Sun Life Financial Inc. has announced a $560 million deal for the Hong Kong-based insurance and pension operations of the Commonwealth Bank of Australia.

As a result of the acquisition of CMG Asia and CommServe Financial, Sun Life Financial Hong Kong will become the seventh-largest life insurance company in Hong Kong measured by premiums from new sales. It will field a proprietary sales force of about 1,700 advisors, with approximately 350,000 customers, and new group insurance and pension businesses.

The transaction will be financed with existing cash resources and is expected to be immediately accretive to earnings per share and return on equity.

“The primary business development objective for Sun Life Financial worldwide has been to build sustainable scale and scope in the businesses in which we choose to compete,” says Jim Prieur, president and chief operating officer at Sun Life Financial. “This singular strategic opportunity significantly strengthens the position of Sun Life Financial in Hong Kong and provides a platform for increased growth throughout Asia. Among the many benefits of this transaction, the acquisition will enable Sun Life Financial to leverage its market-leading expertise in the pension business in Hong Kong.”

Geoffrey Saggers, CEO of Sun Life Financial (Hong Kong) Ltd., adds, “The Hong Kong insurance market continues to expand rapidly and is a key market for Sun Life Financial. With this transaction, we are firmly established among the top 10 providers in Hong Kong with the distribution breadth and scale to grow even larger.”

The transaction, which is subject to the approval of regulatory authorities in Hong Kong and Bermuda and the Office of the Superintendent of Financial Institutions in Canada, is expected to close late in the third quarter of this year.

Following word that Sun Life Financial Inc. is buying CMG Asia Ltd. from Commonwealth Bank of Australia, Standard & Poor’s Ratings Services has placed CMG’s ratings on CreditWatch with positive implications.

Commonwealth Bank of Australia agreed to sell the company (as well as its Hong Kong based pension and financial planning businesses) to Sun Life for about $560 million.

“The CreditWatch placement and its positive implications reflect the expected benefits of CMG Asia’s prospective ownership by Sun Life Financial Inc. in terms of additional business development and the new owner’s own endeavors to expand in Hong Kong and elsewhere in Asia,” says S&P credit analyst Paul Clarkson.

The rating agency says that the firm’s CreditWatch status will be resolved once the transition and necessary regulatory approvals have been completed, along with further discussions between S&P and Sun Life.

At the same time S&P says that its ratings on CBA are not affected by the announcement of the sale of CMG Asia. At less than 1% of total CBA group assets, CMG Asia is not considered a significant member of the group, and its sale is not material in terms of CBA’s business and financial profile. Despite CMG Asia’s role as the main life insurance operation of the CBA group in Hong Kong, the company was not considered central to the wider group’s plans for expansion in China.

S&P says that the deal would not affect the ratings or outlook on Sun Life or any of its subsidiaries. “This acquisition will give Sun Life’s Hong Kong franchise additional scale, will be financed with existing cash resources, and is expected to be immediately accretive to earnings and return on equity,” it says.