Industrial Alliance profit edges up 2 percent

TORONTO (Reuters) - Canada's Industrial Alliance Insurance and Financial Services (IAG.TO) said on Tuesday its net income rose 2 percent in the second quarter, an increase that was lower than expected due to elevated claims and a bond default in its investment portfolio.

The company, which sells life insurance and manages mutual funds, said profit in the three months ended June 30 was C$63.4 million ($62 million), or 78 Canadian cents a share. That was up from C$62.1 million, or 77 Canadian cents a share, a year earlier.

Analysts had expected to see a profit of 80 Canadian cents before items, according to Reuters Estimates.

Net income was constrained by higher than expected death claims in the individual insurance sector, abnormally high auto and home insurance claims due to poor weather, and a C$5 million provision for a bond investment that defaulted, the company said. After-tax, the loss on the bond default amounted to C$3.6 million, or 4 Canadian cents a share.

The company, based in Quebec City, said it boosted its quarterly dividend by 9 percent, to 24.5 Canadian cents a share.

Industrial Alliance sells and manages the IA Clarington family of mutual funds, and is the fourth-biggest publicly traded life insurer in Canada.

Premiums and mutual fund deposits inched up to C$1.53 billion in quarter, from C$1.51 billion a year earlier. Mutual fund sales fell 16 percent due to unstable markets, the company said.

Industrial Alliance shares were down 11 Canadian cents, or 0.3 percent, at C$33.17 on Tuesday morning on the Toronto Stock Exchange.

($1=$1.03 Canadian)

(Reporting by Lynne Olver and Frank Pingue; Editing by Peter Galloway)