S&P: Credit Rating of Sun Life Financial and its Operating Subsidiaries Unaffected by Pre-Earnin

October 19 00:00 2011

NEW YORK, October 19 (RainbowNewsLine.com) – S&P Rating Services retains its ratings on Sun Life Financial Inc. (NYSE: SLF) (A/Stable/A-1), Sun Life Assurance Co. of Canada (AA-/Stable/A-1+) and of other subsidiaries after company’s pre-release on Q3 results.

The ratings were unaffected by pre-announcements because Q3 results were within S&P’s estimates in spite of lower equity market and interest rate impact on earnings and capital. SLA’s MCCSR is about 210%, which supports the earning but does not reflect the risks of companies that are the direct subsidiaries of SLF. North American equity markets and interest rate recovered from previous quarter declines, the analyst says. However, given the very low interest rate, chances of US treasuries to face further decline are slim.

The difference in accounting standards, Canadian IFRS (a fair value framework) and US GAAP (book value framework) makes Canadian financial statements more volatile in terms of equivalent assets, liabilities, and net exposure. The analyst believes Sun Life’s planned accounting revision for its hedging cost are unaffected to the ratings as it does not reflect the change in the economics of the business.