The insurer said Wednesday it earned $383 million, or 64 cents per share, for the quarter ended Sept. 30, compared with a loss of $621 million, or $1.07 per share, a year ago.
"Results for the third quarter reflect overall solid underlying performance as we continue to execute on our growth initiatives," Sun Life president and chief executive Dean Connor said in a statement.
Premiums and deposits improved to $26.2 billion for the quarter, compared to $18.6 billion for the same period last year.
"Adjusted premiums and deposits were up more than 40 per cent, led by MFS Investment Management, which recorded its best ever gross sales and surpassed the US$300 billion mark in assets under management," Connor said.
Operating net income — which excludes items that the company believes are not ongoing — was $401 million, or 68 cents per share.
That beat analysts estimates for adjusted earnings of 63 cents per share, according to Thomson Reuters.
In the third quarter of 2011, the company booked an operating loss of $572 million, or 99 cents per share, largely due to reserve increases in its individual life and variable annuity businesses in the U.S. related to steep declines in equity markets and interest rate levels.
Volatile markets and low interest rates hit insurers because they tend to invest much of the money they make from policyholders into equity and bond markets.
The company said the positive impact of improved equity markets in the most recent quarter was largely offset by declines in the fixed income reinvestment rates in its insurance contract liabilities, driven by persistently low interest rates.
Return on equity also swung into positive territory at 11.1 per cent, compared to minus 17.4 per cent in the third quarter of 2011.
However, it also booked a charge of $44 million due to declines in fixed income reinvestment rates and expects to book a further charge of $50 million in the fourth quarter if low interest rates persist.
Total revenue slipped to $5.24 billion, down from $7.51 billion a year ago, largely due to lower net gains in the fair value of some assets and liabilities, reduced net premium revenue from its Canadian group retirement services and lower investment income.
Sun Life is targeting $2 billion of earnings in 2015 with a return on equity of between 12 and 14 per cent.
But in the second-quarter it warned that persistently low interest rates could cause a further $600 million hit to its earnings by 2015 after weak rates and volatile markets crushed its earnings.
In September, ratings agency DBRS placed Sun Life's debt and preferred share ratings under review with negative implications reflecting the company's weak profitability and earnings volatility associated with outside market forces.
DBRS said its action also reflected uncertainty associated with the company's strategic plan to restore profitability and earnings stability by pursuing more profitable products with fewer embedded risks and lower capital requirements.
It said Sun Life faces a string of challenges, including the continuing weak economic and interest rate environment aggravated by evolving regulatory measures.
Sun Life employs about 16,000 people, including 7,000 in Canada, and has insurance, wealth management and mutual fund operations around the world.
Shares in Sun Life, which reported its results after the close of markets, were down 72 cents at $24.37 on the Toronto Stock Exchange.
Note to readers: This is a corrected story. A previous version erroneously reported the net income.