* Manulife, Sun Life beat expectations, Great West matches
* Higher sales, stock market gains drive profits
* Shares rise
(Adds details, CEO comment)
By Andrea Hopkins
TORONTO, May 6 Canada's big three life
insurance companies posted strong profits on Thursday as a
rebounding economy buoyed sales and rising stock markets lifted
Manulife Financial Corp (MFC.TO), Great West Lifeco Inc
(GWO.TO) and Sun Life Financial Inc (SLF.TO) boasted relatively
clean and optimistic profit pictures in the first quarter,
pushing their share prices higher as the broader market
The quarterly results mark a turnaround for the insurers
after more than a year of credit downgrades or stock market
declines that held back their performances.
Sun Life, Canada's No. 3 life insurer, kicked off the
first-quarter earnings season with a C$409 million ($393
million) profit, while rival Manulife, North America's largest
life insurer, reported C$1.14 billion in net income.
Both results were well above market expectations and
reversed big losses from a year earlier, when the financial
crisis sideswiped global life insurers.
"Canada has three world-class insurance companies and we
have two of the results so far today that show the sales growth
is ultimately going to have a very positive impact on future
earnings," Edward Jones analyst Craig Fehr said.
Winnipeg-based Great West Lifeco, the nation's
second-largest insurer, followed with a C$441 million profit,
up from C$326 million a year earlier, as sales of Canadian
insurance and U.S. retirement products surged.
At 47 Canadian cents a share, Great West's profit matched
The strong profits pushed shares of the companies higher
even as the broader Toronto market dropped in volatile trade.
Manulife shares closed 3.3 percent higher at C$18.25, while Sun
Life was up 2.2 percent at $29.77 and Great West ended 2.1
percent higher at $26.75.
"It's kind of nice at the end of the day that our stock
price is up and reflecting more where it ought to be valued,"
Manulife Chief Executive Donald Guloien said in an interview
with Reuters. "I think people are looking to what our growth
prospects are long term and we believe they are very good."
Toronto-based Manulife said stock market gains and a 20
percent increase in insurance sales boosted earnings. Profit
was 64 Canadian cents a share, reversing a loss of 67 Canadian
cents a share in the first quarter 2009, when the financial
crisis decimated the big equity investments of life insurers.
Analysts had expected a per share profit around 45 Canadian
cents, according to Thomson Reuters I/B/E/S.
Adjusted earnings from operations, a measure Manulife uses
to gauge profit strength, were C$742 million, in line with the
company's forecast of C$700 million to C$800 million for each
quarter of 2010.
SALES GROWTH STRONG
Sun Life also surged past market expectations with net
income of 72 Canadian cents a share. That compared with a loss
of 38 Canadian cents a share a year earlier, and was well above
expectations for a profit of 62 Canadian cents a share.
Toronto-based Sun Life said return on equity, a key measure
of profitability, rose to 10.5 percent from 7.6 percent in the
fourth quarter. Chief Executive Donald Stewart said sales
growth in many key segments was "outstanding".
He attributed the growth in insurance and annuities sales
in part to a stronger sales force in the United States. The
struggles of rival insurers there have enabled Sun Life to pick
up both staff and customers from competitors.
Sun Life reiterated that it sees adjusted 2010 earnings
from operations in the range of C$1.4 billion to C$1.7
Profits at rival Great West Lifeco grew 35 percent from the
first quarter of 2009 as stock markets recovered and credit
markets stabilized, boosting return on equity to 15.0 percent.
The strength of the Canadian dollar hurt all three life
insurers as they converted foreign income into their home
Analysts zeroed in on the capital levels of the insurers,
concerned that impending changes in global regulatory
requirements will mean the companies must stockpile more
capital than previously.
Manulife, which has spent a year building "fortress" levels
of cash, appeared better capitalized than Sun Life, with a key
capital level of 250 percent, compared with Sun Life's 210
percent and Great West's 202 percent.
Canadian regulators require a minimum 150 percent, and
anything above 200 percent was once considered a gold standard.
However, the ability of lifecos to absorb crises like that of
2009 has meant capital is more scrutinized than ever.
Guarding high capital levels slows earnings growth but puts
the companies in good position to make acquisitions as the
insurance industry consolidates.
(Reporting by Andrea Hopkins; editing by Frank McGurty)