PrefBlog

Standard & Poor’s has announced:

• •Sun Life Financial Inc. has successfully implemented its “four pillar” strategy, leading to an improved business risk profile as shown by its strong and very stable operating performance.
• •The company’s financial risk profile continues to be characterized by healthy capitalization and strong financial flexibility.
• •We are raising our ratings on the group’s insurance operating subsidiaries to ‘AA’ from ‘AA-‘ and on the holding company to ‘A+’ from ‘A’.
• •The outlook is stable, reflecting our expectation that the group will maintain its status as a top three insurer in Canada and continue to grow its other global businesses.

…
In 2012, SLF announced its “four pillar” strategy that focuses on its Canadian
group and individual life, U.S. group, Asia group, and asset management businesses. Over the past seven years, SLF has grown these businesses profitably (including through acquisitions) while also divesting some of its noncore businesses, such as its U.S. variable annuity business in 2013.

The outlook on SLF is stable, reflecting our expectation that the group will continue to maintain its status as a top three insurer in Canada and continue to grow its Asia, U.S., and asset management businesses, earning consistent returns from each. We also expect the group to maintain its current level of capitalization, as well as fixed-charge coverage above 8.0x with financial leverage below 30%.

We could lower the ratings if we believe SLF’s competitive advantage is deteriorating, resulting in a longer-term decline in operating performance relative to peers; if it loses its market position or experiences meaningful damage to its reputation in Canada; or if its asset management businesses see sustained losses.

While unlikely in the next two years, we could raise our ratings if SLF’s capital redundancy at ‘AAA’ grows significantly and we believe management remains committed to ‘AAA’ levels of capital.

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 sale of the US annuities unit was reported on PrefBlog in August, 2013, as was S&P’s positive outlook in March 2017.

DBRS downgraded the SLF preferred to Pfd-2 in December 2015, and most recently confirmed them at that level in December, 2018.

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