* Q2 EPS C$1.09 vs C$0.66 yr-earlier
* Cuts dividend by 50 pct to C$0.13
* Capital ratio at 242 pct, up from 200 pct yr-earlier
By Andrea Hopkins
TORONTO, Aug 6 (Reuters) - Manulife Financial Corp <MFC.TO, Canada's largest insurer, reported a bigger-than-expected quarterly profit on Thursday as global stock markets boosted income, but it cut its dividend in a bid to preserve capital.
The Toronto-based life insurer said it had net income of C$1.77 billion ($1.66 billion), or C$1.09 a share, in the second quarter ended June 30, compared with a profit of C$1.01 billion, or 66 Canadian cents a share, in the same period last year.
Analysts had expected per share earnings of 66 Canadian cents, according to Reuters Estimates.
While the profit exceeded market expectations, Manulife surprised observers by cutting its quarterly dividend by 50 percent to C$0.13 a share, saying it preferred to guard "fortress levels" of capital.
"We believe that retaining more of our earnings is the most effective means of building capital, while still providing an attractive yield for our shareholders who will benefit as we deploy our capital for growth," Manulife said in a statement.
Manulife said while its minimum continuing capital and surplus ratio, at 242 percent, is up from 200 percent in the same quarter last year, it must anticipate more conservative economic scenarios and be prepared to respond to risks and opportunities.
$1=$1.07 Canadian Reporting by Andrea Hopkins; editing by Peter Galloway