A.M. Best Affirms Ratings of Sun Life Financial Inc. and Its Subsidiaries

A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of “aa-” of Sun Life Assurance Company of Canada (Sun Life) (Ontario, Canada) and Sun Life and Health Insurance Company (U.S.) (SLHIC) (Windsor, CT) – the core insurance subsidiaries of Sun Life Financial Inc. (SLF) (Ontario, Canada) [NYSE:SLF]. Concurrently, A.M. Best has affirmed the ICR of “a-” and existing debt ratings of SLF.

Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Independence Life and Annuity Company (Wilmington, DE), as well as the FSR of B++ (Good) and the ICR of “bbb+” of Professional Insurance Company (Dallas, TX). The outlook for all ratings is stable. (See link below for a detailed listing of the companies and ratings.)

The rating affirmations reflect SLF’s strong business profile, demonstrated by Sun Life’s leading positions in its core Canadian markets – group life and health benefits, group pension and individual insurance –and complemented by its renewed focus on the U.S. group insurance and voluntary benefits space. SLF’s diversified revenue stream is further enhanced by its global asset management business, led by MFS Investment Management, and bolstered by recent acquisitions in North America that have increased the asset base and broadened its service capabilities. Through local subsidiaries and partnerships, Sun Life continues to expand its footprint in Asia, which is a key contributor to the organization’s results. Additionally, SLF maintains sound risk-adjusted capitalization, strong financial flexibility and a sophisticated enterprise risk management process, which A.M. Best views positively. In recent years, these disciplines have yielded action plans to reduce the volatility of SLF’s results through portfolio de-risking and focusing on less capital-intensive businesses.

SLF’s sales and earnings trends are favorable and continue to foster the group’s excellent financial flexibility. With a debt-to-capital ratio (including preferred shares) of roughly 25% and interest coverage of seven to eight times, SLF is within A.M. Best’s guidelines for its current ratings.

While the focus of the group’s repositioned U.S. operations is on markets and businesses that lack sensitivity to interest rates and equity market fluctuations, significant competition remains from established players in these markets, as well as in Canada and Asia. As the organization continues to realign its core business strategies, its results will remain subject to new business strain and lower investment returns. Additionally, the company retains exposure to real estate-linked assets through its investments in commercial mortgage loans, direct real estate and residential and commercial mortgage-backed securities, and may be subject to significant losses should North American real estate market fundamentals deteriorate. Moreover, reducing volatility through the 2013 sale of the U.S. annuity business and focusing on less capital-intensive businesses will make SLF more dependent on cash flows from its Canadian, global asset management businesses and growing Asian business segments.

For a complete listing of FSRs, ICRs and debt ratings for SLF and its life/health subsidiaries, please visit Sun Life Financial Inc.

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best CompanyRichard McMillan, 908-439-2200, ext. 5615Managing Senior Financial [e-mail] Sharkey, 908-439-2200, ext. 5159Manager, Public [e-mail] Edelsberg, 908-439-2200, ext. 5182Vice [e-mail] Peavy, 908-439-2200, ext. 5644Assistant Vice President, Public [e-mail]