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Sun Life Financial (SLF) Units' Ratings Affirmed by A. M. Best - Analyst Blog

A.M. Best reiterated the issuer credit rating (ICR) of "a-" and existing debt ratings of Sun Life Financial Inc. 's SLF . Concurrently, the credit rating agency reiterated the financial strength rating (FSR) of A+ (Superior) and ICR of "aa-" of the company's core insurance subsidiaries - Sun Life Assurance Company of Canada and Sun Life and Health Insurance Company (U.S.).

A. M. Best reiterated the ratings of some other affiliates of the company as well. Independence Life and Annuity Company was affirmed FSR of A- (Excellent) and the ICR of "a-" and Professional Insurance Company was affirmed FSR of B++ (Good) and the ICR of "bbb+". The outlook for all the ratings remains stable.

The ratings reflect Sun Life Financial's solid business profile. The insurance company enjoys the leading position in group life and health benefits, group pension and individual insurance in the Canadian markets. Also, the insurer remains focused on the U.S. group insurance and voluntary benefits space. Moreover, the company has been able to strengthen its revenue base as a result of its recent acquisitions in North America. The development was accompanied by the company's improved global asset management business and MFS Investment Management.

Additionally, Sun Life Financial has been consistently boosting its inorganic growth as well as its global footprint via the acquisition of the local subsidiaries of other companies and partnerships. A.M. Best is optimistic about the company's strong risk-adjusted capitalization, solid financial flexibility and an advanced enterprise risk management process. All these metrics have been contributing toward portfolio de-risking and shifting the focus on less capital-intensive businesses, thereby making the company's results much more stable. Also, the company divested its U.S. annuity business in 2013 and has been concentrating on less capital-intensive businesses, which have increased its reliance on cash flows from its Canadian, global asset management businesses and Asian business segments.

The company remains exposed to high interest rates, volatility in the equity market, and stiff competition in the U.S., Canadian and Asian markets, which affect it. Moreover, Sun Life Financial's investment returns continue to remain low due to the realignment of its core business strategies.

Sun Life Financial remains exposed to real estate-linked assets through its investments in commercial mortgage loans, direct real estate and residential and commercial mortgage-backed securities. Therefore, any deterioration in the North American real estate market fundamentals may translate into huge losses for the company.

However, the company's favorable sales and earnings trend bolster its solid financial flexibility along with solid liquidity position with debt-to-capital ratio of 25% and interest coverage of seven to eight times.

Rating affirmations or upgrades from credit rating agencies play an important part in instilling investor confidence in the stock as well as in maintaining its creditworthiness in the market.

Currently, Sun Life Financial carries a Zacks Rank #4 (Sell). Some better-ranked stocks from the life insurance sector include American Equity Investment Life Holding Co. AEL , Aviva plc AV and China Life Insurance Co. Ltd. LFC . All these stocks hold a Zacks Rank #2 (Buy).

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CHINA LIFE INS (LFC): Free Stock Analysis Report

AMER EQUITY INV (AEL): Free Stock Analysis Report

AVIVA PLC-ADR (AV): Free Stock Analysis Report

SUN LIFE FINL (SLF): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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