Industrial Alliance Ends 2007 on a Strong Note: Net income to common shareholders is up 12% and premiums and deposits are up 10% in the fourth quarter



    The dividend is increased by 12.5%

    QUEBEC CITY, Feb. 13 /CNW Telbec/ - Industrial Alliance Insurance and
Financial Services Inc. ("Industrial Alliance" or "the Company") ended the
fourth quarter of 2007 with net income available to common shareholders of
$63.1 million, a 12% increase over the same period last year. This income
translates into diluted earnings per common share of $0.78, up $0.08 compared
to the same period last year, and a return on equity to common shareholders of
15.2% for the quarter on an annualized basis, which exceeds the Company's 13%
to 15% target range. The good performance for the quarter is primarily
explained by strict management of profit margins on individual insurance
products and by strong business growth in most lines of business.
    In terms of business growth, the highlight of the quarter was Individual
Insurance sales, which surpassed the old mark by a wide margin, amounting to
$48.9 million in the fourth quarter. This represents a record increase of 20%
compared to the same period in 2006. Mutual funds continued their momentum of
the first three quarters, carrying premiums and deposits to $1.3 billion in
the fourth quarter, a 10% increase over the same period the previous year.
    "The year ended on a strong note," stated Yvon Charest, President and
Chief Executive Officer. "We have once again obtained low double-digit growth
in income, which is in line with our expectations, and we efficiently managed
profit margins and sales in the Individual Insurance sector. These results
enabled us to increase the quarterly dividend by $0.025, to achieve our 28%
target payout ratio."
    Among the other highlights of the quarter, mutual fund sales were very
strong once again this quarter, finishing the year with a 46% increase; once
again this year, more than half of sales from all sectors came from outside of
Quebec; the acquisition of Excellence was successfully completed on January
31, 2008, which will allow the Company to enter the individual disability and
health insurance market; the recurring components of embedded value achieved
low double-digit growth once again in 2007, thanks to the strong growth of the
value of new business; and the Company is ready to deal with an economic
slowdown, if one should occur, thanks to the high quality of its investments
and its very low exposure to the U.S. market and securities in riskier
sectors.

    
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    Highlights
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                           Fourth quarter                    Year
    -------------------------------------------------------------------------
    (Millions of
     dollars,unless
     otherwise                          Varia-                        Varia-
     indicated)      2007      2006      tion      2007      2006      tion
    -------------------------------------------------------------------------
    Net income to
     common
     shareholders    63.1      56.4        12%    242.2     223.0         9%
    -------------------------------------------------------------------------
    Earnings per
     common share
     (diluted)     $ 0.78    $ 0.70    $ 0.08    $ 2.99    $ 2.74    $ 0.25
    -------------------------------------------------------------------------
    Return on
     common
     shareholders'
     equity(1)       15.2%     15.4%  (20 bps)     15.2%     15.7%  (50 bps)
    -------------------------------------------------------------------------
    Premiums and
     deposits     1,317.6   1,202.6        10%  5,826.2   4,990.6        17%
    -------------------------------------------------------------------------
                  December 31, 2007  September 30, 2007   December 31, 2006
    -------------------------------------------------------------------------
    Assets under
     management
     and under
     administration        50,411.6            50,802.1            46,904.1
    -------------------------------------------------------------------------


    Highlights of the fourth quarter

    Following are the main highlights of the fourth quarter:

    1)  Earnings per common share (diluted) of $0.78, up $0.08 compared to
        the same period the previous year. This result takes into account a
        $0.02 per common share accounting loss resulting from the asymmetric
        evolution of the market value of debt instrument liabilities and the
        assets that match them. In the third quarter, this same phenomenon
        resulted in an accounting gain of $0.03 per common share. Without
        this accounting loss, earnings per common share (diluted) would have
        been $0.80 for the fourth quarter.

    2)  Efficient and successful management of profit margins and sales in
        the Individual Insurance sector. This translated into:

      a)  A significant reduction in strain in the Individual Insurance
          sector, from 62% of sales in the fourth quarter of 2006 to 46% in
          the fourth quarter of 2007. This rate is below the Company's 50% to
          55% target range (medium-term target). The decreased strain helped
          to increase the sector's operating profit by 27% in the fourth
          quarter compared to the same period in 2006;

      b)  A substantial increase in sales in the Individual Insurance sector,
          which surpassed the old mark by a wide margin, amounting to
          $48.9 million in the fourth quarter. This represents a record
          increase of 20% compared to the same period in 2006.

    3)  A considerable increase in mutual fund sales. Gross sales were up 35%
        in the fourth quarter, compared to the same period in 2006, and net
        sales more than doubled (they even tripled for the entire year in
        2007).

    4)  No significant impact on net income following the revision of
        valuation assumptions at the end of 2007 (the provisions for future
        policy benefits were strengthened by $1.0 million before tax). As
        with previous years, the provisions for future policy benefits were
        strengthened to take into account a reduction in interest rates and
        lower lapse rates, and were released to take into account improved
        mortality rates and the lower than expected increase in unit costs.

    5)  A 12.5% increase in the quarterly dividend, or $0.025 per common
        share. This raises the payout ratio to 28% of the net earnings for
        the quarter, which is in keeping with the Company's objective to
        gradually increase the payout ratio to 28% of the sustainable net
        earnings by mid-2008.

    6)  No change in the 15% markdown of non-bank asset-backed commercial
        paper (ABCP) posted on September 30, 2007. Given the plan proposed on
        December 23, 2007 by the Pan-Canadian Investors Committee on non-bank
        ABCP and given the composition of the non-bank ABCP held by the
        Company, which is less risky than that of the market, since,
        relatively speaking, it contains more traditional assets and fewer
        synthetic assets, the Company believes that the 15% reduction in
        value is adequate.

    7)  Quality of investments, which remains very high, placing the Company
        in a good position in the event of a deterioration in the economic
        situation. Net impaired investments totalled $11.7 million as at
        December 31, 2007, which represents just 0.08% of total investments.
        Moreover, the Company does not hold any investments in the U.S.
        subprime mortgage loans market, and it has less than $0.2 million in
        investments guaranteed by monoline financial guarantors. The Company
        also has minimal exposure to the most highly-publicized securities in
        the aviation, automobile, telecommunications and printing sectors.

    8)  Conclusion of the acquisition of The Excellence Life Insurance
        Company (the acquisition was completed on January 31, 2008). This
        acquisition will enable Industrial Alliance to enter a new market
        segment, namely individual disability and health insurance. This
        acquisition should help to grow the Company's earnings per share by
        $0.04 in 2008.

    9)  Buy-back of 521,400 common shares in the last few weeks (391,000
        common shares were bought back at the end of 2007 and 130,400 at the
        beginning of 2008). These buy-backs were made to preclude a portion
        of the dilutive effect of the common shares that will be issued in
        2008 as part of the Company's stock option plan and the acquisition
        of Excellence.

    10) Publication of the Company's embedded value for the financial year
        ending December 31, 2007. Embedded value amounted to $2.8 billion as
        at December 31, 2007, which represents growth of 16.3% compared to
        the value as at December 31, 2006, before the payment of dividends to
        common shareholders, and 13.8%, after the payment of these dividends.
        The embedded value/book value ratio increased slightly, from 1.65x as
        at December 31, 2006 to 1.66x as at December 31, 2007.

        The recurring components of embedded value, namely those over which
        the Company exercises a certain control, added 11.7% to the Company's
        embedded value in 2007, thanks to strong growth in the added value of
        new business. Since the Company began calculating its embedded value,
        the recurring components have always grown the embedded value by low
        double digits, which is in line with the Company's expectations.

    Market Guidance for 2008

    1)  Earnings per common share - The Company estimates that under normal
        circumstances, it is able to grow earnings per common share by 10% to
        13% per year in the medium term (based on sustainable earnings).
        However, given the volatility of the stock markets at the beginning
        of 2008, the Company estimates that a sudden 10% drop in the stock
        markets at the beginning of the year, followed by stock market growth
        according to forecasts for the year, would lead to a $18.6 million
        ($0.23 per common share) decrease in the net income available to
        common shareholders.

    2)  Strain on sales - The Company estimates that the current pricing
        structure in the Individual Insurance sector should allow it to
        maintain the new business strain around 50% to 55% in the medium
        term.

    3)  Effective tax rate - The Company expects a 1 percentage point
        reduction in its effective tax rate, which should decrease to about
        28% in 2008, due to the application of measures to further optimize
        the Company's tax situation.

    4)  Dividend - The Company is maintaining its target of a 28% dividend
        payout ratio, which is in the upper end of the Company's target range
        of 20% to 30% of the sustainable net earnings.

    5)  Solvency ratio - The Company continues to target a solvency ratio
        within the 175% to 200% target range.

    6)  Excess capital - The Company estimates that under normal
        circumstances, about one third of the net income is added to the
        excess capital each year.

    7)  Buy-back of shares - The Company plans to use its normal course
        issuer bid to eliminate any dilutive effect caused by the issuance of
        common shares as part of the stock option plan or the acquisition of
        business. The Company's normal course issuer bid has been renewed for
        another year.

    Strategy

    The Company's strategic objectives can be summarized in six points:

    1)  Develop the wealth management sector
    2)  Grow the distribution networks
    3)  Accelerate geographic diversification
    4)  Penetrate new market niches
    5)  Establish the foundations of a solid local presence in the U.S.
    6)  Maximize synergies within Industrial Alliance group companies

    "This is the strategy that has brought us to where we are today,"
continued Mr. Charest. "To be successful, you need a good strategy, but you
also have to execute it properly. As in the past, we are determined to do
everything it takes to grow Industrial Alliance so that it continues to be a
partner trusted by our clients, our distributors, our employees, the community
and our shareholders."

    Profitability

    The Company ended the fourth quarter with net income available to common
shareholders of $63.1 million, a 12% increase over the same period last year.
This income translates into diluted earnings per common share of $0.78, up
$0.08 compared to the same period last year, and a return on common
shareholders' equity of 15.2% for the quarter on an annualized basis, which
exceeds the Company's 13% to 15% target range.
    The good performance for the quarter is primarily explained by strict
management of profit margins on individual insurance products and by strong
business growth in most lines of business.

    -------------------------------------------------------------------------
    Profitability
    -------------------------------------------------------------------------

                           Fourth quarter                    Year
    -------------------------------------------------------------------------
    (Millions of
     dollars,unless
     otherwise                          Varia-                        Varia-
     indicated)      2007      2006      tion      2007      2006      tion
    -------------------------------------------------------------------------
    Net income to
     common
     shareholders    63.1      56.4        12%    242.2     223.0         9%
    Decrease in
     value of
     non-bank
     ABCP, net
     of tax             -         -         -       7.3         -         -
    National Life
     restructuring
     charges, net
     of tax             -       0.7         -         -       3.0         -
    Effect of the
     reduction of
     tax rates on
     the future
     income tax
     liability          -         -         -         -     (11.5)        -
    -------------------------------------------------------------------------
    Net income to
     common
     shareholders,
     adjusted        63.1      57.1        11%    249.5     214.5        16%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per
     common share
     (diluted)     $ 0.78    $ 0.70    $ 0.08    $ 2.99    $ 2.74    $ 0.25
    Earnings per
     common share
     (diluted),
     adjusted      $ 0.78    $ 0.71    $ 0.07    $ 3.08    $ 2.64    $ 0.44
    -------------------------------------------------------------------------
    Return on
     equity(1)
      Return to
       common
       shareholders  15.2%     15.4%  (20 bps)     15.2%     15.7%  (50 bps)
      Return to
       common
       shareholders,
       adjusted      15.2%     15.6%  (40 bps)     15.6%     15.1%   50 bps
    -------------------------------------------------------------------------


    Following are the main highlights for the fourth quarter with respect to
profitability.

    1)  Profit margins in the Individual Insurance sector - The main factor
        that explains the improved income in the quarter is the strict
        management of profit margins in the Individual Insurance sector. New
        business strain in the Individual Insurance sector decreased
        considerably during the quarter, from $25.2 million in the fourth
        quarter of 2006 to $22.5 million in the fourth quarter of 2007. This
        represents an 11% decrease, despite a 20% increase in sales. This
        decrease results from the changes made to the product line in the
        last two years, as well as the impact of these modifications on the
        sales mix (Universal Life policy sales continue to shift in favour of
        yearly renewable term products, which are less strain intensive).

        Expressed as a percentage of sales, the strain amounted to 46% of
        first-year annualized premiums in the fourth quarter, compared to 62%
        in the fourth quarter of 2006. This rate is below the Company's 50%
        to 55% target range (medium-term target). The strain was 52% for
        2007, which is within the 50% to 55% target range. The Company
        estimates that the current pricing structure should allow it to
        maintain strain around 50% to 55% in the medium term.

    2)  Expected profit on in-force - Good business growth in the last few
        years increased the expected profit on in-force by 10% in the fourth
        quarter, compared to the same period the previous year, carrying it
        to $91.2 million. The growth is in line with expectations and comes
        from all sectors, particularly Individual Wealth Management, which
        has experienced strong growth for the past several years,
        particularly since the Company entered the mutual fund management
        market.

    3)  Experience gains - The Company did not realize any significant
        experience gains in the fourth quarter (the gains totalled
        $0.1 million). The results vary from one sector to another however,
        since Group Insurance suffered $2.7 million in experience losses
        (poor mortality and accidental death and dismemberment insurance
        results), whereas the other three sectors realized gains. Experience
        gains amounted to $3.9 million in the fourth quarter of 2006.

    4)  Changes in assumptions - Year-end changes in valuation assumptions
        did not have a significant impact on the profit for the quarter,
        which was reduced by $1.0 million before tax in the fourth quarter.
        As with past years, changes in assumptions mainly affected the
        Individual Insurance sector, due to the long-term commitments in this
        sector. As with the last few years, the provisions for future policy
        benefits were strengthened to take into account a reduction in
        interest rates and lower lapse rates. The strengthened reserves were
        offset by releases of provisions in future policy benefits to take
        into account improved mortality rates and the lower than expected
        increase in unit costs.

    5)  Income on capital - Income on capital increased by 5% during the
        quarter, from $23.0 million in the fourth quarter of 2006 to
        $24.2 million in the fourth quarter of 2007. Income on capital
        benefited from the normal growth of the capital base, the good
        performance by the auto and home insurance subsidiary and the good
        return on investments, particularly real estate.

        On the other hand, growth of the income on capital was slowed by a
        $2.4 million accounting loss ($1.7 million after tax, or $0.02 per
        common share) resulting from the asymmetric evolution of the market
        value of debt instruments and the assets that match them, following
        the realignment of risk premiums that followed last summer's
        liquidity crisis. In the third quarter, this same phenomenon resulted
        in an accounting gain of $4.1 million before tax ($2.7 million after
        tax, or $0.03 per common share). This is due to the application of
        the new accounting standards which, for a second consecutive quarter,
        induced a certain volatility in the results. Without this accounting
        loss, income on capital would have grown 16% in the fourth quarter,
        compared to the same period last year.

    6)  Earning power - If the $0.02 per common share accounting loss is
        added to the net income for the quarter, the result is earnings per
        common share of $0.80 for the fourth quarter. To a certain degree,
        this is a measure of the Company's true earning power.

    7)  Effective tax rate - The effective tax rate was 28.8% for the fourth
        quarter (29.4% for the same period in 2006), which is in line with
        the Company's expectations. The Company is expecting a 1 percentage
        point decrease in the effective tax rate in 2008, which should be
        around 28%, due to the application of measures to further optimize
        the Company's tax situation.

    8)  2007 results - The year ended with net income to common shareholders
        of $242.2 million, a 9% increase over the previous year. The income
        was reduced by $7.3 million to take into account the 15% decrease in
        value of non-bank asset-backed commercial paper (ABCP). If it were
        not for this event, net income to common shareholders would have
        amounted to $249.5 million. This result would have represented a 16%
        increase compared to the previous year's adjusted result (adjusted to
        take into account National Life restructuring charges and the effect
        of the reduction in tax rates on the future income tax liability).


    -------------------------------------------------------------------------
    Sources of Earnings
    -------------------------------------------------------------------------
                                    Fourth Quarter             Year
    -------------------------------------------------------------------------
    (Millions of dollars)          2007        2006        2007        2006
    -------------------------------------------------------------------------
    Operating profit
      Expected profit on
       in-force                    91.2        83.0       352.7       321.2
      Experience gains (losses)     0.1         3.9         8.3        18.7
      Gain (strain) on sales      (23.8)      (27.5)      (89.7)     (109.4)
      Changes in assumptions       (1.0)        0.6        (1.0)        0.6
    -------------------------------------------------------------------------
      Total                        66.5        60.0       270.3       231.1
    -------------------------------------------------------------------------
    Income on capital
      Investment income            21.6           -        79.9           -
      Gains (losses) realized
       on assets available
       for sale                     2.6           -         8.9           -
    -------------------------------------------------------------------------
      Total                        24.2        23.0        88.8        78.0
    -------------------------------------------------------------------------
    Income taxes                  (26.1)      (24.4)     (103.8)      (89.7)
    -------------------------------------------------------------------------
    Net income to
     shareholders, adjusted        64.6        58.6       255.3       219.4
    -------------------------------------------------------------------------
    Less: preferred
     shareholders dividends         1.5         1.5         5.8         4.9
    -------------------------------------------------------------------------
    Net income to common
     shareholders, adjusted        63.1        57.1       249.5       214.5
    -------------------------------------------------------------------------
    Other items(2)                  0.0        (0.7)       (7.3)        8.5
    -------------------------------------------------------------------------
    Net income to common
     shareholders                  63.1        56.4       242.2       223.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    9)  Non-bank asset-backed commercial paper (ABCP) - Given the most recent
        information available, the Company believes that the 15% markdown in
        the fair value of non-bank ABCP posted in the third quarter is still
        adequate.

        On December 23, 2007, the Pan-Canadian Committee of Investors for
        non-bank ABCP announced that an agreement in principle had been
        reached regarding a comprehensive restructuring of the ABCP issued by
        20 of the trusts covered by the Montreal Agreement. The Investors
        Committee approved the agreement in principle. The restructuring is
        designed to i) extend the maturity of the ABCP to provide for a
        maturity similar to that of the underlying assets; ii) pool certain
        series of ABCP which are supported in whole or in part by underlying
        synthetic assets; iii) mitigate margin call obligations of existing
        conduits with margin call risk and create a structure to address
        margin calls if they occur; and iv) support the liquidity needs of
        those ABCP holders requiring it.

        The assets will be broken down into three buckets: i) ABCP which is
        supported solely by traditional securitized assets (approximately
        $3 billion, or 9.4% of the ABCP covered by the Montreal Agreement);
        ii) ABCP which is supported by synthetic assets (approximately
        $26 billion, or 81.2% of the total); and iii) ABCP supported
        primarily by U.S. subprime assets (about $3 billion, or 9.4% of the
        total). Approval of the restructuring is subject to a vote by all
        investors, and should be completed by March 2008.

        The Company's total exposure to non-bank ABCP amounts to
        $104.1 million. According to the breakdown proposed by the committee,
        40.7% of the ABCP to which the Company is exposed is in the
        traditional assets category (deemed the least risky of the three
        categories), 51.7% in the synthetic assets category and 7.6% in the
        U.S. subprime assets category (deemed the most risky). The
        distribution of ABCP to which the Company is exposed is less risky
        than that of the market, since, relatively speaking, it contains more
        traditional assets and fewer synthetic assets.

    -------------------------------------------------------------------------
    Distribution of Industrial Alliance and Market Non-Bank
     ABCP by Asset Category
    -------------------------------------------------------------------------
                                    Industrial Alliance              Market
    -------------------------------------------------------------------------
    Traditional assets                             40.7%                9.4%
    -------------------------------------------------------------------------
    Synthetic assets                               51.7%               81.2%
    -------------------------------------------------------------------------
    Subprime assets                                 7.6%                9.4%
    -------------------------------------------------------------------------
    Total                                         100.0%              100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

        Since non-bank ABCP is not traded on an active market, the Company
        estimated its fair value using a valuation method that takes into
        account the best public information available, market conditions and
        other factors, such as the credit risk of the underlying assets, the
        maturity dates and the assumption that the restructuring process will
        unfold as planned.

        Given the plan proposed by the committee and the composition of the
        non-bank ABCP held by the Company, the Company believes that the 15%
        markdown taken on September 30, 2007 is adequate. However, this
        estimate contains a great deal of uncertainty and, even though the
        Company deems its estimate appropriate according to the current
        conditions, it is possible that the final value of theses investments
        could vary from the current estimate, possibly even considerably,
        once the restructuring process is completed. Depending on the size of
        the variation, it could affect the Company's financial results.

    Business Growth

    Following are the main highlights of the fourth quarter in terms of
business growth.

    Premiums and deposits - After three very strong quarters, record mutual
fund entries for this period carried premiums and deposits to $1.3 billion in
the fourth quarter, which is 10% higher than the same period the previous
year. All sectors recorded favourable results during the quarter, except Group
Pensions, which did not sign any large contracts.
    Premiums and deposits reached a new high of $5.8 billion in 2007, a 17%
increase over 2006. Premiums and deposits achieved double-digit growth for the
sixth consecutive year. This growth comes from the great diversity of the
Company's distribution networks and the growth of its penetration rate in all
regions of the country.

    -------------------------------------------------------------------------
    Premiums and Deposits
    -------------------------------------------------------------------------

                           Fourth quarter                    Year
    -------------------------------------------------------------------------
    (Millions of
     dollars,unless
     otherwise                          Varia-                        Varia-
     indicated)      2007      2006      tion      2007      2006      tion
    -------------------------------------------------------------------------
    Individual
     Insurance      236.1     217.0         9%    897.3     838.6         7%
    -------------------------------------------------------------------------
    Individual
     Wealth
     Management     663.8     568.9        17%  3,121.9   2,475.1        26%
    -------------------------------------------------------------------------
    Group
     Insurance      212.8     190.2        12%    860.5     749.6        15%
    -------------------------------------------------------------------------
    Group Pensions  174.2     198.0       (12%)   828.3     820.1         1%
    -------------------------------------------------------------------------
    General
     Insurance       30.7      28.5         8%    118.2     107.2        10%
    -------------------------------------------------------------------------
    Total         1,317.6   1,202.6        10%  5,826.2   4,990.6        17%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Sales - Following are a few comments concerning sales growth by line of
business.

    1)  Individual Insurance - The Individual Insurance sector just
        experienced the best quarter in its history, with sales of
        $48.9 million, a record increase of 20% compared to the fourth
        quarter of 2006. The second half was extremely strong in terms of
        sales, which made up for the accumulated shortfall at the beginning
        of the year, enabling the Company to end the year with a 4% increase
        in sales compared to 2006.

        Fourth quarter sales were up in all regions of Canada, in all
        distribution networks and in all markets, in both the middle-income
        and high-income family markets. Universal Life policy sales were
        particularly strong this quarter (a 33% increase) and the desired
        shift in sales in favour of yearly renewable term insurance policies
        continued, with sales of these policies representing almost one half
        of fourth quarter Universal Life sales (compared to just over 40% in
        the fourth quarter of 2006). These results were generated by changes
        made to the product line in the last few quarters to improve the
        Company's competitive position and profit margins.

    2)  Individual Wealth Management - Sales in the Individual Wealth
        Management sector continued their momentum of the first three
        quarters, totalling $663.8 million for the fourth quarter, a 17%
        increase compared to the same period in 2006 (the increase is 26% for
        2007). Here again, the growth was driven by mutual funds (35%
        increase in the fourth quarter). Net investment fund sales continue
        to be very strong and totalled $1.4 billion for 2007, a 58% increase
        over 2006. The increase comes primarily from IA Clarington, whose net
        mutual fund sales tripled compared to the previous year. These
        results are explained by the size and depth of the Company's
        distribution networks, as well as the successful integration of the
        operations of Clarington Corporation with those of the parent
        company.

        In terms of operations, the Company kicked off the 2008 RRSP season
        with a road show across Canada. The main new feature of this season
        is the introduction of a new guaranteed retirement product called
        Ecoflextra, a flexible investment solution that provides a guaranteed
        income for life with all the growth potential of the markets.

    3)  Group Insurance: Employee Plans - The Group Insurance Employee Plans
        sector obtained variable results for its 2007 sales, with two good
        quarters and two slower quarters. The fourth quarter ended with sales
        of $10.2 million, a 34% decrease compared to the same period the
        previous year. No large group sales were made during the quarter.
        However, thanks to strong sales after three quarters, the year ended
        with a 2% increase in sales compared to 2006. For a third consecutive
        year, more than half of the year's sales were made outside Quebec,
        which is in line with the Company's objective to expand in all
        regions of the country.

    4)  Group Creditor Insurance - Growth continued in the Group Creditor
        Insurance sector, but at a lower rate than previous quarters, with
        sales totalling $41.1 million, a 2% increase compared to the fourth
        quarter of 2006 (the increase is 9% for 2007). Sales continue to
        exceed those of the automobile sector, whose sales were down 2.7% in
        the fourth quarter compared to the same period in 2006. The sector's
        growth is attributable to increased production among current dealers
        and expansion of the client dealer base (the product's primary
        distributors).

    5)  Group Insurance: Special Markets Group (SMG) - Special Markets Group
        continues to grow steadily. Sales totalled $29.8 million in the
        fourth quarter, up 4% compared to the same period the previous year
        (and up 13% for 2007). The increase in the quarter is very
        satisfying, since the results for the fourth quarter of 2006 were
        particularly strong. Once again, this increase is primarily
        attributable to the growth of the travel insurance block of business,
        which accounts for some 40% of the sales results for the sector.

    6)  Group Pensions - Although sales are satisfactory in absolute terms,
        fourth quarter sales of $174.2 million are 12% lower than the same
        period the previous year (sales were relatively strong in the fourth
        quarter of 2006). Sales were up for accumulation products, which
        continues to be the Company's priority market, but are down for
        insured annuities, where no large contracts were sold. Total sales
        for the year were slightly higher than the previous year. Finally,
        for a third consecutive year, more than half of all new accumulation
        contract sales for the year came from outside Quebec, which is in
        line with the Company's geographic diversification objective.


    -------------------------------------------------------------------------
    Sales(3)
    -------------------------------------------------------------------------

                           Fourth quarter                    Year
    -------------------------------------------------------------------------
    (Millions of
     dollars,unless
     otherwise                          Varia-                        Varia-
     indicated)      2007      2006      tion      2007      2006      tion
    -------------------------------------------------------------------------
    Individual
     Insurance       48.9      40.6        20%    159.0     153.6         4%
    -------------------------------------------------------------------------
    Individual
     Wealth
     Management
      General fund   77.7      70.1        11%    334.4     289.2        16%
      Segregated
       funds        189.0     204.1        (7%)   990.6     958.3         3%
      Mutual funds  397.1     294.7        35%  1,796.9   1,227.6        46%
    -------------------------------------------------------------------------
      Total         663.8     568.9        17%  3,121.9   2,475.1        26%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Group
     Insurance
      Employee
       Plans         10.2      15.5       (34%)    72.0      70.8         2%
      Creditor
       Insurance     41.1      40.2         2%    192.0     176.4         9%
      Special
       Markets
       Group (SMG)   29.8      28.7         4%    104.4      92.6        13%
    -------------------------------------------------------------------------
    Group
     Pensions       174.2     198.0       (12%)   828.3     820.1         1%
    -------------------------------------------------------------------------


    Value of new business - The value of new business grew 16% (or         
$4.1 million) in the fourth quarter compared to the same period the previous
year, totalling $29.1 million ($0.36 per common share). The growth in the
value of new business was driven by strong sales (primarily in the Individual
Insurance and Individual Wealth Management sectors), which accounted for    
$2.0 million of the increase, and improved profit margins (primarily in the
Individual Insurance and Group Pensions sectors), which accounted for       
$2.1 million.

    Assets under management and under administration - Assets under management
grew $258.1 million in the fourth quarter, reaching a new high of $32.8
billion as at December 31, 2007, up 1% compared to the end of the third
quarter of 2007 and 13% since the end of 2006. Weak stock markets in the
fourth quarter were more than offset by strong net segregated fund and mutual
fund sales and good premium growth in the various lines of business.
    Assets under administration decreased slightly in 2007, amounting to $17.6
billion as at December 31, 2007, a decrease of 4% over the quarter and 1%
since the end of 2006. Positive net sales and transfers did not succeed in
erasing the negative variations in the market value of assets in the mutual
fund and securities brokerage subsidiaries.
    Assets under management and under administration totalled $50.4 billion as
at December 31, 2007, which is $390.5 million less than at September 30, 2007
(a 1% decrease). Nevertheless, total assets are up $3.5 billion for 2007 (a 7%
increase), thanks to an excellent start to the year.


    -------------------------------------------------------------------------
    Assets Under Management and Under Administration
    -------------------------------------------------------------------------
    (Millions
     of dollars)  December 31, 2007  September 30, 2007   December 31, 2006
    -------------------------------------------------------------------------
    Assets under
     management
      General fund         15,104.3            14,778.8            13,090.7
      Segregated funds     10,210.9            10,170.1             9,204.1
      Mutual funds          6,846.9             7,021.2             6,295.4
      Other                   630.6               564.5               501.3
    -------------------------------------------------------------------------
      Total                32,792.7            32,534.6            29,091.5
    -------------------------------------------------------------------------
    Assets under
     administration        17,618.9            18,267.5            17,812.6
    -------------------------------------------------------------------------
    Total                  50,411.6            50,802.1            46,904.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Capitalization

    The Company's capital totalled $2.1 billion as at December 31, 2007, which
represents an increase of $25.2 million (or 1%) compared to September 30,
2007. This growth is primarily the result of the increase in retained earnings
for the period and the issuance of 2,000 common shares following the exercise
of options under the Company's stock option plan (313,250 in total for 2007).
However, the growth of capital was slowed by the buy-back of 391,000 common
shares at the end of 2007 (see the "Buy-Back of Shares" section below).
    The combination of these items caused the debt ratio to decrease very
slightly, from 14.6% as at September 30, 2007 to 14.5% as at December 31,
2007, for the debt items, and from 20.5% as at September 30, 2007 to 20.4% as
at December 31, 2007, for the debt items and preferred shares. These rates
have been almost constantly decreasing over the last two years, thanks to the
Company's good profitability.
    The Company had 79,841,363 issued and outstanding common shares as at
December 31, 2007, a decrease of 389,000 compared to September 30, 2007. The
decrease during the quarter is attributable to the buy-back of common shares
at the end of 2007 (see the "Buy-Back of Shares" section below), net of the
issuance of common shares following the exercise of options under the
Company's stock option plan.


    -------------------------------------------------------------------------
    Capitalization and Debt
    -------------------------------------------------------------------------
    (Millions
     of dollars,
     unless
     otherwise          December 31,       September 30,        December 31,
     indicated)                2007                2007                2006
    -------------------------------------------------------------------------
    Capital structure
      Equity
        Common shares         513.1               515.6               507.7
        Preferred shares      125.0               125.0               125.0
        Retained earnings   1,148.3             1,115.4               971.3
        Accumulated other
         comprehensive
         income                (3.8)                2.3                   -
        Contributed
         surplus               17.1                16.1                14.6
        Currency
         translation
         account                  -                   -                (6.8)
    -------------------------------------------------------------------------
        Total               1,799.7             1,774.4             1,611.8
    -------------------------------------------------------------------------
      Subordinated
       debentures             309.8               308.0               310.1
    -------------------------------------------------------------------------
      Participating
       policyholders'
       account                 24.1                26.0                23.1
    -------------------------------------------------------------------------
      Total                 2,133.6             2,108.4             1,945.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Debt ratio
      Subordinated
       debentures/capital      14.5%               14.6%               15.9%
      Subordinated
       debentures and
       preferred
       shares/capital          20.4%               20.5%               22.4%
    -------------------------------------------------------------------------


    Solvency

    The solvency ratio totalled 193% as at December 31, 2007, a 4 percentage
point decrease compared to the previous quarter. This ratio remains in the
upper end of the Company's 175% to 200% target range.
    Several factors had an impact on the solvency ratio during the quarter.
The solvency ratio was increased by the usual contribution of the net income
to the available capital, net of the normal increase in the required capital
related to business growth. This impact was offset by the buy-back of common
shares at the end of 2007 (see the "Buy-Back of Shares" section below) and a
few other non-recurring and non-material factors, all of which contributed to
decreasing the solvency ratio.
    Excess capital increased slightly in the fourth quarter, from          
$168 million as at September 30, 2007 to $171 million as at December 31, 2007.
The Company estimates that, under normal circumstances, about one third of the
net income is added to the excess capital each year.


    -------------------------------------------------------------------------
    Solvency
    -------------------------------------------------------------------------
    (Millions
     of dollars,
     unless
     otherwise          December 31,       September 30,        December 31,
     indicated)                2007                2007                2006
    -------------------------------------------------------------------------
    Available capital
      Net tier 1            1,685.6             1,655.1             1,498.9
      Net tier 2              120.6               118.5               128.6
    -------------------------------------------------------------------------
      Total                 1,806.2             1,773.6             1,627.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Required capital          934.6               900.9               809.9
    -------------------------------------------------------------------------
    Solvency ratio              193%                197%                201%
    -------------------------------------------------------------------------
    Excess capital              171                 168                 147
    -------------------------------------------------------------------------


    Quality of Investments

    Very few changes took place in the quality of investments in the fourth
quarter, other than a decrease in the proportion of the bond portfolio rated
BB and lower, from 0.30% of the portfolio as at September 30, 2007, to 0.10%
as at December 31, 2007. This decrease results from the redemption of      
$14.6 million in bonds by the issuers. The Company did not suffer any capital
loss from these redemptions, and even collected a redemption premium.
    The quality of the portfolio remains excellent for all investment quality
indices. Net impaired investments totalled $11.7 million as at December 31,
2007 ($11.8 million as at September 30, 2007), which represents just 0.08% of
total investments, unchanged from September 30, 2007. No bonds defaulted
during the quarter and the portfolio does not contain any new bonds rated BB
and lower.
    The quality of the mortgage loans portfolio remained excellent in the last
three months of the year, with the delinquency rate amounting to 0.16% as at
December 31, 2007, compared to 0.18% as at September 30, 2007. Delinquent
mortgage loans represent just $4.7 million of a $2.9 billion portfolio.
Insured loans account for 41.0% of mortgage loans in arrears.
    The Company's total exposure to non-bank asset-backed commercial paper
(ABCP) amounts to $104.1 million and these securities were devalued by 15% in
the third quarter. Even though the ABCP held by the Company has been placed on
the watch list, this classification has not had an impact on the investment
quality indices.
    The Company does not hold any investments in the U.S. subprime mortgage
loans market, and it has less than $0.2 million in investments guaranteed by
monoline financial guarantors. The Company also has minimal exposure to the
most highly-publicized securities in the aviation, automobile,
telecommunications and printing sectors.


    -------------------------------------------------------------------------
    Quality of Investments
    -------------------------------------------------------------------------
    (Millions
     of dollars,
     unless
     otherwise          December 31,       September 30,        December 31,
     indicated)                2007                2007                2006
    -------------------------------------------------------------------------
    Investments
    Gross impaired
     investments               20.7                21.3                95.2
    Provisions for losses      (9.0)               (9.5)              (87.3)
    -------------------------------------------------------------------------
    Net impaired
     investments               11.7                11.8                 7.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net impaired
     investments as a %
     of total investments      0.08%               0.08%               0.06%
    Provisions as a % of
     gross impaired
     investments               43.6%               44.7%               91.7%
    -------------------------------------------------------------------------
    Bonds
    Rated BB and lower         0.10%               0.30%               0.31%
    Delinquency rate           0.02%               0.02%               0.02%
    -------------------------------------------------------------------------
    Mortgage loans
    Delinquency rate           0.16%               0.18%               0.06%
    Proportion of impaired
     loans that are insured    41.0%               39.6%               88.0%
    -------------------------------------------------------------------------
    Stocks and market
     indices
    Market value/book value
     ratio, as a %              N/A                 N/A               110.1%
    -------------------------------------------------------------------------
    Real estate
    Market value/book value
     ratio, as a %            129.5%              120.1%              117.4%
    Occupancy rate             95.5%               95.1%               95.5%
    -------------------------------------------------------------------------


    Embedded Value

    The Company took advantage of the disclosure of its quarterly results to
publish its embedded value for 2007. As at December 31, 2007, Industrial
Alliance's embedded value amounted to $2.8 billion, or $34.92 per common
share. This represents growth of 16.3% compared to the value calculated as at
December 31, 2006, before the payment of dividends to common shareholders, and
13.8% after the payment of these dividends. The embedded value/book value
ratio increased slightly, from 1.65x as at December 31, 2006 to 1.66x as at
December 31, 2007.
    The recurring components of embedded value, which are those over which the
Company exercises a certain control, added 11.7% to the Company's embedded
value in 2007. Since the Company began calculating its embedded value,
recurring items have always grown embedded value by double digits, which is in
line with the Company's expectations.
    Embedded value was also affected by non-recurring items, the main one
being the reduction of the federal corporate tax rate over the next few years,
which increased embedded value by $1.51 per common share (4.9%). The Company's
decision to reduce the value of its non-bank asset-backed commercial paper
(ABCP) by 15% in 2007 resulted in a decrease of $0.09 per common share (-0.3%)
in embedded value.
    The Company continues to stand out through its capacity to generate
profitable new business. The value of new business reached a high of $1.51 per
common share in 2007, contributing 5.0% to the growth of embedded value for
the year. The embedded value of new business is particularly significant for
the financial community, as it allows for a judgment to be made on the
profitability of the products and services offered by the Company.
    Lastly, the acquisition of Excellence, which was completed on January 31,
2008, will reduce the embedded value by $36 million in 2008. This decrease is
explained by the fact that, other than the value of the in-force business, the
purchase price includes other considerations that are not taken into account
in the calculation of embedded value, including the value of the acquired
company's future sales. This negative impact on the embedded value will be
recovered over the years, according to the rate of growth of new business.


    -------------------------------------------------------------------------
    Embedded Value
    -------------------------------------------------------------------------
                           Embedded     Contribution to      Embedded value
    2007                      value      embedded value    per common share
    -------------------------------------------------------------------------
                          ($Million)                 (%)                 ($)
    -------------------------------------------------------------------------
    Embedded value as
     at December 31, 2006     2,448                   -               30.64
    -------------------------------------------------------------------------
    Recurring items
      Expected growth of
       embedded value           165                 6.7                2.07
      New sales                 121                 5.0                1.51
    -------------------------------------------------------------------------
      Total                     286                11.7                3.58
    -------------------------------------------------------------------------
    Non-recurring items
      Experience gains
       (losses)
        Related to the
         equity markets          (6)               (0.3)              (0.08)
        Other                   127                 5.2                1.59
      Changes in
       assumptions                7                 0.3                0.09
      Decrease in value
       of non-bank ABCP          (7)               (0.3)              (0.09)
    -------------------------------------------------------------------------
      Total                     121                 4.9                1.51
    -------------------------------------------------------------------------
    Changes in the capital
     structure                   (7)               (0.3)              (0.05)
    -------------------------------------------------------------------------
    Embedded value as at
     December 31, 2007,
     before dividends         2,848                16.3               35.68
    -------------------------------------------------------------------------
    Dividends paid to
     common shareholders        (61)               (2.5)              (0.76)
    -------------------------------------------------------------------------
    Embedded value as at
    December 31, 2007         2,787                13.8               34.92
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Declaration of Dividend

    The favourable results for the quarter have enabled the Board of Directors
to announce a $0.025 per common share increase in the quarterly dividend,
which will increase from $0.20 to $0.225 per common share, a 12.5% increase.
This dividend translates into a payout ratio of 28% of the net earnings for
the quarter, an increase over the 24% ratio paid out in the third quarter.
This increase is in keeping with the objective the Company set at the end of
2006, to gradually increase the payout ratio to 28% of the sustainable net
earnings by mid-2008. The Company's policy provides for the payment of a
dividend between 20% and 30% of the sustainable net earnings. This dividend
will be payable in cash on March 17, 2008, to the shareholders of record as at
February 26, 2008.
    The Board of Directors has also declared the payment of a quarterly
dividend of $0.2875 per non-cumulative class A preferred share series B. The
dividend is payable in cash on March 31, 2008, to the preferred shareholders
of record as at March 3, 2008.
    For the purposes of the enhanced dividend tax credit rules contained in
the Income Tax Act (Canada) and any corresponding provincial and territorial
tax legislation, all dividends paid by Industrial Alliance on its common and
preferred shares since January 1, 2006 are considered to be eligible
dividends. Unless otherwise indicated, all dividends paid by the Company are
now eligible dividends for the purposes of such rules.

    Conclusion of the Acquisition of Excellence

    The Company has received all the regulatory approvals to conclude the
acquisition of The Excellence Life Insurance Company and the brokerage
companies associated with it ("Excellence"). The transfer was completed on
January 31, 2008. This acquisition will enable Industrial Alliance to enter a
new market segment, namely individual disability and health insurance.
    On December 13, 2007, Industrial Alliance announced the signing of
agreements to acquire all shares of the holding companies controlling
Excellence. Excellence is an insurance company that specializes in the
manufacturing and distribution of life and health insurance products for
individuals, corporations and professional associations. It distributes its
products primarily in Quebec.
    The acquisition of Excellence represents an investment that could reach
$67.3 million for Industrial Alliance, if certain conditions are met and if
existing debt is taken into account. The transaction was partially financed in
cash and partially through the issuance of common shares of Industrial
Alliance. The common shares issued as part of this acquisition will be bought
back by the Company to eliminate the dilutive effect on the earnings per share
(see the "Buy-Back of Shares" section below). The Company estimates that this
acquisition should grow its earnings per share by $0.04 in 2008.

    Conclusion of the Sale of the Caribbean Business Block

    The Company also received all the regulatory approvals to conclude the
sale of the Caribbean life insurance business block. The transfer was
completed on January 18, 2008.
    On December 12, 2006, Industrial Alliance announced the signing of an
agreement to sell its Caribbean business block to Sagicor Capital Life
Insurance Company Limited, a subsidiary of Sagicor Life Inc., of Barbados.
This block is primarily made up of individual life insurance business. It
contains some 9,500 policies and generates some $9 million Canadian in direct
annual premium income.

    Normal Course Issuer Bid

    With the approval of the Toronto Stock Exchange, the Board of Directors of
Industrial Alliance Insurance and Financial Services Inc. has authorized the
Company to purchase in the normal course of its activities, from February 15,
2008 to February 14, 2009, up to 3,900,000 common shares, representing
approximately 4.9% of the 80,291,621 common shares issued and outstanding on
February 8, 2008.
    Under this authorization, the purchases will be made at market prices
through the facility of the Toronto Stock Exchange, in accordance with its
rules and policies. The common shares thereby purchased will be cancelled.
    The average daily trading volume of the Company's common shares was
165,548 on the TSX over the last six completed calendar months (the ADTV).
Accordingly, the Company is entitled to purchase up to 25% of the ADTV on any
trading day (being 41,387 common shares).
    Industrial Alliance believes that the purchase of its common shares would
represent an effective use of its funds and would be in the best interests of
the Company and its shareholders. The Company may, subject to obtaining the
prior written approval of the Exchange, enter into derivative transactions in
the normal course of business, including forward contracts, pursuant to which
it may acquire its common shares.
    Shareholders may obtain without charge a copy of the documents filed with
the Exchange concerning this Bid by writing to the Corporate Secretary of the
Company.

    Buy-Back of Shares

    Under the previous normal course issuer bid, which extended from February
13, 2007 to February 12, 2008, the Company purchased 521,400 common shares, at
an average price of $42.77 per common share, for a total amount of
approximately $22.3 million.
    Of the 521,400 common shares purchased, 391,000 were purchased at the end
of 2007, at an average price of $42.76 per common share, and 130,400 were
purchased at the beginning of 2008, at an average price of $42.80 per common
share. The common shares thus purchased were cancelled.
    These purchases were made to preclude a portion of the dilutive effect of
the common shares that will be issued in 2008 as part of the Company's stock
option plan and the acquisition of Excellence (the acquisition of Excellence
was concluded on January 31, 2008).
    In 2008, the Company plans to use its normal course issuer bid to
eliminate any dilutive effect caused by the issuance of common shares as part
of the stock option plan or the acquisition of business.

    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.
    These 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 Industrial Alliance's most recent
annual management's discussion and analysis.
    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 future financial results of
Industrial Alliance, they are provided in order to assist investors in
understanding 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 taken 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 or not foreseeable, except
as required by applicable securities legislation.

    Documents Related to the Financial Results

    All documents related to Industrial Alliance's financial results are
available on the Company's website at www.inalco.com, in the Investor
Relations section, under Financial Reports. More information about the Company
can also be found on the SEDAR website at www.sedar.com, as well as in the
Company's Annual Information Form, which can be found on the Company website
or the SEDAR website.

    Conference Call

    Management will hold a conference call to present its results on
Wednesday, February 13, 2008, at 2:00 p.m. (ET). To listen in on the
conference call, dial 1 800 951-1214 (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, February 13, 2008. To listen to the conference call replay, dial  
1 800 558-5253 (toll free) and enter access code 21363164. 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.

    Investor Day

    Industrial Alliance will hold an investor day on Tuesday, June 17, 2008,
in Toronto, from 8:30 a.m. to 1:30 p.m. (ET). All details of the conference
will be provided over the next few months.

    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 fifth 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 well-being of
over three million Canadians, employs more than 2,900 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)  The calculation of the return on common shareholders' equity excludes
        accumulated other comprehensive income.

    2)  The "Other items" are detailed in the profitability table.

    3)  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: first-year annualized
        premiums for Employee Plans, including premium equivalents
        (Administrative Services Only (ASO) contracts), gross premiums
        (before reinsurance) for Creditor Insurance and premiums for Special
        Markets Group (SMG); Group Pensions: premiums.


    -------------------------------------------------------------------------
    Consolidated Income Statements
    -------------------------------------------------------------------------
                                   Quarters ended           Years ended
                                     December 31            December 31
    -------------------------------------------------------------------------
    (Millions of dollars,
     unless otherwise indicated)   2007        2006        2007        2006
    -------------------------------------------------------------------------
    Revenues                         (unaudited)             (audited)
      Premiums                    920.5       907.9     4,029.3     3,763.0
      Net investment income       317.5       281.2       578.8       860.0
      Fees and other revenues      94.6        84.6       363.5       314.9
    -------------------------------------------------------------------------
      Total                     1,332.6     1,273.7     4,971.6     4,937.9
    -------------------------------------------------------------------------
    Policy benefits and
     expenses
      Change in provisions
       for future policy
       benefits                   303.8       279.0       506.4       736.3
      Payments to
       policyholders and
       beneficiaries              439.4       410.0     1,737.7     1,591.5
      Net transfer to
       segregated funds           278.6       266.3     1,456.9     1,400.5
      Dividends, experience
       rating refunds and
       interest on amounts
       on deposit                  17.1         9.0        43.8        37.2
      Commissions                 135.1       125.7       519.2       484.7
      Premium and other taxes      14.0        14.7        58.2        56.3
      General expenses             88.5        81.3       333.5       314.0
      Financing expenses            5.9         4.2         3.3        17.8
    -------------------------------------------------------------------------
      Total                     1,282.4     1,190.2     4,659.0     4,638.3
    -------------------------------------------------------------------------
    Income before income
     taxes                         50.2        83.5       312.6       299.6
    -------------------------------------------------------------------------
    Income taxes                   12.7       (24.5)      (63.4)      (68.3)
    -------------------------------------------------------------------------
    Net income                     62.9        59.0       249.2       231.3
    -------------------------------------------------------------------------
    Less: net income
     attributed to
     participating
     policyholders                 (1.7)        1.1         1.2         3.4
    -------------------------------------------------------------------------
    Net income attributed
     to shareholders               64.6        57.9       248.0       227.9
    -------------------------------------------------------------------------
    Less: preferred
     shareholders dividends         1.5         1.5         5.8         4.9
    -------------------------------------------------------------------------
    Net income available to
     common shareholders           63.1        56.4       242.2       223.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share
      basic (in dollars)           0.79        0.71        3.02        2.77
      diluted (in dollars)         0.78        0.70        2.99        2.74
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Segmented Information (unaudited)
    -------------------------------------------------------------------------
                                Quarter ended December 31, 2007
    -------------------------------------------------------------------------
                      Individual           Group
    -------------------------------------------------------------------------
    (Millions                Wealth                         Other
     of          Life and    manage- Life and              activi-
     dollars)      Health      ment    Health  Pensions      ties(*)  Total
    -------------------------------------------------------------------------
    Revenues
      Premiums      236.1     266.7     212.8     174.2      30.7     920.5
      Net
       investment
       income       208.7      28.4      24.4      55.9       0.1     317.5
      Fees and
       other
       revenues       0.6      86.4       1.9       6.0      (0.3)     94.6
    -------------------------------------------------------------------------
      Total         445.4     381.5     239.1     236.1      30.5   1,332.6
    -------------------------------------------------------------------------
    Operating
     expenses
      Cost of
       commitments
       to policy-
       holders      337.5      59.4     168.7     177.2      17.5     760.3
      Net transfer
       to segrega-
       ted funds        -     233.1         -      45.5         -     278.6
      Commissions,
       general and
       other
       expenses      98.3      67.9      61.9       8.3       7.1     243.5
    -------------------------------------------------------------------------
      Total         435.8     360.4     230.6     231.0      24.6   1,282.4
    -------------------------------------------------------------------------
    Income before
     income taxes     9.6      21.1       8.5       5.1       5.9      50.2
    -------------------------------------------------------------------------
    Income taxes     14.9      (1.6)      1.4       0.4      (2.4)     12.7
    -------------------------------------------------------------------------
    Net income
     before
     allocation of
     other
     activities      24.5      19.5       9.9       5.5       3.5      62.9
    -------------------------------------------------------------------------
    Allocation of
     other
     activities       2.5      (0.1)      0.7       0.4      (3.5)        -
    -------------------------------------------------------------------------
    Net income for
     the period      27.0      19.4      10.6       5.9         -      62.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders    28.8      19.4      10.6       5.8         -      64.6
    Attributed to
     participating
     policyholders   (1.8)        -         -       0.1         -      (1.7)
    -------------------------------------------------------------------------
                                Quarter ended December 31, 2006
    -------------------------------------------------------------------------
    Revenues
      Premiums      217.0     274.2     190.2     198.0      28.5     907.9
      Net invest-
       ment income  187.2      29.6      17.9      47.2      (0.7)    281.2
      Fees and
       other
       revenues       0.1      73.7       3.2       5.4       2.2      84.6
    -------------------------------------------------------------------------
      Total         404.3     377.5     211.3     250.6      30.0   1,273.7
    -------------------------------------------------------------------------
    Operating
     expenses
      Cost of
       commitments
       to policy-
       holders      279.9      53.3     139.2     204.5      21.1     698.0
      Net transfer
       to segrega-
       ted funds        -     234.8         -      31.5         -     266.3
      Commissions,
       general and
       other
       expenses      92.2      59.2      57.4       7.7       9.4     225.9
    -------------------------------------------------------------------------
      Total         372.1     347.3     196.6     243.7      30.5   1,190.2
    -------------------------------------------------------------------------
    Income before
     income taxes    32.2      30.2      14.7       6.9      (0.5)     83.5
    -------------------------------------------------------------------------
    Income taxes    (10.3)    (10.5)     (3.9)     (1.8)      2.0     (24.5)
    -------------------------------------------------------------------------
    Net income
     before
     allocation
     of other
     activities      21.9      19.7      10.8       5.1       1.5      59.0
    -------------------------------------------------------------------------
    Allocation of
     other
     activities       1.0         -       0.3       0.2      (1.5)        -
    -------------------------------------------------------------------------
    Net income for
     the period      22.9      19.7      11.1       5.3         -      59.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders    21.9      19.7      11.1       5.2         -      57.9
    Attributed to
     participating
     policyholders    1.0         -         -       0.1         -       1.1
    -------------------------------------------------------------------------
    (*) Composed of other sectors and intercompany eliminations


    -------------------------------------------------------------------------
    Segmented Information (audited)
    -------------------------------------------------------------------------
                                           2007
    -------------------------------------------------------------------------
                      Individual           Group
    -------------------------------------------------------------------------
    (Millions                Wealth                         Other
     of          Life and    manage- Life and              activi-
     dollars)      Health      ment    Health  Pensions      ties(*)  Total
    -------------------------------------------------------------------------
    Revenues
      Premiums      897.3   1,325.0     860.5     828.3     118.2   4,029.3
      Net
       investment
       income       292.1      86.7      63.7     135.8       0.5     578.8
      Fees and
       other
       revenues       2.0     326.5       8.2      24.1       2.7     363.5
    -------------------------------------------------------------------------
      Total       1,191.4   1,738.2     932.4     988.2     121.4   4,971.6
    -------------------------------------------------------------------------
    Operating
     expenses
      Cost of
       commitments
       to policy-
       holders      739.4     173.0     622.1     671.4      82.0   2,287.9
      Net transfer
       to segrega-
       ted funds        -   1,190.0         -     266.9         -   1,456.9
      Commissions,
       general and
       other
       expenses     333.7     269.9     253.5      27.0      30.1     914.2
    -------------------------------------------------------------------------
      Total       1,073.1   1,632.9     875.6     965.3     112.1   4,659.0
    -------------------------------------------------------------------------
    Income before
     income taxes   118.3     105.3      56.8      22.9       9.3     312.6
    -------------------------------------------------------------------------
    Income taxes    (15.6)    (27.3)    (12.5)     (4.4)     (3.6)    (63.4)
    -------------------------------------------------------------------------
    Net income
     before
     allocation of
     other
     activities     102.7      78.0      44.3      18.5       5.7     249.2
    -------------------------------------------------------------------------
    Allocation of
     other
     activities       4.1      (0.1)      1.0       0.7      (5.7)        -
    -------------------------------------------------------------------------
    Net income for
     the period     106.8      77.9      45.3      19.2         -     249.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders   106.3      77.9      45.3      18.5         -     248.0
    Attributed to
     participating
     policyholders    0.5         -         -       0.7         -       1.2
    -------------------------------------------------------------------------
                                           2006
    -------------------------------------------------------------------------
    Revenues
      Premiums      838.6   1,247.5     749.6     820.1     107.2   3,763.0
      Net
       investment
       income       488.6     115.7      70.9     184.8         -     860.0
      Fees and
       other
       revenues       1.9     273.5      14.1      21.3       4.1     314.9
    -------------------------------------------------------------------------
      Total       1,329.1   1,636.7     834.6   1,026.2     111.3   4,937.9
    -------------------------------------------------------------------------
    Operating
     expenses
      Cost of
       commitments
       to policy-
       holders      872.3     224.5     543.7     644.4      80.1   2,365.0
      Net transfer
       to segregat-
       ed funds         -   1,068.5         -     332.0         -   1,400.5
      Commissions,
       general and
       other
       expenses     346.3     241.2     231.5      26.4      27.4     872.8
    -------------------------------------------------------------------------
      Total       1,218.6   1,534.2     775.2   1,002.8     107.5   4,638.3
    -------------------------------------------------------------------------
    Income before
     income taxes   110.5     102.5      59.4      23.4       3.8     299.6
    -------------------------------------------------------------------------
    Income taxes    (23.5)    (24.6)    (13.0)     (5.5)     (1.7)    (68.3)
    -------------------------------------------------------------------------
    Net income
     before
     allocation
     of other
     activities      87.0      77.9      46.4      17.9       2.1     231.3
    -------------------------------------------------------------------------
    Allocation
     of other
     activities       1.5      (0.1)      0.4       0.3      (2.1)        -
    -------------------------------------------------------------------------
    Net income for
     the period      88.5      77.8      46.8      18.2         -     231.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders    85.8      77.8      46.8      17.5         -     227.9
    Attributed to
     participating
     policyholders    2.7         -         -       0.7         -       3.4
    -------------------------------------------------------------------------
    (*) Composed of other sectors and intercompany eliminations


    -------------------------------------------------------------------------
    Premiums (unaudited)
    -------------------------------------------------------------------------
                                Quarter ended December 31, 2007
    -------------------------------------------------------------------------
                      Individual           Group
    -------------------------------------------------------------------------
    (Millions                Wealth                       General
     of          Life and    manage- Life and               Insur-
     dollars)      Health      ment    Health  Pensions      ance     Total
    -------------------------------------------------------------------------
    Invested in
     general fund   236.1      77.7     212.8      45.1      30.7     602.4
    -------------------------------------------------------------------------
    Invested in
     segregated
     funds              -     189.0         -     129.1         -     318.1
    -------------------------------------------------------------------------
    Total           236.1     266.7     212.8     174.2      30.7     920.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                Quarter ended December 31, 2006
    -------------------------------------------------------------------------
    Invested in
     general fund   217.0      70.1     190.2      84.3      28.5     590.1
    -------------------------------------------------------------------------
    Invested in
     segregated
     funds              -     204.1         -     113.7         -     317.8
    -------------------------------------------------------------------------
    Total           217.0     274.2     190.2     198.0      28.5     907.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Premiums (audited)
    -------------------------------------------------------------------------
                                           2007
    -------------------------------------------------------------------------
                      Individual           Group
    -------------------------------------------------------------------------
    (Millions                Wealth                       General
     of          Life and    manage- Life and               Insur-
     dollars)      Health      ment    Health  Pensions      ance     Total
    -------------------------------------------------------------------------
    Invested in
     general fund   897.3     334.4     860.5     253.3     118.2   2,463.7
    -------------------------------------------------------------------------
    Invested in
     segregated
     funds              -     990.6         -     575.0         -   1,565.6
    -------------------------------------------------------------------------
    Total           897.3   1,325.0     860.5     828.3     118.2   4,029.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                           2006
    -------------------------------------------------------------------------
    Invested in
     general fund   838.6     289.2     749.6     224.4     107.2   2,209.0
    -------------------------------------------------------------------------
    Invested in
     segregated
     funds              -     958.3         -     595.7         -   1,554.0
    -------------------------------------------------------------------------
    Total           838.6   1,247.5     749.6     820.1     107.2   3,763.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Jacques Carrière, Vice-President, Investor
Relations, Office: (418) 684-5275, cell: (418) 576-3624,
jacques.carriere@inalco.com, www.inalco.com


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