bond scale (from A), which did not change their quality as measured on the preferred scale, where it remains at P-1(low).

All the outstanding SunLife preferreds are tracked by HIMIPref™ and included in the PerpetualDiscount sub-index.

This entry was posted on Friday, March 6th, 2009 at 3:21 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.