Industrial Alliance Ends the First Quarter of 2009 With $46.2 Million in Net Income and Increased Financial Strength



    The dividend is renewed at $0.2450 per common share

    QUEBEC CITY, May 6 /CNW Telbec/ - Despite the prevailing economic and
financial environment, Industrial Alliance Insurance and Financial Services
Inc. ("Industrial Alliance" or "the Company") ended the first quarter of 2009
with net income to common shareholders of $46.2 million, an 11.2% return on
equity, positive net sales in all lines of business, growth of individual life
insurance sales in the family market, a reinforced solvency ratio of 204%,
which is above the Company's 175% to 200% target range, and high quality
investments, with just 0.06% of the portfolio made up of net impaired
investments.
    "Despite weak financial markets and the economic slowdown, we are
continuing to produce very satisfying results," declared Yvon Charest,
President and Chief Executive Officer. "Profits are positive, the return is
relatively high, financial strength remains very solid, the quality of
investments remains excellent, the Company's book value is growing and we
still have enough leeway to absorb significant market downturns. We also
continued to take steps to solidify our balance sheet. In the first quarter,
we issued $100 million in subordinated debentures and we continued to actively
manage our investment portfolio to optimize the asset mix and the return."
    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, and 9% higher
than the one announced for the same period last year. According to the
Company's business plan, the quarterly dividend to common shareholders is
expected to remain at the current level for 2009.

    
    -------------------------------------------------------------------------
    Highlights
    -------------------------------------------------------------------------
    (In millions of dollars, unless
     otherwise indicated)               Q1 2009       Q1 2008     Variation
    -------------------------------------------------------------------------
    Net income to common shareholders      46.2          61.7           (25%)
    Earnings per common share (diluted)   $0.58         $0.76        ($0.18)
    Return on common shareholders
     equity                                11.2%         14.5%     (330 bps)
    Premiums and deposits               1,238.5       1,418.4           (13%)
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                                       March 31,  December 31,     March 31,
                                           2009          2008          2008
    -------------------------------------------------------------------------
    Assets under management and
     under administration              49,731.5      49,472.2      50,326.5
    Solvency ratio                          204%          199%          188%
    Net impaired investments                8.4           8.8          17.1
    Net impaired investments as
     a % of total investments              0.06%         0.06%         0.12%
    -------------------------------------------------------------------------
    

    Following are the Company's main results for the first quarter in terms
of profitability, business growth and financial strength.

    Profitability

    Industrial Alliance ended the first quarter of 2009 with net income to
common shareholders of $46.2 million, compared to $61.7 million for the same
period in 2008. This result translates into diluted earnings per common share
of $0.58 ($0.76 in the first quarter of 2008) and a return on common
shareholders equity of 11.2% on an annualized basis (14.5% in the first
quarter of 2008).
    The results for the quarter benefited from a $7.5 million gain after
taxes ($0.10 per common share) resulting from the favourable evolution of the
gap between the market value of the debt instruments and that of the
underlying assets. Debt instruments were classified as "held-for-trading" when
the new accounting standards took effect on January 1, 2007. Hence, any
difference between the variation in the market value of the debt instruments
and the corresponding assets must be recognized immediately on the income
statement. However, this difference should be gradually eliminated by the time
the debt instruments mature, in the next five years.
    On the other hand, the results for the quarter were affected by the
current economic and financial environment, which reduced the Company's
expected income by about $9.9 million after taxes ($0.12 per common share).

    
    - The stock market downturn reduced the Company's income by some
      $5.8 million after taxes ($0.07 per common share), compared to the
      expected result. The S&P/TSX index of the Toronto Stock Exchange was
      very volatile during the quarter, suffering strong downward pressure
      for a few weeks before regaining a good part of the lost ground, to
      finally close the quarter down 3% compared to December 31, 2008. The
      stock market downturn had the following effects:

      - Reduced the fee income on the investment funds managed by the Company
        by $3.9 million after taxes. This shortfall primarily affected the
        Individual Wealth Management sector and, to a lesser degree, Group
        Pensions.

      - Reduced the discounted future revenues on Universal Life policy funds
        by $1.3 million after taxes. This shortfall only affected the
        Individual Insurance sector.

      - Reduced the income on capital by $0.6 million after taxes. This
        shortfall comes from a decrease in the value of seed money and the
        decrease in income from a life insurance company in which Industrial
        Alliance has a 45% share.

    - The financial environment reduced the Company's income by $0.7 million
      after taxes ($0.01 per common share), following the permanent writedown
      of a bond.

    - The economic situation has contributed to an increase in group
      insurance claims particularly for the long-term disability benefit.
      This increase led to an experience loss of $3.4 million after taxes
      ($0.04 per common share).

    -------------------------------------------------------------------------
    Impact of the Economic and Financial Environment on the Net Income to
    Common Shareholders for the First Quarter, by Component
    -------------------------------------------------------------------------
    (In millions of dollars, unless      Before         After    Per common
     otherwise indicated)                 taxes         taxes         share
    -------------------------------------------------------------------------
    Stock market downturn
      Lower than expected management
       fees on investment funds            (5.5)         (3.9)       ($0.05)
      Discounted future revenues on
       Universal Life policy funds         (1.8)         (1.3)       ($0.01)
      Income on capital                    (0.8)         (0.6)       ($0.01)
    -------------------------------------------------------------------------
      Subtotal                             (8.1)         (5.8)       ($0.07)
    Credit                                 (1.0)         (0.7)       ($0.01)
    Economy                                (4.6)         (3.4)       ($0.04)
    -------------------------------------------------------------------------
    Total                                 (13.7)         (9.9)       ($0.12)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The items indicated above affected both the Company's operating profit and
income on capital. The following table shows the impact of these various items
by line of business.

    -------------------------------------------------------------------------
    Impact of the Economic and Financial Environment on the Net Income to
    Common Shareholders for the First Quarter, by Line of Business
    -------------------------------------------------------------------------
    (In millions of
     dollars, unless          Stock
     otherwise indicated)   markets    Credit   Economy     Total     Total
    -------------------------------------------------------------------------
                                                                     (After
    Operating profit (loss)             (Before taxes)                taxes)
      Individual Insurance     (2.0)        -         -      (2.0)     (1.5)
      Individual Wealth
       Management              (5.1)        -         -      (5.1)     (3.6)
      Group Insurance             -         -      (4.6)     (4.6)     (3.4)
      Group Pensions           (0.2)        -         -      (0.2)     (0.1)
    -------------------------------------------------------------------------
      Subtotal                 (7.3)        -      (4.6)    (11.9)     (8.6)
    Income on capital          (0.8)     (1.0)        -      (1.8)     (1.3)
    -------------------------------------------------------------------------
    Total - Before taxes       (8.1)     (1.0)     (4.6)    (13.7)        -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total - After taxes        (5.8)     (0.7)     (3.4)     (9.9)     (9.9)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per common share
     (diluted)               ($0.07)   ($0.01)    ($0.04)  ($0.12)   ($0.12)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                                            After
                                                     distribution       Per
    (In millions of                                            of    common
     dollars, unless                                    income on     share
     otherwise indicated)                                 capital  (diluted)
    -------------------------------------------------------------------------
    Operating profit (loss)                                   (After taxes)
      Individual Insurance                                   (2.5)   ($0.03)
      Individual Wealth
       Management                                            (3.6)   ($0.05)
      Group Insurance                                        (3.6)   ($0.04)
      Group Pensions                                         (0.2)        -
    -------------------------------------------------------------------------
      Subtotal                                               (9.9)   ($0.12)
    Income on capital                                         -         -
    -------------------------------------------------------------------------
    Total - Before taxes                                      -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total - After taxes                                       -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Per common share
     (diluted)                                                -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Following are a few additional points worth highlighting about the
Company's first quarter profitability.

    - Stocks matched to long-term liabilities and segregated funds guarantee
      - The Company did not have to increase the provisions for future policy
      benefits for stocks matched to long-term liabilities and still does not
      have to maintain provisions for the segregated funds guarantee,
      according to industry standards of practice. The Company had
      strengthened its provisions for future policy benefits at the end of
      2008 to be in a position to absorb a stock market downturn of
      approximately 13%, compared to the level reached at the end of 2008.
      The Company does not expect that it will have to strengthen its
      provisions for future policy benefits for stocks matched to long-term
      liabilities, including the segregated funds guarantee, as long as the
      S&P/TSX remains above approximately 7,850 points.

    - Strain on individual insurance sales - Strain amounted to $20.8 million
      for the first quarter, which represents 66% of individual insurance
      sales (sales are measured in terms of first-year annualized premiums).
      Strain as a percentage of sales exceeds the Company's 50% to 55% mid-
      term target range. This difference comes primarily from a sharp
      decrease in the sale of the savings component of Universal Life
      policies.

    - Auto and home insurance - The auto and home insurance subsidiary had a
      better start to the year than in 2008. Claims are in line with
      expectations. As a result, the company ended the first quarter with a
      net loss of $0.8 million (it is normal for a general insurance company
      to end the first quarter with a loss, since the first quarter covers
      the winter months). This result compares to a net loss of $1.4 million
      in the first quarter of 2008, when the Company had to deal with an
      extremely tough winter. As a reminder, the auto and home insurance
      subsidiary ended 2008 with a $2.4 million net profit for the entire
      financial year.

    - Effective tax rate - The effective tax rate amounted to 27.4% for the
      first quarter, which is slightly lower than the 28.0% rate obtained in
      the first quarter of 2008, if the $4.0 million tax gain posted in the
      first quarter of last year is excluded. This rate is slightly higher
      than the Company's expectations of a 26% to 27% effective tax rate in
      the medium term.

    - Non-bank asset-backed commercial paper - The restructuring of the
      non-bank asset-backed commercial paper (ABCP) was completed on
      January 21, 2009, when the ABCP was exchanged for interest bearing
      floating rate notes. Three categories of notes were created, according
      to the characteristics of the underlying assets: traditional assets,
      synthetic assets and ineligible assets. These three categories have a
      maturity date equivalent to that of the underlying assets. Following
      the restructuring, the Company now has ABCP with a nominal value of
      $103.2 million ($104.1 million before the restructuring). The paper is
      divided among the three categories of notes as follows: traditional
      assets: 40%; synthetic assets: 51%; and ineligible assets: 9%. The new
      notes are subject to a regular valuation. Based on the most recent
      valuation, the 29% writedown taken by the Company so far on the ABCP is
      still adequate.
    

    Business Growth

    Following are the business growth highlights for the first quarter.

    Premiums and deposits - After several years of strong growth, premiums
and deposits have suffered the effects of the economic downturn. This downturn
has reduced consumer enthusiasm for retail products (savings and investment
products), but has not prevented the group products market from continuing to
grow. Nevertheless, premium growth in the group sectors was not enough to
erase the decline in the retail sectors, such that the first quarter ended
with $1.2 billion in premiums and deposits, down 13% compared to the same
period in 2008.

    
    -------------------------------------------------------------------------
    Premiums and Deposits
    -------------------------------------------------------------------------
    (In millions of dollars, unless
     otherwise indicated)               Q1 2009       Q1 2008     Variation
    -------------------------------------------------------------------------
    Individual Insurance                  226.6         226.0             0%
    Individual Wealth Management          589.0         792.7           (26%)
    Group Insurance                       232.6         219.3             6%
    Group Pensions                        157.6         149.6             5%
    General Insurance                      32.7          30.8             6%
    -------------------------------------------------------------------------
    Total                               1,238.5       1,418.4           (13%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    - Individual Insurance - Individual Insurance sales continued to grow in
      the family market, but were down in the high net-worth market,
      resulting in a 7% decrease in sales for the sector in the first quarter
      compared to the same period last year. Sales of insurance policies used
      for financial planning purposes decreased somewhat during the quarter,
      due to the instability of the markets ("excess" premiums were down
      36%), whereas sales were up for policies used to cover families basic
      insurance needs ("minimum premiums" were up 2% for the quarter). Also,
      the level of activity among agents remained steady at the beginning of
      the year, with the number of policies sold up 3% during the quarter.
      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 stock market downturn continued to
      slow sales of savings and investment products. Despite record sales of
      deposit products, such as guaranteed investment certificates (which
      jumped 21%), sales in the Individual Wealth Management sector were down
      26% for the first quarter compared to the same period last year. Net
      segregated fund and mutual fund sales continue to be positive, however,
      totalling $166.7 million in the first quarter. At the end of the first
      quarter, the Company ranked 4th in terms of net segregated fund sales,
      with a 7.3% market share. For mutual funds, the Company continues to
      gain market share, while its IA Clarington Investments subsidiary
      ranked 10th at quarter-end in terms of net sales of long-term funds,
      compared to 19th in terms of assets. The Company's wide range of funds,
      their good relative performance in the last few quarters 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 - After having reached a record level
      in the first quarter of last year, employee plan sales are down 12%
      compared to the same period last year, totalling $24.4 million.
      Quotation activity was slower in the first quarter, due to the gloomy
      economic environment, and the sector made few large group sales. On the
      other hand, sales were very strong outside Quebec, thanks to the close
      ties developed with new distributors in the last few years. More than
      half of all sales came from outside Quebec in the first quarter, in
      accordance with the Company's desire to expand throughout the country.

    - Group Creditor Insurance - The decline in car sales finally had an
      impact on the Group Creditor Insurance sector, whose sales dropped 22%
      in the first quarter compared to the same period last year, totalling
      $29.3 million. Light vehicle sales were also down 22% in the first
      quarter in Canada. 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.

    - Group Insurance: Special Markets Group (SMG) - The SMG sector continued
      its regular growth, with $28.7 million in sales, up 3% compared to the
      same period last year. This sector specializes in certain insurance
      markets that are not well served by traditional group insurance
      carriers.

    - Group Pensions - The Group Pensions sector had another good quarter,
      with $157.6 million in sales, up 5% over the same period last year. The
      increase in sales is primarily explained by the signing of agreements
      with a few large groups in the savings product market (accumulation
      products). However, sales of annuity products (disbursement products)
      are down, as the Company continues to favour the attainment of profit
      margins over business growth. As with the Group Insurance Employee
      Plans sector, more than half of all sales for this sector were made
      outside Quebec in the first quarter, in accordance with the Company's
      desire to expand throughout the country.

    -------------------------------------------------------------------------
    Sales(1)
    -------------------------------------------------------------------------
    (In millions of dollars,
      unless otherwise indicated)       Q1 2009       Q1 2008     Variation
    -------------------------------------------------------------------------
    Individual Insurance
      Minimum premiums                     26.3          25.8             2%
      Excess premiums                       5.2           8.1           (36%)
    -------------------------------------------------------------------------
      Total                                31.5          33.9            (7%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Individual Wealth Management
      General fund                        122.2         101.4            21%
      Segregated funds                    217.7         291.5           (25%)
      Mutual funds                        249.1         399.8           (38%)
    -------------------------------------------------------------------------
      Total                               589.0         792.7           (26%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Group Insurance
      Employee Plans                       24.4          27.8           (12%)
      Creditor insurance                   29.3          37.4           (22%)
      Special Markets Group (SMG)          28.7          28.0             3%
    Group Pensions                        157.6         149.6             5%
    -------------------------------------------------------------------------

    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.


    Assets under management and under administration - Positive net fund
entries in all lines of business were partially cancelled out by the stock
market downturn in the first quarter, such that assets under management and
under administration totalled $49.7 billion as at March 31, 2009, up 1% for
the quarter.

    -------------------------------------------------------------------------
    Assets Under Management and Under Administration
    -------------------------------------------------------------------------
                                       March 31,  December 31,     March 31,
    (In millions of dollars)               2009          2008          2008
    -------------------------------------------------------------------------
    Assets under management            30,416.8      30,213.8      32,790.3
    Assets under administration        19,314.7      19,258.4      17,536.2
    -------------------------------------------------------------------------
    Total                              49,731.5      49,472.2      50,326.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Value of new business - The value of new business decreased by 12% (or
$3.8 million) in the first quarter compared to the same period last year,
amounting to $28.4 million ($0.35 per common share). The decline in sales in
several lines of business, particularly the Individual Wealth Management
sector, reduced the value of new business by $6.6 million. This decrease was
partially offset, however, by improved profit margins and a favourable sales
mix, which increased the value of new business by $0.9 million, and by a
reduction in the discount rate (resulting from the drop in interest rates),
which increased the value of new business by $1.9 million.

    Financial Strength

    Following are the financial strength highlights for the first quarter.

    Solvency - Despite the volatility of the financial markets, the Company's
financial strength continued to improve. The solvency ratio amounted to 204%
as at March 31, 2009, which is 5 percentage points higher than December 31,
2008 (199%) and higher than the Company's 175% to 200% target range.
    The increase in the solvency ratio is primarily attributable to the
capital contribution resulting from a $100 million subordinated debenture
issue. This issue added 10 percentage points to the solvency ratio.
    On the other hand, there was downward pressure on the solvency ratio due
to the capital requirements for the segregated funds guarantee. These
requirements reduced the solvency ratio by 4 percentage points. The Company
had to start considering capital requirements for the segregated funds
guarantee when the S&P/TSX index fell below 9,000 points. The Toronto Stock
Exchange closed at 8,720 points on March 31, 2009. However, the Company is
still not required to maintain provisions for future policy benefits for the
segregated funds guarantee, according to industry standards of practice.
    Capitalization - The Company's capital totalled $2,390.4 million as at
March 31, 2009, which is 5% ($119.6 million) higher than December 31, 2008.
This growth is primarily explained by the capital contribution resulting from
the $100 million subordinated debenture issue and the increase in retained
earnings, which corresponds to the income for the quarter reduced by the
dividends paid to common shareholders.
    Book value - The book value per common share amounted to $20.70 as at
March 31, 2009, up 2% compared to December 31, 2008. This increase is
essentially explained by the increase in retained earnings, which corresponds
to the income for the quarter reduced by the dividends paid to common
shareholders.
    Financial leverage - The subordinated debenture issue in the first
quarter increased the debt ratio, which nevertheless remains at a prudent
level. Hence, the debt ratio amounted to 19.9% as at March 31, 2009 (17.0% as
at December 31, 2008), if the debentures alone are included in the debt items,
and 29.3% (26.8% as at December 31, 2008), if the preferred shares are added.
    Quality of investments - Despite the prevailing economic environment, the
quality of investments remained good in the first quarter. Following are a few
highlights of the quarter:

    
    - In terms of securities writedowns, the Company reduced the value of a
      bond that was weakened by the current economic environment by
      $1.0 million before taxes ($0.7 million after taxes or $0.01 per common
      share).

    - Net impaired investments decreased during the quarter, from
      $8.8 million as at December 31, 2008 to $8.4 million as at March 31,
      2009. The proportion of net impaired investments represents just 0.06%
      of total investments, the same proportion as the end of 2008.

    - The proportion of bonds rated BB and lower increased slightly during
      the quarter, from 0.23% as at December 31, 2008 to 0.26% as at
      March 31, 2009. This increase is primarily explained by the fact that
      the non-bank asset-backed commercial paper (ABCP), which was
      restructured in January into floating rate notes, is now part of the
      bond portfolio. All ABCP that is not rated by the rating agencies has
      been classified as BB and lower.

    - The quality of the mortgage portfolio remained excellent, with no new
      loans defaulting in the first quarter. The mortgage loans delinquency
      rate remained stable at 0.26% of the portfolio between December 31,
      2008 and March 31, 2009. Delinquent loans represent just $9.1 million
      of a $3.5 billion portfolio, including $7.3 million for uninsured
      loans.

    - The real estate occupancy rate remained high and stable during the
      quarter. The occupancy rate was 94.2% as at March 31, 2009 (94.0% as at
      December 31, 2008), and the market value of the real estate portfolio
      is still much higher than the book value.

    -------------------------------------------------------------------------
    Investment Quality Indices
    -------------------------------------------------------------------------
    (In millions of dollars,           March 31,  December 31,     March 31,
     unless otherwise indicated)           2009          2008          2008
    -------------------------------------------------------------------------
    Net impaired investments                8.4           8.8          17.1
    Net impaired investments as a %
     of total investments                  0.06%         0.06%         0.12%
    Bonds - Rated BB and lower             0.26%         0.23%         0.11%
    Mortgage loans - Delinquency rate      0.26%         0.26%         0.33%
    Real estate - Occupancy rate           94.2%         94.0%         96.2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    There were very few changes in the last quarter for securities that have
been making the headlines. 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, CanWest and Abitibi Bowater, an $11 million investment in
asset-backed securities in the U.S., less than $25 million invested in the
securities of U.K. financial institutions, including just $3 million in
capital notes, and minimal exposure to securities that are currently receiving
a great deal of media attention in the aviation, automobile,
telecommunications and print sectors.
    Following are three additional points concerning the quality of
investments:

    - Unrealized gross losses on fixed income securities classified as
      "available-for-sale" amounted to $58.5 million as at March 31, 2009,
      down from $65.3 million as at December 31, 2008.

    - Unrealized net losses on fixed income securities classified as
      "available-for-sale" amounted to $44.8 million as at March 31, 2009,
      down from $52.3 million as at December 31, 2008.

    - Unrealized losses on bonds whose market value has been 20% or more
      lower than the nominal value for six or more months amounted to
      $44.7 million as at March 31, 2009, compared to $12.7 million as at
      December 31, 2008. 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.

    Non-GAAP Financial Measures

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

    Forward-Looking Statements

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

    Conference Call

    Management will hold a conference call to present the Company's results
on Wednesday, May 6, 2009 at 11:30 a.m. (ET). To listen in on the conference
call, dial 1 800 891-8794 (toll-free). A replay of the conference call will
also be available for a one-week period, starting at 2:00 p.m. on Wednesday,
May 6, 2009. To listen to the conference call replay, dial 1 800 558-5253
(toll-free) and enter access code 21417730. 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 three million Canadians, employs more than 3,400 people and manages and
administers over $49 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.

    
    CONSOLIDATED INCOME STATEMENTS
    -------------------------------------------------------------------------

    (in millions of dollars, unless                      Three months ended
     otherwise indicated)                                     March 31
                                                         2009          2008
                                                            $             $
                                                             (unaudited)
    Revenues
    Premiums                                              989         1,019
    Net investment income                                  60           177
    Fees and other revenues                                81            93
    -------------------------------------------------------------------------
                                                        1,130         1,289

    Policy benefits and expenses
    Payments to policyholders and beneficiaries           476           490
    Net transfer to segregated funds                      288           342
    Dividends, experience rating refunds and
     interest on amounts on deposit                        14            20
    Change in provisions for future policy benefits        56           119
    -------------------------------------------------------------------------
                                                          834           971
    Commissions                                           122           129
    Premium and other taxes                                15            15
    General expenses                                       92            80
    Financing expenses                                     (3)           11
    -------------------------------------------------------------------------
                                                        1,060         1,206

    Income before income taxes                             70            83
    Less: income taxes                                     19            19
    -------------------------------------------------------------------------
    Net income                                             51            64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Less: net income attributed to participating
     policyholders                                          1             1
    -------------------------------------------------------------------------
    Net income attributed to shareholders                  50            63
    Less: preferred share dividends                         4             1
    -------------------------------------------------------------------------
    Net income available to common shareholders            46            62
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share (in dollars)
      basic                                              0.58          0.77
      diluted                                            0.58          0.76


    CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------

                                          As at         As at         As at
                                       March 31   December 31      March 31
    (in millions of dollars)               2009          2008          2008
                                              $             $             $
                                     (unaudited)                 (unaudited)
    Assets
    Invested assets
    Bonds                                 8,114         7,942         8,233
    Mortgages                             3,507         3,508         3,019
    Stocks                                1,332         1,340         1,708
    Real estate                             635           630           496
    Policy loans                            366           320           302
    Cash and cash equivalents               254           259           300
    Other invested assets                   344           397           303
    -------------------------------------------------------------------------
                                         14,552        14,396        14,361

    Other assets                            603           550           533
    Intangible assets                       352           354           319
    Goodwill                                115           115           118
    -------------------------------------------------------------------------
    Total general fund assets            15,622        15,415        15,331
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segregated funds net assets           8,946         8,924        10,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Policy liabilities
    Provisions for future policy
     benefits                            11,909        11,853        11,832
    Provisions for dividends to
     policyholders and experience
     rating refunds                          60            56            54
    Benefits payable and provision for
     unreported claims                      167           156           159
    Policyholders' amounts on deposit       187           185           178
    -------------------------------------------------------------------------
                                         12,323        12,250        12,223

    Other liabilities                       597           648           573
    Future income tax                       302           236           307
    Deferred net realized gains              10            10            10
    Debentures                              476           386           328
    Participating policyholders'
     account                                 28            27            25
    -------------------------------------------------------------------------
                                         13,736        13,557        13,466
    -------------------------------------------------------------------------

    Equity
    Share capital                           765           765           662
    Contributed surplus                      20            19            18
    Retained earnings and accumulated
     other comprehensive income           1,101         1,074         1,185
    -------------------------------------------------------------------------
                                          1,886         1,858         1,865
    -------------------------------------------------------------------------
    Total general fund liabilities
     and equity                          15,622        15,415        15,331
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Segregated funds liabilities          8,946         8,924        10,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED PARTICIPATING POLICYHOLDERS' ACCOUNT
    -------------------------------------------------------------------------

                                                         Three months ended
    (in millions of dollars)                                  March 31
                                                         2009          2008
                                                            $             $
                                                             (unaudited)

    Balance at beginning                                   27            24
    Net income for the period                               2             2
    Dividends                                              (1)           (1)
    -------------------------------------------------------------------------
    Net income attributed to participating
     policyholders                                          1             1

    Balance at end                                         28            25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED CONTRIBUTED SURPLUS
    -------------------------------------------------------------------------

                                                         Three months ended
    (in millions of dollars)                                  March 31
                                                         2009          2008
                                                            $             $
                                                             (unaudited)

    Balance at beginning                                   19            17
    Current period contribution for the stock
     option plan                                            1             1
    Stock options exercised                                 -             -
    -------------------------------------------------------------------------

    Balance at end                                         20            18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED SHAREHOLDERS' RETAINED EARNINGS AND
    CONSOLIDATED ACCUMULATED OTHER COMPREHENSIVE INCOME STATEMENTS
    -------------------------------------------------------------------------

                                                         Three months ended
    (in millions of dollars)                                  March 31
                                                         2009          2008
                                                            $             $
                                                             (unaudited)
    Consolidated shareholders' retained earnings
    Balance at beginning                                1,128         1,148
    Net income attributed to shareholders                  50            63
    Common share dividends                                (20)          (18)
    Preferred share dividends                              (4)           (1)
    Purchase and cancellation of common shares              -            (7)
    -------------------------------------------------------------------------

    Balance at end                                      1,154         1,185
    -------------------------------------------------------------------------

    Consolidated accumulated other comprehensive
     income, net of income taxes
    Balance at beginning                                  (54)           (4)
    Total other comprehensive income                        1             4
    -------------------------------------------------------------------------

    Balance at end                                        (53)            -
    -------------------------------------------------------------------------
    Total                                               1,101         1,185
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED ACCUMULATED OTHER COMPREHENSIVE INCOME STATEMENTS
    -------------------------------------------------------------------------

                                          As at         As at         As at
                                       March 31   December 31      March 31
    (in millions of dollars)               2009          2008          2008
                                              $             $             $
                                     (unaudited)                 (unaudited)

    Unrealized gains (losses) on bonds
     classified available-for-sale          (33)          (37)            1
    Unrealized gains (losses) on stocks
     classified available-for-sale          (19)          (16)           11
    Comprehensive income from an entity
     subject to significant influence        (1)           (1)            -
    Currency translation gains (losses)
     on self-sustaining foreign
     operations, net of hedging
     activities                               -             -           (12)
    -------------------------------------------------------------------------
    Consolidated accumulated other
     comprehensive income, net of income
     taxes                                  (53)          (54)            -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
    -------------------------------------------------------------------------

                                                         Three months ended
    (in millions of dollars)                                  March 31
                                                         2009          2008
                                                            $             $
                                                             (unaudited)

    Net income                                             51            64
    Other comprehensive income
    Unrealized gains (losses) arising during the period
     on available-for-sale financial assets:
    Bonds (net of income tax of $2 ($3 in 2008))            5             8
    Stocks (net of income tax of $2 ($1 in 2008))          (4)           (3)
    Reclassification of (gains) losses on
     available-for-sale financial assets
    included in the net income:
    Bonds (net of income tax of $0 ($0 in 2008))           (1)           (1)
    Stocks (net of income tax of $0 ($0 in 2008))           1            (1)
    -------------------------------------------------------------------------
    Change in unrealized gains on available-for-sale
     financial assets                                       1             3

    Change in unrealized currency translation gains
     on self-sustaining foreign operations                  1             1
    Hedges on self-sustaining foreign operations           (1)            -
    -------------------------------------------------------------------------
    Total other comprehensive income                        1             4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Comprehensive income                                   52            68
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Comprehensive income attributed to shareholders        51            67
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Comprehensive income attributed to participating
     policyholders                                          1             1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED CASH FLOWS STATEMENTS
    -------------------------------------------------------------------------

                                                         Three months ended
    (in millions of dollars)                                  March 31
                                                         2009          2008
                                                            $             $
                                                             (unaudited)
    Cash flows from operating activities
    Net income                                             51            64
    Items not affecting cash and cash equivalents:
      Change in provisions for future policy benefits      56           119
      Share of results of entity subject to significant
       influence                                            -            (1)
      Amortization of realized and unrealized gains        (5)           (4)
      Amortization of premiums and discounts                2             -
      Variation of realized and unrealized (gains)
       losses                                              45           (60)
      Realized gains on available-for-sale financial
       assets                                               -            (2)
      Future income taxes                                  62            10
      Stock option plan                                     1             1
      Amortization of deferred sales commissions,
       depreciation of fixed assets and depreciation
       of intangible assets                                14            12
      Other                                                33           (36)
    -------------------------------------------------------------------------
                                                          259            103
    Changes in other assets and liabilities              (125)          (56)
    -------------------------------------------------------------------------
    Cash flows from operating activities                  134            47
    -------------------------------------------------------------------------
    Cash flows from investing activities
    Sales, maturities and repayments of the
     following items:
      Bonds                                               685           472
      Mortgages                                            59            89
      Stocks                                              306            87
      Real estate                                           -             -
      Policy loans                                         28            28
      Other invested assets                                 1             -
    -------------------------------------------------------------------------
                                                        1,079           676
    Purchases of the following items:
      Bonds                                              (794)         (374)
      Mortgages                                           (58)         (188)
      Stocks                                             (341)          (85)
      Real estate                                           -            (7)
      Policy loans                                        (77)          (63)
      Other invested assets                               (24)          (42)
      Acquisition of cash and cash equivalents              -             2
    -------------------------------------------------------------------------
                                                       (1,294)         (757)
    Cash flows from investing activities                 (215)          (81)
    -------------------------------------------------------------------------
    Cash flows from financing activities
    Redemption of common shares                             -            (8)
    Issue of debenture (net of transaction fees of $1)     99             -
    Preferred shareholders dividends                       (4)           (1)
    Common shareholders dividends                         (20)          (18)
    Decrease in mortgage debt                               -            (1)
    -------------------------------------------------------------------------
    Cash flows from financing activities                   75           (28)
    -------------------------------------------------------------------------
    Foreign currency gains on cash and cash equivalents     1             -
    -------------------------------------------------------------------------
    Decrease in cash and cash equivalents                  (5)          (62)
    Cash and cash equivalents at beginning                259           362
    -------------------------------------------------------------------------
    Cash and cash equivalents at end                      254           300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
      Cash                                                 19            (5)
      Cash equivalents                                    235           305
    -------------------------------------------------------------------------
    Total cash and cash equivalents                       254           300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest paid                                           4             1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes paid, net of refunds                      21            26
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED FINANCIAL STATEMENTS OF SEGREGATED FUNDS
    -------------------------------------------------------------------------

    Consolidated statements of            As at         As at         As at
     net assets                        March 31   December 31      March 31
    (in millions of dollars)               2009          2008          2008
                                              $             $             $
                                     (unaudited)                 (unaudited)
    Assets
    Bonds                                 2,785         2,745         2,742
    Mortgages and mortgage-backed
     securities                               -             -             7
    Stocks                                2,367         2,297         2,823
    Fund units                            3,166         3,209         4,067
    Cash, short-term investments and
     other invested assets                  642           655           466
    Other assets                            110            50           105
    -------------------------------------------------------------------------
                                          9,070         8,956        10,210
    Liabilities
    Accounts payable and accrued
     expenses                               124            32            56
    -------------------------------------------------------------------------
    Net assets                            8,946         8,924        10,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated statements of     Three months Twelve months  Three months
     changes in net assets                ended         ended         ended
    (in millions of dollars)           March 31   December 31      March 31
                                           2009          2008          2008
                                              $             $             $
                                     (unaudited)                 (unaudited)

    Balance at beginning                  8,924        10,211        10,211
    Additions:
      Amounts received from
       policyholders                        359         1,792           449
      Interest and dividends                 72           369            61
      Net realized gains (losses)           (88)         (108)           31
      Net decrease in fair value            (87)       (2,062)         (242)
    -------------------------------------------------------------------------
                                          9,180        10,202        10,510
    -------------------------------------------------------------------------
    Deductions:
      Amounts withdrawn by
       policyholders                        197         1,097           311
      Operating expenses                     37           181            45
    -------------------------------------------------------------------------
                                            234         1,278           356
    -------------------------------------------------------------------------
    Balance at end                        8,946         8,924        10,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                       Three months ended March 31, 2009 and 2008 (unaudited)
                         (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

                        Three months ended March 31, 2009 (unaudited)

                       Individual           Group

                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
                        $         $         $         $         $         $

    Revenues
    Premiums          227       340       233       157        32       989
    Net investment
     income           (18)       23        18        36         1        60
    Fees and other
     revenues           4        67         2         7         1        81
    -------------------------------------------------------------------------
                      213       430       253       200        34     1,130
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to
     policyholders     85       111       182       142        26       546
    Net transfer
     to segregated
     funds              -       241         -        47         -       288
    Commissions,
     general and
     other expenses    82        69        61         5         9       226
    -------------------------------------------------------------------------
                      167       421       243       194        35     1,060
    -------------------------------------------------------------------------
    Income before
     income taxes      46         9        10         6        (1)       70
    Less: income
     taxes             12         3         3         1         -        19
    -------------------------------------------------------------------------
    Net income
     before
     allocation
     of other
     activities        34         6         7         5        (1)       51
    Allocation
     of other
     activities        (1)        -         -         -         1         -
    -------------------------------------------------------------------------
    Net income         33         6         7         5         -        51
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders      32         6         7         5         -        50
    Attributed to
     participating
     policyholders      1         -         -         -         -         1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                        Three months ended March 31, 2008 (unaudited)

                       Individual           Group

                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
                        $         $         $         $         $         $

    Revenues
    Premiums          226       393       219       150        31     1,019
    Net investment
     income            68        30        28        50         1       177
    Fees and other
     revenues           3        80         2         7         1        93
    -------------------------------------------------------------------------
                      297       503       249       207        33     1,289
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to
     policyholders    169        71       175       188        26       629
    Net transfer
     to segregated
     funds              -       336         -         6         -       342
    Commissions,
     general and
     other expenses    85        72        63         7         8       235
    -------------------------------------------------------------------------
                      254       479       238       201        34     1,206
    -------------------------------------------------------------------------
    Income before
     income taxes      43        24        11         6        (1)       83
    Less: income
     taxes             11         6         1         1         -        19
    -------------------------------------------------------------------------
    Net income
     before
     allocation
     of other
     activities        32        18        10         5        (1)       64
    Allocation
     of other
     activities        (1)        -         -         -         1         -
    -------------------------------------------------------------------------
    Net income         31        18        10         5         -        64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributed to
     shareholders      30        18        10         5         -        63
    Attributed to
     participating
     policyholders      1         -         -         -         -         1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Includes other segments and intercompany eliminations.


    Segmented General Fund Assets

                               As at March 31, 2009 (unaudited)

                      Individual           Group

                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
                        $         $         $         $         $         $
    Assets
    Invested
     assets         7,970     1,833     1,500     2,993       256    14,552
    Other assets      180       171        91        54       107       603
    Intangible
     assets            40       310         1         1         -       352
    Goodwill           49        46        20         -         -       115
    -------------------------------------------------------------------------
    Total           8,239     2,360     1,612     3,048       363    15,622
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                   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      160       147        84        47       112       550
    Intangible
     assets            40       312         1         1         -       354
    Goodwill           49        46        20         -         -       115
    -------------------------------------------------------------------------
    Total           8,164     2,281     1,593     3,029       348    15,415
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                               As at March 31, 2008 (unaudited)

                     Individual           Group

                     Life    Wealth      Life               Other
                      and    Manage-      and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
                        $         $         $         $         $         $
    Assets
    Invested
     assets         8,074     1,785     1,438     2,878       186    14,361
    Other assets      170       143        78        64        78       533
    Intangible
     assets             5       312         1         1         -       319
    Goodwill           81        17        20         -         -       118
    -------------------------------------------------------------------------
    Total           8,330     2,257     1,537     2,943       264    15,331
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Includes other segments and intercompany eliminations.
    




For further information:

For further information: Analysts and investors: Manon Gauthier,
Director, Investor Relations, (418) 780-5945, Cell: (581) 888-1561,
manon.gauthier@inalco.com, www.inalco.com; Media: Jacques Carrière,
Vice-President, Investor Relations, (418) 684-5275, Cell: (418) 576-3624,
jacques.carriere@inalco.com, www.inalco.com


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