Mr. Yvon Charest reports

INDUSTRIAL ALLIANCE REPORTS THIRD QUARTER RESULTS - EARNINGS MOMENTUM SUSTAINED BY STRONG OPERATING RESULTS

For the third quarter ended Sept. 30, 2015, Industrial Alliance Insurance and Financial Services Inc. had net income attributed to common shareholders of $113.1-million, up 24 per cent over the previous year. Diluted earnings per common share (EPS) rose to $1.11 from 91 cents a year ago, the annualized return on shareholders' equity was 12.3 per cent and the solvency ratio at quarter-end was 225 per cent.

Yvon Charest, president and chief executive officer, commented: "In line with the year to date, we are reporting another strong quarter with earnings above guidance. Our business growth continues to be highlighted by our retail insurance operations in Canada and the U.S. that have been gaining momentum over the last quarters, as well as our segregated funds that continue to capture a bigger piece of the industry's assets. In early October, we announced the acquisition of CTL Corp. that enhances our product shelf for car dealers and we completed another acquisition that adds distribution in our wealth management operations. I am satisfied that we are continuing to execute on our strategy to deliver profitable organic growth in all our lines of business, while pursuing additional opportunities for value-creating EPS expansion through acquisitions."

Rene Chabot, executive vice-president, chief financial officer and chief actuary, added: "Despite the unfavourable impact of equity markets during the quarter, we delivered strong year-over-year earnings growth that topped our guidance. We are especially pleased to note the favourable policyholder experience in retail insurance as well as in all our group businesses. Strain on new business was better than expected for the second consecutive quarter, and our auto and home subsidiary delivered an excellent quarter. Our solvency ratio remains above our target range, which together with our balance sheet flexibility gives us the capacity to invest in the continued growth of our operations."

                                   HIGHLIGHTS
                                                                         Year-to-date 
                                                       Third quarter     at Sept. 30,        
(In millions of dollars, unless otherwise indicated)   2015     2014     2015    2014

Net income attributed to shareholders                $117.6    $98.5    $378.1  $309.2
Less preferred share dividends                          4.5      7.0      13.9    21.2
Less premium on preferred share redemption                -        -       4.0     -
Net income attributed to common shareholders          113.1     91.5     360.2   288.0
Earnings per common share (diluted)                   $1.11    $0.91     $3.54   $2.86
Return on common shareholders' equity (1)             12.3%    11.2%     13.5%   12.1%

(1) Annualized for the quarter. Trailing 12 months for the year to date.                                              
                                                                                                                        
                                              Sept. 30, June 30,  Dec. 31,  Sept. 30,
                                                 2015      2015      2014      2014

Solvency ratio                                   225%      223%      209%      215%              
Book value per share                           $36.45    $36.11    $33.83    $33.00            
Assets under management and administration    $111.2B   $112.9B   $109.5B   $106.9B           
Net impaired investments as a percentage of 
total investments                               0.10%     0.07%     0.07%     0.07%             

Third quarter highlights

Profitability

For the third quarter ended Sept. 30, 2015, Industrial Alliance reports net income attributed to common shareholders of $113.1-million, an increase of 24 per cent over the previous year. Diluted earnings per share of $1.11 compare with 91 cents in the same quarter a year ago and with guidance of $1.00 to $1.10 for the quarter. The annualized shareholders' return on equity of 12.3 per cent compares with 11.2 per cent a year ago, and is at the top of the guidance provided by management to the financial markets for 2015 (11.0 per cent to 12.5 per cent).

The key elements that explain profitability follow. All figures are after taxes unless otherwise indicated.

Expected profit on in force increased by 14 per cent to $136.4-million pretax over the same quarter last year, and is attributed mainly to the retail insurance and wealth management sectors. In addition, Industrial Alliance realized a net experience gain of $1.2-million pretax (one-cent earnings per share) related to favourable policyholder experience. A detailed analysis of gains and losses follows.

Individual insurance reported a net experience gain of two cents per share ($2.1-million). Favourable morbidity, expenses and other experience gains (nine-cent EPS) were mostly offset by a loss of seven-cent EPS related to the drop in equity markets during the quarter.

Individual wealth management had an experience loss of eight cents per share (negative $8.1-million), of which three-cent EPS is attributed to the dynamic hedging program for the segregated fund guarantee, one-cent EPS to lower fees on assets under management and the remainder related to lower profitability from IA affiliates.

Group insurance reported an experience gain of five cents per share ($5.4-million) related to lower claims for special markets solutions and dealer services. Employee plans performed in line with expectations.

Group savings and retirement reported a longevity gain of two cents per share ($1.5-million) in the third quarter.

Strain

In the individual insurance sector, strain on new business amounted to $15.2-million pretax, or 24 per cent of sales, compared with guidance of 30 per cent for the quarter. Management estimates that the lower strain ratio, which is attributed to higher sales and a favourable product mix, represented a gain of two cents per share.

Income on capital

Total income on capital of $23.5-million pretax compares with $20.2-million in the previous quarter. The increase in the third quarter is mainly attributed to an excellent quarter for IA auto and home.

Income taxes

The effective tax rate was 19 per cent, which is in line with the company's guidance of 18 per cent to 20 per cent.

Business growth

Premiums and deposits of $1.8-billion were down 3 per cent year over year because of lower inflows in the individual and group wealth management sectors. Likewise, assets under management and administration of $111.2-billion were down by 1 per cent in the third quarter but up by 4 per cent over the last 12 months.

In retail insurance, business growth continued to maintain good momentum for the third quarter in a row. Total sales of $63.8-million (plus 25 per cent) reflect growth in Canada (plus 16 per cent) and the United States (plus 47 per cent). Sales in the company's adjustable disability business, which is continuing its cross-Canada rollout, were up by 13 per cent.

In retail wealth management, gross sales of segregated funds increased to $358.2-million (plus 12 per cent) reflecting the continuing success of the company's cross-Canada distribution strategy; net inflows increased to $80.5-million (plus 18 per cent) in the quarter. Gross sales of mutual funds amounted to $313.7-million (minus 24 per cent) while net outflows were $315.7-million for the quarter.

The group insurance sector reported total sales of $220.3-million. Special markets solutions had sales of $41.9-million (plus 3 per cent). In dealer services, sales amounted to $56.4-million (plus 31 per cent) in property and casualty products, and $109.1-million (minus 3 per cent) in creditor insurance for an overall increase of 6 per cent. In the employee plans segment, sales amounted to $12.9-million (minus 72 per cent).

In group savings and retirement, sales were $246.0-million, 5 per cent lower than the previous year, reflecting a weaker quarter for insured annuities.

Capital

At Sept. 30, 2015, the solvency ratio was 225 per cent compared with 223 per cent at the end of the previous quarter. The increase is related to changes in interest rates (plus 1 per cent) and the contribution from third quarter earnings (plus 1 per cent).

Dividend

The board of directors approved a dividend of 30 cents per share on the company's outstanding common shares. This dividend is payable on Dec. 15, 2015, to shareholders of record at Nov. 20, 2015.

Dividend reinvestment and share purchase

Registered shareholders wishing to enroll in the company's dividend reinvestment and share purchase plan so as to be eligible to reinvest the next dividend payable on Dec. 15, 2015, must ensure that the duly completed form is delivered to Computershare no later than 4 p.m. on Nov. 13, 2015. Enrolment information is provided on the company's website under about IA, in the investor relations/dividends section.

Year-end preview

Subject to completion of the company's year-end review and according to management's best estimates on this date, the company anticipates a charge to net income attributed to common shareholders of approximately $100-million after-tax related principally to the lapse assumption in the actuarial reserve. This charge takes into consideration, among other things, the study disclosed by the Canadian Institute of Actuaries in September, 2015. The final results of the company's year-end review, which will be reported on Feb. 11, 2016, as part of its fourth quarter disclosure, could vary from this preliminary estimate.

Transactions subsequent to quarter-end

On Oct. 1, 2015, the company acquired all the outstanding shares of FIN-XO Securities, a full-service securities broker operating in the provinces of Quebec, Ontario, Alberta, Manitoba, British Columbia, Saskatchewan and New Brunswick. This transaction adds $700-million in assets under administration and further expands the company's affiliated distribution network. Terms of the transaction were not disclosed.

On Oct. 2, 2015, the company acquired all the outstanding shares of CTL Corp., the largest privately owned consumer vehicle finance company in Canada. CTL has a loan portfolio of more than $100-million originated through a network of car dealers located across Canada. This acquisition, which increases the company's current product shelf for car dealers, is immediately accretive and expected to contribute full-year earnings of four cents per share. The impact on the solvency ratio will be a decrease of approximately four percentage points.

Conference call

Management will hold a conference call to present the company's results on Wednesday, Nov. 4, 2015, at 2 p.m. (ET). The toll-free dial-in number is 1-800-381-7839. A replay of the conference call will be available for a one-week period, starting at 4:30 p.m. on Nov. 4, 2015. To access the the conference call replay, dial 1-800-558-5253 (toll-free) and enter access code 21774496. A webcast of the conference call (listen-only mode) will also be available on the IA Financial Group website.

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