UPDATE 2-IAG profit drops in first quarter
* EPS of C$0.58 vs C$0.57 expected by analysts
* Says investments, markets cut profit by C$0.12
* Shares up 3.5 pct at C$26.08
(Adds details, company comment)
TORONTO, May 6 (Reuters) - Industrial Alliance Insurance and Financial Services Inc (IAG.TO) said on Wednesday its profit fell 25 percent in the first quarter as stock market declines and an increase in group claims hurt income.
The Canadian insurance and wealth management company said on Wednesday that net income was C$46.2 million ($39.5 million), or 58 Canadian cents a share, for the three months ended March 31. That was down from C$61.7 million, or 76 Canadian cents a share, in the same 2008 period.
Analysts had expected a profit of 57 Canadian cents a share before items, according to Reuters Estimates.
Canadian life insurers have outperformed U.S. peers since the start of the credit crunch last year, but equity market exposure has hurt earnings and sales have suffered due to the the weak economy.
The company said the results for the quarter were boosted by a C$7.5 million gain after taxes, or 10 Canadian cents a share, resulting from the gap between the market value of the debt instruments and that of underlying assets allowed under new accounting standards.
But the stock market downturn and economic environment cut expected income by about C$9.9 million, or 12 Canadian cents a share, after taxes, Industrial Alliance said.
Still, the company boasted an 11.2 percent return on equity, positive net sales in all lines of business and a reinforced solvency ratio of 204 percent, which is above the company's target range.
"Profits are positive, the return is relatively high, financial strength remains very solid, the quality of investments remains excellent, the Company's book value is growing and we still have enough leeway to absorb significant market downturns," President and Chief Executive Yvon Charest said in a statement.
The company, Canada's fourth-biggest publicly traded life insurer, said premiums and mutual fund deposits fell 13 percent to C$1.24 billion in the first quarter from the same period in 2008 as a rise in group premiums failed to offset a drop in consumer appetite for savings and investment products.
Industrial Alliance shares were up 10 Canadian cents at $26.06 in early Toronto trading. ($1=$1.17 Canadian) (Reporting by Andrea Hopkins, editing by Gerald E. McCormick, editing by Dave Zimmerman)
