Industrial Alliance Insurance and Financial Services Inc. has widened its asset-gathering net by acquiring two mutual fund dealers from a rival insurer that has decided to narrow its focus.

Quebec City-based IA has acquired Money Concepts Canada Ltd., a mutual fund dealer with more than $2.8 billion in assets under management, from Toronto-based AEGON Canada Inc., a sister company to Transamerica Life Canada that’s ultimately owned by Netherlands-based AEGON NV.

National Financial Insurance Agency Inc., the managing general agent through which Money Concepts advisors filed their insurance business, was also part of the deal, as was AEGON Dealer Services Inc., a smaller mutual fund dealer.

“It fits our growth plan,” says Normand Pépin, executive vice president of IA. “For years, we’ve talked about our capacity to manage multiple distribution networks on the insurance side. And we extended that capacity to wealth management.”

AEGON Canada owned each of the business units that it sold in National Financial Corp., a holding company that will cease to exist with the change of ownership. The terms of the deal were not disclosed.

In Money Concepts, IA gets a recognizable brand name that it will maintain.

“We believe that to be close to distribution is better for us,” says Pépin, who is also chairman of Investia Financial Services Inc., a mutual fund dealer owned by IA. “Our distributors are very independent, and we respect that — and we’re committed to respecting it. But at the same time, we know that by getting close to them [by getting] good products, they’ll take a look at our products and sell some.”

Byren Innes, senior vice president with insurance consultancy NewLink Group Inc. in Toronto, says that Money Concepts delivers a different wealth-management model to IA. Money Concepts is run under a franchise model that’s unique in the industry. The deal also brings in insurance sales through MGA National Financial Insurance, which will add IA insurance products.

“Some things,” Innes says, “give IA more control over its advisors than under other mutual fund dealership models.”

AEGON Dealer Services advi-sors, however, can expect some changes. They will be folded into Investia, and IA plans to wrap them in some new technology, although it will be from the same provider, Univeris Corp. of Toronto, that they have used in the past.

“There will be room for all of the employees,” says Pépin, “but there will be some restructuring.”

Once the acquisition is complete, IA will have more than $17 billion in mutual fund assets under administration through roughly 2,500 financial advisors. It will be one of the five largest non-bank-owned mutual fund dealers in Canada.

IA also owns Markham, Ont.-based FundEx Investments Inc., a firm that pays out 100% commissions, charging a monthly desk fee to advisors under its umbrella.

IA is also deepening its footprint in the U.S. During IA’s first-quarter earnings conference call at the beginning of May, it announced that it had acquired United Family Life Insurance Co. from Assurant Inc., a New York-based specialty insurer, for US$3 million plus another US$30 million for its capital and surplus. United Family, which will be renamed IA American Life, is licensed in 49 U.S. states.

“The game plan is to build slowly on existing U.S. business: annuities aimed at teachers and universal life aimed at the middle-income family market,” says Michael Goldberg, a senior financial services equity analyst for Desjardins Securities Inc. in Toronto.

IA had already opened a 15-person office in Phoenix, and Jacques Carrière, IA’s vice president of investor relations, says the firm already owns a small branch in Seattle through IA Pacific Life Insurance Co.

Carrière admits IA America Life is at an early stage, but that it has signed contracts with “a couple” of insurance distributors in the U.S. The U.S. business accounts for less than 1% of both IA’s income from premiums and its deposits.

IA reported net income of $67.1 million for the quarter ended March 31, up 7% from the same quarter in 2007 but down 2% from the previous quarter.

Goldberg says the variance in the quarterly results was mainly due to “seasonally weak” results from the property and casualty business. He notes there were no credit issues evident in IA’s business and has bumped his rating to “buy” from “hold” while maintaining his “average risk” rating on the company.

@page_break@The insurance industry is becoming more familiar with independent distribution. Recently, Toronto-based Manulife Financial Corp. acquired Burlington, Ont.-based mutual fund and securities dealer Berkshire-TWC Financial Group Inc. In 2006, Montreal-based Desjardins Financial Security Investments Inc. acquired fund dealer Performa Financial Group Ltd.

Yet, even as IA spreads its wings, so to speak, Transamerica Life Canada is retrenching. Standard & Poor’s Corp. noted in a March report, in which it announced it was lowering its rating on Transamerica Life Canada, that parent AEGON had stepped in to capitalize its Canadian subsidiary on more than one occasion in the past few years. Often, in this sort of situation, the S&P report added, firms rationalize financial resources by selling off business units.

Paul Raeburn, president and CEO of AEGON Canada, says that the deal with IA allows AEGON Canada to focus on its core business, the manufacturing of individual life insurance and annuity products.

National Financial Insurance and Trans-america Life Canada are sister companies to AEGON Fund Management Inc. and AEGON Capital Management Inc., each wholly owned subsidiaries of AEGON Canada. They all fall under the umbrella of U.S.-based Transamerica Corp., which, in turn, is part of the AEGON NV’s Americas business unit. IE