Wealth management drives Canadian insurance profits

Thu Feb 13, 2014 5:23pm EST
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By Cameron French

TORONTO (Reuters) - The profits of Canadian life insurers grew in the fourth quarter, as higher returns from growing wealth management units offset uneven insurance sales, highlighting a shift in business as the companies cut risk in the wake of the financial crisis.

Manulife Financial Corp (MFC.TO: Quote), the country's largest insurer, posted a 20 percent rise in net profit for the fourth quarter on Thursday, while No. 3 player Sun Life Financial Inc (SLF.TO: Quote) said its profit from continuing operations more than doubled to C$571 million ($519.78 million).

Smaller Industrial Alliance Insurance and Financial Services Inc (IAG.TO: Quote), the No.4 player in the market, posted a 26 percent rise in profit and boosted its dividend by 6 percent. Great-West Lifeco Inc (GWO.TO: Quote), the second-largest insurer, said its profit doubled largely because of a litigation recovery.

For Manulife, core profit was driven by wealth sales that rose 15 percent to C$12.2 billion, while insurance sales in the quarter fell 32 percent to C$617 million.

"Insurance sales were down, largely because they're charging more for their policies, but wealth sales were way up," said Peter Routledge, an analyst at National Bank Financial.

"That just highlights that Manulife is slowly shifting itself towards wealth and away from protection businesses."

Manulife is not alone.

Sun Life's results were powered by its U.S. MFS Investment management arm, while Industrial Alliance's profit were helped by stronger wealth sales and an 18 percent rise in assets under management, while individual insurance sales fell.   Continued...