Manulife profit slips, bank loan helps capital

* EPS of C$0.33, down from C$0.70 in Q3 2007

* Profit hurt by stock mkt declines, credit losses

* Obtains C$3 bln term loan to bolster capital

* Stock up 1 pct at C$26.07

(Adds details, analyst comments)

By Lynne Olver

TORONTO (Reuters) - Profit at life insurer Manulife Financial (MFC.TO) fell by half in the third quarter as sharply lower stock markets and impaired bond holdings prompted large charges, and a decline in managed assets hurt fee income.

But Manulife's capital position has been a key focus in recent weeks, and the company said on Thursday that it will borrow C$3 billion from the six largest Canadian banks to provide additional regulatory capital for its operating subsidiaries, as needed.

The loan, which will be fully drawn by Nov. 20, will enhance the company's overall capital position and may pave the way for acquisitions, Manulife Chief Executive Dominic D'Alessandro said in a statement.

"Even with the decline in global equity markets since September 30, our capital position is a very comfortable one," D'Alessandro said, adding that the company will evaluate "any strategic opportunities" that emerge from current market conditions.

Manulife's earnings fell to C$510 million ($433 million), or 33 Canadian cents a share, in the three months ended Sept. 30, from C$1.07 billion, or 70 Canadian cents, in the same 2007 period.

Analysts had expected earnings of 40 Canadian cents a share before items, according to Reuters Estimates -- but the range of forecasts was wide, at 20 to 70 Canadian cents.

"The bank loan significantly reinforces their excess capital position and puts any capital issues to bed," said Tom MacKinnon, an analyst at Scotia Capital.

The results were better than MacKinnon had expected, and he said the insurer's excess capital position could be between C$3 billion and C$4 billion by year-end.

Manulife sells insurance and wealth-management products in Canada, the United States and Asia.

As stock markets slid in September and October, Manulife's stock fell on investor concerns the company might be required to raise new capital to offset future obligations, as required by regulators. Its stock hit a year low of C$21.17 on Oct. 27.

The pressure eased on Oct. 28 when Canada's financial institutions regulator said life insurers would get more time to put aside capital for guaranteed payments that will be made many years in the future. The interim rule change relates to segregated funds.

Manulife estimated that after drawing down the new loan, and taking into account recent stock market moves and the new capital rules for segregated fund guarantees, its regulatory capital ratio would be "a very robust 225 percent," above its target range of 180 to 200 percent.

In the third quarter, Manulife was stung by C$574 million in stock market related charges, including those tied to its segregated fund and variable annuity guarantees. If equity markets improve, the company would report gains, it said.

Manulife also took charges of C$253 million on losses for debt securities issued by Lehman Brothers Holdings (LEHMQ.PK), which filed for bankruptcy in September, and by other troubled companies.

Return on equity, a key measure of profitability, fell to 8.2 percent in the quarter from 18.9 percent a year earlier.

On the Toronto Stock Exchange, Manulife shares were up 1 percent at C$26.07 on Thursday morning.

($1=$1.18 Canadian)

(Reporting by Lynne Olver; editing by Rob Wilson)