TORONTO (Reuters) - Canada's big four life insurers now look to be better bets than either their US rivals or the big Canadian banks as a surging stock market brings profits bouncing higher after three awful quarters.

Analysts say credit concerns and reserve questions have set the stage for a noisy quarter when the Big Four start reporting quarterly results next week. But almost all say the insurers have ground to make up, and they make investment sense.

"The lifecos are more sensitive to equity market movements and the banks are more sensitive to credit," said Desjardins Securities analyst Michael Goldberg. "I have continuing concerns about credit, while I think the worst is over for equities, which says to me the lifecos should be relative beneficiaries."

With the US stock market up 15 percent and Toronto stocks 19 percent higher than the first quarter, Manulife Financial Corp, Great-West Lifeco Inc, Sun Life Financial Inc and Industrial Alliance Insurance and Financial Services Inc are all expected to report second-quarter profits.

That reflects the investments the giant firms make with the money handed over by clients, rather than in the policy sales that have slumped in the recession.

Manulife, North America's largest insurance company, made losses in the fourth quarter of 2008 and the first quarter of 2009 as stock markets tumbled and investments soured. Sun Life, Canada's No. 3 insurer, also suffered a first-quarter loss. Great-West and IAG avoided losses in the first quarter, but earnings slumped.

Manulife also had to set aside cash for guarantees it included in products with performance tied to the market.

"When you get a sharp rebound in the equity market, the costs to the company of the guarantees can fall dramatically, so that should be a plus to the income statement in the (second) quarter, just as it was a minus in the first quarter," Scotia Capital analyst Tom MacKinnon said.