Mr. Yvon Charest reports

INDUSTRIAL ALLIANCE INSURANCE AND FINANCIAL SERVICES INC. REPORTS GOOD FIRST QUARTER RESULTS - QUARTERLY DIVIDEND TO COMMON SHAREHOLDERS INCREASED BY 7%

Industrial Alliance Insurance and Financial Services Inc. has released its first quarter results.

2016 first quarter highlights:

• Reported earnings per share (EPS) of 96 cents at midpoint of guidance for first quarter (90 cents to $1);
• Fourth consecutive quarter of favourable policyholder experience in insurance businesses (plus nine-cent EPS);
• New business strain ratio of 17 per cent, better than first quarter guidance of 20 per cent (plus one-cent EPS);
• Retail insurance operations maintain strong momentum in Canada and the United States (plus 19-per-cent sales growth);
• No. 1 position for net sales of segregated funds in Canada during the first quarter;
• Solvency ratio of 205 per cent reflects higher required capital for first quarter macroeconomics and segregated fund portfolio;
• Quarterly dividend increased by two cents to 32 cents per common share.

Yvon Charest, president and chief executive officer, commented: "Our strong first quarter reflects the continued success of initiatives to grow our business organically, as well as through value-building acquisitions, while maintaining a clear focus on delivering profit growth. Building on the excellent momentum of our individual insurance and segregated fund businesses, we continue our action plan to manage strain on new business in retail insurance, solidify the recent progress in our employee plans segment, and make meaningful progress toward improving gross and net sales in our mutual funds business, as well as pursuing new opportunities to sustain long-term value creation for our shareholders."

"On top of the normal growth of our business this quarter, we are particularly pleased with the results from our retail insurance operations, employee plans and car dealer services, all of which reported strong policyholder experience," continued Rene Chabot, executive vice-president, chief financial officer and chief actuary. "Our strain ratio came in below our guidance for the quarter, which also contributed to our solid earnings. iA Auto and Home results reflect normal seasonality, as well as our previously announced investment in a new subsidiary to grow the business. In terms of our balance sheet, our exposure to the oil and gas sector is relatively benign; we can absorb a significant drop in equity markets if need be, and we have the flexibility to fund our growth initiatives."

                                                HIGHLIGHTS  
                          (in millions of dollars, unless otherwise indicated) 
                                                                                                 
                                                                                                First quarter  
                                                                                         2016            2015  
Net income attributed to shareholders                                                  102.4            114.4 
Less preferred share dividends                                                           4.1              5.5  
Less premium on preferred share redemption                                                 -              4.0  
Net income attributed to common shareholders                                            98.3            104.9    
Earnings per common share (diluted)                                                    $0.96            $1.03   
Return on common shareholders' equity (1)                                              10.5%            12.1%   
Results adjusted for significant items (2)                                                                        
Net income attributed to common shareholders                                            98.3             89.8   
Earnings per common share (diluted)                                                    $0.96            $0.88    
Return on common shareholders' equity (1)                                              10.5%            10.4%  
                                                                                                               
                                                              March 31, 2016   Dec. 31, 2015   March 31, 2015  
Solvency ratio                                                          205%            213%             211%        
Book value per share                                                  $36.48          $36.76           $34.94     
Assets under management and administration                           $117.7B         $115.8B          $114.7B  
Net impaired investments as a per cent of total investments            0.04%           0.05%            0.07%   

(1) Annualized for the quarter. 
(2) Non-IFRS (international financial reporting standards), adjusted for tax recovery (19 cents) and premium
for redemption of preferred shares (four cents) in the first quarter of 2015.

First quarter highlights

Profitability: For the first quarter ended March 31, 2016, Industrial Alliance Insurance and Financial Services reports net income attributed to common shareholders of $98.3-million and diluted earnings per common share of 96 cents (guidance was 90-cent to $1 EPS). This compares with net income to common shareholders of $104.9-million and EPS of $1.03 for the same quarter last year. The annualized return on shareholders' equity (ROE) was 10.5 per cent, compared with 12.1 per cent a year earlier. It should be noted that first quarter profitability in the prior year included significant items that provided a net gain of 15 cents per share. Excluding these items, net income attributed to common shareholders was $89.8-million, diluted EPS was 88 cents and ROE was 10.4 per cent in the first quarter a year ago.

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

Expected profit on in force increased by 5 per cent to $126.1-million pretax over the same quarter last year, and is attributed mainly to the retail and group insurance sectors. The same sectors also realized favourable policyholder experience of nine cents per share ($9.2-million), which was more than offset by market-related losses of 11 cents per share ($12.3-million). A detailed analysis of gains and losses follows.

Individual insurance reported favourable mortality and morbidity experience of two cents per share, offset by a market loss of four cents per share on universal life policies, for a net experience loss of two cents per share ($2-million).

Individual wealth management reported a net experience loss of seven cents per share ($6.6-million) related principally to the dynamic hedging program for the segregated fund guarantee (six-cent EPS) and lower fees on assets under management (one-cent EPS).

Group insurance reported an experience gain of seven cents per share ($6.7-million) attributed mainly to favourable long-term disability for employee plans (four-cent EPS), as well as lower claims in the dealer services division (three-cent EPS).

Group savings and retirement results were in line with expectations for the first quarter.

Strain: In the individual insurance sector, strain on new business amounted to $11.3-million pretax, or 17 per cent of sales, compared with guidance of 20 per cent for the first quarter (full-year guidance is 15 per cent). Management estimates that the lower strain ratio, which is attributed to a better-than-expected sales mix, represented a gain of one cent per share.

Income on capital: Total income on capital of $14.8-million pretax compares with $13.6-million in the same quarter a year ago. The result for this quarter is in line with normal earnings seasonality for iA Auto and Home, as well as reflecting the latter's investment in a new subsidiary to grow the business.

Income taxes: The effective tax rate was 17 per cent, versus guidance of 18 per cent to 20 per cent.

Business growth: Assets under management and administration of $117.7-billion grew by 2 per cent in the first quarter (3 per cent year over year), principally due to good inflows from the company's distribution affiliates. Premiums and deposits of $1.9-billion compared with $2-billion a year earlier, reflecting lower gross sales in the individual wealth management sector.

In retail insurance, total sales of $65.4-million (plus 19 per cent) were driven by growth in Canada (plus 10 per cent) and the U.S. (plus 38 per cent). Sales in the company's adjustable disability business, which continues to expand across Canada, were up by 12 per cent. This is the sixth consecutive quarter of business growth in the retail insurance sector.

In retail wealth management, momentum in the segregated fund business carried over into the first quarter, and the company recorded its eighth consecutive quarter of net inflows, which moved it into first position for net sales in Canada. Gross sales of segregated funds amounted to $454.1-million (minus 7 per cent) and net inflows were $142.6-million (minus 17 per cent). In the mutual fund business, the company's gross sales amounted to $285.3-million (minus 35 per cent) while net outflows were $291.2-million for the quarter.

The group insurance sector reported total sales of $174.5-million (plus 6 per cent). Special markets solutions had sales of $50.8-million (plus 7 per cent). In dealer services, sales of P&C products and creditor insurance amounted to $39.5-million (plus 11 per cent) and $66.2-million (plus 1 per cent), respectively, for an overall increase of 5 per cent. In the employee plans segment, sales reached $18-million (plus 18 per cent).

In group savings and retirement, sales were $333.9-million, 33 per cent higher than the previous year, reflecting growth in capital accumulation products as well as insured annuities.

Capital: At March 31, 2016, the solvency ratio was 205 per cent, compared with 213 per cent at the end of the previous quarter. Half of the decrease is related to changes in the macroeconomic environment and the other half to the segregated fund portfolio.

Dividend: The board of directors approved a 7-per-cent increase in the dividend on the company's outstanding common shares, bringing it to 32 cents per share. This dividend is payable on June 15, 2016, to shareholders of record at May 20, 2016.

Dividend reinvestment and share purchase: Registered shareholders wishing to enroll in the company's dividend reinvestment and share purchase plan (DRIP) so as to be eligible to reinvest the next dividend payable on June 15, 2016, must ensure that the duly completed form is delivered to Computershare no later than 4 p.m. on May 13, 2016. Enrolment information is provided on the company's website under about iA, in the investor relations/dividends section. Common shares issued under the company's DRIP will be purchased on the secondary market, and no discount will be applicable.

Market guidance for 2016:

• Earnings per common share -- target range of $4.20 to $4.60;
• Return on common shareholders' equity (ROE) -- target range of 11 per cent to 12.5 per cent;
• Solvency ratio -- target range of 175 per cent to 200 per cent;
• Dividend payout ratio -- payout range of 25 per cent to 35 per cent with the target being the midpoint;
• Effective tax rate -- target range of 18 per cent to 20 per cent;
• Strain on new business -- target of 15 per cent (plus or minus 5 per cent) of sales in individual insurance.

Conference call

Management will hold a conference call to present the company's results on Thursday, May 5, 2016, at 11:30 a.m. (ET). The toll-free dial-in number is 1-800-681-1621. A replay of the conference call will be available for a one-week period starting at 2 p.m. on May 5, 2016. To access the conference call replay, dial 1-800-681-1621 (toll-free) and enter access code 21807897. A webcast of the conference call (listen-only mode) will also be available on the company's website.

Annual meeting

iA Financial Group Alliance is holding its annual meeting at 2 p.m. (ET) on Thursday, May 5, 2016, at the Quebec City Convention Centre located at 1000 Rene-Levesque Boulevard East in Quebec City. Media will have the opportunity to meet with president and chief executive officer Mr. Charest immediately after the annual meetint at approximately 3:30 p.m. A webcast and a video conference of the meeting, as well as a copy of the management presentation, will be available on the company's website under about iA, in the investor relations/events and presentations section.

Investor day

iA Financial Group will hold an investor day in Toronto, Ont., on Tuesday, June 14, 2016, from 8:30 a.m. to 1:30 p.m. (ET). Further information will be provided in the following weeks.

We seek Safe Harbor.