By Nichola Saminather
TORONTO (Reuters) -Sun Life Financial shares jumped on Thursday after reporting a better-than-expected second-quarter profit and announcing the sale of its U.K. business as well as an asset management partnership with the buyer, Phoenix Group Holdings.
Earlier on Thursday, Canada's second-largest life insurer agreed to sell its closed business in the United Kingdom to Phoenix for 248 million pounds ($301 million), and become its strategic asset management partner, managing about C$9 billion ($7 billion) of Sun Life UK's general account.
Sun Life expects to get a "good chunk" of the $25 billion Phoenix plans to deploy in North American fixed income and alternative investments over the next five years, CEO Kevin Strain said on an analyst call on Thursday. He added it will make up for some lost revenue and support earnings.
Strain said Sun Life has no current plans to sell other closed blocks, including the payout annuity part of the U.K. business, which it retained, and an individual life business (IFM) in the United States.
"We like the dynamics of those closed blocks," Strain told Reuters, adding these businesses can generate strong earnings and cash flow and good return on equity for at least 10 more years.
Sun Life shares rose 2.8% to C$60.80 in early afternoon trading in Toronto on Thursday, on track for its highest close in nearly eight weeks. The Toronto stock benchmark rose 0.14%.
Late on Wednesday, Sun Life reported core earnings per share of C$1.52, beating analysts' estimates of C$1.39, helped by improvement in its U.S. business and a better-than-expected performance in Canada that offset underwhelming results from its asset management and Asian units.
Sun Life executives said U.S. benefits provider DentaQuest, whose acquisition it closed on June 1, would help drive its goal of 10% organic growth in its U.S. group benefits business.
"DentaQuest has been a growth engine over its history," Dan Fishbein, president of its U.S. unit, said on the analyst call. "We think there's a lot of potential in the DentaQuest business on multiple fronts to continue to win new government contracts."
He cautioned that the business is "very lumpy" with small but very large contracts that could lead to sporadic growth in earnings.
($1 = 0.8243 pounds)
($1 = 1.2862 Canadian dollars)
(Reporting By Nichola Saminather; Editing by Josie Kao)