Industrial Alliance shares plunge as profit sags

Wed Nov 2, 2011 11:17am EDT
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By Cameron French

(Reuters) - Shares of Industrial Alliance Insurance and Financial Services (IAG.TO: Quote) plunged nearly 8 percent on Wednesday after the company reported an unexpected 28 percent drop in quarterly profit on the back of weak markets and claims-related losses.

The Quebec City-based life insurer and wealth manager earned a net C$45.7 million, ($45 million), or 53 Canadian cents a share, in the third quarter, ended September 30.

That compared with a year-before profit of C$63.5 million, or 75 Canadian cents a share, and missed analysts' expectations of a profit of 74 Canadian cents a share as compiled by Thomson Reuters I/B/E/S.

"The macroeconomic environment in the third quarter of 2011 was certainly one of the most difficult since the financial crisis in 2008," Chief Executive Yvon Charest said in a statement.

Charest said weak equity markets - the Toronto Stock Exchange's benchmark S&P/TSX composite index .GSPTSE fell 12.6 percent during the quarter - stripped 19 Canadian cents a share from the profits of the company's individual insurance and wealth management businesses.

He also said that if bond yields fell further in the fourth quarter, the company would have to strengthen actuarial reserves. Strengthening reserves usually entails a charge to earnings.


While the equity market impact was significant, the large profit miss was also due to weakness in the Industrial Alliance's core insurance business, said CIBC World Markets analyst Robert Sedran.   Continued...