A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a+” of Industrial Alliance Insurance and Financial Services Inc. and its subsidiary, Industrial-Alliance Pacific Life Insurance Co. A.M. Best has also affirmed the debt ratings of IA. The outlook for all ratings is being revised to positive from stable.

The ratings of IA and IAP reflect their improved profitability and increased assets under management and administration while maintaining a strong growth in capital. Much of this asset growth has been due to the acquisitions IA has made and their successful integration. In addition, the overall level of debt remains modest, while the coverage ratio has improved.

With the acquisition of Clarington Corp. Inc. at the end of 2005, IA became a sizeable player in the investment fund market. At the end of 2006, IA managed $6.3 billion in mutual funds in the retail market and $6 billion in segregated funds, placing IA among the top 20 investment fund managers in Canada for the retail market and among the top 10 for the independent advisors channel. This diversification has enabled IA to increase assets under management, lower fixed costs, expand geographically and increase fee income.

Partially offsetting these positive rating factors are the challenges IA faces in growing its insurance and asset management business in the competitive Canadian market while maintaining a strong risk-adjusted capital position. Despite its significant growth, IA still maintains a Quebec concentrated operating profile.

The following debt ratings have been affirmed:
-Industrial Alliance Insurance and Financial Services Inc.:
“bbb+” on 125 million 4.60% non-cumulative perpetual preferred shares Series B; “a-” on 150 million 5.13% subordinated debentures, due 2019.

-Industrial Alliance Capital Trust: “bbb+” on 150 million trust securities Series A, due 2053.

The following indicative ratings on securities available under shelf registration have been affirmed:

-Industrial Alliance Insurance and Financial Services Inc.: “a” on senior unsecured debt; “a-” on subordinated debt; “bbb+” on preferred shares.