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