Sun Life Financial Inc. has agreed to pay $650 million for the employee benefits business of Genworth Financial Inc.

Sun Life, Toronto, already has a substantial group insurance and medical-stop loss business in the United States.

Genworth, Richmond, Va., has a benefits business with 650 employees that provides group life, group disability, medical stop loss and group dental insurance for about 32,000 employers with 2.9 million plan participants.

The deal is subject to approval by U.S. and Canadian regulators. The companies hope to complete the transaction by June 30.

The Genworth benefits unit has reported $24 million in net income $554 million in revenue during the first 3 quarters of 2006.

Genworth recently signaled that change was afoot by leaving the Windsor, Conn.-based benefits division out of a streamlining effort that put the company’s retirement and protection operations in the same segment.

Genworth employees have done a good job of building the benefits business and increasing its profits, but “we concluded it was better for this business to grow outside of Genworth,” Genworth Chairman Michael Fraizer says in a statement.

Sun Life executives say they like the deal because completing it would make Sun Life the second largest U.S. medical stop-loss provider and give it a much larger distribution network, with better access to the small-case employer market.