Sun Life Financial Inc. said profit may be lowered by between C$550 million ($540 million) and C$650 million in the fourth quarter, as Canada’s third-largest insurer records costs tied to variable annuity and segregated fund contracts.
Sun Life told investors last month that it could record C$500 million for the one-time costs in the quarter. The Toronto-based insurer posted its first net loss in two years late yesterday when it reported third-quarter results.
“Despite the pain felt in the third quarter, there does not appear to be much relief for the fourth quarter,” said John Aiken, an analyst at Barclays Capital in Toronto. “Even if the macro environment improves, the forecast half-billion-dollar hit to earnings will likely generate another reported quarterly loss.”
The third-quarter loss was C$621 million, or C$1.07 a share, compared with year-earlier profit of C$416 million, or 73 cents a share, Sun life said in a statement, matching a loss forecast announced on Oct. 17.
The benchmark Standard & Poor’s 500 Index plunged 14 percent during the quarter, while U.S. Treasury yields reached historic lows. Insurers are hurt by falling equities because they reduce investment income while increasing the amounts that must be paid out to clients who bought guaranteed investment products.
Before one-time items, the third-quarter loss was C$572 million, or 99 cents a share, Sun Life said.
Sun Life rose 0.20 percent to C$24 in trading yesterday in Toronto. The shares have fallen 20 percent this year, the sixth-worst performer on the 43-member S&P/TSX Financials Index.
Manulife Financial Corp., Canada’s largest insurer, is scheduled to report third-quarter results today. The Toronto-based company is expected to have a loss before one-time items of 22 cents a share, according to the average estimate of 15 analysts surveyed by Bloomberg News.
(Sun Life will hold a conference call at 10 a.m. Toronto time. To listen, dial +1-416-644-3415 or +1-877-974-0445.)