Sun Life Financial (TSX/NYSE: SLF) said Wednesday it has agreed to sell its life reinsurance business to Warren Buffett's Berkshire Hathaway Life Co. (NYSE: BRK.A), a move that is expected to boost the Canadian insurer's capital levels. Terms of the deal were not disclosed.
The life reinsurance business, which has approximately 70 employees in offices in Canada, the U.S. and Ireland, has life insurance in-force of C$113 billion.
It is hoped that the sale, which is expected to close in December, will increase Sun Life's minimum continuing capital and surplus requirement ratio by 10 to 14 percentage points, it said. The company's ratio was 210% as at June 30, 2010.
The Office of the Superintendent of Financial Institutions requires life insurers to maintain a ratio of at least 120% and expects these companies to target a ratio of at least 150%.
The sale of its assets also reflects Sun Life's strategy of re-deploying capital to parts of its business where it sees potential for growth.
"Our reinsurance business is profitable, but it is not a growth area for Sun Life Financial and this transaction releases capital which can be put to work in other businesses," said CEO Donald Stewart.
As of June 30, 2010, the Sun Life Financial group had total assets under management of C$434 billion. The company was up nearly 2% on Wednesday, trading at $28.5 moments before market close.