August 14, 2008 / 8:15 PM / 9 years ago

UPDATE 2-CI profit falls, says Blackmont not for sale

(Adds details from conference call, closing stock price)

By Lynne Olver

TORONTO, Aug 14 (Reuters) - Profit fell 11 percent at CI Financial Income Fund CIX_u.TO in the second quarter as revenues and fee-earning assets declined due to volatile markets, the company said on Thursday.

CI, which manages mutual funds and other investment products, is not interested in selling its Blackmont Capital investment dealer unit, although it has had “many calls” from small and mid-sized brokerages proposing various combinations, President and Chief Executive Bill Holland said.

CI acquired Blackmont in April 2007 when it bought Rockwater Capital Corp. Recent published reports speculated that Blackmont could combine with another brokerage.

“If we could do a sensible merger that would bulk the company up and strengthen it, we would sure consider it, but an outright sale, no, not interested,” Holland said on a conference call.

Times are tough for smaller investment dealers, but CI is “very comfortable owning Blackmont,” he added.

CI, Canada’s third-largest investment fund company, said net income was C$134.7 million ($127 million), or 48 Canadian cents a unit, in the quarter ended June 30.

That compared with profit of C$151.6 million, or 54 Canadian cents a unit, in the same period a year earlier.

Analysts had expected CI to report earnings of 49 Canadian cents a unit before items, according to Reuters Estimates.

Total revenues fell 7 percent to C$408.7 million.

CI, which manages and sells various types of investments through subsidiaries and affiliates, said fee-earning assets fell 5 percent to C$102.2 billion. It cited declining markets for most of the drop, which was offset partly by positive net sales of funds.

CI continued to benefit in the second quarter from strong sales of segregated funds, which are similar to mutual funds but are held within insurance contracts. CI manages the portfolios for a number of segregated products sold by insurance company Sun Life Financial (SLF.TO), which owns 37 percent of CI.

“July was by a considerable margin our best month of seg fund sales that we’ve had yet,” Holland said. “It just seems that the momentum on this continues to pick up.”

Sales of segregated funds are not as sensitive to market fluctuations as mutual fund sales are, Holland said.

“My sense is these variable-annuity type of products will become much more popular over the next decade, I think we’re probably pretty early in this game still.”

Units of CI closed at C$21.32 on the Toronto Stock Exchange on Thursday, down 1 Canadian cent. ($1=$1.06 Canadian) (Reporting by Lynne Olver; editing by Rob Wilson)

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