TORONTO - Losses rained down on two of Canada's biggest life insurance companies on Thursday as volatility on the stock markets, narrowing spreads and interest rates pulled results at Manulife Financial and Sun Life into the red.
Meanwhile, competitor Great-West Lifeco eked out a profit.
Manulife chief executive officer Donald Guloien told analysts that the life insurer continues working to improve margins, increase sales and its equity risk profile.
"We remain focused on building to fortress capital levels," he said.
"They'll help to cushion us against potential challenging scenarios and fund growth, including future strategic opportunities."
Manulife Financial Corp. (TSX:MFC) slid to a $172-million loss, worth 12 cents per share, as it booked a $1.1-billion pretax charge on changes in actuarial assumptions used to value its policy liabilities.
The results compared with year-earlier profits of $510 million or 33 cents per share, and also slipped below analyst predictions. Manulife was expected to earn 27 cents per share excluding the one-time items, according to analyst estimates from Thomson Reuters.
Meanwhile, Sun Life Financial Inc. (TSX:SLF), Canada's third biggest insurance company, pulled its third-quarter losses down by half to $140 million or 25 cents per share, which was an improvement from a net loss of $396 million or 71 cents per share in the third quarter of 2008.
Analysts had estimated Sun Life would produce a smaller loss of 19 cents per share, according to Thomson Reuters, although such estimates typically exclude unusual items.
"One of the things they're facing is a negative sentiment in terms of the life insurance business overall," said First Asset Investment Management portfolio manager John Stephenson.
"People are saying they've got a fair degree of liabilities coming out in the future, and while equity markets have improved dramatically, they're certainly a ways away from a year and a half ago."
The story was somewhat better at Great-West Lifeco Inc. (TSX:GWO) which turned out stronger results, posting earnings of $445 million in its latest quarter, up from $436 million a year ago.
The Winnipeg-based insurance company said the profit amounted to 47 cents per share, compared with a profit of 49 cents per share a year ago when it had fewer shares outstanding.
Shares in the company lost 33 cents to close at $23.78 in lower volume trading of nearly 600,000 shares.
BMO Capital Markets analyst John Reucassel characterized Great-West's results as slightly positive, noting that revenue growth was good in both Canada and the United States.
"Overall, a decent quarter, particularly when compared to its two larger peers," he wrote in a note.
One common thread between all three company's earnings were revenue results, each which nearly tripled over the same time last year.
Guloien noted that revenues for life insurers can be misleading because they factor in calculations such as mark-to-market on investments. Premiums and deposits are considered the best reflection of money brought in from customers, he said.
At Manulife, premiums and deposits dropped two per cent to $14.3 billion in the quarter while Great-West results fell to $13.6 billion from $15.4 billion.
Sun Life's premiums fell to $3.8 billion from $3.6 billion.
Sun Life chief executive Donald Stewart was quick to acknowledge that market challenges haven't subsided in the near term.
"Although there are signs of stabilization in the economy, we remain cautious on the outlook," he said in a conference call.
"Consumer demand continues to be sluggish as households rebuild lost savings. Going forward, consumers are likely to be more prudent with higher savings rates and more appetite for risky assets."
Manulife shares closed down 3.5 per cent, or 73 cents, to $19.86 on a volume of 7.3 million shares. Sun Life dropped 6.5 per cent, or $1.95 to $28.16 on 6.3 million shares traded.
