Mr. Edward Kohlberg of A.M. Best reports

A.M. BEST ASSIGNS DEBT RATING TO INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC.'S NEWLY ISSUED SUBORDINATED DEBENTURES

A.M. Best has assigned a debt rating of A to the recently issued $250-million 2.64-per-cent subordinated debentures due Feb. 23, 2027, of Industrial Alliance Insurance and Financial Services Inc. (Quebec City, Que.). The outlook assigned is stable, which is consistent with the outlook for the existing ratings of IA and its core operating insurance subsidiaries. (For further details, please see A.M. Best's press release dated Feb. 13, 2015.)

The proceeds from the debt offering will be added to IA's capital base and be utilized for general corporate purposes, including the redemption of IA's outstanding $100-million 5.9-per-cent non-cumulative Class A preferred shares, Series F. IA intends to redeem the preferred shares on March 31, 2015. A.M. Best notes that IA's overall financial leverage is expected to remain below 30 per cent, while interest coverage is expected to remain above five times. Both measures are within A.M. Best's guidelines for IA's current rating level.

The rating recognizes IA's solid absolute and risk-adjusted capitalizations, consistent profitability, product diversification, and growth in assets under management. At year-end 2014, IA reported solid operating earnings while maintaining adequate risk-adjusted capital ratios. Premium growth for the year was led by strong individual insurance sales. Additionally, the company saw improvement in its segregated funds business. A.M. Best will continue to monitor the impact of the current macroeconomic environment, including interest rate movements on IA's earnings and risk-adjusted capital.

The methodology used in determining these ratings is Best's credit rating methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's credit rating methodology can be found at the A.M. Best website.