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Manulife Financial headquarters in Toronto. The company reports earnings on Thursday.KEVIN FRAYER/The Canadian Press

Individual life insurance sales in Canada took a hit in the latest quarter at both Manulife Financial Corp. and Great-West Lifeco, after the companies decided to raise prices to protect their profit margins.

Margins have been pinched by low interest rates. In this environment insurers must decide if they want to accept smaller profit margins to keep up their market share, or raise prices and risk lower sales.

Manulife CEO Don Guloien says the company's Canadian insurance sales have been hurt by its decision to raise prices earlier this year, because some competitors haven't followed suit.

"When interest rates are going down as much as they have, and for as long as they appear to be, smart companies will re-price their products," he said in an interview.

The firm sold $243-million of insurance in Canada in the first quarter, down 24 per cent from a year ago. In addition to the decline in sales of individual insurance policies, that decrease also comes as a result of slower sales in the group benefits market in the most recent quarter.

Great-West's individual insurance sales in Canada were eight per cent lower than a year ago. "That's because of a steep decline – over a 40 per cent decline – in universal life sales, specifically due to re-pricing," the company's new chief executive Paul Mahon (who was previously COO and just stepped into the main role on Thursday following Allen Loney's decision to retire) said in an interview.

He said universal life in particular has faced significant margin pressure because so many of the liabilities associated with it are invested in fixed-income type assets. "We've increased universal life prices three times in the last 24 months in meaningful ways," Mr. Mahon said.

Both CEOs said they are now comfortable with their profit margins in this business.

"Right now with the interest rate environment where it is today we're reasonably satisfied with where our pricing sits," Mr. Mahon said. "We're now at a stage where we believe our margins are solid on universal life."

(Tara Perkins is a Globe and Mail Real Estate Reporter.)

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