[December 18, 2012]

A.M. Best Downgrades Ratings of Sun Life Assurance Company of Canada (US); Places Ratings Under Review

A.M. Best Co. has downgraded the financial strength rating (FSR) to A- (Excellent) from A (Excellent) and issuer credit ratings (ICR) to "a-" from "a" of Sun Life Assurance Company of Canada (U.S.) (SLUS) (Wilmington, DE) and Sun Life Insurance and Annuity Company of New York (SLNY) (New York, NY). Concurrently, the ratings have been placed under review with negative implications.

The ratings of Sun Life Financial Inc. (SLF) and Sun Life Assurance Company of Canada remain unchanged.

The rating actions follow the December 17, 2012 announcement by SLF that it has entered into a definitive agreement to sell its U.S. annuity and certain life insurance business lines to a Guggenheim Partners-led investor group for approximately $1.35 billion. This business will be transferred through the legal entities listed above (SLUS and SLNY). The transaction is expected to close in the second quarter of 2013, subject to regulatory and other customary approvals. The regulatory solvency ratio of Sun Life Assurance Company of Canada, SLF's flagship insurance company, is not expected to be impacted by this transaction. However, at close, the transaction will result in a reduction in SLF's book value of approximately$950 million. A.M. Best will continue to monitor the impact on SLF.

SLF has indicated its commitment to a "Four Pillar" growth strategy, which in the United States is focused primarily on the employee benefits market as well as growing the company's asset management businesses globally through MFS and its other asset management operations. A.M. Best's rating actions reflect its opinion that given the public announcement of SLF's intention to divest of these legal entities, they are ancillary operations for SLF and not part of its ongoing business plans. As a result, the entities will no longer receive any ratings support. The revised ratings reflect SLUS and SLNY's adequate stand-alone capitalization as well as an elevated risk profile that is reflected in high levels of volatility in its reported earnings.

The ratings of SLUS and SLNY will remain under review pending discussions with the new ownership group, a review of its business plan and capitalization position post-close.

In addition, A.M. Best has downgraded the following debt ratings, as this program rating now reflects A.M. Best's belief that the program is on par with SLF's senior debt holders, which are rated "a-" with a stable outlook:

Sun Life Financial Global Funding III, LP-
-- to "a-" from "a" on $900 million senior secured global medium-term notes, due 2013

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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