Strong performance by its Canadian and British operations helped Sun Life Financial Services of Canada Inc. post a 34% increase in net earnings in the first quarter of 2003.

The company said Thursday that shareholders’ net income for the quarter ended March 31 $343 million, or 56¢ a share vs $256 million or 59¢ a share for the same period last year. The per-share profit fell because the company issued new stock, raising its capital to nearly 617 million from close to 432 million last year.

The earnings improvement came despite poor stock markets and a weakening U.S. economy.

“Despite ongoing volatility and uncertainty across international capital markets, and in particular the poor performance of the U.S. economy, the company continued to report steady earnings,” said Donald Stewart, chairman and CEO. “The strategic diversification reflected in our business model and ongoing commitment to effective risk management has mitigated the impact of these difficult economic factors.”

But the company said in a statement the solid performance in its Canadian and British operations was offset by the decline in earnings in the U.S. annuities division. “The U.S. Annuities division results reflected the effect of persistent low interest rates as well as the continued decline in the equity capital markets in the quarter. As interest rates continued to decline, the impact of legislated minimum interest rates on certain fixed annuity contracts contributed to reductions in the interest spread earned on the contracts.”

Meanwhile, return on equity in the first quarter of 2003 improved to 9.3% from 8.4% the previous quarter partially as a result of increased shareholder earnings and lower equity levels due to currency fluctuations and share repurchases. But it declined vs the 13.2% posted in the first quarter of 2002 reflecting the increase in equity related to the goodwill and intangibles arising from the acquisition of Clarica Life Insurance Co.

Total revenue in Q1 2003 was $5.8 billion, up 5.9% vs a year ago. Revenues at Sun Life Financial Canada were up $1.2 billion for the quarter, primarily due to the completion of the Clarica acquisition in the second quarter of 2002. This increase was partially offset by lower U.S. annuity premiums and reduced fee income at MFS Investment Management.

The company also said the Clarica integration is on track with accretion of 5¢ a share in the first quarter. There has also been a net reduction of 5 million shares during the quarter.