TORONTO,
Jan. 26, 2016 /CNW/ - Sun Life
Assurance Company of Canada (Sun
Life), a wholly-owned subsidiary of Sun Life Financial Inc.
(TSX/NYSE: SLF) today announced a groundbreaking combined annuity
buy-in transaction with two Canadian pension plan sponsors to
transfer investment, longevity and inflation risk to Sun Life. The
annuity transaction is valued at approximately $530 million, making it the largest group annuity
in Canadian history.
Many Canadian defined benefit pension plans provide pensions
that increase with inflation and employers are looking for
solutions to reduce risk. To help solve this problem, Sun Life
created a new combined annuity solution providing inflation-linked
annuities at an affordable cost.
Sun Life developed the idea for the new solution after receiving
inquiries from two unrelated inflation-linked pension plans. Sun
Life combined the annuity purchases for the two plans, with the
pricing conditional on both purchases occurring at the same time.
This generated significant cost savings for the clients that would
not have been available for separate annuity purchases because Sun
Life was able to pool the inflation risk for both plans and create
a more efficient asset strategy. A combined annuity purchase is
appropriate for plans with indexing formulas that are related to
inflation but are different enough to be complementary. The
transaction was completed in December
2015.
"We are thrilled to be transforming the annuity market, creating
an innovative solution to help inflation-linked pension plans
reduce risk," said Brent Simmons,
Senior Managing Director, Defined Benefit Solutions, Sun Life
Financial. "This transaction is in response to market demand for
affordable solutions for inflation-linked plans. Plan sponsors are
looking for creative ways to de-risk and this is just one example
of how we can help them meet their objectives and focus on their
core business."
This transaction highlights the growing demand for de-risking
solutions and how the market is evolving to meet that demand. With
estimated volumes of $7.5 billion,
2015 was the largest Canadian pension risk transfer market on
record, three times larger than 2014.
An annuity buy-in is an investment that a pension plan makes to
transfer investment, longevity and inflation risk to an insurance
company, without any impact on plan members' pensions. It can
increase benefit security by allowing the pension plan to better
match its assets with the pension promises it has made. In exchange
for a lump sum premium, Sun Life makes a monthly payment to the
pension plan equal to the pension payments for the covered group,
and the plan continues to pay each member directly.
About Defined Benefit Solutions
Sun Life's Defined Benefit Solutions group is a team of experienced
pension and investment professionals, whose mandate is to help
Canadian companies manage the risks of their defined benefit
pension plans. We work closely with plan sponsors, consultants and
other industry experts to deliver innovative, customized solutions,
including annuity buy-outs, annuity buy-ins, longevity insurance
and liability driven investments, which address the specific
challenges of each plan sponsor. For more information please visit
sunlife.ca/DBSolutions.
About Sun Life Financial
Sun Life Financial is a leading international financial services
organization providing a diverse range of protection and wealth
products and services to individuals and corporate customers. Sun
Life Financial and its partners have operations in a number of
markets worldwide, including Canada, the United
States, the United Kingdom,
Ireland, Hong Kong, the
Philippines, Japan,
Indonesia, India, China,
Australia, Singapore, Vietnam, Malaysia and Bermuda. As of September 30, 2015 the Sun Life Financial
group of companies had total assets under management of
$846 billion. For more information
please visit www.sunlife.com.
Sun Life Financial Inc. trades on the Toronto (TSX), New
York (NYSE) and Philippine (PSE) stock exchanges under the
ticker symbol SLF.
Note to Editors: All figures in Canadian dollars
SOURCE Sun Life Financial Canada