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3. Acquisitions and dispositions
Acquisitions
On October 1, 2009, we acquired the United Kingdom operations of Lincoln National Corporation (“Lincoln U.K.”) for $387. The
acquisition, which included both general and segregated fund businesses, increased the assets under management in the United
Kingdom by nearly 60% and doubled the number of policies in-force. The results and assets of Lincoln U.K., including goodwill, are
included in the Corporate reportable segment in our Consolidated Financial Statements. The Lincoln U.K. results are included in the
2009 income reported from October 1, 2009. There were no material adjustments to the purchase price allocation in 2010.
The Lincoln U.K. acquisition is summarized below:
2009
Lincoln U.K.
Percentage of shares acquired 100%
Invested assets acquired $ 1,249
Other assets acquired 88
$ 1,337
Actuarial liabilities and other policy liabilities acquired $ 1,058
Other liabilities acquired 72
$ 1,130
Net balance sheet assets acquired $ 207
Consideration:
Cash cost of acquisition(1) $ 380
Transaction and other related costs 7
Total consideration $ 387
Goodwill on acquisition $ 180
Cash and cash equivalents acquired $ 402
Increase in segregated fund net assets $ 6,629
(1) Includes the cost to hedge the foreign currency exposure of the purchase price.
Dispositions
On October 27, 2010, we entered into an agreement with Berkshire Hathaway Life Co. of Nebraska (“BHLN”) to sell our life
retrocession business. Our run-off reinsurance business, which is a closed block of reinsurance assumed from other reinsurers, is
excluded from this agreement. The transaction closed on December 31, 2010. The transaction was structured as reinsurance
agreements between BHLN and us, in which we transferred the actuarial liabilities as well as the policy-related assets and liabilities to
BHLN. The net cash payments to BHLN was $240 in lieu of transferring the invested assets backing the actuarial liabilities. As a result
of the agreement, we have exited the life retrocession business and transferred the infrastructure (which includes the IT systems and
workforce) needed to administer the life retrocession business to BHLN. As we transferred substantially all of the economic risks and
benefits relating to this business, the transaction was accounted for as a sale of business. The gain on disposal (net of taxes of $129)
was $1. The pre-tax gain on disposal, net of the related goodwill of $309, was recorded in Other net investment income (loss) in our
Consolidated Statements of Operations.
On December 12, 2008, we sold our 37% interest in CI Financial to the Bank of Nova Scotia in exchange for cash of $1,552, common
shares with a fair value of $437 and preferred shares with a fair value of $250 for total proceeds of $2,239. The investment was
accounted for by the equity method and had a carrying value of $1,218 as at the date of sale. A pre-tax gain of $1,015, net of
transaction costs of $6, was recorded in Net investment income (loss) in the fourth quarter ($825 net of taxes).
4. Segmented information
We have five reportable segments: Sun Life Financial Canada (“SLF Canada”), Sun Life Financial United States (“SLF U.S.”), MFS
Investment Management (“MFS”), Sun Life Financial Asia (“SLF Asia”) and Corporate. Our reportable segments operate in the financial
services industry and reflect our management structure and internal financial reporting. Our revenues from these segments are derived
principally from mutual funds, investment management and annuities, life and health insurance, and life retrocession. Revenues not
attributed to the strategic business units are derived primarily from investments of a corporate nature and earnings on capital.
Corporate includes the results of our U.K. business unit and our Corporate Support operations. Our Corporate Support operations
includes our life retrocession and run-off reinsurance as well as investment income, expenses, capital and other items not allocated to
our other business groups. The life retrocession business was sold on December 31, 2010. Details of this disposition are included in
Note 3. Total net income in Corporate is shown net of certain expenses borne centrally.
88 Sun Life Financial Inc. Annual Report 2010 Notes to the Consolidated Financial Statements