Sun Life Financial Inc. swung to a quarterly loss, hurt by an increase in reserves due to a decline in equity markets, the insurer said Thursday.

The company posted a first-quarter net loss of $213 million, or 38¢ a share, for the quarter ended March 31. That compared with a profit ofC$533 million, or 93¢ a share, a year ago.

Operating loss was 33¢ a share, Sun Life said.

The operating loss for the first quarter does not include after-tax charges of $27 million for restructuring costs taken as part of the company’s actions to reduce expense levels and improve operational efficiency.

Assets under management as at March 31 were $375 billion, down 9.7% from a year ago.

Sun Life said results this quarter were impacted by reserve strengthening, net of hedging, of $325 million related to equity market declines, reserve increases of $167 million for downgrades on the company’s investment portfolio, and credit and equity impairments of $34 million and $42 million respectively.

“Despite the capital market impacts on the first quarter financial results, the company remains well capitalized with a Minimum Continuing Capital Surplus Requirement (MCCSR) ratio of 223% for Sun Life Assurance Company of Canada,” Sun Life said.

The company also reported the 2008 Risk Based Capital Ratio for Sun Life Assurance Co. of Canada (U.S.) of 357%, in excess of its target range of 300%-350%.

“During this challenging period, individuals and organizations are increasingly placing their confidence in Sun Life. We are strong, solid and sustainable. Strong business fundamentals are reflected in the quarter’s higher premium revenues, exceptional fund performance at MFS and impressive sales momentum. North American group businesses advanced nicely, including record earnings in our U.S. Employee Benefits Group, as did Asia where we continue to invest,” said Donald Stewart, CEO.

Sun Life Canada had net income of $194 million in the first quarter of 2009 compared to a loss of $55 million in the fourth quarter of 2008 and earnings of $247 million in the prior year.

Sun Life U.S.’s loss of $407 million in the first quarter of 2009 compares to a loss of $679 million in the fourth quarter of 2008 and to earnings of $113 million in the first quarter of the prior year.

First quarter 2009 earnings for Sun Life’s U.S. investment fund unit MFS decreased $31 million compared to the first quarter of 2008. The movement of the Canadian dollar against the U.S. greenback increased earnings for MFS by $5 million in the first quarter of 2009 compared to the first quarter of 2008.

First quarter 2009 earnings for Sun Life Asia were $17 million compared to earnings of $13 million in the first quarter of 2008.

Sun Life maintained its quarterly shareholder dividend at 36¢ a
common share, payable June 30, to shareholders of record at the close of business on May 27.

IE