Canada's Sun Life looking at acquisition opportunities despite COVID-19 challenges

TORONTO (Reuters) - Canadian insurer Sun Life Financial SLF.TO is looking for acquisition opportunities, its chief executive said on Wednesday, even as the company flagged an uncertain sales outlook amid a raft of unknowns driven by the COVID-19 outbreak.

FILE PHOTO: The Sun Life Financial logo is seen at their corporate headquarters of One York Street in Toronto, Ontario, Canada, February 11, 2019. REUTERS/Chris Helgren

Shares in Canada’s second-biggest life insurer were up 6.7% at C$47.82 at midday after it reported a first-quarter profit Tuesday that beat analyst expectations.

Bigger rival Manulife Financial Corp MFC.TO was to report its results later on Wednesday.

“Anything we look at, we’ll evaluate against our different scenarios, including our severe stress scenario,” Sun Life’s Chief Executive Dean Connor said on an analyst call after Tuesday’s earnings, referring to potential buyout targets.

Sun Life also expects to return to buying back shares when restrictions imposed by the regulator on such use of capital end, Connor said.

Insurers globally have faced a double whammy as market volatility and plunging yields have slammed returns from investment portfolios, even as the COVID-19 pandemic has boosted some payout expenses.

Connor told Reuters on Tuesday he expects a challenging year for life insurers.

Sun Life raised premiums on some life insurance and critical illness policies last month to offset the hit from shrinking yields globally.

Following a drop in reported first-quarter profit driven largely by market declines, executives warned about an uncertain outlook for second-quarter sales.

“As a result of mixed experiences (across geographies), uncertain return to work times, and economic conditions, second-quarter sales levels remain uncertain,” Connor said on the analyst call. “The second quarter will be greatly impacted by jurisdictions’ success in reducing the spread of the virus.”

The insurer has de-risked its portfolio by reducing BBB-minus-rated securities by C$1 billion ($707.11 million), cutting oil and gas exposure by 10% and pulling back from hospitality, aviation and some real estate, company executives said.

Sun Life is looking at non-employment-related cost cuts, including travel, consulting and slowing down some projects this year to boost savings, the executives said.

Reporting By Nichola Saminather; Editing by Chizu Nomiyama and Tom Brown