A.M. Best Affirms Sun Life's Financial Strength and Debt Ratings; Revises Outlook to Stable

Business Wire, Sept 15, 2004

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength ratings of A (Superior) of Sun Life Assurance Company of Canada (Sun Life) (Toronto) and its core subsidiaries, Sun Life Assurance Company of Canada (U.S.), (Wilmington, DE) and Sun Life Insurance and Annuity Company of New York. Concurrently, A.M. Best has affirmed all of Sun Life's existing debt ratings. All rating outlooks have been revised to stable from negative.

The ratings reflect Sun Life's diversified and profitable operations, favorable risk-adjusted capitalization and very strong market positions in all major business segments in Canada. The revised outlook primarily reflects Sun Life's stronger earnings, continued growth and reduced reliance on mutual funds and other wealth management business segments.

Sun Life has strong debt servicing capabilities underpinned by its favorable liquidity posture, high quality investment portfolio and sustainable earnings. Sun Life's earnings are supported by its diverse operations and have been enhanced from expense synergies arising from its completed integration of Clarica Life. Operating earnings are anchored by its very strong franchise in the Canadian market and complemented by its prominent position in the U.S. fixed annuity business. Primarily, as a result of the Clarica acquisition and organic growth in Canada, Sun Life enjoys a good balance between wealth management and protection business, along with a reduced historical reliance on earnings from its mutual fund operation, Massachusetts Financial Services Company (MFS), which has been impacted by volatile equity markets and recent compliance issues.

Despite overall improved earnings performance, A.M. Best believes Sun Life will remain challenged to significantly improve the operating performance of its U.S. wealth management businesses where spread compression and volatile equity markets continue to impact the company's fixed annuity and equity based wealth management businesses. Moreover, reported earnings have been reduced by recent settlements with U.S. federal and state regulators relating to MFS. Although these charges pressured Sun Life's overall operating performance, the expenses are one-time in nature and were easily absorbed by Sun Life's strong capital base without a material impact on the financial strength of the company.

A.M Best has also affirmed the financial strength rating of A (Superior) of Independence Life & Annuity Company (Lincoln, RI).

For a comprehensive list of Sun Life Assurance Company of Canada's financial strength and debt ratings, please visit http://www.ambest.com/press/091502sunlife.pdf.> For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/debt.> A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.