A.M. Best Affirms the Ratings of Industrial Alliance Insurance and Financial Services Inc. and Its Subsidiary

Business Wire,  June 18, 2008  

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OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a+" of Industrial Alliance Insurance and Financial Services Inc. (IA) (Quebec) [TSX: IAG] and its subsidiary, Industrial-Alliance Pacific Life Insurance Company (IAP) (Vancouver, British Columbia). A.M. Best also has affirmed the debt ratings of IA. The outlook for all ratings is positive. (See below for a detailed listing of the companies and ratings.)

The ratings of IA and IAP reflect their improved overall profitability and increased assets under management and administration, while continuing to grow capital. Much of this asset growth has been due to the acquisitions IA has made in the wealth management area and their successful integration. The acquisitions in the wealth management area culminated with Clarington Corporation Inc., which made IA a sizeable player in the investment fund market in Canada. This diversification has enabled IA to increase assets under management, lower fixed costs, expand geographically and increase fee income. Recent acquisitions in the insurance area have focused on expanding operations in the individual disability and health insurance market in Canada and establishing a domestic presence in the United States through the acquisition of a U.S. subsidiary. Despite these acquisitions, the overall level of debt remains within rating expectations, while the coverage is strong.

Partially offsetting these positive rating factors are the challenges IA faces in continuing to grow its insurance and asset management business in the competitive Canadian market while maintaining an adequate risk-adjusted capital position. Planned expansion in the United States exposes IA to new competitive challenges in a different market. The growth in wealth management operations has increased IA's exposure to fluctuations in the equity markets, through fee income, which is based on asset valuation. In addition, IA still maintains a Quebec concentrated operating profile, which has been its historical base.

The following debt ratings have been affirmed:

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The following indicative ratings on securities available under shelf registration have been affirmed:

Industrial Alliance Insurance and Financial Services Inc.--
-- "a" on senior unsecured debt
-- "a-" on subordinated debt
-- "bbb+" on preferred shares

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

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