December 13th, 2011 | Author: Mitch Reynolds

Sun Life Financial Shocks Market With Announcement To Pull Out Of The US

Sun Life will stop selling Life Insurance and Variable Annuities in the US

Sun Life will no longer offer individual life insurance or Variable Annuities in the US.

Another shocking announcement from one of Canada’s major life insurance companies, Sun Life Financial. The big announcement came yesterday, December 12, 2011, that Sun Life will no longer be offering new individual life insurance products or variable annuities (akin to Canada’s GMWBs) as of December 30, 2011. This annoucement came shortly after the company’s sharp financial losses last quarter.

Continued instability in the world stock markets is making it harder for all insurance companies to manage their long-term investments and accurately forecast interest rates, investment returns and expenses. This makes investments with guaranteed income streams in the future, like variable annuities, very hard to account for and leads to balance sheet losses when stock markets move sharply lower.

The Canadian life insurance industry has been handed a series of powerful blows in the last few weeks. Over the last month, life insurance companies across Canada have been announcing and implementing price increases to many of their permanent life insurance products, like universal life and term 100 policies. Then, on November 29, 2011 Standard Life of Canada announced it was exiting the Canadian life and critical illness insurance markets to focus on its investment products.

Many would argue that the future of things like Level Cost of Insurance for universal life insurance and Term 100 policies could be in jeopardy. The guarantees from GMWBs and GLWBs could disappear if the world markets don’t stabilize and interest rates increase. Even the guaranteed cost of insurance on Critical Illness Insurance could go the way of the UK, where premiums are not guaranteed and could be increased even after you buy a policy.

This article below was posted on Advisor.ca, and is worth a read regarding the changes that Sun Life is making, and the implications for the Canadian life insurance industry. I think we are seeing the beginning of a major shift in how companies do business and the financial planning options that clients will have.

SUN LIFE TO STOP SELLING VA, INDIVIDUAL LIFE IN U.S.

Sun Life Financial has announced that it will stop selling variable annuities and individual life products in the U.S., as the products were the primary causes of the company’s deep financial loss last quarter.

The Sun Life’s new CEO Dean Connor says the insurer will discontinue sales starting Dec. 30. The move will not affect existing policyholders.

The move to exit the variable annuity and individual life business in the U.S. comes after Sun Life faced massive charges in the third quarter as it hedged against future liabilities related to the insurance products.

One of the attractions of variable annuity products is that they offer a minimum rate of return guaranteed to investors, which can cost the insurer when markets are underperforming. Last month, Sun Life reported its first quarterly loss in two years, mostly as a result of U.S. operations which took a more than half-billion-dollar hit due to stock market chaos.

“Today begins a new chapter in the history of Sun Life Financial,” Connor said in a release. “We are charting a new course with a new strategy that leverages what we do best today, and positions us for success as we pursue the many opportunities in our business around the world.”

Sun Life said about $200 million of its third-quarter loss was related to an annual update of its actuarial methods and estimates–used to calculate the company’s obligations under various products sold.

However, the insurer didn’t specify how much of the hit would be from equities and how much from interest rates.

The company will focus on what it calls its four key pillars:

Continuing to build on its leadership position in Canada in insurance, wealth management and employee benefits;

Becoming a leader in group insurance and voluntary benefits in the U.S.;

Supporting continued growth in MFS Investment Management, and broadening Sun Life’s other asset management businesses around the world; and

Strengthening Sun Life’s competitive position in Asia.

“To achieve growth in the U.S., we will focus on increasing sales in our employee benefits business, which is already a top ten player, and will expand our presence in the growing voluntary benefits segment,” said Connor. “We are confident that with the focused investment announced earlier this year we can build leading positions in these two sustainable, less capital-intensive businesses.

“We will also continue to support growth in MFS, our highly successful investment manager that has a large U.S. presence and over US$250 billion of assets under management globally.”

Filed by Steven Lamb, with files from wire services, editor@Advisor.ca

Originally published on Advisor.ca

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