* Sun Life, Manulife report losses; Great-West profit

* Losses driven by changes to actuarial assumptions

* Shares of all three, plus Industrial Alliance, drop (Adds Manulife comments from interview)

By Andrea Hopkins

TORONTO, Nov 5 (Reuters) - Two of Canada's big life insurers unveiled surprise losses on Thursday, while a third reported a smaller-than-expected profit as the fallout from volatile financial markets persisted.

Manulife Financial Corp (MFC.TO: Quote, Profile, Research), North America's largest lifeco, and Sun Life Financial Inc (SLF.TO: Quote, Profile, Research), Canada's No. 3 insurer, reported quarterly net losses on Thursday as they changed the assumptions used to value their assets and liabilities and took hits from credit downgrades.

Great West Lifeco (GWO.TO: Quote, Profile, Research), the country's second-largest lifeco, said its profit edged higher in the three months ended Sept. 30, but the result came in slightly below expectations.

While the value of the Manulife's and Sun Life's huge stock market investments climbed in the third quarter, the boost was not enough to offset the big adjustments the companies make annually to value their assets and liabilities.

A drop in global interest rates and equity prices over the last year forced both companies to update the actuarial assumptions on their books, a change that reduced income by C$513 million at Sun Life and by C$783 million at Manulife.