(The following statement was released by the rating agency) Fitch Ratings-New York-August 09: Fitch Ratings has assigned an 'A-' rating to Sun Life Financial Inc.'s (SLF) recently announced issuance of up to CAD750 million 2.38% subordinated unsecured fixed/floating debentures due 2029. The existing ratings for Sun Life Financial, Inc. and its insurance operating subsidiaries are unaffected by today's rating action. Key Rating Drivers The rating for the new offering is equivalent to the rating on Sun Life's existing subordinated debt obligations. Under Fitch's notching methodology, the notes are rated two notches below the company's 'A+' Issuer Default Rating (IDR), which reflects Fitch's assumption of 'poor' recovery prospects in the event of default given the level of subordination. Sun Life's notes represent the company's inaugural sustainability bond issuance in Canada, which remain differentiated from more recent green bond issuance across the industry. These bonds closely follow Sun Life's recently announced sustainability bond framework, which outline criteria for investment in both green and social assets. An amount equal to the net proceeds from this issuance is expected to be allocated to eligible assets under this framework. Fitch expects pro-forma total leverage following this issuance to remain between 20% and 23%, with pro-forma financial leverage remaining low between 12% and 15% at year-end 2018. Fitch upgraded the ratings of SLF and its insurance operating subsidiaries, while revising the Rating Outlook to Stable from Positive on March 1, 2019. For more details, see Fitch's press release at www.fitchratings.com. Rating Sensitivities Key rating sensitivities that could result in a rating upgrade include:--Material improvement in the company's competitive positioning, increasing the company's overall operating scale and diversification of its businesses, while maintaining very strong capitalization metrics;--Reduced exposure associated with legacy related liabilities that strain capital and earnings; --Continued growth and stability in operating earnings metrics, including a return on equity (ROE) measure consistently in excess of 16% and fixed-charge coverage consistently in excess of 15x;--Financial leverage and total leverage metrics that remain below 15% and 25%, respectively.Key rating sensitivities that could result in a ratings downgrade include:--Deterioration in capitalization as measured by a LICAT ratio consistently below 115%;--Significant deterioration in the company's operating earnings metrics, resulting in a decline in fixed-charge coverage, excluding the net impact of market factors, to consistently below 6x;--Deterioration in earnings, leading to a sustained decline in ROE to below 9%; --A sustained increase in financial leverage or total leverage to consistently above 25% or above 35%, respectively;--Deviation from its current risk profile by expanding into inherently riskier products and asset classes;--The addition of unmitigated execution risk associated with acquisition activity, affecting the company's leverage and capitalization.ESG CONSIDERATIONSUnless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity.For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg. Date of Relevant Committee 28 February 2019 Sun Life Financial Inc. ----subordinated; Long Term Rating; New Rating; A- Contacts: Primary Rating Analyst Anthony Beato, Director +1 646 582 4509 Fitch Ratings, Inc. 33 Whitehall Street New York 10004 Secondary Rating Analyst Jamie Tucker, Director +1 212 612 7856 Committee Chairperson James Auden, Managing Director +1 312 368 3146
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