Sun Life Financial Inc. will shift a greater proportion of its investments into hard assets such as roads and bridges in order to prepare for the ugliness that's yet to occur in the economy, its chief executive officer says.
"There's a fair way to run in terms of economic pain," Don Stewart said after the insurer's annual meeting Thursday in Toronto.
While it's hard to say how that pain will affect the stock markets, Mr. Stewart suggested that Sun Life is becoming more cautious. The company will be more inclined to make investments in areas such as infrastructure, which have real physical assets backing them, than in investments that consist of promises to pay, he said.
"That's going to be an area of some emphasis going forward because in tough times you are left with a tangible asset. The tangible asset may have less value, but it is a tangible asset."
While Sun Life executives acknowledged the concern surrounding the commercial mortgage market, they said they are comfortable with the company's current exposure, which is split roughly 50-50 between Canada and the U.S.
In terms of expansion, Mr. Stewart said the company is actively looking for opportunities ranging from acquisitions to joint ventures to buying books of business, but suggested that the possibilities might have narrowed in the past week with U.S. life insurers now receiving money from the government's Troubled Asset Relief Program (TARP).
"It's a logical presumption that if a company is taking TARP, they might be less interested in selling pieces of business," Mr. Stewart said.
On-again, off-again preliminary negotiations to pick up pieces of Connecticut-based Hartford Financial Services Group Inc. fell flat earlier this year, according to sources. Last week, Hartford received approval for $3.4-billion (U.S.) in TARP funds, and this week said it will not be selling its U.S. life insurance business.
Mr. Stewart said Canadian insurers are still determining what impact the TARP funds will have on their southern rivals, and any relative advantages or disadvantages that they might create.
Canadian insurers are increasingly being recognized for having held up better than insurers in the U.S. and much of Europe, and that could soon become evident in the makeup of Sun Life's shareholder base, Mr. Stewart said.
"I've never seen more interest by U.S. investors in our institution," he said.
But all insurers have been hurt by the financial crisis, and that will result in rising insurance prices, he said.
"I think given the economic stress that's come across all financial services participants, including the life insurers, you are definitely going to see some changes in pricing in an upward direction," he said.