Fitch Affirms Sun Life Financial Ratings; Outlook Stable.
SLF's ratings strengths include the Canadian franchise with leading market positions and sustainable distribution capabilities, good U.S. niche positions in individual life and annuities and group insurance, good growth prospects for emerging Asian markets, and a strong presence in the U.S. mutual fund marketplace with opportunities for continued global expansion. Balance sheet strengths include very strong risk-based capitalization, high asset quality, and very strong liquidity.
SLF has reported an unbroken record of improving profitability in recent years, despite significant strengthening of the Canadian dollar against foreign currencies. This reflects progress made in growing distribution channels, enhancing customer service and improving efficiency, but also reflects the company's balanced and diversified operations, disciplined investment strategies, and an effective risk management process. Fitch believes that SLF has continued opportunities for earnings improvement as it focuses on enhancing operating efficiencies and strengthening customer relationships. Top-line business momentum continues to generate stable earnings growth.
Rating concerns include the relatively mature Canadian markets and need to expand the strategic positioning and scale in the United States, particularly in individual life insurance and group insurance. To this end, SLF announced yesterday its agreement to purchase the U.S. group benefits business of Genworth financial Inc., which will add significant scale and scope to SLF's U.S. group business.
Sun Life Assurance Company of Canada's MCCSR was 225% at Sept. 30, 2006, which exceeded ratings expectations. SLF is likely to continue to deploy excess capital through moderate levels of stock repurchase and for potential small- to medium-sized block acquisition opportunities, such as the one announced yesterday. Fitch assesses capitalization of Sun Life Assurance Company of Canada (U.S.) under NAIC risk-based capital (RBC), which was 407% at Dec. 31, 2005.
Equity-credit-adjusted leverage (under Fitch's new criteria published Sept. 27, 2006) was 8.2% (9.6% when adjusting equity for 50% of goodwill) at Sept. 30, 2006 and remains within ratings expectations. Fixed-charge coverage has been moderately below ratings expectations and was 7.5 times (x) through the first nine months of 2006.
SLF is a Toronto-based financial services holding company with interests in life insurance, health insurance, and wealth accumulation. SLF's primary operations are in Canada, the U.S., the United Kingdom and Asia. Through nine months ending Sept. 30, 2006, SLF reported shareholders net income of C$1,544 million.
Fitch affirms Sun Life Financial's IDR, senior unsecured and preferred share ratings as follows, with a Stable Outlook:
--IDR at 'AA-';
--5.0% senior notes due 2031 at 'A+';
--4.95% senior unsecured debentures due 2036 at 'A+';
--4.8% fixed-floater senior unsecured debentures due 2035 at 'A+';
--4.75% noncumulative preferred shares, series 1, at 'A';
--4.8% noncumulative preferred shares, series 2, at 'A';
--4.45% noncumulative preferred shares, series 3, at 'A';
--4.45% noncumulative preferred shares, series 4, at 'A'.
Fitch affirms the following insurance subsidiaries' IFS ratings at 'AA', with a Stable Outlook:
--Sun Life Assurance Co. of Canada;
--Sun Life Assurance Co. of Canada (U.S.);
--Sun Life Insurance & Annuity Co. of NY.
Fitch affirms Sun Life Assurance Co. of Canada's IDR at 'AA-' and outstanding subordinated debt ratings at 'A+' as follows, with a Stable Outlook:
--6.65% subordinated debentures due 10/13/15;
--6.15% deferrable subordinated notes due 6/30/22;
--6.30% subordinated notes due 5/15/2028;
Fitch affirms Sun Canada Financial Company outstanding subordinated debt at 'A+' as follows, with a Stable Outlook:
--6.625% subordinated notes due 12/15/07;
--7.25% subordinated notes due 12/15/15;
Fitch affirms Sun Life Capital Trust's 'A+' ratings as follows, with a Stable Outlook :
--Sun Life ExchangEable Capital Securities (SLEECS), 6.865% Series A;
--Sun Life ExchangEable Capital Securities (SLEECS), 7.093% Series B.
Fitch affirms Sun Life of Canada (US) Capital Trust I's 'A+' ratings as follows, with a Stable Outlook:
--8.526% Cumulative capital securities.
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|Date:||Jan 12, 2007|
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