Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Enter the above code here:
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Action:

Moody's downgrades Sun Life US IFS to Baa2 (on review for downgrade); affirms Sun Life Assurance's Canadian Aa3 IFS (negative outlook); places Sun Life Financial's Baa3(hyb) on review for upgrade

Global Credit Research - 17 Dec 2012

Toronto, December 17, 2012 -- Moody's Investors Service has downgraded to Baa2 from A3 the insurance financial strength (IFS) rating of Sun life Assurance Company of Canada (U.S.) (Sun Life US), the wholly-owned U.S. life insurance subsidiary of Sun Life Financial Inc. (TSX; SLF: preferred stock at Baa3 (hyb) review for possible upgrade ). The rating was also placed on review for further possible downgrade. In the same rating action, the Baa1 senior secured debt rating of Sun Life Financial Global Funding III, L.P. (SLFGF III) was placed under review with direction uncertain. Moody's also affirmed the Aa3 IFS rating of SLF's Canadian insurance subsidiary, Sun Life Assurance Company of Canada (SLA), and the ratings of other Canadian affiliates, with the outlook for the Canadian ratings (excluding SLF) remaining negative. Finally, the rating agency placed SLF's preferred stock Baa3 (hyb) rating on review for possible upgrade. These rating actions follow today's announcement by SLF that it had executed a definitive agreement to sell 100% of the shares of Sun Life US, including SLF's US variable annuity (VA), fixed and fixed indexed annuity, BOLI/COLI, and variable life insurance liabilities, to Delaware Life Holdings (DLH), a company owned by shareholders of Guggenheim Partners, LLC (Guggenheim; unrated) for approximately $1.35billion. The transaction, which is subject to regulatory and other approvals, is expected to close by the end of Q2 2013.

RATING RATIONALE

U.S. Operations

Commenting on the downgrade of Sun Life US to Baa2 from A3 IFS, Moody's said that it had lowered the company's rating to its intrinsic, stand-alone credit profile, in anticipation of the removal of financial support from SLF upon the transaction's closing, as well as the lower financial flexibility of the entity under its new ownership. "Sun Life US's rating had previously benefitted from two notches of uplift from its stand-alone credit profile due to its ownership and support by SLF, which will fall away with the divestiture, leaving its financial profile weaker," said Vice President and Senior Credit Officer, Laura Bazer.

The stand-alone credit profile of Sun Life US primarily reflects the rating agency's concerns about the company's runoff status and potential worsening of the its capital adequacy in a stress equity market scenario post-closing, given the earnings and capital volatility of its substantial runoff variable annuity block with guaranteed benefits. However, the company's NAIC Risk Based Capital (RBC) ratio is currently strong, at 412% at year-end 2011 and estimated at over 400% through Q3 2012. Moody's expects SLF to maintain Sun Life US' RBC ratio at or above 350% up to the closing of the transaction.

Commenting on the review for further downgrade of Sun Life US' rating, Bazer said it would focus on the business, hedging, dividend, capital management, and investment strategies under ownership by Guggenheim, among other factors, as well on Guggenheim's ability and willingness to provide financial support to Sun Life US in a stress situation, assuming the transaction closes as expected.

Given the review for downgrade, an upgrade is not likely at this time. However, the following could lead to a confirmation of the Sun Life US rating: 1) successful execution of the transaction without detriment to Sun Life US' inforce business, and 2) establishment of variable annuity hedging, investment, dividend, and capital management strategies under Guggenheim consistent with Sun Life US' current Baa2 credit profile.

The following factors could move Sun Life US' rating down further: 1) failure to close the transaction in an orderly fashion, or market credit concerns, leading to elevated policyholder surrenders, and net losses, 2) a decline in NAIC RBC ratio below 300%, 3) failure to put in place an appropriate variable annuity hedging program, or 4) a significant decline in investment quality, due to a change in investment strategy under Guggenheim.

Commenting on the review with direction uncertain of the Baa1 rating of SLFGF III, a structured funding agreement-backed note that matures in October 2013, the rating agency said it would focus on the arrangements, possibly including collateralization, SLF and/or Guggenheim may put in place to ensure the timely payment of interest and repayment of principal. The rating could be upgraded if sufficient support arrangements are put into place for these notes, whereas the rating could be downgraded if the sale of Sun Life US to Guggenheim is not completed and no support for these notes is implemented.

Canadian Operations

Commenting on the affirmation of the Aa3 IFS ratings of SLA and other Canadian-affiliated companies, Moody's said that it is based on the company's excellent top-three market position in Canada, strong product risk and diversification, strong and predictable Canadian earnings, and solid capitalization. The sale of Sun Life US will -- once completed -- alleviate the rating agency's concerns related to the execution risks of the runoff strategy for the U.S. businesses and that any further charges arising from Sun Life US' closed blocks would remain a drag on SLF's and possibly SLA's earnings and capital generation. "Moody's views the transaction as credit positive for SLA as it eliminates the potential for additional capital support being needed at Sun Life US, which is the primary driver of the negative outlook" said Vice President and Senior Credit Officer, David Beattie. Moody's expects to resolve the negative outlook on the Aa3 IFS ratings of SLA and other Canadian-affiliated companies upon closing of the transaction and the elimination of the runoff business risk.

Moody's indicated that the following factors could result in the rating outlook of SLA and its affiliates returning to stable from negative: 1) the closing of the transaction, or alternatively the successful execution of the runoff plan for Sun Life US with stable capital generation and sustainable reductions in expenses, 2) a return to stable and sustainable consolidated profitability with a return on capital of at least 8%, and 3) consolidated financial leverage at SLF below 30% and earnings and cashflow coverage above 8x and 5x, respectively. Alternatively, the following could result in a downgrade of SLA's ratings: 1) a decline in return on capital below 8% on a sustained basis with increased earnings volatility, 2) a reduction of SLA's MCCSR capital ratio to below 200%, 3) consolidated financial leverage at SLF exceeding 30% for a sustained period, or 4) consolidated earnings and cashflow coverage below 8x and 5x, respectively, for a sustained period.

Holding Company

Commenting on the review for possible upgrade of SLF's Baa3 (hyb) preferred stock rating, Moody's noted that the sale of the lower-rated Sun Life US entity could result in the more typical notching seen for insurance groups (i.e. three notches from the insurance operating subsidiary's IFS rating to the holding company's senior unsecured debt rating). The proposed transaction -- once concluded -- is positive to the credit profile of SLF as it will eliminate the group's exposure to the chronically poor earnings performance of the U.S. subsidiary, possibility of future charges associated with the U.S. subsidiary's business, as well as the equity market and interest rate sensitivity of the run-off businesses -- all of which contributed to the current notching paradigm for SLF (which is four notches from SLF's Aa3 IFS to the implied senior debt rating of SLF). Similar to the situation with SLA, Moody's expects to conclude the review for SLF's Baa3 (hyb) preferred stock rating upon closing of the divestiture. The debt rating could be upgraded to Baa2 (hyb) if the transaction closes and the debt rating could be confirmed at Baa3 (hyb) if the transaction does not close and Sun Life US is retained by SLF.

The following rating was downgraded and placed on review for further downgrade:

Sun Life Assurance Company of Canada (U.S.) -- insurance financial strength rating to Baa2 from A3;

The following rating was placed under review -- direction uncertain:

Sun Life Financial Global Funding III, L.P. -- funding agreement backed senior secured at Baa1;

The following rating was placed under review for possible upgrade:

Sun Life Financial, Inc. -- preferred stock at Baa3 (hyb)

The following ratings were affirmed with a negative outlook:

Sun Life Assurance Company of Canada -- insurance financial strength at Aa3

Clarica Life Insurance Company -- backed subordinate debt at A2

Sun Life Capital Trust -- preferred stock at A3 (hyb)

Sun Canada Financial Co. -- backed subordinate debt at A2

Sun Life Financial, Inc., headquartered in Toronto, Canada, reported total general and segregated fund assets of approximately $223 billion and total common shareholder's equity of $16 billion at September 30, 2012 .

The principal methodology used in this rating SLF and its affiliates was Moody's Global Rating Methodology for Life Insurers, published May 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

In addition to the information provided below please find on the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued each of the ratings.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

David Beattie
VP - Senior Credit Officer
Financial Institutions Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
(416) 214-1635

Robert Franklyn Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
(416) 214-1635

Moody's downgrades Sun Life US IFS to Baa2 (on review for downgrade); affirms Sun Life Assurance's Canadian Aa3 IFS (negative outlook); places Sun Life Financial's Baa3(hyb) on review for upgrade
No Related Data.

 

© 2014 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATION") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

 


MOODY'S CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY'S CREDIT RATINGS OR MOODY'S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

 


ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

 


All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s Publications.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

 


To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

 


NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

 


MIS, a wholly-owned credit rating agency subsidiary of Moody’s Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

 


For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for "retail clients" to make any investment decision based on MOODY'S credit rating. If in doubt you should contact your financial or other professional adviser.

© 2014 Moody's Investors Service, Inc., Moody’s Analytics, Inc. and/or their affiliates and licensors. All rights reserved.
Regional Sites: