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Industrial Alliance Announces an Offering of $100 Million of 8.25% Subordinated Debentures

Quebec City,

News Release

To view the prospectus

Industrial Alliance Insurance and Financial Services Inc. ("Industrial Alliance" or the "Company") announced today the filing of a prospectus supplement to the short form base shelf prospectus dated March 30, 2007 for an offering of $100 million of 8.25% subordinated debentures due March 27, 2019 (the "Debentures") to further strengthen its financial and capital position.

The Debentures will mature on March 27, 2019 and will bear interest at a fixed annual rate of 8.25% for the first five years, payable semi-annually, and a variable annual rate equal to the 90-day Bankers’ Acceptance Rate plus 7.55% for the last five years, payable quarterly. The Debentures will be redeemable by Industrial Alliance subject to certain conditions. The Debentures have been provisionally rated "A" with a stable trend by DBRS Limited and "A" by Standard & Poor’s. The net proceeds from this offering will be used for general corporate purposes. The Debentures will qualify as Tier 2 capital of the Company for regulatory purposes. The offering is expected to close on March 27, 2009, or soon after, but not later than April 3, 2009.

The issue will be offered on an agency basis by a syndicate of dealers co-led by RBC Dominion Securities Inc. and Scotia Capital Inc., and which includes National Bank Financial Inc., TD Securities Inc., BMO Nesbitt Burns Inc., CIBC World Markets Inc., Desjardins Securities Inc., Casgrain & Company Limited, HSBC Securities (Canada) Inc., Industrial Alliance Securities Inc. and Laurentian Bank Securities Inc.

Impact of the Debenture Issue on Financial Strength and Earnings per Share
On a pro forma basis, after giving effect to the Debenture issue, the Company estimates that, as at December 31, 2008, the solvency ratio would increase from 199% to 209%. The Company targets a solvency ratio between 175% and 200%.

The Debenture issue would also enable Industrial Alliance to absorb even greater stock market downturns, should they occur. On a pro forma basis, after giving effect to the Debenture issue, the Company estimates that the solvency ratio would remain above 175% if the S&P/TSX Index were to drop to around 7,100 points (compared to 7,400 points without such an issue) and that it would remain above 150% if the S&P/TSX Index were to fall to around 5,450 points (compared to 5,700 points without such an issue). 

On a pro forma basis, after giving effect to the Debenture issue, the Company estimates that the earnings per common share would be reduced by approximately $0.04 in 2009 and approximately $0.05 for a complete financial year.

The Debentures have not been and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws, and may not be offered, sold or delivered, directly or indirectly, in the United States of America. This release does not constitute an offer to sell or a solicitation to buy such securities in the United States.

Forward-Looking Statements
This news release may contain forward-looking statements about the operations, objectives and strategies of Industrial Alliance, as well as its financial situation and performance. The forward-looking nature of these statements can generally, though not always, be identified by the use of words such as "may," "expect," "anticipate," "intend," "believe," "estimate," "feel," "continue," or other similar expressions, in the affirmative, negative or conditional. Unless otherwise indicated, any forward-looking information that presents prospective results of operations, financial position or cash flows was approved by management on the date of this news release. Forward-looking statements entail risks and uncertainties that may cause the actual results, performance or achievements of Industrial Alliance to differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause the Company’s actual results to differ from expected results include changes in government regulations or tax laws, competition, technological changes, global capital market activity, interest rates, changes in demographic data, changes in consumer behaviour and demand for the Company’s products and services, catastrophic events, and general economic conditions in Canada or elsewhere in the world. A description of significant factors that could affect forward-looking statements is contained in the Management’s Discussion and Analysis section of the Company’s most recent annual report. This list is not exhaustive of the factors that may affect any of Industrial Alliance’s forward-looking statements. These and other factors must be examined carefully and readers should not place undue reliance on Industrial Alliance’s forward-looking statements. Where the forward-looking statements are presented as guidance regarding the future financial results of Industrial Alliance, they are provided to help investors understand the impact on earnings of the Company’s current plans and objectives. The Company may also provide objectives from time to time. An objective should be interpreted as a statement of management’s goals in managing the Company, and not necessarily as a forecast that the objective will be met. Industrial Alliance is not obligated to revise or update these forward-looking statements to reflect events, circumstances or situations that occur after the date of this news release, whether foreseeable or not, except as required by applicable securities legislation.

About Industrial Alliance
Founded in 1892, Industrial Alliance Insurance and Financial Services Inc. is a life and health insurance company that offers a wide range of life and health insurance products, savings and retirement plans, RRSPs, mutual and segregated funds, securities, auto and home insurance, mortgage loans and other financial products and services. The fourth largest life and health insurance company in Canada, Industrial Alliance is at the head of a large financial group, which has operations across Canada as well as in the Western United States. Industrial Alliance contributes to the financial wellbeing of over 3 million Canadians, employs more than 3,300 people and manages and administers over $49 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. 

Not for dissemination in the United States or to U.S. newswires

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Jacques Carrière
Vice-President, Investor Relations
Office: 418 684-5275