Sun Life Financial Inc. (SLF), Canada’s third-largest insurer, had a net loss of C$621 million ($608 million) in the third quarter, its first in two years, as North American equities and interest rates plunged. The stock had its biggest drop in two years.
Excluding some items, the loss was about C$572 million, the Toronto-based insurer said today in a statement.
Sun Life said equity markets in North America dropped by 12 percent to 14 percent, while U.S. Treasury rates reached historic lows. The losses are at the “high end” of ranges disclosed by Sun Life in the second quarter, the company said.
“September was a brutal month from an equities standpoint,” said John Kinsey, a portfolio manager who helps manage about C$1 billion, including Sun Life shares. “The market has these knee-jerk reactions to these amounts.”
The insurer was expected to have adjusted net income of C$260.6 million, or 38 cents a share, in the third quarter, according to Bloomberg estimates.
Sun Life fell C$2.38, or 9 percent, to C$24.04 on the Toronto Stock Exchange, the biggest one-day plunge since August 2009. Manulife Financial Corp. (MFC), Canada’s biggest insurer, dropped 4.6 percent to C$12.34.
Manulife and Great-West Lifeco Inc. (GWO) “would be subject to the same thing,” Kinsey said today in a telephone interview.
Sun Life and Manulife “could lose money in the quarter as equity markets and interest rates declined sharply,” Andre- Philippe Hardy, an analyst at RBC Capital Markets, wrote in an Oct. 3 note to clients.
Changes to accounting methods and assumptions contributed about C$200 million to the loss forecast, Sun Life said. The insurer will report full results Nov. 2 after markets close.
Sun Life said in the second quarter that a 10 percent decrease in equity markets in the period would lead to a decline in net income of C$125 million to C$175 million, and a 1 percent drop in interest rates would decrease profit by C$200 million to C$300 million.
The company plans to make changes in the way it accounts for hedging costs on its variable annuities starting in the fourth quarter, resulting in a one-time reduction in net income for the period of about C$500 million, based on current market conditions, Sun Life said.
Sun Life last recorded a net loss in the third quarter of 2009.