WRAPUP 1-Canadian insurers hit by market downturn
* Manulife Q1 share loss C$0.67 vs EPS C$0.57 last year
* Sun Life Q1 share loss C$0.38 vs EPS C$0.93 last year
* Declines in equity markets drive down results
* Shares sink in mid-morning trade
TORONTO, May 7 (Reuters) - Two of Canada's largest insurers reported weaker-than-expected quarterly results on Thursday as ailing global markets, credit impairments and the need to shore up reserves took a toll.
Manulife Financial Corp (MFC.TO), Canada's largest insurer, posted a first-quarter loss of C$1.07 billion ($916 million), or 67 Canadian cents a share, compared with a profit of C$869 million, or 57 Canadian cents a share, a year earlier.
Analysts, on average, had expected a loss of 37 Canadian cents before exceptions, according to Reuters Estimates.
Canada's third-largest insurer, Sun Life Financial Inc (SLF.TO) (SLF.N), kicked off the day by reporting a quarterly loss, hurt by an increase in reserves due to a decline in equity markets.
Sun Life posted a first-quarter net loss of C$213 million, or 38 Canadian cents a share, compared with a profit of C$533 million, or 93 Canadian cents a share, a year ago. Analysts had expected a loss of 19 Canadian cents a share.
The disappointing results sent both stocks lower in early Toronto trade. Manulife shares were down 2.5 percent at C$22.18, while Sun Life traded 3 percent lower at C$29.07. The S&P/TSX financial index of banks, insurance companies and asset managers was down 1.1 percent overall.
"This was obviously a difficult quarter, reflecting the impact of the global economy on equity markets, other asset values and sales," said Donald Guloien, Manulife's incoming chief executive. "Our global franchises remain strong, our capital position is near the high end of its historical range, and we enjoy high credit ratings."
Craig Fehr, an analyst at Edward Jones, said Sun Life's results reflected the very difficult start to the first quarter, when equity markets had not yet rebounded.
Fehr said writedowns on credit losses and reserve rebuilding would be a trend across the insurance sector, which makes big investments and needs to hold large reserves against insurance liabilities on the books.
"A lot of this quarter stems from the reserve additions that they had for their credit impairments and the equity market declines and I think that's going to be the theme we see throughout the day as the rest of the lifecos report," Fehr said.
CREDIT, MARKET LOSSES
Manulife said the quarter's loss was primarily driven by declines in U.S. and other equity markets. Reserve strengthening for segregated fund guarantees resulted in an accounting charge of C$1.15 billion. Credit impairments were C$121 million.
Also affecting earnings were fair value adjustments of C$277 million, primarily for declines in commercial real estate values, C$255 million of equity related charges and C$72 million related to credit downgrades, the company said.
Premiums and deposits amounted to C$19.3 billion in the first quarter of 2009, compared to C$19.5 billion for the same period last year.
Sun Life said its results were hit by reserve strengthening of C$325 million related to equity market declines, reserve increases of C$167 million for downgrades on the company's investment portfolio, and credit and equity impairments of C$34 million and C$42 million respectively.
But both companies said they are well-positioned financially to withstand further market declines, and pointed to growth in sales in a few sectors as evidence that business fundamentals are strong.
"Notwithstanding our disappointing short-term results, we are very well positioned to emerge from the recession as a stronger, more focused and competitive company," Sun Life Chief Executive Donald Stewart said in a statement.
Sun Life revenues rose to C$5.03 billion in the first quarter, up 29 percent from a year earlier, while assets under management dipped 10 percent to C$375 billion as a drop in market performance and currency adjustments had an impact.
($1=$1.17 Canadian) (Reporting by Andrea Hopkins; Editing by Jeffrey Hodgson)
