Industrial Alliance shares dive as profit sags

Wed Nov 2, 2011 4:21pm EDT
 
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By Cameron French

(Reuters) - Shares of Industrial Alliance Insurance and Financial Services (IAG.TO: Quote) plunged nearly 11 percent on Wednesday after the company reported an unexpected 28 percent profit drop on the back of weak markets and claims-related losses.

Weak equity markets took a larger-than-expected bite from the company's individual insurance and wealth management businesses, but it was higher life insurance mortality rates and disability claims that surprised analysts.

"They had some pretty significant negative experience around the traditional insurance risks, like mortality, disability and the stuff they should be better at pricing," said CIBC World Markets analyst Robert Sedran, calling the shortfall "troubling".

Speaking on a conference call, Chief Executive Yvon Charest said the higher mortality rates were simply an aberration in a longer-term decreasing trend. He said the higher disability claims were disappointing, but not abnormal.

"Actions are currently being taken to improve this overall situation," he said.

PROFIT MISS "DISAPPOINTING" - CEO

All told, 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.

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