Industrial Alliance Ends 2009 on a Strong Note: Record Income, Higher Return,
Strong Business Growth and Improved Financial Strength in the Fourth Quarter

QUEBEC CITY, Feb. 12 /CNW Telbec/ - Industrial Alliance Insurance and Financial Services Inc. ("Industrial Alliance" or "the Company") ended the fourth quarter of 2009 with record net income to common shareholders of $67.4 million. This result translates into diluted earnings per common share of $0.83 and a return on common shareholders' equity of 14.9% on an annualized basis. Profitability for the quarter is significantly higher than the fourth quarter of 2008, when the Company strengthened its provisions for future policy benefits to take into account the sharp drop in the stock markets and interest rates, which resulted in a loss for the quarter.

Profit for the quarter was stimulated by the stock market upswing ($7.0 million increase in the Company's net profit compared to the expected result) and by the favourable evolution of the difference between the fair value of debt instruments and the underlying assets ($5.3 million increase in the net profit), but was somewhat affected by a modest credit loss ($0.5 million after taxes). As expected, the year-end review of valuation assumptions did not have a significant impact on the results ($0.8 million after-tax increase in the provisions for future policy benefits).

In terms of business growth, premiums and deposits increased by 27% in the fourth quarter, compared to the same period in 2008, amounting to $1.5 billion. The increase primarily comes from sales of segregated funds and mutual funds, which grew 83% during the quarter, thanks primarily to the good performance of stock markets in 2009.

"We are extremely satisfied with these results," stated Yvon Charest, President and Chief Executive Officer. "Strict risk management, close monitoring of investments, strong capitalization, and a focused, balanced and realistic strategy for growth all contributed to these excellent results. Income quickly returned to its pre-crisis level. The solvency ratio is above our target range. The leeway that we have available to absorb potential market downturns remains high. The quality of investments is excellent. Business growth is back on track. Assets reached a new high. The dividend on common shares has been maintained. And we continued to build for the future by concluding two acquisitions in the fourth quarter and by creating a local management team in the US."

    
    -------------------------------------------------------------------------
    Highlights
    -------------------------------------------------------------------------
                                      Fourth quarter             Year
    (In millions of dollars,
     unless otherwise
     indicated)                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Net income to common
     shareholders                     67.4     (110.2)     205.8       66.1
    Earnings per common
     share (diluted)                 $0.83     ($1.37)     $2.55      $0.82
    Return on common
     shareholders' equity             14.9%     (25.8%)     11.9%       4.0%
    Premiums and deposits          1,546.8    1,221.1    5,231.2    5,542.9
    -------------------------------------------------------------------------
                                             December  September   December
                                             31, 2009   30, 2009   31, 2008
    -------------------------------------------------------------------------
    Assets under management and
     under administration                    58,406.6   56,737.6   49,472.2
    Solvency ratio                                208%       197%       199%
    Net impaired investments                     13.0       15.3        8.8
    Net impaired investments as
     a % of total investments                    0.08%      0.10%      0.06%
    -------------------------------------------------------------------------
    

Highlights

Following are the highlights of the fourth quarter.

Changes in assumptions - The year-end review of valuation assumptions did not have a significant impact on results, as the provisions for future policy benefits were strengthened by $1.1 million before taxes ($0.8 million after taxes, or $0.01 per common share).

Even though the review of the valuation assumptions did not have a significant impact on results, substantial transfers of provisions for future policy benefits were made from one business block to another to take into account the evolution of the economic and financial environment and the Company's experience. Provisions were released to take into account improved mortality in the Individual Insurance sector and the improved return on investments, resulting from the stock market upswing and optimization of the Company's asset-liability matching. These releases were offset, however, by strengthening of provisions for future policy benefits to primarily take into account the increased longevity of annuitants in the annuity sectors (Group Pensions and Individual Wealth Management), the decrease in individual insurance policy lapse rates, the 10 basis point decrease in the ultimate reinvestment rate ("URR") and, to a lesser degree, increased unit costs in the Individual Insurance sector.

Four additional points to consider about the changes in assumptions:

    
    - The Company's recent mortality studies show a significant improvement
      in mortality. These results are in line with the trends observed in the
      most recent work done by the industry, including work by the Canadian
      Institute of Actuaries. This improvement has major, but diverging
      effects on the Company's activity sectors, benefiting the Individual
      Insurance sector, but adversely affecting the annuity sectors (Group
      Pensions and Individual Wealth Management). In total, since the
      Company's insurance operations are much larger than its annuity
      operations, the Company benefits from the improved mortality. The
      Company also retains a higher proportion of mortality risk than the
      industry, which adds to the income that the Company draws from improved
      mortality.

    - The strengthening of provisions for future policy benefits to take into
      account the increased longevity of annuitants comes from the fact that,
      among other things, the Company adopted one year early the
      recommendation that it expects the Canadian Institute of Actuaries to
      make about improved future mortality of annuitants.

    - The Company did not modify its valuation assumption for the initial
      reinvestment rate ("IRR"). Despite fairly significant variations during
      the year, this rate closed 2009 at essentially the same level as at the
      end of 2008.

    - Even though it was not obligated to, the Company decided to reduce the
      ultimate reinvestment rate ("URR") by 10 basis points in order to
      recognize the downward trend in long-term interest rates. The Company
      thus reduced the ultimate reinvestment rate from 4.0% at the end of
      2008 to 3.9% at the end of 2009. The maximum rate that the Company
      could use at the end of 2009 for the ultimate reinvestment rate was
      4.1%, according to the formula prescribed by the Canadian Institute of
      Actuaries. If the long-term interest rates used to calculate the
      ultimate reinvestment rate remain at the current level, the maximum
      rate that the Company could use at the end of 2010 would be 4.0%. This
      rate would gradually decrease to reach 3.9% at the end of 2011, 3.8% at
      the end of 2012, 3.7% at the end of 2013 and 2014 and 3.6% starting in
      2015, the level at which it will stabilize. This means that, in these
      circumstances, the Company would not be obligated to strengthen its
      provisions for future policy benefits for the ultimate reinvestment
      rate before 2012. The Company was using an ultimate reinvestment rate
      of 5.0% at the end of 2006. Therefore, most of the decrease in the
      ultimate reinvestment rate has already been recognized in the
      provisions for future policy benefits.
    

Fair value of debt instruments - The Company recorded an unusual, temporary gain of $5.3 million after taxes ($0.06 per common share) in the fourth quarter, resulting from the favourable evolution of the difference between the fair value of debt instruments and underlying assets. This gain, which does not affect the Company's earning power, results from the favourable evolution of risk premiums during the quarter. If this gain is excluded, the Company ended the fourth quarter with net income to common shareholders of $62.1 million. This income translates into diluted earnings per common share of $0.77 and a return on common shareholders' equity of 13.7% on an annualized basis, which is in the upper end of the Company's 12% to 14% target range.

Dividend - The Company's financial strength has enabled the Board of Directors to announce the payment of a quarterly dividend of $0.2450 per common share. This dividend is the same as the one announced in the last quarter. It corresponds to a payout ratio of 32% of earnings on regular operations (excluding the gain resulting from the favourable evolution of the difference between the fair value of the debt instruments and the underlying assets), which is in the upper part of the Company's 25% to 35% target range for the medium term.

Business growth - The Company had its best quarter in terms of business growth since the beginning of the financial crisis that shook the global economies. Following are the highlights of the fourth quarter:

    
    - Sales in the Individual Wealth Management sector grew 68% in the fourth
      quarter, compared to the same period in 2008, to reach $756.2 million.
      The increase is primarily explained by the sustained stock market
      recovery, and by the increasing popularity of the Ecoflextra guaranteed
      minimum withdrawal benefit. Net sales were also up, which allowed the
      Company to gain market share. At the end of 2009, the Company ranked
      4th in terms of net segregated fund sales, with a 10.1% market share
      (5.7% in 2008), and 7th in terms of net mutual fund sales, compared to
      17th in terms of assets.

    - Sales were up in the Individual Insurance sector's traditional
      insurance market (minimum premiums increased by 6%), but were down in
      the Universal Life policy savings market (excess premiums decreased by
      48%). Consumers are thus continuing to cover their basic insurance
      needs, but are still hesitant to invest their savings in their
      Universal Life policies. In total, the sector ended the quarter with
      $41.0 million in sales, a 3% decrease compared to the same period in
      2008.

    - In the group sectors, business growth resumed in the Group Pensions
      sector (4% increase in sales compared to the fourth quarter of 2008)
      and remained satisfactory in the Special Markets Group ("SMG") sector
      despite a difficult economic environment (2% decrease in sales). Only
      the Group Insurance Employee Plans sector (23% decrease in sales),
      which did not sign any agreements with large groups, and Group Creditor
      Insurance distributed through car dealers (17% decrease in sales),
      which suffered from the decline in car sales and the tightening of
      credit conditions in the automobile market, continue to feel the
      effects of the economic slowdown.

    - Strong sales in the Individual Wealth Management sector carried
      premiums and deposits to $1.5 billion in the fourth quarter, a 27% jump
      over the same period in 2008, and the value of new business to
      $36.2 million, a 33% increase.

    - The stock market upswing and positive net fund entries in all sectors
      increased assets under management and under administration to a new
      high of $58.4 billion as at December 31, 2009, which represents an
      increase of 3% for the quarter and 18% for the year.
    

Solvency - Financial strength continued to improve in the fourth quarter. The solvency ratio increased to 208% as at December 31, 2009, which is higher than the ratio of 197% as at September 30, 2009. This ratio is above the Company's 175% to 200% target range. The increase in the solvency ratio is primarily explained by the $100 million preferred share issue concluded in October, which added 10 percentage points to the solvency ratio.

Quality of investments - The effects of the global financial crisis have started to dissipate and, with the help of the economic environment, the quality of investments remained very good, and even improved in certain respects in the fourth quarter. Following are the highlights of the fourth quarter:

    
    - No new securities defaulted during the fourth quarter.

    - The Company recorded a $1.5 million provision for a bond that was
      weakened by the economic environment. The effect of this provision was
      reduced, however, by a $0.8 million net gain realized on the sale of
      previously devalued securities. In total, credit-related items resulted
      in a net loss of $0.7 million before taxes during the quarter ($0.5
      million after taxes, or $0.01 per common share).

    - Net impaired investments decreased during the quarter, from
      $15.3 million as at September 30, 2009 to $13.0 million as at
      December 31, 2009. This decrease results from the posting of the
      previously mentioned $1.5 million provision, which reduced the net
      value of impaired investments, as well as the sale of a previously
      devalued bond at a profit. The proportion of net impaired investments
      represents just 0.08% of total investments as at December 31, 2009
      (0.10% as at September 30, 2009).

    - The proportion of bonds rated BB and lower decreased during the
      quarter, from 0.12% as at September 30, 2009 to 0.07% as at December
      31, 2009. This decrease is essentially attributable to the sale of a
      bond rated BB and lower.

    - The Company's total exposure to notes obtained in exchange for non-bank
      sponsored asset-backed commercial paper ("ABCP") when the ABCP was
      restructured on January 21, 2009, amounted to $91.0 million as at
      December 31, 2009. This exposure takes into account the ABCP that the
      Company held directly, the ABCP that the Company held indirectly
      through its 45% ownership in MD Life Insurance Company Limited ("MD
      Life") and, since December 31, 2009, the ABCP acquired following the
      purchase of MD Life's individual life insurance portfolio. The overall
      devaluation taken for the ABCP due to credit risk amounted to
      $35.6 million, which is equal to 39.1% of its nominal value. The
      Company believes that this devaluation is adequate under the
      circumstances.
    

Embedded value - The Company took advantage of the disclosure of its fourth quarter results to publish its embedded value for 2009. As at December 31, 2009, Industrial Alliance's embedded value amounted to $3.0 billion or $36.89 per common share, a high for the Company. This represents a 21.4% increase compared to the value calculated as at December 31, 2008, before the payment of dividends to common shareholders, and 18.3% after the payment of these dividends. The embedded value/book value ratio increased slightly, from 1.54x as at December 31, 2008 to 1.62x as at December 31, 2009.

The increase in the embedded value is primarily explained by: the stock market upswing, which added 8.6% to the embedded value ($2.68 per common share); normal growth of the in-force business block, which added 6.1% to the embedded value ($1.92 per common share); and the value of new business, which added 4.9% to the embedded value ($1.51 per common share). The Company continues to stand out through its ability to generate profitable new sales. The embedded value of new business is particularly significant, as it allows for a judgement to be made on the profitability of the products and services offered by the Company.

In total, recurring items of embedded value, which are those over which the Company has a certain amount of control (expected growth of embedded value and new sales) added 11.0% to the embedded value in 2009 ($3.43 per common share). Since the Company began calculating its embedded value, recurring items have always increased the embedded value by low double digits, which is in line with the Company's expectations in a normal environment.

Acquisitions - The Company concluded the two acquisitions announced in the fourth quarter, namely the acquisition of the socially responsible investing mutual fund business of Inhance Investment Management Inc., a subsidiary of Vancouver City Savings Credit Union, one of the largest credit unions in Canada (this acquisition was concluded on December 7, 2009), and the acquisition of the individual life insurance portfolio of MD Life Insurance Company Limited, a life and health insurance company that offers life insurance and annuity products to Canadian doctors (this acquisition was effective December 31, 2009).

Market guidance for 2010 - Following is the Company's main market guidance for 2010:

    
    - Return on common shareholders' equity: maintain the 12% to 14% target.
    - Earnings per common share: new target range of $2.75 to $3.25 (up from
      the $2.50 to $3.00 target range given as guidance for 2009).
    - Solvency ratio: maintain the 175% to 200% target range.
    - Dividend payout ratio: maintain the 25% to 35% target range in the
      medium term. However, the Company expects the ratio to be in the upper
      part of the target range in 2010.
    - Effective tax rate: maintain an expected effective tax rate of about
      26% to 27%.
    

Sensitivity analysis - The Company took advantage of the publication of the fourth quarter results to update its sensitivity analyses. The results of these analyses show that the leeway available to the Company to absorb potential stock market downturns remains very high. Hence, the provisions for future policy benefits will not have to be strengthened for the stocks matched to the long-term liabilities as long as the S&P/TSX index remains above about 9,050 points. The solvency ratio will remain above 175% as long as the S&P/TSX index remains above about 7,700 points and will remain above 150% as long as the index remains above about 6,300 points. (Refer to the "Sensitivity Analysis" heading of the "Detailed Comments on the Fourth Quarter 2009 Results" section below for more information.)

Ten years on the Toronto Stock Exchange - On February 3, 2010, Industrial Alliance celebrated its tenth anniversary as a stock company. The Company's stock began trading on the Toronto Stock Exchange on February 3, 2000, effectively ending Industrial Alliance's conversion process from a mutual company to a stock company. The Company has made steady progress and major breakthroughs in the last ten years: entry into the wealth management market, primarily the mutual funds and securities markets, through sixteen acquisitions; growth outside Quebec, thanks to the opening of offices and the strengthening of Canada-wide sales networks; and entry into new markets, including personal health and disability insurance, socially responsible investing mutual funds and the US market, through various acquisitions. From a life and health insurance company operating mainly in Quebec, Industrial Alliance has become a large national financial group. Between February 3, 2000 and February 2, 2010, Industrial Alliance stock grew 309%, compared to 31% for the S&P/TSX index. Industrial Alliance has thus passed the ultimate challenge for any public company: increasing long-term shareholder value.

The Company's results are explained in more detail in the following section.

DETAILED COMMENTS ON THE FOURTH QUARTER 2009 RESULTS

ECONOMIC AND FINANCIAL ENVIRONMENT IN THE FOURTH QUARTER OF 2009

The results of Industrial Alliance depend in part on the prevailing economic and financial environment. In this respect, after having gone through one of the worst financial crises in its history, the Canadian economy continued to show signs of recovery in the fourth quarter. The stock markets continued to grow (3% increase in the S&P/TSX index in the fourth quarter and 31% for 2009), credit conditions continued to improve, even though the situation remains precarious in certain sectors, interest rates remained low, even though there has been a certain upward movement, spreads continued to narrow and, despite the general improvement in economic conditions, consumers and businesses continue to behave very cautiously.

Industrial Alliance benefited considerably from the improved economic and financial environment in the fourth quarter, particularly due to the stock market upswing and improved credit conditions. This permits the Company to present its strongest quarterly results since the financial crisis began.

PROFITABILITY

Industrial Alliance ended the fourth quarter of 2009 with record net income to common shareholders of $67.4 million. This result translates into diluted earnings per common share of $0.83 and a return on common shareholders' equity of 14.9% on an annualized basis. Profitability for the quarter is significantly higher than the fourth quarter of 2008, when the Company strengthened its provisions for future policy benefits to take into account the sharp drop in the stock markets and interest rates, which resulted in a loss for the quarter.

    
    -------------------------------------------------------------------------
    Profitability
    -------------------------------------------------------------------------
                                      Fourth quarter             Year
    (In millions of dollars,
     unless otherwise
     indicated)                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Net income to common
     shareholders                     67.4     (110.2)     205.8       66.1
    Earnings per common
     share (diluted)                 $0.83     ($1.37)     $2.55      $0.82
    Return on common
     shareholders' equity             14.9%     (25.8%)     11.9%       4.0%
    -------------------------------------------------------------------------
    

Profit for the quarter was stimulated by the stock market upswing, which increased the Company's net profit by $7.0 million more than expected after taxes ($0.09 per common share), and by a $5.3 million gain after taxes ($0.06 per common share) resulting from the favourable evolution of the difference between the fair value of debt instruments and the underlying assets. However, profit was somewhat affected by a modest credit loss of $0.5 million after taxes ($0.01 per common share).

Following are a few additional highlights about profitability for the quarter.

Changes in assumptions - The year-end review of valuation assumptions did not have a significant impact on results, as the provisions for future policy benefits were strengthened by $1.1 million before taxes ($0.8 million after taxes, or $0.01 per common share).

Even though the review of the valuation assumptions did not have a significant impact on results, substantial transfers of provisions for future policy benefits were made from one business block to another to take into account the evolution of the economic and financial environment and the Company's experience. Provisions were released to take into account improved mortality in the Individual Insurance sector and the improved return on investments, resulting from the stock market upswing and optimization of the Company's asset-liability matching. These releases were offset, however, by the strengthening of provisions for future policy benefits to primarily take into account the increased longevity of annuitants in the annuity sectors (Group Pensions and Individual Wealth Management), the decrease in individual insurance policy lapse rates, the 10 basis point decrease in the ultimate reinvestment rate ("URR") and, to a lesser degree, increased unit costs in the Individual Insurance sector.

Four additional points to consider about the changes in assumptions:

    
    - The Company's recent mortality studies show a significant improvement
      in mortality. These results are in line with the trends observed in the
      most recent work done by the industry, including work by the Canadian
      Institute of Actuaries. This improvement has major, but diverging
      effects on the Company's activity sectors, benefiting the Individual
      Insurance sector, but adversely affecting the annuity sectors (Group
      Pensions and Individual Wealth Management). In total, since the
      Company's insurance operations are much larger than its annuity
      operations, the Company benefits from the improved mortality. The
      Company also retains a higher proportion of mortality risk than the
      industry, which adds to the income that the Company draws from improved
      mortality.

    - The strengthening of provisions for future policy benefits to take into
      account the increased longevity of annuitants comes from the fact that,
      among other things, the Company adopted one year early the
      recommendation that it expects the Canadian Institute of Actuaries to
      make about improved future mortality of annuitants.

    - The Company did not modify its valuation assumption for the initial
      reinvestment rate ("IRR"). Despite fairly significant variations during
      the year, this rate closed 2009 at essentially the same level as at the
      end of 2008.

    - Even though it was not obligated to, the Company decided to reduce the
      ultimate reinvestment rate ("URR") by 10 basis points in order to
      recognize the downward trend in long-term interest rates. The Company
      thus reduced the ultimate reinvestment rate from 4.0% at the end of
      2008 to 3.9% at the end of 2009. The maximum rate that the Company
      could use at the end of 2009 for the ultimate reinvestment rate was
      4.1%, according to the formula prescribed by the Canadian Institute of
      Actuaries. If the long-term interest rates used to calculate the
      ultimate reinvestment rate remain at the current level, the maximum
      rate that the Company could use at the end of 2010 would be 4.0%. This
      rate would gradually decrease to reach 3.9% at the end of 2011, 3.8% at
      the end of 2012, 3.7% at the end of 2013 and 2014 and 3.6% starting in
      2015, the level at which it will stabilize. This means that, in these
      circumstances, the Company would not be obligated to strengthen its
      provisions for future policy benefits for the ultimate reinvestment
      rate before 2012. The Company was using an ultimate reinvestment rate
      of 5.0% at the end of 2006. Therefore, most of the decrease in the
      ultimate reinvestment rate has already been recognized in the
      provisions for future policy benefits.
    

Experience gains in Individual Insurance - In addition to the gains resulting from the stock market upswing, the Individual Insurance sector had good experience results, particularly in terms of returns and morbidity.

Experience gains in Individual Wealth Management - The gains obtained in the Individual Wealth Management sector from the stock market upswing were almost entirely cancelled out by poor mortality results and a higher than expected persistency rate on investment funds (which is favourable in the long term, but reduces the income from surrender fees in the short term compared to expectations).

Experience gains in Group Insurance - Experience results for the Group Insurance Employee Plans sector were very good in the fourth quarter, thanks to good mortality, dental care and long-term disability results. Claims in this sector had increased considerably for these benefits in the last few quarters. Improved economic conditions and good claims management contributed to the results. These good results were partially offset, however, by an experience loss in Creditor Insurance distributed through car dealers, which continues to be affected by weak car sales in the country.

Individual Insurance strain - New business strain as a percentage of sales in the Individual Insurance sector returned to the 50% to 55% target range for the first time in the last year, despite the fact that excess premiums paid into Universal Life policies remained low. This is primarily explained by a favourable product mix this quarter.

Effective tax rate - The effective tax rate amounted to 27.4% in the fourth quarter, which is slightly higher than the Company's expectations of a tax rate of around 26% to 27% in the medium term.

Fair value of debt instruments - The Company recorded an unusual, temporary gain of $5.3 million after taxes ($0.06 per common share) in the fourth quarter, resulting from the favourable evolution of the difference between the fair value of debt instruments and underlying assets. This gain, which does not affect the Company's earning power, results from the favourable evolution of risk premiums during the quarter, which reduced the fair value of the debt instruments, but increased the fair value of the assets matched to these instruments.

The debt instruments that were part of the Company's balance sheet when the new accounting standards on financial instruments took effect on January 1, 2007 were classified as "held for trading." For these debt instruments, any difference between the fair value of the debt instruments and the corresponding assets must be recognized immediately on the income statement. The gaps thus created will be reversed as the debt instruments approach maturity, which is in the next five years. In total, since the new accounting standards took effect, the asymmetric evolution of the market value of the debt instruments and the underlying assets resulted in a $0.6 million loss.

If this gain is excluded, the Company ended the fourth quarter with net income to common shareholders of $62.1 million. This income translates into diluted earnings per common share of $0.77 and a return on common shareholders' equity of 13.7% on an annualized basis, which is in the upper end of the Company's 12% to 14% target range.

    
    -------------------------------------------------------------------------
    Profitability on Regular Operations
    -------------------------------------------------------------------------
                                      Fourth quarter             Year
    (In millions of dollars,
     unless otherwise
     indicated)                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Net income to common
     shareholders                     67.4     (110.2)     205.8       66.1
    Less: gain (loss) resulting
     from the variation in the
     fair value of debt
     instruments and underlying
     assets (after taxes)              5.3        7.8       (5.4)       7.6
    -------------------------------------------------------------------------
    Net income to common
     shareholders on regular
     operations                       62.1     (118.0)     211.2       58.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common
     share (diluted) on regular
     operations                      $0.77     ($1.46)     $2.62      $0.72
    Return on common
     shareholders' equity on
     regular operations               13.7%     (27.6%)     12.2%       3.6%
    -------------------------------------------------------------------------
    

Profit by line of business - By line of business, the changes made to the valuation assumptions resulted in a $45.9 million operating loss for the Group Pensions sector in the fourth quarter and prevented the Individual Wealth Management sector from posting an operating profit ($0.7 million operating loss). Hence, the operating profit for the quarter comes essentially from the two insurance sectors, mainly Individual Insurance.

    
    -------------------------------------------------------------------------
    Sources of Earnings
    -------------------------------------------------------------------------
                                      Fourth quarter             Year
    (In millions of dollars)          2009       2008       2009       2008
    -------------------------------------------------------------------------
    Operating profit
      Individual Insurance           104.3     (171.6)     194.4      (91.0)
      Individual Wealth Management    (0.7)       6.1       32.4       80.2
      Group Insurance                 12.2        5.6       36.8       44.1
      Group Pensions                 (45.9)     (21.5)     (35.9)     (17.5)
    -------------------------------------------------------------------------
      Total                           69.9     (181.4)     227.7       15.8
    Income on capital                 21.4       14.8       79.7       62.4
    Income taxes                     (25.0)      50.1      (82.4)     (13.9)
    -------------------------------------------------------------------------
    Net income to shareholders
     on regular operations            66.3     (116.5)     225.0       64.3
    Less: dividends on preferred
     shares                            4.2        1.5       13.8        5.8
    -------------------------------------------------------------------------
    Net income to common
     shareholders on regular
     operations                       62.1     (118.0)     211.2       58.5
    Plus: gain (loss) resulting
     from the variation in the
     fair value of debt
     instruments and underlying
     assets (after taxes)              5.3        7.8       (5.4)       7.6
    -------------------------------------------------------------------------
    Net income to common
     shareholders                     67.4     (110.2)     205.8       66.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Profitability for 2009 - The good profitability for the quarter increased the net income to common shareholders to $211.2 million on regular operations for 2009, which is over three and a half times higher than the comparable result for 2008. The Company thus ended the year with diluted earnings per common share of $2.62 on regular operations, which is within the $2.50 to $3.00 target range that it gave to the markets as guidance at the beginning of the year. The return on common shareholders' equity amounted to 12.2% for regular operations in 2009, which is also within the 12% to 14% target range that the Company gave as guidance to the financial markets at the beginning of the year.

These good results are primarily explained by the stock market upswing, which increased the profit by $13.3 million after taxes ($0.17 per common share) compared to the expected result. However, profit was affected by credit losses of $2.7 million after taxes ($0.04 per common share) and by a $5.4 million loss after taxes ($0.07 per common share) resulting from the unfavourable evolution of the difference between the fair value of debt instruments and the underlying assets. The Group Insurance sector had negative experience in 2009, primarily due to the difficult economic environment. These results were partially offset by positive experience in the Individual Insurance sector. As mentioned earlier, the year-end review of valuation assumptions did not have a significant impact on the results ($0.8 million increase in the provisions for future policy benefits after taxes).

MARKET GUIDANCE FOR 2010

Following is the Company's main market guidance for 2010:

Return on common shareholders' equity - The Company expects that the return on common shareholders' equity should be between about 12% and 14% in 2010. This target range is the same as the one for 2009.

Earnings per common share - A 12% to 14% return on common shareholders' equity translates into earnings per common share between about $2.75 and $3.25. This target range is higher than the $2.50 to $3.00 target range given as guidance for 2009.

Solvency ratio - The Company continues to target a 175% to 200% solvency ratio.

Dividend payout ratio - The Company is maintaining its 25% to 35% target range for the dividend payout ratio in the medium term. The Company expects, however, that the ratio should be in the upper part of the target range in 2010.

Effective tax rate - The Company expects the effective tax rate to be around 26% to 27% in 2010, which is the same level as in 2009.

SENSITIVITY ANALYSIS

The Company took advantage of the publication of the fourth quarter results to update its sensitivity analyses. The results of these analyses vary from one quarter to another according to numerous factors, including changes in the economic and financial environment and the normal evolution of the Company's business. The results of the most recent analyses, which take into account the changes made to the provisions for future policy benefits following the year-end review of valuation assumptions, show that the leeway available to the Company to absorb potential market downturns remains very high.

Stocks matched to the long-term liabilities - The Company will not have to strengthen its provisions for future policy benefits for stocks matched to long-term liabilities as long as the S&P/TSX index remains above about 9,050 points. The Company is thus in a position to absorb a decrease in the S&P/TSX index of about 23% compared to the December 31, 2009 level, before having to strengthen its provisions for future policy benefits for stocks matched to long-term liabilities.

Solvency ratio - The solvency ratio will remain above 175% as long as the S&P/TSX index stays above about 7,700 points and will remain above 150% as long as the index stays above about 6,300 points. This means that the Company is able to absorb a decrease of about 34% in the S&P/TSX index, compared to the December 31, 2009 level, before its solvency ratio drops to 175% (the lower end of its target range) and a decrease of 46% before its solvency ratio drops to 150% (the minimum required by the regulatory authorities).

Net income - The Company estimates that if, on average, the stock markets were to remain at a level 10% lower (or higher) than its expectations for a full year (the Company generally expects the S&P/TSX index to grow about 7% annually), the net income to common shareholders would be about $18 million lower (or higher) than expected. This amount represents the impact of a stock market variation for a full year. By quarter, however, the decrease (or increase) in profit is not necessarily proportional. Among other things, it depends on the average level of the stock market index during the period and its closing level at the end of the period.

Ultimate reinvestment rate ("URR") - The Company believes that a 10 basis point decrease (or increase) in the ultimate reinvestment rate would require the provisions for future policy benefits to be strengthened (or would allow them to be released) by some $41 million after taxes.

Initial reinvestment rate ("IRR") - The Company believes that a 10 basis point decrease (or increase) in the initial reinvestment rate would require the provisions for future policy benefits to be strengthened (or would allow them to be released) by some $24 million after taxes.

    
    -------------------------------------------------------------------------
    Sensitivity Analysis
    -------------------------------------------------------------------------
    Stocks matched to the   Level of S&P/TSX index requiring   9,050 points
    long-term liabilities   a strengthening of the provisions
                            for future policy benefits for
                            stocks matched to long-term
                            liabilities

    Solvency ratio          Level of S&P/TSX index for the     7,700 points
                            solvency ratio to be at 175%

                            Level of S&P/TSX index for the     6,300 points
                            solvency ratio to be at 150%

    Net income              Impact on the net income of a      ($18 million)
                            sudden 10% decrease in the stock
                            markets (impact for a complete
                            year)

    Ultimate reinvestment   Impact on the net income of a      ($41 million)
    rate (URR)              10 basis point decrease in the
                            URR

    Initial reinvestment    Impact on the net income of a      ($24 million)
    rate (IRR)              10 basis point decrease in the
                            IRR
    -------------------------------------------------------------------------
    

BUSINESS GROWTH

The Company had its best quarter in terms of business growth since the beginning of the financial crisis that shook the global economies. Following are the highlights of the fourth quarter.

Premiums and Deposits

The good stock market performance and general improvement in economic conditions resulted in strong renewed growth in premiums and deposits in the fourth quarter. Premiums and deposits amounted to $1.5 billion in the fourth quarter, a 27% increase compared to the same period in 2008. The increase is primarily explained by the strong rebound in segregated fund and mutual fund sales, which are benefiting from the sustained stock market recovery. In fact, in absolute terms, premiums and deposits in the fourth quarter are the second highest in the Company's history for one quarter.

    
    -------------------------------------------------------------------------
    Premiums and Deposits
    -------------------------------------------------------------------------
                         Fourth quarter                      Year
    (In millions
     of dollars,
     unless
     otherwise                         Varia-                         Varia-
     indicated)     2009      2008      tion       2009      2008      tion
    -------------------------------------------------------------------------
    Individual
     Insurance     241.4     233.7         3%     938.4     920.7         2%
    Individual
     Wealth
     Management    756.2     450.9        68%   2,350.0   2,422.4        (3%)
    Group
     Insurance     244.1     245.4        (1%)    962.4     956.5         1%
    Group
     Pensions      267.4     257.8         4%     839.8   1,114.9       (25%)
    General
     insurance      37.7      33.3        13%     140.6     128.4        10%
    -------------------------------------------------------------------------
    Total        1,546.8   1,221.1        27%   5,231.2   5,542.9        (6%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Sales by Line of Business

Generally speaking, fourth quarter sales were up for the savings and investment product sectors, and up very sharply for the Individual Wealth Management sector, and for the family market in the Individual Insurance sector. Only the Group Insurance sector continues to feel the effects of the economic slowdown.

Individual Insurance - Families continued to cover their basic insurance needs, but are still hesitant to invest their savings in their Universal Life policies. Sales in the traditional life, health and disability insurance market (measured by "minimum premiums") continued to grow in the fourth quarter (6% increase), as was the case throughout the financial crisis, but sales in the savings market (measured by "excess premiums") dropped in the fourth quarter (48% decrease). In total, the sector ended the quarter with $41.0 million in sales, 3% lower than the same period in 2008. The results for the entire year nevertheless remain satisfactory, since the Company ended 2009 with sales at the same level as 2008. The level of activity among agents also remained steady throughout the year, with the number of policies sold up 6% for the quarter and 5% for the year, compared to the same periods the previous year. The Company sold 112,335 individual insurance policies in 2009, which ranks it third in Canada (after nine months). Minimum premiums and the number of policies sold are two of the most important components the Company uses to measure the sector's profitability.

Individual Wealth Management - The highlight of the quarter in terms of business growth is the fact that fourth quarter sales jumped in the Individual Wealth Management sector, both for segregated funds (107% increase) and mutual funds (66% increase). This increase is primarily explained by the sustained stock market recovery, and the growing popularity of the Ecoflextra guaranteed minimum withdrawal benefit. In total, the sector ended the quarter with $756.2 million in sales, which represents a 68% increase over the same period in 2008.

Net sales are also up sharply compared to last year, which allowed the Company to gain market share. At the end of 2009, the Company ranked 4th in terms of net segregated fund sales, with a 10.1% market share, which is almost double the previous year's result (5.7% in 2008). For mutual funds, the Company continues to perform better than its size would suggest, ending 2009 ranked 7th in terms of net sales, compared to 17th in terms of assets. These results can be explained by the Company's vast range of funds, their good relative performance in the last year (more than half of investment fund assets performed above the median for one-, three-, five- and ten-year periods) and the size of the Company's distribution networks.

Group Insurance: Employee Plans - The Group Insurance Employee Plans sector continues to be affected by the general weakness of the job market, such that sales totalled $17.0 million in the fourth quarter, a 23% decrease compared to the same period in 2008. The sector had few opportunities to make sales to large groups. The sector remained very disciplined, however, in terms of rates during the quarter and focused on client service and claims management, which translated into a significant improvement in profitability.

Group Creditor Insurance - The decline in car sales and the tightening of credit conditions in the automobile market continue to affect sales in the Group Creditor Insurance sector. The sector ended the fourth quarter with $34.6 million in sales, a 17% decrease compared to the same period in 2008. Sales for this sector rely on car sales, since the products are distributed primarily through car dealers. The Company has been a leader in Canada in the creditor insurance market among car dealers for several years.

Group Insurance: Special Markets Group ("SMG") - The SMG sector continues to hold its own in the current economic environment, with $31.2 million in sales in the fourth quarter, a 2% decrease compared to the same period the previous year. However, the year ended with sales equivalent to 2008. This sector specializes in certain insurance markets that are not well served by traditional insurance carriers.

Group Pensions - The Group Pensions sector ended the year on a strong note, with $267.4 million in sales, a 4% increase over the same period the previous year, thus breaking with the trend of the last two quarters. Growth was particularly high in the accumulation products segment, which is the segment that the Company is seeking to develop. In terms of insured annuities (disbursement products), the Company continues to emphasize the attainment of profit margins over business growth.

    
    -------------------------------------------------------------------------
    Sales(1)
    -------------------------------------------------------------------------
                         Fourth quarter                      Year
    (In millions
     of dollars,
     unless
     otherwise                         Varia-                         Varia-
     indicated)     2009      2008      tion       2009      2008      tion
    -------------------------------------------------------------------------
    Individual
     Insurance
      Minimum
       premiums     37.4      35.3         6%     126.4     118.6         7%
      Excess
       premiums      3.6       6.9       (48%)     20.7      28.3       (27%)
    -------------------------------------------------------------------------
      Total         41.0      42.2        (3%)    147.1     146.9         0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Individual
     Wealth
     Management
      General
       fund         92.0      87.3         5%     404.3     345.5        17%
      Segregated
       funds       308.1     149.2       107%     866.2     815.7         6%
      Mutual
       funds       356.1     214.4        66%   1,079.5   1,261.2       (14%)
    -------------------------------------------------------------------------
    Total          756.2     450.9        68%   2,350.0   2,422.4        (3%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Group
     Insurance
      Employee
       Plans        17.0      22.1       (23%)     75.0      92.9       (19%)
      Creditor
       Insurance    34.6      41.6       (17%)    152.4     194.2       (22%)
      Special
       Markets
       (SMG)        31.2      31.8        (2%)    113.2     112.9         0%
    Group
     Pensions      267.4     257.8         4%     839.8   1,114.9       (25%)
    -------------------------------------------------------------------------
    

Assets Under Management and Under Administration

The stock market upswing and positive net fund entries in all lines of business carried assets under management and under administration to a new high of $58.4 billion as at December 31, 2009, up 3% for the quarter and 18% for the year. All the main asset components increased this year, particularly segregated funds and mutual funds.

    
    -------------------------------------------------------------------------
    Assets Under Management and Under Administration
    -------------------------------------------------------------------------
    (In millions of
     dollars, unless
     otherwise         December  September   December         Q4     1 year
     indicated)        31, 2009   30, 2009   31, 2008  variation  variation
    -------------------------------------------------------------------------
    Assets under
     management
      General fund     17,626.5   16,920.4   15,415.2          4%        14%
      Segregated
       funds           11,450.3   10,970.4    8,924.2          4%        28%
      Mutual funds      6,615.7    6,224.5    5,277.7          6%        25%
      Other               563.3      659.0      596.7        (15%)       (6%)
    -------------------------------------------------------------------------
      Subtotal         36,255.8   34,774.3   30,213.8          4%        20%
    Assets under
     administration    22,150.8   21,963.3   19,258.4          1%        15%
    -------------------------------------------------------------------------
    Total              58,406.6   56,737.6   49,472.2          3%        18%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Value of New Business

The value of new business showed renewed growth in the fourth quarter, with a 33% (or $8.9 million) jump in the fourth quarter compared to the same period the previous year, amounting to $36.2 million ($0.45 per common share). The increase is primarily attributable to the Individual Wealth Management sector, due to the strong growth of segregated fund and mutual fund sales.

The value of new business evolves according to three components: the level of sales, profit margins and changes in the discount rate. Hence, as the table below shows, the "sales" component increased the value of new business by $8.0 million in the fourth quarter, primarily due to the strong increase in segregated fund and mutual fund sales. The product mix was slightly unfavourable in the fourth quarter, which reduced the value of new business by $1.0 million for the "profit margin" component. The reduction in the discount rate, net of the impact of the drop in interest rates and market returns, increased the value of new business by $1.9 million.

    
    -------------------------------------------------------------------------
    Value of New Business by Component
    -------------------------------------------------------------------------
                                                          Fourth
    (In millions of dollars)                             quarter       Year
    -------------------------------------------------------------------------
    Value of new business in 2008                           27.3      122.8
    Sales                                                    8.0       (8.5)
    Profit margins                                          (1.0)       0.0
    Discount rate (decrease)                                 1.9        7.1
    -------------------------------------------------------------------------
    Value of new business in 2009                           36.2      121.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

FINANCIAL STRENGTH

Financial strength continued to improve in the fourth quarter. Following are the highlights.

Solvency

The solvency ratio increased to 208% as at December 31, 2009, which is higher than the ratio of 197% as at September 30, 2009. This ratio is above the Company's 175% to 200% target range. The increase in the solvency ratio is primarily explained by the $100 million preferred share issue concluded in October 2009, which added 10 percentage points to the solvency ratio.

The issue of $100 million in non-cumulative class A, series E preferred shares was concluded on October 15, 2009. These shares offer an annual rate of return of 6.00% and are not redeemable by the Company prior to December 31, 2014.

    
    -------------------------------------------------------------------------
    Solvency
    -------------------------------------------------------------------------
    (In millions of dollars, unless          December  September   December
     otherwise indicated)                    31, 2009   30, 2009   31, 2008
    -------------------------------------------------------------------------
    Available capital
      Tier 1                                  1,961.9    1,842.6    1,726.0
      Tier 2                                    343.1      309.5      195.4
    -------------------------------------------------------------------------
      Total                                   2,305.0    2,152.1    1,921.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Required capital                          1,107.2    1,090.0      967.1
    Solvency ratio                                208%       197%       199%
    -------------------------------------------------------------------------
    

Capitalization

The Company's capital totalled $2,703.1 million as at December 31, 2009, which is 5% ($135.0 million) higher than September 30, 2009. This growth is primarily explained by the $100 million preferred share issue and by the increase in retained earnings (resulting from the income for the quarter reduced by the dividends paid to common shareholders). The other comprehensive income contributed to reducing the capital, primarily due to the latent losses that accumulated during the quarter on bonds (due to the increase in interest rates). These losses were alleviated, however, by the accumulation of latent gains in stock investments (attributable to the stock market upswing).

    
    -------------------------------------------------------------------------
    Capitalization
    -------------------------------------------------------------------------
    (In millions of dollars)                 December  September   December
                                             31, 2009   30, 2009   31, 2008
    -------------------------------------------------------------------------
    Equity
      Common shares                             545.7      541.5      541.0
      Preferred shares                          325.0      225.0      223.7
      Retained earnings                       1,254.8    1,207.3    1,127.7
      Contributed surplus                        21.6       21.6       19.8
      Accumulated other comprehensive
       income                                    10.5       20.5      (54.3)
    -------------------------------------------------------------------------
      Subtotal                                2,157.6    2,015.9    1,857.9
    Debentures                                  519.8      524.3      385.9
    Participating policyholders' account         25.7       27.9       27.0
    -------------------------------------------------------------------------
    Total                                     2,703.1    2,568.1    2,270.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Financial Leverage

The decrease in the market value of the Company's debentures and the increase in capital contributed to a decrease in the debt ratio, from 20.4% as at September 30, 2009 to 19.2% as at December 31, 2009, if the debentures alone are included in the debt items. However, if the preferred shares are added (including those issued during the quarter), the debt ratio actually increased, from 29.2% as at September 30, 2009 to 31.3% as at December 31, 2009. These rates respect credit agency requirements for a company that has the same rating as Industrial Alliance.

    
    -------------------------------------------------------------------------
    Debt Ratio
    -------------------------------------------------------------------------
                                             December  September   December
                                             31, 2009   30, 2009   31, 2008
    -------------------------------------------------------------------------
    Debentures/capital                           19.2%      20.4%      17.0%
    Debentures + preferred shares/capital        31.3%      29.2%      26.8%
    -------------------------------------------------------------------------
    

Book Value per Common Share and Market Capitalization

Industrial Alliance's book value per common share continued to grow in the fourth quarter, in line with the rebound that began in the first quarter of 2009, thanks to the increase in common shareholders' equity. Hence, the book value amounted to $22.77 as at December 31, 2009, an increase of 2% compared to September 30, 2009 and 12% compared to the value as at December 31, 2008.

The Company's market capitalization amounted to $2,592.5 million as at December 31, 2009, an increase of 10% compared to September 30, 2009 and 38% compared to December 31, 2008. These increases are similar to the ones recorded by the Company's stock price, which also grew 10% in the fourth quarter (from $29.31 as at September 30, 2009 to $32.20 as at December 31, 2009) and 38% for the year (from $23.31 as at December 31, 2008 to $32.20 as at December 31, 2009).

The Company had 80,511,771 issued and outstanding common shares as at December 31, 2009, compared to 80,346,771 as September 30, 2009. The increase during the quarter comes from the issuance of 165,000 common shares following the exercise of options under the Company's stock option plan. The Company did not buy back any common shares in 2009. At the beginning of the year, the Company indicated that it would not buy back its common shares to eliminate the dilutive effect caused by the issuance of common shares under the stock option plan until the financial situation in Canada becomes completely stable.

    
    -------------------------------------------------------------------------
    Book Value per Common Share and Market Capitalization
    -------------------------------------------------------------------------
    (In millions of dollars, unless          December  September   December
     otherwise indicated)                    31, 2009   30, 2009   31, 2008
    -------------------------------------------------------------------------
    Book value per common share                $22.77     $22.30     $20.35
    Market capitalization                     2,592.5    2,355.0    1,872.5
    -------------------------------------------------------------------------
    

QUALITY OF INVESTMENTS

The effects of the global financial crisis have started to dissipate and, with the help of the economic environment, the quality of investments remained very good, and even improved in certain respects in the fourth quarter. Following are the highlights of the fourth quarter:

    
    -------------------------------------------------------------------------
    Quality of Investments
    -------------------------------------------------------------------------
    (In millions of dollars, unless          December  September   December
     otherwise indicated)                    31, 2009   30, 2009   31, 2008
    -------------------------------------------------------------------------
    Net impaired investments                     13.0       15.3        8.8
    Impaired investments as a % of total
     investments                                 0.08%      0.10%      0.06%
    Bonds - Proportion rated BB or lower         0.07%      0.12%      0.23%
    Mortgage loans - Delinquency rate            0.36%      0.34%      0.26%
    Real estate - Occupancy rate                 94.4%      94.3%      94.0%
    -------------------------------------------------------------------------

    - No new securities defaulted during the fourth quarter.

    - The Company posted a $1.5 million provision for a bond that was
      weakened by the economic environment. The effect of this provision was
      reduced, however, by a net gain of $0.8 million realized on the sale of
      previously devalued securities. In total, credit-related events
      resulted in a net loss of $0.7 million before taxes for the quarter
      ($0.5 million after taxes or $0.01 per common share).

    - Net impaired investments decreased during the quarter, from
      $15.3 million as at September 30, 2009 to $13.0 million as at
      December 31, 2009. This decrease results from the posting of the
      previously mentioned $1.5 million provision, which reduced the net
      value of impaired investments, and the sale of a previously devalued
      bond at a profit. The proportion of net impaired investments represents
      just 0.08% of total investments as at December 31, 2009 (0.10% as at
      September 30, 2009).

    - The proportion of bonds rated BB or lower decreased during the quarter,
      from 0.12% as at September 30, 2009 to 0.07% as at December 31, 2009.
      This decrease is essentially attributable to the sale of a bond rated
      BB or lower.

    - The Company received $1.8 million in repayments of principal for the
      old non-bank sponsored asset-backed commercial paper ("ABCP") in the
      fourth quarter, which increased the total amount of repayments of
      principal to $25.5 million since the ABCP was restructured (the
      restructuring took place on January 21, 2009 and the ABCP was converted
      into floating rate long-term notes). During the quarter, the Company
      wrote off its entire holdings in certain notes resulting from the ABCP,
      whose underlying assets, composed exclusively of ineligible assets, had
      a nominal value of $72,000. These transactions reduced the nominal
      value of the notes resulting from the ABCP held directly by the Company
      or indirectly through its 45% ownership in MD Life Insurance Company
      Limited ("MD Life"), from $78.9 million as at September 30, 2009, to
      $77.0 million as at December 31, 2009.

      This latter amount excludes the fact that Industrial Alliance acquired
      MD Life's entire individual life insurance portfolio on December 31,
      2009 and, when the acquisition was made, 55% of the residual value of
      the old ABCP from MD Life's life insurance portfolio, net of the effect
      of adjustments related to restructuring and repayments of principal
      received, was added to Industrial Alliance's balance sheet. This led to
      a $14.0 million increase in the nominal value of the notes resulting
      from the ABCP to which Industrial Alliance is exposed, carrying it to
      $91.0 million as at December 31, 2009. Moreover, the overall
      devaluation taken for the old ABCP due to credit risk, including the
      impact of the acquisition of MD Life's life insurance portfolio,
      amounted to $35.6 million as at December 31, 2009, which is equal to
      39.1% of the nominal value of the notes resulting from the ABCP held.
      The Company believes that this devaluation is adequate under the
      circumstances.

    - In terms of mortgage loans, the delinquency rate of the portfolio
      increased slightly, from 0.34% as at September 30, 2009 to 0.36% as at
      December 31, 2009. The increase in the quarter primarily results from
      an increase in delinquent loans on single family homes, which follows
      the same trend as the market for single family homes in Canada. Despite
      this increase, the quality of the mortgage loan portfolio for single
      family homes remains very high.

    - The real estate occupancy rate remained pretty much stable during the
      quarter (94.3% as at September 30, 2009 and 94.4% as at December 31,
      2009) and the market value of the real estate portfolio is still much
      higher than the book value (the market to book value ratio was 126.9%
      as at December 31, 2009, which is the same ratio as September 30,
      2009).

    - There was little change in the last quarter for securities that have
      been making the headlines. The Company has no investments in the US
      subprime mortgage loan market, no investments in US automobile
      manufacturers, no investments in monolines, and a $25 million
      investment in the securities of UK financial institutions, including
      $3 million in capital notes.

    - Finally, two points with respect to losses in value on certain
      securities in the investment portfolio, a subject likely to still be of
      interest to the financial markets:

      - Unrealized losses on corporate fixed income securities classified as
        "available for sale" amounted to $14.5 million as at December 31,
        2009, compared to $9.6 million as at September 30, 2009. This
        increase results from the reclassification of a security during the
        quarter.

      - The nominal value of bonds whose market value has been 20% or more
        lower than the nominal value for six or more months amounted to
        $46.0 million as at December 31, 2009, compared to $54.4 million as
        at September 30, 2009. This figure, which had increased continually
        since the beginning of the financial crisis, amounted to
        $111.5 million as at June 30, 2009. However, the unrealized losses on
        these bonds (measured according to the difference between the market
        value and the nominal value) decreased again in the fourth quarter of
        2009, from $17.3 million as at September 30, 2009 to $13.3 million as
        at December 31, 2009. Most of these securities are classified as
        "held for trading."
    

In the current financial market environment, the Company continues to closely monitor its investment portfolio and remains on the lookout for any developments that could affect the quality of the portfolio in one way or another.

Composition of Investments

The Company's investment portfolio is composed of various assets, the main ones being bonds, mortgage loans, stocks and real estate. There was no significant change to the distribution of investments by asset category in the fourth quarter. However, the total value of investments has increased by $677.7 million, from $15,812.5 million as at September 30, 2009 to $16,490.2 million as at December 31, 2009, a 4% increase. The increase comes primarily from the purchase of new bonds during the quarter and the appreciation of the stock portfolio, which benefited from the growth of the stock markets.

    
    -------------------------------------------------------------------------
    Investments
    -------------------------------------------------------------------------
    (In millions of dollars, unless          December  September   December
     otherwise indicated)                    31, 2009   30, 2009   31, 2008
    -------------------------------------------------------------------------
    Book value of investments                16,490.2   15,812.5   14,396.3
    Distribution of investments by asset
     category
      Bonds                                      57.1%      57.1%      55.2%
      Mortgage loans                             20.6%      21.6%      24.3%
      Stocks                                     11.5%      11.3%       9.3%
      Real estate                                 3.9%       4.1%       4.4%
      Other                                       6.9%       5.9%       6.8%
    -------------------------------------------------------------------------
      Total                                     100.0%     100.0%     100.0%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

CREDIT RATINGS

There were no changes to the credit ratings assigned to Industrial Alliance in the fourth quarter of 2009. However, on September 30, 2009, Standard & Poor's confirmed all of the credit ratings and the outlook that it assigns to Industrial Alliance. Also, the three agencies that rate Industrial Alliance assigned the new preferred shares recently issued by the Company ($100 million issue concluded on October 15, 2009) the same ratings that they had assigned to the preferred shares previously issued by the Company (these ratings appear in the table below).

    
    -------------------------------------------------------------------------
    Industrial Alliance Credit Ratings
    -------------------------------------------------------------------------
    Agency             Type of Evaluation          Rating         Outlook
    -------------------------------------------------------------------------
    Standard & Poor's  Financial Strength          A+ (Strong)    Negative
                       Issuer Credit Rating        A+ (Strong)    Negative
                       Subordinated Debentures     A              -
                       Industrial Alliance Trust
                        Securities (IATS) (global
                        scale)                     A-             -
                       Preferred Shares (global
                        scale)                     A-             -
    -------------------------------------------------------------------------
    A.M. Best          Financial Strength          A (Excellent)  Stable
                       Issuer Credit Rating        a+             Stable
                       Subordinated Debentures     a-             Stable
                       Industrial Alliance Trust
                        Securities (IATS)          bbb+           Stable
                       Preferred Shares            bbb+           Stable
    -------------------------------------------------------------------------
    DBRS               Claims Paying Ability       IC-2           Stable
                       Subordinated Debentures     A              Stable
                       Industrial Alliance Trust
                        Securities (IATS)          A (low)yn      Stable
                       Preferred Shares            Pfd-2 (high)n  Stable
    -------------------------------------------------------------------------
    

ACQUISITIONS

The Company concluded the two acquisitions announced in the fourth quarter.

Inhance Socially Responsible Investment Funds

On December 7, 2009, IA Clarington Investments Inc. ("IA Clarington"), a wholly owned subsidiary of Industrial Alliance, announced the closing of an agreement to acquire certain assets of the socially responsible investing mutual fund business of Inhance Investment Management Inc. ("Inhance"), a wholly owned subsidiary of Vancouver City Savings Credit Union ("Vancity").

Inhance is a mutual fund company recognized as a leader in the socially responsible investing ("SRI") arena in Canada. The SRI funds acquired represent about $92 million in assets under management. Vancity is one of Canada's largest credit unions, with over $14 billion in assets, more than 400,000 members, and 60 retail branches in British Columbia.

The majority of Inhance funds were merged with IA Clarington's new SRI funds, which will be offered across Canada through the IA Clarington network and Vancity branches. The IA Clarington SRI funds will continue to be managed by Inhance's investment team.

The agreement also provides for the establishment of a strategic long-term relationship whereby IA Clarington mutual funds will be distributed in Vancity branches.

From a strategic standpoint, this agreement has numerous advantages for Industrial Alliance. It gives the Company access to the socially responsible investing market, which is becoming increasingly popular; it allows the Company to enter this market with a well known line of funds and seasoned managers; and it gives the Company access to a new distribution network in Western Canada, made up of experienced advisors.

Individual Life Insurance Portfolio of MD Life

Effective December 31, 2009, Industrial Alliance concluded the acquisition of the individual life insurance portfolio of MD Life Insurance Company Limited ("MD Life") for $9 million.

MD Life is a life and health insurance company that offers life insurance and annuity products to Canadian doctors. It is 55% owned by MD Physician Services Inc., a Canadian Medical Association company, and 45% owned by Industrial Alliance.

The acquired life insurance portfolio contains more than 8,800 policies and riders, which generated $72 million in premium income in 2009. The acquired policies were already being administered by Industrial Alliance.

MD Life will continue to manufacture the MD Stable Income Fund ("MDSIF Fund") group pension contract. The MDSIF Fund will continue to be distributed by MD Insurance Agency Ltd., a subsidiary of MD Physician Services Inc., and managed by Industrial Alliance.

The transaction includes a distribution agreement whereby MD Insurance Agency Limited will offer Industrial Alliance insurance products to Canadian doctors.

EMBEDDED VALUE

The Company took advantage of the disclosure of its fourth quarter results to publish its embedded value for 2009. As at December 31, 2009, Industrial Alliance's embedded value amounted to $3.0 billion or $36.89 per common share, a high for the Company. This represents a 21.4% increase compared to the value calculated as at December 31, 2008, before the payment of dividends to common shareholders, and 18.3% after the payment of these dividends. The embedded value/book value ratio increased slightly, from 1.54x as at December 31, 2008 to 1.62x as at December 31, 2009.

The increase in the embedded value is primarily explained by:

    
    - The stock market upswing, which added 8.6% to the embedded value
      ($2.68 per common share).

    - Normal growth of the in-force business block, which added 6.1% to the
      embedded value ($1.92 per common share).

    - The value of new business, which added 4.9% to the embedded value
      ($1.51 per common share). The Company thus continues to stand out
      through its ability to generate profitable new sales. The embedded
      value of new business is particularly significant, since it allows for
      a judgement to be made about the profitability of the products and
      services offered by the Company.
    

In total, recurring items of embedded value, which are those over which the Company has a certain amount of control (namely expected growth of embedded value and new sales) added 11.0% to the embedded value in 2009 ($3.43 per common share). Since the Company began calculating its embedded value, recurring items have always increased the embedded value by low double digits, which is in line with the Company's expectations in a normal environment.

The changes in assumptions made to the provisions for future policy benefits at the end of 2009, and the increase in the discount rate (from 6.50% to 7.25%) and the risk-free rate for purposes of calculating the embedded value (from 3.50% to 4.25%) did not have a significant impact on embedded value in 2009. The Company used the same discount rate and the same risk-free rate in 2009 as it did in 2007, before the financial crisis. These changes in assumptions aim to reflect changes in the current economic environment in which the Company operates.

    
    -------------------------------------------------------------------------
    Embedded Value
    -------------------------------------------------------------------------
                                                        Contribu-  Embedded
                                                         tion to  value per
                                             Embedded   embedded     common
                                                value      value      share
    -------------------------------------------------------------------------
                                            ($Million)        (%)        ($)

    Embedded value as at December 31, 2008       2,510         -      31.26
    Recurring items
      Expected growth of embedded value            154       6.1       1.92
      New sales                                    121       4.9       1.51
    -------------------------------------------------------------------------
      Subtotal                                     275      11.0       3.43
    Non-recurring items
      Experience gains (losses) - related
       to the equity markets                       215       8.6       2.68
      Experience gains (losses) - other             47       1.8       0.58
      Changes in assumptions and management
       actions                                     (10)     (0.4)     (0.12)
      Changes in solvency requirements              (2)     (0.1)     (0.03)
      Acquisitions                                   7       0.3       0.08
    -------------------------------------------------------------------------
      Subtotal                                     257      10.2       3.19
    Changes in capital structure                     6       0.2      (0.01)
    -------------------------------------------------------------------------
    Total variation in embedded value in 2009      538      21.4       6.61
    -------------------------------------------------------------------------
    Embedded value as at December 31, 2009,
     before dividends                            3,048         -      37.87
    Dividends paid to common shareholders          (79)     (3.1)     (0.98)
    -------------------------------------------------------------------------
    Embedded value as at December 31, 2009       2,969      18.3      36.89
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

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 18, 2010 to February 17, 2011, up to 2,415,353 common shares, representing approximately 3% of its 80,511,771 common shares issued and outstanding on February 10, 2010.

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 189,797 on the Toronto Stock Exchange over the last six completed calendar months (the "ADTV"). Accordingly, since the Company is entitled to purchase up to 25% of the ADTV on any trading day, it can purchase 47,449 common shares per day.

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.

Under normal circumstances, the Company uses 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 when business is acquired. However, the Company does not plan to buy back its shares to eliminate the dilutive effect caused by the issuance of common shares as part of the stock option plan until the financial situation in Canada becomes completely stable.

Shareholders may obtain a free copy of the documents filed with the Exchange concerning this Bid by writing to the Corporate Secretary of Industrial Alliance.

BUY-BACK OF SHARES

Under the current normal course issuer bid, which began on February 18, 2009 and will end on February 17, 2010, so far the Company has not purchased any common shares. The Company does not expect to make any purchases in the days remaining before expiry of the current normal course issuer bid.

DECLARATION OF DIVIDEND

The Company's financial strength has enabled the Board of Directors to announce the payment of a quarterly dividend of $0.2450 per common share. This dividend is the same as the one announced in the last quarter. It corresponds to a payout ratio of 32% of earnings on regular operations (excluding the gain resulting from the favourable evolution of the difference between the fair value of the debt instruments and the underlying assets), which is in the upper end of the Company's 25% to 35% target range for the medium term.

Following are the amounts and dates of payment and closing of registers for the Company's common shares and the various categories of its preferred shares.

The Board of Directors has declared the payment of a quarterly dividend of $0.2450 per common share. The dividend is payable in cash on March 15, 2010, to the common shareholders of record as at February 19, 2010.

The Board of Directors has 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, 2010, to the preferred shareholders of record as at February 26, 2010.

The Board of Directors has declared the payment of a quarterly dividend of $0.3875 per non-cumulative class A preferred share series C. The dividend is payable in cash on March 31, 2010, to the preferred shareholders of record as at February 26, 2010.

The Board of Directors has declared the payment of a quarterly dividend of $0.3750 per non-cumulative class A preferred share series E. The dividend is payable in cash on March 31, 2010, to the preferred shareholders of record as at February 26, 2010.

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.

WARNING AND GENERAL INFORMATION

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 or data on regular operations - 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 or data on regular operations, 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.

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 the Company's results on Friday, February 12, 2010 at 2:00 p.m. (ET). To listen in on the conference call, dial 1 800 933-2547 (toll-free). A replay of the conference call will also be available for a one-week period, starting at 4:30 p.m. on Friday, February 12, 2010. To listen to the conference call replay, dial 1 800 558-5253 (toll-free) and enter access code 21449085. 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 in all regions of Canada, as well as in the United States. Industrial Alliance contributes to the financial well-being of over three million Canadians, employs more than 3,400 people and manages and administers over $58 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) 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,          Quarters ended     Twelve months ended
     unless otherwise indicated)        December 31           December 31
                                      2009       2008       2009       2008
                                         $          $          $          $
                                         (unaudited)
    Revenues
    Premiums                         1,191      1,007      4,152      4,282
    Net investment income               99        (44)     1,302       (188)
    Fees and other revenues             94         81        361        371
    -------------------------------------------------------------------------
                                     1,384      1,044      5,815      4,465

    Policy benefits and expenses
    Payments to policyholders and
     beneficiaries                     496        486      1,928      1,950
    Net transfer to segregated
     funds                             454        235      1,299      1,347
    Dividends, experience rating
     refunds and interest on
     amounts on deposit                 16         13         56         62
    Change in provisions for
     future policy benefits             65        229      1,194         53
    -------------------------------------------------------------------------
                                     1,031        963      4,477      3,412

    Commissions                        145        142        528        545
    Premium and other taxes             16         16         63         62
    General expenses                   108         90        400        358
    Financing expenses                   4        (11)        64         (4)
    -------------------------------------------------------------------------
                                     1,304      1,200      5,532      4,373

    Income before income taxes          80       (156)       283         92
    Less: income taxes                  10        (48)        64         17
    -------------------------------------------------------------------------

    Net income                          70       (108)       219         75
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Less: net income attributed to
     participating policyholders        (2)         -         (1)         3
    -------------------------------------------------------------------------

    Net income attributed to
     shareholders                       72       (108)       220         72

    Less: preferred share dividends      4          2         14          6
    -------------------------------------------------------------------------

    Net income available to common
     shareholders                       68       (110)       206         66
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share (in
     dollars)
      basic                           0.84      (1.37)      2.56       0.82
      diluted                         0.83      (1.37)      2.55       0.82


    CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
                                                As at      As at      As at
                                             December   December  September
                                                   31         31         30
    (in millions of dollars)                     2009       2008       2009
                                                    $          $          $
                                                                 (unaudited)
    Assets
    Invested assets
    Bonds                                       9,410      7,942      9,030
    Mortgages                                   3,405      3,508      3,412
    Stocks                                      1,896      1,340      1,785
    Real estate                                   649        630        644
    Policy loans                                  381        320        374
    Cash and cash equivalents                     382        259        199
    Other invested assets                         367        397        368
    -------------------------------------------------------------------------
                                               16,490     14,396     15,812

    Other assets                                  646        547        636
    Intangible assets                             375        357        361
    Goodwill                                      116        115        111
    -------------------------------------------------------------------------

    Total general fund assets                  17,627     15,415     16,920
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Segregated funds net assets                11,450      8,924     10,970
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Policy liabilities
    Provisions for future policy benefits      13,392     11,853     12,923
    Provisions for dividends to
     policyholders and experience rating
     refunds                                       60         56         49
    Benefits payable and provision for
     unreported claims                            139        156        148
    Policyholders' amounts on deposit             212        185        205
    -------------------------------------------------------------------------
                                               13,803     12,250     13,325

    Other liabilities                             772        648        678
    Future income tax                             339        236        340
    Deferred net realized gains                     9         10          9
    Debentures                                    520        386        524
    Participating policyholders' account           26         27         28
    -------------------------------------------------------------------------
                                               15,469     13,557     14,904
    -------------------------------------------------------------------------

    Equity
    Share capital                                 871        765        767
    Contributed surplus                            22         19         22
    Retained earnings and accumulated other
     comprehensive income                       1,265      1,074      1,227
    -------------------------------------------------------------------------
                                                2,158      1,858      2,016
    -------------------------------------------------------------------------

    Total general fund liabilities and equity  17,627     15,415     16,920
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Segregated funds liabilities               11,450      8,924     10,970
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                             Twelve months ended December 31, 2009 and 2008
                        (in millions of dollars, unless otherwise indicated)
    

Segmented Information

The Company operates principally in one dominant industry segment, the life and health insurance industry, and offers individual and group life and health insurance products, savings and retirement plans, and segregated funds. The Company also operates mutual fund, securities brokerage and trust businesses. These businesses are principally related to the Individual Wealth Management segment and are included in that segment with the Individual Annuities. The Company operates mainly in Canada and the operations outside Canada are not significant.

    
    Segmented Income Statements

                              Quarter ended December 31, 2009

                       Individual            Group
                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions      ties*  Total
                        $         $         $         $         $         $
    Revenues
    Premiums          241       401       245       267        37     1,191
    Net inves-
     tment income      28        22        12        35         2        99
    Fees and
     other
     revenues          (5)       85         3         7         4        94
    -------------------------------------------------------------------------
                      264       508       260       309        43     1,384
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to policy-
     holders           65        77       176       235        24       577
    Net transfer
     to segre-
     gated funds        -       344         -       110         -       454
    Commissions,
     general and
     other
     expenses         101        84        67         8        13       273
    -------------------------------------------------------------------------
                      166       505       243       353        37     1,304
    -------------------------------------------------------------------------
    Income before
     income
     taxes             98         3        17       (44)        6        80
    Less: income
     taxes             19         1         3       (15)        2        10
    -------------------------------------------------------------------------
    Net income
     before
     allocation
     of other
     activities        79         2        14       (29)        4        70
    Allocation
     of other
     activities         4         -         -         -        (4)        -
    -------------------------------------------------------------------------
    Net income         83         2        14       (29)        -        70
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders      85         2        14       (29)        -        72
    Attributed to
     participating
     policyholders     (2)        -         -         -         -        (2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                              Quarter ended December 31, 2008

                       Individual            Group
                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions      ties*  Total
                        $         $         $         $         $         $
    Revenues
    Premiums          234       236       246       258        33     1,007
    Net inves-
     tment income    (124)       24        20        36         -       (44)
    Fees and
     other
     revenues           1        70         2         6         2        81
    -------------------------------------------------------------------------
                      111       330       268       300        35     1,044
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to policy-
     holders          179        63       193       270        23       728
    Net transfer
     to segre-
     gated funds        -       192         -        43         -       235
    Commissions,
     general and
     other
     expenses          92        65        63         7        10       237
    -------------------------------------------------------------------------
                      271       320       256       320        33     1,200
    -------------------------------------------------------------------------
    Income before
     income
     taxes           (160)       10        12       (20)        2      (156)
    Less: income
     taxes            (47)        2         4        (6)       (1)      (48)
    -------------------------------------------------------------------------
    Net income
     before
     allocation
     of other
     activities      (113)        8         8       (14)        3      (108)
    Allocation
     of other
     activities         3         -         -         -        (3)        -
    -------------------------------------------------------------------------
    Net income       (110)        8         8       (14)        -      (108)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders    (110)        8         8       (14)        -      (108)
    Attributed to
     participating
     policyholders      -         -         -         -         -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    * Includes other segments and intercompany eliminations.


                            Twelve months ended December 31, 2009

                       Individual            Group
                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions      ties*  Total
                        $         $         $         $         $         $
    Revenues
    Premiums          938     1,271       963       840       140     4,152
    Net inves-
     tment income     838       112        89       257         6     1,302
    Fees and
     other
     revenues           5       304         9        29        14       361
    -------------------------------------------------------------------------
                    1,781     1,687     1,061     1,126       160     5,815
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to policy-
     holders        1,165       357       739       821        96     3,178
    Net transfer
     to segre-
     gated funds        -       999         -       300         -     1,299
    Commissions,
     general and
     other
     expenses         404       290       275        35        51     1,055
    -------------------------------------------------------------------------
                    1,569     1,646     1,014     1,156       147     5,532
    -------------------------------------------------------------------------
    Income before
     income
     taxes            212        41        47       (30)       13       283
    Less: income
     taxes             47        12        12       (12)        5        64
    -------------------------------------------------------------------------
    Net income
     before
     allocation
     of other
     activities       165        29        35       (18)        8       219
    Allocation
     of other
     activities         8         -         -         -        (8)        -
    -------------------------------------------------------------------------
    Net income        173        29        35       (18)        -       219
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders     174        29        35       (18)        -       220
    Attributed to
     participating
     policyholders     (1)        -         -         -         -        (1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                            Twelve months ended December 31, 2008

                       Individual            Group
                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions      ties*  Total
                        $         $         $         $         $         $
    Revenues
    Premiums          921     1,161       957     1,115       128     4,282
    Net inves-
     tment income    (434)       84        62       103        (3)     (188)
    Fees and
     other
     revenues           2       319         9        28        13       371
    -------------------------------------------------------------------------
                      489     1,564     1,028     1,246       138     4,465
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to policy-
     holders          187       225       699       859        95     2,065
    Net transfer
     to segre-
     gated funds        -       978         -       369         -     1,347
    Commissions,
     general and
     other
     expenses         347       274       272        29        39       961
    -------------------------------------------------------------------------
                      534     1,477       971     1,257       134     4,373
    -------------------------------------------------------------------------
    Income before
     income
     taxes            (45)       87        57       (11)        4        92
    Less: income
     taxes            (18)       24        14        (4)        1        17
    -------------------------------------------------------------------------
    Net income
     before
     allocation
     of other
     activities       (27)       63        43        (7)        3        75
    Allocation
     of other
     activities         3         -         -         -        (3)        -
    -------------------------------------------------------------------------
    Net income        (24)       63        43        (7)        -        75
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders     (27)       63        43        (7)        -        72
    Attributed to
     participating
     policyholders      3         -         -         -         -         3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    * Includes other segments and intercompany eliminations.


    Segmented General Fund Assets

                                   As at December 31, 2009

                       Individual            Group
                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions      ties*  Total
                        $         $         $         $         $         $
    Assets
    Invested
     assets         9,274     2,128     1,607     3,128       353    16,490
    Other
     assets           242       178        99        42        85       646
    Intangible
     assets            49       322         3         1         -       375
    Goodwill           55        41        20         -         -       116
    -------------------------------------------------------------------------
    Total           9,620     2,669     1,729     3,171       438    17,627
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                   As at December 31, 2008

                       Individual            Group
                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions      ties*  Total
                        $         $         $         $         $         $
    Assets
    Invested
     assets         7,915     1,776     1,488     2,981       236    14,396
    Other
     assets           158       147        83        47       112       547
    Intangible
     assets            42       312         2         1         -       357
    Goodwill           49        46        20         -         -       115
    -------------------------------------------------------------------------
    Total           8,164     2,281     1,593     3,029       348    15,415
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                             As at September 30, 2009 (unaudited)

                       Individual            Group
                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions      ties*  Total
                        $         $         $         $         $         $
    Assets
    Invested
     assets         8,683     1,953     1,712     3,166       298    15,812
    Other
     assets           219       172        98        45       102       636
    Intangible
     assets            46       311         3         1         -       361
    Goodwill           46        45        20         -         -       111
    -------------------------------------------------------------------------
    Total           8,994     2,481     1,833     3,212       400    16,920
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    * Includes other segments and intercompany eliminations.
    

SOURCE Industrial Alliance Insurance and Financial Services Inc.

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


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