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Sun Life's Assurant benefits deal: 3 messages for brokers

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Sun Life Financial Inc. (TSX:SLF) made headlines Wednesday by agreeing to spend up to $975 million in cash and subordinated debt to acquire Assurant Employee Benefits.

Assurant Inc. (NYSE:AIZ) earlier announced plans to sell the benefits unit and shut down its health insurance unit. Assurant President Alan Colberg said his company will use the Sun Life deal as an opportunity to sharpen its focus on housing and lifestyle protection products and services.

Sun Life executives talked about using the benefits unit offices they are getting in Kansas City, Mo., and the benefits unit’s 1,700 employees, to reach the 30,000 small and midsize employers that have been using Assurant’s life, disability, dental and vision products.

Assurant Employee Benefits reported $49 million in net operating income for 2014 on $166 million in U.S. sales and $1.4 billion in revenue from coverage already in force.

Sun Life, a Toronto-based company, is already the second biggest seller of health stop-loss insurance, or insurance for employers’ self-insured group health plans, in the United States. The Patient Protection and Affordable Care Act of 2010 (PPACA) has raised the profile of health plan stop-loss insurance by exempting employers’ self-insured plans from some of the PPACA coverage requirements that apply to fully insured group health plans.

Sun Life and Assurant hope to close on the deal by March 31, 2016. Completing the acquisition would give Sun Life’s Sun Life Financial U.S. unit relationships with a total of about 64,000 U.S. employers.

What could the deal mean for insurance agents and brokers?

For three ideas, read on.

Dental X-ray

1. Dental makes Sun Life smile.

Sun Life executives welcomed the addition of the Assurant Employee Benefits life and disability operations today during a conference call with securities analysts, but what they talked about most often was Assurant’s group dental business.

Sun Life has catered mainly to employers with more than 500 employees. Assurant Employee Benefits has mostly served employers with 500 or fewer employees. But Dean Connor, Sun Life’s president, said Sun Life will probably migrate its dental business to the Assurant dental platform.

Dan Fishbein, president of Sun Life’s U.S. unit, said he sees immediate opportunities to cross-sell dental to existing customers as well as to new customers.

“I was with our sales management team last night,” Fishbein said during the call. “There was overwhelming enthusiasm for a chance to begin selling a competitive dental product once again.”

See also: NAHU 2012: Some See Silver Lining to PPACA Worries

Eye

2. Vision benefits caught Sun Life’s eye.

Vision insurance sometimes seems like an afterthought, but it came up several times during the conference call.

Fishbein told analysts vision coverage is something distributors can sell along with dental insurance. 

See also: Public exchanges squint at vision market

Client meeting

3. Sun Life likes the Assurant benefits unit’s ability to help it connect with more employers.

Executives at U.S. health insurance companies seem to have been going out of their way in recent years to avoid mentioning insurance agents or brokers.

Sun Life has emphasized in a presentation prepared for investors and securities analysts that the deal will lead to “strong positioning with distribution partners, including brokers and private exchanges.”

Fishbein said completing the Assurant Employee Benefits deal should make Sun Life’s U.S. business more attractive to brokers and lead to brokers having bigger blocks of business with Sun Life.

Sun Life Financial U.S. and the Assurant benefits unit “work with some of the same brokers,” Fishbein said. 

But each company has some brokers that are not working with the other company, and that should create new distribution opportunities, Fishbein said.

See also: Covered California reboots its small-group division