Nov. 6 (Bloomberg) -- Manulife Financial Corp., North America's largest insurer by market value, received C$3 billion ($2.57 billion) in loans from six Canadian banks to shore up its capital after reporting its biggest profit decline in seven years on investment writedowns.

Third-quarter net income dropped 52 percent to C$510 million, or 33 cents a share, from C$1.07 billion, or 70 cents, a year earlier, the Toronto-based insurer said today in a statement. Revenue fell 38 percent to C$5.83 billion.

Manulife, which owns John Hancock in the U.S., arranged a five-year credit line with the Canadian banks to provide additional cash. Manulife joins Prudential Financial Inc. and MetLife Inc. that have raised more than $49 billion in capital after plunging stock prices eroded assets that back client annuities.

``It's just sort of a safety net to maybe calm everything down,'' said John Kinsey, which helps manage about C$1 billion for Caldwell Securities Ltd. in Toronto, including Manulife shares. ``They're a well-managed company, but you expected something like this was coming.''

Manulife fell 45 cents to C$25.35 in 4:13 p.m. trading on the Toronto Stock Exchange. The shares have dropped 38 percent this year, matching the drop on the six-member S&P/TSX Life and Health Insurance Index.

Acquisitions

Chief Executive Officer Dominic D'Alessandro said the loan, to be drawn on as needed, will enhance Manulife's capital position and give it cash to look at ``strategic opportunities.'' The insurer has been identified by analysts as a possible buyer of American International Group Inc. assets.

D'Alessandro said that he doesn't expect the company would spend the entire credit line on an acquisition, and that they hope to repay it ``sooner rather than later.''

The insurer expects to maintain its debt ratings. Moody's Investors Service and Standard & Poor's Ratings Services affirmed Manulife's financial strength ratings today, although Moody's changed its outlook to ``negative'' from ``stable.''

``The company intends to increase its borrowings, modestly weakening its flexibility,'' Moody's analyst Peter Routledge wrote.

Manulife recorded C$253 million in writedowns from its investments such as AIG and Lehman Brothers Holdings Inc., adding to C$732 million in costs taken by Manulife's two main Canadian competitors in the quarter. Insurers worldwide, including Prudential and AIG have recorded $124 billion in credit losses and writedowns in the last year, according to Bloomberg data.

Missed Estimates

Profit missed the 39-cent-a-share estimate of UBS Securities analyst Andrew Kligerman. The company was expected to earn 38 cents a share, according to the average estimate of four analysts surveyed by Bloomberg.

Premiums and deposits declined 2.4 percent to C$16.4 billion because of lower deposits in some of its annuity and mutual fund businesses. Asset-management fees, which have fallen because of slumping equity markets, account for about 75 percent of Manulife's premiums and deposits, according to Genuity Capital Markets analyst Mario Mendonca. An 8.9 percent drop in the benchmark Standard & Poor's 500 Index reduced mutual-fund fees.

``So much of this depends on the way the equity markets go,'' said Ian Nakamoto, director of MacDougall MacDougall and MacTier Inc. in Toronto, which manages about C$4.5 billion in assets, including Manulife shares.

Return on Equity

Return on common shareholders' equity dropped to 8.2 percent from a year-earlier 18.9 percent, the company said.

Insurance earnings in the U.S. climbed 49 percent to C$311 million. U.S. asset-management profit plunged 95 percent to C$13 million as stock markets slumped.

Profit from Canada dropped 61 percent to C$113 million because of equity markets and higher segregated fund guarantees. Canada's financial-services regulator announced last month that it has relaxed capital requirements for segregated funds run by insurers, so that firms can set aside less money for longer-term obligations.

Earnings at the Asia and Japan division fell 4.8 percent to C$216 million because of lower fee income.

Manulife is the last of Canada's three main insurers to report third-quarter results. Great-West Lifeco Inc. said Oct. 30 that profit that fell 5.3 percent to C$450 million, while Sun Life Financial Inc. reported its first quarterly loss since going public in 2000.

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.

Last Updated: November 6, 2008 16:23 EST