Canadian insurers sag on Sun Life's loss warning

Mon Oct 17, 2011 1:09pm EDT
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By Cameron French

TORONTO (Reuters) - Shares of Canadian insurers sank on Monday after Sun Life Financial (SLF.TO: Quote) warned it will post a loss in its third quarter due to falling bond yields and stock markets.

Sun Life, Canada's No. 3 insurer, was down more than 9 percent just after midday, after it said it expects to report a loss of C$621 million ($615 million) in the quarter. On an operating basis, the company said the loss would be C$572 million.

The forecast - which also weighed on shares of rivals Manulife Financial (MFC.TO: Quote) and Great-West Lifeco (GWO.TO: Quote) - contrasted with analysts' expectations of a net loss of C$49 million and an operating profit of C$259 million, according to Thomson Reuters I/B/E/S.

"September was a gruesome month," Caldwell Securities portfolio manager John Kinsey said of the 9 percent drop in Canadian stocks, which hit Sun Life's bottom line.

"We weren't expecting too much (from Sun Life)."

Life insurers hold stocks and bonds to guarantee they'll be able to pay future investment and insurance policy obligations. When the value of their portfolios fall on a quarterly basis, they use profits to bulk up reserves.

"Losses from equity market and interest rate movements were at the high end of the ranges previously disclosed," Sun Life said in a statement.

The Toronto Stock Exchange's benchmark S&P/TSX composite index .GSPTSE fell 12.6 percent in the third quarter, while bond yields retreated due to economic uncertainty in Europe and the United States.   Continued...