Sun Life Financial Inc.’s SLF wholly owned subsidiary, Sun Life Assurance Company of Canada (SLA) has agreed to divest the sponsored markets business to Canadian Premier Life Insurance Company. Subject to the fulfillment of closing conditions, the transaction is expected to see the light of day in early 2023.
The sponsored markets business includes association, affinity, and group creditor clients. Per the divestiture deal, 100 plan sponsors and about 1.5 million insured clients and plan members/customers of Sun Life will go to Canadian Premier.
Rationale Behind the Transaction
The divestiture will help Sun Life intensify its focus on growing the core segments within the group benefits business. Being the largest group benefits provider in the country, this Zacks Rank #3 (Hold) insurer is shifting its growth focus toward products that require lower capital and offer more predictable earnings such as mutual funds and group benefits. Sun Life is also growing its voluntary benefits business (launched new products in this line) and targeting a place among the top five players. Thus, the divestiture is in tandem with its growth strategy.
Sun Life expects a one-time after-tax gain of about $65 million and a 1% increase in SLF and SLA LICAT ratios. However, underlying earnings per share are likely to decrease 3 cents annually.
How Does the Acquirer Stand to Benefit?
Canadian Premier, a subsidiary of Securian Financial Group, Inc., has a track record of providing insurance solutions to its Canadian clients, including financial institutions, retailers, affinity groups and distribution partners for more than six decades. Thus, the acquisitions will enhance its core creditor insurance portfolio, exposure to the adjacent markets in the association and affinity business and, in turn, strengthen its market presence.
Suzette Huovinen, CEO of Canadian Premier stated, “This is an exciting milestone for our company as we look to serve more Canadians through our affinity groups and creditor insurance businesses.” Thus, the acquisition is a strategic fit as it expands the association, affinity and group creditor businesses of Canadian Premier.
Price Performance
Shares of Sun Life have rallied 25.1% year to date (YTD) compared with the industry’s increase of 5.5%. Focus on the Asian operation, growing asset management businesses and a strong financial position continue to drive the third-largest insurer in Canada.`
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Stocks to Consider
Some better-ranked stocks from the same space include American Equity Investment Life Holding AEL, Athene Holding ATH and Brighthouse Financial BHF.
American Equity carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2021 and 2022 has moved up 4.8% and 0.6% in the past 60 days. American Equity delivered a four-quarter average earnings surprise of 31.49%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2021 earnings of Athene, carrying a Zacks Rank #2 (Buy), has moved up 9.9% in the past 60 days, implying 123.7% year-over-year growth. Athene delivered a four-quarter average earnings surprise of 46.12%.
Brighthouse Financial carries a Zacks Rank #2. The Zacks Consensus Estimate for 2021 and 2022 has moved up 14% and 0.6% in the past 60 days. Brighthouse delivered a four-quarter average earnings surprise of 67.61%.
Shares of AEL, ATH and BHF have gained 17.7%, 15% and 22.4%, respectively, YTD.
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American Equity Investment Life Holding Company (AEL): Free Stock Analysis Report
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