Sun Life 2015 Annual Report Download - page 16

SLF U.S.
On September 9, 2015, we entered into an agreement with Assurant, Inc. to acquire its U.S. Employee Benefits business for a cash
consideration of US$940 million which consists of a ceding commission and a payment for the acquisition of direct subsidiaries. The
transaction will add new capabilities and increase the size of our SLF U.S. business segment.
• We expect the acquisition to be accretive in 2016, excluding transaction and integration costs, and we estimate an accretion of
$0.17 per share to earnings in 2019 including expected pre-tax run-rate synergies of US$100 million at the end of 2019(1)
• The pre-tax transaction and integration related costs are expected to be US$160 million(1)
The transaction is expected to close by the end of the first quarter of 2016, subject to regulatory approvals and customary closing
conditions. For additional information, refer to Note 3 in our 2015 Annual Consolidated Financial Statements.
In December 2015, we closed our International wealth business to new sales. We re-focused the business on the life insurance
segment, where we expect to achieve stronger growth and profitability.
SLF Asia
On January 7, 2016, we increased our ownership interest in PVI Sun Life Insurance Company Limited, from 49% to 75%, by acquiring
an additional 26% of the charter capital of PVI Sun Life.
On December 2, 2015, we entered into an agreement to increase our ownership in Birla Sun Life Insurance Company Limited, from
26% to 49% by acquiring an additional 23%, the maximum permitted under foreign ownership rules in India, for a consideration of
approximately $340 million. This transaction is expected to close by the end of the first quarter of 2016, subject to regulatory approvals
and customary closing conditions.
Common Share Dividend Activity
SLF Inc. increased its dividend in the second and fourth quarters of 2015 and paid common shareholder dividends of $1.51 per
common share in 2015, compared to $1.44 paid in 2014. In 2015, SLF Inc. issued approximately 2 million shares from treasury under
its Canadian Dividend Reinvestment and Share Purchase Plan.
Share Repurchase Program
On November 10, 2014, SLF Inc. launched a normal course issuer bid under which it was authorized to purchase up to 9 million
common shares between November 10, 2014 and November 9, 2015, and subsequently the normal course issuer bid was not
renewed. During 2015, SLF Inc. purchased and cancelled 5.3 million common shares at a total cost of $212 million. During 2014, SLF
Inc. repurchased and cancelled 0.9 million common shares at a total cost of $39 million.
Financing Arrangements
On June 30, 2015, 6.0 million Class A Non-Cumulative 5-Year Rate Reset Preferred Shares Series 8R of SLF Inc. (“Series 8R Shares”)
were converted into Class A Non-Cumulative Floating Rate Preferred Shares Series 9QR of SLF Inc. (“Series 9QR Shares”) through a
shareholder option, on a one-for-one basis. After the conversion, 5.2 million Series 8R Shares and 6.0 million Series 9QR Shares were
outstanding. For additional information, refer to Note 16 in our Annual Consolidated Financial Statements.
On September 25, 2015, SLF Inc. issued $500 million principal amount of Series 2015-1 Subordinated Unsecured 2.60% Fixed/
Floating Debentures due 2025. The net proceeds will be used to partially fund the acquisition of Assurant EB and may also be used for
general corporate purposes.
On November 23, 2015, SLF Inc. redeemed all of the outstanding $600 million principal amount of Series A Senior Unsecured 4.80%
Fixed/Floating Debentures (“the Series A Senior Debentures”) due 2035 in accordance with the terms of the Series A Senior
Debentures.
On December 15, 2015, the US$150 million principal amount of Subordinated Unsecured 7.25% Debentures due 2015 issued by Sun
Canada Financial Company matured and was repaid.
Outlook
We expect global growth to be modest in 2016, with volatile market conditions and interest rates remaining in a low range. Most
developed economies have stabilized but emerging economies are slowing. Significant declines in commodity prices have led to stress
in related industries and increased market volatility. An extended period of weak commodity prices is likely to cause these pressures to
intensify. Some key themes that are likely to drive markets in 2016 are the normalization of U.S. monetary policy while the vast majority
of other countries are still easing, adjustments to oil’s oversupply, slowing growth in China and potential market imbalances caused by
the extremely accommodative policies of central banks globally. The capital framework for Canadian insurers, regulations in the
Canadian wealth industry and the Asian insurance industry continue to evolve as governments take on more active roles in consumer
protection.
We will continue to focus on businesses with strong growth prospects fueled by consumer demand and favourable demographic
trends. In North America, the aging of the population and modest economic growth are expected to continue to drive the demand for
greater security and protection of retirement savings. We will respond to this demand with retirement income solutions across various
distribution and technology platforms. We will continue to observe the shift in responsibility for funding health and retirement needs
from governments and employers to individuals, which has created new opportunities for group and voluntary benefits including the
medical stop-loss insurance market in the U.S. We will continue to target higher growth markets in Asia, where we are present in seven
markets. With the younger populations and rapidly growing middle class in Asian markets, demand for protection and wealth
accumulation products continues to increase. All of these trends are expected to support demand for the pension, savings and health
care solutions provided by life insurance companies. Volatile equity markets have resulted in the demand for sophisticated investment
and risk management solutions through asset management products. We believe that our asset management businesses will benefit
from this environment.
(1) See the sections in this MD&A under the headings Non-IFRS Financial Measures and Forward-looking Statements.
14 Sun Life Financial Inc. Annual Report 2015 Management’s Discussion and Analysis