Sun Life refocuses U.S. business, affirms dividend

Mon Dec 12, 2011 5:52pm EST
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By Cameron French and Euan Rocha

TORONTO (Reuters) - Sun Life Financial (SLF.TO: Quote) shares jumped on Monday after the Canadian insurer said it would stop marketing variable annuities and individual life insurance in the United States, and signaled support for its lofty dividend unless financial markets wither.

Canada's No. 3 insurer billed its decision to pull out of two capital-intensive businesses that had become a drag on earnings as the start of a "new chapter." The move comes just two weeks after Dean Connor took over as chief executive from longtime head Donald Stewart.

Connor said the insurer was hardly pulling back from the United States, but instead shifting its focus to become a leader in U.S. group insurance and voluntary benefits. It will also push ahead with its U.S. MFS Investment Management business and strengthen its growing position in Asia, he said during a conference call.

Connor suggested the company - which recently recorded its first quarterly loss in two years due to weak markets - would maintain its lofty dividend unless financial markets deteriorate.

"We see the dividend as being supported by both the run rate earnings and the strong capital position we're at today," Connor said.

Sun Life last raised its dividend in early 2008. The quarterly payout sits at 36 Canadian cents a share and yields about 8 percent due to the decline in its shares over the past four years.

The high yield combined with the company's sagging earnings prompted some analysts to predict Sun Life would follow the lead of its larger rival Manulife Financial (MFC.TO: Quote), which cut its payout in 2009 and watched its shares plunge as a result.

Sun Life, which was down 39 percent year-to-date at the start of Monday's session, rose 8.4 percent to C$19.86.   Continued...