Canadian Financials Steer Largely Clear of CIT Woes

Struggling U.S. money lender CIT Group (CIT) has managed to avoid bankruptcy after securing a $3-billion in loans from bondholders, but even if the company failed, exposure of Canadian life insurance companies would be minimal.

After examining 2008 filings, Scotia Capital estimates $193-million exposure for Manulife Financial Corp. (MFC), $100-million for Sun Life Financial (SLF), and only $8-million for Great-West Life Co. (GWLOF.PK).

If a bankruptcy does occur, Scotia expects bondholders to recover between 25 cents and 60 cents on the dollar. Assuming a 25-cent recovery, the potential earnings-per-share hit is a relatively minor 10 cents for Sun Life, 7 cents for Manulife, and less than 1 cent for Great-West Life Co.