PrefBlog

Standard and Poor’s has announced:

• We believe Sun Life Financial Inc.’s 2010 after-tax operating earnings will come in below our expectation and that the U.S. investment portfolio will show further asset impairments, which will add pressure to the group’s capital.
• Based on weaker-than-expected operating earnings and expected future pressure on capital, we have lowered the ratings on SLF and its North American subsidiaries by one notch.
• The outlook on SLF’s North American subsidiaries is stable, and the outlook on SLF is negative.

Standard & Poor’s Ratings Services said today that it lowered its long-term counterparty credit and financial strength ratings on Sun Life Financial Inc.’s (SLF) core insurance subsidiaries–Sun Life Assurance Co. of Canada (SLA), Sun Life Assurance Co. of Canada (U.S.) (SLUS), and Sun Life Insurance & Annuity Co. of New York–to ‘AA-‘ from ‘AA’.

Standard & Poor’s also said that it lowered its financial strength ratings on Independence Life & Annuity Co., which benefits from an explicit claims guarantee for policyholder obligations provided by SLUS–to ‘AA-‘ from ‘AA’. The outlook on these companies is stable.

In addition, Standard & Poor’s lowered its long-term counterparty credit rating on SLF to ‘A’ from ‘A+’. The outlook on SLF in negative.

The ratings and outlook on SLF’s Hong Kong subsidiary, Sun Life Hong Kong Ltd. (A+/Stable/—), remain unchanged…
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Sun Life’s 2009 operating earnings were well below the C$1.75 billion normal run rate required for the higher ratings, as outlined within the report we published on March 6, 2009. We believe SLF’s 2010 after-tax operating earnings will also come in below our expectation of at least C$1.75 billion. The company’s current earnings guidance is for adjusted earnings from operations for 2010 to be C$1.4 billion-C$1.7 billion, which is notionally below the above target.

Supporting the ratings are Sun Life’s very strong business profile and competitive advantages in Canada as well as its very strong earnings, capitalization, and investments. We view Sun Life’s enterprise risk management (ERM) as strong and a neutral to the ratings given the group’s complexity and risks. We view Sun Life’s financial flexibility as a weakness to the ratings.

Sun Life has six issues of PerpetualDiscounts outstanding: SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D and SLF.PR.E, as well as one FixedReset, SLF.PR.F. All are tracked by HIMIPref™ and assigned to their expected subindices.

This entry was posted on Tuesday, April 13th, 2010 at 10:22 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.