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Sun Life to Stop Selling U.S. Annuities, Cuts 800 Jobs

Tuesday, 13 Dec 2011 12:43 PM

Sun Life Financial Inc., Canada’s third-largest insurer, plans to stop selling variable annuities and individual life insurance products in the U.S. and will cut 800 jobs there as it shifts focus to Canada and Asia.

Sun Life expects to record costs of about C$75 million ($73 million) to C$100 million from the changes, a portion of which will be in the fourth quarter, the Toronto-based company said today in a statement. The insurer will also take a writedown of about C$97 million.

Variable annuities, which provide guaranteed incomes to customers regardless of market performance, have led to losses at Sun Life and bigger rival Manulife Financial Corp. after equities plunged. Sun Life’s U.S. insurance unit had losses of C$569 million in the third quarter, and C$279 million in the first nine months of 2011.

The move follows the Dec. 1 promotion of Dean Connor to chief executive officer, replacing Donald Stewart, who retired. Sun Life plans to concentrate in the U.S. on group insurance and voluntary benefits, as well as its Boston-based MFS Investment Management business. The company also pledged to focus on Asia and Canada.

Sun Life is “setting out on a course that is focused on improving return on equity, reducing the volatility in the business, and being more focused in areas that we think provide superior avenues for growth,” Connor, 55, said today in a telephone interview.

Job Cuts

Sun Life will eliminate about 800 jobs in the “coming months,” mostly in the U.S. in positions that support sales of annuities and life insurance, Connor said. The move will reduce expenses by about $170 million. The insurer had 2,650 U.S. employees at the end of 2010, according to company reports.

When asked by investors on a conference call about the sustainability of Sun Life’s 36 cent-a-share quarterly dividend, Connor said the company would reconsider the payout if the economy worsens and it has an impact on capital levels. Sun Life’s dividend yield is about 7.7 percent, compared with 4.7 percent for Manulife.

“There are other options,” available to Sun Life instead of cutting the dividend, Connor said. “Those include selling businesses that are non-core to our future growth plans, and reinsurance.”

Sun Life rose 1.5 percent to C$18.60 in 9:51 a.m. Toronto Stock Exchange trading. The shares have plunged 39 percent this year, the second-worst performer on the 43-company S&P/TSX Financials Index.

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