Oct. 27 (Bloomberg) -- Manulife Financial Corp. and Sun Life Financial Inc. may need to raise capital to bolster their balance sheets after global equities plunged, according to RBC Capital Markets analyst Andre-Philippe Hardy.

Declining stock prices, combined with rising credit spreads and a higher risk of defaults have put pressure on Canadian insurers, particularly Manulife and Sun Life, Hardy said today in a note to clients.

There's an ``increasing likelihood'' Manulife may evaluate options to bolster its balance sheet by reinsuring some risks, selling businesses or issuing stock, debt or preferred shares, Hardy said.

Manulife, the country's biggest insurer, may need to add C$2 billion ($1.56 billion) in capital in the fourth quarter, compared with about C$500 million for Sun Life, Hardy said. He rates Manulife ``sector perform'' and Sun Life `outperform.''

BMO Capital Markets analyst John Reucassel said in an Oct. 24 note that Manulife may need to raise C$3 billion to C$5 billion in capital due to declines in the equity markets. Reucassel downgraded Manulife to ``market perform'' from ``outperform.''

Manulife fell C$3.83, or 15 percent, to C$21.17 at 4:10 p.m. trading on the Toronto Stock Exchange, its biggest decline since it began trading in 1999. Sun Life fell C$3.86, or 13 percent, to C$26.29.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

Last Updated: October 27, 2008 16:17 EDT