UPDATE 2-Sun Life sees no dividend cut this year

* Expects cash position to fall as credit stabilizes

* Does not expect to cut the dividend

* Industrial Alliance (IAG.TO) also happy with dividend (Adds Industrial Alliance dividend comments)

TORONTO, Sept 17 (Reuters) - A top executive at Sun Life Financial Inc (SLF.TO), Canada's No. 3 life insurer, said on Thursday he did not see a reason to cut the company's dividend, in contrast to a surprise cut made by Manulife Financial Corp (MFC.TO) last month.

Manulife, Canada's biggest life insurer, surprised investors in August by halving its quarterly dividend -- the only Canadian financial services company to cut its payout during the financial crisis.

Dean Connor, president of Sun Life Financial Canada, told a conference hosted by Scotia Capital in Toronto that Sun Life has strong capital ratios and reserves, with a higher than normal cash position of more than C$11 billion ($10.4 billion).

"We do not foresee recommending a dividend cut to the board because our capital levels are strong, our capital sensitivity to market levels are low, and we maintain significant cash on hand," he said.

"As well, in the past we've maintained a total payout ratio in the 50 percent range, including buybacks, and with no further buybacks planned in 2009, we're comfortable we're in a position to maintain this level of payout."

Sun Life's quarterly dividend is 36 Canadian cents a share.

Connor said the company expects its cash position to decrease as the credit environment stabilizes.

INDUSTRIAL ALLIANCE

Industrial Alliance Insurance and Financial Services Inc, Canada's fourth-biggest publicly traded life insurer, also said on Thursday it is happy with its dividend level.

"You look at the payout, in Q2 the payout is 38 percent and the policy is to have a payout between 25 and 35 (percent)," Chief Executive Yvon Charest said at the Scotia Capital conference.

"So we are almost already within the policy guidance, so clearly with the earnings power that we have, the fact that our earnings came back on track faster than the competition, the fact that we might have a payout a bit lower than the other guys, certainly we feel good about the dividend."

Quebec-based Industrial Alliance said in announcing second quarter results in July that it held its quarterly dividend at 24.5 Canadian cents, and that it aimed to maintain the payout through 2009. ($1=$1.06 Canadian) (Reporting by Andrea Hopkins; additional reporting by Pav Jordan; editing by Peter Galloway)