Industrial Alliance Ends the 2008 Financial Year With a $66.1 Million Profit



    QUEBEC CITY, Jan. 26 /CNW Telbec/ - Industrial Alliance Insurance and
Financial Services Inc. ("Industrial Alliance" or "the Company") ended the
2008 financial year with net income to common shareholders of $66.1 million,
compared to $242.2 million for 2007. This translates into diluted earnings per
common share of $0.82 ($2.99 in 2007).
    For the fourth quarter of 2008, the Company recorded a net loss to common
shareholders of $110.2 million ($1.37 per diluted common share), compared to
net income to common shareholders of $63.1 million for the same period in 2007
($0.78 per diluted common share).
    The fourth quarter results were affected by the stock market downturn,
which reduced the Company's expected earnings by about $25.5 million after
taxes, by an additional 14% devaluation of non-bank sponsored asset-backed
commercial paper, increasing the total devaluation of these securities to 29%,
and by a $138.2 million after-tax strengthening of the provisions for future
policy benefits. The Company decided to strengthen its provisions for future
policy benefits, while implementing additional measures, to protect itself
against an additional stock market downturn of about 13% and, even though it
was not required to do so, in order to take into account an additional 20
basis point drop in the ultimate reinvestment rate (URR). Without the
strengthening of its provisions for future policy benefits, the Company would
have ended the quarter with $20.2 million in after-tax income from its current
operations.
    Despite the volatility of the financial markets, financial strength, as
measured by the solvency ratio, continued to improve in 2008. The Company
expects to end the year with a solvency ratio of about 200% as at December 31,
2008. This is higher than the 193% ratio recorded as at December 31, 2007. The
solvency ratio should be at the top of the Company's 175% to 200% target
range.
    "Given the volatility of the financial markets, we decided to exercise
caution and protect the Company from further stock market downturns and
interest rate reductions," stated Yvon Charest, President and Chief Executive
Officer. "Our financial strength remains very solid, as indicated by our
solvency ratio, which has proven to be very robust in the current economic
environment. The quality of investments also remains very good, despite the
devaluation of a few securities. We also expect to maintain our dividend at
the current level throughout 2009. Clearly, we have weathered a good part of
the storm without weakening the Company, and we are confident that we will be
able to resist further downturns, if they occur, for the greater good of our
policyholders and shareholders."

    Unaudited Results

    The results presented in this news release for the 2008 financial year
have not been audited by the external auditors. Certain final results may
differ from those presented in this news release. To simplify reading, this
news release has been drafted in the affirmative, as if the results presented
herein were final. The audited consolidated financial results for the
financial year ending December 31, 2008, including the consolidated financial
statements and management's discussion and analysis, will be published on
Friday, February 13, 2009.

    Profitability

    Following are the profitability highlights for the fourth quarter.

    
    -------------------------------------------------------------------------
    Profitability
    -------------------------------------------------------------------------
                                          Fourth quarter           Year
    -------------------------------------------------------------------------
    (Millions of dollars,
     unless otherwise indicated)          2008      2007      2008      2007
    -------------------------------------------------------------------------
    Income from current operations
     (after taxes)                        20.2      65.5     196.7     242.3
    Strengthening of provisions
     for future policy benefits
     (after taxes)                      (138.2)     (0.7)   (138.2)     (0.7)
    Net effect of the variation in
     the fair value of debt
     instruments and underlying
     assets (after taxes)                  7.8      (1.7)      7.6       0.6
    -------------------------------------------------------------------------
    Net income (loss) to common
     shareholders                       (110.2)     63.1      66.1     242,2
    -------------------------------------------------------------------------
    Earnings (loss) per common share
     (diluted)                          ($1.37)    $0.78     $0.82     $2.99
    Return on common shareholders
     equity                              (25.8%)    15.2%      4.0%     15.1%
    -------------------------------------------------------------------------


    Income from current operations - The Company ended the fourth quarter of
2008 with income from current operations of $20.2 million after taxes ($0.25
per common share). The Company's profit was affected by:

    - The stock market downturn, which reduced the expected profit by about
      $25.5 million after taxes ($0.32 per common share). The S&P/TSX index
      of the Toronto Stock Exchange dropped 24% in the fourth quarter and 35%
      for all of 2008. The stock market downturn reduced the fees collected
      on the segregated funds and mutual funds managed by the Company,
      decreased the discounted future revenues on Universal Life policy funds
      and reduced the income on capital.

    - An additional 14% devaluation of the non-bank sponsored asset-backed
      commercial paper. This devaluation reduced the Company's earnings by
      $10.6 million after taxes ($0.13 per common share). The Company's total
      exposure to non-bank sponsored asset-backed commercial paper is $104.1
      million and this paper was devalued by 15% in the third quarter of
      2007. The devaluation announced today increases the total devaluation
      of this paper to 29%. This devaluation was posted to primarily take
      into account the estimated loss in value of commercial paper due to the
      widening of interest rate spreads that occurred at the end of 2008.

    - A permanent decrease of $2.2 million after taxes ($0.03 per common
      share) in the value of a few securities that were weakened by the
      current economic environment.

    - Experience losses of $9.6 million after taxes ($0.12 per common share),
      resulting primarily from unfavourable mortality and disability
      experience in the Group Insurance and Group Pensions sectors.

    The Company recorded gains of $7.8 million after taxes resulting from a
favourable change in the gap between the market value of debt instruments and
the underlying assets ($0.10 per common share).
    Strengthening of the provisions for future policy benefits - Given the
current economic and financial environment, the Company believed it was more
prudent to strengthen its provisions for future policy benefits by $138.2
million after taxes ($1.71 per common share) to protect itself against further
decreases in the interest rates and in the stock markets. At the end of each
quarter, the Company makes sure its provisions are sufficient, given the
existing economic environment, but it only reviews its valuation assumptions
at the end of each year to take into account the most recent developments in
the market and its own experience in terms of mortality, morbidity, lapse
rates, unit costs and other factors. This year, the year-end review of
assumptions led the Company to strengthen its provisions for future policy
benefits to take into account three factors in particular:

    - An additional 20 basis point decrease in the ultimate reinvestment rate
      (URR). Even though the Company was not required to strengthen its
      provisions for future policy benefits for the URR, since it already
      uses a lower rate than the maximum rate determined under standards of
      actuarial practices, it decided to exercise caution by reducing its
      rate once again to take into account the significant reduction in long-
      term interest rates at the end of the year (the maximum URR is
      calculated by using data on long-term federal government bond rates for
      the last 10 years). Hence, to evaluate its provisions for future policy
      benefits, the Company now uses a lower URR than the maximum rate
      expected at the end of 2009, should long-term federal government bond
      rates remain at the current level for all of 2009.

    - The sharp decline in the value of stocks backing the Company's very
      long-term liabilities (the stock markets dropped 35% in 2008). Given
      the volatility of the stock markets, the Company felt it was more
      prudent to strengthen its provisions for future policy benefits, while
      implementing additional measures, such that an additional strengthening
      would not necessarily be required if there was an additional drop in
      the stock markets of about 13% compared to December 31, 2008 (which
      would place the S&P/TSX index at about 7,850 points).

    - The decrease in life insurance policy lapse rates.

    The strengthening of the provisions for future policy benefits was
partially offset by a release of reserves to take into account two factors in
particular, namely the ongoing improvement in mortality rates in individual
insurance and the slight increase (15 basis points) in the initial
reinvestment rate (IRR). This rate is determined from a basket composed
primarily of long-term provincial government bonds and reflects the current
rates applicable on these bonds on the valuation date, which is December 31,
2008.
    Finally, the revision of unit cost valuation assumptions did not have a
material impact on the provisions for future policy benefits in 2008.
    Following are a few additional points worth highlighting about the
Company's fourth quarter profitability.

    - Strain on individual insurance sales - Good strain management continued
      in the Individual Insurance sector. Strain, expressed as a percentage
      of sales, amounted to 51% in the fourth quarter (46% in the fourth
      quarter of 2007). Strain amounted to 56% for 2008, which is slightly
      higher than the Company's 50% to 55% target range.

    - Auto and home insurance - After a challenging start to the year in
      terms of claims, due to poor weather conditions, the auto and home
      insurance subsidiary had an excellent year-end, recording a net profit
      of $2.5 million in the fourth quarter ($3.5 million in the fourth
      quarter of 2007).

    - Contribution by Excellence - The contribution by Excellence Life
      Insurance Company and the brokerage companies it is associated with
      continued to be in line with expectations. When Excellence was
      acquired, the Company had indicated that it believed Excellence would
      contribute to improving its earnings per share by $0.04 in 2008. The
      acquisition of Excellence was completed on January 31, 2008.

    - Income taxes - The fourth quarter loss enabled the Company to recover
      tax expenses posted in previous quarters, reducing the tax expense for
      2008 to $17.0 million. This represents an effective tax rate of 17.8%.
      This rate is lower than the one usually applicable to the Company
      (around 28%). This difference is due to the fact that the reduction of
      earnings in 2008 did not impact specific revenue or expense items for
      which the Company enjoys a tax advantage.

    - Profit by line of business - All business lines were affected in one
      way or another by the prevailing economic and financial environment in
      the fourth quarter. The Individual Insurance sector was mainly affected
      by the changes in assumptions for the provisions for future policy
      benefits, Individual Wealth Management by the stock market downturn,
      Group Insurance by poor claims experience, and Group Pensions by the
      changes in assumptions and poor claims experience.

    Of all these factors, however, only the impact of the stock market
downturn on the Individual Wealth Management, Group Pensions and, to a lesser
degree, the Individual Insurance sector, may have a recurring impact on the
results.

    -------------------------------------------------------------------------
    Impact of the Economic and Financial Environment on Net Income
    to Common Shareholders in the Fourth Quarter, by Line of Business
    -------------------------------------------------------------------------
                                                                       Total,
                                                                       after
                                       Changes                        alloca-
                               Stock        in                       tion of
    (Millions of              market    assump-                    income on
      dollars)      Credit  downturn     tions     Total     Total   capital
    -------------------------------------------------------------------------
    Operating profit                                        (After    (After
     (loss)                     (Before taxes)               taxes)    taxes)
      Individual
       Insurance     (11.9)     (8.0)   (175.6)   (195.5)   (138.5)   (142.9)
      Individual
       Wealth
       Management     (0.8)    (23.2)     (1.9)    (25.9)    (18.3)    (18.4)
      Group Insurance    -         -      (1.0)     (1.0)     (0.7)     (1.7)
      Group Pensions     -      (1.5)    (16.7)    (18.2)    (12.9)    (13.5)
    -------------------------------------------------------------------------
      Subtotal       (12.7)    (32.7)   (195.2)   (240.6)   (170.4)   (176.5)
    -------------------------------------------------------------------------
    Income on capital (5.3)     (3.3)        -      (8.6)     (6.1)        -
    -------------------------------------------------------------------------
    Total -
     Before taxes    (18.0)    (36.0)   (195.2)   (249.2)        -         -
    Total -
     After taxes     (12.8)    (25.5)   (138.2)   (176.5)   (176.5)        -
    -------------------------------------------------------------------------


    Guidance for 2009

    The current economic and financial environment makes it more difficult
than in past years to establish specific guidance to the financial markets.
Given the current environment, the Company believes, however, that it is
useful to provide general market guidance for 2009 to help investors better
understand the source of the Company's earnings. Following are a few
indications for 2009 to the best of the Company's knowledge.

    Return on equity - The Company estimates that the return on common
shareholders' equity (ROE) should be between 12% and 14% in 2009. This target
range is lower than the 14% to 16% range announced last June. The decrease in
the target ROE is primarily explained by the stock market downturn, which
reduced the income on capital and management fee income drawn from segregated
funds, mutual funds, Universal Life policy funds and group pension plan
accumulation funds, as well as the cost of subordinated debentures and
preferred shares issued in 2008.

    Earnings per common share - An ROE of between 12% and 14% translates into
earnings per common share (EPS) of between $2.50 and $3.00. The Company
estimates however, that if in 2009, the S&P/TSX index should hover around the
December 31, 2008 level, EPS should be within the lower end of the $2.50 to
$3.00 range.

    Solvency ratio - The Company continues to target a solvency ratio in the
175% to 200% range. If 2009 ends with an ROE of about 12% and the S&P/TSX
index at around 9,000 points, the Company estimates that the solvency ratio
should be in the upper end of the 175% to 200% range at the end of 2009.

    Dividend - The Company expects to maintain the quarterly dividend to
common shareholders at the current level for 2009, namely $0.245 per common
share.

    Effective tax rate - The Company anticipates a 1 to 2 percentage point
drop in the effective tax rate, which should be around 26% to 27% in 2009.

    Sensitivity Analysis

    Following is the sensitivity of the Company's results for a certain number
of key indicators.

    Net income and stock market downturn - The Company estimates that if the
stock markets drop 10% at the very beginning of 2009, to subsequently recover
a portion of this loss during the year, net income to common shareholders for
2009 would be about $17 million lower than expected. The stock market downturn
reduces the fees collected on the segregated funds and mutual funds managed by
the Company, decreases the expected future income on Universal Life policy
funds and reduces the income on capital. On the other hand, a 10% drop should
not affect the Company's net income in relation to stocks backing the
long-term liabilities.

    Solvency ratio - The Company expects its solvency ratio to be around 200%
as at December 31, 2008. The S&P/TSX index was at 8,988 points on that date.
The Company estimates that if the S&P/TSX index had been at 7,400 points as at
December 31, 2008, the solvency ratio would have been around 175%, and if it
had been at 5,700 points, it would have been around 150%.

    Stocks matching long-term liabilities and segregated funds guarantee - The
Company believed that it was more prudent to strengthen its provisions for
future policy benefits in 2008, while implementing additional measures, by an
amount such that an additional strengthening would not necessarily be required
if there was an additional drop in the stock markets of about 13% compared to
December 31, 2008 (which would place the S&P/TSX index at about 7,850 points).
Such a decrease in the stock markets should not affect the Company's profit.

    Ultimate reinvestment rate (URR) - To calculate its provisions for future
policy benefits, as at December 31, 2008, the Company used a lower ultimate
reinvestment rate than the maximum rate expected at the end of 2009 if the
rates of long-term federal government bonds remain at the current level
(3.45%) for all of 2009. According to the Company's most recent simulations, a
10 basis point decrease in the URR would require the provisions for future
policy benefits to be strengthened by about $35 million after taxes.

    Initial reinvestment rate (IRR) - To calculate its provisions for future
policy benefits, as at December 31, 2008, the Company used an initial
reinvestment rate that takes into account existing rates of return on the
valuation date, considering the target asset mix. According to the Company's
most recent simulations, a 10 basis point increase in the IRR would allow for
about $24 million after taxes to be released from the provisions for future
policy benefits.

    Mortality rate - As required by standards of actuarial practice, the
Company does not anticipate an improvement in the mortality rate when it
determines its provisions for future policy benefits in individual insurance.
However, given the ongoing improvement of mortality rates in Canada, the
Company regularly releases excess reserves that are no longer necessary.
Hence, the Company estimates that a 5% reduction in the mortality rate could
result in the release of about $88 million after taxes in provisions for
future policy benefits for all lines of business.

    Business Growth

    Following are the business growth highlights for the fourth quarter.

    Premiums and deposits - After several years of strong growth, the gloomy
economic environment has slowed consumer and investor enthusiasm in the retail
markets, but has not had a significant impact in the group markets, where some
sectors even had a record year. Nevertheless, strong premium growth in the
group sectors was not enough to erase the decline in the retail sectors, such
that premiums and deposits totalled $1.2 billion in the fourth quarter, down
7% compared to the same period in 2007.

    -------------------------------------------------------------------------
    Premiums and Deposits
    -------------------------------------------------------------------------
                           Fourth quarter                     Year
    -------------------------------------------------------------------------
    (Millions of
     dollars, unless
     otherwise                           Vari-                         Vari-
     indicated)      2008      2007     ation      2008      2007     ation
    -------------------------------------------------------------------------
    Individual
     Insurance      233.7     236.1        (1%)   920.7     897.3         3%
    -------------------------------------------------------------------------
    Individual
     Wealth
     Management     450.9     663.8       (32%) 2,422.4   3,121.9       (22%)
    -------------------------------------------------------------------------
    Group
     Insurance      245.4     212.8        15%    956.5     860.5        11%
    -------------------------------------------------------------------------
    Group Pensions  257.8     174.2        48%  1,114.9     828.3        35%
    -------------------------------------------------------------------------
    General
     Insurance       33.2      30.7         8%    128.3     118.2         9%
    -------------------------------------------------------------------------
    Total         1,221.0   1,317.6        (7%) 5,542.8   5,826.2        (5%)
    -------------------------------------------------------------------------


    Sales by line of business - Following are the sales highlights by line of
business for the fourth quarter.

    - Individual insurance - Individual Insurance sales continued to grow in
      the family market, but were down in the high net-worth market,
      resulting in a 14% decrease in total sales for the sector in the fourth
      quarter compared to the same period last year. Investors who use their
      Universal Life policy as a financial planning tool decided to reduce
      the amounts they invest in their insurance policy savings account
      (excess premiums), due to the instability of the markets. On the other
      hand, clients continued to cover their basic insurance needs, since
      minimum premiums (the "insurance" component of premiums) were up 6%
      during the quarter. Also, the level of activity among agents remained
      high throughout the year, since the number of policies sold was up 5%
      during the quarter and 4% for 2008. Minimum premiums and the number of
      policies sold are two of the most important factors the Company uses to
      measure the sector's profitability.

    - Individual Wealth Management - The stock market downturn continued to
      slow sales of savings and investment products. Hence, after several
      years of strong growth, sales in the Individual Wealth Management
      sector were down 32% for the quarter compared to the same period the
      previous year. On the other hand, net segregated fund and mutual fund
      sales were positive each quarter, which is excellent under the
      circumstances. The Company even outperformed the industry in terms of
      net mutual fund sales (the IA Clarington Investments subsidiary was
      ranked 9th in terms of net mutual fund sales in 2008, an increase
      compared to its 12th place ranking in 2007). The Company's wide range
      of funds, their good relative performance in the last year and the size
      of the Company's distribution networks should contribute to getting
      sales back on track as soon as the markets are more stable.

    - Group Insurance: Employee Plans - The momentum continued in the
      Employee Plans sector, with fourth quarter sales more than double the
      same period in 2007. Sales were particularly strong in the West, thanks
      to the close ties developed with new distributors in the last few
      years. The strong sales for the quarter pushed sales for the year to a
      record $92.9 million, up 29% over the previous year. More than half of
      all sales came from outside Quebec for a fourth consecutive year, in
      accordance with the Company's desire to expand throughout the country.

    - Group Creditor Insurance - Despite a sharp drop in car sales in the
      country, the Group Creditor Insurance sector ended the quarter with a
      1% increase in sales compared to the fourth quarter of 2007. Sales for
      this sector rely on car sales, since the products are distributed
      primarily by car dealers. The Company has been a leader in Canada in
      the creditor insurance market among car dealers for several years.

    - Special Markets Group (SMG) - The SMG sector continued its regular
      growth, with a 7% increase in sales compared to the same period the
      previous year. This sector has so far been very resilient to the
      economic environment. This sector specializes in certain insurance
      markets that are not well served by traditional insurance carriers.

    - Group Pensions - The Group Pensions sector had another excellent
      quarter, with a 48% increase in sales compared to the same period in
      2007. Sales were strong in the accumulation products market (savings
      products) and in the payout products market (insured annuity products),
      which was particularly active in 2008. The result for the quarter
      pushed sales for the year to a record $1.1 billion, up 35% over the
      previous year. This is the first time that sales have surpassed the
      billion dollar mark in this sector. As with the Group Insurance
      Employee Plans sector, more than half of all sales were made outside
      Quebec during the year, in accordance with the Company's desire to
      expand throughout the country.


    -------------------------------------------------------------------------
    Sales(1)
    -------------------------------------------------------------------------
                               Fourth quarter                Year
    -------------------------------------------------------------------------
    (Millions of
     dollars, unless
     otherwise                           Vari-                         Vari-
     indicated)      2008      2007     ation      2008      2007     ation
    -------------------------------------------------------------------------
    Individual
     Insurance
      Minimum
       premiums      35.3      33.3         6%    118.6     111.0         7%
      Excess
       premiums       6.9      15.6       (56%)    28.3      48.0       (41%)
    -------------------------------------------------------------------------
    Total            42.2      48.9       (14%)   146.9     159.0        (8%)
    -------------------------------------------------------------------------
    Individual Wealth
     Management
      General fund   87.3      77.7        12%    345.5     334.4         3%
      Segregated
       funds        149.2     189.0       (21%)   815.7     990.6       (18%)
      Mutual funds  214.4     397.1       (46%) 1,261.2   1,796.9       (30%)
    -------------------------------------------------------------------------
    Total           450.9     663.8       (32%) 2,422.4   3,121.9       (22%)
    -------------------------------------------------------------------------
    Group Insurance
      Employee
       Plans         22.1      10.2       117%     92.9      72.0        29%
      Creditor
       Insurance     41.6      41.1         1%    194.2     192.0         1%
      Special
       Markets
       Group (SMG)   31.8      29.8         7%    112.9     104.4         8%
    -------------------------------------------------------------------------
    Group Pensions  257.8     174.2        48%  1,114.9     828.3        35%
    -------------------------------------------------------------------------


    Value of new business - The value of new business decreased by 6% (or $1.8
million) in the fourth quarter compared to the same period last year,
amounting to $27.3 million ($0.34 per common share). This decrease comes
solely from the Individual Wealth Management sector, due to a decrease in new
fund entries, since the value of new business was up in all other sectors,
thanks primarily to improved profit margins. Despite the decrease in the
fourth quarter, the value of new business was up 1% for the year, amounting to
$122.8 million.

    Financial Strength
    Following are the financial strength highlights for the fourth quarter.

    Solvency ratio - Despite the volatility of the financial markets,
financial strength continued to improve in 2008. The Company expects to end
the year with a solvency ratio of about 200% as at December 31, 2008. This is
higher than the 193% ratio recorded as at December 31, 2007 and equal to the
ratio as at September 30, 2008. The solvency ratio should be at the top of the
Company's 175% to 200% target range.
    In the last quarter, the solvency ratio benefited from a $100 million
preferred share issue concluded on November 25, 2008 (this issue added 10
percentage points to the solvency ratio) and from changes made to the solvency
standards by the regulatory authorities. These changes affected the interest
margin pricing risk (addition of 10 percentage points to the solvency ratio),
the unrealized gains and losses on available-for-sale debt securities
(addition of 4 percentage points) and the segregated funds guarantee (addition
of 12 percentage points). Changes to the segregated funds guarantee allowed
the Company to avoid having capital requirements for the segregated funds
guarantee.
    On the other hand, there was downward pressure on the solvency ratio due
to the loss recorded during the quarter and the gradual recognition over two
years of the impact of the new accounting standards that took effect on
January 1, 2007 (the effect of the new accounting standards has now been fully
recognized).

    Capitalization - The Company's capital totalled $1,857 million as at
December 31, 2008, a decrease of 3% ($55 million) compared to September 30,
2008. This decrease is explained by the loss in the fourth quarter and by the
dividends paid to common shareholders, which more than offset the capital
contribution resulting from the preferred share issue. The Company's book
value per common share amounted to $20.34 as at December 31, 2008, down 9%
compared to September 30, 2008 ($22.25). This decrease is explained by the
reduction in the Company's capital, but also by the $22 million increase in
unrealized losses on available-for-sale securities.

    Financial leverage - The combined effect of the preferred share issue and
the loss for the quarter increased the Company's debt ratio, which
nevertheless remains at a prudent level. The debt ratio increased from 17.0%
as at September 30, 2008 to 17.9% as at December 31, 2008, if the subordinated
debentures alone are included in the debt items, and from 22.5% as at
September 30, 2008 to 26.9% as at December 31, 2008 if the preferred shares
are added.

    Quality of Investments

    Despite the devaluation of certain securities during the quarter, the
quality of investments remained excellent given the gloomy economic
environment. Following are a few highlights of the quarter:

    - As indicated earlier, the Company devalued by 14% the $104.1 million in
      non-bank sponsored asset-backed commercial paper to which it is
      exposed, increasing the total devaluation of these securities to 29%.

    - The Company sold the bond that it held in American International Group,
      Inc. (AIG). The Company had a $15.8 million bond in AIG (the parent
      company). This investment was devalued by 40% in the third quarter. The
      sale of this security did not have any material impact on the results
      for the quarter.

    - Given the economic environment, the Company reduced the value of a few
      securities that were weakened by the current context by $3.0 million
      before taxes ($2.2 million after taxes).

    - Net impaired investments decreased slightly during the quarter, from
      $8.7 million as at September 30, 2008 to $8.4 million as at December
      31, 2008. The proportion of net impaired investments represents just
      0.06% of total investments as at December 31, 2008 (0.06% as at
      September 30, 2008).

    - Almost the entire bond portfolio is composed of securities rated BBB or
      higher (99.77% as at December 31, 2008 compared to 99.95% as at
      September 30, 2008).

    - The delinquency rate of the mortgage loan portfolio decreased slightly
      during the quarter, from 0.31% as at September 30, 2008 to 0.26% as at
      December 31, 2008, with no new loans defaulting in the fourth quarter.
      Delinquent loans represent just $9.2 million of a $3.5 billion
      portfolio.

    - The real estate occupancy rate remained high and stable during the
      quarter (94.0% as at December 31, 2008), and the market value of the
      real estate portfolio is still much higher than the book value.

    - Finally, there were very few changes in the last quarter for securities
      that have been making the headlines, other than the fact that the
      Company sold its interest in AIG. The Company has no investments in the
      U.S. subprime mortgage loan market, no investments in monolines, a $0.7
      million investment in the U.S. firms Freddie Mac and Fannie Mae, no
      exposure to Nortel, Teck Cominco and CanWest, a $4 million investment
      in asset-backed securities in the U.S., an investment lower than $25
      million in the securities of United Kingdom financial institutions,
      including just $3 million in capital notes, and minimal exposure to
      securities that are currently receiving media attention in the
      aviation, automobile, telecommunications and print sectors.


    -------------------------------------------------------------------------
    Investment Quality Indices
    -------------------------------------------------------------------------
    (Millions of dollars,           December 31,  September 30,  December 31,
     unless otherwise indicated)           2008           2008          2007
    -------------------------------------------------------------------------
    Net impaired investments                8.4            8.7          11.7
    -------------------------------------------------------------------------
    Net impaired investments as
     a % of total investments              0.06%          0.06%         0.08%
    -------------------------------------------------------------------------
    Bonds - Rated BB and lower             0.23%          0.05%         0.11%
    -------------------------------------------------------------------------
    Mortgage loans - Delinquency rate      0.26%          0.31%         0.16%
    -------------------------------------------------------------------------
    Real estate - Market/book value       129.4%         125.4%        129.5%
    -------------------------------------------------------------------------


    Acquisitions

    The Company continued to build for the future with the conclusion of two
new acquisitions in the fourth quarter.

    On October 31, 2008, the Company concluded the acquisition of all issued
and outstanding shares of Sarbit Asset Management Inc. ("Sarbit"). Sarbit is a
mutual fund management firm founded in 2005 by Larry Sarbit, a portfolio
manager with over 28 years of experience. When the transaction closed, Sarbit
had some $100 million in assets under management. Sarbit funds will be
integrated into the fund family of IA Clarington Investments Inc., Industrial
Alliance's mutual fund management subsidiary. Larry Sarbit and his investment
team will continue to act as investment advisors for Sarbit's U.S. equity
fund.
    On December 31, 2008, the Company also concluded the acquisition of the
Quebec-based mutual fund and insurance distribution network of DundeeWealth
Inc. ("DundeeWealth"). When the transaction closed, DundeeWealth had some 300
mutual fund advisors and over $2.0 billion in assets under administration. The
acquired operations will be merged with Investia Financial Services Inc.
("Investia"), one of Industrial Alliance's two mutual fund brokerage firms.
This acquisition will increase the size, scope and efficiency of Investia's
mutual fund distribution operations.
    These two acquisitions bring the number of acquisitions concluded in 2008
to five (Excellence Life Insurance Company and its affiliated companies on
January 31, 2008, the shell company United Family Life Insurance Company in
the U.S. on May 1, and AEGON Dealer Services Canada Inc. and the affiliated
Money Concepts network on July 1, 2008).

    Non-GAAP Financial Measures

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

    Forward-Looking Statements

    This news release may contain forward-looking statements about the
operations, objectives and strategies of Industrial Alliance, as well as its
financial situation and performance. The forward-looking nature of these
statements can generally, though not always, be identified by the use of words
such as "may," "expect," "anticipate," "intend," "believe," "estimate,"
"feel," "continue," or other similar expressions, in the affirmative, negative
or conditional. Unless otherwise indicated, any forward-looking information
that presents prospective results of operations, financial position or cash
flows was approved by management on the date of this news release.
    Forward-looking statements entail risks and uncertainties that may cause
the actual results, performance or achievements of Industrial Alliance to
differ materially from the future results, performance or achievements
expressed or implied by the forward-looking statements. Factors that could
cause the Company's actual results to differ from expected results include
changes in government regulations or tax laws, competition, technological
changes, global capital market activity, interest rates, changes in
demographic data, changes in consumer behaviour and demand for the Company's
products and services, catastrophic events, and general economic conditions in
Canada or elsewhere in the world. A description of significant factors that
could affect forward-looking statements is contained in the Management's
Discussion and Analysis section of the Company's most recent annual report.
    This list is not exhaustive of the factors that may affect any of
Industrial Alliance's forward-looking statements. These and other factors must
be examined carefully and readers should not place undue reliance on
Industrial Alliance's forward-looking statements. Where the forward-looking
statements are presented as guidance regarding the future financial results of
Industrial Alliance, they are provided to help investors understand the impact
on earnings of the Company's current plans and objectives. The Company may
also provide objectives from time to time. An objective should be interpreted
as a statement of management's goals in managing the Company, and not
necessarily as a forecast that the objective will be met.
    Industrial Alliance is not obligated to revise or update these
forward-looking statements to reflect events, circumstances or situations that
occur after the date of this news release, whether foreseeable or not, except
as required by applicable securities legislation.

    Conference Call

    Management will hold a conference call to present the Company's results at
8:30 this morning (ET). To listen in on the conference call, dial 1 800
761-0059 (toll-free). A replay of the conference call will also be available
for a one-week period, starting at 11:30 this morning. To listen to the
conference call replay, dial 1 800 558-5253 (toll-free) and enter access code
21411877. A webcast of the conference call (in listen only mode) will also be
available on the Industrial Alliance website at www.inalco.com, as well as on
the CNW website at www.cnw.ca.

    About Industrial Alliance

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

    Notes
    -----
    1) 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.
    




For further information:

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


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