Stronger equity markets and improvements in capital markets helped Sun Life Financial Inc. earn net income of $591 million in the second quarter of 2009, up from $519 million in the same period last year, the company announced on Thursday.

For the three months ended June 30, Sun Life Financial saw revenues rise sharply to $8.7 billion, up from $4.3 billion from the comparable period a year ago, mainly due to growth in the company’s Canadian division and in U.S. annuity premiums.

Reserve releases as a result of higher equity markets, increased interest rates and the positive impact of narrowing credit spreads impacted the quarterly results favourably, the company said.

“Equity markets showed substantial improvement in the second quarter resulting in strong earnings gains,” said Donald A. Stewart, Sun Life’s CEO.

But Sun Life said strong results from improvements in capital markets were partially offset by increased reserves for downgrades on the company’s investment portfolio, changes in asset default assumptions in anticipation of future credit-related losses, as well as credit impairments incurred during the quarter.

Assets under management were $397.5 billion at the end of Q2, down from $413.2 billion a year ago, largely due to market performance.

Return on equity was 14.9% for the quarter, up from 12.9% reported in the same quarter last year.

Sun Life’s Canadian operations earned net income of $217 million in Q2, up from $194 million in the first quarter but lower than net income of $296 million in Q2 2008.

Within the division, earnings from individual insurance and investments fell to $136 million from $177 million last year, but Sun Life said sales of fixed interest products were strong. Sales of accumulation annuities, GICs and payout annuities surged 119% from the same period a year ago, to $248 million.

Sales in group benefits were also strong, jumping 68% to $69 million during the quarter, Sun Life said.

Sun Life Financial U.S. saw net income soar to $422 million from $83 million in Q2 2008. The results were helped by the depreciation of the Canadian dollar against the U.S. dollar, as well as improvements in equity markets and credit spreads, which drove up annuities earnings sharply.

Stewart warned that although recent stock market gains are encouraging, a full economic recovery would take time. He said tight credit conditions and other external factors would continue to influence Sun Life’s results in the third quarter.

“We remain focused on maintaining a healthy capital base, well in excess of minimum regulatory levels,” Stewart said. “While market turbulence can result in quarterly earnings volatility it does not diminish the underlying strength of our businesses.”