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Sun Life Financial Inc.’s Toronto office tower, in 2021. Sun Life said that as part of the deal it will form a long-term partnership to become a strategic asset management partner to Phoenix Group.Fred Lum/the Globe and Mail

Sun Life Financial Inc. has reached a deal to sell a U.K.-based division of the company to Phoenix Group Holdings PLC for about $385-million as part of a shift to make the company more nimble.

The insurer said Thursday it will sell SLF of Canada U.K. Ltd., or Sun Life U.K., a company that manages life insurance and pension policies but is closed to new sales.

Sun Life said that as part of the deal it will form a long-term partnership to become a strategic asset management partner to Phoenix Group, including the management of Sun Life UK’s $9-billion general account.

The sale is consistent with the company’s strategy of growing fee-based and capital light businesses, said Sun Life chief executive Kevin Strain on an analyst call.

“It’s an exciting opportunity for us that is aligned to our strategy to focus on less capital-intensive businesses in markets with natural tailwinds.”

The sale announcement comes a day after Sun Life reported a second-quarter net income of $785 million, a 13 per cent decrease from a year earlier.

Sun Life said declines in equity markets weighed on results, while its Canada and U.S. divisions got a boost from lower COVID-19 related impacts.

Earnings were also affected by acquisition costs for DentaQuest, the roughly $3.1 billion deal the company closed June 1. Buying the dental benefits company, with about 2,400 employees, is part of Sun Life’s transition from a focus on life insurance to benefits in the U.S.

“Over the past decade, we have transformed the U.S. business from a mostly retail individual life and annuities business to a high-performing market-leading benefits business,” said Daniel Fishbein, president of Sun Life U.S.

“The DentaQuest acquisition continues this evolution, changing the footprint of our business in the U.S. into a larger, more health care-focused organization.”

Fishbein said the acquisition also fell under the company’s wider shift from a focus on capital-intensive to capital-light business.

Sun Life’s U.S. division saw net income climb 36 per cent to $213 million, in part boosted by a 90 per cent drop in COVID-19 related deaths under coverage.

“The really big change was a great lessening in the COVID mortality from Q1 to Q2,” said Fishbein.

Canadian income was down 60 per cent in the quarter from the prior year to $160 million, mostly on lower equity markets, while lower claims volumes and shorter claims durations softened the impact.

The company’s Asia division reported an eight per cent decline in net income to $131 million as some COVID-19 restrictions weighed on sales.

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