* Manulife, Sun Life beat expectations, Great West matches
* Higher sales, stock market gains drive profits
* Shares rise
(Adds details, CEO comment)
By Andrea Hopkins
TORONTO, May 6 (Reuters) - Canada's big three life insurance companies posted strong profits on Thursday as a rebounding economy buoyed sales and rising stock markets lifted their investments.
Manulife Financial Corp (MFC.TO), Great West Lifeco Inc (GWO.TO) and Sun Life Financial Inc (SLF.TO) boasted relatively clean and optimistic profit pictures in the first quarter, pushing their share prices higher as the broader market swooned.
The quarterly results mark a turnaround for the insurers after more than a year of credit downgrades or stock market declines that held back their performances.
Sun Life, Canada's No. 3 life insurer, kicked off the first-quarter earnings season with a C$409 million ($393 million) profit, while rival Manulife, North America's largest life insurer, reported C$1.14 billion in net income.
Both results were well above market expectations and reversed big losses from a year earlier, when the financial crisis sideswiped global life insurers.
"Canada has three world-class insurance companies and we have two of the results so far today that show the sales growth is ultimately going to have a very positive impact on future earnings," Edward Jones analyst Craig Fehr said.
Winnipeg-based Great West Lifeco, the nation's second-largest insurer, followed with a C$441 million profit, up from C$326 million a year earlier, as sales of Canadian insurance and U.S. retirement products surged.
At 47 Canadian cents a share, Great West's profit matched analysts' expectations.
The strong profits pushed shares of the companies higher even as the broader Toronto market dropped in volatile trade. Manulife shares closed 3.3 percent higher at C$18.25, while Sun Life was up 2.2 percent at $29.77 and Great West ended 2.1 percent higher at $26.75.
"It's kind of nice at the end of the day that our stock price is up and reflecting more where it ought to be valued," Manulife Chief Executive Donald Guloien said in an interview with Reuters. "I think people are looking to what our growth prospects are long term and we believe they are very good."
Toronto-based Manulife said stock market gains and a 20 percent increase in insurance sales boosted earnings. Profit was 64 Canadian cents a share, reversing a loss of 67 Canadian cents a share in the first quarter 2009, when the financial crisis decimated the big equity investments of life insurers.
Analysts had expected a per share profit around 45 Canadian cents, according to Thomson Reuters I/B/E/S.
Adjusted earnings from operations, a measure Manulife uses to gauge profit strength, were C$742 million, in line with the company's forecast of C$700 million to C$800 million for each quarter of 2010.
Sun Life also surged past market expectations with net income of 72 Canadian cents a share. That compared with a loss of 38 Canadian cents a share a year earlier, and was well above expectations for a profit of 62 Canadian cents a share.
Toronto-based Sun Life said return on equity, a key measure of profitability, rose to 10.5 percent from 7.6 percent in the fourth quarter. Chief Executive Donald Stewart said sales growth in many key segments was "outstanding".
He attributed the growth in insurance and annuities sales in part to a stronger sales force in the United States. The struggles of rival insurers there have enabled Sun Life to pick up both staff and customers from competitors.
Sun Life reiterated that it sees adjusted 2010 earnings from operations in the range of C$1.4 billion to C$1.7 billion.
Profits at rival Great West Lifeco grew 35 percent from the first quarter of 2009 as stock markets recovered and credit markets stabilized, boosting return on equity to 15.0 percent.
The strength of the Canadian dollar hurt all three life insurers as they converted foreign income into their home currency.
Analysts zeroed in on the capital levels of the insurers, concerned that impending changes in global regulatory requirements will mean the companies must stockpile more capital than previously.
Manulife, which has spent a year building "fortress" levels of cash, appeared better capitalized than Sun Life, with a key capital level of 250 percent, compared with Sun Life's 210 percent and Great West's 202 percent.
Canadian regulators require a minimum 150 percent, and anything above 200 percent was once considered a gold standard. However, the ability of lifecos to absorb crises like that of 2009 has meant capital is more scrutinized than ever.
Guarding high capital levels slows earnings growth but puts the companies in good position to make acquisitions as the insurance industry consolidates.
$1=$1.03 Canadian Reporting by Andrea Hopkins; editing by Frank McGurty