May 5, 2010 / 9:27 PM / in 8 years

UPDATE 2-Sun Life swings back to profit, tops forecasts

* Q1 EPS C$0.72 vs yr-ago loss C$0.38

* Beats estimates for C$0.62 EPS (Adds details)

TORONTO, May 5 (Reuters) - Sun Life Financial Inc (SLF.TO) reported a better than expected quarterly profit on Wednesday, more than reversing a loss in the first quarter a year ago, as global stock markets and favorable interest rates boosted earnings.

Canada’s No. 3 life insurer said it had net income of C$409 million ($397 million), or 72 Canadian cents a share, in the three months ended March 31. That compared with a loss of C$213 million, or 38 Canadian cents a share, a year earlier, when the financial crisis pummeled the big equity investments of life insurers and Sun Life was forced to strengthen reserves.

Analysts had expected per share earnings of 62 Canadian cents, according to Thomson Reuters I/B/E/S.

Toronto-based Sun Life said return on equity, a key measure of profitability, rose to 10.5 percent, up from 7.6 percent in the fourth quarter, and negative 5.5 percent a year earlier.

Assets under management rose 16 percent from the first quarter of 2009 to C$435 billion.

“While there are still headwinds in credit markets, our focus on risk management and a strategy of diversifying across product lines and geographies has allowed Sun Life to achieve a solid start in 2010,” Chief Executive Donald Stewart said in a statement.

Canadian operations had net income of C$238 million in the first three months of 2010, down slightly from C$243 million in the fourth quarter but sharply higher than the C$194 million earned in the first quarter of 2009. Sales of life and health insurance helped power profits.

U.S. operations turned a profit after two consecutive quarterly losses, as improved distribution contributed to a 45 percent increase in sales of variable annuities.

Net income for U.S. operations was C$88 million, up from a loss of C$9 million in the fourth quarter and a loss of C$407 million in the first quarter of 2009. The strengthening Canadian dollar decreased net income by C$17 million compared to a year earlier, Sun Life noted.

Sun Life reiterated its expectation that adjusted earnings from operations in 2010 will be in the range of C$1.4 billion to C$1.7 billion.

Before the results were released, shares in Sun Life had closed down 0.9 percent at C$29.12 on the Toronto Stock Exchange amid a broad-based selloff.

Sun Life is the first of Canada’s big three life insurance companies to report results. Manulife Financial Corp (MFC.TO), North America’s largest life insurer, and Great West Lifeco Inc (GWO.TO), Canada’s No. 2, are due to report on Thursday.

$1=$1.03 Canadian Reporting by Andrea Hopkins; editing by Rob Wilson

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