July 06, 2005 16:59 ET

A.M. Best Comments on Sun Life's Proposed Acquisition of the Hong Kong Insurance and Pension Operations of the Commonwealth Bank of Australia

OLDWICK, N.J.--(CCNMatthews - Jul 6, 2005) -

A.M. Best Co. views favorably Sun Life Assurance Company of Canada's (Toronto) proposed acquisition of the Hong Kong life insurance and pension operations of the Commonwealth Bank of Australia.

The purchase price of CAD 560 million--which will be funded internally--fits with Sun Life's acquisition strategy geared toward businesses, which build upon existing franchises in areas that offer the opportunity for strong growth. This mid-sized acquisition affords Sun Life increased geographic diversification with a much stronger platform upon which to build its existing Hong Kong business. Sun Life will benefit from a significantly larger sales force and expanded product offering in a geographic region that is experiencing double digit growth. Moreover, the acquisition offers the opportunity to enter and build upon Sun Life's core competency in the group pension and benefit arena. Currently, Asia contributes a very small portion to Sun Life's overall earnings.

Despite a purchase price that exceeds three times the Hong Kong book value, A.M. Best believes the expense synergies along with new business opportunities will be immediately accretive to earnings and will ultimately enhance Sun Life's return measures.

Although goodwill will increase modestly, Sun Life's capitalization ratios are expected to remain relatively unchanged. A.M. Best believes Sun Life will continue to employ its excess capital position, which may include other acquisitions primarily outside of the mature Canadian market place, share buy backs or both.

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A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.

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