AM Best Affirms Credit Ratings of Sun Life Financial Inc. and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "aa" (Superior) of Sun Life Assurance Company of Canada (Sun Life) (Ontario, Canada) and Sun Life and Health Insurance Company (U.S.) (Lansing, MI). These companies are the core insurance subsidiaries of Sun Life Financial Inc. (SLF) (Ontario, Canada) (NYSE:SLF) (collectively referred to as Sun Life Group). Concurrently, AM Best has affirmed the Long-Term ICR of "a" (Excellent) and the Long-Term Issue Credit Ratings (Long-Term IRs) of SLF. The outlook of these Credit Ratings (ratings) is stable. (Please see below for a detailed listing of the Long-Term IRs.)

Additionally, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of "a" (Excellent) of Independence Life and Annuity Company (Independence) (Wilmington, DE), a strategic subsidiary of SLF. Lastly, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR of "bbb+" (Good) of Professional Insurance Company (Dallas, TX), an SLF runoff subsidiary. The outlook of these ratings is stable.

The ratings reflect Sun Life Group's balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM).

The group has maintained a favorable level of risk-adjusted capitalization over the long term, with most recent years seeing further excess capital being held as evidenced by rising scores in Best's Capital Adequacy Ratio (BCAR) and the Canadian regulatory Life Insurance Capital Adequacy Test (LICAT). The balance sheet is supported further by overall favorable operating earnings, strong liquidity metrics and a holding company that can provide additional financial flexibility. The group continues to hold dominant market positions in several lines within the Canadian, U.S. and Asian markets due in part to a robust ERM framework, which AM Best views as a competitive advantage.

The ratings also reflect Independence's balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile, very strong ERM, and support from its parental organization. The company continues to develop within the stop-loss insurance market, which it entered in 2020 after being in runoff prior to the strategic change. Premium growth remains moderate to date as the company continues to produce modest operating gains while attempting to achieve scale over time.

The ratings also reflect Professional Insurance Company's balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, very limited business profile, appropriate ERM, and support from its parental organization. The company has operated as a runoff since 2010 and has been successful over that timeframe in maintaining profitability, occasionally returning capital to the parent as insurance in force declines and excess risk-adjusted capital grows.

The following Long-Term IRs have been affirmed with stable outlooks:

Sun Life Financial Inc.—

-- "a-" (Excellent) on CAD 1 billion 2.58% subordinated debentures, due 2032

-- "a-" (Excellent) on CAD 750 million 2.06% subordinated debentures, due 2035

-- "a-" (Excellent) on CAD 400 million 5.40% subordinated debentures, due 2042

-- "bbb+" (Good) on CAD 250 million 4.45% Class A non-cumulative preferred stock, Series 3

-- "bbb+" (Good) on CAD 300 million 4.45% Class A non-cumulative preferred stock, Series 4

-- "bbb+" (Good) on CAD 250 million 4.50% Class A non-cumulative preferred stock, Series 5

-- "bbb+" (Good) on CAD 155 million 1.825% Class A non-cumulative preferred stock, Series 8R

-- "bbb+" (Good) on CAD 125 million floating rate Class A non-cumulative preferred stock, Series 9QR

-- "bbb+" (Good) on CAD 171 million 2.967% Class A non-cumulative preferred stock, Series 10R

-- "bbb+" (Good) on CAD 29 million floating rate Class A non-cumulative preferred shares, Series 11QR

The following Long-Term IRs have been affirmed with stable outlooks:

Sun Life Assurance Company of Canada—

-- "a+" (Excellent) on CAD 150 million 6.30% subordinated debentures, Series 2, due 2028 (originally issued by Clarica Life Insurance Company)

Sun Life Capital Trust—

-- "a" (Excellent) on CAD 200 million 7.093% non-cumulative Sun Life ExchangEable Capital Securities, call date 2032

The following indicative Long-Term IRs have been affirmed with stable outlooks:

Sun Life Financial Inc.—

-- "a" (Excellent) on senior unsecured debt

-- "a-" (Excellent) on subordinated debt

-- "bbb+" (Good) on preferred stock

This press release relates to Credit Ratings that have been published on AM 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 see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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