Canadian life insurance giant Sun Life Financial Inc. plans to sell its struggling US annuity unit based in Wellesley and a small portion of its life insurance business to Delaware Life Holdings for $1.35 billion.
The deal, expected to be completed next year, will affect 300 employees in Wellesley, where Sun Life’s US headquarters is, and 200 more in Lethbridge, Alberta, and Waterford, Ireland, where Sun Life has operations.
The workers are generally expected to be offered jobs with Delaware Life, which is owned by shareholders of Guggenheim Partners, a privately-held financial services firm headquartered in New York and Chicago. But the companies declined to say whether workers will have to move to a new location to keep their jobs.
“It was a non-core business,” said Wes Thompson, chief executive of Sun Life’s US operations, adding that it made the company’s earnings much less reliable and harder to invest in other parts of its business.
Sun Life has lost hundred of millions of dollars on its annuities business in part because of the volatile stock market and ultra-low interest rates since the financial crisis.
Annuities typically offer investors guaranteed payments over many years in exchange for an upfront investment. But many insurers have had a difficult time earning a strong return on the investments since interest rates have fallen to near zero, prompting some other companies to exit the business or record heavy losses. Indeed, Sun Life already cut hundreds of jobs in its annuities business and trimmed sales and marketing of the products.
Thompson, the Sun Life executive, said the divesture should help the company “put a lot more emphasis on growing” its core US business of providing group employee benefits, such as life and disability insurance, which are typically offered through companies and other employers.
Sun Life, based in Toronto, is already one of the largest providers of group employee benefits in the US, though it’s not as well known as some other large insurers that primarily market directly to individuals.
Even after the divesture, Sun Life will likely have roughly 1,000 employees in the Wellesley area. In addition, Sun Life also owns MFS Investment Management, a prominent mutual fund company in Boston that has another 1,200 employees in Massachusetts. An MFS spokesman said Monday’s announcement likely won’t affect the fund company.