A.M. Best Assigns Initial Debt Ratings to Sun Life.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--June 8, 2001 A.M. Best Co. has assigned a rating of "a+" to the existing C$300 million subordinated debentures of Sun Life Assurance Company of Canada (Sun Life), Toronto. A.M. Best has also assigned an "a+" rating to the US$300 million subordinated notes issued by Sun Canada Financial Co. and the US$600 million cumulative capital trust securities issued by Sun Life of Canada (U.S.) Capital Trust I. The U.S. dollar-denominated securities are unconditionally guaranteed Unconditionally Guaranteed is the eighth LP by Captain Beefheart & the Magic Band, originally released in 1974. Upon release it was criticised for being too commercial, however it failed to give Beefheart any real chart success and peaked at #192 on the Billboard by Sun Life. The A++ (Superior) financial strength rating of Sun Life and its principal life/health subsidiaries is unaffected. These ratings reflect Sun Life's leading market position in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. , diversified earnings sources, strong operating performance, sophisticated asset-liability management practices and superior capitalization. The group maintains a strong franchise as a top provider of wealth management and protection products in North America. Sun Life is a leader in Canada's pension and group life/health markets. Solid positions in U.S. niche markets for group life/health and individual life products and a strong variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. presence contribute to diversification and operating performance. MFS Investment Management MFS Investment Management, formerly Massachusetts Financial Services, is a Boston, Massachusetts-based financial services firm. In its publicity, MFS claims to have invented the mutual fund. The current chair of the company is Robert Pozen. (MFS MFS Medicare fee schedule ), a prominent mutual fund company, accounts for nearly 30% of earnings. An established--albeit reduced--presence in the United Kingdom and growing operations in Asia round out Sun Life's diverse operating profile. A.M. Best expects Sun Life to maintain its significant market presence in Canada and the United States due to its extensive distribution channels, emphasis on customer service and competitive product line. Sun Life's product portfolio and distribution capabilities will be enhanced through its pending acquisition of Keyport Life, a fixed and variable annuity writer and Independent Financial Marketing Group (IFMG IFMG Institut für Markenentwicklung Graz (Graz, Austria) IFMG Integration-Flexibility-Modularity-Generality IFMG Identically-Distributed First-Order Markov Gaussian ), a third-party marketer of insurance and investment products through banks. While the purchase represents a significant investment, A.M. Best believes Sun Life's post-transaction capitalization will remain strong. The acquisition will be financed with existing cash resources as well as external funds External funds Funds originating from a source outside the corporation to increase cash flow and to aid in expansion efforts, e.g., bank loan or bond offering. external funds The funds that are raised from sources outside a firm. , most likely a combination of equity and debt. A.M. Best believes the consistent flow of earnings from Sun Life's core businesses is sustainable and provides ample liquidity to strongly support its long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. service capabilities. Once the Keyport transaction is completed, Sun Life's financial leverage--though moderate--will be consistent with its peers, with debt plus preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. to total capital in the 25% range. Sun Life effectively manages its asset-liability exposure by considering asset mix, credit risk, duration and liquidity aspects for each product segment and in the aggregate. The company's high-quality investments are comprised mainly of bonds and mortgages. With only 0.10% of its portfolio not performing at year-end 2000, Sun Life's investments have produced consistent returns. With 60% of Sun Life's earnings derived from wealth management business, its operating results may be impacted by a prolonged equity market correction Market correction A relatively short-term drop in stock market prices, generally viewed as bringing overpriced stocks back to a level closer to companies' actual values. . A.M. Best notes MFS has performed well through the recent market volatility by exhibiting positive net inflows and declining redemptions, resulting in a top five mutual fund industry ranking for net new flows in 2000. Additionally, Sun Life is currently reviewing its strategic position in the United Kingdom after exiting the direct sales force distribution business. The company will continue to monitor industry review requirements related to pension mis-selling and to manage interest rate and mortality risk associated with guaranteed annuity options. Finally, Sun Life faces limited growth opportunities in the mature Canadian market. Sun Life is a leading international financial services organization providing a diverse range of wealth accumulation and protection products and services to individuals and corporate customers. Sun Life has operations in markets worldwide, including Canada, United States, United Kingdom, Hong Kong, Philippines, Japan, Indonesia, India and Bermuda. As of March 31, 2001, the Sun Life Financial group of companies (NYSE NYSE See: New York Stock Exchange : SLC (Subscriber Loop Carrier) Lucent's designation for its digital loop carrier (DLC) products. See digital loop carrier. See also 386SLC. ) had total assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. of C$316 billion. The following debt ratings have been assigned: Sun Life Assurance Company of Canada-- -- "a+" rating on C$300 million, 8.49% subordinated debentures due 2005 Sun Canada Financial Co.-- -- "a+" rating on US$150 million, 6.625% subordinated notes due December 2007 -- "a+" rating on US$150 million, 7.25% subordinated notes due December 2015 Sun Life of Canada (U.S.) Capital Trust I-- -- "a+" rating on US$600 million, 8.526% cumulative capital securities backed by subordinated redeemable debentures (The U.S. dollar-denominated issues are unconditionally guaranteed by Sun Life Assurance Company of Canada) A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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