(Corrects bullet and the second paragraph to show results were for the second quarter, not the first)
* Q2 loss C$1.36/shr vs year-earlier profit C$1.09/shr
* Weaker stocks, low bond yields force reserve increases
TORONTO, Aug 5 (Reuters) - Manulife Financial Corp (MFC.TO), Canada's largest life insurer, posted a steep quarterly loss due to sharp declines in equity markets and bond yields.
The company, which a year ago cut its dividend in half in a campaign to rebuild capital levels, posted a loss of C$2.4 billion ($2.4 billion), or C$1.36 a share, for the fiscal second quarter ended June 30.
That compared with net income of C$1.8 billion, or C$1.09 a share, in the year-earlier period.
The Toronto-based company, which operates under the John Hancock banner in the United States, said the decline of global stock markets during the quarter stripped C$1.7 billion from its bottom line, while lower interest rates led to a C$1.5 billion profit hit.
The weaker stock prices and bond yields -- which hurt the potential return on the assets its holds -- forced the company to increase reserves to cover off potential payments to policyholders. ($1=$1.01 Canadian) (Reporting by Cameron French; editing by John Wallace)