Sun Life falls to steep loss on weak markets

Wed Nov 2, 2011 6:06pm EDT
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TORONTO (Reuters) - Sun Life Financial (SLF.TO: Quote) fell to a steep loss in the third quarter due to falling bond yields and stock prices, Canada's No. 3 insurer said on Wednesday.

The company lost C$621 million, or C$1.07 a share, in the quarter ended September 30. That compared with a year-before profit of C$416 million, or 73 Canadian cents a share.

On an operating basis, the insurer lost C$572 million, or 99 Canadian cents a share.

Sun Life warned two weeks ago that it would take the loss - which caught analysts and investors alike by surprise, as forecasts had called for a modest profit.

The stock dropped 9 percent after the warning.

"Our financial results reflect the severe volatility experienced during the third quarter," Chief Executive Don Stewart said in a statement.

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 falls on a quarterly basis, they use profits to bulk up reserves.

Sun Life said it increased its reserves by C$684 million during the quarter due to the market declines. It took additional charges of C$203 million to update actuarial assumptions, which it typically does in the third quarter.

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 U.S. Federal Reserve's purchases of long-term bonds..   Continued...