February 17, 2012 / 2:08 PM / in 6 years

UPDATE 2-Industrial Alliance shares fall on weak forecast

* 2012 earnings guidance on low side of estimates

* Outlook raises dividend cut worries-analyst

* Takes Q4 loss due to markets-related charge

* Shares down 3.2 pct at C$25.65

By Cameron French

TORONTO, Feb 17 (Reuters) - Industrial Alliance Insurance and Financial Services fell to a loss in the fourth quarter and unveiled a weaker than expected earnings forecast, sending its shares down more than 3 percent.

Canada’s No. 4 insurer said it expects 2012 earnings per share of C$2.50 to C$3.10, a range that largely lags current analyst estimates of C$3.07 a share, according to Thomson Reuters I/B/E/S.

National Bank Financial analyst Peter Routledge said a result in the low end of that range suggests the company might be compelled to cut its dividend, given its stated payout range of 25-35 percent of profit and a current annual dividend of 98 Canadian cents a share.

“I think that’s what’s driving the stock,” he said.

Just before midday, the shares were down 86 Canadian cents, or 3.2 percent, at C$25.65 on the Toronto Stock Exchange.


For the quarter, Industrial Alliance lost C$81.2 million ($81.2 million), or 90 Canadian cents a share. That compared with a year-before profit of C$74.1 million, or 87 Canadian cents a share.

The loss was due to a C$152 million charge to offset the impact of falling bond yields and equity markets, which change the valuation assumptions on the assets Industrial Alliance uses to pay future liabilities.

“Our year-end results reflect the extremely challenging environment in 2011, both for equity markets and especially long-term interest rates,” Yvon Charest, the company’s chief executive, said in a statement.

The loss was slightly better than the 96 Canadian cents per share loss analysts had expected.

Quebec City-based Industrial Alliance is the last of Canada’s top four life insurers to report fourth-quarter results.

Manulife Financial and Sun Life Financial both took losses due to charges and writedowns, while Great-West Lifeco, which is the insurer least susceptible to market swings, recorded a profit.

Industrial Alliance’s revenue rose to C$2.3 billion in the quarter from C$1.7 billion, helped by a sharp jump in investment income.

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