TORONTO Shares of Industrial Alliance Insurance and Financial Services (IAG.TO) rose more than 4 percent to hit an 18-month high on Friday after the Canadian life insurer reported a stronger-than-expected quarterly profit.
The result caps off a generally strong quarter for Canadian life insurers, which have rebounded over the past year from steep market-related losses taken in the wake of the 2008 financial crisis.
Like larger rivals Manulife Financial (MFC.TO) and Sun Life Financial (SLF.TO), Industrial Alliance has been working to reduce its exposure to weak markets.
The company, Canada's fourth-largest life insurer, earned C$73.8 million ($73.7 million), or 78 Canadian cents a share, in the fourth quarter.
That compared with a year-earlier loss of C$81.2 million, or 90 Canadian cents a share, when the company took a C$152 million charge to offset the impact of falling bond yields and equity markets.
Stronger markets this year allowed Industrial Alliance to take a much smaller C$19.9 million markets-related hit.
Excluding certain items, the company earned 81 Canadian cents a share, topping analysts' forecasts for a profit of 73 Canadian cents, according to Thomson Reuters I/B/E/S.
Assets under management and administration rose 13.6 percent to C$83.3 billion, while premiums and deposits were C$1.8 billion, a amount the company said was comparable with the year-before period.
For the full year, the company earned C$3.31 a share. It said it expects to earn C$3.00 to C$3.40 a share in 2013.
Following the results, National Bank Financial analyst Peter Routledge upgraded Industrial Alliance to "sector perform", the equivalent of a "hold" rating, and boosted his 12-month target for the share price to C$37 from C$30.
"IAG is better positioned to absorb unanticipated downturns in equity markets and interest rates without having to resort to secondary common equity issuances," he said in a research note.
CIBC World Markets analyst Robert Sedran called the result "a solid beat".
Just after midday on Friday, the company's shares were up 4.5 percent at C$37.96, a level last seen in August 2011.
The stock gain move extends a strong run by Canadian insurers over the past year and comes despite predictions from analysts that the shares were due for a pullback.
Industrial Alliance is now up 45 percent over the past 12 months, while Manulife has gained 28 percent, and Sun Life has risen 39 percent.
Shares of all three companies have been boosted by signs of economic stabilization in Europe and recent rises in bond yields, which improve the projected returns of assets the insurers hold to offset the policy payouts they must make over time.
Analysts have been concerned the shares have been rising in anticipation of further gains in bond yields that may not materialize.
In addition to Industrial, shares of Manulife and Great-West Lifeco (GWO.TO) have gained since they reported results a week ago.
Sun Life shares have pulled back after it reported results late on Wednesday, although its profit topped estimates and some analysts boosted their share-price targets for the company.
(Reporting By Cameron French; Editing by Steve Orlofsky; and Peter Galloway)