Industrial Alliance Delivers Solid Third Quarter Performance

Net earnings from continuing activities increase by 49% 

    --  Net earnings of $68.1 million exclude gain from sale of US
        annuity business
    --  Premiums and deposits remain robust at $1.7 billion (+7%)
    --  Assets under management and administration reach a record high
        of $81.0 billion
    --  Annualized ROE of 17.4% (11.3% excluding the gain on sale of
        the US annuities)
    --  Solvency ratio of 211%

|The following financial results are based on International Financial|
|Reporting Standards ("IFRS") unless otherwise noted. A full         |
|discussion of the third quarter results is available at             |
| under Investor   |
|Relations/Financial Reports.                                        |

QUEBEC CITY, Nov. 7, 2012 /CNW Telbec/ - For the third quarter ended September 
30, 2012, Industrial Alliance Insurance and Financial Services Inc. (TSX: IAG) 
reported net earnings of $105.5 million, including an after-tax gain of $37.4 
million on the sale of the US annuity business announced on August 16th. 
Excluding this gain, net earnings were $68.1million versus $45.7 million in 
the same quarter last year, an increase of 49%. 
Diluted and adjusted earnings per share, excluding the gain on sale of the US 
annuity business and the dilutive impact of the Company's innovative Tier 1 
debt instruments, amounted to $0.75 compared with $0.53 a year ago. The 
consensus estimate for the third quarter was $0.71 per share. 
At September 30, 2012, the solvency ratio was 211%, bolstered by the capital 
relief and gain on sale of the USannuity business that added 12 percentage 
"We delivered a solid performance in the third quarter," commented Yvon 
Charest, President and Chief Executive Officer. "Profitability was well ahead 
of our results a year ago - even excluding the gain on the sale of the 
USannuity business - reflecting better equity markets, an improvement in 
long-term disability claims and lower strain on new business. We also ended 
the quarter with a solvency ratio well above our guidance of 175-200%." 
"We continue to make headway on our plan to secure our core earnings power," 
added Mr. Charest. "A key element is reducing the cost of writing new business 
on our life products and, in that regard, we are in line to meet our 2012 
objective. Strain on new business should be close to 25% at year-end, 
representing potential pre-tax savings of about $50million on a yearly 
"Business growth is an important driver of tomorrow's potential earnings 
power," said Mr. Charest. "I am extremely satisfied that volumes continue to 
be healthy, with premiums and deposits up 7% year over year. Sales growth was 
strong with notable increases in group accumulation products, US insurance, 
complementary warranties and general insurance." 
"Over the last two years a growing proportion of our operating income has come 
from lines of business that require less capital and are less sensitive to 
interest rate and equity market movements," concluded Mr. Charest. "These 
businesses include mutual funds, creditor insurance and complementary 
warranties, special markets and general insurance, to name but a few. For the 
year to date, our non-traditional businesses have contributed 43% to our 
pre-tax operating income, up from 33% for the full year 2011 and 28% the year 

                                              Year-to-date as at September
                          Third quarter                    30

(In millions
of dollars,
indicated)          2012     2011 Variation       2012      2011 Variation

Net income
attributed to
shareholders       114.5     51.7      121%      259.6     202.4       28%

dividends            9.0      6.0       50%       21.5      17.9       20%

Net income
available to
shareholders       105.5     45.7      131%      238.2     184.5       29%

Less: gain
from the sale
of the US
business            37.4       --        --       37.4        --        --

Net income
attributed to
on continuing
activities          68.1     45.7       49%      200.7     184.5        9%

Earnings per
common share
(diluted)          $1.11    $0.52     $0.59      $2.52     $2.10     $0.42

Earnings per
common share
(diluted and
adjusted(1))       $0.75    $0.53     $0.22      $2.21     $2.16     $0.05

Return on
equity(2)          17.4%     8.0%   940 bps       6.7%     11.3% (460 bps)

Premiums and
deposits         1,688.9  1,579.9        7%    5,152.7   5,260.8      (2%)

Effective tax
rate on
activities (%)     17.9%    22.7%        --      14.0%     22.9%        --
               September                      December September
                     30, June 30,                  31,       30,
                    2012     2012                 2011      2011        

Solvency ratio      211%     200%                 189%      197%          

Book value per
share             $27.21   $26.28               $25.54    $26.74          

Assets under
management and
administration  80,966.6 77,212.1             73,350.7  70,393.4          

Net impaired
investments          8.9      8.8                 13.1      13.2          

Net impaired
investments as
a % of total
investments        0.04%    0.04%                0.06%     0.06%          

(1) Excluding the dilutive impact of the innovative Tier 1 debt
    instruments (IATS) and the gain on the sale of the US annuity

(2) Annualized for the quarter. Trailing twelve months for the year to
    Third Quarter Highlights

Profitability - Industrial Alliance ended the third quarter of 2012 with net 
income to common shareholders of $105.5million, including a gain of $37.4 
million on the sale of its US annuity business. Excluding this gain, net 
income was $68.1 million, representing an increase of 49% over the previous 

Diluted earnings per share amounted to $1.11 compared with $0.52 a year ago. 
Excluding the gain on the USannuities and the dilutive impact of the 
Company's innovative Tier 1 debt instruments, diluted and adjusted earnings 
per share amounted to $0.75 compared with $0.53 a year ago.

The annualized return on common shareholders' equity was 17.4%. Excluding the 
gain on the sale of the USannuities, the return was 11.3% on an annualized 
basis, which is slightly above the Company's guidance of 9-11% for 2012.

The key elements that had an impact on profitability follow. All figures are 
after taxes unless otherwise indicated.

Sale of US annuity business - On August 16(th), 2012, the Company announced 
the sale of its US annuity business, reflecting its strategic decision to 
focus its resources in the US on the development of its life insurance 
business. The sale of the fixed annuities and accumulation riders generated an 
after-tax gain of $67.9million, before charges related to goodwill and 
intangible assets. After the latter items, the net gain was $37.4million. 
Management estimates that the sale of this business should reduce after-tax 
earnings by approximately $1.5 million to $2.5 million on an annual basis.

Market-related experience - The stock market improvement contributed a gain of 
$5.1 million or $0.05 per share, attributed to the Individual Insurance and 
Wealth Management sectors. The dynamic hedging program accounted for $0.04 per 
share of this gain.

Policyholder experience - After four quarters of poor claims experience, we 
are pleased to report that Employee Plans generated a gain of $2.0 million or 
$0.02 per share related to an improvement in long-term disability experience. 
The Individual Insurance sector experienced a loss of $7.6 million or $0.09 
per share, primarily attributed to unfavourable lapse and mortality.

Strain - In the Individual Insurance sector, the strain-to-new business ratio 
was 37% in the third quarter, down from 44% in the second quarter and 56% in 
the first quarter of 2012. This improvement reflects the higher pricing 
introduced in July at which 31% of new sales were made during the third 
quarter. The strain-to-new business ratio should drop to approximately 25% by 
year-end as the new pricing continues to work its way through all new sales.

Change in assumptions for US operations - Concurrent with the sale of the US 
annuity business, actuarial assumptions were reviewed for the remaining block 
of US business. The review resulted in a net reserve strengthening of 
$1.3million after tax, or $0.01 per share.

Income taxes - The Company reported a tax gain of $0.04 per share in the third 
quarter. The benefit is mostly attributed to an increase in the fair value of 
real estate, which would be taxed as a capital gain when realized (50% of the 
amount of the gain would be taxable at the regular corporate tax rate). The 
increase in fair value resulted in a deferred tax gain, reducing the effective 
tax rate to 17.9%.

Income on capital - Total income on capital for the third quarter was 
$18.5million pre-tax, compared with $26.4million in the second quarter and 
$25.8 million a year earlier. The decrease is due to lower income on capital 
following higher gains on assets available for sale (AFS) over the last five 
quarters, together with lower AFS gains in the quarter. IAAuto and Home had 
a third profitable quarter this year contributing a pre-tax gain of $4.1 
million compared with $3.8million last quarter and a loss of $0.8 million a 
year ago.

Business Growth - Premiums and deposits reached $1.7 billion in the third 
quarter, an increase of 7% over the previous year. Assets under management and 
administration at September 30, 2012 were $81.0 billion, up 5% over the second 
quarter and 15% year over year.

Individual Insurance sales grew by 5% to $58.5 million, with a strong 
contribution from the U.S.operations.

In Group Insurance, Creditor insurance sales reached a record high of $98.6 
million in the third quarter, and sales of complementary warranties increased 
64% to $36.5 million. Special Market Solutions continued to report good 
momentum, with sales increasing 13% to $35.1 million. Employee Plans reported 
sales of $10.6 million compared with $4.8 million a year earlier, when the 
third quarter was unusually weak.

Group Savings and Retirement reported excellent sales of $277.1 million, an 
increase of 79% attributed to growth in accumulation products.

Individual Wealth Management net sales continue to be positive. Net mutual 
fund sales were $93.5 million and net sales of segregated funds were $45.0 

Solvency - At September 30, 2012, the solvency ratio was 211% compared with 
200% at June 30, 2012. The increase is attributed to the sale of the US 
annuity business that provided both capital relief and a gain, adding a total 
of 12percentage points to the solvency ratio. It should be noted that the 
impact of macroeconomic factors was neutral in the third quarter.

Quality of Investments - Our investment portfolio continues to be of the 
highest quality. At September 30, 2012, net impaired loans remained unchanged 
from the previous quarter at 0.04% of total investments. The real estate 
occupancy rate also remained unchanged at 95.2%. The proportion of bonds rated 
BB and lower increased slightly to 0.11%.

Dividend - The Board of Directors declared a quarterly dividend of $0.2450 per 
common share. This corresponds to a payout ratio of 33% of net earnings from 
continuing activities.

Sensitivity Analysis - Market sensitivities decreased over the previous 
quarter. At September 30, 2012:
    --  The Company can absorb a decrease of about 12% (9% at June 30,
        2012) in the S&P/TSX index before having to strengthen policy
    --  The Company can absorb a decrease of 30% (21% at June 30,2012)
        before the solvency ratio drops below 175% and a decrease of
        42% (35% at June 30, 2012) before the solvency ratio drops
        below 150%.
    --  The full-year impact on net income of a sudden 10% decrease in
        the stock markets is $23 million ($24 million at June 30,
    --  The impact on net income of a 10 basis point decrease in the
        initial re-investment rate (IRR) is $24 million ($29 million at
        June 30, 2012) and the comparable impact for the ultimate
        re-investment rate (URR) is $60 million ($62 million at June
        30, 2012). The improvement is mostly related to the sale of the
        US annuity business.

Market Guidance for 2012
    --  Return on common shareholders' equity (ROE): target range of 9%
        to 11%
    --  Earnings per common share: target range of $2.50 to $3.10
    --  Solvency ratio: 175% to 200% target range
    --  Dividend payout ratio: 25% to 35% medium-term payout range
    --  Effective tax rate: target range of 22% to 24%

Guidance for ROE and earnings per common share excludes any potential reserve 
strengthening in 2012.


Non-IFRS Financial Information
The Company reports its financial results in accordance with International 
Financial Reporting Standards(IFRS). It also publishes certain non-IFRS 
financial measures that do not have an IFRS equivalent, including sales, value 
of new business, embedded value and solvency ratio, or which have an IFRS 
equivalent such as data on operating profit and income taxes on earnings 
presented in the sources of earnings table. The Company also uses non-IFRS 
adjusted data in relation to net income, earnings per share and return on 
equity. These non-IFRS financial measures are always accompanied by and 
reconciled with IFRS financial measures. The Company believes that these 
non-IFRS financial measures provide investors and analysts with additional 
information to better understand the Company's financial results as well as 
assess its growth and earnings potential. Since non-IFRS financial measures do 
not have a standardized definition, they may differ from the non-IFRS 
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.

Conference Call
Management will hold a conference call to present the Company's results on 
Wednesday, November 7, 2012 at 2p.m.(ET). To listen in on the conference 
call, dial 1800268-5851 (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, 2012. To listen to the conference call replay, dial 
1800997-6910 (toll-free) and enter access code 21603450. A webcast of the 
conference call (in listen only mode) will also be available on the Industrial 
Alliance website at

Documents Related to the Financial Results
For a detailed discussion of the Company's third quarter results, investors 
are invited to consult the MD&A, financial statements and accompanying notes 
as well as our supplemental information package, all of which are available on 
the Industrial Alliance website at under Investor Relations / 
Financial Reports and on SEDAR at

Forward-looking Statements
This press release may contain statements relating to strategies used by 
Industrial Alliance or statements that are predictive in nature, that depend 
upon or refer to future events or conditions, or that include words such as 
"may", "will", "could", "should", "would", "suspect", "expect", "anticipate", 
"intend", "plan", "believe", "estimate", and "continue" (or the negative 
thereof), as well as words such as "objective" or "goal" or other similar 
words or expressions. Such statements constitute forward-looking statements 
within the meaning of securities laws. Forward-looking statements include, but 
are not limited to, information concerning the Company's possible or assumed 
future operating results. These statements are not historical facts; they 
represent only the Company's expectations, estimates and projections regarding 
future events.

Although Industrial Alliance believes that the expectations reflected in such 
forward-looking statements are reasonable, such statements involve risks and 
uncertainties, and undue reliance should not be placed on such statements. 
Certain material factors or assumptions are applied in making forward-looking 
statements, and actual results may differ materially from those expressed or 
implied in such statements. Factors that could cause actual results to differ 
materially from expectations include, but are not limited to: general business 
and economic conditions; level of competition and consolidation; changes in 
laws and regulations including tax laws; liquidity of Industrial Alliance 
including the availability of financing to meet existing financial commitments 
on their expected maturity dates when required; accuracy of information 
received from counterparties and the ability of counterparties to meet their 
obligations; accuracy of accounting policies and actuarial methods used by 
Industrial Alliance; insurance risks including mortality, morbidity, longevity 
and policyholder behaviour including the occurrence of natural or man-made 
disasters, pandemic diseases and acts of terrorism.

Additional information about the material factors that could cause actual 
results to differ materially from expectations and about material factors or 
assumptions applied in making forward-looking statements may be found in the 
"Risk Management" section of the 2011 Management's Discussion and Analysis and 
in the "Management of Risks Associated with Financial Instruments" note to 
Industrial Alliance's consolidated financial statements, and elsewhere in 
Industrial Alliance's filings with Canadian securities regulators, which are 
available for review at

The forward-looking statements in this news release reflect the Company's 
expectations as of the date of this document. Industrial Alliance does not 
undertake to update or release any revisions to these forward-looking 
statements to reflect events or circumstances after the date of this document 
or to reflect the occurrence of unanticipated events, except as required by 

About Industrial Alliance
Founded in 1892, Industrial Alliance Insurance and Financial Services Inc. is 
a life and health insurance company with operations in all regions of Canada 
as well as in the United States. The Company 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 for both individuals and groups. The 
fourth largest life and health insurance company in Canada, Industrial 
Alliance contributes to the financial wellbeing of over three million 
Canadians, employs 4,200 people and manages and administers more than 
$80billion in assets. Industrial Alliance stock is listed on the Toronto 
Stock Exchange under the ticker symbol IAG.

Investor Relations Grace Pollock Office: 418780-5945


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