Manulife Financial Corp. Tuesday tapped investors for $2.1-billion in fresh capital to top up its reserves, after Canada’s largest insurer warned it would fall into a loss for the first time in its history as a public company.

The move marked a reversal for Dominic D’Alessandro, the outgoing chief executive, who had earlier insisted the bank would not need to turn to shareholders for fresh support, but was welcomed by analysts as a sign that investors were ready to inject fresh cash into Canadian financial institutions.

The chief executive turned to backers Tuesday after it became evident volatile markets were rapidly draining the insurer’s reserves and would forced it to set aside billions this year to cover pledges made to customers.

Manulife had led the way in Canada in recent years in selling consumers financial products that guaranteed them a minimum return on their investment to help pay for costs associated with retirement.

The products have been a major source of growth and were seen as the future of the life insurance industry as it sought to increase profits by assuming a greater role in meeting the needs of an aging population.

But as market conditions have worsened, the investments made by Manulife and other insurers to back up these guarantees have declined in value dramatically, meaning Manulife will have to set aside $5-billion in reserves by the end of this year to cover the pledges.

This deteriorating situation has helped drive Manulife’s share price down by half this year and Tuesday compelled it to top up its reserves by selling fresh shares at a sharp discount, mainly to Canadian institutional investors.

In the largest equity financing this year, the insurer sold $1.1-billion to eight major existing backers, and a separate $1-billion to a mix of institutional investors, at a price of $19.40 a share, a discount of 5% from Monday’s closing price.

About half of that capital will be used to pay off an emergency loan of $3-billion drawn down from the country’s top banks last month, reducing that high-priced debt to $2-billion.

Manulife also forecast a loss of $1.5 billion, its first loss since becoming a publicly traded company in 1999. The worse-than-expected outlook prompted Standard & Poor’s, the ratings agency, to cut the company’s outlook to ‘negative’ from ‘stable’ because of its reduced financial flexibility.

Mr. D’Alessandro said, “This issue of common shares along with the renegotiated credit facilities will noticeably bolster our already strong capital position. These transactions provide us with the flexibility to absorb the accounting impact of future volatility in financial markets.”

The extra reserves will also give the insurer greater scope to consider small-to-medium sized acquisitions in overseas markets, but it would likely require another round of fresh capital to make a major buy.