Last week, Assurant, Inc. announced an agreement to sell its employee benefits business to Sun Life Assurance Company of Canada, a subsidiary of Sun Life Financial, Inc., for $940 million. This transaction comes just three months after Assurant shut down operations at Milwaukee-based Assurant Health. It also coincides with the announcement of increased dividends to shareholders and a rise in the company’s stock price.
The employee benefits business purchased by Sun Life includes Assurant’s voluntary and employer paid dental, short-term and long-term disability, and life insurance products. The 1,700 employees of Kansas City-based Assurant Employee Benefits are expected to be offered positions with Sun Life Financial. Current policies and claims will continue to be serviced and new policies sold during the transition.
Back in June, Assurant Health announced that it was selling its supplemental and small group self-funded business to National General Holdings Corp. It continues to sell these products while the acquisition is finalized, and will continue to pay claims, benefits, and commissions for in-force policies. However, Assurant Health stopped selling individual major medical, short-term medical, and fully-insured small group health insurance policies as of June 15. Assurant Health employed 1,700 people (1,200 in Milwaukee), and about 300 were terminated in the first phase of job reductions. The company struggled to adapt to changes brought about by the Affordable Care Act, and suffered losses of $64 million in 2014 and $84 million in the first quarter of this year.
The same day Assurant announced the Sun Life deal, it also announced an increase in its fourth quarter dividend and a plan to repurchase company stock. The dividend was $0.50 per share, a 67% increase above the previous quarter’s $0.30 dividend. The stock repurchase authorization of $750 million was in addition to an existing plan to buy back $276 million worth of shares, bringing the total repurchase authorization to more than $1 billion. This helped to raise Assurant’s stock price as of Monday.
These changes will have numerous impacts both locally and globally. The Sun Life deal increased the Canadian company’s group benefit business in the U.S. by 50%, making it the sixth largest group benefits provider in the country. More specifically, the acquisition boosted Sun Life’s group dental business, particularly among employers with 500 or fewer employees. According to the President of Sun Life’s U.S. unit, Dan Fishbein, the company also expects the deal to “lead to strong positioning with distribution partners, including brokers and private exchanges,” and allow the company to work with brokers who may have sold for one of the companies, but not the other.