(By Balaseshan) Canada's No. 3 life insurer Sun Life Financial Inc. (NYSE: SLF) (TSE: SLF) has agreed to sell its domestic U.S. annuity business and certain life insurance businesses for base price of $1.35 billion to Delaware Life Holdings, which is owned by shareholders of Guggenheim Partners.
Sun Life said the transaction advances the company's strategy of reducing its risk profile and focusing U.S. insurance operations on its growing employee benefits and voluntary benefits franchises. The base price is adjusted to reflect the performance of the business through closing.
The transaction will consist primarily of the sale of 100% of the shares of Sun Life Assurance Company of Canada (U.S.), which includes Sun Life Financial's domestic U.S. variable annuity, fixed annuity and fixed index annuity products, corporate and bank-owned life insurance products and variable life insurance products.
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Sun Life Financial estimates that the transaction will result in a reduction in book value of C$950 million at closing. It is estimated that the impact of the transaction on Sun Life Financial is about C$0.22 per share of loss in 2013, assuming actual experience in line with actuarial best estimates.
As a result of the sale, Sun Life Financial's earnings sensitivities to equity markets would be reduced by 50% and earnings sensitivities to interest rates would be reduced by 35%, relative to the published earnings sensitivities as of September 30, 2012.
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The transaction is not expected to result in any change to the Minimum Continuing Capital and Surplus Requirements ratio for Sun Life Assurance Company of Canada, which continues to have strong capital levels.
At close, the transaction is expected to result in a cash level at Sun Life Financial of C$1.9 billion, net of the planned repayment of C$350 million of debt in June 2013. Holders of the Medium Term Notes (MTNs) issued by Sun Life Financial Global Funding III, L.P. will not be impacted by the sale of Sun Life Assurance Company of Canada (U.S.).
Employees of Sun Life Financial U.S. in Wellesley, Massachusetts; Lethbridge, Alberta; and Waterford, Ireland will continue to support the acquired businesses, which will be renamed Delaware Life Insurance Co. Guggenheim Partners will provide services to the company including investment management.
The transaction is expected to close by the end of Q2-2013. Morgan Stanley & Co. LLC served as financial advisor to Sun Life Financial. Debevoise & Plimpton LLP served as legal advisor to Sun Life Financial.
The stock closed Friday's regular session down 0.07% at $28.19 in the NYSE, while in TSE it ended up 0.11% at C$27.83.