Property and casualty insurer ING Canada Inc. today said that fourth-quarter earnings dropped 12% to $95.8 million on investment losses.

Earnings for the quarter ended Dec. 31 amounted to 77¢ per share and compared with $109.4 million, or 82¢ per share a year earlier.

Direct premiums written, excluding pools, increased slightly during the quarter to reach $961.3 million, the insurer said.

For the full year, net income declined about 23% to $508.3 million, or $4.01 a share, from $658.1 million, or $4.92 per share, in 2006.

Net operating income per share dropped 6.5% to $3.71 while direct premiums written, excluding pools, reached $4.1 billion, a 2.9% increase.

“Our operating performance was solid during the last three months of the year and outpaced our results of the previous quarter,” CEO Charles Brindamour said in a release.

“Overall, our underwriting income also improved year-over-year, excluding an increase to claims liabilities to reflect lower market interest rates. Direct premiums written were stable during the quarter as a result of our continued pricing discipline.

“Our investment activities continue to generate substantial interest and dividend income but recent unfavourable capital markets conditions led to a net loss of $3.3 million on invested assets.”

ING Canada said it will increase its quarterly dividend by 4¢ to 31¢ per share, payable March 31 to shareholders of record on March 14.

The insurer also announced that it plans to buy back up to 5% of its shares over the next 12 months, with a normal-course issuer bid.

ING Canada noted that on Feb. 8, the Court of Queen’s Bench of Alberta rendered a decision lifting the $4,000 cap on pain and suffering awards for minor injuries resulting from auto accidents. The decision has been appealed by the government of Alberta.

“Management continues to assess the potential impact of the judgement on claims costs and premiums,” the company said. “If the changing situation results in a reassessment of the provision, changes will be recorded in future quarters.”

Toronto-based ING Canada is the largest provider of P&C insurance in the country, offering automobile, property and liability insurance to individuals and businesses.