The earnings of most financial services companies remained stable or improved in the third quarter of 2010. Most firms either held their own or improved their earnings, compared with the same period a year earlier, with an average gain for the sector of 16.6%. Out of 47 companies, 21 reported increases in earnings, two remained at about the same level and seven posted positive net income, compared to losses the previous year.

The 47 companies exclude three firms in the table whose results are consolidated with others surveyed. These are Great-West Lifeco Inc. and IGM Financial Inc. , which are majority-owned by Power Financial Corp. ; and DundeeWealth Inc. , which is majority-owned by Dundee Corp.

The stronger results were reflected in a rash of announcements of dividend increases. Canadian Western Bank’s quarterly dividend rose to 13¢ from 11¢; Gluskin Sheff & Associates Inc. ’s to 13.75¢ from 12.5¢; Home Capital Group Inc. ’s to 18¢ from 16¢; Intact Financial Corp. ’s to 34¢ from 32¢; Laurentian Bank of Canada’s to 39¢ from 36¢; National Bank of Canada’s went to 66¢ a quarter from 62¢; Sprott Inc. ’s to 3¢ from 2.5¢; and TMX Group Inc. ’s to 40¢ from 38¢.

In addition, Integrated Asset Management Corp. ’s dividend was reinstated at 4¢; CI Financial Corp. ’s monthly dividend went to 7¢ from 6.5¢; and DundeeWealth Inc. switched to a monthly dividend of 5¢ from a quarterly payout of 7¢.

Nevertheless, there were still 11 companies that reported a decline in earnings. There were also six that reported losses. Manulife Financial Corp. posted the biggest drop, with a huge $899 million loss, $761 million more than its loss a year earlier. However, the size of the loss is partly due to changes in actuarial methods and assumptions. Manulife also took a goodwill impairment charge on its U.S. insurance business.

Consolidation, a trend evident in the third quarter in 2009, is continuing. Bank of Nova Scotia has announced an agreement to buy all the shares of DundeeWealth that it didn’t already own. In a smaller deal, Sceptre Investment Counsel Ltd. was merged with Fiera Capital Inc. on Sept. 1, 2010.

Here’s a look at the sectors in more detail:

> Banks. Results in this group were mixed, with Pacific & Western Credit Corp. in a loss position, earnings at five other deposit-taking institutions down, and eight firms with increases. Results at the country’s largest bank, Royal Bank of Canada, were flat when the loss on its sale of Liberty Life Insurance Co. is excluded. (IE’s profit survey excludes unusual and non-recurring items that are not part of normal, day-to-day business.)

Among the other big banks, Bank of Montreal, Scotiabank and National Bank were up, while Canadian Imperial Bank of Commerce and Toronto-Dominion Bank were down. All had higher net income in their Canadian retail and commercial banking sectors, with weaker results in wholesale banking or financial markets.

Of the big banks that break out wealth-management figures, National Bank’s and TD’s were both down from a year earlier. Scotiabank’s international banking, which is primarily in Latin America and the Caribbean, was up. TD’s U.S. personal and commercial banking were also up, but BMO’s were down and RBC’s remained in a loss position (albeit a smaller loss than the year before).

In general, Scotiabank has made significant organizational changes — notably, creating a global wealth-management division. After the end of the quarter, National announced that its securities-trading subsidiary, National Bank Financial Ltd., will focus on smaller companies — especially mining companies — rather than large-caps.

> Llife Insurers. In contrast to this time last year, profits in this group were very mixed. Manulife had a bigger loss than a year earlier and GWL’s earnings were down by 35.7%. But Sun Life Financial Inc. reported net income of $479 million vs a loss of $113 million; and Industrial Alliance Insurance & Financial Services Inc. ’s earnings were up by 12.7%.@page_break@Lack of consistency among the results in this group are partly explained by timing. In this quarter, Manulife took charges related to its annual review of actuarial methods and assumptions. A year ago, Sun Life had similar charges.

The drop in earnings at GWL was the result of a $204-million provision related to ongoing litigation connected to GWL’s acquisition of London Life Insurance Co. in 1997.

The U.S. wealth-management arms of all three companies increased their assets under management from a year earlier. Manulife and Sun Life have seen their U.S. AUM increase for some time.

However, this is the first quarter since GWL acquired Putnam Investments LLC in 2007 that GWL’s U.S. arm has had more sales than redemptions.

At Industrial Alliance, all lines of business, except individual insurance, had higher operating earnings.

> Property And Casualty Insurers. The key factor for companies in this group is their combined ratio — a ratio of less than 100% indicates a profit. Intact was the only company to improve its underwriting results, with a combined ratio of 96.9%. Not surprisingly, that put Intact back into the black, vs a loss the year before.

The others all had underwriting losses, with Kingsway Financial Services Inc. ’s combined ratio of 137.9% being, by far, the highest. The company has been struggling for years and has shrunk to a fraction of its previous size in an effort to reinvent itself. Kingsway reported a profit for the first time since the second quarter of 2008, but only because of a gain resulting from increasing its ownership in Kingsway Linked Return of Capital Trust to 74.8%.

Intact’s report notes that Ontario’s new auto insurance regime should help curb premium rate increases for consumers and reduce costs over time. The report says commercial lines remain soft but there has been some firming in certain sectors in the past year.

> Mutual Fund And Investment-Management Companies. Only Guardian Capital Group Ltd. had lower net income than the year before, mainly due to lower investment income.

Six of the other 10 companies in this group had increased earnings. Brookfield Asset Management Inc. and Matrix Asset Management Inc. both reported positive net income vs a losses the year before. Sceptre’s net income was unchanged.

DundeeWealth has had industry-leading mutual fund net sales. CI Financial Corp. has had net sales most of the year but was in net redemptions in August and November. AGF Management Ltd. posted net redemptions, as it did last year, as has IGM Financial Inc. ’s Mackenzie Financial Corp. subsidiary. But IGM’s Investors Group Inc. subsidiary, which had been in net redemptions since April, reported $46.8 million in net sales in November.

> Distributors And Suppliers. Coventree Inc. is winding up its business because of its involvement in asset-backed commercial paper. Northern Financial Corp. , which has been struggling to establish itself for more than a decade, remained in a loss position.

Investment bank Oppenheimer Holdings Inc. ’s net income dropped by almost half from a year earlier, due to lower volumes of business in the U.S., where all of its operations are located.

Grey Horse Corp. ’s net income was almost unchanged, and the other firms had very strong increases. The results for Anthony Clark International Insurance Brokers Ltd., Canaccord Finan-cial Inc. and GMP Capital Inc. however, represent gains from unusually low levels a year ago.

> Holding Companies. Results at Dundee and Power Corp. reflect earnings at DundeeWealth, GWL and IGM.

At Desjardins Group, personal, business and institutional services were strong, while wealth management and insurance — life and health, and property and casualty — were down.

Jovian Capital Corp. continues to struggle. IE