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The Sun Life Financial building in Toronto.

The Globe and Mail

DBRS has put the debt and preferred share ratings of Sun Life Financial under review with negative implications while confirming the ratings of Canadian insurance companies Industrial Alliance, Manulife Financial Corp. and Great-West Life.

The ratings service said Friday that the change for Sun Life Financial Inc. reflected the company's weak profitability and earnings volatility associated with outside market forces.

Following a review of the Canadian insurance industry, DBRS says Sun Life's exposures are "out of alignment" with its recent earnings and those of its peers.

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DBRS said its action also reflected uncertainty associated with the company's strategic plan to restore profitability and earnings stability by pursuing more profitable products with fewer embedded risks and lower capital requirements.

It says Sun Life faces a string of challenges, including the continuing weak economic and interest rate environment aggravated by evolving regulatory measures.

Industrial Alliance Insurance and Financial Services Inc's ratings were confirmed but with a negative trend to reflect its reduced financial flexibility to shore up regulatory capital ratios through the issuance of additional preferred shares.

DBRS had placed its debt and preferred shares ratings under review with negative implications in June.

It says Industrial Alliance's rating can be addressed to some degree with a return to a more sustainable interest rate environment that would remove pressure on earnings.

Meanwhile, the ratings for Great-West Lifeco Inc. and Manulife Financial Corp. were maintained.

DBRS says Manulife's rating trend is stable reflecting its strong position in Canada, Asia and in the U.S., where it offers the John Hancock brand. It is also well-diversified by customer, distribution channel, and product line.

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The ratings for Great-West and its subsidiaries Canada Life and London Life reflect its strong financial performance and absence of earnings volatility.

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