Industrial Alliance Insurance and Financial Services Inc. posted at 13% drop in profit in the third quarter, as stock market declines and cut into income.

The Quebec City-based insurance and wealth management company said on Wednesday that net income was $51.2 million, or 63¢ a share, in the three months ended Sept. 30. That compared with $59.1 million, or 73¢ a share, in the same 2007 period.

The insurer said losses on investments, including bonds of U.S. insurer AIG, cut net income by 11¢ a share, while lower fees because of the stock market downturn cut profit by another 11¢ a share.

Return on equity was 11.5% in the quarter, down from 14.5% a year earlier, Industrial Alliance said.

Premiums and mutual fund deposits rose 6% to $1.37 billion in the third quarter.

“Despite the credit crisis and the sharp drop in the stock markets, we are showing very satisfactory results under the circumstances,” stated Yvon Charest, president and CEO, in a release. “Even though we are not immune to the current turbulence, we are succeeding in generating a positive profit and return, growing our business volume and improving the profitability of our new sales.”

“The quality of our investments also remains very good, despite the devaluation of a few securities. Even though it is difficult to predict how the markets and economy will evolve over the next few quarters, we are confident that we will be able to weather the storm without weakening the company, for the greater good of our policyholders and our shareholders,” he added.

Earlier this week, Industrial Alliance announced a deal to buy a network of 340 mutual fund advisers and 70 insurance advisers in the province of Quebec from DundeeWealth Inc.

It also completed its acquisition of Sarbit Asset Management Inc. and announced plans to combine Sarbit with the IA Clarington family of mutual funds.

IE