May 13, 2009 / 10:16 AM / in 8 years

UPDATE 3-ING Canada posts Q1 net loss, eyes acquisitions

* Net loss C$0.30/shr on one-time charge

* Operating EPS C$0.58, up 3.6 pct

* Says eyeing acquisition opportunities

* Shares fall 3.8 pct to C$34.94 (Recasts with CEO comment)

By Andrea Hopkins

TORONTO, May 13 (Reuters) - Home and auto insurer ING Canada Inc IIC.TO posted a first-quarter loss on Wednesday but said it is ready to make acquisitions if opportunities arise as competitors struggle with losses.

ING, Canada’s biggest property and casualty insurer, said it is looking to boost its business in 2009, either through organic growth or acquisitions, with capitalization that will allow it to snap up market share.

“With our strong capital base we have the strategic flexibility to move quickly when the right market opportunities arise,” President and Chief Executive Charles Brindamour told a conference call after the results were released.

“The M&A (mergers and acquisitions) environment has improved since last year as the industry results have deteriorated as the capital cushions at both the company and at the parent level have melted,” Brindamour said.

ING, which was spun off by its Dutch parent in February and will soon rebrand itself as Intact Financial Corp, reported a net loss in the first quarter as a rise in underwriting income was offset by a one-time loss resulting from the launch of a hedging program.

ING said its net loss was C$36.3 million ($31.21 million), or 30 Canadian cents a share, in the three months ended March 31. That compares with a profit of C$23 million, or 19 Canadian cents a share, in the same period a year earlier.

On an operating basis, it earned 58 Canadian cents a share, an increase of 3.6 percent from last year.

Analysts had expected a profit of 59 Canadian cents a share, according to Reuters Estimates.

ING Canada shares fell 3.8 percent to C$34.94 in Toronto on Wednesday morning, while the market’s broader financial index was down 2.1 percent.

The quarterly loss at ING was largely due to an C$82.9 million pretax investment loss resulting from the implementation of a hedging program aimed at reducing the risk of holding common shares of Canadian financial institutions.

RBC analyst Dennis Westfall said ING’s financial flexibility remains strong, with a minimum capital test ratio of 208 percent, zero debt and about C$389 million in excess capital. He also said ING should see growth in earned premiums in the next year.

Net premiums earned fell 0.3 percent in the first quarter as previous rate increases in personal auto insurance were offset by a drop in insured risks and a change in the types of vehicles insured.

“ING Canada began raising rates several quarters before its peers; however, based on the most recent available data, the industry’s rate increases have begun to close the gap, which should help growth in earned premiums in the next year,” Westfall said in a research note.

“The company is also raising prices and insured amounts in home insurance,” he noted.

Brindamour said he expects ING will grow “organically” in the latter part of 2009 or in 2010 as competitors catch up on rate increases and customers take another look at ING.

“We’ve moved early on rates on most lines of business and ... we’re still more expensive in a number of segments than the average players, and so there’s a lag,” Brindamour told analysts on the post-earnings conference call.

Shareholders will vote on the name change to Intact Financial Corp at the company’s annual general meeting later on Wednesday.

ING said underwriting income for the period rose to C$7.9 million, while return on equity for the quarter ended March 31 was 2.4 percent, down from 13 percent a year earlier.

The combined ratio, which measures how much was spent on claims and expenses as a percentage of premiums earned, fell 0.7 points to 99.2 percent.

$1=$1.17 Canadian Additional reporting by Anurag Kotoky in Bangalore; editing by Rob Wilson

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