Industrial Alliance Maintains its Momentum: Income and Sales up Again in the Third Quarter of 2007



    QUEBEC CITY, Nov. 7 /CNW Telbec/ - Industrial Alliance Insurance and
Financial Services Inc. ("Industrial Alliance" or "the Company") ended the
third quarter of 2007 with net income to common shareholders of $59.1 million,
an 8% increase over the same period last year. This income translates into
diluted earnings per common share of $0.73, up $0.05 compared to the same
period last year, and a return on equity attributable to common shareholders
of 14.5% for the quarter on an annualized basis.
    The good performance for the quarter is primarily explained by the strong
business growth recorded in all lines of business, strict management of profit
margins on individual insurance products and a substantial increase in income
on capital, thanks to the favourable evolution of the market values of the
Company's debt instrument liabilities and the supporting assets, following the
realignment of risk premiums in the financial markets over the last few months
(this item increased the Company's net income by $2.7 million during the
quarter, or $0.03 per common share).
    However, the income for the quarter was affected by a 15% decrease in the
estimated fair market value of the $104.0 million in non-bank-sponsored
asset-backed commercial paper (ABCP) to which the Company is exposed. This
reduction in value, of which one third has been absorbed by the provisions for
future policy benefits, reduces the Company's net income by $7.3 million for
the quarter ($0.09 per common share). The fair market value of ABCP was
estimated taking into account current market conditions, including the
temporary absence of liquidity, a possible deterioration in the quality of the
underlying assets, and fees related to the restructuring process that ABCP is
currently undergoing.
    After two already very strong quarters, record mutual fund entries for
this period of the year carried premiums and deposits to $1.3 billion in the
third quarter, which is 30% higher than the same period last year. All sectors
recorded strong business growth during the quarter. This growth results from
the great diversity of the Company's distribution networks and the increase in
its penetration rate in all regions of the country.
    "We have decided to exercise caution and reduce the value of our
commercial paper right now to be able to continue concentrating on what has
always been our strong point, namely business growth, particularly this
quarter," stated Yvon Charest, President and Chief Executive Officer. "We
continue to gain market share in all lines of business. Mutual fund sales
jumped 75% during the quarter and retail segregated fund sales have grown 21%.
After two quarters of decreases, individual insurance sales have rebounded,
with an 11% increase. Group Insurance Employee Plans obtained record sales
this quarter. And fund entries have more than tripled in the Group Pensions
insured annuities segment. In total, new sales increased the value of new
business by 39% during the quarter, our best result so far."
    "This strong growth was not achieved to the detriment of profitability,"
continued Mr. Charest, "since we have continued to grow the Company's profit
and generate a particularly high return, in spite of the decrease in value of
our commercial paper. We also continued to generate excess capital during the
quarter. And the Company's solidity remains just as strong, with a solvency
ratio that remains in the upper end of our target range."

    
    -------------------------------------------------------------------------
    Highlights
    -------------------------------------------------------------------------
                                                        Year-to-date as
                           Third quarter                at September 30
    -------------------------------------------------------------------------
    (Millions of
    dollars,unless
    otherwise                           Varia-                        Varia-
    indicated)       2007      2006      tion      2007      2006      tion
    -------------------------------------------------------------------------
    Net income to
     common
     shareholders    59.1      54.7         8%    179.1     166.6         8%
    -------------------------------------------------------------------------
    Earnings per
     common share
     (diluted)     $ 0.73    $ 0.68    $ 0.05    $ 2.21    $ 2.04    $ 0.17
    -------------------------------------------------------------------------
    Return on
     common
     shareholders'
     equity(1)
      Quarter
       annualized/
       trailing
       twelve
       months        14.5%     15.4%  (90 bps)     15.3%     15.7%  (40 bps)
    -------------------------------------------------------------------------
    Premiums and
     deposits     1,301.8     998.8        30%  4,508.6   3,788.0        19%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                              September     June 30    December   September
                               30, 2007        2007    31, 2006    30, 2006
    -------------------------------------------------------------------------
    Assets under management
     and under
     administration            50,802.1    50,601.6    46,904.1    44,286.0
    -------------------------------------------------------------------------

    Profitability

    Following are the third quarter highlights in terms of profitability

    New business strain - The main factor that explains the higher income
during the quarter is the strict management of profit margins in the
Individual Insurance sector. New business strain in the Individual Insurance
sector decreased significantly during the quarter, from $23.8 million in the
third quarter of 2006 to $20.6 million in the third quarter of 2007, in spite
of an 11% increase in individual insurance sales. This decrease primarily
results from the pricing adjustments made to the product line in 2006, in
addition to the resulting changes to the sales mix during the quarter, with
sales continuing to shift in favour of less strain-intensive products.
    The strain, expressed as a percentage of sales, has decreased compared to
last year, from 64% of first-year annualized premiums in the third quarter of
2006, to 50% in the third quarter of 2007. This rate is at the lower end of
the Company's 50% to 55% target range. On a sequential basis, the strain
increased from 55% in the first quarter of 2007 to 61% in the second, and
decreased to 50% in the third. The Company estimates that its current pricing
structure should allow it to maintain the strain within the 50% to 55% range
in the medium term.

    Income on capital - Income on capital jumped 29% during the quarter,
increasing from $19.5 million in the third quarter of 2006 to $25.1 million in
the third quarter of 2007. This increase is primarily explained by the
asymmetric evolution of the market values of the Company's debt instrument
liabilities (subordinated debentures and Industrial Alliance Capital Trust
securities) and the supporting assets, following the realignment of risk
premiums that followed the liquidity crisis that hit the asset-backed
commercial paper market in the summer. This realignment had a greater impact
on the market value of debt instruments posted under liabilities than on the
market value of the assets matched to these instruments. The result was a
significantly higher decrease in debt instrument liabilities than the decrease
in the corresponding assets. Since debt instruments were classified as
"held-for-trading" when the new accounting standards took effect, any
difference between the variation in the market value of the assets and that of
the liabilities must be immediately posted in the income statement. This
difference generated a $4.1 million profit before taxes in the third quarter
of 2007, or $2.7 million after taxes ($0.03 per common share). For the first
time this year, the new accounting standards that took effect have had a major
impact on the results for the quarter.

    Expected profit on in-force - Good business growth in the last few years
increased the expected profit on in-force business by 10% in the third
quarter, compared to the third quarter of last year, to reach $90.4 million.
All sectors contributed to the increase, particularly Individual Wealth
Management, which has experienced strong growth in the last few years,
particularly since the Company entered the mutual fund management market.

    Experience gains - Experience gains were high once again this quarter,
totalling $2.5 million in the third quarter of 2007. However, these gains did
not contribute to the increase in income during the quarter since they were
also high in the third quarter of last year ($3.4 million). The gains come
primarily from the Individual Wealth Management sector, owing to strong mutual
fund and segregated fund sales, and the Group Insurance sector, which
continues to record favourable mortality experience.

    Asset-backed commercial paper - The income for the quarter was affected by
a 15% decrease in the estimated fair market value of the $104.0 million in
non-bank-sponsored asset-backed commercial paper (ABCP) to which the Company
is exposed. This reduction in value, of which one third has been absorbed by
the provisions for future policy benefits, reduced the Company's income for
the quarter by $9.9 million before taxes or $7.3 million after taxes ($0.09
per common share).
    The fair market value of ABCP was estimated taking into account current
market conditions, including the temporary absence of liquidity, a possible
deterioration in the quality of the underlying assets, and fees related to the
restructuring process that ABCP is currently undergoing under the agreement
known as the "Montreal agreement."
    The Company's total exposure to non-bank-sponsored ABCP amounted to $104.0
million as at September 30, 2007. Of this amount, $90.0 million is held
directly by Industrial Alliance and $14.0 million through a 45% ownership in
an entity subject to significant influence. The $90.0 million held directly by
Industrial Alliance includes $13.2 million that was already held in the
Company's general fund and $76.8 million that was repurchased from the
Company's money market investment funds (these repurchases were announced on
August 21, 2007 and took place in September, at 100% of the purchase price
plus accrued interest). The $90.0 million investment is presented in the
Company's consolidated balance sheet under "Other Invested Assets" and is
classified as "held-for-trading". It is used to match policy liabilities in
the Individual Insurance sector.

    Effective tax rate - The effective tax rate was 28.9% for the third
quarter, which is in line with the Company's expectations. The Company expects
this rate to remain around 29% in the medium term, even if the recent
reduction in corporate tax rates announced by the federal government in its
October 30, 2007 Economic Statement were to be adopted by Parliament. Given
the Company's tax situation, its effective tax rate already takes into account
a reduction in corporate tax rates, further to previous announcements made by
the federal government.

    Adjusted profitability - To show its earning power, the Company estimates
that for presentation and financial analysis purposes, it is useful to make an
adjustment to the third quarter results, namely the impact of the reduction in
its exposure to non-bank-sponsored ABCP ($7.3 million, net of taxes). The
Company had also adjusted its results for the third quarter of 2006 to take
into account a restructuring charge related to the integration of its National
Life subsidiary's operations with those of the parent company ($0.8 million,
net of taxes). Taking these adjustments into account, the Company estimates
that the net income to common shareholders would have increased by 20% in the
third quarter.

    -------------------------------------------------------------------------
    Adjusted Profitability
    -------------------------------------------------------------------------
                                                        Year-to-date as
                           Third quarter                at September 30
    -------------------------------------------------------------------------
    (Millions of
    dollars,unless
    otherwise                           Varia-                        Varia-
    indicated)       2007      2006      tion      2007      2006      tion
    -------------------------------------------------------------------------
    Net income to
     common
     shareholders    59.1      54.7         8%    179.1     166.6         8%
    Impact of the
     reduction in
     value of non-
     bank ABCP, net
     of taxes         7.3         -         -       7.3         -         -
    National Life
     restructuring
     charges, net
     of taxes           -       0.8         -         -       2.3         -
    Impact of the
     reduction of
     income tax
     rates on the
     future tax
     liability          -         -         -         -     (11.5)        -
    -------------------------------------------------------------------------
    Net income to
     common
     shareholders,
     adjusted        66.4      55.5        20%    186.4     157.4        18%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per
     common share
     (diluted)     $ 0.73    $ 0.68    $ 0.05    $ 2.21    $ 2.04    $ 0.17
    Earnings per
     common share
     (diluted),
     adjusted      $ 0.82    $ 0.69    $ 0.13    $ 2.30    $ 1.93    $ 0.37
    -------------------------------------------------------------------------
    Return on          (Quarter annualized)        (Trailing twelve months)
     equity(1)
      Return on
       common
       shareholders'
       equity        14.5%     15.4%  (90 bps)     15.3%     15.7%  (40 bps)
      Return on
       common
       shareholders'
       equity,
       adjusted      16.3%     15.6%   70 bps      15.7%     15.2%   50 bps
    -------------------------------------------------------------------------

    Business Growth

    Following are the third quarter highlights in terms of business growth

    Premiums and deposits - Strong mutual fund growth again in the third
quarter carried premiums and deposits to $1.3 billion, a 30% increase over the
same period last year. Premiums and deposits were up in all lines of business
during the quarter, with double-digit increases or close to it. Premiums and
deposits have reached a new high of $4.5 billion since the beginning of the
year, 19% higher than the same period last year.

    -------------------------------------------------------------------------
    Premiums and Deposits
    -------------------------------------------------------------------------
                                                        Year-to-date as
                           Third quarter                at September 30
    -------------------------------------------------------------------------
    (Millions of
    dollars,unless
    otherwise                           Varia-                        Varia-
    indicated)       2007      2006      tion      2007      2006      tion
    -------------------------------------------------------------------------
    Individual
     Insurance      225.8     208.5         8%    661.2     621.6         6%
    -------------------------------------------------------------------------
    Individual
     Wealth
     Management     672.2     453.0        48%  2,458.1   1,906.2        29%
    -------------------------------------------------------------------------
    Group
     Insurance      228.6     198.3        15%    647.7     559.4        16%
    -------------------------------------------------------------------------
    Group Pensions  144.8     111.6        30%    654.1     622.1         5%
    -------------------------------------------------------------------------
    General
     Insurance       30.4      27.4        11%     87.5      78.7        11%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total         1,301.8     998.8        30%  4,508.6   3,788.0        19%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

    - The changes made to the product line in the last few quarters to
      improve the Company's competitive position have had a positive impact
      since, after two declining quarters, individual insurance sales
      totalled $41.2 million in the third quarter, an 11% increase over the
      same period last year. This is the second highest level of quarterly
      sales ever achieved by the Company. Sales are up in all regions of the
      country, all distribution networks and all markets, for middle income
      families as well as high income families. Universal Life policy sales
      were particularly good this quarter and the shift in sales in favour of
      yearly renewable term (YRT) Universal Life policies has continued, in
      accordance with the Company's wishes (YRT cost products, which are less
      strain-intensive, jumped 66% in the third quarter, whereas level cost
      insurance products grew 2%).

    - However, the Individual Wealth Management sector obtained the strongest
      growth once again, with a 48% increase in sales in the third quarter
      compared to the same period last year. This growth was once again
      driven by mutual fund sales (75% increase), but segregated fund sales
      (21% increase) also contributed. These results are explained by the
      size and depth of the Company's distribution networks, as well as the
      successful integration of the operations of Clarington Corporation with
      those of the parent company.

    - After a very good first quarter and a rather soft second, sales were
      very strong in the Group Insurance Employee Plans sector in the third
      quarter, even reaching a high of $24.8 million (excluding the sale of
      the Bombardier contract, which has been in force since the fourth
      quarter of 2002). Sales for the quarter are 16% higher than the third
      quarter of last year, mainly due to contracts signed with a few large
      groups.

    - The Group Creditor Insurance sector continues to generate good results.
      Sales have increased for a twelfth consecutive quarter, growing 8% in
      the third quarter. Sales continue to exceed those of the automobile
      sector, whose sales were relatively stable during the period. The
      sector's success depends on the expansion of the automobile dealer base
      (through which this product is mainly distributed) and the increase in
      the penetration rate among clients of automobile dealers.

    - Special Markets Group continues to grow steadily, with sales up 9% in
      the third quarter compared to the same period in 2006. This increase is
      primarily attributable to the growth of the travel insurance block of
      business, which accounts for some 40% of the sales results for the
      sector.

    - After a very good first quarter, followed by a rather slow second,
      Group Pension sales recovered in the third, with a 30% increase
      compared to the same period in 2006. The growth essentially comes from
      the insured annuities segment, which continues to benefit from a very
      active market.

    -------------------------------------------------------------------------
    Sales(2)
                                                         Year-to-date as
                            Third quarter                at September 30
    -------------------------------------------------------------------------
    (Millions of
    dollars,unless
    otherwise                           Varia-                        Varia-
    indicated)       2007      2006      tion      2007      2006      tion
    -------------------------------------------------------------------------
    Individual
     Insurance       41.2      37.2        11%    110.1     113.0        (3%)
    -------------------------------------------------------------------------
    Individual
     Wealth
     Management
      General fund   78.8      65.9        20%    256.7     219.1        17%
      Segregated
       funds        192.3     158.4        21%    801.6     754.2         6%
      Mutual funds  401.1     228.7        75%  1,399.8     932.9        50%
    -------------------------------------------------------------------------
      Total         672.2     453.0        48%  2,458.1   1,906.2        29%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Group
     Insurance
      Employee
       Plans         24.8      21.3        16%     61.8      55.3        12%
      Creditor
       Insurance     57.9      53.7         8%    150.9     136.2        11%
      Special
       Markets
       Group(SMG)    24.4      22.3         9%     74.6      63.9        17%
    -------------------------------------------------------------------------
    Group Pensions  144.8     111.6        30%    654.1     622.1         5%
    -------------------------------------------------------------------------

    Assets under management and under administration - Assets under management
grew $437.2 million in the third quarter, reaching a new high of $32.5 billion
as at September 30, 2007, up 1% compared to the end of the second quarter of
2007 and 12% since the end of 2006. Strong net mutual fund and segregated fund
sales and good premium growth in the various lines of business contributed to
this increase.
    Assets under administration decreased slightly compared to June 30, 2007,
amounting to $18.3 billion as at September 30, 2007, a 1% decrease over the
quarter, but a 3% increase since the end of 2006. Positive net sales and
transfers did not succeed in completely erasing the negative variations in the
market value of assets in the mutual fund and securities brokerage
subsidiaries, a result of the weak stock markets.
    In total, assets under management and under administration grew slightly
during the quarter, totalling $50.8 billion as at September 30, 2007, an 8%
increase since the end of 2006.

    -------------------------------------------------------------------------
    Assets Under Management and Under Administration
    -------------------------------------------------------------------------
                              September     June 30,   December   September
    (Millions of dollars)      30, 2007        2007    31, 2006    30, 2006
    -------------------------------------------------------------------------
    Assets under management    32,534.6    32,097.4    29,091.5    27,690.1
    -------------------------------------------------------------------------
    Assets under
     administration            18,267.5    18,504.2    17,812.6    16,595.9
    -------------------------------------------------------------------------
    Total                      50,802.1    50,601.6    46,904.1    44,286.0
    -------------------------------------------------------------------------

    Value of new business - The value of new business grew 39% (or         
$7.5 million) in the third quarter compared to the same period last year,
totalling $26.9 million ($0.34 per common share). This is the highest
quarterly growth rate ever obtained by the Company. The growth in the value of
new business was driven by strong sales in all lines of business, which
accounted for $5.9 million of the increase, and improved profit margins
(primarily in the Individual Insurance sector), which accounted for         
$1.6 million.

    Financial Strength

    Following are the third quarter highlights in terms of financial
    strength

    Capitalization - The Company's capital totalled $2.1 billion as at
September 30, 2007, which represents an increase of $31.5 million (or 2%)
compared to June 30, 2007. This growth is primarily the result of the increase
in retained earnings for the period and the issuance of 23,500 common shares
following the exercise of options under the Company's stock option plan
(311,250 in total for the first three quarters).

    Financial leverage - The Company still has a great deal of flexibility in
terms of financial leverage, since the debt ratio amounted to 14.6% as at
September 30, 2007, if the subordinated debentures alone are included in the
debt items, and 20.5% if the preferred shares are added. These rates have been
almost constantly decreasing over the last two years, thanks to the Company's
good profitability.

    Solvency - The solvency ratio remained stable during the quarter,
totalling 197% as at September 30, 2007. This ratio remains in the upper end
of the Company's 175% to 200% target range. No material unusual items affected
the solvency ratio during the quarter.

    Excess capital - The excess capital continued to increase in the third
quarter, from $152 million as at June 30, 2007 to $168 million as at
September 30, 2007. This increase is the result of normal business growth.
About one third of the Company's net profit is added to the excess capital
each quarter.

    Quality of investments - Even though the non-bank-sponsored asset-backed
commercial paper held by the Company has been placed on the watch list, it has
not had an impact on the investment quality indices. These indices have
remained excellent, with net impaired investments totalling $11.8 million as
at September 30, 2007 ($9.3 million as at June 30, 2007), which represents
just 0.08% of total investments (0.07% as at June 30, 2007). No bonds
defaulted during the quarter and the portfolio does not contain any new bonds
rated BB or lower. The quality of the mortgage loans portfolio remains
excellent, despite the default of a $1.7 million conventional mortgage loan.
The Company does not expect to suffer any losses on this loan. The addition of
this loan to the loan default list increased the mortgage loan delinquency
rate from 0.11% as at June 30, 2007 to 0.18% as at September 30, 2007. The
quality of the mortgage portfolio remains excellent, with delinquent loans
representing just $4.9 million of a $2.7 billion portfolio. Finally,
Industrial Alliance does not hold any investments in the U.S. subprime
mortgage loan market.

    Dividend

    The Board of Directors has announced the payment of a quarterly dividend
of $0.20 per common share, the same dividend that was declared last quarter.
This dividend is payable in cash on December 17, 2007 to the shareholders of
record as at November 23, 2007. This dividend corresponds to a payout ratio of
24% of the adjusted net earnings for the quarter. The Company aims to increase
the payout ratio by early or mid-2008 to 28% of the sustainable net earnings,
which is in the upper end of the 20% to 30% range provided for in the
Company's policy.
    The Board of Directors has also declared the payment of a quarterly
dividend of $0.2875 per non-cumulative class A preferred share series B. The
dividend is payable in cash on December 31, 2007, to the preferred
shareholders of record as at November 30, 2007.
    For the purposes of the enhanced dividend tax credit rules contained in
the Income Tax Act (Canada) and any corresponding provincial and territorial
tax legislation, all dividends paid by Industrial Alliance on its common and
preferred shares since January 1, 2006 are considered to be eligible
dividends. Unless otherwise indicated, all dividends paid by the Company are
now eligible dividends for the purposes of such rules.

    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. These statements entail risks and uncertainties that may cause
the actual results, performance or achievements of Industrial Alliance to
differ materially from the future results, performance or achievements
expressed or implied by the forward-looking statements. Factors that could
cause the Company's actual results to differ from expected results include
changes in government regulations or tax laws, competition, technological
changes, global capital market activity, interest rates, changes in
demographic data, changes in consumer behaviour and demand for the Company's
products and services, catastrophic events, and general economic conditions in
Canada or elsewhere in the world. 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. 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, or following unforeseen events, except as required by
applicable securities legislation.

    Documents Related to the Financial Results

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

    Conference Call

    Management will hold a conference call to present its results on
Wednesday, November 7, 2007, at 2:00 p.m. (ET). To listen in on the conference
call, dial 1 800 926-7431 (toll free). A replay of the conference call will
also be available for a one-week period, starting at 4:30 p.m. on Wednesday,
November 7, 2007. To listen to the conference call replay, dial 1 800 558-5253
(toll free) and enter access code 21349757.
    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 fifth largest life and health
insurance company in Canada, Industrial Alliance is at the head of a large
financial group, which has operations across Canada as well as in the western
United States. Industrial Alliance contributes to the financial well-being of
over 3 million Canadians, employs more than 2,900 people and manages and
administers over $50 billion in assets. Industrial Alliance stock is listed on
the Toronto Stock Exchange under the ticker symbol IAG. Industrial Alliance is
among the 100 largest public companies in Canada.

    Notes
    -----

    (1) The calculation of the return on common shareholders' equity excludes
        accumulated other comprehensive income.
    (2) Sales (new business) are defined as follows for each sector:
        Individual Insurance: first-year annualized premiums; Individual
        Wealth Management: premiums for the general fund and segregated funds
        and deposits for mutual funds; Group Insurance: first-year annualized
        premiums for Employee Plans, including premium equivalents
        (Administrative Services Only (ASO) contracts), gross premiums
        (before reinsurance) for Creditor Insurance and premiums for Special
        Markets Group (SMG); Group Pensions: premiums.



          INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.



                      Consolidated Financial Statements
                      as at September 30, 2007 and 2006

                   These consolidated financial statements
               have not been reviewed by the external auditors.


    INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
    CONSOLIDATED INCOME STATEMENTS
    (in millions of dollars, unless otherwise indicated)

                                    Quarters ended        Nine months ended
                                     September 30            September 30
                             -----------------------  -----------------------
                                   2007        2006        2007        2006
                             -----------  ----------  -----------  ----------
                                      $           $           $           $
                                                   (unaudited)

    REVENUES

    Premiums (note 10)            900.7       770.1     3,108.8     2,855.1
    Net investment income         170.9       222.1       261.3       578.8
    Fees and other revenues        90.8        83.6       268.9       230.3
    -------------------------------------------------------------------------
                                1,162.4     1,075.8     3,639.0     3,664.2

    POLICY BENEFITS AND EXPENSES

    Change in provisions for
     future policy benefits       166.4       180.8       202.6       457.3
    Payments to policyholders
     and beneficiaries            421.7       364.0     1,298.3     1,181.5
    Net transfer to
     segregated funds             250.7       226.4     1,178.3     1,134.2
    Dividends, experience
     rating refunds and
     interest on amounts
     on deposit                    11.9         8.2        26.7        28.2
    Commissions                   132.8       123.9       384.1       359.0
    Premium and other taxes        15.1        14.0        44.2        41.6
    General expenses               77.9        74.5       245.0       232.7
    Financing expenses             (1.5)        4.3        (2.6)       13.6
    -------------------------------------------------------------------------
                                1,075.0       996.1     3,376.6     3,448.1

    INCOME BEFORE
     INCOME TAXES                  87.4        79.7       262.4       216.1

    Income taxes                  (25.6)      (22.5)      (76.1)      (43.8)
    -------------------------------------------------------------------------

    NET INCOME                     61.8        57.2       186.3       172.3
    -------------------------------------------------------------------------

    Less: net income
     attributable to
     participating
     policyholders                  1.3         1.1         2.9         2.3
    -------------------------------------------------------------------------

    NET INCOME ATTRIBUTABLE
     TO SHAREHOLDERS               60.5        56.1       183.4       170.0
    -------------------------------------------------------------------------

    Less: preferred
     shareholders dividends         1.4         1.4         4.3         3.4
    -------------------------------------------------------------------------

    NET INCOME ATTRIBUTABLE
     TO COMMON SHAREHOLDERS        59.1        54.7       179.1       166.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common
     share(note 7)
    basic (in dollars)             0.74        0.68        2.24        2.06
    diluted (in dollars)           0.73        0.68        2.21        2.04


    INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
    CONSOLIDATED BALANCE SHEETS
    (in millions of dollars)
                                              As at       As at       As at
                                          September    December   September
                                                 30          31          30
                                          ----------  ----------  -----------
                                               2007        2006        2006
                                          ----------  ----------  -----------
                                                  $           $           $
                                         (unaudited)             (unaudited)

    ASSETS

    Invested assets
    Bonds                                   7,990.7     7,189.4     7,097.7
    Mortgages                               2,736.4     2,457.2     2,432.8
    Stocks                                  1,711.7     1,453.5     1,272.6
    Real estate                               478.4       451.8       449.9
    Policy loans                              257.6       220.3       216.4
    Short-term investments                        -           -        12.0
    Cash and cash equivalents                 431.2       371.8       228.3
    Other invested assets                     267.3       112.2       111.4
    -------------------------------------------------------------------------
                                           13,873.3    12,256.2    11,821.1

    Goodwill                                   67.7        67.7       296.9
    Intangible assets                         297.6       297.6        67.9
    Other assets                              528.7       469.2       483.2
    Derivative products                        11.5           -
    -------------------------------------------------------------------------
                                              905.5       834.5       848.0

    TOTAL GENERAL FUND ASSETS              14,778.8    13,090.7    12,669.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SEGREGATED FUNDS NET ASSETS            10,170.1     9,204.1     8,456.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES

    Policy liabilities
    Provisions for future policy benefits  11,400.4     9,446.6     9,157.9
    Provisions for dividends to
     policyholders and experience
     rating refunds                            31.9        38.6        33.9
    Benefits payable and provision for
     unreported claims                        143.9       146.6       150.3
    Policyholders' amounts on deposit         183.5       175.2       175.3
    -------------------------------------------------------------------------
                                           11,759.7     9,807.0     9,517.4

    Other liabilities                         568.0       494.8       460.3
    Future income tax                         332.9       285.7       279.6
    Deferred net realized gains                 9.8       558.2       514.3
    Debentures                                308.0       310.1       310.1
    Participating policyholders' account       26.0        23.1        22.0

    EQUITY

    Share capital(note 6)                     640.6       632.7       630.8
    Contributed surplus                        16.1        14.6        14.1
    Retained earnings                       1,115.4       971.3       927.6
    Currency translation account                  -        (6.8)       (7.1)
    Accumulated other comprehensive
     income                                     2.3           -           -
    -------------------------------------------------------------------------
                                            1,774.4     1,611.8     1,565.4

    TOTAL GENERAL FUND LIABILITIES
     AND EQUITY                            14,778.8    13,090.7    12,669.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SEGREGATED FUNDS LIABILITIES           10,170.1     9,204.1     8,456.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
    CONSOLIDATED PARTICIPATING POLICYHOLDERS' ACCOUNT
    (in millions of dollars)
                                                          Nine months ended
                                                             September 30
                                                      -----------------------
                                                           2007        2006
                                                      ----------  -----------
                                                              $           $
                                                              (unaudited)

    Balance at beginning                                   23.1        19.7

    Income for the period                                   5.5         5.1

    Dividends                                              (2.3)       (2.5)

    Transfer to the shareholders' account                  (0.3)       (0.3)
    -------------------------------------------------------------------------
    Net income attributable to participating
     policyholders                                          2.9         2.3
    -------------------------------------------------------------------------

    Balance at end                                         26.0        22.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED CONTRIBUTED SURPLUS
    (in millions of dollars)
                                                          Nine months ended
                                                             September 30
                                                      -----------------------
                                                           2007        2006
                                                      ----------  -----------
                                                              $           $
                                                              (unaudited)

    Balance at beginning                                   14.6        12.3

    Current period contribution for the
     stock option plan                                      2.9         2.4

    Stock options exercised                                (1.4)       (0.6)
    -------------------------------------------------------------------------

    Balance at end                                         16.1        14.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED SHAREHOLDERS' RETAINED EARNINGS
    (in millions of dollars)
                                                          Nine months ended
                                                             September 30
                                                      -----------------------
                                                           2007        2006
                                                      ----------  -----------
                                                              $           $
                                                              (unaudited)

    Balance at beginning                                  971.3       845.4

    Impact of the new accounting standards (note 2)         9.9           -

    Net income attributable to shareholders               183.4       170.0

    Common shareholders dividends                         (44.9)      (35.6)

    Preferred shareholders dividends                       (4.3)       (3.4)

    Issue cost of preferred shares, net of taxes              -        (2.3)

    Cancellation following the redemption
     of common shares                                         -       (46.5)
    -------------------------------------------------------------------------

    Balance at end                                      1,115.4       927.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
    CONSOLIDATED COMPREHENSIVE INCOME
    (in millions of dollars)
                                                                       Nine
                                                        Quarter      months
                                                          ended       ended
                                                      September   September
                                                             30          30
                                                      ----------  -----------
                                                           2007        2007
                                                      ----------  -----------
                                                              $           $
                                                              (unaudited)

    NET INCOME                                             61.8       186.3

    Other comprehensive income, net of income tax:

    Available-for-sale

    Unrealized gains (losses) arising during the period:
    Bonds                                                   0.2       (10.0)
    Stocks                                                 (1.2)        1.6
    Other                                                   0.1        (0.2)

    Reclassification adjustment for (gains) losses
     included in the net income:
    Bonds                                                     -        (1.5)
    Stocks                                                 (1.3)       (2.8)
    -------------------------------------------------------------------------

    Change in unrealized gains (losses) on assets
     available-for-sale                                    (2.2)      (12.9)

    Currency translation account

    Unrealized gains (losses) on foreign
     currency translation                                  (6.2)       (6.2)
    -------------------------------------------------------------------------

    Total other comprehensive income                       (8.4)      (19.1)
    -------------------------------------------------------------------------

    Comprehensive income                                   53.4       167.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Comprehensive income attributable to shareholders      52.1       164.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Comprehensive income attributable to
     participating policyholders                            1.3         2.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED ACCUMULATED OTHER COMPREHENSIVE INCOME
    (in millions of dollars)


                                          As at September 30, 2007
                            -------------------------------------------------
                                                         Currency
                            Available-for-sale            transla-
                            -------------------              tion
                               Bonds    Stocks    Other   account     Total
                            -------------------------------------------------
                                  $         $         $         $         $
                                                (unaudited)

    Balance at beginning          -         -         -         -         -

    Impact of the new
     accounting
     standards(note 2)          5.7      22.4       0.1      (6.8)     21.4

    Total other
     comprehensive income     (11.5)     (1.2)     (0.2)     (6.2)    (19.1)
    -------------------------------------------------------------------------

    Balance at end             (5.8)     21.2      (0.1)    (13.0)      2.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
    CONSOLIDATED CASH FLOWS STATEMENTS
    (in millions of dollars)
                                   Quarters ended        Nine months ended
                                    September 30            September 30
                             -----------------------  -----------------------
                                   2007        2006        2007        2006
                             -----------  ----------  -----------  ----------
                                      $           $           $           $
                                                   (unaudited)
    CASH FLOWS FROM
     OPERATING ACTIVITIES
    Net income                     61.8        57.2       186.3       172.3
    Items not affecting cash
     and cash equivalents:
    Change in provision for
     future policy benefits       166.4       180.8       202.6       456.9
    Share of results of entity
     subject to significant
     influence                     (0.1)       (0.6)       (1.6)       (1.2)
    Amortization of realized
     and unrealized (gains)
     losses                        (2.3)      (45.2)       (6.6)     (103.7)
    Amortization of premiums
     and discounts                 (0.1)      (47.9)        0.4      (137.5)
    Variation of unrealized
     (gains) losses               (72.8)          -        57.8           -
    Realized (gains) losses
     on assets
     available-for-sale            (1.8)          -        (6.3)          -
    Future income taxes            14.2        15.6        34.2        15.3
    Stock option plan               1.0         0.8         2.9         2.4
    Provision on invested
     assets                           -        (2.1)        0.1        (2.0)
    Deferred sales commissions
     and fixed assets
     depreciation                  12.2        10.7        29.2        27.7
    Other                           6.8       (10.3)        8.9       (12.6)
    -------------------------------------------------------------------------
                                  185.3       159.0       507.9       417.6
    Other changes in other
     assets and liabilities        40.2         0.2       (19.3)      (68.2)
    -------------------------------------------------------------------------
    Cash flows from operating
     activities                   225.5       159.2       488.6       349.4
    -------------------------------------------------------------------------

    CASH FLOWS FROM INVESTING ACTIVITIES
    Sales, maturities and
     repayments of the
     following items:
    Bonds                         421.5       500.7     1,147.4     1,451.9
    Mortgages                      74.3       115.9       249.5       285.8
    Stocks                         78.3        81.6       227.7       306.5
    Real estate                     3.7         0.1         3.9         2.0
    Policy loans                   18.1        17.7        64.0        57.3
    Other invested assets           1.1        16.2         2.1        37.3
    -------------------------------------------------------------------------
                                  597.0       732.2     1,694.6     2,140.8
    Purchases of the
     following items:
    Bonds                        (250.2)     (644.4)     (966.7)   (1,683.4)
    Mortgages                    (205.8)      (96.3)     (560.4)     (291.6)
    Stocks                        (94.5)      (72.7)     (247.0)     (364.2)
    Real estate                    (1.5)       (0.3)      (22.7)       (0.5)
    Policy loans                  (20.8)      (13.2)     (102.5)      (87.5)
    Other invested assets        (118.7)      (48.9)     (184.5)     (104.8)
    -------------------------------------------------------------------------
                                 (691.5)     (875.8)   (2,083.8)   (2,532.0)
    Cash flows from investing
     activities                   (94.5)     (143.6)     (389.2)     (391.2)
    -------------------------------------------------------------------------

    CASH FLOWS FROM FINANCING
     ACTIVITIES
    Issue of common shares          0.5         0.4         6.5         3.5
    Redemption of common shares       -           -           -       (57.9)
    Issue of preferred shares         -           -           -       125.0
    Cost of issuance of
     preferred shares                 -           -           -        (3.4)
    Increase of debenture             -           -           -         4.7
    Redemption of debentures          -           -           -       (67.7)
    Preferred shareholders
     dividends                     (1.4)       (1.4)       (4.3)       (3.4)
    Common shareholders
     dividends                    (16.1)      (12.8)      (44.9)      (35.6)
    Increase (decrease) in
     mortgage debts                (0.4)       (0.3)        7.2        (0.8)
    -------------------------------------------------------------------------
    Cash flows from financing
     activities                   (17.4)      (14.1)      (35.5)      (35.6)
    -------------------------------------------------------------------------

    Gain (loss) of foreign
     currency on cash and cash
     equivalents                   (4.5)          -        (4.5)          -
    -------------------------------------------------------------------------
    INCREASE (DECREASE) IN
     CASH AND CASH EQUIVALENTS    109.1         1.5        59.4       (77.4)
    CASH AND CASH EQUIVALENTS
     AT BEGINNING                 322.1       226.8       371.8       305.7
    -------------------------------------------------------------------------
    CASH AND CASH EQUIVALENTS
     AT END                       431.2       228.3       431.2       228.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information:
    Cash                                                   10.6       (11.9)
    Cash equivalents                                      420.6       240.2
    -------------------------------------------------------------------------
    Cash and Cash equivalents                             431.2       228.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Interest paid                   0.7         1.6        10.9        10.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes paid, net
     of refunds                     7.6        (7.8)       38.1        19.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
    CONSOLIDATED FINANCIAL STATEMENTS OF SEGREGATED FUNDS

    CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
    (in millions of dollars)
                                               Nine      Twelve        Nine
                                             months      months      months
                                              ended       ended       ended
                                          September    December   September
                                                 30          31          30
                                          ----------  ----------  -----------
                                               2007        2006        2006
                                          ----------  ----------  -----------
                                                  $           $           $
                                         (unaudited)             (unaudited)

    Balance at beginning                    9,204.1     7,348.8     7,348.8
    Impact of the new accounting
     standards(note 2)                         (2.3)          -           -
    Additions:
    Amounts received from policyholders     1,365.0     1,676.5     1,263.7
    Investment income                         186.3       221.1       163.3
    Net realized gains                        256.2       462.4       258.3
    Net increase in market value              (61.0)      381.3        40.3
    -------------------------------------------------------------------------
                                           10,948.3    10,090.1     9,074.4
    -------------------------------------------------------------------------

    Deductions:
    Amounts withdrawn by policyholders        639.5       736.2       508.4
    Operating expenses                        138.7       149.8       109.1
    -------------------------------------------------------------------------
                                              778.2       886.0       617.5
    -------------------------------------------------------------------------

    Balance at end                         10,170.1     9,204.1     8,456.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF NET ASSETS
    (in millions of dollars)

                                              As at       As at       As at
                                          September    December   September
                                                 30          31          30
                                          ----------  ----------  -----------
                                               2007        2006        2006
                                          ----------  ----------  -----------
                                                  $           $           $
                                         (unaudited)             (unaudited)

    Assets
    Bonds                                   2,831.8     2,679.4     2,597.7
    Mortgages and mortgage-backed
     securities                                 8.1        21.2        18.3
    Stocks                                  2,738.0     2,411.6     2,201.3
    Fund units                              4,139.4     3,624.9     3,192.4
    Cash, short-term investments
     and other investments                    413.4       438.1       427.1
    Other assets                              109.4        50.1        78.8
    -------------------------------------------------------------------------
                                           10,240.1     9,225.3     8,515.6

    Liabilities
    Accounts payable and accrued expenses      70.0        21.2        58.7
    -------------------------------------------------------------------------

    Net assets                             10,170.1     9,204.1     8,456.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Six months ended September 30, 2007 and 2006 (unaudited)
    (in millions of dollars, unless otherwise indicated)

    1- ACCOUNTING POLICIES

    These interim Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements for the year ended
December 31, 2006, as set out in the 2006 Annual Report. The significant
accounting policies followed in the preparation of these interim Consolidated
Financial Statements are consistent with those found in the 2006 Annual
Report, except as described in note 2 below.

    2- CHANGE IN ACCOUNTING POLICIES

    Financial Instruments

    On January 1, 2007, the Company adopted the following accounting
standards: Handbook Section 1530, Comprehensive Income, Handbook Section 3855,
Financial Instruments - Recognition and Measurement, Handbook Section 3865,
Hedges and Handbook section 4211 Life insurance enterprise-specific items.

    Financial Instruments - Recognition and Measurement

    Financial assets subject to the new standard are classified as one of the
following: Held-for-trading, Available-for-sale, Held-to-maturity, Loans and
Receivables. Financial liabilities subject to the new standard are classified
as Held-for-trading or Other. Held-for-trading financial instruments are
measured at fair value with gains and losses recognized in Net income.
Available-for-sale financial instruments are measured at fair value and any
unrealized gains and losses are recognized in other comprehensive income.
Held-to-maturity, Loans and Receivables financial assets and financial
liabilities classified as Other are measured at amortized cost using the
effective interest rate method. The new standard allows an entity to designate
financial instruments as Held-for-trading at the initial accounting or at the
adoption of the standard even if this financial instrument does not satisfy
the definition of financial instruments Held-for-trading. Financial
instruments classified as Held-for-trading under the fair value option should
have a reliable fair value.
    When a financial instrument is acquired, it should be recorded on the
balance sheet at fair value except for the related party transactions.
Subsequent measurement of the financial instruments will be determined by
their initial classification.
    The fair value of a financial instrument is the amount at which the
financial instrument could be exchanged in an arm's length transaction between
knowledgeable and willing parties. Fair value is based on quoted market rates
(bid/ask) prices. If not, the fair value is based on prevailing market prices
for instruments with similar characteristics and risk profiles or internal or
external valuation models using observable market based inputs.
    For the asset with a regular-way contract, the Company continues to apply
the settlement-date accounting method. Under this method, the gain or loss in
value between the transaction date and the settlement date is assumed in the
Net income for assets Held-for-trading and in the other comprehensive income
for the assets Available-for-sale.
    Derivatives must be accounted for at the fair value, unless they are
specifically designated within an effective hedging relation. The change in
fair value will be presented directly in Net income.
    The Company has chosen to classify assets matching the provisions for
future policy benefits as Held-for-trading with the exception of mortgages, as
well as private stocks and private bonds that are not quoted on an active
market. This is because the provisions for future policy benefits are excluded
from the new standards. The provisions for future policy benefits are
calculated based on the Canadian Asset Liability Method (CALM). Under this
method, the carrying value of assets matching these liabilities is considered
in the basis of the calculation. Therefore, any changes in fair value of
assets matching these liabilities will be taken into account in the
calculation.
    Bonds and stocks quoted on an active market, but which do not match the
provisions for future policy benefits are classified as Available-for-sale.
The change in fair value of these assets will therefore be presented in the
comprehensive income statement. Mortgages and private bonds not quoted on an
active market are classified as Loans and Receivables and measured at
amortized cost using the effective interest rate method. Private stocks are
classified Available-for-sale but will be valued at cost.
    The Company has chosen to classify the debentures as Held-for-trading. The
debentures are measured at fair value with gains and losses presented as
financing expense.
    Transaction fees related to financial assets and liabilities classified as
Available-for-sale or Held-for-trading are assumed in the net income when they
are incurred. Transaction fees related to assets classified as Loans and
Receivables and liabilities classified in the Other category are capitalized
and amortized according to the effective interest rate method.
    Real estate is excluded from this new standard and continues to be
presented at the moving average method. The realized gains and losses on
disposal continues to be deferred and amortized at 3% per quarter on a
declining balance basis.

    Comprehensive Income

    As a result of adopting these standards, a new category, Accumulated other
comprehensive income, has been added to Shareholders' equity on the
Consolidated Balance Sheets. This new category includes unrealized gains and
losses net of income taxes for financial assets classified as
Available-for-sale as well as unrealized foreign currency translation gains
and losses for self-sustaining establishments.

    Hedges

    This new standard specifies the criteria under which hedge accounting can
be applied and how hedge accounting can be executed for each of the permitted
hedging strategies. The Company doesn't use hedge accounting.

    Impact of initial adoption of new standards

    Market value adjustments attributable to the classification of certain
assets and liabilities as instruments Held-for-trading and the elimination of
unamortized deferred gains and losses, impact the provisions for future policy
benefits due to the re-evaluation of the financial assets matching these
liabilities. These adjustments are recognized in the opening balance of the
retained earnings on January 1, 2007. The impact is a $9.9 increase in the
retained earnings (RE).
    The adjustments resulting from the re-evaluation of financial assets
classified as Available-for-sale are recognized in the opening balance of the
accumulated other comprehensive income (OCI) on January 1, 2007. The impact is
a $28.2 increase.
    The results for the previous periods have not been restated, except for
the reclassification of the opening balance of the currency translation
account in the accumulated other comprehensive income and commission and
interest expenses discounted as mortgage loans.
    The adjustments from the re-evaluation of segregated fund assets to use
the Bid price are a $2.3 reduction of the net assets.

    Impact of the new accounting standard on the opening balance sheet

                                  As at         Impact of             As at
                            December 31      the new standard     January 1
                            ------------  ----------------------  -----------
                                           Retained
                                   2006    earnings         OCI        2007
                            ------------  ----------------------  -----------
                                      $           $           $           $
                                                     (unaudited)
    ASSETS

    Invested assets
    Bonds                       7,189.4     1,160.6         8.3     8,358.3
    Mortgages                   2,457.2         2.8           -     2,460.0
    Stocks                      1,453.5       114.6        32.8     1,600.9
    Real estate                   451.8           -           -       451.8
    Policy loans                  220.3           -           -       220.3
    Cash and cash equivalents     371.8           -           -       371.8
    Other invested assets         112.2         0.9         0.1       113.2
    -------------------------------------------------------------------------
                               12,256.2     1,278.9        41.2    13,576.3

    Goodwill                       67.7           -           -        67.7
    Intangible assets             297.6           -           -       297.6
    Other assets                  469.2        (3.9)          -       465.3
    -------------------------------------------------------------------------
                                  834.5        (3.9)          -       830.6

    TOTAL GENERAL FUND ASSETS  13,090.7     1,275.0        41.2    14,406.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Policy liabilities
    Provisions for future
     policy benefits            9,446.6     1,798.9           -    11,245.5
    Provisions for dividends
     to policyholders and
     experience rating refunds     38.6           -           -        38.6
    Benefits payable and
     provision for unreported
     claims                       146.6           -           -       146.6
    Policyholders' amounts on
     deposit                      175.2           -           -       175.2
    -------------------------------------------------------------------------
                                9,807.0     1,798.9           -    11,605.9

    Other liabilities             780.5         1.5        13.0       795.0
    Deferred net realized
     gains                        558.2      (548.5)          -         9.7
    Debentures                    310.1        13.2           -       323.3
    Participating
     policyholders' account        23.1           -           -        23.1

    EQUITY

    Share capital                 632.7           -           -       632.7
    Contributed surplus            14.6           -           -        14.6
    Retained earnings             971.3         9.9           -       981.2
    Currency translation
     account                       (6.8)          -         6.8           -
    Accumulated other
     comprehensive income             -           -        21.4        21.4
    -------------------------------------------------------------------------
                                1,611.8         9.9        28.2     1,649.9

    TOTAL GENERAL FUND
     LIABILITIES AND EQUITY    13,090.7     1,275.0        41.2    14,406.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Distribution of investments according to the categories of financial
    instruments
                                As at January 1, 2007
                 ------------------------------------------------------------
                            Designa-              Loans
                           ted Held-   Availa-      and
                 Held-for-      for-      ble-  Receiva-
                  trading   trading  for-sale      bles     Other     Total
                 ------------------------------------------------------------
                        $         $         $         $         $         $
                                         (unaudited)

    Bonds               -   6,753.1     911.7     693.5         -   8,358.3

    Mortgages           -         -         -   2,460.0         -   2,460.0

    Stocks              -   1,308.9     292.0         -         -   1,600.9

    Real estate         -         -         -         -     451.8     451.8

    Policy loans        -         -         -     220.3         -     220.3

    Cash and cash
     equivalents    371.8         -         -         -         -     371.8

    Other invested
     assets             -         -         -      98.0      15.2     113.2
                 ------------------------------------------------------------
    Total           371.8   8,062.0   1,203.7   3,471.8     467.0  13,576.3
                 ------------------------------------------------------------
                 ------------------------------------------------------------

    3- ASSET-BACKED COMMERCIAL PAPER

    The asset-backed commercial paper market was shaken by a liquidity crisis
in August 2007. Hence, since August 13, 2007, Industrial Alliance has not been
able to receive payments for the amounts due upon maturity of the
non-bank-sponsored ABCP that it holds.
    ABCP is a short-term financial instrument issued by trusts, also called
"conduits." The paper is usually issued for a one or three month term. There
are two large categories of ABCP: A paper, which comes with a backing
agreement with a banking institution in the event of a liquidity problem, and
E paper, which has an extension clause.
    On August 21, 2007, the Company announced that it would buy back all
non-bank-sponsored ABCP held in the money market investment funds of the
Industrial Alliance group's various companies (segregated funds, mutual funds
and institutional funds subject to treasury portfolio management agreements).
Industrial Alliance thus purchased $76.8 million in non-bank-sponsored ABCP.
These purchases took place in September 2007, at 100% of the purchase price
plus accrued interest. This measure was announced to protect the Company's
clients against the uncertainty surrounding the liquidity crisis that struck
the ABCP market This non-bank-sponsored ABCP and the $13.2 million already
held in the Company's general fund represent a total of $90.0 million. As well
as this ABCP directly held, the Company held $14.0 million through a 45%
ownership in an entity subject to significant influence.
    When it was acquired by the Company, the non-bank-sponsored ABCP was rated
"R-1 (High)" by the DBRS Limited rating agency ("DBRS"), which is the highest
rating DBRS grants for commercial paper, and it met the criteria of the
Company's investment policy. On August 16, 2007, DBRS placed certain ABCP
"Under Review with Developing Implications" and on November 6, 2007, changed
the rating of one of the conduits to "R-4 (Under Review with Developing
Implications)."
    On August 15, 2007, a group of investors proposed an agreement, "the
Montreal agreement," to investors who hold non-bank-sponsored ABCP. Industrial
Alliance is part of this group. Under this agreement, the investors agree to
not place the conduits in default (22 in total) to avoid a forced sale of the
underlying financial assets ("standstill agreement"). The group's objective is
to restructure the paper by converting it into floating rate notes with a
maturity that corresponds to that of the underlying assets. Since then,
maturing paper is either extended, in the case of E paper, or the maturity
date has been deferred to October 15, in the case of A paper. This maturity
date was subsequently pushed back to December 14, 2007.
    On September 6, a pan-Canadian committee headed by Purdy Crawford, and
composed of participants in the Montreal agreement, was formed to oversee the
restructuring process. The firms Ernst & Young and JP Morgan were hired to
assist the committee. On October 16, 2007, the committee chairman announced
the successful restructuring of a first conduit of the 22 affected by the
Montreal agreement, and the acceptance by the participants in the agreement of
the extension of the standstill agreement until December 14, 2007.
    Considering that the non-bank-sponsored ABCP is not traded on an active
market, management estimated the fair value of its investments taking into
account the best public information available with respect to the market
environment and other factors taken into consideration by market analysts for
such investments. For the non-bank-sponsored ABCP held directly by the
Company, this estimate has led to a $13.5 million reduction in the estimated
fair market value of these investments. Their fair value has therefore been
reduced from $90.0 million to $76.5 million and it is presented in the
Company's consolidated balance sheet under "Other Invested Assets." The
non-bank-sponsored ABCP has been classified under held-for-trading and is used
to match the policy liabilities in the Individual Insurance sector. The
variation in the value of non-bank-sponsored ABCP has caused a $4.5 million
reduction in policy liabilities.
    The value of the Company's investment in an entity subject to significant
influence decreased by $0.9 million, leading to a corresponding decrease in
the investment income drawn from this company.
    The total impact of the reduction in value of non-bank-sponsored ABCP on
the Company's results as at September 30, 2007 is $9.9 million before taxes
($7.3 million after taxes or $0.09 per common share).

    4- ACQUISITION OF BUSINESS

    On June 29, 2007, the Company completed the acquisition of the remaining
8.25% of FundEX for a cash consideration of $0.8, which had already been
accounted as at December 31, 2006.

    5- RESTRUCTURING COSTS

    IA Clarington Investments Inc.

    In acquiring Clarington Corporation on December 28, 2005, the Company
established a plan to restructure and consolidate the activities involving
Clarington's business operations, locations and back-office systems. Related
costs include back office conversion expenses, penalties to third parties and
compensation costs. These costs, which have been accounted for as part of the
purchase price, amount to $18.5.
    In acquiring BLC-Edmond de Rothschild Asset Management Inc. (BLCER) on
December 31, 2004, the Company developed a plan to restructure the operations.
Costs of $3.4 were expected to be incurred as a result of consolidating
activities involving operations and systems and compensation costs. These
costs were accounted for as part of the purchase price.
    On June 30, 2006, Industrial Alliance Fund Management Inc. (formerly
BLCER) and Clarington were merged to create a single entity, IA Clarington
Investments Inc.

                                         Accrued on acquisition
                       ------------------------------------------------------
                                Cumulative
                                    amount
                                  incurred            Cumulative    Balance
                       Expected      as at    Amounts     amount      as at
                         future   December   incurred   incurred  September
                          costs   31, 2006    in 2007    to date   30, 2007
                       ---------  ---------  ---------  ---------  ----------
                              $          $          $          $          $
                                                         (unaudited)

    Cost of
     restructuring
     operations            21.9       11.8        1.4       13.2        8.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    6- SHARE CAPITAL

                                Nine months ended September 30 (unaudited)
                            -------------------------------------------------
                                       2007                    2006
                            ------------------------  -----------------------
                              Number of               Number of
                                 shares      Amount      shares      Amount
                            ------------  ----------  ----------  -----------
                                    (in           $         (in           $
                              thousands)              thousands)

    Common shares
    Balance at beginning       79,919.1       507.9    81,387.2       510.8
    Shares issued on exercise
     of stock options             311.3         7.9       166.8         4.1
    Shares issued on
     acquisition of business          -           -        90.2         2.5
    Cancellation of shares
     issued at
     demutualization                  -           -        (3.0)          -
    Cancellation following
     the repurchase of common
     shares                           -           -    (1,800.0)      (11.4)
    -------------------------------------------------------------------------
    Balance at end             80,230.4       515.8    79,841.2       506.0

    Shares held in treasury       (21.6)       (0.2)      (21.6)       (0.2)
    -------------------------------------------------------------------------
                               80,208.8       515.6    79,819.6       505.8
                            ------------              ----------
                            ------------              ----------
    Preferred shares,
     class A - Series A
    Balance at beginning            4.0         0.1         4.0         0.1
    Shares issued                     -           -           -           -
    -------------------------------------------------------------------------
    Balance at end                  4.0         0.1         4.0         0.1

    Shares held in treasury        (4.0)       (0.1)       (4.0)       (0.1)
    -------------------------------------------------------------------------
                                      -           -           -           -
                            ------------              ----------
                            ------------              ----------
    Preferred shares,
     class A - Series B
    Balance at beginning        5,000.0       125.0           -           -
    Shares issued                     -           -     5,000.0       125.0
    -------------------------------------------------------------------------
    Balance at end              5,000.0       125.0     5,000.0       125.0
                            ------------              ----------
                            ------------              ----------
    Total share capital                       640.6                   630.8
                                          ----------              -----------
                                          ----------              -----------

    The number of outstanding stock options (in thousands) as at
    September 30, 2007 is 3,308.3 (3,194.0 in 2006).

    On February 24, 2006, the Company issued 5,000,000 class A - Series B
    preferred shares for an amount of $125.0.


    7- EARNINGS PER COMMON SHARE


                                    Quarters ended        Nine months ended
                                     September 30            September 30
                             -----------------------  -----------------------
                                   2007        2006        2007        2006
                             -----------  ----------  -----------  ----------
                                      $           $           $           $
                                                   (unaudited)


    Common shareholders'
     net income                    59.1        54.7       179.1       166.6

    Weighted daily average
     number of common
     shares outstanding      80,192,132  79,809,888  80,096,420  80,690,024
    Add: diluted effect of
     stock options granted
     and outstanding            983,426     782,563     957,566     740,501
    -------------------------------------------------------------------------
    Weighted daily average
     number of common
     shares outstanding
     on a diluted basis      81,175,558  80,592,451  81,053,986  81,430,525

    Earnings per common
     share (in dollars)
    basic                          0.74        0.68        2.24        2.06
    diluted                        0.73        0.68        2.21        2.04


    8- EMPLOYEE FUTURE BENEFITS
                                       Nine months ended September 30
                             ------------------------------------------------
                                        2007                    2006
                             -----------------------  -----------------------
                                Pension       Other     Pension       Other
                                  plans       plans       plans       plans
                             -----------  ----------  ----------  -----------
                                      $           $           $           $
                                                   (unaudited)

    Benefit plan expenses
    Current service cost           13.5         2.1        12.5         0.7
    Interest cost                  16.2         1.2        12.6         0.8
    Return on plan assets         (19.4)          -       (18.2)          -
    Actuarial loss (gain)
     on plan                        1.8         0.4         0.6           -
    Amortization of the
     transitional obligation       (0.3)          -        (0.3)          -
    Amortization of
     plan amendment                 0.3         0.1         0.3           -
    -------------------------------------------------------------------------

    Defined benefit plan
     costs recognized              12.1         3.8         7.5         1.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Defined contribution
     plan costs recognized          0.4           -         0.3           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    9- SEGMENTED INFORMATION

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

    Segmented income statements

                          Quarter ended September 30, 2007 (unaudited)
                 ------------------------------------------------------------
                      Individual            Group
                 ------------------------------------------------------------
                             Wealth                         Other
                 Life and    manage- Life and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
    -------------------------------------------------------------------------
                        $         $         $         $         $         $
    Revenues
    Premiums        225.8     271.1     228.6     144.8      30.4     900.7
    Net investment
     income          81.5      26.3      19.3      43.3       0.5     170.9
    Fees and
     other revenues   0.4      81.4       1.9       6.1       1.0      90.8
    -------------------------------------------------------------------------
                    307.7     378.8     249.8     194.2      31.9   1,162.4
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to policy-
     holders        192.7      52.1     165.5     166.7      23.0     600.0
    Net transfer
     to segregated
     funds              -     234.9         -      15.8         -     250.7
    Commissions,
     general and
     other
     expenses        81.9      62.8      66.6       5.5       7.5     224.3
    -------------------------------------------------------------------------
                    274.6     349.8     232.1     188.0      30.5   1,075.0
    -------------------------------------------------------------------------
    Income before
     income taxes    33.1      29.0      17.7       6.2       1.4      87.4

    Income taxes     (9.4)     (8.9)     (5.3)     (1.8)     (0.2)    (25.6)
    -------------------------------------------------------------------------

    Net income
     before
     allocation
     of other
     activities      23.7      20.1      12.4       4.4       1.2      61.8

    Allocation of
     other
     activities       0.9         -       0.1       0.2      (1.2)        -
    -------------------------------------------------------------------------
    Net income for
     the period      24.6      20.1      12.5       4.6         -      61.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributable
     to
     shareholders    23.5      20.1      12.5       4.4         -      60.5
    Attributable to
     participating
     policyholders    1.1         -         -       0.2         -       1.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                          Quarter ended September 30, 2006 (unaudited)
                 ------------------------------------------------------------
                      Individual            Group
                 ------------------------------------------------------------
                             Wealth                         Other
                 Life and    manage- Life and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
    -------------------------------------------------------------------------
                        $         $         $         $         $         $
    Revenues
    Premiums        208.5     224.3     198.3     111.6      27.4     770.1
    Net investment
     income         126.8      30.7      18.7      46.8      (0.9)    222.1
    Fees and other
     revenues         0.8      73.0       3.5       5.9       0.4      83.6
    -------------------------------------------------------------------------
                    336.1     328.0     220.5     164.3      26.9   1,075.8
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to policy-
     holders        222.0      56.0     141.9     111.9      21.2     553.0
    Net transfer
     to segregated
     funds              -     186.0         -      40.4         -     226.4
    Commissions,
     general and
     other
     expenses        81.7      62.5      61.8       5.6       5.1     216.7
    -------------------------------------------------------------------------
                    303.7     304.5     203.7     157.9      26.3     996.1
    -------------------------------------------------------------------------
    Income before
     income taxes    32.4      23.5      16.8       6.4       0.6      79.7

    Income taxes    (10.3)     (5.8)     (4.0)     (1.8)     (0.6)    (22.5)
    -------------------------------------------------------------------------
    Net income
     before
     allocation of
     other
     activities      22.1      17.7      12.8       4.6         -      57.2

    Allocation of
     other
     activities         -         -         -         -         -         -
    -------------------------------------------------------------------------
    Net income for
     the period      22.1      17.7      12.8       4.6         -      57.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributable
     to share-
     holders         21.1      17.7      12.8       4.5         -      56.1
    Attributable
     to partici-
     pating policy-
     holders          1.0         -         -       0.1         -       1.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (*) Includes other segments and intercompany eliminations.

    Segmented income statements

                       Nine months ended September 30, 2007 (unaudited)
                 ------------------------------------------------------------
                      Individual           Group
                 ------------------------------------------------------------
                             Wealth                         Other
                 Life and    manage- Life and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
    -------------------------------------------------------------------------
    Revenues
    Premiums        661.2   1,058.3     647.7     654.1      87.5   3,108.8
    Net investment
     income          83.4      58.3      39.3      79.9       0.4     261.3
    Fees and other
     revenues         1.4     240.1       6.3      18.1       3.0     268.9
    -------------------------------------------------------------------------
                    746.0   1,356.7     693.3     752.1      90.9   3,639.0
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to policy-
     holders        401.9     113.6     453.4     494.2      64.5   1,527.6
    Net transfer
     to segregated
     funds              -     956.9         -     221.4         -   1,178.3
    Commissions,
     general
     and other
     expenses       235.4     202.0     191.6      18.7      23.0     670.7
    -------------------------------------------------------------------------
                    637.3   1,272.5     645.0     734.3      87.5   3,376.6
    -------------------------------------------------------------------------

    Income before
     income taxes   108.7      84.2      48.3      17.8       3.4     262.4

    Income taxes    (30.5)    (25.7)    (13.9)     (4.8)     (1.2)    (76.1)
    -------------------------------------------------------------------------

    Net income
     before
     allocation of
     other
     activities      78.2      58.5      34.4      13.0       2.2     186.3

    Allocation
     of other
     activities       1.6         -       0.3       0.3      (2.2)        -
    -------------------------------------------------------------------------

    Net income for
     the period      79.8      58.5      34.7      13.3         -     186.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Attributable
     to share-
     holders         77.5      58.5      34.7      12.7         -     183.4
    Attributable
     to participa-
     ting policy-
     holders          2.3         -         -       0.6         -       2.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                       Nine months ended September 30, 2006 (unaudited)
                 ------------------------------------------------------------
                      Individual           Group
                 ------------------------------------------------------------
                             Wealth                         Other
                 Life and    manage- Life and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
    -------------------------------------------------------------------------
    Revenues
    Premiums        621.6     973.3     559.4     622.1      78.7   2,855.1
    Net investment
     income         301.4      86.1      53.0     137.6       0.7     578.8
    Fees and other
     revenues         1.8     199.8      10.9      15.9       1.9     230.3
    -------------------------------------------------------------------------
                    924.8   1,259.2     623.3     775.6      81.3   3,664.2
    -------------------------------------------------------------------------
    Operating
     expenses
    Cost of
     commitments
     to policy-
     holders        592.4     171.2     404.5     439.9      59.0   1,667.0
    Net transfer
     to segregated
     funds              -     833.7         -     300.5         -   1,134.2
    Commissions,
     general and
     other
     expenses       254.1     182.0     174.1      18.7      18.0     646.9
    -------------------------------------------------------------------------
                    846.5   1,186.9     578.6     759.1      77.0   3,448.1
    -------------------------------------------------------------------------

    Income before
     income taxes    78.3      72.3      44.7      16.5       4.3     216.1

    Income taxes    (13.2)    (14.1)     (9.1)     (3.7)     (3.7)    (43.8)
    -------------------------------------------------------------------------

    Net income
     before
     allocation of
     other
     activities      65.1      58.2      35.6      12.8       0.6     172.3

    Allocation of
     other
     activities       0.5      (0.1)      0.1       0.1      (0.6)        -
    -------------------------------------------------------------------------

    Net income for
     the period      65.6      58.1      35.7      12.9         -     172.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Attributable
     to share-
     holders         63.9      58.1      35.7      12.3         -     170.0
    Attributable
     to participa-
     ting policy-
     holders          1.7         -         -       0.6         -       2.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (*) Includes other segments and intercompany eliminations.


    Segmented general fund assets

                              As at September 30, 2007 (unaudited)
                 ------------------------------------------------------------
                      Individual            Group
                 ------------------------------------------------------------
                             Wealth                         Other
                 Life and    manage- Life and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
    -------------------------------------------------------------------------
                        $         $         $         $         $         $

    Assets
    Invested
     assets       7,564.0   1,842.3   1,371.0   2,879.5     216.5  13,873.3
    Goodwill         30.5      17.3      19.9         -         -      67.7
    Intangible
     assets             -     297.6         -         -         -     297.6
    Other
     assets         152.3     162.5      83.2      57.0      85.2     540.2
    -------------------------------------------------------------------------
    Total         7,746.8   2,319.7   1,474.1   2,936.5     301.7  14,778.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                   As at December 31, 2006
                 ------------------------------------------------------------
                      Individual            Group
                 ------------------------------------------------------------
                             Wealth                         Other
                 Life and    manage- Life and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
    -------------------------------------------------------------------------
                        $         $         $         $         $         $

    Assets
    Invested
     assets       6,271.9   1,879.1   1,289.0   2,623.7     192.5  12,256.2
    Goodwill         30.5      17.3      19.9         -         -      67.7
    Intangible
     assets             -     297.6         -         -         -     297.6
    Other assets    133.9     137.5      74.4      45.9      77.5     469.2
    -------------------------------------------------------------------------
    Total         6,436.3   2,331.5   1,383.3   2,669.6     270.0  13,090.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                              As at September 30, 2006 (unaudited)
                 ------------------------------------------------------------
                      Individual            Group
                 ------------------------------------------------------------
                             Wealth                         Other
                 Life and    manage- Life and              activi-
                   Health      ment    Health  Pensions    ties(*)    Total
    -------------------------------------------------------------------------
                        $         $         $         $         $         $
    Assets
    Invested
     assets       5,878.2   1,912.4   1,258.5   2,580.3     191.7  11,821.1
    Goodwill         30.5     246.5      19.9         -         -     296.9
    Intangible
     assets             -      67.9         -         -         -      67.9
    Other assets    147.8     132.6      78.6      53.5      70.7     483.2
    -------------------------------------------------------------------------
    Total         6,056.5   2,359.4   1,357.0   2,633.8     262.4  12,669.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (*) Includes other segments and intercompany eliminations.


    10- PREMIUMS
                          Quarter ended September 30, 2007 (unaudited)
                 ------------------------------------------------------------
                      Individual            Group
                 ------------------------------------------------------------
                             Wealth
                 Life and    manage- Life and             General
                   Health      ment    Health  Pensions Insurance     Total
    -------------------------------------------------------------------------
                        $         $         $         $         $         $

    Invested in
     general fund   225.8      78.8     228.6      54.9      30.4     618.5
    Invested in
     segregated
     funds              -     192.3         -      89.9         -     282.2
    -------------------------------------------------------------------------
    Total           225.8     271.1     228.6     144.8      30.4     900.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                         Quarter ended September 30, 2006 (unaudited)
                 ------------------------------------------------------------
                      Individual            Group
                 ------------------------------------------------------------
                             Wealth
                 Life and    manage- Life and             General
                   Health      ment    Health  Pensions Insurance     Total
    -------------------------------------------------------------------------
                        $         $         $         $         $         $

    Invested in
     general fund   208.5      65.9     198.3      20.5      27.4     520.6
    Invested in
     segregated
     funds              -     158.4         -      91.1         -     249.5
    -------------------------------------------------------------------------
    Total           208.5     224.3     198.3     111.6      27.4     770.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                        Nine months ended September 30, 2007 (unaudited)
                 ------------------------------------------------------------
                      Individual            Group
                 ------------------------------------------------------------
                             Wealth
                 Life and    manage- Life and             General
                   Health      ment    Health  Pensions Insurance     Total
    -------------------------------------------------------------------------
                        $         $         $         $         $         $

    Invested in
     general fund   661.2     256.7     647.7     208.2      87.5   1,861.3
    Invested in
     segregated
     funds              -     801.6         -     445.9         -   1,247.5
    -------------------------------------------------------------------------
    Total           661.2   1,058.3     647.7     654.1      87.5   3,108.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                        Nine months ended September 30, 2006 (unaudited)
                 ------------------------------------------------------------
                      Individual            Group
                 ------------------------------------------------------------
                             Wealth
                 Life and    manage- Life and             General
                   Health      ment    Health  Pensions Insurance     Total
    -------------------------------------------------------------------------
                        $         $         $         $         $         $

    Invested in
     general fund   621.6     219.1     559.4     140.1      78.7   1,618.9
    Invested in
     segregated
     funds              -     754.2         -     482.0         -   1,236.2
    -------------------------------------------------------------------------
    Total           621.6     973.3     559.4     622.1      78.7   2,855.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    11-Related party transactions

    In September 2007, the Company purchased $76.8 in non-bank-sponsored
asset-backed commercial paper (ABCP) held in all of its money market funds.
This transaction is distributed as follows: $28.6 from segregated funds, $40.1
from mutual funds and $8.1 from institutional funds subject to treasury
portfolio management agreements.

    12- Comparative Figures

    Certain comparative figures have been reclassified to comply with the
current year's presentation.
    




For further information:

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


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