Industrial Alliance profit edges higher

By Lynne Olver

TORONTO (Reuters) - Industrial Alliance Insurance and Financial Services (IAG.TO: Quote) said on Tuesday that net income rose 2 percent in the second quarter, a smaller increase than expected due to elevated claims and a bond default in its investment portfolio.

The company, based in Quebec City, nevertheless boosted its quarterly dividend by 9 percent to 24.5 Canadian cents a share, citing confidence in its core insurance and wealth management operations.

Industrial Alliance shares were up 38 Canadian cents, or 1 percent, at C$33.66 late Tuesday afternoon on the Toronto Stock Exchange.

The company said profit in the three months ended June 30 was C$63.4 million ($62 million), or 78 Canadian cents a share. That was up from C$62.1 million, or 77 Canadian cents a share, a year earlier.

Analysts had expected to see a profit of 80 Canadian cents before items, according to Reuters Estimates.

Net income was constrained by higher than expected death claims in the individual insurance sector, abnormally high auto and home insurance claims due to poor weather, and a C$5 million provision for a bond investment that defaulted, the company said. After tax, the loss on the bond default amounted to C$3.6 million, or 4 Canadian cents a share.

Company officials did not identify the borrower, but said the debt was issued in a private placement, and was not in the auto, insurance or financial services industry.

"We are confident that this (default) is not indicative of any trend," Michel Tremblay, executive vice-president of investments, said on a conference call.