Sun Life to sell its U.S. annuity unit for $1.35 billion to Delaware Life

TORONTO – Sun Life Financial (TSX:SLF) has a deal to sell its U.S. annuity unit and certain life insurance businesses for US$1.35 billion to Delaware Life Holdings, a company owned by shareholders of Guggenheim Partners.

“This transaction represents a transformational change for Sun Life,” Dean Connor, the Toronto-based company’s president and chief executive officer, told analysts in a conference call to discuss the deal.

“The proceeds of the transaction will provide funding for our organic growth plans as well as for potential opportunities to make smaller acquisitions that move our strategy forward.”

The U.S. annuity business has been challenging in recent years, due to a combination of low interest rates , difficult equity markets and a substantial increase in the amount of capital required by regulators.

Sun Life says the sale of the U.S. annuity business, which is expected to close in mid-2013, will reduce next year’s earnings by about 22 cents per share. The deal will increase Sun Life’s cash holdings and allow it to pay off some debt.

Connor said Sun Life plans to maintain its current level of dividends on common shares and use about $350 million of the proceeds to repay debt that matures in June.

The sale the U.S. annuity business will allow Sun Life management to focus their time and capital on the company’s U.S. group benefits business, which is still seen as one of “four pillars” of growth, he said.

“We’ve been moving quickly in 2012 to de-risk, transform and grow our businesses,” Connor said.

“We believe the decision to sell this business is in the best interest of our shareholders. We’re pleased to have a partner with Gugeenheim’s financial strength an insurance capabilities, who will bring the right approach for staff and policyholders.”

The businesses being sold have employees in Wellesley, Mass., Lethbridge, Alta., and Waterford, Ireland.

Speaking on behalf of Delaware Life Holdings, Guggenheim Partners president Todd Boehly said: “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.”

Sun Life shares slipped 50 cents or about two per cent to $27.33 in early trading Monday, just short of a 52-week high of $28 set last week.