Life insurance giant Manulife Financial Corp. said its profit fell by half in the third quarter end Sept. 30, hurt by stock market declines and credit losses.

The company said on Thursday that it will borrow $3 billion from the six largest Canadian banks to provide additional regulatory capital for its operating subsidiaries, as needed.

The loan will enhance the company’s overall capital position, Manulife CEO Dominic D’Alessandro said in a release.

“Even with the decline in global equity markets since Sept. 30, our capital position is a very comfortable one,” D’Alessandro said, adding that the company will also evaluate “any strategic opportunities” that emerge from current market conditions.

Toronto-based Manulife said quarterly earnings fell to $510 million, or 33¢ a share, from $1.07 billion, or 70¢, in the same 2007 period.

Return on equity fell to 8.2% in the quarter, down from 18.9% a year earlier.

Manulife had previously warned that it would take charges of about $250 million on debt securities issued by Lehman Brothers Holdings which filed for bankrupcty in September, and by other troubled companies.

Manulife’s premiums and deposits amounted to $16.4 billion in the third quarter, compared to $16.8 billion for the same period last year.

Excluding currency movements and a large group insurance sale in the prior year, Insurance sales were up 16%, while wealth management sales were down 6% reflecting very unsettled markets.

Despite the challenging environment, new business embedded value generated in the quarter amounted to $540 million, compared to $514 million for the same period last year, Manulife said.

Total funds under management as at Sept. 30, 2008 were $385.3 billion, $14.1 billion lower than last year.

Net policyholder cash flows of $17 billion and favourable currency movements of $19 billion were overshadowed by an approximate $52 billion decrease due to market value declines.

Manulife’s Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio as at Sept. 30, was 193%, a drop of 7 points from the 200% as at June 30. The decrease was due to the impact of the market declines on required capital levels for segregated fund and variable annuity guarantees, Manulife said.

On Oct. 28, the Office of the Superintendent of Finanical Institutions said life insurers would get more time to put aside capital for guaranteed payments that will be made many years in the future. The interim rule change relates to segregated funds.

IE