WRAPUP 3-Canada insurers fall short of forecasts, shares drop
* Sun Life, Manulife report losses; Great-West profit
* Losses driven by changes to actuarial assumptions
* Shares of all three, plus Industrial Alliance, drop (Adds Manulife comments from interview)
TORONTO, Nov 5 (Reuters) - Two of Canada's big life insurers unveiled surprise losses on Thursday, while a third reported a smaller-than-expected profit as the fallout from volatile financial markets persisted.
Manulife Financial Corp (MFC.TO), North America's largest lifeco, and Sun Life Financial Inc (SLF.TO), Canada's No. 3 insurer, reported quarterly net losses on Thursday as they changed the assumptions used to value their assets and liabilities and took hits from credit downgrades.
Great West Lifeco (GWO.TO), the country's second-largest lifeco, said its profit edged higher in the three months ended Sept. 30, but the result came in slightly below expectations.
While the value of the Manulife's and Sun Life's huge stock market investments climbed in the third quarter, the boost was not enough to offset the big adjustments the companies make annually to value their assets and liabilities.
A drop in global interest rates and equity prices over the last year forced both companies to update the actuarial assumptions on their books, a change that reduced income by C$513 million at Sun Life and by C$783 million at Manulife.
Lower interest rates hurt returns on fixed-income investments, forcing the insurers to rebuild capital to cover promises made to customers who bought a guaranteed class of insurance products.
"This year, because of the volatility we've seen in financial markets, the assumption changes are quite large, and quite material -- clearly a show-stealer," Edward Jones analyst Craig Fehr said.
"We can't ignore the changes, because it is part of the core operations of an insurance company. At the same time, you can't expect this to occur every single quarter so you have to try to look through it determine what the core performance of these insurance companies was -- and I think it was OK."
Sun Life's net loss shrank to C$140 million ($132 million), or 25 Canadian cents a share, for the third quarter. That compares with a net loss of C$396 million, or 71 Canadian cents, a year earlier, when asset impairments, credit-related losses and a huge decline in equity markets took a toll.
Analysts on average had expected earnings of 19 Canadian cents a share, according to Thomson Reuters I/B/E/S.
Sun Life also offered a much-sought-after view of what it considers normalized income once the global economic crisis abates. It said it believes 2010 earnings could come in much as 33 percent lower than before the financial crunch.
Chief Executive Donald Stewart said the company had solid sales increases and stood to benefit in the years ahead from an aging population and an increase in private pension planning as government and employers step out of the business. Continued...
