The logo of Sun Life Financial is seen in Toronto May 6, 2015.FRED THORNHILL/Reuters
Sun Life Financial Inc. is boosting its presence in the United States, striking a $975-million (U.S.) deal with insurer Assurant Inc. to expand its offerings of disability, dental and life insurance.
The Toronto-based insurer said the acquisition will expand the employee benefits insurance business it offers in the U.S., a market Sun Life has targeted for growth. Once combined, the deal will vault Sun Life into position as the sixth-largest group-benefits business in the U.S. by revenue, from its former ninth-place ranking.
The deal value of $975-million includes the purchase price, a contribution of capital, and a tax deduction.
Sun Life is looking to Assurant's business to broaden its offerings and add scale. Assurant's client strengths are in small to mid-sized employers, compared with Sun Life's business that includes more larger businesses. Together with Assurant, Sun Life will nearly double the number of group-benefits customers it has to 64,000, and more than double the volume of premiums it has to about $4-billion.
Through the agreement, Sun Life will add some business lines that it didn't have, such as vision benefits. Sun Life will also be able to cross-sell some of its products to Assurant's existing clients. The businesses also cover slightly different geographies in the U.S., adding new partnerships with brokers to the distribution network Sun Life is building.
"The acquisition of the Assurant Employee Benefits business is directly on strategy, accelerating the growth of our U.S. Group Benefits business and expanding the scope of our benefits business in North America," Dean Connor, chief executive of Sun Life Financial, said in a statement.
Assurant has been looking to sell the business for several months, as part of a strategic shift to "sharpen its focus" and deploy capital toward just a few kinds of insurance, such as housing. That means walking away from health insurance and the employee benefits line.
There was speculation that Sun Life would be the buyer in this deal. Tom MacKinnon, analyst with BMO Nesbitt Burns, said in a note to clients in late August that a tie up with Assurant's U.S. employee benefits business would "expand Sun Life's dental and voluntary benefits platform, which would be a positive, but would also expand Sun Life's presence in the volatile and often troublesome long-term disability market."
In Assurant's most recent second-quarter results, earnings from employee benefits fell by $3-million to $11-million, caused by an increase in life claims and disability incidents. Other parts of the business were more profitable, such as the dental-benefits business, which boasts an extensive network of dentists.
Sun Life has also been making changes to its group benefits business in the U.S. in recent months such as changing pricing and investing in disability claims management systems.
Expanding in the U.S. group-benefits business comes after several smaller acquisitions by Sun Life in the U.S. market. So far this year, the insurer bought real estate investment manager Bentall Kennedy Group for $560-million, and U.S.-based investment management company Prime Advisors Inc. for an undisclosed amount. It also closed a deal for fixed-income-focused U.S. asset manager Ryan Labs Inc.
Dean Connor, chief executive officer of Sun Life, said in a recent interview that Sun Life is in an "opportunistic growth phase" and had enough capital to take advantage of acquisition opportunities that might present themselves.