May 5, 2010 / 4:31 PM / in 8 years

UPDATE 2-IAG profit rises, in line with expectations

* Q1 EPS C$0.73 vs C$0.58 a year-earlier

* Core EPS C$0.72, in line with expectations

* Stock market drives gains

* Shares close down 0.5 pct (Adds CEO comment, share price)

TORONTO, May 5 (Reuters) - Industrial Alliance Insurance and Financial Services (IAG.TO) said on Wednesday its profit rose 31 percent in the first quarter, a result it said proves the financial crisis is over.

Gains in global stock markets and a strong rise in premiums and deposits in IAG’s bread-and-butter insurance and wealth management segments drove profit growth at Canada’s fourth-largest life insurer.

The quarterly earnings were largely in line with market expectations, and shares of IAG ended the day down 0.5 percent at C$35.00 on the Toronto Stock Exchange. The broader financials index was down 1.3 percent.

Quebec City-based IAG said net income rose to C$60.3 million ($58.7 million), or 73 Canadian cents a share, in the three months to March 31. That’s up from C$46.2 million, or 58 Canadian cents a share, in the year-before period.

The results included a one-time gain of C$1.1 million from the fair value adjustment of its debt instruments. When that temporary gain is excluded, earnings were C$59.2 million, or 72 Canadian cents a share.

Analysts had expected a profit of 74 Canadian cents a share, according to Thomson Reuters I/B/E/S.

The surge in earnings was attributed to a strong stock market upswing in the past year, which more than tripled the operating profit in the individual wealth management sector, as well as good results in auto and home insurance thanks to a mild winter. The insurer also had no credit losses during the quarter.

Return on equity, excluding the one-time gain, was 12.5 percent, in line with the company’s 12 percent to 14 percent target range for that key measure of profitability.

The results returned IAG to the earnings level it enjoyed before the financial crisis of 2009 sideswiped global insurers and their big investment portfolios.

“The financial crisis is a thing of the past,” Chief Executive Yvon Charest told analysts on a conference call.

“We are now in a solid position to focus on new growth initiatives.”

Last week, IAG announced the acquisition of U.S. life insurer American-Amicable Holding Inc, expanding its presence in the U.S. middle-income insurance market, and Charest said IAG would focus on completing that deal before looking at other opportunities to expand south of the border.

The 118-year-old company previously said the C$145 million acquisition, to be funded from cash on hand, would immediately add to earnings by 5 Canadian cents a share on an annual basis.

IAG is the first of Canada’s four big life insurers to report first-quarter earnings. Sun Life Financial (SLF.TO), Manulife Financial Corp (MFC.TO) and Great West Lifeco (GWO.TO) are also due to report this week.

$1=$1.03 Canadian Reporting by Andrea Hopkins; editing by Peter Galloway and Rob Wilson

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