Fitch Ratings has downgraded its ratings of Sun Life Financial Services of Canada Inc.’s insurance subsidiaries to AA+ from AAA and upgraded the insurer financial strength rating of subsidiary, Keyport Life Insurance Company, to AA+ from AA.

Fitch has also downgraded the fixed income ratings of Sun Life Assurance Company of Canada and its financing subsidiaries by one notch. The rating outlook for all ratings is stable.

The rating actions follow Sun Life Financial’s acquisition of Clarica Life Insurance Co. Fitch believes that the acquisition of Clarica with its strong retail distribution system, and the acquisition of Keyport Life with its bank distribution, gives Sun Life an enviable financial services platform that should support above-average growth and profitability over the long term.

Other positive benefits of the acquisitions should be increased scale and top market share in individual and group insurance, as well as improved product balance and alternative distribution sources. Sun Life Financial ranks among the top 10 North American insurers by market capitalization.

However, Fitch believes that Sun Life’s approach to capital management has become less conservative than in the past with the deployment of excess capital and use of both capital trust securities and intangible equity in the form of goodwill in the capital structure. The premiums to book values paid also sacrifice the achievement of the superior financial performance characteristic as measured by ROE of AAA rated companies in the intermediate term.

Additionally the close proximity of two significantly sized acquisitions may also present certain execution challenges for management, says Fitch. Furthermore, the rating company says the integration of two of Canada’s top five life insurers could prove challenging.