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Industrial Alliance Converts $56,250,000 of its Preferred Shares Held by Capital d'Amérique CDPQ into Common Shares

Quebec City,

News Release

Industrial-Alliance Life Insurance Company (Toronto Stock Exchange: IAG) announced today the conversion of 2,250,000 of its series 1 preferred shares that were held by Capital d’Amérique CDPQ inc., into 1,697,447 common shares. The common shares were issued at a price of $33.138 each, for an aggregate amount of $56,250,000. The conversion followed a request to this effect by Capital d’Amérique CDPQ and has been approved by the regulatory authorities.

The series 1 preferred shares had originally been issued in the form of series 1 preferred securities on February 12, 1999, to Capital d’Amérique CDPQ, a subsidiary of the Caisse de dépôt et placement du Québec. Industrial Alliance was a mutual company when the issue took place. This issue contained 3,000,000 series 1 preferred securities worth $25 each, for a total amount of $75,000,000. These securities were subsequently converted into series 1 preferred shares when Industrial Alliance converted into a stock company in February 2000.

The preferred shares were convertible into common shares of Industrial Alliance, at the option of the holder, starting on February 10, 2001, one year after Industrial Alliance converted into a stock company. The conversion privilege was limited to $18,750,000 per year. The amounts that were not converted were cumulative and Capital d’Amérique CDPQ had not exercised its conversion privilege until now. The conversion announced today covers 75% of the preferred shares held by Capital d’Amérique CDPQ.

The series 1 preferred shares were convertible at a price equal to 95% of the weighted average value of the trading price of Industrial Alliance common shares for the 15-day period preceding the reception of the notice of conversion. The notice of conversion was received by Industrial Alliance on April 1, 2003.

The series 1 preferred securities were issued in 1999 as part of a $150 million private issuing of capital underwritten by Capital d’Amérique CDPQ. In addition to the $75 million of series 1 preferred securities, this issue also included the issuance of $75 million of series 3 subordinated debentures.

Industrial Alliance used the proceeds of this capital issue to finance the acquisition of Seaboard Life Insurance Company, a life and health insurance company whose head office was located in Vancouver. Seaboard was subsequently merged with The North West Life Assurance Company of Canada, another Industrial Alliance life and health insurance subsidiary based in Vancouver. Today, this company operates under the name Industrial Alliance Pacific.

The table below shows the impact of the conversion of Capital d’Amérique CDPQ preferred shares on the main financial parameters of Industrial Alliance. Hence, for 2002, the conversion would have had a positive impact on the debt ratio, which would have decreased by 4.8 percentage points, and on the book value per common share, which would have increased by $0.48. The impact would have been neutral on the solvency ratio, which would have remained at 186%, and would have put downward pressure on the basic earnings per share, which would have decreased by $0.07, and on the diluted earnings per share, which would have been reduced by $0.10 (the earnings per share data exclude the Teleglobe provision). The return on equity would have remained at essentially the same level, decreasing by 0.2 percentage points (excluding the provision for Teleglobe).

Impact of the conversion of Capital d'Amérique CDPQ preferred shares
Data as at December 31, 2002 Befor the conversion After the conversion Variation
    (Pro forma)  
Earnings per share (excluding the provision for Teleglobe)      
- Basic $3.18 $3.11 ($0.07)
- Diluted $3.18
$3.08 ($0.10)
Return on equity (excluning the provision for Teleglobe) 14.4% 14.2% (0.2%)
Book value per common share $22.92 $23.40 +$0.48
Sovency ratio (MCCSR) 186% 186% --
Debt ratio (subordinated debentures and preferred shares as a % of total capital 22.0% 17.2% (4.8%)
Coverage ratio (fixed financing expenses) 8.40 10.33 +1.93
Weighted number of shares outstanding 37,527,989 39,225,436 1,697,447

About the Industrial Alliance Group
The Industrial Alliance Group is among the most solid financial institutions in the country, where it is an industry leader in the field of insurance and financial services. The Group has operations across Canada through Industrial Alliance (Quebec City), National Life (Toronto) and Industrial Alliance Pacific (Vancouver). The seventh largest life and health insurance organization in Canada, the Industrial Alliance Group insures over 1.5 million Canadians, employs more than 2,000 people and administers $16.8 billion in assets. Industrial Alliance stock is listed on the Toronto Stock Exchange, under the ticker symbol IAG. Industrial Alliance is among the 100 largest public companies in Canada.

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Jacques Carrière
Vice-President, Investor Relations
Office: (418) 684-5275
Cellular: (418) 576-3624