Sun Life: Closing on Sale of US Annuities, US Life Insurance Businesses Delayed on NY Review
June 24, 2013 by Fran Lysiak
TORONTO – Canada’s Sun Life Financial said its closing on the sale of its U.S. annuities business and some of its U.S. life insurance businesses will be delayed, due to New York insurance regulators undertaking a review of private investor groups as owners of annuity businesses.
Sun Life Financial (TSX/NYSE/PSE: SLF) in December said it agreed to sell these businesses for about $1.35 billion to Delaware Life Holdings, owned by shareholders of Guggenheim Partners. At that time it was expected to close on the purchase by the end of the second quarter of this year. The acquired businesses would be renamed Delaware Life Insurance Co., and Guggenheim would provide services to the company, including investment management (Best’s News Service, Dec. 17, 2012).
The approval process is underway with the New York Department of Financial Services, Sun Life said in a statement. The department “has recently undertaken a review of private investor groups as owners of annuity businesses, and we anticipate that the review will delay the close of the transaction beyond the end of the second quarter of 2013,” Sun Life said. “We are continuing to work with Delaware Life Holdings, LLC, to obtain approval from the New York Department of Financial Services for the transaction and to close the transaction as soon as possible.”
Sun Life Financial said approvals for the transaction have since been obtained from several regulators, including the Delaware Department of Insurance and the Financial Industry Regulatory Authority.
Sun Life previously said most of the transaction involves 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, fixed and indexed annuities; variable life insurance, and corporate and bank-owned life insurance. The move is to advance its strategy of reducing its risk and focusing its U.S. insurance operations on its employee and voluntary benefits businesses, the company said (Best’s News Service, Dec. 17, 2012).
“Both parties have made substantial progress in preparing for the close and for the transition of employees and operations to support the business going forward,” Sun Life said.
Private equity firms are increasingly tapping into what they view as a potentially lucrative financial opportunity in fixed annuities, including indexed, in the United States (Best’s News Service, Jan. 16, 2013).
Amid 2011’s sharply volatile equity markets, Best’s News Service reported in January 2012 that some U.S. variable annuity writers cut policyholder benefits to reduce their own financial exposure or exited the market. In addition to Sun Life, regulatory changes also were cited by another Canadian writer — Manulife Financial (Best’s News Service, Jan. 3, 2012). Sun Life cited “unfavorable product economics, which, due to ongoing shifts in capital markets and regulatory requirements, no longer enhance shareholder value” when it shut down sales of variable annuities and individual life insurance in the United States at the end of 2011 (Best’s News Service, Dec. 12, 2011).
Sun Life Assurance Company of CA (US) and Sun Life Insurance and Annuity Co. of NY each currently has a Best’s Financial Strength Rating of A – (Excellent). Sun Life and Health Insurance Co. (US) currently has a Best’s Financial Strength Rating of A+ (Superior).
On the morning of June 21, Sun Life Financial’s stock was trading at $29.00 a share, down 2.46% from the previous close. (By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com) BN-NJ-06-21-2013 1045 ET #
