Source: The Canadian Press

Sun Life Financial Inc.(TSX/NYSE:SLF), Canada’s third largest insurance company, reported its net profits fell sharply in the second quarter as volatile stock markets and a big loss in its U.S. operations squeezed the company’s business.

The Toronto financial services giant reported late Wednesday it earned $213 million or 37 cents a share for the three months ended June 30. That compared with earnings of $591 million or $1.05 for the same period last year, when the company benefited from reserve-related and other gains on its books. Sun Life said its total adjusted revenue in the quarter fell to $5.75 billion from $6.2 billion a year earlier.

The insurer and wealth manager said it lost C$95 million on its U.S. operations in the quarter, reversing an $88 million profit a year earlier.

As well, the company said volatile stock markets and a decline in long-term interest rates continued to hurt the value of its stock and bond investments and squeeze the bottom line.

“While our reported earnings were impacted adversely by declining equity markets and lower interest rates, the impact was in-line with our published market risk sensitivities,” CEO Don Stewart said in the earnings report statement.

“Sun Life continues to take action to mitigate the impact of volatile economic and market factors, including changing product design and mix to reduce risk and increase profit while continuing to meet the needs of clients as well as a continued focus on expense management.”

In breaking down its latest quarter, Sun Life said its net profit was hurt by $187 million from unfavourable equity market conditions, $99 million from a decrease in interest rates, and $14 million from the strengthening of the Canadian dollar.

The company also reported its return on equity for the second quarter — a measure of financial profitability — fell to 5.4% from 14.9%.

Despite the earnings decline, Sun Life noted its Canadian business continues to make solid profits, earning $146 million, though down from $210 million a year earlier.

And though its overall U.S. insurance business lost money, earnings at Boston-based asset manager MFS “were very strong compared to the same period last year, primarily due to higher average net assets.”

“We continued to execute on our growth strategies this past quarter, resulting in solid growth in sales and premiums and deposits across a number of our businesses and geographies,” Stewart said after stock markets closed.

“Strong momentum continued in our Canadian businesses, spurred by a significant increase in sales of individual life and health insurance, fixed income products and annuities,” he said. “SLF Canada has also seen strong growth in our pension rollover business and in national account sales by our Group Benefits unit.”

Sun Life employs about 16,000 people, including about 7,000 in Canada, and has insurance, wealth management and mutual fund operations around the world.

In earlier trading Wednesday, Sun Life shares ended the TSX trading session at $28.60, down 21 cents on the day.