Analysts predict declines in underlying earnings per share of between 10% and 14% from a year earlier for the four major life insurers -- Manulife Financial, Sun Life Financial, Great-West Lifeco and IA Financial.

"Insurance companies keep a very large reserve of cash, and when interest rates are as low as they are... it obviously hurts them," said Allan Small, senior investment adviser at Allan Small Financial Group with HollisWealth.

The year-on-year declines are set to be the most since the first quarter of 2012, according to analysts.

On Thursday, IA Financial reported a 6% drop in core earnings from a year earlier to C$1.57 a share, handily beating analysts' estimates of C$1.38.

Great-West, Manulife and Sun Life are set to report earnings on Aug. 4, 5 and 6 respectively.

IA Financial shares are down 37% this year. Manulife and Great-West have lost nearly 30%, and Sun Life 10.6%, versus the benchmark Toronto stock index's 4.6% decline.

Canaccord Genuity analyst Scott Chan wrote in a note that the industry is buffeted by lower interest rates, higher credit losses from corporate downgrades and the energy sector, resulting in a 14% year-on-year profit drop, despite strong wealth management performance.

Despite the headwinds, second-quarter profits are likely to be an improvement on the prior three months, of about 1%, Barclays analyst John Aiken said, helped by improved equity markets. Canaccord also expects a 1% profit increase from the prior quarter, and CIBC Capital Markets a 4.6% gain.

Canadian insurers could follow some of their U.S. counterparts, including Aflac Inc and Principal Financial in beating estimates, said Brian Madden, portfolio manager at Goodreid Investment Counsel, which holds Manulife shares.

But wealth management strength is "not likely to be enough to offset weak sales in the group insurance and group retirement segments," said Madden, who expects earnings declines in the high-single-digits from a year ago. "When you're having bankruptcies and layoffs, and you're not adding a lot of employees, you're not buying a lot of new... plans."

By Nichola Saminather