* Q3 EPS C$0.74 vs C$0.63 a year earlier
* Analysts forecast EPS of C$0.65
* Profit surpasses estimates, shares surge (Recasts, adds CEO comments from conference call)
By Andrea Hopkins
TORONTO, Nov 4 Industrial Alliance Insurance and Financial Services (IAG.TO) kicked off earnings season for Canada's big life insurers on Wednesday with a 17 percent jump in profit, sending its shares up by more than 4 percent.
Canada's fourth-largest life insurer said net income surged to C$60.1 million ($56.7 million), or 74 Canadian cents a share, in the three months to Sept. 30, up from C$51.2 million, or 63 Canadian cents a share, in the year-ago period.
The result beat the average analyst profit estimate of 65 Canadian cents a share, according to Thomson Reuters I/B/E/S, and sent its shares 4.3 percent higher to C$30.61 by late Wednesday afternoon in Toronto.
The broader S&P/TSX financial index of banks, insurance companies and asset managers was up just 0.5 percent.
Profit at the Quebec City-based insurer was boosted by a C$1.1 million gain as the difference between the market value of its debt instruments and that of underlying assets changed in the company's favor, but the biggest part of the surge was pure stock market gains in its investment portfolio.
"It's probably not too early to say that the worst is most likely behind us. Overall, our results for the third quarter are very strong indeed, and by far the best since the beginning of the financial crisis, both for the top line and the bottom line," Chief Executive Yvon Charest told analysts during a conference call.
Industrial Alliance said it did not post any credit losses during the latest quarter and did not have to strengthen its provisions for future policy benefits.
"Our strict management during the crisis and the general improvement in market conditions are paying off," Charest said in a statement.
"Assets reached a new high. Sales growth has resumed in the retail sectors and even jumped considerably in the individual insurance sector."
The balance sheet at Industrial Alliance was boosted by a C$100 million preferred share issue, a move Charest said was prompted more by good appetite in the market than by a concern about the company's financial strength.
"The leeway that we've developed in the last year to absorb significant potential market downturns remains very good," he said.
As expected, the dividend was unchanged at 24.5 Canadian cents per common share, and Industrial Alliance reiterated it expects its dividend to be maintained through 2009.
Unlike restrictions facing Canada's big banks, Charest said insurers have not received any direction from regulators that would prevent share buybacks or dividend increases.
Analysts have begun to speculate about the big capital positions enjoyed by Canada's financial sector, and whether that might mean acquisitions, share buybacks or dividend increases might be on the horizon.
Premiums and deposits fell 9 percent to C$1.2 billion in the third quarter, due entirely to weakness in the group pensions sector. Premiums and deposits are either stable or increasing in all other sectors, the company said.
"The decrease in the group pensions sector is due to the fact that the company was not able to sign any large contracts during the quarter, contrary to last year, when the signing of a few large contracts allowed the sector to end the quarter with sales among the highest in its history," it said.
Industrial Alliance is the first of Canada's four big life insurers to report third-quarter earnings. Manulife Financial Corp (MFC.TO), Great West Lifeco (GWO.TO), and Sun Life Financial (SLF.TO) are due to report on Thursday.
($1=$1.06 Canadian) (Reporting by Andrea Hopkins; editing by Rob Wilson)