Sun Life left with $270M Cdn in bonds issued by failed U.S. bank

As U.S. financial firms continued to crumble, Toronto's Sun Life Financial Inc. has reported more damage to its investments south of the border, this time involving bonds caught in the biggest bank failure in U.S. history.

The Canadian insurer disclosed Friday that it holds bonds with face value of $270 million issued by Seattle-based Washington Mutual Inc. and related entities.

Sun Life stock fell six per cent, dropping $2.39 to $37.10 in TSX trading.

WaMu, which collapsed under the weight of bad mortgage bets, was seized Thursday by the U.S. Federal Deposit Insurance Corporation.

Sun said it doesn't know how much of the $270 million it may be able to recover, but it expects to take a charge against its third-quarter profit. It suggested the loss would not be significant for a company of its size.

"Sun Life’s $60-billion bond portfolio is highly diversified across 1,400 different borrowers around the world and is rated 97 per cent investment grade," it said in a statement.

"The aggregate exposures to Washington Mutual discussed above represent less than one per cent of Sun Life’s invested assets. Sun Life Financial continues to have a strong balance sheet, is well capitalized and is very well positioned to fulfil all of its obligations."

Last week, Sun reported two other troubled U.S. holdings:

Bonds with face value of $315 million issued by American International Group Inc. and its subsidiaries. The New York insurer agreed Sept. 16 to be taken over by the U.S. government in an $85 billion US rescue.Bonds with face value of $334 million and derivates with net value of about $15 million issued by Lehman Brothers Holdings Inc. The New York investment bank filed for bankruptcy Sept. 15.

After the market closed, Winnipeg-based Great-West Lifeco Inc. said it holds $2.1 million Cdn of WaMu bonds. It also has mortgage-backed securities that are packaged and serviced by a WaMu subsidiary, but "these securities do not expose Lifeco to the credit of Washington Mutual."

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