Dominion Bond Rating Service and Standard & Poor’s Ratings Services are both out with ratings for Sun Life Financial Inc.’s proposed offering of preferred shares.
Sun Life is embarking on a domestic public offering of preferred shares in an effort to drum up $300 million, the firm announced today.
The shares, to be priced at $25 each, will pay non-cumulative quarterly dividends of 29.7¢ per share with a yield of 4.75% annually, the company said.
The offering, to be underwritten by a syndicate led by RBC Capital Markets, closes on Feb. 25 and carries an option for the company to issue an additional $100 million worth of preferred shares.
“The ratings on Sun Life Financial are derived primarily from the ‘AA+’ financial strength ratings on its primary Canadian and U.S. insurance operating subsidiaries,” said Standard & Poor’s credit analyst Donald Chu. The ratings on these insurance companies reflect their very strong operating performance, business profile, and consolidated capital strength, S&P says.
“Partially offsetting these strengths are the strong competitive pressures that Sun Life Financial faces in its primary markets; the susceptibility of its wealth management businesses to earnings volatility given the uncertainties associated with the equity markets and interest rates; the impact of the devaluated U.S. dollar against the Canadian dollar, which is Sun Life Financial’s reporting currency; and economic and political risk associated with investments in emerging markets,” S&P notes.
At the same time, S&P affirmed the ratings outstanding on Sun Life Financial and its primary insurance operating companies. The outlook on Sun Life Financial is positive.
“The positive outlook on Sun Life Financial reflects the increased divergence in income streams to the holding company following the corporate destacking in Jan 2005; lighter regulation and lower capital requirements for the asset management businesses and other noninsurance businesses, which provides the group with a higher level of financial flexibility,” S&P says. “Continued traction in revenues and earnings need to be seen in the U.S. businesses before the ratings on Sun Life Financial are raised.”
DBRS says its rating reflects Sun Life’s broad diversity of operations, good credit quality, and strong financial risk profile. “The company reported favourable consolidated results for 2004, with net income of $1.7 billion and improved financial strength. Contributing to the increased 2004 earnings were better credit quality results and the impact of higher average equity market levels,” DBRS says.
DBRS rating http://www.dbrs.com/web/sentry?COMP=1400&DocId=147291www
S&P rating http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_article&cid=1107815931768&b=10&r=1&l=EN