Sun Life Expands ASEAN Footprint - Analyst Blog

By Zacks | January 23, 2013 AAA

In an effort to expand its international operations, the Canadian life insurer Sun Life Financial Inc. (SLF) has announced a bancassurance agreement with CIMB Bank located in Malaysia.    

Sun Life Financial Inc. has forged an alliance with Khazanah Nasional Berhad (Khazanah) to jointly acquire 98% of CIMB Aviva Assurance Berhad, the life insurer in Malaysia and CIMB Aviva Takaful Berhad, a takaful company in Malaysia. The acquisition is expected to culminate in the first half of this year.pending regulatory approvals in Canada and Malaysia.

The bancassurance agreement will cover a span of 20 years and will cost C$586 million.

Sun Life Financial as well as Khazanah are each paying RM900 million (C$293 million) for the deal. For the consideration, each of the companies will acquire 49% from Aviva International Holdings Limited and CIMB Group Holdings Berhad (CIMB Group), respectively.  The remaining 2% will be retained by CIMB Group.

With the agreement, Sun Life Financial will obtain instant access to millions of customers of CIMB Bank. Presently the bank has a network of 312 branches and serves approximately 8 million customers. The agreement will give an exclusive right of distributing insurance as well as access to takaful products across Malaysia to Sun Life.  Takaful is a Shariah-compliant alternative to an insurance scheme.

The transaction is a strategic step in the company's objective to grow internationally. Sun Life is specifically focusing on the emerging economies of Asia, which is expected to provide higher return and growth compared to the North American markets. Historically, the company's Asian operation represented an average of only 2-3% of the company's consolidated earnings and premiums. However, management plans to drive 12.5% of consolidated operating earnings from Sun Life Asia by 2015.

Other life insurers Metlife Inc. (MET), Manulife Financial Corp. (MFC) and American International Group, Inc. (AIG) also have an active presence in Asia.

Sun Life retains a Zacks Rank #3 (Hold).  The company is expected to release fourth quarter earnings on Feb.14, 2013. The Zacks Consensus Estimate for fourth quarter earnings is 56 cents per share, compared with reported loss of 38 cents per share in the year ago quarter.

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