Moody’s Investors Service affirmed the credit ratings of Sun Life Financial Inc. (TSX:SLF), and its Canadian affiliates, including the Aa3 insurance financial strength (IFS) ratings of Sun Life Assurance Company of Canada with a stable outlook, the rating agency said Wednesday.

The ratings of SLF’s U.S. affiliates, including the Aa3 IFS rating of Sun Life Assurance Company of Canada U.S. (Sun Life US), were also affirmed and their the negative outlook was maintained.

Moody’s said that the rating affirmations are based on Sun Life’s leading market position in Canada, with top positions in virtually all of its market segments that, together, generate solid, diversified earnings and capital.

“SLF’s excellent business and financial profiles in Canada remain the lynchpin of the group’s ratings — particularly those of its financially weaker U.S. subsidiary, Sun Life US, whose stand-alone credit profile isconsiderably weaker,” said Peter Nerby, Moody’s senior vice president.

Moody’s also said that the stable outlook on SLF and its Canadian entities “reflects the ability of these operations to produce consistent profitability through the economic cycle, both to fund their own business needs and to provide capital support to Sun Life US in a stress scenario, if need be.”

The negative outlook on Sun Life US “reflects the risks associated with its new business strategy, which includes a focus on variable annuity sales and an exit or retreat from certain non-core, and/or  underperforming businesses,” it adds.

“Although Sun Life US has reduced the risk of its variable annuity product features for new business, the size and consistency of its profits will continue to be challenged by its smaller scale, the ultimate competitiveness of its product offering, as well as the firm’s  more limited diversification relative to other US competitors,” said vice president and senior credit officer, Laura Bazer. “The success of the new strategy is untested, and remains to be seen.”