Industrial Alliance Ends the Third Quarter of 2008 With $51.2 Million in Net Income and an ROE of 11.5% - Premiums and deposits are up 6% and financial solidity continues to improve

QUEBEC CITY, Nov. 5, 2008 (Canada NewsWire via COMTEX) -- IDLLF | Quote | Chart | News | PowerRating -- Despite the current financial turmoil in the markets, Industrial Alliance Insurance and Financial Services Inc. ("Industrial Alliance" or "the Company") is pleased to announce that it ended the third quarter of 2008 with net income to common shareholders of $51.2 million, an 11.5% return on equity, and a 6% increase in premiums and deposits and 12% in the value of new business compared to the same quarter last year. The solvency ratio was 200% as at September 30, 2008, a 15 percentage point increase compared to June 30, 2008. The solvency ratio is at the top of the Company's target range. The board of directors has also announced the payment of a quarterly dividend of $0.245 per common share, which is the same as the one announced last quarter. This dividend represents a 22.5% increase compared to the dividend paid out for the same period last year.

"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 Chief Executive Officer. "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. But as we must do under the circumstances, we are focusing first and foremost on financial solidity. And we are pleased to say that our financial solidity is up since we succeeded in strengthening our solvency ratio and increasing our excess capital during the quarter. 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."

<< ------------------------------------------------------------------------- Highlights ------------------------------------------------------------------------- Third quarter Year-to-date as at September 30 ------------------------------------------------------------------------- (Millions of dollars, unless otherwise Varia- Varia- indicated) 2008 2007 tion 2008 2007 tion ------------------------------------------------------------------------- Profitability measures Net income to common shareholders 51.2 59.1 (13%) 176.3 179.1 (2%) Earnings per common share (diluted) $0.63 $0.73 ($0.10) $2.17 $2.21 ($0.04) Return on common shareholders' equity (quarter annualized/ trailing twelve months) 11.5% 14.5% (300 bps) 13.9% 15.2% (130 bps) ------------------------------------------------------------------------- Business growth measures Premiums and deposits 1,374.8 1,301.8 6% 4,321.8 4,508.6 (4%) Value of new business 30.1 26.9 12% 95.5 91.9 4% Assets under management and under adminis- tration 50,626.3 50,802.1 0% - - - ------------------------------------------------------------------------- September June 30, December September 30, 2008 2008 31, 2007 30, 2007 ------------------------------------------------------------------------- Financial solidity measures Capitalization(1) 2,342.6 2,245.1 2,133.6 2,108.4 Solvency ratio 200% 185% 193% 197% Excess capital 216 100 171 168 Net impaired investments 8.7 16.0 11.7 11.8 Net impaired investments as a % of total investments 0.06% 0.11% 0.08% 0.08% ------------------------------------------------------------------------- Following are the Company's main results for the third quarter in terms of profitability, business growth and financial solidity. Profitability Industrial Alliance ended the third quarter of 2008 with net income to common shareholders of $51.2 million, down 13% compared to the corresponding income last year. This result translates into diluted earnings per common share of $0.63 ($0.73 in the third quarter of 2007) and a return on equity to common shareholders of 11.5% for the quarter (on an annualized basis) and 13.9% for the trailing twelve months. The results for the quarter were affected by the financial environment, which reduced the net income for the quarter by about $19.6 million ($0.24 per common share), as compared to the expected result. - The credit crisis reduced the Company's income by $8.6 million after taxes, following the devaluation of certain bonds. In particular, the Company devalued the $15.8 million bond that it holds in American International Group, Inc. (AIG) by 40% (the Company's investment is in AIG's holding company). - The stock market downturn also reduced the Company's income by some $11.0 million after taxes compared to the expected result. The stock market decline had the following effects: - Reduced the revenues from fees collected on the investment funds managed by the Company by $4.6 million after taxes. This shortfall primarily affected the Individual Wealth Management sector and, to a lesser degree, Group Pensions. - Reduced the present value of future revenues from management fees collected on Universal Life policy funds by $4.1 million after taxes. This shortfall only affected the Individual Insurance sector. - Reduced the income on capital by $2.3 million after taxes. This shortfall comes from a decrease in the value of seed money and the decrease in income from a life insurance company in which Industrial Alliance has a 45% share. ------------------------------------------------------------------------- Impact of the Financial Environment on the Net Income to Common Shareholders, by Component ------------------------------------------------------------------------- Third quarter Per (Millions of dollars, Before After common unless otherwise indicated) tax tax share ------------------------------------------------------------------------- Impact of the credit crisis 40% devaluation of AIG security (6.3) (4.6) ($0.06) Other permanent losses in value on investments (5.6) (4.0) ($0.05) ------------------------------------------------------------------------- Subtotal (11.9) (8.6) ($0.11) ------------------------------------------------------------------------- Impact of the stock market downturn Lower than expected management fees on investment funds (6.4) (4.6) ($0.06) Present value of the reduction in management fees on Universal Life policy funds (5.7) (4.1) ($0.05) Income on capital (3.1) (2.3) ($0.02) ------------------------------------------------------------------------- Subtotal (15.2) (11.0) ($0.13) ------------------------------------------------------------------------- Total (27.1) (19.6) ($0.24) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Some of the factors indicated above are "recurring," while others are not. Hence, if in the fourth quarter the stock markets were to remain at the same level as at September 30, 2008, only the decrease in income drawn from investment fund management fees and a portion of the income on capital would be recurrent. Moreover, the items indicated above affected both the Company's operating profit and income on capital. The following table shows the impact of these various items by line of business. ------------------------------------------------------------------------- Impact of the Financial Environment on the Net Income to Common Shareholders, by Line of Business ------------------------------------------------------------------------- Total, after allocation Stock of Credit market income on Third quarter crisis decline Total capital ------------------------------------------------------------------------- (Millions of dollars, unless Before Before Before After After otherwise indicated) tax tax tax tax tax ------------------------------------------------------------------------- Operating profit Individual Insurance - (5.7) (5.7) (4.1) (11.0) Individual Wealth Management - (5.9) (5.9) (4.2) (4.3) Group Insurance (1.1) - (1.1) (0.8) (2.4) Group Pensions (0.7) (0.5) (1.2) (0.9) (1.9) ------------------------------------------------------------------------- Subtotal (1.8) (12.1) (13.9) (10.0) (19.6) ------------------------------------------------------------------------- Income on capital (10.1) (3.1) (13.2) (9.6) - ------------------------------------------------------------------------- Total (11.9) (15.2) (27.1) (19.6) (19.6) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Following are a few additional points worth highlighting about the Company's third quarter profitability: - The Company did not have to increase its reserves or required capital for the segregated funds guarantee, since they were sufficient to absorb the stock market downturn during the quarter. - New business strain amounted to 61% of sales in the Individual Insurance sector, compared to 50% for the same period last year (sales are measured by first-year annualized premiums, which contain an "insurance" portion and a "savings" portion). This result surpasses the Company's 50% to 55% target range. The higher strain comes from the fact that the "savings" portion of Universal Life policies is lower than expected. When it is calculated on the "insurance" portion only, strain is in line with expectations. - After two challenging quarters in terms of claims, due to the poor climatic conditions last winter, the auto and home insurance subsidiary had an excellent third quarter, posting a net profit of $2.2 million ($1.2 million in the third quarter of 2007). - The contribution of Excellence Life Insurance Company continues to be in line with the Company's expectations. When Excellence was acquired, the Company had indicated that it believed Excellence would contribute to improving its earnings per share by $0.04 in 2008. The acquisition of Excellence was completed on January 31, 2008. - The effective tax rate was 27.6% in the third quarter, which is lower than the rate of 28.7% in the third quarter of 2007. This rate is in line with the Company's expectations that the effective tax rate should be around 28% in the medium term. - The Company is closely following developments surrounding asset-backed commercial paper (ABCP) and regularly reviews its valuation model for the ABCP it holds. Based on the most recent information available, the Company believes that the 15% writedown on the fair value posted in the third quarter of 2007 is still adequate. - The income for the quarter benefited from an unusual gain of $0.3 million resulting from the asymmetric evolution of the market value of debt instruments and underlying assets ($2.7 million in the third quarter of 2007). However, this gain is temporary, given that any difference between the market value of debt instruments and the corresponding assets will be eliminated by the time the debt instruments mature, which is in the next six years. The investment that the Company holds in AIG is partially matched to the debt instruments, but the decrease in the value of this security was not considered in this temporary effect, as the Company believes that this decrease in value is permanent. - The Company's good financial solidity has enabled the board of directors to announce a quarterly dividend of $0.245 per common share, which is the same as the one announced in the last quarter. The board had increased the quarterly dividend by $0.02 when the results for the last quarter were published. The dividend for the quarter corresponds to a 22.5% increase compared to the dividend paid out for the same period last year. Business Growth Following are the main highlights of the third quarter in terms of business growth. Premiums and deposits - In spite of the gloomy economic environment, all lines of business again ended the quarter with an increase in premiums and deposits, except for Individual Wealth Management (savings and investment products), whose sales declined due to investor unease about the instability of the financial markets. Strong growth of premiums in the Group Pensions sector erased the decline in the Individual Wealth Management sector, so that the third quarter ended with $1.4 billion in premiums and deposits, up 6% compared to the same period in 2007. ------------------------------------------------------------------------- Premiums and Deposits ------------------------------------------------------------------------- Third quarter Year-to-date as at September 30 ------------------------------------------------------------------------- (Millions of dollars, unless otherwise Varia- Varia- indicated) 2008 2007 tion 2008 2007 tion ------------------------------------------------------------------------- Individual Insurance 235.6 225.8 4% 687.0 661.2 4% ------------------------------------------------------------------------- Individual Wealth Management 518.8 672.2 (23%) 1,971.5 2,458.1 (20%) ------------------------------------------------------------------------- Group Insurance 247.8 228.6 8% 711.1 647.7 10% ------------------------------------------------------------------------- Group Pensions 339.8 144.8 135% 857.1 654.1 31% ------------------------------------------------------------------------- General Insurance 32.8 30.4 8% 95.1 87.5 9% ------------------------------------------------------------------------- Total 1,374.8 1,301.8 6% 4,321.8 4,508.6 (4%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Sales - Following are the main highlights of sales by line of business. - Individual Insurance sales continued to grow in the family market, but were down somewhat in the high net worth market, with the end result being a 16% decrease in sales for the third quarter compared to the same period last year. Investors who use their Universal Life policy as a financial planning tool have thus decided to postpone making deposits to their policy, due to the instability of the markets. On the other hand, Canadians have continued to ensure that their basic insurance needs are covered, since so-called "minimum" premiums (the "insurance" component of the premiums) are up 3% for the quarter and 8% for the year-to-date. Also, despite a small 1% decline during the quarter, the number of policies sold has grown by 3% since the beginning of the year. - Sales of savings and investment products are down sharply due to the stock market downturn. After several years of strong growth, sales in the Individual Wealth Management sector are down 23% for the quarter compared to the same period last year. Nevertheless, net segregated fund and mutual fund sales remain positive ($130.0 million for the quarter and $562.6 million for the first nine months of the year). The IA Clarington Investments mutual fund subsidiary continues to perform well, with higher net sales than the industry, given its size. The Company's broad range of funds, their good relative performance in the last few quarters and the scope of the Company's distribution networks should help to get sales back on track once the markets are more stable. - Even though the Group Insurance Employee Plans sector obtained its second best third quarter sales results in absolute terms since the beginning of the decade, sales were down 2% for the quarter compared to the same period last year. This decrease is essentially due to the fact that last year's sales were exceptional. Nevertheless, the sector is heading towards one of its best years, since sales are up 15% for the first nine months. Sales were very strong in Western Canada, thanks to the close ties developed with new distributors in the last few years. More than half of the sector's sales continue to be made outside Quebec, in accordance with the Company's desire to expand throughout the country. - Despite lower car sales, third quarter sales were up 2% in the Group Creditor Insurance sector. Sales for this sector rely on car sales, since the products are distributed primarily by car dealers. The Company has been a leader in Canada in the creditor insurance market among car dealers for several years, with a market share of over 40%. - Special Markets Group (SMG) had a very good quarter, with a 16% increase in sales compared to the same period the previous year. This sector specializes in certain insurance markets that are not well served by traditional group insurance carriers. - However, it was the Group Pensions sector that took the spotlight this quarter in terms of sales. Thanks to the signing of several contracts in the small, medium and even large business market, sales for the sector were 135% higher than the same period last year. In fact, the sector obtained one of its best ever quarterly results. Sales were strong in the accumulation products market (savings products) and in the disbursement products market (annuity products). As with the Group Insurance Employee Plans sector, more than half of the sector's sales were made outside Quebec in the first three quarters, in accordance with the Company's desire to expand throughout the country. ------------------------------------------------------------------------- Sales(2) ------------------------------------------------------------------------- Third quarter Year-to-date as at September 30 ------------------------------------------------------------------------- (Millions of dollars, unless otherwise Varia- Varia- indicated) 2008 2007 tion 2008 2007 tion ------------------------------------------------------------------------- Individual Insurance 34.5 41.2 (16%) 104.7 110.1 (5%) ------------------------------------------------------------------------- Individual Wealth Management General fund 74.7 78.8 (5%) 258.2 256.7 1% Segregated funds 183.3 192.3 (5%) 666.5 801.6 (17%) Mutual funds 260.8 401.1 (35%) 1,046.8 1,399.8 (25%) ------------------------------------------------------------------------- Total 518.8 672.2 (23%) 1,971.5 2,458.1 (20%) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Group Insurance Employee Plans 24.3 24.8 (2%) 70.8 61.8 15% Creditor Insurance 58.9 57.9 2% 152.6 150.9 1% Special Markets Group (SMG) 28.4 24.4 16% 81.2 74.6 9% ------------------------------------------------------------------------- Group Pensions 339.8 144.8 135% 857.1 654.1 31% ------------------------------------------------------------------------- ------------------------------------------------------------------------- Assets under management and under administration - Assets under management totalled $31.9 billion as at September 30, 2008, a 5% decrease compared to June 30, 2008. This decrease is primarily explained by the stock market downturn, which led to a decrease in the value of the stock portfolio, and by the decrease in the market value of general fund bonds, a consequence of the widening of interest rate spreads that occurred during the quarter. The decrease in assets under management was slowed, however, by good premium growth in most sectors, as well as by positive net investment fund sales. Despite the stock market downturn, assets under administration continued to grow, amounting to $18.7 billion as at September 30, 2008, a 6% increase since June 30, 2008. The increase is explained by positive net sales for the Company's various brokerage subsidiaries, but, mainly, by the acquisition of AEGON Dealer Services Canada, which added $2.8 billion to the assets under administration of the mutual fund brokerage operations. This acquisition was concluded on July 1, 2008. Assets under management and under administration totalled $50.6 billion as at September 30, 2008, a 2% decrease compared to June 30, 2008 and slightly higher than December 31, 2007. ------------------------------------------------------------------------- Assets Under Management and Under Administration ------------------------------------------------------------------------- September June 30, December September (Millions of dollars) 30, 2008 2008 31, 2007 30, 2007 ------------------------------------------------------------------------- Assets under management 31,898.1 33,660.6 32,792.7 32,534.6 Assets under administration 18,728.2 17,741.2 17,618.9 18,267.5 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total 50,626.3 51,401.8 50,411.6 50,802.1 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Value of new business - In spite of weak sales in several lines of business, the value of new business increased by 12% in the third quarter compared to the same period last year, amounting to $30.1 million ($0.37 per common share). The value of new business increased due to improved profit margins in most lines of business. Financial Solidity Following are the main highlights of the third quarter in terms of financial solidity. Capitalization - The Company's capital totalled $2.3 billion as at September 30, 2008. This represents a 4% ($97.5 million) increase compared to June 30, 2008. This increase comes primarily from the issuance of a $100 million debenture during the quarter and the increase in retained earnings. Capital growth was slowed, however, by the decrease in unrealized gains, resulting from the stock market decline and the widening of interest rate spreads. Financial leverage - Even though the debt ratio increased somewhat in the third quarter, primarily due to the issuance of the $100 million debenture, the Company still has a good amount of leeway in terms of financial leverage. Hence, the debt ratio amounted to 17.2% as at September 30, 2008 (14.2% as at June 30, 2008), if the debentures alone are included in the debt items, and 22.5% (19.8% as at June 30, 2008) if the preferred shares are added. Solvency - Despite the financial turmoil in the markets, the solvency ratio continued to strengthen during the quarter. The solvency ratio amounted to 200% as at September 30, 2008, 15 percentage points higher than June 30, 2008. This ratio is at the top of the Company's 175% to 200% target range. The increase in the ratio during the quarter is primarily attributable to the issuance of the $100 million debenture, the reduction in the capital requirements resulting from the decrease in the market value of equity investments (due to the stock market downturn), and the usual contribution of net earnings to the available capital (net of the normal increase in the required capital related to business growth). On the other hand, the gradual recognition over two years of the impact of the new accounting standards that took effect on January 1, 2007 continues to put downward pressure on the solvency ratio. This impact will be felt until the fourth quarter of 2008. Excess capital - The excess capital more than doubled in the third quarter, from $100 million as at June 30, 2008 to $216 million as at September 30, 2008. This increase is attributable to the same factors that increased the solvency ratio. Quality of investments - Despite the devaluation of certain securities during the quarter, the main investment quality indices were not weakened. Hence, net impaired investments decreased during the quarter, totalling $8.7 million as at September 30, 2008, compared to $16.0 million as at June 30, 2008, which represents just 0.06% of total investments, about half the level of the previous quarter (0.11% as at June 30, 2008). This decrease is explained by the sale of a property that was repossessed in 1997. The sale of this property erased a defaulted mortgage loan and generated a modest gain. The bond portfolio continues to be of very high quality. The proportion of bonds rated BB and lower decreased from 0.08% as at June 30, 2008 to 0.05% as at September 30, 2008. The quality of the mortgage portfolio remained excellent, with no new loans defaulting in the third quarter. The mortgage loans delinquency rate decreased slightly, from 0.33% to 0.31% of the portfolio between June 30 and September 30, 2008. The real estate occupancy rate decreased slightly to 94.0% as at September 30, 2008, compared to 96.5% as at June 30, 2008. In the context of the current financial environment, the Company continues to closely monitor its investment portfolio and to be on the look-out for any developments that could cause the quality of its portfolio to change in any way. ------------------------------------------------------------------------- Investment Quality Indices ------------------------------------------------------------------------- (Millions of dollars unless otherwise September June 30, December September indicated) 30, 2008 2008 31, 2007 30, 2007 ------------------------------------------------------------------------- Net impaired investments 8.7 16.0 11.7 11.8 ------------------------------------------------------------------------- Net impaired investments as a % of total investments 0.06% 0.11% 0.08% 0.08% ------------------------------------------------------------------------- Bonds - Rated BB and lower 0.05% 0.08% 0.11% 0.30% ------------------------------------------------------------------------- Mortgage loans - Delinquency rate 0.31% 0.33% 0.16% 0.18% ------------------------------------------------------------------------- Real estate - Occupancy rate 94.0% 96.5% 95.5% 95.1% ------------------------------------------------------------------------- >>

Credit ratings - On July 31, 2008, the Standard & Poor's rating agency renewed all credit ratings that it grants to Industrial Alliance with a stable outlook. Standard & Poor's renewed the A+ (Strong) rating that it grants Industrial Alliance for its financial strength. Financial strength measures the Company's ability to meet its commitments to its policyholders. Industrial Alliance also has credit ratings with two other rating agencies, A.M. Best and DBRS, which have also been renewed in the last year. A.M. Best grants Industrial Alliance an A (Excellent) rating for its financial strength, with a positive outlook, while DBRS grants the Company an IC-2 rating for its ability to meet its claims paying ability, with a stable outlook.

Acquisition of Sarbit Asset Management

On October 31, 2008, Industrial Alliance concluded the acquisition of all of the issued and outstanding shares of Sarbit Asset Management Inc. ("Sarbit"). This acquisition followed the conclusion of an agreement with Sarbit announced on September 8, 2008, whereby Industrial Alliance undertook to present an offer to acquire all of Sarbit's issued and outstanding shares. At the time of this announcement, Industrial Alliance had entered into lock-up agreements with shareholders representing over 75% of Sarbit's issued and outstanding shares.

Sarbit is a Winnipeg-based mutual fund management company founded in 2005 by Larry Sarbit, a money manager with over 28 years' experience. When the transaction closed, Sarbit was managing about $100 million in assets. These assets will be integrated with those of IA Clarington Investments Inc. ("IA Clarington"), a subsidiary of Industrial Alliance. Mr. Sarbit and his investment team will continue to provide investment advice to Sarbit's U.S. equity funds, and the remainder of Sarbit's mutual funds will be managed by an affiliate of IA Clarington.

Acquisition of DundeeWealth's Quebec-Based Mutual Fund Dealer and

Insurance Distribution Operations

On November 3, 2008, Industrial Alliance and DundeeWealth Inc. announced that they had entered into an agreement whereby Industrial Alliance will acquire the financial planning, mutual fund dealer and life insurance sales operations of DundeeWealth in the Province of Quebec.

The transaction includes approximately $2.6 billion in assets under administration and a network of more than 400 licensed financial advisors throughout Quebec (approximately 340 mutual fund licensed and 70 insurance only licensed). The purchase will be made through Investia Financial Services Inc., one of Industrial Alliance's two mutual fund dealer subsidiaries. Upon completion, the mutual fund businesses will be merged with Investia.

This acquisition will allow Industrial Alliance to further increase the size, scale and efficiencies of its Quebec mutual fund distribution operations. After the transaction closes, the combined assets under administration of Industrial Alliance's two mutual fund dealers, Investia and FundEX Investments Inc., will secure Industrial Alliance's position in the top five non-bank owned mutual fund dealerships in Canada.

The transaction is subject to regulatory approval and is expected to close on December 31, 2008.

This is Industrial Alliance's fifteenth acquisition in the wealth management market since the beginning of 2000.

Non-GAAP Financial Measures

The Company reports its financial results in accordance with generally accepted accounting principles (GAAP). It also occasionally uses certain non-GAAP financial measures - adjusted data - mainly concerning the profit, earnings per share and return on equity. These non-GAAP financial measures are always clearly indicated, and are always accompanied by and reconciled with GAAP financial measures. The Company believes that these non-GAAP financial measures provide investors and analysts with useful information so that they can better understand the financial results and perform a better analysis of the Company's growth and profitability potential. These non-GAAP financial measures provide a different way of assessing various aspects of the Company's operations and may facilitate the comparison of results from one period to another. Since non-GAAP financial measures do not have a standardized definition, they may differ from the non-GAAP financial measures used by other institutions. The Company strongly encourages investors to review its financial statements and other publicly-filed reports in their entirety and not to rely on any single financial measure. The data related to the solvency ratio, embedded value and the value of new business, as well as adjusted data, as indicated above, are not subject to GAAP.

Forward-Looking Statements

This news release may contain forward-looking statements about the operations, objectives and strategies of Industrial Alliance, as well as its financial situation and performance. The forward-looking nature of these statements can generally, though not always, be identified by the use of words such as "may," "expect," "anticipate," "intend," "believe," "estimate," "feel," "continue," or other similar expressions, in the affirmative, negative or conditional. Unless otherwise indicated, any forward-looking information that presents prospective results of operations, financial position or cash flows was approved by management on the date of this news release.

Forward-looking statements entail risks and uncertainties that may cause the actual results, performance or achievements of Industrial Alliance to differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause the Company's actual results to differ from expected results include changes in government regulations or tax laws, competition, technological changes, global capital market activity, interest rates, changes in demographic data, changes in consumer behaviour and demand for the Company's products and services, catastrophic events, and general economic conditions in Canada or elsewhere in the world. A description of significant factors that could affect forward-looking statements is contained in the Management's Discussion and Analysis section of the Company's most recent annual report.

This list is not exhaustive of the factors that may affect any of Industrial Alliance's forward-looking statements. These and other factors must be examined carefully and readers should not place undue reliance on Industrial Alliance's forward-looking statements. Where the forward-looking statements are presented as guidance regarding the future financial results of Industrial Alliance, they are provided to help investors understand the impact on earnings of the Company's current plans and objectives. The Company may also provide objectives from time to time. An objective should be interpreted as a statement of management's goals in managing the Company, and not necessarily as a forecast that the objective will be met.

Industrial Alliance is not obligated to revise or update these forward-looking statements to reflect events, circumstances or situations that occur after the date of this news release, whether foreseeable or not, except as required by applicable securities legislation.

Conference Call

Management will hold a conference call to present the Company's results on Wednesday, November 5, 2008, at 2:00 p.m. (ET). To listen in on the conference call, dial 1 800 926-4481 (toll-free). A replay of the conference call will also be available for a one-week period, starting at 4:30 p.m. on Wednesday, November 5, 2008. To listen to the conference call replay, dial 1 800 558-5253 (toll-free) and enter access code 21391309. A webcast of the conference call (in listen only mode) will also be available on the Industrial Alliance website at www.inalco.com, as well as on the CNW website at www.cnw.ca.

About Industrial Alliance

Founded in 1892, Industrial Alliance Insurance and Financial Services Inc. is a life and health insurance company that offers a wide range of life and health insurance products, savings and retirement plans, RRSPs, mutual and segregated funds, securities, auto and home insurance, mortgage loans and other financial products and services. The fourth largest life and health insurance company in Canada, Industrial Alliance is at the head of a large financial group, which has operations across Canada as well as in the Western United States. Industrial Alliance contributes to the financial wellbeing of over 3 million Canadians, employs more than 3,300 people and manages and administers over $50 billion in assets. Industrial Alliance stock is listed on the Toronto Stock Exchange under the ticker symbol IAG. Industrial Alliance is among the 100 largest public companies in Canada.

<< Notes ----- 1) Capitalization includes equity, the debentures and the participating policyholders account. 2) Sales (new business) are defined as follows for each sector: Individual Insurance: first-year annualized premiums; Individual Wealth Management: premiums for the general fund and segregated funds and deposits for mutual funds; Group Insurance Employee Plans: first- year annualized premiums, including premium equivalents (Administrative Services Only (ASO) contracts); Group Creditor Insurance: gross premiums (before reinsurance); Special Markets Group (SMG): premiums; Group Pensions: premiums. CONSOLIDATED INCOME STATEMENTS ------------------------------------------------------------------------- (in millions of dollars, unless Quarters ended Nine months ended otherwise indicated) September 30 September 30 2008 2007 2008 2007 $ $ $ $ (unaudited) Revenues Premiums 1,114 900 3,275 3,108 Net investment income (394) 170 (144) 261 Fees and other revenues 98 91 290 269 ------------------------------------------------------------------------- 818 1,161 3,421 3,638 Policy benefits and expenses Payments to policyholders and beneficiaries 427 421 1,464 1,298 Net transfer to segregated funds 399 250 1,112 1,178 Dividends, experience rating refunds and interest on amounts on deposit 20 12 49 27 Change in provisions for future policy benefits (351) 167 (176) 203 ------------------------------------------------------------------------- 495 850 2,449 2,706 Commissions 139 133 403 384 Premium and other taxes 16 15 46 44 General expenses 94 78 268 245 Financing expenses - (2) 7 (3) ------------------------------------------------------------------------- 744 1,074 3,173 3,376 Income before income taxes 74 87 248 262 Less: income taxes 21 26 65 76 ------------------------------------------------------------------------- Net income 53 61 183 186 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Less: net income attributed to participating policyholders 1 1 3 3 ------------------------------------------------------------------------- Net income attributed to shareholders 52 60 180 183 Less: preferred share dividends 1 1 4 4 ------------------------------------------------------------------------- Net income available to common shareholders 51 59 176 179 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per common share (in dollars) basic 0.64 0.74 2.20 2.24 diluted 0.63 0.73 2.17 2.21 CONSOLIDATED BALANCE SHEETS ------------------------------------------------------------------------- As at As at As at September December September 30 31 30 (in millions of dollars) 2008 2007 2007 $ $ $ (unaudited) (unaudited) Assets Invested assets Bonds 7,575 8,127 7,991 Mortgages 3,406 2,920 2,736 Stocks 1,588 1,764 1,712 Real estate 519 482 478 Policy loans 305 267 258 Cash and cash equivalents 464 362 431 Other invested assets 376 292 267 ------------------------------------------------------------------------- 14,233 14,214 13,873 Intangible assets 298 298 298 Other assets 607 524 540 Goodwill 131 68 68 ------------------------------------------------------------------------- Total general fund assets 15,269 15,104 14,779 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Segregated funds net assets 9,830 10,211 10,170 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Policy liabilities Provisions for future policy benefits 11,563 11,705 11,400 Provisions for dividends to policyholders and experience rating refunds 48 41 32 Benefits payable and provision for unreported claims 160 160 144 Policyholders' amounts on deposit 192 182 184 ------------------------------------------------------------------------- 11,963 12,088 11,760 Other liabilities 642 579 568 Future income tax 312 294 333 Deferred net realized gains 10 10 10 Debentures 403 310 308 Participating policyholders' account 27 24 26 ------------------------------------------------------------------------- 13,357 13,305 13,005 ------------------------------------------------------------------------- Equity Share capital 666 638 641 Contributed surplus 19 17 16 Retained earnings and accumulated other comprehensive income 1,227 1,144 1,117 ------------------------------------------------------------------------- 1,912 1,799 1,774 ------------------------------------------------------------------------- Total general fund liabilities and equity 15,269 15,104 14,779 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Segregated funds liabilities 9,830 10,211 10,170 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED PARTICIPATING POLICYHOLDERS' ACCOUNT ------------------------------------------------------------------------- Nine months ended (in millions of dollars) September 30 2008 2007 $ $ (unaudited) Balance at beginning 24 23 Net income for the period 5 5 Dividends (2) (2) ------------------------------------------------------------------------- Net income attributed to participating policyholders 3 3 Balance at end 27 26 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED CONTRIBUTED SURPLUS ------------------------------------------------------------------------- Nine months ended (in millions of dollars) September 30 2008 2007 $ $ (unaudited) Balance at beginning 17 15 Current period contribution for the stock option plan 3 3 Stock options exercised (1) (2) ------------------------------------------------------------------------- Balance at end 19 16 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED SHAREHOLDERS' RETAINED EARNINGS AND CONSOLIDATED ACCUMULATED OTHER COMPREHENSIVE INCOME STATEMENTS ------------------------------------------------------------------------- Nine months ended (in millions of dollars) September 30 2008 2007 $ $ (unaudited) Consolidated shareholders' retained earnings Balance at beginning 1,148 971 Impact of adopting new accounting standards - 10 Net income attributed to shareholders 180 183 Common share dividends (56) (45) Preferred share dividends (4) (4) Purchase and cancellation of common shares (9) - ------------------------------------------------------------------------- Balance at end 1,259 1,115 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated accumulated other comprehensive income Balance at beginning (4) - Impact of adopting new accounting standards - 21 Total other comprehensive income (28) (19) ------------------------------------------------------------------------- Balance at end (32) 2 ------------------------------------------------------------------------- Total 1,227 1,117 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS ------------------------------------------------------------------------- Quarters ended Nine months ended (in millions of dollars) September 30 September 30 2008 2007 2008 2007 $ $ $ $ (unaudited) Net income 53 61 183 186 Other comprehensive income Unrealized gains (losses) arising during the period on available-for-sale financial assets: Bonds (net of income tax of $9 ($5 in 2007)) (19) - (22) (10) Stocks (net of income tax of $4 ($1 in 2007)) (7) (2) (10) 1 Reclassification of (gains) losses on available-for- sale financial assets included in the net income: Bonds (net of income tax of $1 ($1 in 2007)) 3 1 2 (1) Stocks (net of income tax of $2 ($1 in 2007)) (2) (2) (4) (3) ------------------------------------------------------------------------- Change in unrealized gains (losses) on available-for- sale financial assets (25) (3) (34) (13) Change in unrealized currency translation gains (losses) on self-sustaining foreign operations 5 (6) 6 (6) ------------------------------------------------------------------------- Total other comprehensive income (20) (9) (28) (19) ------------------------------------------------------------------------- Comprehensive income 33 52 155 167 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Comprehensive income attributed to shareholders 32 51 152 164 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Comprehensive income attributed to participating policyholders 1 1 3 3 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED CASH FLOWS STATEMENTS ------------------------------------------------------------------------- Quarters ended Nine months ended (in millions of dollars) September 30 September 30 2008 2007 2008 2007 $ $ $ $ (unaudited) Cash flows from operating activities Net income 53 61 183 186 Items not affecting cash and cash equivalents: Change in provisions for future policy benefits (351) 167 (176) 203 Share of results of entity subject to significant influence 2 - 1 (2) Amortization of realized and unrealized (gains) losses (3) (3) (11) (7) Amortization of premiums and discounts 1 - 1 1 Variation of realized and unrealized (gains) losses 496 (73) 472 58 Realized (gains) losses on available-for-sale financial assets 3 (1) (2) (6) Future income taxes 8 14 31 34 Stock option plan 1 2 3 3 Amortization of deferred sales commissions and depreciation of fixed assets 13 12 37 29 Other 4 7 (22) 9 ------------------------------------------------------------------------- 227 186 517 508 Changes in other assets and liabilities (13) 40 (76) (19) ------------------------------------------------------------------------- Cash flows from operating activities 214 226 441 489 ------------------------------------------------------------------------- Cash flows from investing activities Sales, maturities and repayments of the following items: Bonds 778 421 1,852 1,147 Mortgages 99 74 297 249 Stocks 112 79 298 228 Real estate 18 3 20 4 Policy loans 20 18 73 64 Other invested assets (2) 1 1 2 ------------------------------------------------------------------------- 1,025 596 2,541 1,694 Purchases of the following items: Bonds (783) (250) (1,533) (967) Mortgages (137) (205) (766) (560) Stocks (88) (95) (285) (247) Real estate (35) (2) (42) (23) Policy loans (24) (20) (106) (102) Other invested assets (58) (118) (170) (184) Acquisition of cash and cash equivalents 1 - 3 - ------------------------------------------------------------------------- (1,124) (690) (2,899) (2,083) Cash flows from investing activities (99) (94) (358) (389) ------------------------------------------------------------------------- Cash flows from financing activities Issue of common shares 2 - 4 6 Redemption of common shares (3) - (11) - Issue of debenture 88 - 88 - Preferred shareholders dividends (1) (1) (4) (4) Common shareholders dividends (20) (16) (56) (45) Decrease in long term debt (2) - (2) - Increase (decrease) in mortgage debt - (1) (1) 7 ------------------------------------------------------------------------- Cash flows from financing activities 64 (18) 18 (36) ------------------------------------------------------------------------- Gains (losses) on conversion of cash and cash equivalents 1 (5) 1 (5) Increase (decrease) in cash and cash equivalents 180 109 102 59 Cash and cash equivalents at beginning 284 322 362 372 ------------------------------------------------------------------------- Cash and cash equivalents at end 464 431 464 431 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplementary information: Cash 25 10 Cash equivalents 439 421 Total cash and cash equivalents 464 431 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest paid - 1 11 11 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Income taxes paid, net of refunds 9 8 55 38 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CONSOLIDATED FINANCIAL STATEMENTS OF SEGREGATED FUNDS ------------------------------------------------------------------------- Consolidated statements As at As at As at of net assets September December September 30 31 30 (in millions of dollars) 2008 2007 2007 $ $ $ (unaudited) (unaudited) Assets Bonds 2,859 2,800 2,832 Mortgages and mortgage-backed securities 7 7 8 Stocks 2,578 2,750 2,738 Fund units 3,743 4,224 4,140 Cash, short-term investments and other invested assets 614 411 413 Other assets 94 55 109 -------------------------------------

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