Makati—(PHStocks)—Sun Life Financial Inc. (PSE: SLF) (TSX: SLF) (NYSE: SLF) today announced the execution of a definitive agreement whereby Delaware Life Holdings, a company owned by shareholders of Guggenheim Partners, will purchase Sun Life’s domestic U.S. annuity business and certain life insurance businesses for a base purchase price of US$1.35 billion, as adjusted to reflect the performance of the business through closing.
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 Company. Guggenheim Partners will provide services to the company including investment management.
The transaction is expected to close by the end of Q2 2013 subject to regulatory approvals and customary closing conditions.
Dean A. Connor, President and Chief Executive Officer, Sun Life Financial, stated, “This transaction represents a transformational change for Sun Life. It significantly advances our strategy of reducing Sun Life’s risk profile and earnings volatility, focuses our U.S. operations on our areas of greatest strength and opportunity, and crystallizes future earnings and capital releases that will further support our growth and shareholder value creation. It also transfers this business to a financially strong buyer that understands and is committed to the annuity and life insurance sectors, which will benefit customers and the outstanding employees who will continue to support them.”
Connor added, “Consistent with our Four Pillar strategy unveiled in March, we will continue to invest in both our U.S. employee benefits business, which is already a top 10 player, and in our growing voluntary benefits business. We have made excellent progress in growing both of these businesses in 2012. We will also continue to support growth in MFS, our highly successful investment manager that has a large U.S. presence and over US$300 billion of assets under management globally.”
Todd Boehly, speaking on behalf of Delaware Life Holdings, added: “Together with Sun Life Financial’s employees, we look forward to maintaining a high level of customer service, strong capitalization and ratings, and to building on this impressive platform.”
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.
Sun Life Financial estimates that the transaction will result in a reduction in book value of $950 million at closing. It is estimated that the impact of the transaction on Sun Life Financial is approximately ($0.22) per share of earnings 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. 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 Inc. of $1.9 billion, net of the planned repayment of $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.).
Morgan Stanley & Co. LLC served as financial advisor to Sun Life Financial. Debevoise & Plimpton LLP served as legal advisor to Sun Life Financial.
The information contained in this document is in Canadian dollars unless otherwise noted.