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Second Quarter 2000 Results of Industrial-Alliance Life Insurance Company

21% Increase in the Profit for the First Half


News Release

Industrial-Alliance Life Insurance Company (Toronto Stock Exchange: IAG) ended the second quarter of 2000 with net income attributable to the shareholders (the "net income") of $23.1 million, or $0.60 per common share, compared to regular pro forma income of $19.5 million, or $0.52 per share for the second quarter of 1999. The 1999 regular pro forma income excludes an unusual gain of $5.3 million after taxes, following the sale of subsidiaries.

You can also consult the Financial Results for the Second Quarter of 2000 section.

Cumulatively, the net income for the first six months is $43.3 million, which is $1.14 per common share, while the regular pro forma income was $30.5 million ($0.81 per common share) for the first six months of 1999, a 42% increase. Even by taking into account the unusual gain in 1999, the net income up to June 30 of this year is 21% higher than that of last year. The rate of return on common shareholders´ equity for the twelve months ending June 30, 2000 is 13.37%, compared to 12.27% for the same period in 1999, excluding the unusual gain.

"For a second quarter this year, there is a clear increase in the net income that the Company draws from its regular operations," declared Yvon Charest, President and Chief Executive Officer, after the board of directors meeting that was held today, in Vancouver, at the head office of The North West Life Assurance Company of Canada, a subsidiary of Industrial-Alliance. "The profit is up for all lines of business, including Group insurance, which has returned to profitability after a few negative quarters. The rate adjustments made to contract renewals, which are continuing, appear to be successful. The rate of return of the common shareholders remains in the upper end of the 12% to 14% range targeted by the Company, stability we are proud of."

The increase in income in the second quarter is the result of the combined effect of the regular growth of sales, the growth of funds under management, favourable claims experience in individual and group life insurance, the maintaining of the good mortality experience in individual annuities and the control of the level of operating costs.

Business growth
With respect to business growth, insurance and annuities premiums in the second quarter, including contributions to segregated funds, reached $500.0 million, compared to $543.5 million for the corresponding period in 1999. If it were not for the variations observed in the Group Pensions sector, particularly in the fund entries under a large contract from a professional association, premiums for all lines of business would have been $40 million higher. However, for the first six months of the year, premiums total $1,122 million, a $53 million increase compared to the same period in 1999. The increase in premiums since the beginning of the year is attributable to a good business persistency rate and the increase in sales. Premiums from wealth management products account for almost 60% of the total.

Individual insurance – After growing 9% in the first quarter, individual insurance sales (first-year annualized premiums) increased 5% in the second quarter, totalling $56.1 million since the beginning of the year, 7% more than the same period in 1999. With a sales force made up of over 14,000 representatives, in three distribution networks, the Industrial-Alliance Group is still ranked second in Canada in terms of sales, with 12.8% of the market (first quarter data).

Group insurance: creditor insurance – Sales (single premiums) reached $31.0 million in the second quarter of 2000 for the creditor insurance segment, up 4% over the same period last year. Total sales reached $50.1 million, 6% higher than the first half of 1999. Most of this growth comes from the insurance offered through automotive dealers, where the company is a leader in Canada. The implementation of the development strategy in this sector took another step in recent months, when North West Life purchased Mecagroup, a specialized broker that distributes creditor insurance products to automotive dealers in Quebec. The Industrial-Alliance Group now has a direct sales force in all regions of Canada.

Group insurance: employee plans - In the more volatile employee plans market, the company made up for some of the shortfall accumulated in the first quarter with sales (first-year annualized premiums) of $12.3 million in the second quarter, up 16% compared to the same period last year. Sales total $22.9 million for the first six months, compared to $25.1 million for the same period in 1999.

Individual annuities - Individual annuities premiums reach $126.7 million for the second quarter, 23% higher than the same period last year. This comes after a rather exceptional first quarter, with fund entries just over 50% higher than those of last year (the RRSP period was exceptional this year). For the first six months of the year, premiums reached $392.6 million, up 42% compared to last year. Segregated funds represent over 60% of the assets under management in this line of business.

Group pensions - Premiums in the second quarter reached $126.2 million, compared to $210.1 million for the same period in 1999, which brings the total to $250.2 million since the beginning of the year, compared to $347.8 million for the same period in 1999. The decrease is attributable to two factors: the end of the government´s Program for Older Worker Adjustment (POWA), for which the Company had collected premiums of $45.6 million for the first six months of 1999, and the temporary – and scheduled – pause of fund transfers from another insurer as part of a major contract with a professional association. As we know, this contract, with a client associated with the Company for over 40 years, is being restructured. No amounts were recovered from the other insurer in the second quarter, but an asset balance of $423 million will be the subject of a reinsurance recovery in the next few years, including $122 million by the end of the year. These recoveries vary according to the maturities of existing deposits.

Sales of insured annuities, which had been voluntarily restricted in the past few years, started to pick up again this year. Premiums, net of reinsurance, have totalled $35.2 million since the beginning of the year, up 25% over the same period in 1999. The signing of a reinsurance agreement now allows us to obtain the expected return on this business, an area in which the Company´s expertise is well-known.

Assets under management
Assets under management reached $13.5 billion as at June 30, 2000, an 8% increase in the last 12 months. As we mentioned in the first quarter, the distribution of assets, between general funds and segregated funds, has changed considerably this year, primarily due to the transfer of $1.4 billion between National Life´s general funds and segregated funds.

Quality of investments
The quality of investments remains excellent. Non-performing assets as a percentage of investments reached 0.23% as at June 30, 2000, down from 0.33% as at June 30, 1999 and 0.24% as at March 31, 2000. The delinquency rate of the bond portfolio is practically nil and that of the mortgage loans portfolio was 0.28% as at June 30, 2000, compared to 0.50% as at June 30, 1999 and 0.38% as at March 31, 2000.

Equity reached $731.7 million as at June 30, 2000, an increase of 12% compared to June 30, 1999, on a pro forma basis. The book value per common share was $17.48 as at June 30, 2000, up 4% compared to the end of the previous quarter. The capitalization ratio, as measured by the regulatory authorities´ guidelines, reached 185.0% for Industrial-Alliance as at June 30, 2000, a ratio that has remained practically stable since the end of the first quarter. This ratio greatly exceeds the regulatory authorities´ requirements.

Pro forma data
Because of the demutualization of Industrial-Alliance on February 10, 2000, the 1999 comparative data are presented on a pro forma basis, when deemed appropriate. These data present the income for the period that would have been attributable to the shareholders, as well as the equity, if Industrial-Alliance had demutualized on January 1, 1999. They give effect to the estimated cost of managing the share ownership, and the adjustment of participating contracts accounts.

North West Life changes names
North West Life, a subsidiary of Industrial-Alliance, announced today that it was going to change its name to "Industrial Alliance Pacific ." This new name, which is basically that of the parent company, but with a regional component, is another step in the rapprochement that has been taking place for the last few years between North West Life and Industrial-Alliance, two companies offering essentially the same line of products, but in different regions. From a marketing standpoint, the generic part of the name, which indicates the field of activity, will become "Insurance and Financial Services," to better reflect the fact that the Company operates in both the life and health insurance and wealth management sectors. This new name will be used starting September 1 in Canada. North West Life is the only life insurance company to offer a full line of products and services with its head office west of Winnipeg.

Other events to underline for the second quarter

DBRS has begun to give ratings to Industrial-Alliance by granting the ratings of IC-2 for its claims paying ability (2nd highest level), Pfd-2 (high) for the preferred shares (2nd level) and A for the subordinated debentures (3rd level).

A.M. Best announced the renewal of the credit rating of A (Excellent) it grants the three life insurance companies in the Group, that is, Industrial-Alliance, North West Life and National Life.

The parent company and North West Life recently introduced MERIDIA, a new universal life insurance policy. This product combines insurance and wealth management. One of the main concepts is the "wealth maximizer" option, which focuses on the investment component and related tax advantage. At the end of the first quarter, the Company was ranked second in Canada for universal life insurance sales, calculated according to gross annualized premiums.

National Life introduced three new investment funds in June, an RER global balanced fund, an RER U.S. equity fund and a Canadian equity index fund.

About Industrial-Alliance
With the strength of over 100 years of experience, Industrial-Alliance is a life and health insurance company that offers a wide range of insurance and wealth management products. It has operations across Canada, either directly or through its subsidiaries, including National Life of Canada (Toronto) and North West Life (Vancouver). Industrial-Alliance also owns a general insurance company, Industrial-Alliance Home & Auto Insurance. Industrial-Alliance is the seventh largest life and health insurance company in Canada.

You will also find Industrial-Alliance´s financial results for the second quarter, including complete financial statements, on the Company´s Internet site at

Sources and information

Jacques Carrière
(418) 684-5275 (office)
(418) 576-3624 (cellular)

Investors and financial analysts:
Yvon Sauvageau
(418) 684-5058 (office)