A.M. Best Co. has assigned a debt rating of “bbb+” to Industrial Alliance Insurance and Financial Services Inc.’s issuance of $125 million 4.60% non-cumulative preferred shares.

The preferred shares have been issued under a prospectus supplement to IA’s short form base shelf dated February 19, 2004.

The proceeds from the preferred shares offering will be used for general corporate purposes, to buy back shares issued in the acquisition of Clarington Corp., and to redeem the existing Clarington subordinated debt of $62.9 million.

Following the transaction, debt-to-capital levels will remain within the guidelines for the current rating, and interest coverage will continue to be strong, with fixed charge coverage expected to be in excess of 10 times.

Concurrently, A.M. Best has affirmed the financial strength rating of A (Excellent), issuer credit rating of “a+” and debt ratings of Industrial Alliance. A.M. Best has also affirmed the FSR of A (Excellent) and assigned an ICR of “a+” to IA’s life insurance subsidiary, Industrial-Alliance Pacific Life Insurance Co. of Vancouver, B.C. All ratings have a stable outlook.

A.M. Best has changed the FSR of A (Excellent) to a rating of NR-5 (Not Formally Followed) for The National Life Assurance Co. of Canada due to its merger with Industrial Alliance in 2005.

The ratings of Industrial Alliance and Industrial-Alliance Pacific reflect continued profitable operations, a diversified product portfolio, strong sales results in core individual insurance and wealth management sectors and adequate capitalization.

Industrial Alliance has a strong market presence in the province of Quebec, with growth outside the province complemented by the operations of Industrial-Alliance Pacific.

Industrial Alliance offers a diversified product portfolio through a number of distribution channels, including a favorable position in the brokerage and fund management community. The insurer has leveraged its distribution capacity and product diversification to maintain overall sales and premium growth in its core individual, group and wealth management lines.

Partially offsetting these positive rating factors are the firm’s concentrated operating profile in Quebec, its reduced risk-adjusted capital and the competitive challenges in the Canadian market.