Canada's Sun Life sees challenging year for insurers; profit beats estimates

TORONTO (Reuters) - Life insurers face a challenging year as rising unemployment from the coronavirus pandemic reduces group benefit and retirement plan enrollment, and market declines and credit deterioration weigh on asset-management earnings, Sun Life Financial Inc's <SLF.TO> CEO said on Tuesday.

"COVID-19 is an enormous health and economic and humanitarian shock," Chief Executive Dean Connor said in an interview after Canada's second-biggest life insurer reported first-quarter underlying profit that beat analyst estimates and rose from a year ago.

"That's got to put some pressure on assets and eventual revenues and profits," he said of the impact from the illness caused by the novel coronavirus.

But Sun Life's earnings power supports continued dividend payouts, Connor said.

With most of the period's earnings coming before business shutdowns were enacted in March, Sun Life's increase in underlying profit was driven by higher investing activity in Canada and the United States, and increased earnings in Asia.

Underlying profit from asset management rose 7% and Asia's jumped 27%, compared with 8% and 7% in the United States and Canada respectively.

Although China, Hong Kong and Vietnam are now opening back up and Sun Life is "doing more in terms of insurance and wealth in those markets," ongoing lockdowns in Southeast Asia and India could make for a challenging second quarter, Connor said.

Mortality and morbidity claims related to COVID-19 had been less than 5% of Sun Life's monthly average for mortality and disability claims paid, the company said in a statement.

"There is a lag factor, so it's difficult to say whether we’re at the maximum level, or whether we’ll see a bit more claims," Connor said.

While long-term disability claims had been rising because of increasing mental health issues even before the coronavirus outbreak, they have been offset by lower short-term disability and elective surgery payments, he said.

Sun Life reported underlying net income of C$770 million ($548.24 million), or C$1.31 per share, in the three months that ended on March 31, up from C$1.20 a year ago. Analysts had expected C$1.12.

Reported net income fell to C$391 million ($278.39 million), or 67 Canadian cents per share, from C$623 million ($443.57 million), or C$1.04, a year ago, due to market declines driven by the COVID-19 outbreak, Connor said in a statement.

Sun Life shares lost 4.3% in Toronto on Tuesday before the company reported results, compared with a 0.5% increase in the Toronto stock benchmark <.GSPTSE>.

(Reporting by Nichola Saminather; Editing by Aurora Ellis and Peter Cooney)