The economic downturn led to both a loss in the fourth quarter and a drop in full-year earnings for Industrial Alliance Insurance and Financial Services Inc., the Quebec-based company said Monday.

Industrial-Alliance posted a loss of $110.2 million for the quarter ended Dec. 31, 2008, reversing year-earlier profit of $63.1 million. The loss per share was $1.37 per share compared to a profit of 78¢ a share recorded during the same period in 2007.

Industrial Alliance said the poor market conditions reduced the company’s earnings by about $25.5 million after tax.

The company said it decided to strengthen its provisions for future policy benefits, while implementing additional measures, to protect itself against an additional stock market downturn of about 13% and, even though it was not required to do so, in order to take into account an additional 20 basis point drop in the ultimate reinvestment rate (URR).

Quarterly income from current operations was $20.2 million, compared to $65.5 million the year before.

“Given the volatility of the financial markets, we decided to exercise caution and protect the company from further stock market downturns and interest rate reductions,” said Yvon Charest, president and CEO, in a release. “Our financial strength remains very solid, as indicated by our solvency ratio, which has proven to be very robust in the current economic environment. The quality of investments also remains very good, despite the devaluation of a few securities. We also expect to maintain our dividend at the current level throughout 2009.”

The fourth-quarter loss contributed to a drop in Industrial Alliance’s full year earnings, which plunged to $66.1 million from $242.2 million earned in 2007.

Full-year earnings per share amounted to 82¢ a share, down from $2.99 a share recorded the year before.