Earnings for most of Canada’s publicly traded financial services firms were up in the final quarter of 2010 vs the corresponding quarter in the previous year, but six of 11 mutual fund and investment-management companies and two of four property and casualty insurers had weaker results. Earnings exclude unusual and non-recurring items that aren’t part of a company’s core business.

Of the 48 firms surveyed, 27 had higher net income, four reported profits vs a loss the previous year, 11 had declines and five were in a loss position. The company total excludes three firms in the table: Great-West Lifeco Inc. and IGM Financial Inc. , whose results are consolidated with their majority owner, Power Financial Corp.; and DundeeWealth Inc. , which was majority owned by Dundee Corp.

The overall average increase in earnings was 21.8%. But that was skewed by huge increases of $1.4 billion at Brookfield Asset Management Inc. and $969 million at Manulife Financial Corp. , respectively, that were only partially offset by a decline of $446.5 million for Fairfax Financial Holdings Ltd. But even if these three companies’ results are excluded, the average gain was 20.9%.

The improved earnings were reflected in increases in regular dividends for 11 companies. Bank of Nova Scotia’s quarterly dividend per share is now 52¢ vs 49¢; Cash Store Financial Services Inc. ’s is 12¢ vs 10¢; Equitable Group Inc. ’s is 11¢ vs 10¢; Toronto-Dominion Bank’s is 66¢ vs 61¢; Intact Financial Corp. ’s is 37¢ vs 34¢; Fiera Sceptre Inc. ’s is 8¢ vs 6¢; Guardian Capital Group Ltd. ’s is 16¢ vs 15¢; Canaccord Financial Inc. ’s is 7.5¢ vs 5¢; and GMP Capital Inc. ’s is 8¢ vs 6¢. In addition, CI Financial Corp. raised its monthly dividend to 7.5¢ from 7¢; and Fairfax now is paying an annual dividend of $10 vs $8. As well, Sprott Inc. is paying two special yearend 2010 dividends of 60¢ and 12¢; and First National Financial Corp. announced a 40¢ special distribution for yearend 2010.

The fourth quarter of 2010 was notable for the announcement of two very big acquisitions: Scotiabank’s purchase of DundeeWealth, which was subsequently completed in early February; and Bank of Montreal’s deal to buy Marshall & Ilsley Corp. (a U.S. bank holding company with about US$52 billion in assets), which is expected to close in the May-July 2011 period.

AGF Management Ltd. ’s acquisition of Acuity Funds Ltd., announced in November 2010, was completed in early February. CI’s purchase of Hartford Investments Canada Corp. was completed in December 2010.

In addition, Desjardins Group has extended its offer to buy Western Financial Inc., acceptance of which is being recommended by Western Financial’s board of directors, to April 15.

A closer look at the sectors:

> Banks. Eleven of the 16 deposit-taking institutions had higher earnings, while Xceed Mortgage Corp. reported a small profit vs a loss in the same period the year prior. Only Cash Store, First National Financial and HSBC Bank Canada had lower earnings, while Pacific & Western Credit Corp. continued to post a loss.

New provincial regulations have compressed Cash Stores’ margins; First National Financial was affected by the slower real estate market; and HSBC had lower securitization revenue.

In general, Canada’s big banks experienced strong growth in personal and commercial banking and increases in wealth management. Returns from U.S. banking and capital markets were mixed.@page_break@The quarter saw the announcement or completion of a number of smaller acquisitions in the banking sector. One is TD’s proposed purchase of Chrysler Financial’s Canadian and U.S. operations, which is expected to close in the next month. Scotiabank continued its expansion in Latin America and also completed its purchase of WaterStreet Group Inc.

> Life Insurers. The big increases at Manulife and Sun Life Financial Inc. both were due mainly to improved equities markets and higher interest rates.

For the big three lifecos (excluding Industrial Alliance Insurance and Financial Services Inc. ), U.S. insurance and Asian operations had stronger results. Canadian profits were up for Manulife but down for both GWL and Sun Life. The U.S. wealth-management divisions posted good results at both Manulife and Sun Life, but GWL’s U.S.-based Putnam Investments LLC continues to struggle. GWL’s earnings in Europe also were down — as were Manulife’s reinsurance activities.

Industrial Alliance is a smaller firm than the others in this sector, operating only in Canada. The firm has been making frequent add-on acquisitions, announcing three during or after the fourth quarter.

> Property And Casualty Insurers. Co-operators General Insurance Co., EGI Financial Holdings Inc. and Intact Financial Corp. all made underwriting profits, as witnessed by their combined ratios of less than 100. However, these ratios were smaller than a year earlier because of the early and severe winter weather. The firms hope new automobile insurance regulations in Ontario introduced on Sept. 1, 2010, will improve profitability in that line of business that continues to be eroded, particularly in the Greater Toronto Area, by rising medical claim costs.

Fairfax generally makes most of its money from its expertise in investing the assets accumulated in its insurance operations. In this quarter, however, there was a US$683.9-million loss on investments vs a US$30.3-million loss in the same period a year prior.

> Mutual Fund And Investment Management Companies. Only Brookfield, DundeeWealth, Fiera Sceptre, IGM and Sprott had increased earnings, while the other six firms had declines, although only AGF’s assets under management declined.

Brookfield had a substantial increase in the fair value of its AUM, and Sprott had very large performance fees this quarter. Dundee Wealth had very strong net sales. Fiera Sceptre is now a large firm, following the September 2010 merger of Fiera Capital Inc. and Sceptre Investment Counsel Ltd.

AGF, CI and IGM all had net redemptions in the quarter. Unfortunately, the monthly sales data that all three companies used to provide is no longer being released, so investors won’t know how fund sales are going until the quarterly financial reports are released.

> Distributors And Suppliers. Six companies had higher earnings, and Northern Financial Corp. had a profit vs a loss a year earlier. Only Coventree Inc. , which is winding up its business, and Anthony Clark International Insurance Brokers Ltd. , which continues to struggle, reported losses.

Canaccord says that its strong results during this quarter “are an early indication of the earnings power we believe is possible from our expanded global capital markets operations.”

GMP says it’s beginning to realize the benefits of Richardson GMP Ltd., the result of the merger of GMP Private Client LP and Richardson Partners Financial Ltd. in November 2009.

> Holding Companies. Dundee’s and Power Financial’s increases reflect the results of Dundee Wealth and GWL and IGM, respectively. Desjardins’ earnings were down, due in part to increased life insurance costs and writeoffs of certain assets. Jovian Capital Corp. ’s loss is attributable to its struggles to establish many of its lines of business. IE