Profit shrank at Desjardins Financial Security in the first six months of 2006.

The life and health insurer today reported net income of $38.7 million compared with $42.4 million in 2005.
As was the case in the first quarter, the poor experience in long-term disability continues to affect the year’s results, DFS said.

Insurance sales totalled $175.9 million, up by $98.3 million over the first six months of 2005. Acquisition of new major contracts, including one with the Government of Newfoundland and Labrador for its 36,000 employees and retirees, explains the 126.7% increase over last year.

Insurance and annuities income, investment income and other income represent $1.6321 billion compared with $1.5103 billion in 2005, up 8.1%.

Assets under management rose to $17.5 billion, up $2 billion from the corresponding date in 2005.

DFS continues its sustained contribution to the profitability of Desjardins Group. Its share of the net income attributable to the ultimate shareholders, the Desjardins caisses, is $68.1 million with a return on shareholder equity of 19.4%.

Commenting on these results, the president and CEO of Desjardins Group and CEO of Desjardins Financial Security, Alban D’Amours, said “On the eve of the new 2006-2008 strategic plan, the performance of the first six months permits us to expect continued profitable growth of the company to the benefit of its clients and Desjardins caisse members.”

François Joly, president and COO, emphasized the solid growth especially outside Quebec where the company is aiming to double its market share. “The signing of major group insurance and retirement savings contracts in the past few months has helped strengthen our penetration into the Canadian market. Also, the recent acquisition of the Performa Financial Group will reinforce our capacity for product and service distribution, and thus help reach our objectives for development outside Quebec, which will allow us to strengthen our position among the key financial service providers in Canada.”

At the end of the first six months of 2006, net income for the group insurance line, which includes group and business insurance as well as group plans offered in financial institutions, including Desjardins caisses, generated $48.3 million compared with $49.1 million last year..

Net income for the individual insurance line grew by 10.3% reaching $19.3 million, compared with $17.5 million for the first six months of 2005.

Important new contracts signed in group retirement savings largely contributed to the growth in overall sales of this line, reaching $366.1 million, an increase of $70.3 million or 23.8% compared with the first two quarters of 2005.