Sun Life to Buy Assurant's Employee-Benefits Business

Sun Life Financial Inc. agreed to buy the employee-benefits business of Assurant Inc. in a complicated transaction valued at $975 million, the latest sign of consolidation in the insurance industry.

The transaction is part of a deal boom that is combining companies across the health, life and property-casualty insurance sectors. While the Canadian insurer's purchase of the Assurant unit is much smaller than property-casualty insurer ACE Ltd.'s pending $28.3 billion acquisition of Chubb Corp., it is more typical of the deals that industry executives, bankers and analysts expect in coming months. Sun Life is based in Toronto.

Insurers are pursuing these small-to-midsize deals to gain economies of scale in areas where they see themselves as leading players, and to divest units where they aren't. The activity comes at a time of heightened competition and ultralow interest rates that have been pressuring insurers' profits since 2008. Insurers invest customers' premium dollars, primarily in bonds, until claims come due.

The Sun Life deal will create the sixth-largest group-benefits business by revenue in the U.S. Such units sell products to employers for their workers, including dental, disability-income and basic life insurance. Rivals include MetLife Inc., Cigna, Aetna, Unum Group and Prudential Financial. Sun Life said the transaction "will add significant new capabilities" to its existing unit.

Assurant said earlier this year that it was looking for buyers for the unit as it seeks to focus on its mortgage-insurance and property-insurance businesses.

Upon closing, Sun Life's U.S. unit will provide protection through about 64,000 employers in small, medium and large workplaces, Sun Life said.

The deal will be done through reinsurance agreements, asset transfers and the direct purchase of certain legal entities, the company said. The acquisition is expected to close in early 2016. It will be financed with a combination of cash and subordinated debt.

Write to Leslie Scism at [e-mail]

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September 09, 2015 17:35 ET (21:35 GMT)

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