IAG key messages Good top line momentum in all business segments - - PDF document

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

1 June 29, 2004 2

IAG key messages

Good top line momentum in all business segments

with a disciplined approach that delivers a stable ROE

IAG is taking advantage of consolidation to grow

its market shares

IAG has a proven track record and a well-executed

strategy

Low risk Clean story Quality of investments Hidden value (visibility of future earnings) Conservative approach to bottom line (limited use of

reinsurance, seg funds guarantee reserve)

Embedded value Excess capital

Investor and Analyst Conference

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Agenda

Section 1 - Bottom line

• 1. Can IAG maintain a 13 to 15% ROE?

Section 2 - Top line

• 2. Can IAG grow at "industry +5%" in each line of

business?

Section 3 - Current issues

• 3. What is IAG going to do about its exces capital?
• 4. Is IAG being too conservative in its reserving

practices for seg fund guarantees?

• 5. How sensitive is IAG to interest rate and equity

market movements?

Investor and Analyst Conference 4

First question

Bottom line

Can IAG maintain a 13 to 15% ROE?

Investor and Analyst Conference

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Can IAG maintain a 13 to 15% ROE?

Proven track record No loss leader: each sector contributes to profit Strategy aims to avoid competing on price alone Competitive cost structure Limited use of reinsurance (hidden value) Strong top line momentum (see section 2)

Question 1: Bottom line 6

Proven track record

Question 1: Bottom line

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

7 Target 13-15% 12.6 14.5 14.4 11.8 2.2 14.3 0% 3% 6% 9% 12% 15% 1999 2000 2001 2002 2003

Five-year adjusted1 ROE

Pro forma

1 See Appendix for details about adjusted figures

Teleglobe 14.0 Proven track record 8

No loss leader:

Each sector contributes to profit

Question 1: Bottom line

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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1.91 2.51 2.84 3.09 3.42 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 '99 '00 '01 '02 '03

Five-year adjusted1 and diluted EPS growth by line Contribution of each line to adjusted1 net income

0% 20% 40% 60% 80% 100% '99 '00 '01 '02 '03

• Indiv. Insurance
• Indiv. Annuities

Group Insurance Group Pensions

No loss leader

Growing EPS and good diversity of earnings

4

• y

e a r C A G R : 1 6 %

Pro forma

1 See Appendix for details about adjusted figures

10

Adjusted ROE by line of business1

2001-2003

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Net income Required surplus

No loss leader ROE by line 2001-2003 Comments Group Pensions 13.1% Met hurdle rate. Repositioning towards accumulation products Group Insurance 16.2% Steady growth Individual Annuities 16.7% High since market rebound Individual Insurance 13.5% Substantial embedded value. Short term ROE could be increased to between 15% and 16% if the company were to reinsure at industry level (see slides 22 to 26) Company: 14.3%

1 See Appendix for details about adjusted figures. ROE calculated on

required surplus, using same MCCSR and same leverage by line.

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Strategy aims to avoid competing

• n price alone

Question 1: Bottom line 12

Distribution is at the heart of our strategy

The key paradigm of the life insurance industry: life

insurance is a product that is “sold” to consumers, not a product that is bought by consumers

Thus, success is achieved through a sound

distribution strategy

IAG’s distribution strategy

Build strong relationships with distributors, captive or independent, in order to develop long-lasting partnerships and become their insurer of choice

Avoid competing on price alone

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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IAG key differentiating skill

Avoid competing on price alone

Distribution

Strategy: Be better (how IAG differentiates itself)

Build and manage multi-channel distribution

Support distributors in building their business

Provide innovative products

Provide marketing support

Strategy: Be competitive

Product price

Compensation Point-of-sale

technology

14

Good at managing multi-channel networks

26% 63% 8% National Career Insurance brokers accounts Altern. 3% 37% 63% Career Insurance brokers Career Insurance National Mutual fund agents brokers accounts brokers 1,309 Over 12,000 Over 300 Over 1,000

Avoid competing on price alone

Individual Insurance 2003 sales Individual Annuities 2003 sales

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Smart positioning could deliver higher ROE

ROE potential Commodity Low High

Product value scale Field force dedication scale

Value

Avoid competing on price alone 16

Competitive cost structure

Question 1: Bottom line

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Competitive cost structure

IAG believes that it has: A competitive cost structure in the retail markets

where it is an industry leader

A cost structure compatible with a 13 to 15% ROE in

the group markets where it is a focused/niche player

Possibilities to even further improve the cost structure

• f the IAG group

However no industry data are available to compare

companies’ cost structure

Demonstration about IAG’s competitive cost structure

must therefore be "indirect"

Competitive cost structure 18

Breakdown of costs in the price of a UL product

Competitive cost structure

Increasing profitability and a market share above 10% in sales certainly put IAG in the best "cost structure" category Claims 53% Compen- sation 19% Profits and taxes (incl. IIT) 14% Acquisition costs 8.5% Administration costs 5.5% With its low cost structure, if IAG were to double in size, management believes that the price of products could be reduced by some 1% to 2%

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Factors influencing cost structure

Retail market Group market Size

A leader in Canada with a competitive cost structure Smaller player than the top 3

Strategy

Size and cost structure allow IAG to compete in all markets, in all provinces, with all distribution networks Strategy adapted to size

Target small- and medium-

sized businesses

Exploit niches neglected by

traditional carriers, such as creditor insurance with car dealers and special risks market

Culture

IAG is a lean organization with a cost-minded

management culture

IAG has the reputation of being an efficient operator Competitive cost structure 20

Constant efforts to improve cost structure

Group Pensions: one IAG operation (since 2000) Group Insurance: one IAG operation (harmonization

since 2000 and integration since 2002)

Individual Annuities: common family of funds since 2002 Investments: common leadership since 2000 Career sales force: increased use of technology

(Career sales force cost structure within 5% of brokerage network cost structure)

Competitive cost structure

Measures are aimed at improving productivity while keeping the entrepreneurial spirit to maintain top line momentum

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Limited use of reinsurance:

Hidden value

Question 1: Bottom line 22

IAG uses less reinsurance than the industry

Limited use of reinsurance

It is estimated that over 75% of 2003 individual life new business face amount in Canada was reinsured. Industry IAG

New business New business In-force Distribution (% FYAP) Reinsured (%face amount) Distribution (% FYAP) Reinsured (%face amount) Reinsured (% face amount)

UL 52 78 72 32 27 Term 24 80 18 86 63 Others 24 70 10 20 12

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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YES NO

IAG

High Mortality improvement Expensive Reinsurance quote

Reinsurers have embedded mortality improvement in their quotes IAG wants to retain future mortality improvement benefits

Inexpensive None

Decision to reinsure - Permanent products

Limited use of reinsurance 24

• 50
• 30

130 70 80 40

• 75
• 50
• 25

25 50 75 100 125 150 1st year Years 2+ Total

IAG level of reinsurance Industry level of reinsurance

New business profits - Permanent products

Assumption: Moderate level of mortality improvement

Limited use of reinsurance

(% of annualized premiums) Use of lower levels of reinsurance means: More capital intensive More hidden value Lower short-term ROE

Present value

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Decision to reinsure - Summary

Impact of reinsurance in % of annualized premiums

Impact on income statement Impact on embedded value

1st year profit (loss) Years 2+ pv of profits Total pv of profits Cost of capital Added value (a) (b) (c)=(a)+(b) (d) (c)-(d) IAG level

• f reinsurance

(50) 130 80 30 50 Industry level

• f reinsurance

(30) 70 40 25 15 Investment

• vs. return

(20) 60 40 5 35 Use of lower levels of reinsurance More capital intensive More hidden value More capital intensive More hidden value Limited use of reinsurance 26

Impact on IAG of using industry levels

• f reinsurance

Limited use of reinsurance

New sales: if IAG had reinsured its 2003 sales at the

same level as the industry (i.e. increased reinsurance from 30% to 80% on products other than term)

Impact on 2003 net income: up by $10/15 million

(from $135 million to $145/$150 million)

Impact on 2003 ROE: up by 100/150 basis points

(from 14.3% to 15.5%/16.0%)

In-force: the low level of reinsurance used in the past

leads to anticipated higher future profits as mortality margins are released and mortality improvements materialize

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Conclusion

28 Question 1: Bottom line

ROE and EPS targets

ROE EPS growth 13% 10% 14% 11% 15% 12% 13 to 15% ROE target translates into EPS growth of 10 to 12%, consistent with previous management guidance

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Can IAG maintain a 13 to 15% ROE?

Yes, in the foreseeable future, because of IAG’s proven track record and

• ngoing ability to effectively manage product mix,

multi-channel distribution networks, and use of reinsurance to produce high and consistent ROE, while at the same time building the business to maximize long-term shareholder value

Question 1: Bottom line 30 Question 1: Bottom line

Question period

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Second question

Top line

Can IAG grow at "industry +5%" in each line

• f business?

Investor and Analyst Conference 32

Double-digit premium growth1

300 600 900 1,200 1,500 1,800 2,100 2,400 2,700 1999 2000 2001 2002 2003 Wealth Mgmt Life Insurance Other ($M)

5-year CAGR: 14% 1,594 2,567 2,337 1,889 1,815 13% 15%

5-year CAGR:

1 Excluding CMA

Question 2: Top line

5-year industry CAGR: 5%

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Well-balanced revenue sources

2003 premiums: $2,567 million

Group Insurance 24% Group Pensions 22% Individual Insurance 27% Individual Wealth Mgmt 27%

Question 2: Top line 34

Well-diversified operations throughout Canada

Individual Insurance Premiums 2001-03 21% 20% 51%

Outside Canada 4%

4% Group Insurance Premiums 2001-03 21% 34% 40% 5% Individual Annuities Assets 2003 16% 15% 65%

Outside Canada 1%

3% Group Pensions Assets 2003 7% 33% 58% 2%

Question 2: Top line

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Good sales growth vs. the industry1

1 Excluding CMA 2 IAG data: general and seg funds. Industry data: mutual funds (gross sales) 3 Four-year growth rate 4 Preliminary CLHIA data

Sources: CLHIA, LIMRA, IFIC and Investor Economics

Growth up to 2003 5-year CAGR 2-year CAGR ($Million) IAG Industry IAG Industry Individual Insurance 10% 5% (3%) (2%) Individual Annuities2 6% (4%) 12% (12%) Group Insurance Employee Plans 10% 9% (5%) (4%) Creditor Insurance 60%

• 10%
• Special Markets (SMG)

33%3

• 49%
• Group Pensions

29% 6%4 28% (4%)4 Growth objective maintained at industry + 5%

Question 2: Top line 36

Individual Insurance

Question 2: Top line

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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12 indicators of why IAG can - and will - continue to succeed in the Individual Insurance line of business

Individual Insurance 38

• 8%
• 10%

1% 3% 4%

• 12
• 10
• 8
• 6
• 4
• 2

2 4 6 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04

• 1. Sales momentum is back. IAG’s sales have

been up for the last three quarters.

(%)

IAG sales growth1 (Quarter over quarter)

1 In this presentation, Individual Insurance sales and premium income are

measured with FYAP (first-year annualized premiums). IAG sales figures also exclude CMA, unless otherwise indicated.

Individual Insurance

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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IAG sales growth vs. industry (Year over year)

• 2. IAG has outperformed or kept up with industry

sales growth over the last few years.

17 17 8 2

• 2 -3
• 3
• 1

4 1

• 8
• 4

4 8 12 16 20 2000 2001 2002 2003 Q1/2004 IAG Industry

(%)

0% +6% +1%

• 2%

+3% IAG vs. industry

Individual Insurance

1 Including CMA

1

40

Growth (excl.

• 3. IAG’s traditional networks sales growth has

always been positive.

117.3 118.5 109.0 104.1 98.7 10.2 16.0 26.6 21.2 15.7 20 40 60 80 100 120 1999 2000 2001 2002 2003 5 10 15 20 25 30

General, Career, other National accounts ($M) Individual Insurance

IAG sales

• +5%

+5% +8% +1%

• Nat. accts)

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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• 4. IAG’s “minimum premium” sales growth has

been on the rise over the last few years.

79.5 77.2 85.0 98.5 95.1 34.9 48.1 50.6 38.2 30.2 20 40 60 80 100 1999 2000 2001 2002 2003

Minimum premium Excess premium ($M) Individual Insurance

IAG sales

• 3%

+10% +12% +4% Minimum premium growth Minimum premium up by 10% in Q1/04

42

• 5. IAG regained the 3rd rank in terms of sales.

Market share consistently above 10%.

Market share Rank Comments 2000 13.4% 2nd

• 2001

13.9% 1st

• 2002

12.9% 2nd Sun merged with Clarica 2003 11.9% 4th Great-West merged with Canada Life Q1/2004 12.2% 3rd IAG ahead of one of the top 3

Individual Insurance

IAG sales

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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• 6. IAG’s in-force has been growing steadily.

($M)

535 598 645 664 683 100 200 300 400 500 600 700 1999 2000 2001 2002 2003 5-year industry CAGR: 4%

Individual Insurance

5 y e a r C A G R : 1 %

Premium income

44

• 7. Relative to its size, IAG is probably the

company that sells the most in Canada.

2003 Individual Insurance market IAG 19% Industry 10% Top 3 7%

IAG and industry sales (FYAP) as a % of in-force (premiums)

Individual Insurance

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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• 8. IAG’s market potential is still very good all

across Canada, mainly outside Quebec.

Individual Insurance

2003 Atlantic Quebec Ontario West Out of Can. Total Sales 5% 40% 29% 22% 4% 100% Premiums (2003) 7.4% Sales (Q1/2004) 12.2%

IAG business distribution IAG market shares in Canada

46

• 9. IAG can take advantage of any new trend

in the market, the most recent one being critical illness.

Individual Insurance

($Million) 2000 2003 IAG 0.4 8.2 Industry 18.0 71.2 IAG market share 2.2% 11.5%

Critical illness sales

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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• 10. IAG’s multi-channel distribution strategy

is the cornerstone of its success.

Individual Insurance

Distribution

Strategy: Be better (how IAG differentiates itself)

Build and manage multi-channel distribution

Support distributors in building their business

Provide innovative products

Provide marketing support

Strategy: Be competitive

Product price

Compensation Point-of-sale

technology

48

• 11. IAG’s distributon philosophy is aimed at

building long-term relationships.

Individual Insurance

Active support of MGAs Help MGAs grow their business Privilege long-term relationships Innovative products Active management of channel conflicts IAG has specialized people to manage its different

networks

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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• 12. IAG maintains a prudent approach in light
• f the current competitive environment.

Individual Insurance

Managing in the current environment is a balancing act IAG’s current approach is to: Keep margins: not ready to compromise on price Keep long-term distribution potential: not ready to compromise

• n ability to generate growth in the future
• This has lead IAG to sharpen its pencil somewhat in the high net

worth market

IAG has also the flexibility of reinsuring more, if required,

to meet short-term competitive pressures

50

Strategic positioning

Individual Insurance

Market opportunity IAG’s capability

Struggle Invest Maintain Exploit High Low Low High Individual Insurance

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Individual Wealth Management (Individual Annuities)

Question 2: Top line 52

The key to our success has been our multi-channel strategy to sell insurance products

Individual Wealth Management

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Our objective: leverage our skill in managing multi-channels to sell a broad range

• f financial products

Individual Wealth Management 54

Traditional wealth products

GICs SPIAs UL life insurance Seg funds

Individual Wealth Management

Historically, IAG was selling life insurance products... … through its traditional networks

Traditional networks

Career MGAs National accounts

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Traditional wealth products

GICs SPIAs UL life insurance Seg funds

Individual Wealth Management

Now, IAG is selling financial products... … through its own expanded networks

Traditional networks

Career MGAs National accounts

New wealth products

Mutual funds Securities

New networks

Mutual fund brokers Securities brokers

56

The wealth management world

Assets Canadian market1 GIC $649 billion SPIA $19 billion UL $8 billion Seg funds $47 billion Mutual funds $462 billion Securities $547 billion

Individual Wealth Management

1 Source: Investor Economics. 2003 estimated figures

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Wealth assets managed by IAG

Canadian market IAG assets Comments GIC $649 B $1.2 B Well-established player SPIA $19 B $600 M Well-established player UL $8 B $1.3 B Among industry leaders Seg funds $47 B $3.5 B Among industry leaders

• Net sales: 3rd (13.5% of market)
• Assets: 4th (7.5% of market)

Mutual funds $462 B $5 B $100 M Distribution – Started in 2000 Manufacturing – Started in 2003 Securities $547 B $470 M Started in 2002

1 Retail market only. Data as at March 31, 2004

Individual Wealth Management 58

That’s where the money is

Individual Wealth Management

• Total estimated wealth management market in

Canada in 2003: $1,700 billion

Why expand further in wealth management?

1.

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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1,206 1,732 3,379

500 1,000 1,500 2,000 2,500 3,000 3,500 1997 2003 2012

6% 9%

Individual Wealth Management ($B)

Estimated asset growth

e

Why expand further in wealth management? (cont.)

That’s where the money is It’s growing quickly

1. 2.

Source: Investor Economics

60

Life agents

65% have a mutual funds license

Stock brokers

74% have a life license

Mutual fund brokers

60% have a life license

And many agents have more than two licenses

Individual Wealth Management

Why expand further in wealth management? (cont.)

That’s where the money is It’s growing quickly Convergence in distribution

1. 2. 3.

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

61 Individual Wealth Management

Why expand further in wealth management? (cont.)

That’s where the money is It’s growing quickly Convergence in distribution Follow our distributors

1. 2. 3. 4.

62

That’s where the money is It’s growing quickly Convergence in distribution Follow our distributors Bring new distributors in to sell our existing and future products

Individual Wealth Management

Why expand further in wealth management? (cont.)

1. 2. 3. 4. 5.

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Wealth management strategy

Individual Wealth Management

IA mutual funds IA mutual funds

IA Mutual Funds IA Lifecos

Career and MGAs referrals s e g f u n d s l i f e i n s u r a n c e

IA Securities all mutual funds

I n v e s t i a s e g f u n d s l i f e i n s u r a n c e FundEX

Life insurance Seg funds IA mutual funds 64

Strategy - Step 1

Build a mutual fund broker-dealer: Investia (1999) Acquisitions: Concorde Financial Group, Global Allocation,

FundEX

Assets under administration: $5.0 billion1 Build a full-service broker: IA Securities (2002) Acquisitions: ISL-Lafferty, BNP (Canada), Leduc Assets under administration: $470 million1

1 As at March 31, 2004 (pro-forma numbers for Investia take

into account the closing of the FundEX acquisition in April 2004)

Individual Wealth Management

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Strategy - Step 1 (cont.)

Build a mutual fund manufacturer:

Industrial Alliance Mutual Funds (2003)

Acquisition: Co-operators Mutual Funds Assets under management: $96 million1 Offer a full line of mutual funds

1 As at March 31, 2004

Individual Wealth Management 66

Strategy - Step 2

Sell more of our existing products through these

additional distribution vehicles

Manufacture new products that could be sold by our

existing and new distributors

Manufacturing - not distribution - is the desired end

Individual Wealth Management

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Wealth management strategy

Individual Wealth Management

IA mutual funds IA mutual funds

IA Mutual Funds IA Lifecos

Career and MGAs referrals s e g f u n d s l i f e i n s u r a n c e

IA Securities all mutual funds

I n v e s t i a s e g f u n d s l i f e i n s u r a n c e FundEX

Life insurance Seg funds IA mutual funds 68

Purchase price of recent wealth management acquisitions

Purchase price: $14.6 million Assets under administration acquired: $5.0 billion Assets under management acquired: $100 million

Overall risk is small. Upside potential is great.

Individual Wealth Management

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Where are the profits?

Manufacturing, not distribution, is the desired end Transfer AUA to AUM Cross-sell life insurance Reinforce our relationship with current networks

and help attract new distribution

Individual Wealth Management 70

Strategic positioning

Individual Wealth Management

Market opportunity IAG’s capability

Struggle Invest Maintain Exploit High Low Low High

Seg funds GICs Mutual funds & Securities

SPIAs

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Measures of success

Grow our mutual funds managed assets Cross-sell life products

Individual Wealth Management 72

Group Insurance

Question 2: Top line

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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IAG is active in three market segments

IA IA Pacific National Life

Employee plans Creditor insurance Special markets group (SMG)

One Canada-wide strategy since 2000. One brand name since January 2004: Industrial Alliance Through

• ne

bank Through car dealers (SAL), all across Canada Mainly AD&D, travel insurance, student accident, term life, all across Canada

Group Insurance 74

Bottom line turnaround

Group Insurance

• 5.4

4.9 15.0 23.7 24.4

• 10
• 5

5 10 15 20 25 1999 2000 2001 2002 2003

($M)

Adjusted operating income1

1 See Appendix for details about adjusted figures. Adjusted operating

income: adjusted net income before income on capital and income taxes.

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Group Insurance

Employee plans

Question 2: Top line 76

Strong top line growth

258 306 365 423 525 100 200 300 400 500 600 '99 '00 '01 '02 '03 ($M)

Premium income1

($M)

Sales (FYAP)

20 40 60 80 100 '99 '00 '01 '02 '03 5

• y

e a r C A G R : 1 9 %

38 37 59 92 53

Bombardier ($51.0 million)

Industry 5-year CAGR: 9%2

1 Including ASO 2 Source: Fraser Group

Group Insurance - Employee plans

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Market opportunities created by consolidation

Mergers and acquisitions resulted in:

Bigger players, but fewer players IAG is one of some 15 group insurers, about half of which

have national capacities

Distributors and employers want alternatives

Consolidation provides further opportunities to: Strengthen relationships with existing distributors Establish new distributor relationships

Group Insurance - Employee plans 78

IAG’s marketing strategy

To grow all across Canada, particularly outside Quebec, by increasing penetration in the mid-size market and by being opportunistic in underwriting larger groups

Be recognized as a state-of-the-art Canada-wide company

Group Insurance - Employee plans

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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IAG’s advantages as a mid-size insurer

Accessibility: Sales and service teams in all regions

• f Canada with decentralized

underwriting and administrative centers

Flexibility:

Ability to design simple and efficient solutions and to adapt to particular needs

Service:

Ability to respond quickly and efficiently to requests and have state-of-the-art technological tools

Group Insurance - Employee plans

IAG’s advantages are a good fit with the mid-size market that we target and distinguish us from the big 3

80

IAG’s focus is on mid-size companies where there are still strong opportunities for growth

Under 50 lives 50 to 999 lives 1,000 lives and over Canada Premium income (2002)

Industry

12% 29% 59% 100%

IAG

17% 52% 31% 100% IAG market share

Premium (2002)

3.4% 4.5% 1.3% 2.5%

Sales (2003)

1.7% 6.2% 2.9% 3.7%

Source: Fraser Group

Group Insurance - Employee plans

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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IAG has good positioning in Quebec and strong market opportunities outside Quebec

2002 Atlantic Quebec Ontario West Canada Premium income

Industry

5% 19% 52% 24% 100%

IAG

2% 54% 35% 9% 100% IAG market share

Premium

1.0% 7.1% 1.6% 0.9% 2.5%

Sales

1.3% 17.1% 3.4% 2.2% 4.1% Market shares have systematically been higher for sales than for in-force over the last 5 years: IAG is gaining ground over competition

Source: Fraser Group

Group Insurance - Employee plans 82

Steps taken to grow the business

January 1, 2004: new marketing strategy to brand all

across Canada under the Industrial Alliance name

TV and newsprint advertising campaign outside of

Quebec to support national name recognition

Web@dmin launch and continuing development

(transactional website)

New sales directors in Ontario and Western Canada

with strong experience in consulting segment

Entering multi-employer market segment

Group Insurance - Employee plans

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Market opportunity IAG’s capability

Struggle Invest Maintain Exploit High Low Low High

Strategic positioning

Now 3 years ago

IAG’s

• perations

merged Group Insurance - Employee plans 84

Group Insurance

Creditor insurance with car dealers and special markets group (SMG)

Question 2: Top line

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Why is IAG in these two market segments?

Business inherited from Seaboard Life acquisition in

1999

These are niche/specialized markets neglected by

traditional life carriers

Potential for high ROI

Group Insurance - Creditor and SMG 86

Strong top line growth

Premium income

75.7 84.6 85.9 98.7 105.5

20 40 60 80 100 120 '99 '00 '01 '02 '03

($M) ($M)

Special markets group

23.2 27.8 32.3 65.7 71.5

10 20 30 40 50 60 70 80 '99 '00 '01 '02 '03

4

• y

e a r C A G R : 9 %

Creditor insurance

4-year CAGR: 33% Group Insurance - Creditor and SMG

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87

IAG strengths

First in Canada in the car dealer market, with a

market share of over 40%

Direct and exclusive Canada-wide distribution

network

Product expertise Ability to work with automobile dealers culture

Group Insurance - Creditor and SMG 88

IAG’s strategy

Pursue expansion across Canada Expand product portfolio to include additional P&C

insurance products (for creditor insurance) and new customized products (for SMG)

Group Insurance - Creditor and SMG

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Group Pensions

Question 2: Top line 90

IAG is active in two market segments

Characteristics Accumulation Products Insured Annuities Capital intensive Less More ROE potential High Good Competition Many players Few players Distribution Multi-channels: NBT, brokers, consultants Specialized channels: consultants Cdn market size

• Assets 2003

$65 billion $14 billion IAG market share

• Assets 2003

2.8% 13.4%

Group Pensions

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IAG is active in two market segments

Characteristics Accumulation Products Insured Annuities Capacity to differentiate Easier: product and service

• ffering make

a difference More difficult: need competitive pricing IAG credentials Added-value features and customized services Long-standing commitment in the marketplace and strong ties with key distributors IAG expertise Important player in Quebec (11% market share), rather new player outside Quebec Well established player all across Canada

Group Pensions 92

IAG’s overall strategy

Accumulation Products Insured Annuities Develop aggressively all across Canada, particularly outside Quebec, by increasing penetration in the mid-size market Maintain current position by strictly managing ROE and risk

Group Pensions

Products are marketed under one brand (the Industrial Alliance brand) since 2000

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Market opportunity IAG’s capability

Struggle Invest Maintain Exploit High Low Low High

Strategic positioning

Insured annuities Accumulation products

Group Pensions 94

Assets under management - Top line growth

Proportion outside Quebec: 15%

($M)

Accumulation products

Group Pensions

Proportion outside Quebec: 69%

($M) 5 y e a r C A G R : 5 %

Insured annuities1

5 y e a r C A G R : 1 4 % 965 1,095 1,077 1,333 1,799

250 500 750 1,000 1,250 1,500 1,750 2,000 '99 '00 '01 '02 '03

1,566 1,562 1,640 1,652 1,905

400 800 1,200 1,600 2,000 2,400 '99 '00 '01 '02 '03

1 Excluding CMA

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Accumulation products - Top line turnaround

100 200 300 400 500 1999 2000 2001 2002 2003

National Bank Trust Transfers Recurrent premiums

($M) 106 93 140 Core business 4-year CAGR: 26% 438 456

Premiums / Sales1

• 100
• 50

50 100 '00 '01 '02 '03

($M)

Net sales2

Group Pensions

1 Excluding CMA 2 Excluding National Bank Trust (NBT)

91 65

• 64
• 26

96

Steps taken to grow the business

Accumulation products

Strategic alliance with National Bank Trust Consolidates leadership position in Quebec by

providing exclusive distribution network

Building a Canada-wide sales team Opened new sales offices in Halifax, Toronto,

Vancouver and Calgary

Industry consolidation provides further opportunities to:

• Strengthen relationships with existing distributors
• Establish new distributor relationships

Group Pensions

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Steps taken to grow the business

Accumulation products (cont.)

Upgrading product offering Significant improvement in product line in the following

areas: Web services, communication material, fund offering and customization of products

Product gap significantly closed with top carriers

Insured annuities

Disciplined underwriting for new business:

IAG continues to favour margins over growth in this market segment

Group Pensions 98

Conclusion

Question 2: Top line

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Growth opportunities

Consolidation: offers good opportunities in all lines

• f business

Distribution: constantly strengthen our multi-channel

distribution network by attracting new distributors and become their insurer of choice

Wealth management strategy: offers opportunity to

broaden the networks and solidify ties

Development outside Quebec: good opportunities

in all lines of business, including in Group Insurance and Group Pensions

Question 2: Top line 100

Question period

Question 2: Top line

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

101

Third question

Current issues

What is IAG going to do about its excess capital?

Investor and Analyst Conference 102 Target 175-200%

182 183 175 186 181 185 214 221 230 100 125 150 175 200 225 250 Q1/02 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04

MCCSR

(%)

Pro forma1 Excess capital

1 Takes into account change to the capital structure that took place in

April 2004: redemption of $60 million Series 1 subordinated debentures.

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

103 ($Million) March 31, 2004 pro forma1 Removing $150 M capital Removing $200 M capital Conditions Available capital Core Tier 1 879 727 673

• Innov. Tier 1

150 128 119

• Innov. Tier 1 15% Tier 1

Total Tier 1 1,029 855 792 Tier 1 MCCSR 135% Total Tier 2 319 319 319 Debt ratio 25% Total available capital 1,348 1,174 1,111 Required capital 587 587 587 Solvency ratio 230% 200% 189% MCCSR between 175-200%

Excess capital: between $150 and $200 million

Excess capital

1 Takes into account change to the capital structure that took place in

April 2004: redemption of $60 million Series 1 subordinated debentures.

104

Management’s preferred options with respect to excess capital

• 1. Make acquisitions
• 2. Increase dividend
• 3. Buy-back shares (Normal Course Issuer Bid allows

buy-backs of 5% of IAG shares until December 2004)

Excess capital

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• 1. Make acquisitions

Excess capital

Acquisition targets Companies in Canada that would:

• Grow our core life business
• Grow our wealth management operations
• Expand our distribution networks

Small specialized companies in order to increase market

shares in specific niches

Acquisition criteria EPS: accretion to EPS no later than the second year ROE: 13 to 15% (level varies with strategic intent) Embedded value: accretion to appraisal value

(Appraisal value = EmV plus value of new sales)

106

• 2. Increase dividend

Dividend pay-out policy 20 to 30% of sustainable earnings Comparable to that of other demutualized insurers Current pay-out ratio: 20.5% Further adjustments likely before year-end

Excess capital

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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Fourth question

Current issues

Is IAG being too conservative in its reserving practices for seg fund guarantees?

Investor and Analyst Conference 108

IAG seg funds guarantee reserve methodology

IAG reserve methodology = Maximum of {IAG internal formula; CIA’s CTE 80 formula} IAG internal formula = a percentage of net deposits Modulated according to expected guarantee payments IAG methodology produces more stable results Short term market fluctuations don’t change

long term risks

$22 million1 of reserves is not excessive for:

• Assets under management of $3.5 billion
• Market value deficiency of $111 million

Seg funds reserve

1 Figures as at March 31, 2004

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Segregated funds guarantee reserve according to the two formulas

5 10 15 20 25 Q4/02 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04

% net deposits CTE 80 Actual reserve (max of two formulas)

($M) Seg funds reserve

Only quarter where CTE 80 reserve IAG internal formula

110

Fifth question

Current issues

How sensitive is IAG to interest rate and equity market movements?

Investor and Analyst Conference

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Impact of interest rate movements on IAG

Market sensitivity

1% decrease Impact on 2003 profit

• Annuities
• $0.6 million
• Insurance
• $5.0 million

Impact on 2003 profit if the reserve were to be changed to reflect permanent impact (insurance)

• $51.0 million1

Impact on embedded value

• 3%

1% increase in interest rates reversed impact

1 Includes impact on 2003 profits

112

Impact of stock market movements

• n IAG net income

Market sensitivity

10% decrease On operating profit (MER, reserves for seg funds, assets backing long-term liabilities)

• $6.8 million

On return on capital and surplus (seed money, others)

• $3.0 million

Total

• $9.8 million

10% increase in stock markets reversed impact

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Question period

114

Conclusion

Investor and Analyst Conference

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Conclusion

Sound fundamentals Management’s confidence in its ability to: Reach its ROE target of 13 to 15% Reach its growth target of "industry +5%” Importance of hidden value to measure the worth

• f IAG

Excess capital provides opportunities

Investor and Analyst Conference

Company’s operating philosophy: entrepreneurial on top line, conservative on bottom line

116

Appendix

Investor and Analyst Conference

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

117

Income 1999

(Pro forma1)

2000 2001 2002

(Restated2)

2003 Shareholder net income according to GAAP 75.0 98.1 103.9 97.4 135.0 Unusual items (5.3) (6.0)3

• Goodwill expense

2.8 2.94 3.44

• Provision for

Teleglobe

• 19.45
• Adjusted net income

to shareholders 72.5 95.0 107.3 116.8 135.0

Investor and Analyst Conference

See Notes on slide 119

Net income and adjusted net income reconciliation

118

Net income and adjusted net income reconciliation (cont.)

Performance measures

1999 (Pro forma1) 2000 2001 2002 (Restated2) 2003

Rate of return on common shareholders’ equity According to net income 13.2% 15.0% 14.0% 11.8% 14.3% According to adjusted net income 12.6% 14.5% 14.4% 14.0% 14.3% Earnings per share (basic) According to net income $1.98 $2.59 $2.75 $2.57 $3.47 According to adjusted net income $1.91 $2.51 $2.84 $3.09 $3.47 Earnings per share (diluted) According to net income $1.98 $2.59 $2.75 $2.57 $3.42 According to adjusted net income $1.91 $2.51 $2.84 $3.09 $3.42 Investor and Analyst Conference

See Notes on slide 119

Industrial Alliance Insurance and Financial Services Inc. 2004 Investor and Analyst Conference Toronto, June 29, 2004

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1 1999 data are pro forma to present the information on a stock company

basis.

2 2002 figures have been restated to reflect the changes made to

accounting principles (introduced in 2003) concerning the stock-based compensation plan.

3 The unusual item indicated in 2000 results from the impact of the

reduction of corporate tax rates announced by the governments of Canada and Ontario.

4 The adjustments made in 2000 and 2001 to the goodwill expense aim to

provide comparable data following the accounting changes in 2002 to the accounting of goodwill.

5 In 2002, the Company’s income was reduced by $19.4 million following

the provision taken by the Company to cover its bond holdings in Teleglobe Inc.

Investor and Analyst Conference

Notes

Net income and adjusted net income reconciliation (cont.)

120

Acronyms

ASO

• Administrative Services Only

AUA

• Assets Under Administration

AUM

• Assets Under Management

CAGR

• Compound Annual Growth Rate

CMA

• Canadian Medical Association

EPS

• Earnings per share

FYAP

• First-year Annualized Premiums

GIC

• Guaranteed Investment Certificates

IA

• Industrial Alliance

IAG

• Industrial Alliance Group. Either Industrial Alliance consolidated operations
• r Industrial Alliance member companies (IA, IAP and NL)

IAP

• Industrial Alliance Pacific

NBT

• National Bank Trust

NL

• National Life

ROE

• Return on Equity

ROI

• Return on Investment

SPIA

• Single Premium Insured Annuities

Investor and Analyst Conference

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Forward-looking statements

This presentation may contain forward-looking statements about the

• perations, objectives and strategies of Industrial Alliance Insurance and

Financial Services Inc., as well as its financial situation and performance. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by the forward- looking statements. Factors that could cause actual results to differ materially from the Company’s expectations include changes in government regulations

• r in tax laws, competition, technological changes, global capital market

activity, interest rates, changes in demographic data, changes in consumer demand for the Company’s products and services, catastrophic events and general economic conditions in Canada or elsewhere in the world. This list is not exhaustive of the factors that may affect any of Indutrial 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. The Company does not undertake to update any forward- looking statements.

Investor and Analyst Conference 122 June 29, 2004