Shared Ownership Life Insurance

Shared Ownership Life InsuranceA Technical and Practical Guide for

Financial Planners and Advisors

IA / IAP SHARED OWNERSHIP GUIDE - FOR USE BY ADVISORS ONLY

Revised April 2010

IA / IAP SHARED OWNERSHIP GUIDE – FOR USE BY ADVISORS ONLY

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TABLE OF CONTENTS I. Shared Ownership Life Insurance – an introduction …………….. 4 II. How does it work? …………………………… 5 1. Shared policy rights and obligations …………………………… 5 2. Shared premium costs …………………………… 6

a) Equivalent coverage …………………………… 6 b) Premium payment period …………………………… 7 c) Life expectancy …………………………… 7 d) Discount rate …………………………… 7 e) Amortization calculation …………………………… 8

III. The insurance product …………………………… 8 IV. Contract setup and documentation …………………………… 9 V. Tax considerations …………………………… 10 1. On transfer of ownership …………………………… 10 2. Taxable benefit to the individual …………………………… 11 3. The “Pre-Payment Account” …………………………… 12

4. Interpretation by the Canada Revenue Agency…………………. 12 VI. An example - sole shareholder …………………………… 13 VII. Other relevant topics of discussion …………………………… 14 1. Face + Fund death benefit …………………………… 14 2. YRT or Level Cost of Insurance charges?..……………………… 14 3. Multi-Life UL contract ………………………....... 14 4. Leveraging …………………………... 15 5. Creditor protection …………………………… 15 6. Use of existing contracts …………………………… 15 7. Revisions to the calculations …………………………… 15 8. Dissolution or sale of the corporation …………………………… 16

9. Transfer of death benefit ownership to the individual..………..... 16 10. Administrative Issues .……………………….... 16


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VIII. Samples of required documents (common law provinces) Shared Ownership Agreement …………………. ……….. 19 Schedule 1 - Designation of Ownership Form …………………… 26 Schedule 2 - Change of Beneficiary Form…………………………. 28

Schedule 3 - Premium Deposits ..………………………….. 30 Schedule 4 - Allocation of Policy Proceeds…..……………………. 31 IX. Additional Materials

Specimen Loan and Bonus Covenant …………………………… 32 Genesis Universal Life Illustration and CONCEPTIA presentation 36


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I. Shared Ownership Life Insurance - an introduction Industrial Alliance, and Industrial Alliance Pacific Insurance and Financial Services Inc., will hereinafter be referred to as “Industrial Alliance”. “Shared Ownership” is not a product. Rather, it is a financing arrangement between two or more parties to share the benefits and costs associated with an exempt life insurance policy. The arrangement consists of a life insurance policy, a shared ownership agreement and a special transfer of a portion of this policy. There are no explicit provisions in the Canadian Income Tax Act (the “ITA”) that address the various tax issues relating to shared ownership arrangements. The concept derives from the wording in various provisions in the ITA which refer to “an interest in a life insurance policy”. Although interests in a life insurance policy can be shared amongst any parties, the most common use of the Shared Ownership strategy involves a private Canadian corporation and the shareholder(s) of that corporation. Generally underlying this strategy is the corporation’s need to purchase life insurance to protect against financial losses arising from the premature death of a key shareholder / employee. Where additional funds are available inside the corporation and not currently needed to invest in the underlying business, the Shared Ownership strategy not only satisfies the need for life insurance coverage, but creates a tax-deferred investment vehicle that can benefit the shareholder / employee during retirement years. By utilizing a “Universal Life” insurance policy (explained later in this Guide), the two main components of the policy are apportioned between the corporation and the individual. The initial death benefit, which will be referred to hereinafter from time to time as the “Face Amount”, is owned by the corporation (the “Death Benefit Owner”) which is also the beneficiary thereof and the cash value or “Savings Element” is owned by the individual (which will be referred to hereinafter from time to time as the “Savings Element Owner”) and is payable as a tax-free death benefit to the individual’s named beneficiary. If the entire premium relating to the policy is paid by the corporation in a given year, the payment of the portion of that premium representing the premium payable for the Face Amount (which is calculated in the manner discussed below), if properly accounted for by way of a “Pre-Payment Account”, should not result in a taxable benefit in the hands of the Savings Element Owner in a given year. Where the entire premium paid by the corporation exceeds the premium relating to the Face Amount coverage then the excess portion of the premium is deemed a taxable benefit in the hands of the Savings Element Owner. The Shared Ownership strategy can be integrated with a business succession strategy, key-person life insurance coverage or the buy-sell / share redemption component of a shareholders agreement. It can also be used to fund estate liabilities. However, it is important to carefully plan and document all the terms and conditions. It is highly recommended that the financial, legal, accounting and tax advisors of the parties involved


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be consulted to ensure the strategy meets the particular needs of the client and that all the relevant documentation (including the requisite corporate resolutions required to effect the transactions) is prepared and signed. The risks, if any, whether from an income tax perspective or otherwise, should be assessed by such independent advisors, as certain benefits of this strategy, as with any plan involving the use of life insurance in the overall estate planning process, can never be guaranteed.

II. How does it work? 1. Shared policy rights and obligations

The first and most important step is to identify and quantify through proper analysis, a specific need, amount and duration of life insurance coverage which will be owned, and paid for, by the Death Benefit Owner. This information should be carefully documented and retained in the event of an audit by the Canada Revenue Agency (“CRA”). The next step in the Shared Ownership strategy involves the Savings Element Owner applying for the policy personally. Once the coverage is approved and the policy is in force, the Savings Element Owner transfers partial ownership so that the Death Benefit Owner and the Savings Element Owner become joint owners of the policy. The new joint owners appoint beneficiaries for the Face Amount and the Savings Element. Industrial Alliance’s Designation of Ownership form allows for joint ownership, and the Change of Beneficiary form allows for the different named beneficiaries (with all the necessary signatures to be obtained). The Death Benefit Owner will pay the premiums relating to, and will have the right to designate a beneficiary for, the initial Face Amount plus the “Pre-Payment Account”. The beneficiary named by the Savings Element Owner will be entitled to payment of the cash value on the death of the life insured. Only one annual premium notice is sent by Industrial Alliance, and it is to the joint owners of the policy, at one mailing address. If the premium is paid annually, two separate cheques can be sent, one from the Death Benefit Owner and one from the Savings Element Owner. They should indicate that the cheques relate to one policy, and the policy number should be noted with each cheque. If pre-authorized withdrawls (“PAC’s”) have been authorized, Industrial Alliance can only withdraw the premium once each month and from only one bank account. A Shared Ownership Agreement between the parties then sets out all the rights and obligations of each party. Industrial Alliance is not a party to it, and a copy of the Agreement should not be sent to us.


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2. Shared premium costs

Once the Shared Ownership Agreement is in place, the parties are joint owners of the policy and therefore any requests relating to the policy must be approved and signed by all parties. Each owner is responsible for its share of the premiums relating to its respective interest in the policy, but to reiterate, only one annual premium notice will be generated and only one monthly PAC withdrawal can be processed. In order to avoid adverse income tax consequences, each party should pay fair market value (“FMV”) for its interest in the policy. Accordingly, the annual premiums to be paid by the Death Benefit Owner should represent the premiums that would be payable under an equivalent policy, i.e., one that would provide the same death benefit coverage, for the same period of time. The amount deposited into the policy by the Savings Element Owner can vary from year to year based on a number of factors including the individual’s available funds and perhaps certain minimum amounts as agreed to by the parties. The maximum that can be deposited into the policy by the Savings Element Owner, without jeopardizing the policy’s exempt status, will be indicated on the policy illustration. The administration system will also calculate the maximum deposit allowed to the next policy anniversary on each policy anniversary (this amount is available on the Industrial Alliance Extranet). An automatic notice is generated, approximately 60 days prior to the anniversary, to advise of the maximum deposits allowed prior to the next anniversary. The premiums to be paid by the Death Benefit Owner (i.e., the corporation) are based on the following parameters:

a) Equivalent coverage

The most important consideration in determining the FMV price the Death Benefit Owner should pay for its ownership interest is what type of insurance coverage is required. There are many ways to determine the FMV. For example, if the coverage is only required for a relatively short period, say, until retirement, some form of Term insurance such as ten-year term might be the most appropriate “benchmark”. If the company is expected to own the coverage for life or beyond the renewal period for term insurance, T100 may be a better measure of FMV. Even though the underlying insurance contract will be Genesis Universal Life (typically with level cost of insurance), the FMV price to be paid by the Death Benefit Owner could be based on any type of insurance such as T5, T10, T15, T20, T65, or T100. If the corporation requires a level amount of insurance coverage for the lifetime of the individual, rather than purchase the Universal Life policy, it could satisfy this need with Term 100 insurance. Accordingly, for the Shared Ownership strategy, the premium that would be paid for such a level, lifetime Term 100 premium for the amount of coverage required represents the corporation’s share of the premium costs. As discussed below in paragraph II.2.e), this level premium amount is then


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discounted, based on the number of premium deposits to be made under the Share Ownership Agreement, to determine the premium that the Death Benefit Owner should pay in order to avoid any adverse tax consequences.

b) Premium payment period

The Universal Life policy will not be funded on a lifetime, level, annual basis. Rather, the policy will be funded on a “quick-pay” basis, with larger, but fewer premiums to be paid. This will accomplish two main objectives: 1) transfer large amounts of corporate cash into the policy in the shortest time possible, and 2) create tax-deferred cash value inside the policy. Over-funding of the policy can create a “shuttle fund” resulting in a T5 slip being generated in the joint owners’ names, for income earned in this fund. The owners will be responsible for reporting the appropriate amount. Since only one T5 is being generated, the parties will need to prepare a copy of the slip, and provide an explanation for CRA.

Usually a period of 10 years is selected, although the payment period can be adjusted to fit the needs of the parties on a case-by-case basis.

The FMV of the corporation’s annual premium, which is required to fund the Face Amount, will therefore be the “actuarial” equivalent of a level, lifetime Term 100 premium paid over a specific number of years. This “actuarial” equivalent must take into account the time value of money and projected mortality rates on the Term 100 coverage, the latter point addressing the question of how many years the T100 premiums would actually be paid.

Rather than using projected mortality rates in our calculations, a simplification has been introduced as explained in paragraph II.2.c), below.

c) Life expectancy

Actuarial discounting of the Term 100 premiums involves accounting for mortality rates. The period over which the premiums are discounted depends on how long the Death Benefit Owner requires the insurance coverage. Typically, if the Savings Element Owner is a shareholder, it may be reasonable to assume the coverage is required until that person’s life expectancy. We set this life expectancy at age 85 for non-smokers and age 80 for smokers. So, for example, for a non-smoker, age 50, we would discount 35 (thirty-five) T100 premium payments, in determining the equivalent 10-pay premiums.

d) Discount rate

Since the respective costs of the arrangement are to be spread out over a number of years, it is important to determine a reasonable discount rate to be used in calculating the present value of these costs. There is some leeway involved in selecting a discount rate. Some might choose the current inflation rate while others might prefer


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the cost of replacing capital or the current GIC rate. The discount rate used can be anything that is reasonable, considering that the lower the rate, the more aggressive the strategy. Both parties should agree to the rate used in determining the FMV of the benefits received.

This rate is applied on an after-tax basis, using the corporate rate applicable to income earned on passive investments.

e) Amortization calculation

Once the desired number of premium payment years has been established, we calculate the present value of the equivalent Term 100 premiums determined in paragraph II.2.a) above, discounted using the interest rate determined in paragraph II.2.d) above, so that both “streams” of premiums are actuarially equivalent, on a present value basis.

For example, for a 10-Pay concept:

Policy Actuarial Equivalent Year Premium Paid by Corporation 1 Term 100 10-Pay 2 Term 100 10-Pay 3 Term 100 10-Pay 4 Term 100 10-Pay 5 Term 100 10-Pay 10 Term 100 10-Pay * 15 Term 100 ------ 20 Term 100 ------ 25 Term 100 ------ 30 Term 100 ------ … Term 100 ------ Age 85 Term 100 ------ * last payment based on 10-Pay

In this example, the present value of the T100 premiums paid annually to age 85 is equivalent to the 10 annual payments made in years 1 through 10, using the 10-pay methodology

III. The insurance product A Universal Life policy is the most appropriate vehicle for use with the Shared Ownership strategy as it offers flexibility and a variety of coverages and investment options that can be easily tracked and allocated to different parties. The death benefit


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should always be structured as “Face Amount + Fund”. The Face Amount will be owned by, and paid to, the corporation and the Fund will be owned by the Savings Element Owner and paid to the individual’s named beneficiary at death. Once again, the ownership is on a policy level and is joint, with the joint owners appointing the beneficiaries. Both of these amounts are paid out tax-free at the time of the insured’s death. Industrial Alliance is able to manage, administratively, the separation of these interests. When a death claim is paid out, Industrial Alliance’s Claims Department will pay out the Face Amount and the cash value according to the beneficiary designations. The amount, and timing, of the premium payments relating to the policy are entirely flexible, subject to the minimum premium required on either an annual premium notice basis, or on a monthly PAC basis. The target premium is flexible and can be changed from time to time, by way of a completed and signed F4 - Request to Change form, to be signed by the joint owners. While the corporation’s premium schedule will show fixed and constant payments (so long as the face amount of the policy does not change), the premiums paid by the Savings Element Owner can vary. This provides the individual flexibility in deciding the level of personal funding. Therefore the individual can view the Shared Ownership strategy as not only an effective use of corporate assets, but also as a way of accumulating tax-deferred personal investments.

IV. Contract setup and documentation It is crucial that the documentation describing the terms and conditions of the sharing of the ownership of the Universal Life insurance policy be properly drafted, and of course, signed by the parties. Once again, the Shared Ownership Agreement is between the two parties and should not be sent to Industrial Alliance. The following steps should be followed: Step ONE – Life insurance application The party who will be the Savings Element Owner (usually the individual) should apply for the life insurance initially. Special care should be taken when naming the beneficiary. The beneficiary named on the application should be the beneficiary that will remain the Savings Element Owner after the transfer described in Step FOUR below. The corporation will eventually become the beneficiary of the Face Amount once that interest is transferred to it using a Designation of Ownership form, and the Shared Ownership Agreement is signed. Once the ownership has been changed to joint, the new owners can appoint the beneficiaries. The beneficiary designations should be revocable. Step TWO – Life insurance contract The application must be processed and the underwriting completed before the insurance policy is issued. The remaining documentation (most importantly, the Shared Ownership Agreement) should be dated on or after the policy effective date as shown on the policy contract specifications page. The designation of ownership should be dated after the Shared Ownership Agreement and completed and signed by the applicant for the life


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insurance coverage. The new joint owner, complete the change of beneficiary form, which should be completed and signed by the new joint owners, after the date of the designation of ownership. The most current forms as found on the Industrial Alliance Extranet should be used, and all owners will need to complete the Proceeds of Crime section (Corporation), and if the same section is not current for the individual, it will also need to be completed. Step THREE – Shared Ownership Agreement Your client’s lawyer should prepare the actual Shared Ownership Agreement. Although we provide a sample agreement in this Guide, it is made available as a courtesy to you so that you can provide it as a resource to the lawyer drafting the agreement. There may be substantial modifications required to it, as a result of the province of residence of the client or for a number of other reasons, based on the facts and the client’s particular situation. It is strongly recommended that legal advice be sought and that the attached sample be treated as only a guide and under no circumstances, a final document. Certain schedules must be attached to, and form part of, the Agreement. Those schedules include a list of the premium commitments made by each of the parties, the latest calculations of those premium amounts, a schedule showing the allocation of policy proceeds and benefits, and a copy of the Designation of Ownership Form. It is also essential for all parties to keep records of the final, signed illustration(s) relating to the life insurance policy, and any spreadsheets applicable to the Shared Ownership strategy. Step FOUR – Designation of ownership and change of beneficiary Upon completion of the Shared Ownership Agreement, the original owner/applicant should complete a Designation of Ownership Form to transfer the policy to the joint owners The current owner (the individual) signs, as well as the new additional owner (the corporation), and the Form is filed with Industrial Alliance. Concurrently, the parties should also fill out a change of beneficiary form, advising Industrial Alliance that the corporation is now the beneficiary of the Face Amount, while the beneficiary of the cash value is the individual. The originals are to be sent to Industrial Alliance head office for recording and registration. Copies of these documents should be attached as a schedule to the Shared Ownership Agreement.

V. Tax Considerations 1. On transfer of ownership

Under the ITA, when an interest (full or partial) in a life insurance policy is disposed of, or transferred from one party to another, the result is a disposition of that interest for income tax purposes. The income inclusion resulting from that disposition is usually determined by calculating the amount by which the proceeds of disposition exceeds the adjusted cost base (“ACB”) of the interest in the policy transferred. There are exceptions to these rules when the transfer is between related parties, as


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would be the case in a Shared Ownership strategy. With related parties, subsection 148(7) of the ITA deems the proceeds of disposition to the transferor, and the new ACB to the transferee, to be equal to the “value” of the policy at the time of disposition. The term “value” is defined in subsection 148(9) of the ITA as the amount that the holder of the policy would be entitled to receive if the policy were surrendered (essentially the cash surrender value of the policy net of any outstanding policy loans) where there is a cash surrender value component to the policy, and otherwise, nil. When the Face Amount is assigned to the corporation, since it has no cash value, the deemed proceeds of disposition are equal to zero, and there is no taxable disposition at the time of assignment. For these reasons it is preferable to have the eventual owner of the cash value component initially purchase the policy and then transfer the ownership to the individual and corporation, jointly. Although this is an actual disposition for income tax purposes, it should not result in a taxable event.

2. Taxable benefit to the individual

An important consideration in the Shared Ownership strategy is ensuring that the annual payment of premiums (or monthly PAC) by the corporation for the death benefit component do not confer a taxable shareholder or employee benefit in the hands of the Savings Element Owner. If the corporation can demonstrate that it is paying an annual premium that represents FMV, based on its interest in the policy, this will lessen the chances that such a benefit is assessed by the CRA. By relating the corporation’s premiums to the cost of a level, Term 100 policy, the strategy ensures that the corporation is paying an annual premium equivalent to what it would be paying in the marketplace for the exact same benefit, i.e., a level death benefit for life, with no cash value. There may be situations where, in a given year, the parties prefer to have the entire premium paid for by the corporation. In this case, the individual should receive a T-4 tax reporting slip from the corporation, for any amount of premium paid for by the corporation in excess of the reasonable premium to be paid by the corporation for equivalent Face Amount coverage. If the Savings Element Owner is a shareholder (which is usually the case), the payment of its portion of the premium by the Corporation will result in a taxable shareholder benefit under subsection 15(1) of the ITA. Shareholder benefits are not tax deductible to the corporation, resulting in double taxation. To prevent this outcome, the corporation should record the payment of the Savings Element Owner’s share of the premium as a loan to the shareholder which will be repaid at the end of the year from additional salary or bonus. There is a separate document, attached as an Appendix, called a “Loan and Bonus Covenant”, which can be used for this purpose.


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3. The “Pre-Payment Account”

In the Shared Ownership strategy, the corporation pays an annual premium for a specific number of years, which exceeds the annual premium which would have been required on a level, Term 100 basis. The Pre-Payment Account is a notional account that is updated annually and is used to keep track of the “excess” premiums paid by the corporation (i.e., those in excess of the level, Term 100 premiums that would have been payable under a comparable policy). In the first year that the corporation pays a premium, assuming that the corporation is only paying the amount that relates to the Face Amount, the Pre-Payment Account is increased by the amount by which the actual premium paid by it exceeds the level, Term 100 premium. Interest is applied to this notional account. In each subsequent year that the corporation pays a premium, the Pre-Payment Account is increased in the same manner. When the corporation has stopped paying premiums, which will occur once the corporation has made the intended number of premium payments, the Pre-Payment Account begins to be reduced each year by the amount of the level, Term 100 premium (which it would have paid annually), with interest still being applied on the remaining balance. Stated another way, the Pre-Payment Account keeps track of notional “overpayments” made by the corporation. Upon the happening of certain events, such as the early death of the insured, or surrender of the policy, the corporation is legally entitled to the balance of the Pre-Payment Account. However, keep in mind that Industrial Alliance will always, on a contractual basis, disburse the death benefit according to the contractual obligations of the policy contract and based on the most recent beneficiary designation. Accordingly, the underlying Shared Ownership Agreement should include specific wording to address how the corporation can recoup the positive balance in the Pre-Payment Account (if any) from the Savings Element Owner.

4. Interpretation by the Canada Revenue Agency

The CRA has been unwilling to provide specific guidance on Shared Ownership arrangements using Universal Life insurance policies. In the past, when requested to comment on the issue of whether a taxable benefit results from a particular method of allocating the premium to be paid, it has indicated that such determination will be made on a case-by-case basis.

To reiterate, Industrial Alliance strongly advises that anyone considering entering into a Shared Ownership Agreement seek independent legal advice in order to determine the specific income tax consequences that may arise.


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VI. An example - Sole Shareholder

Johnny Print, 45 years of age, is the sole shareholder of a printing business with an estimated value of $1.0 million. Johnny is currently reviewing his business succession and key shareholder insurance needs and he has decided that $1.0 million of coverage should be acquired to protect the business in the event of his death, and to provide the funds necessary for his estate to redeem his shares.

Johnny’s business has surplus cash, but those funds are not required to sustain future corporate growth. Johnny is at an age where he is contemplating enjoying the fruits of his labor. While he would prefer taking this cash out of his business and adding it to his retirement income plans, any cash he withdraws would be taxable to him (as a dividend or salary) and would attract further taxation to the extent it is reinvested personally. Johnny is looking for a way to access the corporate cash personally, with minimal tax consequences. Accordingly, he is an ideal candidate for the Shared Ownership strategy. His business can be the owner of the $1 million Face Amount and Johnny can be the owner of the cash value generated inside a tax deferred Universal Life policy as stipulated in the Shared Ownership Agreement.

Industrial Alliance can provide all of the projections for a particular scenario (an example of which is attached at the end of this Guide, along with a Conceptia presentation that can be generated based on an illustration). In this example it is projected that a total premium of $40,000 annually would be paid into the Universal Life policy for 10 years by the corporation, with $24,028 deemed to be the equivalent fair market value of the premium relating to the Face Amount (i.e., the $ 1 million death benefit component) and the balance of $15,972 paid by Johnny. A complete presentation is available in Conceptia in the Genesis Illustration Software. Under the terms of the Shared Ownership Agreement, the cash value component of the policy is owned by Johnny, i.e., he is the Savings Element Owner and the named beneficiary of the funds will be paid out tax-free to his named beneficiary upon his death. During his lifetime, he can use this asset to secure a line of credit by way of pledging the policy as collateral for a loan (this strategy, which is also referred to as “back-end leveraging”, would be considered a collateral assignment and it must be clear as to what exactly is being assigned). This strategy provides him with liquidity on a non-taxable basis, with the loan to be repaid at the time of his death. Any borrowing in this regard is subject to the terms of the underlying Shared Ownership Agreement.


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VII. Other relevant topics of discussion 1. Face + Fund death benefit The Face + Fund death benefit option is always used in a Shared Ownership strategy in order to create two clearly distinguishable benefits that are easy to track over time and easy to allocate between parties. The total policy death benefit is always equal to the sum of the initial death benefit (Face Amount) of the policy and the cash value. Under the Shared Ownership Agreement, the corporation is the owner/beneficiary of the Face Amount, and the individual is the owner of the cash value for which he/she can designate a beneficiary. To reiterate, the contract itself does not differentiate the components of the policy, as this is done through the beneficiary designations. The benefit to the individual of owning the cash value is two-fold: 1) it can be leveraged against, within the boundaries set forth in the agreement, to create additional tax-free retirement funds, and 2) it is paid out tax-free to the individual’s named beneficiary at death. 2. YRT or Level Cost of Insurance charges? A very important step in setting up any insurance contract is deciding whether to pay for the premiums based on a Yearly Renewable Term basis (“YRT”) or a level cost of insurance basis (“Level COI”).

The YRT option will perform better in the short term and therefore yield higher cash values in the near term vis-à-vis the Level COI option. At the end of, say, a 10 year annual premium payment period, the cash value of the YRT option may be as much as 50% higher than that of the Level COI option. Depending on the investment returns on the cash value, then the YRT option may also perform better over the long term.

If a client wishes to remain conservative in his or her investment return assumptions, the Level COI option is the better choice. Industrial Alliance’s Genesis UL product has no surrender charges on its Level COI option and this may be attractive to the client in the short term. 3. Multi-Life UL contract There may be situations where more than one individual can benefit from a Shared Ownership strategy. In these situations we recommend setting up separate insurance contracts for each individual, since a multi-life UL contract only has one cash value and that cash value cannot be split between two or more lives insured. With the Shared Ownership strategy, each Savings Element Owner must be able to track his or her own cash value in the policy.


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4. Leveraging The Savings Element Owner may be able to leverage against the cash value, using a bank or other financial institution. The maximum collateral available to the Savings Element Owner will be the total policy cash value less the value of the Pre-Payment Account. Depending on the nature of the underlying investments, the Savings Element Owner may be able to leverage up to 90% of this amount. 5. Creditor Protection Current provincial legislation affords life insurance products protection from claims of creditors at the death of the insured, so long as a beneficiary (other than the deceased’s estate) is properly designated. In terms of the status of a life insurance product during the lifetime of the insured, if the beneficiary falls under a certain class – normally a spouse, parent, grandparent, child or grandchild of the life insured (commonly referred to as “Preferred Beneficiaries”) then, generally, creditor protection is available, subject to many potential overriding areas of law such as bankruptcy and CRA’s possible priority under the ITA. In terms of the creditor protection available in a given situation, Industrial Alliance recommends that a client seek the advice of a lawyer familiar with the rules in the province of residence. As the Death Benefit Owner, the corporation would not enjoy potential protection from creditors as the corporation is the beneficiary of the Face Amount and this falls outside the class of Preferred Beneficiaries.

6. Use of existing contracts An existing UL contract owned by an individual may be used in conjunction with a Shared Ownership strategy. Although this could not be made retroactive to the original “effective” date, an individual may transfer the ownership on a joint basis, and designate new beneficiaries, for an existing policy. The transfer of an ownership interest constitutes a disposition for tax purposes and may result in some tax cost. The annual premium requirement for the corporation would be calculated based on the age of the individual on the day the transfer of ownership takes place. If an existing Term policy is converted for the purpose of entering into a Shared Ownership Agreement, the UL contract can be treated as a new policy for the purposes of the calculations. The conversion would take place on an individual basis, and once the Shared Ownership agreement is completed, the designation of ownership and subsequent change of beneficiaries would take place. 7. Revisions to the calculations As in any financial arrangement, regular ongoing reviews are always recommended. However, with the Shared Ownership strategy, certain calculations cannot be revised once the strategy has been put into effect. The one figure which will always remain a constant is the premium paid by the corporation with respect to its obligation for the Face Amount. To reiterate, this premium has been calculated based on a guaranteed level Term 100 premium, and discounted at the after-tax discount rate then in effect.


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The premiums paid by the individual are flexible and can be reviewed at any time. Reasons for reviewing the individual’s premium contributions include: 1) the availability of additional personal funds which can be deposited into a tax-free environment; 2) the need to increase the policy’s funding in case of lower-than-expected investment returns; and 3) a desire to gain greater retirement income. 8. Dissolution or sale of the corporation The Shared Ownership Agreement should include provisions addressing what happens if the corporation is dissolved, or is sold, prior to the death of the life insured. The most likely course of action will be for the individual to purchase from the corporation its interest in the Face Amount. Accordingly, the Shared Ownership Agreement should include some wording which provides the Savings Element Owner with a right of first refusal with respect to purchasing such interest. Professional advice should be sought in determining the proper purchase price.

9. Transfer of death benefit ownership to the individual The Death Benefit Owner may transfer its ownership to the Savings Element Owner. However, caution must be exercised, as this transfer could trigger a taxable benefit to the recipient. For example, if the Shared Ownership Agreement has been structured so that the Death Benefit Owner has prepaid the cost of its ownership interest (the Face Amount) to age 85 and its interest is transferred to the Savings Element Owner (who is a shareholder) at age 65 for no consideration, there will be a taxable shareholder benefit conferred upon the Savings Element Owner.

10. Administrative Issues Here is a summary of some important issues from an Industrial Alliance administration standpoint (most, but not all of these points have been mentioned above):

The policy will be administered by Industrial Alliance as one single contract that is jointly owned. There will be only one annual premium notice sent to the joint owners that reflects the total premium due, and only one annual statement that reflects the total policy funds. These will not distinguish the ownership interests of each owner. Also, the ACB of the policy is not separated so there will be only one ACB for the policy as a whole.

The “exempt” status of the life insurance contract must be maintained to preserve

the tax benefits associated therewith. It is critical that the legal structure of the Shared Ownership arrangement does not inadvertently result in a split of the “single” life insurance policy into separate, distinct contracts instead of separate ownership interests. If the CRA considers the separate ownership interests to be actually separate insurance contracts with the insurer, the result will be that the Savings Element Owner’s interest, which has no pure protection/insurance component, would likely be viewed by the CRA as a non-exempt contract with


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potentially adverse tax consequences. This is one example of why joint ownership at the policy level is so crucial

Industrial Alliance will require the permission and signature of all joint owners

for any decisions relating to the policy such as a beneficiary change, the partial withdrawal of funds, a collateral assignment, a change in investment options, etc.

If a request is being made to Industrial Alliance by only one of the joint owners,

then a copy of the agreement should be sent to Industrial Alliance along with such request, specifying that this owner is authorized to make this request on its own, without the consent of the other owner. This will be noted, and the agreement will be returned. One way to deal with this inconvenience is to execute a special Power of Attorney, either as a separate document or contained within the Shared Ownership Agreement, which would allow one party (owner) to carry out certain transactions under the policy on behalf of the other party (owner).

The Shared Ownership Agreement does not form part of the policy contract, and

is not to be submitted to Industrial Alliance.

Only one mailing address is permitted. All outgoing correspondence will be generated in the name of the policyowners at the mailing address provided. This includes policy statements, notices, etc. Copies can be requested by the policyowners if needed.

Any income tax slips for the purpose of reporting taxable gains, dividends and/or

interest for the shuttle account are prepared in the name of the policyowners (the individual and the corporation). The policyowners will need to photocopy the slips and report the applicable portion of the taxable amounts to the CRA, preferably with a cover letter explaining the situation and the filing position taken.

All disbursements such as loans, partial surrenders, premium refunds, etc., are

payable to the policyowners.

A duplicate policy contract is only provided when the original has been lost; only one contract may be available at any given time. Duplicate contracts must be requested by the policyowners (with an applicable fee charged).

Each December, on the policy effective day, the net cost of pure insurance is

updated and is available on the Industrial Alliance Extranet, appearing under the “history tab” details.

Premium payments are the responsibility of the policyowners and only one annual

premium notice will be generated. If premiums are to be paid by PAC, only one single amount per month may be withdrawn from one account (draw days available are 1 – 28). A completed and signed PAC authorization is required from the holder of the account from which the funds will be withdrawn .


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VIII. Samples of Required Documents (Common Law Provinces)

Shared Ownership Agreement…………..……………………………………….19

Schedule 1 - Designation of Ownership Form *………………………………..26 Schedule 2 - Change of Beneficiary Form * …………………………………...28

Schedule 3 - Premium Deposits………………………………………………...30 Schedule 4 - Allocation of Policy Proceeds…..………………………………...31

* All forms should be obtained from the Industrial Alliance Extranet where the most current versions of these forms are available. The attached forms are valid as of April 2010, but the most recent version should always be used.


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Notice : This specimen Shared Ownership Agreement has been prepared only as an example of the document which might be used in conjunction with the implementation of a Shared Ownership Strategy. It is not intended to be used in its current form, nor does it substitute for competent professional advice. It may be provided to the professional advisors of all parties involved, as a resource to them. The final Agreement must be customized to take into account the client’s needs, and should be prepared by the client’s legal advisors.

Shared Ownership Agreement BETWEEN : 1 Name (“the Savings Element Owner”) And Name (“the Death Benefit Owner”) (each, a “Party” and collectively, the “Parties”) WHEREAS: 2 1. The Saving Element Owner is the owner of a Genesis life insurance policy insuring the life of

the Savings Element Owner and bearing the policy number _______ (the “Policy”), issued by Industrial Alliance Pacific Life Insurance Company (“Industrial Alliance Pacific”);

2. The Savings Element Owner has agreed to make an absolute assignment of the Policy to the

Death Benefit Owner and the Savings Element Owner, as tenants in common; 3. The Parties have agreed that the premium deposits for the Policy shall be paid partly by each

of them in the amounts provided for in this Agreement; and 4. The Parties have agreed to share the rights and obligations created under the Policy in the

manner provided for in this Agreement. Now this Agreement witnesses that in consideration of the mutual agreements and covenants herein contained, the Parties agree as follows: 1 “Saving Element Owner” and “Death Benefit Owner” have been used to identify the parties. The surnames, corporate names and titles of the Parties may be substituted in the actual Agreement, to make the document more reader-friendly. 2 The recitals set out the fact that the policy has been issued and is in force as well as the fact that one party is to assign the policy into joint ownership. It may be useful to insert an additional recital setting out the purpose of the shared ownership plan.

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1. Definitions 3 In this Agreement, unless the context is inconsistent therewith, all terms have the meaning specified in the Policy. 2. Initial Assignment 4 The Savings Element Owner agrees forthwith to absolutely assign the Policy to the Death Benefit Owner and the Savings Element Owner as tenants in common in a form acceptable to Industrial Alliance Pacific. 3. Allocation of Death Benefit between the Parties 5

3.1. If the person whose life is insured dies while the Policy is in force, the total amount payable by Industrial Alliance Pacific pursuant to the Policy (the “Amount”) shall be paid to the Parties in the following manner:

(a) The Death Benefit Owner, or the beneficiary(ies) designated by the Death Benefit

Owner, shall be entitled to the lesser of:

I) The Amount; and II) The face amount of the Policy.

(b) The beneficiary named by the Savings Element Owner or, failing such designation, the estate of the Savings Element Owner shall be entitled to the remaining portion of the Amount not paid to the Death Benefit Owner’s named beneficiary, as set out in Article 3.1(a) herein.

3.2. The amount payable to each of the Parties pursuant to Article 3.1 herein shall be reduced

by the amount of any outstanding policy loan granted by Industrial Alliance Pacific to each respective Party.

3.3. Any modification of the face amount of the insurance shall be agreed upon by both

Parties.

3 This Agreement is subject to the terms of the underlying life insurance policy and it incorporates by reference the terminology used in the policy. 4 The assignment can be made on a standard Industrial Alliance Pacific form, unless the parties wish to include more details than the form provides, in which case a customized form may be prepared by the client’s legal advisors. Any customized form must include a disclaimer through which the parties acknowledge that Industrial Alliance Pacific does not accept responsibility for the form’s validity or effect. We note that if the insured under the policy dies resulting in a death benefit payable, and the Agreement has not yet been executed, depending on the conduct of the parties, this may result in a situation whereby one Party is holding some of the proceeds of the policy in the trust for the other. 5 The death benefit to be allocated can be set stated as a percentage, a specific amount, or based on a formula. Unless percentages are used, only the benefit payable to one party should be specified in the agreement, with the remainder payable to the other party. One of the advantages of using percentages is that, where loans are taken out against the policy, or withdrawals from or enhancements to the policy are made, the Agreement will not have to be amended.

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3.4. Each of the Parties and their respective heirs, administrators and assigns shall cooperate in making any proof of claim under the Policy.

3.5. It is agreed between the Parties that in the event that, at the time a payout is to be made

under the Policy, the Pre-Payment Account balance is positive, as illustrated in accordance with the Policy, the Death Benefit Owner will be entitled to claim this amount from the Savings Element Owner’s estate. The Savings Element Owner and its respective heirs, administrators and assigns shall co-operate in paying this amount to the Death Benefit Owner.

4. Premiums Deposits

4.1. In consideration of the assignment of the full face amount to the Death Benefit Owner as set out in Article 2 of this Agreement, the Death Benefit Owner shall pay to the Savings Element Owner the following amount: _______ (as specified in Schedule A hereto), which represents the Death Benefit Owner’s portion of the premium deposits made by the Savings Element Owner prior to the execution of this Agreement.

4.2. The respective portion of the annual premium payable by each Party (each of which

shall be hereinafter referred to as the “Respective Share”) on or after the date of this Agreement is set out in Schedule A, hereto.

4.3. The Savings Element Owner may increase its premium deposit in a given year, without

requiring the consent of the Death Benefit Owner.

4.4. If Industrial Alliance Pacific is unable to deposit any portion of the premium paid by the Savings Element Owner into the Policy, for any reason whatsoever, the excess amount that has not been deposited into the Policy shall be applied to reduce the amount otherwise required to be paid by the Saving Elements Owner in a subsequent year or years.

4.5. If any additional premium is required to cover the cost of insurance under the Policy, as

a result of an increase in the face amount of the Policy, such premium will be paid by the current Death Benefit Owner.

5. Withdrawal Option 6

5.1. The Savings Elements Owner may withdraw amounts pursuant to the terms of the policy, provided that sufficient funds remain in the Policy after the withdrawal to cover the cost of insurance. Withdrawals in excess of this amount require the express written consent of the Death Benefit Owner.

5.2. The Death Benefit Owner may withdraw amounts pursuant to the terms of the Policy

only with the express written consent of the Savings Element Owner.

6 The amounts that may be withdrawn or borrowed from the policy should be dealt with in the Agreement, from two perspectives. First, the effect of a loan or withdrawal on the rights of the parties and the beneficiaries must be addressed. Second, provision should be made setting out whether one or both parties have the right to unilaterally make a withdrawal, or borrow from the Policy.

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6. Loans

6.1. The maximum value of a loan taken by a Party under the terms of the Policy shall not exceed the amount which that Party is entitled to withdraw from the Policy pursuant to Article 5. The Parties agree not to borrow from the Policy except with the written consent of the other Party, and such consent cannot be unreasonably withheld.

7. Default 7

7.1 If either Party fails to pay its Respective Share as required by Schedule A within 30 days of the due date specified therein, then such Party is in default of this Agreement. In the event of such default, the non-defaulting Party may pay the defaulter’s Respective Share and take all steps required to recover such amount from the Party in default. In addition, either or both of the Parties shall be entitled to pay any overdue premiums within __ days.

7.2 The Parties may agree to both contribute to the payment of the premiums required to

bring a Party out of default. In this event, the rights and obligations of the Parties under the Policy shall be re-allocated, in a manner that reflects and takes into account the proportion of such premiums paid by each of the Parties.

8. Reinstatement 8

8.1. One, or both, of the Parties may apply for reinstatement of the Policy if it lapses, in accordance with the terms of the Policy.

8.2. Where the Parties agree to share the payment of the premiums required to reinstate the

Policy, all rights and obligations of the Parties under the Policy shall be divided and shared pursuant to the terms of this agreement, as it may be amended from time to time.

8.3. Where the Death Benefit Owner wishes to reinstate the Policy, the Savings Element

Owner agrees to consent to such reinstatement and to provide relevant medical information to Industrial Alliance Pacific or its agents.

8.4. Where only one of the Parties pays the premiums required to reinstate the Policy, the

other Party acknowledges that it shall not, after the happening of such event, have any right, title or interest in the Policy thereafter.

7 The rights of the Parties in the event one or both defaults with respect to payment of premiums must be considered. Note that in some provinces, life insurance law permits a life insured to compel termination of a life insurance contract where an insurable interest no longer exists. 8 The rights of each Party in the event that the Policy lapses should be addressed in the Agreement, including the Parties’ respective rights and responsibilities should one or both desire to reinstate the policy.

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9. Policy features 9

9.1 Any option made available by Industrial Alliance Pacific to the owners of the Policy, except as otherwise provided in this Agreement, may be exercised by one Party only with the express written consent of the other Party.

10. Subsequent Assignment of Interest in Policy 10

10.1 The respective rights of each of the Parties under the Policy may be assigned to other persons without the consent of the other Party.

11. Termination 11

11.1 Subject to the provisions set out below, this Agreement shall terminate upon the happening of any of the following events (each, an “Event of Termination”):

(a) A written agreement to that effect, signed by the Parties hereto; (b) The Death Benefit Owner is dissolved, wound up, granted articles of dissolution,

makes an assignment in bankruptcy, has a receiving order against it, or there is a change in its control (unless the Savings Element Owner waives this event’s characterization as an Event of Termination);

(c) The Savings Element Owner is adjudged bankrupt or makes an assignment in bankruptcy or for the general benefit of creditors, or the Savings Element Owner’s interest in the Policy is seized or otherwise taken to satisfy the claims of any one or more creditors (unless the Death Benefit Owner waives this event’s characterization as an Event of Termination); or

(d) At the option of either Party upon the termination of employment of the Savings Element Owner otherwise than upon retirement.

11.2 In the event of termination of this Agreement pursuant to Article 11.1, the Savings

Element Owner may purchase all the rights, title and interest of the Death Benefit Owner in the Policy by payment to the Death Benefit Owner of an amount equal to the amount that the Death Benefit Owner would have been entitled to withdraw from the Policy pursuant to Article 5.2 at the date of the Event of Termination with such amount to be adjusted upwards or downwards based on unpaid premiums as set out in Article 7.1. This option shall extend for a period of 60 days after the date of the Event of Termination.

11.3 If the Savings Element Owner shall fail to exercise the option referred to in Article 11.2

by the 61st day after the date of the Event of Termination, the Death Benefit Owner shall

9 The Genesis life insurance policy contract includes many policy features. This provision in the sample Agreement provides that such elections shall be made jointly by the Parties. 10 The ability of each party to assign their rights under the policy should be addressed. The sample Agreement allows either party to assign its interest in the policy unilaterally. 11 Any other potential grounds for termination should be considered and included. In addition, the consequences of termination must be considered. The income tax implications of these arrangements should be considered in advance. The Parties who are residents of provinces in which life insurance law permits a life insured to compel termination of a life insurance policy should pay particular attention to this issue.

S A M P L E ONLY


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purchase all rights, title and interest of the Savings Element Owner in the Policy by payment to the Savings Element Owner of an amount equal to the aggregate of the amount that the Savings Element Owner would have been entitled to withdraw from the Policy pursuant to Article 5.2 at the date of the Event of Termination with such amount to be adjusted upwards or downwards based on unpaid premiums as set out in Article 7.1.

11.4 If the Death Benefit Owner fails to purchase the interest in the Policy owned by the

Savings Element Owner pursuant to Article 11.3 within a period of 90 days after the date of the Event of Termination, the Death Benefit Owner hereby forfeits all rights, title and interest in the Policy and the Savings Element Owner thereafter becomes the sole owner of the Policy.

12. Notices and Amendment

12.1 The Parties agree that all elections and notices made under this Agreement shall be in writing and delivered to the other Party.

12.2 The Parties agree that they may mutually agree to amend this Agreement and such

amendment shall be in writing and signed by the Parties. 13. General Provisions

13.1 The Parties hereto agree to execute any additional documents which may be necessary or proper in order to carry out the full purpose and intent of this Agreement.

13.2 This Agreement is governed by and shall be interpreted according to the laws of the

province of _____________________. 13.3 Any notice to be provided hereunder may be made by personal delivery, mail, facsimile

transmission or other electronic means to the other Party at that Party’s last known address or facsimile number.

13.4 This Agreement shall enure to the benefit of the Parties hereto and their respective heirs,

successors, executors, administrators and assigns. 14. Independent Legal Advice 12 The Parties acknowledge that they are executing this Agreement voluntarily and without reliance on any statement or representation made by the other. Each party acknowledges having been advised to seek independent legal advice before executing this document and that its nature and effect are fully understood.

12 Independent Legal Advice It is strongly recommended that each party to the agreement obtain independent and objective professional advice from both a legal and taxation perspective.

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IF WITNESS WHEREOF, the Parties hereto have executed 13 this Agreement this day of , 2010.

Signed in the presence of: _______________________________ Signature of Witness _________________________________ Printed Name of Witness _________________________________ Street Address of Witness _________________________________ City _________________________________ Occupation of Witness

)))))))))))))))

_________________________________ Savings Element Owner

Signed in the presence of: _______________________________ Signature of Witness _________________________________ Print Name of Witness _________________________________ Street Address of Witness _________________________________ City _________________________________ Occupation of Witness

)))))))))))))))

_________________________________ Death Benefit Owner

13 Execution Normally, the Agreement will be executed as soon as possible after the Policy has been issued in order to minimize tax consequences of the disposition.


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Schedule 1 Shared Ownership Designation of Ownership Form

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Schedule 2 Shared Ownership Change of Beneficiary Form

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Schedule 3 Shared Ownership Premium Deposits Aggregate Portion owing by Portion owing by Pre- Policy Premium Death Benefit Savings Element Payment Year Deposit Owner Owner* Due Date Account 1 2 3 4 5 6 7 8 9 10 (Show for premium payment period) *The Savings Element Owner may vary premium deposits each year up to the maximum permitted under the Income Tax Act (Canada) to keep the policy’s exempt status.

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Schedule 4 Shared Ownership Allocation of Policy Proceeds Policy Year Death Benefit Owner Savings Element Owner 1 2 3 4 5 6 7 8 9 10 … … … (Show to age 100 if the Shared Ownership Agreement is for the life of the insured)

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IX. Additional Materials Specimen Loan and Bonus Covenant Notice: This specimen Loan and Bonus Covenant has been prepared as an example only, of the documentation which may be used in the implementation of a Shared Ownership Strategy. It is not intended to be used as a form, nor does it substitute for independent, professional advice. It may be provided to professional advisors in the course of their preparation of the actual legal documentation required but the final documentation should be customized for the individual client’s situation and needs, and should be prepared and reviewed by the client’s professional advisors.

LOAN AND BONUS COVENANT

BETWEEN Name (the “Savings Element Owner”)

-and-

Name (the “Death Benefit Owner”) WHEREAS:

1. The Savings Element Owner and the Death Benefit Owner (the “Parties”) have entered into an agreement (the “Agreement”) to share in the payment of premiums and the rights and obligations created under a life insurance policy on the life of _______________ bearing the number _________ (the “Policy”), issued by Industrial Alliance Insurance and Financial Services Inc. (the “Insurer”); and

2. The Death Benefit Owner has agreed to make loans and /or pay bonuses to the Savings Element Owner to assist the Savings Element Owner in funding the payment of premiums relating to the Policy.

NOW THIS AGREEMENT witnesses that in consideration of the mutual agreements and covenants herein contained, the Parties agree as follows: 1. Loan 1.1 The Death Benefit Owner will make such advance or advances (the “Loans”) to the Savings Element Owner as may be required by the Savings Element Owner to pay premiums pursuant to the Agreement.


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1.2 The Loans shall be made on or before the date specified in the Agreement for payment by the Savings Element Owner of the corresponding premium. 2. Interest 2.1 No interest shall be payable by the Savings Element Owner on the Loans outstanding from time to time. 3. Repayment 3.1 Subject to Article 6.1 below, the Savings Element Owner shall make repayments of the Loans according to Schedule A, hereto. These loan repayments will be equal to the amounts shown as “Executive Portion” on Schedule A hereto. 4. Bonus Payments 4.1 The Death Benefit Owner may also make bonus payments to the Savings Element Owner according to Schedule A, hereto. These bonus payments will be equal to the amounts shown as the “Executive Portion” on Schedule A hereto, as grossed up to account for the personal income tax payable by the Savings Element Owner on such bonuses. 5. Security 5.1 The Savings Element Owner assigns his/her interest in the Policy to the Death Benefit Owner as collateral security for the Loans made pursuant to this agreement. 5.2 The Death Benefit Owner covenants and agrees that the balance of any sums received from the Insurer, after repayment of the Loans, shall be paid to the persons entitled thereto under the terms of the Agreement. 5.3 The Death Benefit Owner shall release the Savings Element Owner’s assignment at such time as the Loans have been repaid in full. 6. Termination 6.1 Upon termination of this agreement, the Savings Element Owner shall repay in full any Loans remaining outstanding at the date of termination. 7. Amendment 7.1 The Parties may amend this agreement by notice in writing, signed by both Parties.


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8. General Provisions 8.1 The Parties agree to execute any documents which may be necessary or proper in order to carry out this agreement. 8.2 This agreement is governed by the laws of the province of ________________ . 8.3 Any notice to be given hereunder shall be in writing and may be given by personal delivery, mail, facsimile transmission or other electronic means to the other Party at that Party’s last known address or facsimile number. Any notice given by personal delivery shall be conclusively deemed to have been given on the date of actual delivery, or, if given by facsimile or electronic transmittal, on the first business day following transmittal, or if given by mail, after 5 days from the date of mailing. 8.4 This agreement shall enure to the benefit of the Parties hereto and their respective heirs, successors, executors, administrators and assigns. 9. Independent Legal Advice 9.1 The parties each state that they are executing this agreement voluntarily and without reliance on any statement or representation made by the other. Each party acknowledges having been advised to seek independent legal advice before executing this document and that its nature and effect are fully understood. IN WITNESS WHEREOF the Parties hereto have executed this agreement this ___ day of ________ , 2010. Signed in the presence of: _______________________________ Signature of Witness _________________________________ Printed Name of Witness _________________________________ Street Address of Witness _________________________________ City _________________________________ Occupation of Witness

)))))))))))))))

_________________________________ Savings Element Owner


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Signed in the presence of: _______________________________ Signature of Witness _________________________________ Print Name of Witness _________________________________ Street Address of Witness _________________________________ City _________________________________ Occupation of Witness

)))))))))))))))

_________________________________ Death Benefit Owner

A PARTNER YOU CAN TRUST.

Illustration

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April 16, 2010

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A FINANCIAL SOLUTION FOR ALL YOUR NEEDS

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WHAT IS UNIVERSAL LIFEINSURANCE?

GENESIS universal life insurance is a highly flexible product that combines the two elements that areessential to financial planning under the same contract: affordable life insurance protection and aprofitable tax-sheltered savings account.

In addition to insuring your financial security, GENESIS offers several fully guaranteed components,such as:

• Fully guaranteed GENESIS costs of insurance;

• Deposits to the Genesis index accounts of your contract are 75% to 100% guaranteed at death,depending on your age at the time the contract is issued, adjusted proportionally for anywithdrawals. Regardless of fluctuations in financial markets, your savings are in good hands;

THE GENESIS PLANGUARANTEES

• The assurance that investors can always benefit from a fixed-term account in their GENESISpolicy, as well as a guaranteed return for fixed-term accounts of 1 to 5 and 10 years. In fact,these accounts currently guarantee investors a return of no less than 3% for a 10-year term, 2%for a 5-year term and 1% for a 4-year term. The guaranteed return for investors choosing theminimum fee option will be 3.7% for a 10-year term, 2.7% for a 5-year term and 1.7% for a4-year term;

• An optional guaranteed interest bonus, which increases the returns on your savings;

• Policy fees that are guaranteed for the duration of your contract;

• The guarantee of knowing that the investor can always select from at least three index accountsin the GENESIS policy;

• The annual management fees for the index accounts, which contain a guaranteed maximum.

SOME OF THEIn addition to meeting your insurance needs, GENESIS helps you to reach your personal savingsobjectives. You will benefit from:

MOST PROFITABLEINVESTMENT OPTIONS

• The option of transferring funds between the various GENESIS index accounts with notransaction fees;

• A simple and automatic management of your savings;

• An attractive additional bonus starting in the 1st year (not available for the low fees option).

TAXATIONWith GENESIS, you determine the amount of premium you want to pay, subject to a minimumpremium for the insurance and a maximum premium established by law.

Limits on this accumulation are defined by the Canada Revenue Agency.

A PARTNER YOU CANTRUST

Founded in 1892, Industrial Alliance Insurance and Financial Services Inc. is a life and healthinsurance company that offers a wide range of life and health insurance products, savings andretirement plans, RRSPs, mutual and segregated funds, securities and other financial products andservices.

The fifth largest life and health insurance company in Canada, the Industrial Alliance Group hasoperations across Canada. Industrial Alliance stock is listed on the Toronto Stock Exchange under theticker symbol IAG. Industrial Alliance is among the 100 largest public companies in Canada.

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April 16, 2010Trademark of Industrial Alliance Insurance and Financial Services Inc., used under license by Industrial Alliance Pacific Insurance and Financial Services Inc.

E. & O.E.

PLAN DETAILS

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Applicant(s)

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BC British Columbia

Applicant:

Province: Illustration Date: April 16, 2010

Marginal rate On dividends

45.67%

43.70%

33.33%

32.71%

On capital gain

22.84%

21.85%Personal tax rate:

Corporate tax rate:

Insured(s)

Death Benefit: Face Amount + Fund

PROTECTION

ANNUALMINIMUM PREMIUM

100 %Portion of the accumulation fund payable automatically upon each insured's death:

GENESIS 5, Level cost. $1,000,000.00 for life $7,937.16 for 55 yrs

Total annual minimum premium for insured: $7,937.16

Insured 1:

Johnny Print

Male, 45 yrs, NS (Non smoker)

Premium Details

$40,336.85

$7,937.16

Maximum premium for the first year to retain the tax-free status

Premiums at issue: Minimum annual premium

Premium frequency: Annual

Premiums paid: $40,000.00Specify for 10 years

Investment Assumptions

Accumulation Fund Interest Bonus: Low Fees Option

Allocation PeriodInterest Rate DDA Allocation

Money Market 100% Year 1 to 245.00% Yes 100%

Year 25 to 553.00% Yes 100%

1st year average return: 5.00%

The interest rates provided in this illustration are shown on a net basis, after deduction of management fees. These management fees influence the net return obtained. Current management fees are available on the Company’s website. These fees are subject to change. However, there are guaranteed maximum fees defined in the contract (you may contact your advisor for more information).

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PLAN DETAILS

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Shuttle Fund Assumptions

Shuttle account Automatic Investment Instructions (AII) : Identical to the accumulation fund AII

PeriodInterest Rate

for life6.00%

According to the parameters used, this illustration does not contain any values in the shuttle fund for the entire duration of the projection.

Alternative Investment Assumptions

Allocation Rate of Return Tax Rate Period

100.00% 6.00% 45.67% for lifeInterest

Term Plan Assumptions

Term Plan Protection Annual Premium

$1,000,000.00 $7,890.00Trad. Insurance - T100

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Comparison with an Alternative Investment and Term Plan

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VALUE NET OF TAXESVALUE NET OF TAXES

ESTATEESTATE

UNIVERSAL LIFE INSURANCE FINANCIAL STRATEGY ALTERNATIVE INVESTMENT AND TERM PLAN

Like all investors, your goal is to preserve the funds you have accumulated over the years and continue to accumulate savings intax-sheltered investment vehicles so that you can leave a more valuable estate to your loved ones.

Traditional investment vehicles such as GICs and mutual funds can’t completely meet all your financial needs. In fact, systematic taxation,year after year, on income generated by these investments means a very small increase in capital and therefore less to leave to your heirs.

Your goal is to invest your available funds in a financial vehicle that allows you to bequeath the full value of your savings to your heirsupon your death.

The following pages compare growth in the value, after taxes, of an estate invested in a universal life insurance policy and one invested inan alternative investment vehicle, both of which generate investment income. You will see that universal life insurance provides a higherestate value and that the difference continues to increase over the years.

Universal life insurance is the perfect vehicle to leave your savings intact for your heirs without worrying about taxes.

At age 65: $1,247,933.69At age 65: $1,359,456.94

At age 79 (life expectancy): $1,367,129.44At age 79 (life expectancy): $1,632,372.73

At age 100: $1,556,999.91At age 100: $1,999,260.48

Note: The figures take additional deposits and withdrawals into account.

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Details of Comparison

N e t E s t a t e V a l u e a t D e a t h ( A f t e r t a x e s )

Genesis Universal Life' ALTERNATIVE INVESTMENT and term plan Gain

Year Age AnnualPremiums

Paid

After TaxWithdrawals

Total Funds Death BenefitInsured 1

Term DeathBenefit

ClosingMarket Value

AfterDeferred TaxEstate Value

Net EstateValue

IncludingTerm Plan

Genesisadvantage

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1 46 40,000.00 0 33,173 1,038,669 1,000,000 33,157 33,157 1,033,157 18,253

2 47 40,000.00 0 67,992 1,067,992 1,000,000 67,394 67,394 1,067,394 26,013

3 48 40,000.00 0 104,564 1,104,564 1,000,000 102,748 102,748 1,102,748 39,831

4 49 40,000.00 0 142,965 1,142,965 1,000,000 139,254 139,254 1,139,254 54,242

5 50 40,000.00 0 183,286 1,183,286 1,000,000 176,950 176,950 1,176,950 69,292

6 51 40,000.00 0 225,622 1,225,622 1,000,000 215,875 215,875 1,215,875 85,033

7 52 40,000.00 0 270,076 1,270,076 1,000,000 256,069 256,069 1,256,069 101,507

8 53 40,000.00 0 316,752 1,316,752 1,000,000 297,573 297,573 1,297,573 118,755

9 54 40,000.00 0 365,762 1,365,762 1,000,000 340,430 340,430 1,340,430 136,816

10 55 40,000.00 0 417,223 1,417,223 1,000,000 384,684 384,684 1,384,684 155,733

11 56 0.00 0 430,097 1,430,097 1,000,000 389,077 389,077 1,389,077 162,630

12 57 0.00 0 443,614 1,443,614 1,000,000 393,613 393,613 1,393,613 169,805

13 58 0.00 0 457,807 1,457,807 1,000,000 398,296 398,296 1,398,296 177,269

14 59 0.00 0 472,710 1,472,710 1,000,000 403,133 403,133 1,403,133 185,038

15 60 0.00 0 488,358 1,488,358 1,000,000 408,127 408,127 1,408,127 193,109

16 61 0.00 0 504,789 1,504,789 1,000,000 413,284 413,284 1,413,284 201,239

17 62 0.00 0 522,041 1,522,041 1,000,000 418,609 418,609 1,418,609 209,637

18 63 0.00 0 540,155 1,540,155 1,000,000 424,108 424,108 1,424,108 218,255

19 64 0.00 0 559,175 1,559,175 1,000,000 429,786 429,786 1,429,786 227,056

20 65 0.00 0 579,147 1,579,147 1,000,000 435,648 435,648 1,435,648 236,024

25 70 0.00 0 681,711 1,681,711 1,000,000 467,958 467,958 1,467,958 279,219

34 79 0.00 0 809,178 1,809,178 1,000,000 540,930 540,930 1,540,930 323,855

40 85 0.00 0 915,073 1,915,073 1,000,000 602,692 602,692 1,602,692 374,338

55 100 0.00 0 1,278,644 2,278,644 1,000,000 820,686 820,686 1,820,686 542,324

The highlighted line in the previous table corresponds to the life expectancy of the insured covered by the basic protection.

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Policy Projected Values

P r o j e c t e d V a l u e s B a s e d o n y o u r I n v e s t m e n t A s s u m p t i o n s

Year Age AnnualPremiums

Paid

After TaxWithdrawals

Death BenefitInsured 1

Total Funds Shuttle Fund(BeforeTaxes)

TotalSurrender

Value

WeightedAverage

Yield (incl.bonus) (1)

ExtendedInsurance

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1 46 40,000.00 0 1,038,669 33,173 0 33,173 5.00% 4

2 47 40,000.00 0 1,067,992 67,992 0 67,992 5.00% 11

3 48 40,000.00 0 1,104,564 104,564 0 104,564 5.00% 21

4 49 40,000.00 0 1,142,965 142,965 0 142,965 5.00% 39

5 50 40,000.00 0 1,183,286 183,286 0 183,286 5.00% 100

6 51 40,000.00 0 1,225,622 225,622 0 225,622 5.00% 100

7 52 40,000.00 0 1,270,076 270,076 0 270,076 5.00% 100

8 53 40,000.00 0 1,316,752 316,752 0 316,752 5.00% 100

9 54 40,000.00 0 1,365,762 365,762 0 365,762 5.00% 100

10 55 40,000.00 0 1,417,223 417,223 0 417,223 5.00% 100

11 56 0.00 0 1,430,097 430,097 0 430,097 5.00% 100

12 57 0.00 0 1,443,614 443,614 0 443,614 5.00% 100

13 58 0.00 0 1,457,807 457,807 0 457,807 5.00% 100

14 59 0.00 0 1,472,710 472,710 0 472,710 5.00% 100

15 60 0.00 0 1,488,358 488,358 0 488,358 5.00% 100

16 61 0.00 0 1,504,789 504,789 0 504,789 5.00% 100

17 62 0.00 0 1,522,041 522,041 0 522,041 5.00% 100

18 63 0.00 0 1,540,155 540,155 0 540,155 5.00% 100

19 64 0.00 0 1,559,175 559,175 0 559,175 5.00% 100

20 65 0.00 0 1,579,147 579,147 0 579,147 5.00% 100

25 70 0.00 0 1,681,711 681,711 0 681,711 3.00% 100

34 79 0.00 0 1,809,178 809,178 0 809,178 3.00% 100

40 85 0.00 0 1,915,073 915,073 0 915,073 3.00% 100

55 100 0.00 0 2,278,644 1,278,644 0 1,278,644 3.00% 100

Premiums are payable in years 1 to 10.Premiums are deposited at the beginning of each year and values are calculated at the end of each year.According to the investment assumptions shown, the policy will remain in effect until age 100.Thanks to the Automatic Optimization of the Face Amount (AOFA), an increase in the face amount is needed in year 1 to maintain the policy’s exempt status.The highlighted line in the previous table corresponds to the life expectancy of the insured covered by the basic protection.(1) With the "Low fees option" type of bonus, no annual bonus is paid, but the management expense ratios are lower than those of Genesis contracts withbonuses.

This illustration is provided for information purposes to facilitate your understanding of the product. The above data must not be considered as a guarantee ofthe future results, which could be higher or lower depending on the real returns obtained on your investments. If there is any discrepancy, your policy contractprevails.

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The illustration presented in the previous pages contains technical terms. The following text aims to clarify certain terms and present youwith some of the product's features.

HIGHLIGHTS

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Face Amount + Fund:

This term means that, in addition to the face amount, the higher of thefollowing amounts will be paid. The total of these amounts appears in theDeath Benefit (Insured 1) column.

Costs:

At issue, the Level, Level Investor or Yearly Renewable Term (YRT)costs of insurance are guaranteed for life. Once issued, all additionsmade to the coverages will require new evidence of insurablility and willbe calculated according to the insurance costs in effect at that time. Thepolicy fees are also guaranteed as long as the number of insuredsremains the same.

Preferred Rates ($200,000 and Over):

The company is aware of the importance you place on your health. Thatis why we have developed a preferred rates program to reward you. Ifyou are in excellent health, you may qualify for the "Preferred" or "Elite"categories, which allow you to reduce your insurance costs substantially.

Extended Insurance:

Extended insurance represents the number of years during which yourpolicy will remain in effect if you stop paying premiums. This duration isnot guaranteed and can vary according to several factors, particularly thereal returns that your investments obtain.

Maximum premium:

The maximum premium indicated in this illustration is calculated byprojecting various values in the contract over time at a fixed rate ofreturn. Consequently, the actual residual tax room could differ over timefrom that illustrated, according to the actual returns of the investmentsselected by the policyholder.

Automatic Optimization of the Face Amount:

This option will increase or decrease the face amount as needed. Thisresults in a minimum of transfers being made to the shuttle fund and, bythe same token, will maximize your tax-sheltered capitalization.

Adjusted Cost Basis (ACB):

The Adjusted Cost Basis (ACB) is equal to the sum of the premiums paidadjusted for withdrawals less the accumulated Net Cost of PureInsurance (NCPI) since issue of the policy. The NCPI is calculated basedon the cost of a yearly renewable term set by the Income Tax Act. TheACB is used in the calculation of taxable gain at the time of surrender, bythe applicant, of an interest in the policy.

Portfolio account:

The portfolio account is designed to receive the deposit of sums paid intothe policy. All transactions are made through this account. Insurancecosts are deducted from this account each month. Excess amounts arethen transferred to different investment accounts according to theAutomatic Investment Instructions (AII).

Total Funds:

The total funds represent the total amount invested in the policy's variousaccounts and the shuttle fund. The total funds must be sufficient tomaintain your policy in force.

Shuttle Fund (see Taxation):

The amounts transferred to this account remain there temporarily.Amounts accumulated in the shuttle fund are returned to theaccumulation fund as quickly as possible. The term "before tax" meansthat the taxes to be paid on the shuttle fund growth are supposed to bepaid with additional and external money.

Total Surrender Value:

The Total Surrender Value shown includes the shuttle fund and theGuaranteed Surrender Value if Option 10-15-20 is selected. It does nottake into account market value adjustments that may exist on certaintypes of investments, or the Company's current transaction fees.However, it does take into account the surrender fees for coverage withYRT cost type which range from 7 to 10 years depending on the DeathBenefit Type selected. Coverage with Level cost type do not have anysurrender charges, except for Level Investor costs, which are applicablefor 7 years. It is important to note that in all cases, the total surrendervalue payable is reduced by the current balance of all policy loans.

Premiums Paid:

Premiums paid include the premiums received on a regular basis andadditional deposits. They are subject to a 2.00 % premium tax. This taxmay vary according to changes made to tax laws or following a change ofprovince of residence. You do not have to pay a premium, provided thatthe premiums paid respect the minimum premiums required to keep yourpolicy in force.

Taxation:

The amounts accumulated in the contract are tax exempt as long as theyrespect the maximum allowed to retain the policy's tax-free status. Whenthe accumulated amounts exceed the maximum, a transfer is made tothe shuttle fund. You must pay income taxes on the returns generated bythis account. Also, a portion of any withdrawals, policy loans andsurrender values may be subject to the Income Tax Act.

Duration of the Illustration:

The fact that the illustration shows values until insured 1 reaches age 100does not mean that the policy remains in force until that time. In reality,the policy remains in effect until the last insured dies if the premiums paidand funds are sufficient.

Weighted Average Yield:

The illustration software calculates a yearly average rate of return basedon the different interest rate in each investment option, asset allocationand monthly deductions. This will result in a changing weighted averageyield year by year as shown in the policy's projected values. The interestrates provided in this illustration are shown on a net basis (afterdeduction of management fees). The "weighted average rate (incl.bonus)" column shown in certain reports includes annual bonuses, ifapplicable, which may not be guaranteed depending on the type of bonuschosen.

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INTEREST RATE SENSITIVITY TEST

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IMPORTANT NOTICE:

The values shown are sensitive to the interest rates used. In order to make a comparison with your basic scenario, we suggest thefollowing two additional scenarios. Your investment assumptions include at least one index account. Since this type of account has amore variable return, the illustration difference is 2%.

The 0% minimum rate for fixed-term accounts of 3 years and less, 1% for 5-year average accounts and the 4-year fixed term, 2% for the5-year fixed-term account and 3% for the 10-year fixed-term account has been used, if applicable. With the low fees option bonus, allrates are increased by 0.7%.

The Company reserves the right to offer new investment options or cancel certain options, whenever it feels that such an approach isrelevant and without requiring the prior approval of the policyholder; please refer to the contract clauses.

Universal Life Value Estate Value Net of Taxes

Current assumptions (5%)¹ Assumptions (+2%)

Estate Value Net of Taxes

Assumptions (-2%)

Estate Value Net of Taxes

Estate at age 65 $1,359,456.94 $1,538,214.83 $1,227,003.35

Estate at age 79 (life expectancy) $1,632,372.73 $2,223,663.80 $1,305,543.90

Estate at age 100 $1,999,260.48 $4,186,113.88 $1,234,518.94

Age at the end of the illustration 100 100 100

Alternative Investment and a Term Plan Value

Estate Value Net of Taxes Estate Value Net of Taxes Estate Value Net of Taxes

Estate at age 65 $1,247,933.69 $1,318,148.83 $1,188,547.55

Estate at age 79 (life expectancy) $1,367,129.44 $1,541,913.67 $1,235,933.69

Estate at age 100 $1,556,999.91 $2,138,624.86 $1,235,949.64

Age at the end of the illustration 100 100 100

¹1st year average return

Even though all efforts are made to ensure the quality of the illustration or its use, the figures used in the illustration, particularly costsand/or premiums, are subject to approval by the Company.

I, the undersigned, declare that I have read this illustration of the GENESIS product.

I understand that the results obtained could be higher or lower than those illustrated. I also understand that the interest rates arenot guaranteed and the tax rates may be different.

I acknowledge that this illustration is not part of the contract.

Client's Signature Advisor's Signature Application Number Date

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E. & O.E.

MEDICAL REQUIREMENTS

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Holdco

INSURED 1

Johnny Print, 45 years old, NS (Non smoker)

FACE AMOUNT: $1,000,000.00

A Paramedical examination

A E.K.G.

A Blood Profile

IMPORTANT NOTICE:

For immigrants less than 1 year in Canada: Paramedical and blood profile.

The Company reserves the right to require different medical requirements from those shown.

Please total the amount of insurance requested in all the applications submitted for a proposed insured whendetermining the underwriting requirements.

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INVESTOR PROFILE

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You have not selected any profile for your illustration.

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Designed for: Holdco

Presented by:

1. Protect your business by insuring your key shareholder witha purchase of a Universal Life policy

2. Take advantage of tax-deferred investment growth and costeffective life insurance.

Industrial Alliance Pacific strongly encourages you to obtain independent advice from your tax advisor, legal counsel or accountant to ensure that this concept is right for you.

Objectives

Shared Ownership

03-02-2010 15:55

This presentation is incomplete w ithout the LEGAL NOTICE that appears on the last page of this document.

(E&OE) Conceptia 5.30 uses GENESIS 5.30 © Industrial Alliance Pacific Insurance and Financial Services Inc..

GENESIS Universal LifeFinancial product that combines permanent life insurance coverage with an investment vehicle with tax-sheltered returnsSome features of this product are guaranteed for lifeFlexibility in the choice of coverage combinations

A flexible, high-performance productA wide range of investments tied to the return of the stock or bond market indices, plus active management or guaranteed interest accountsInvestments managed by renowned managers

GENESIS is the most complete and the most flexible financial vehicle with insurance coverage currently offered on the Canadian market

General

03-02-2010 15:55



Protect your business from financial hardship in the event ofthe death of the key shareholderAs an added bonus, provide additional tax-deferred investment forthe key shareholder to accumulate wealth for retirementProvide cost-effective life insurance for the company and the key shareholder

Buy a GENESIS universal life insurance policyA Shared Ownership Agreement is drawn up between the companyand the key shareholder outlining the benefits and costs to both parties

GENESIS universal life insurance, an excellent product for the Shared Ownership strategy. It combines cost effective insurance with a choice of over 40 investment options.

Shared Ownership

Your Goals

The solution that can do all of the above:

03-02-2010 15:55


(E&OE) Conceptia 5.30 uses GENESIS 5.30 © Industrial Alliance Pacif ic Insurance and Financial Services Inc..

Company Key Shareholder

Key Shareholder owns thetax-deferred investment account

Death benefit transferred toKey Shareholder after 40 years

Both parties contribute to theGENESIS insurancepolicy

Death benefit owned bythe company for 40 years

Shared Ownership

03-02-2010 15:55



Company Key Shareholder GENESIS Details :

Death Benefit Split at Issue: 100% 0% Death Benefit Type:

Death Benefit Transfer at Age: 85 Cost Type: Level

Premium Split Basis : $7,890.00 Bonus: Low Fees Option

Canadian Controlled Private Corporation? Y N Province: British Columbia

Include pre-payment in Company's Death Benefit? Y Initial Death Benefit: $1,000,000

Pre-payment Discount Rate: 2.00% Pre-payment Growth Rate: 2.00% Projected Growth Rate: 5.00%

Marginal Tax Rate: 45.67% 43.70%

Fund Pre-Payment Capital Div. FundYear Age Deposits Coverage Value Deposits Account Coverage Acct. Credit Deposits Value Coverage

1 46 40000 1038669 33173 24028 16461 1016461 993473 15972 16712 222092 47 40000 1067992 67992 24028 33251 1033251 987472 15972 34741 347413 48 40000 1104564 104564 24028 50377 1050377 982019 15972 54187 541874 49 40000 1142965 142965 24028 67845 1067845 977150 15972 75120 751205 50 40000 1183286 183286 24028 85663 1085663 972899 15972 97622 976226 51 40000 1225622 225622 24028 103837 1103837 969285 15972 121785 1217857 52 40000 1270076 270076 24028 122375 1122375 966375 15972 147701 1477018 53 40000 1316752 316752 24028 141283 1141283 964245 15972 175469 1754699 54 40000 1365762 365762 24028 160570 1160570 962993 15972 205193 205193

10 55 40000 1417223 417223 24028 180242 1180242 962718 15972 236981 23698111 56 0 1430097 430097 0 175799 1175799 962995 0 254298 25429812 57 0 1443614 443614 0 171267 1171267 963863 0 272347 27234713 58 0 1457807 457807 0 166645 1166645 965370 0 291162 29116214 59 0 1472710 472710 0 161930 1161930 967555 0 310780 31078015 60 0 1488358 488358 0 157121 1157121 970516 0 331237 33123716 61 0 1504789 504789 0 152215 1152215 975091 0 352573 35257317 62 0 1522041 522041 0 147212 1147212 980747 0 374829 37482918 63 0 1540155 540155 0 142108 1142108 987734 0 398047 39804719 64 0 1559175 559175 0 136903 1136903 996278 0 422273 42227320 65 0 1579147 579147 0 131593 1131593 1006548 0 447554 44755425 70 0 1686368 686368 0 103408 1103408 1087654 0 582960 58296030 75 0 1780384 780384 0 72290 1072290 1072290 0 708094 70809435 80 0 1893128 893128 0 37933 1037933 1037933 0 855195 85519540 85 0 2028331 1028331 0 0 1000000 1000000 0 1028331 102833145 90 0 2190468 1190468 0 0 0 0 0 1190468 219046850 95 0 2384903 1384903 0 0 0 0 0 1384903 238490355 100 0 2618071 1618071 0 0 0 0 0 1618071 2618071

Face Amount + Fund

Johnny Print, Male, Non-smoker, 45

Trad. Insurance - T100

Total Policy Holdco

Shared Ownership : Summary

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Pre- Death Capital Div. Fund Death Total TotalYear Age Deposits Payment Benefit NCPI ACB* Acct. Credit Deposits Value Benefit NCPI ACB* Deposits ACB

1 46 24028 16461 1016461 1040 22988 993473 15972 16712 22209 0 15972 40000 389602 47 24028 33251 1033251 1237 45779 987472 15972 34741 34741 0 31944 40000 777233 48 24028 50377 1050377 1450 68358 982019 15972 54187 54187 0 47916 40000 1162734 49 24028 67845 1067845 1690 90696 977150 15972 75120 75120 0 63887 40000 1545835 50 24028 85663 1085663 1960 112764 972899 15972 97622 97622 0 79859 40000 1926236 51 24028 103837 1103837 2240 134552 969285 15972 121785 121785 0 95831 40000 2303837 52 24028 122375 1122375 2580 156000 966375 15972 147701 147701 0 111803 40000 2678038 53 24028 141283 1141283 2990 177038 964245 15972 175469 175469 0 127775 40000 3048139 54 24028 160570 1160570 3490 197576 962993 15972 205193 205193 0 143747 40000 341323

10 55 24028 180242 1180242 4080 217525 962718 15972 236981 236981 0 159719 40000 37724311 56 0 175799 1175799 4720 212805 962995 0 254298 254298 0 159719 0 37252312 57 0 171267 1171267 5400 207405 963863 0 272347 272347 0 159719 0 36712313 58 0 166645 1166645 6130 201275 965370 0 291162 291162 0 159719 0 36099314 59 0 161930 1161930 6900 194375 967555 0 310780 310780 0 159719 0 35409315 60 0 157121 1157121 7770 186605 970516 0 331237 331237 0 159719 0 34632316 61 0 152215 1152215 9480 177125 975091 0 352573 352573 0 159719 0 33684317 62 0 147212 1147212 10660 166465 980747 0 374829 374829 0 159719 0 32618318 63 0 142108 1142108 12090 154375 987734 0 398047 398047 0 159719 0 31409319 64 0 136903 1136903 13750 140625 996278 0 422273 422273 0 159719 0 30034320 65 0 131593 1131593 15580 125045 1006548 0 447554 447554 0 159719 0 28476321 66 0 126177 1126177 17500 107545 1018632 0 473939 473939 0 159719 0 26726422 67 0 120653 1120653 19540 88005 1032648 0 501482 501482 0 159719 0 24772423 68 0 115018 1115018 21680 66325 1048693 0 530236 530236 0 159719 0 22604424 69 0 109271 1109271 23990 42335 1066936 0 560259 560259 0 159719 0 20205325 70 0 103408 1103408 26580 15755 1087654 0 582960 582960 0 159719 0 17547326 71 0 97429 1097429 29550 0 1097429 0 606402 606402 0 159719 0 14592327 72 0 91329 1091329 32880 0 1091329 0 630609 630609 0 159719 0 11304328 73 0 85108 1085108 36500 0 1085108 0 655609 655609 0 159719 0 7654329 74 0 78763 1078763 40350 0 1078763 0 681428 681428 0 159719 0 3619330 75 0 72290 1072290 44370 0 1072290 0 708094 708094 0 159719 0 0

Face Amount + Fund

Holdco



Shared Ownership : Details

03-02-2010 15:55











Pre- Death Capital Div. Fund Death Total TotalYear Age Deposits Payment Benefit NCPI ACB* Acct. Credit Deposits Value Benefit NCPI ACB* Deposits ACB

31 76 0 65688 1065688 48410 0 1065688 0 735637 735637 0 159719 0 032 77 0 58954 1058954 52720 0 1058954 0 764086 764086 0 159719 0 033 78 0 52085 1052085 57590 0 1052085 0 793474 793474 0 159719 0 034 79 0 45079 1045079 63160 0 1045079 0 823832 823832 0 159719 0 035 80 0 37933 1037933 69410 0 1037933 0 855195 855195 0 159719 0 036 81 0 30644 1030644 76390 0 1030644 0 887596 887596 0 159719 0 037 82 0 23209 1023209 84170 0 1023209 0 921073 921073 0 159719 0 038 83 0 15625 1015625 92860 0 1015625 0 955661 955661 0 159719 0 039 84 0 7890 1007890 102650 0 1007890 0 991401 991401 0 159719 0 040 85 0 0 1000000 113280 0 1000000 0 1028331 1028331 0 35129 0 041 86 0 0 0 0 0 0 0 1058446 2058446 124590 0 0 042 87 0 0 0 0 0 0 0 1089675 2089675 136370 0 0 043 88 0 0 0 0 0 0 0 1122060 2122060 148520 0 0 044 89 0 0 0 0 0 0 0 1155642 2155642 160580 0 0 045 90 0 0 0 0 0 0 0 1190468 2190468 172790 0 0 046 91 0 0 0 0 0 0 0 1226582 2226582 185130 0 0 047 92 0 0 0 0 0 0 0 1264032 2264032 197600 0 0 048 93 0 0 0 0 0 0 0 1302867 2302867 210450 0 0 049 94 0 0 0 0 0 0 0 1343140 2343140 223860 0 0 050 95 0 0 0 0 0 0 0 1384903 2384903 238980 0 0 051 96 0 0 0 0 0 0 0 1428211 2428211 256860 0 0 052 97 0 0 0 0 0 0 0 1473121 2473121 278430 0 0 053 98 0 0 0 0 0 0 0 1519693 2519693 305620 0 0 054 99 0 0 0 0 0 0 0 1567989 2567989 340260 0 0 055 100 0 0 0 0 0 0 0 1618071 2618071 384440 0 0 0

Face Amount + Fund


Holdco Johnny Print, Male, Non-smoker, 45

Shared Ownership : Details (page 2)

03-02-2010 15:55



Loan Amount: $44,203.00 Death Benefit Type: Face Amount + Fund Initial Death Benefit: $1,000,000.00Assumed Loan Interest Rate: 4.75% Cost Type: Level Projected Growth Rate: 5.00%Loan Start Age: 70 Bonus: Low Fees OptionLoan End Age: 80 Province: British Columbia

90%

Loan InterestYear Age Deposits 4.75% Loan Balance Fund Value Death Benefit

1 46 15,972 16,712 22,209 0 0 0 0 16,712 22,2092 47 15,972 34,741 34,741 0 0 0 0 34,741 34,7413 48 15,972 54,187 54,187 0 0 0 0 54,187 54,1874 49 15,972 75,120 75,120 0 0 0 0 75,120 75,1205 50 15,972 97,622 97,622 0 0 0 0 97,622 97,6226 51 15,972 121,785 121,785 0 0 0 0 121,785 121,7857 52 15,972 147,701 147,701 0 0 0 0 147,701 147,7018 53 15,972 175,469 175,469 0 0 0 0 175,469 175,4699 54 15,972 205,193 205,193 0 0 0 0 205,193 205,193

10 55 15,972 236,981 236,981 0 0 0 0 236,981 236,98111 56 0 254,298 254,298 0 0 0 0 254,298 254,29812 57 0 272,347 272,347 0 0 0 0 272,347 272,34713 58 0 291,162 291,162 0 0 0 0 291,162 291,16214 59 0 310,780 310,780 0 0 0 0 310,780 310,78015 60 0 331,237 331,237 0 0 0 0 331,237 331,23716 61 0 352,573 352,573 0 0 0 0 352,573 352,57317 62 0 374,829 374,829 0 0 0 0 374,829 374,82918 63 0 398,047 398,047 0 0 0 0 398,047 398,04719 64 0 422,273 422,273 0 0 0 0 422,273 422,27320 65 0 447,554 447,554 0 0 0 0 447,554 447,55421 66 0 473,939 473,939 0 0 0 0 473,939 473,93922 67 0 501,482 501,482 0 0 0 0 501,482 501,48223 68 0 530,236 530,236 0 0 0 0 530,236 530,23624 69 0 560,259 560,259 0 0 0 0 560,259 560,25925 70 0 582,960 582,960 44,203 0 44,203 0 538,757 538,75726 71 0 606,402 606,402 44,203 2,100 90,506 0 515,896 515,89627 72 0 630,609 630,609 44,203 4,299 139,008 0 491,602 491,60228 73 0 655,609 655,609 44,203 6,603 189,814 0 465,795 465,79529 74 0 681,428 681,428 44,203 9,016 243,033 0 438,395 438,39530 75 0 708,094 708,094 44,203 11,544 298,780 0 409,314 409,314

Maximum Loan Ratio at Age 100:

Net of LoanDeath BenefitFund Value Loan Amount


Loan as a % of Fund

Value

Shared Ownership : Loan Details

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Loan Amount: $44,203.00 Death Benefit Type: Face Amount + Fund Initial Death Benefit: $1,000,000.00Assumed Loan Interest Rate: 4.75% Cost Type: Level Projected Growth Rate: 5.00%Loan Start Age: 70 Bonus: Low Fees OptionLoan End Age: 80 Province: British Columbia

90%

Loan InterestYear Age Deposits 4.75% Loan Balance Fund Value Death Benefit

31 76 0 735,637 735,637 44,203 14,192 357,175 49% 378,462 378,46232 77 0 764,086 764,086 44,203 16,966 418,344 55% 345,743 345,74333 78 0 793,474 793,474 44,203 19,871 482,418 61% 311,056 311,05634 79 0 823,832 823,832 44,203 22,915 549,536 67% 274,297 274,29735 80 0 855,195 855,195 0 26,103 575,639 67% 279,556 279,55636 81 0 887,596 887,596 0 27,343 602,982 68% 284,615 284,61537 82 0 921,073 921,073 0 28,642 631,623 69% 289,450 289,45038 83 0 955,661 955,661 0 30,002 661,625 69% 294,036 294,03639 84 0 991,401 991,401 0 31,427 693,052 70% 298,348 298,34840 85 0 1,028,331 1,028,331 0 32,920 725,972 71% 302,359 302,35941 86 0 1,058,446 2,058,446 0 34,484 760,456 72% 297,990 1,297,99042 87 0 1,089,675 2,089,675 0 36,122 796,578 73% 293,097 1,293,09743 88 0 1,122,060 2,122,060 0 37,837 834,415 74% 287,644 1,287,64444 89 0 1,155,642 2,155,642 0 39,635 874,050 76% 281,592 1,281,59245 90 0 1,190,468 2,190,468 0 41,517 915,567 77% 274,900 1,274,90046 91 0 1,226,582 2,226,582 0 43,489 959,057 78% 267,525 1,267,52547 92 0 1,264,032 2,264,032 0 45,555 1,004,612 79% 259,420 1,259,42048 93 0 1,302,867 2,302,867 0 47,719 1,052,331 81% 250,536 1,250,53649 94 0 1,343,140 2,343,140 0 49,986 1,102,317 82% 240,823 1,240,82350 95 0 1,384,903 2,384,903 0 52,360 1,154,677 83% 230,226 1,230,22651 96 0 1,428,211 2,428,211 0 54,847 1,209,524 85% 218,687 1,218,68752 97 0 1,473,121 2,473,121 0 57,452 1,266,976 86% 206,145 1,206,14553 98 0 1,519,693 2,519,693 0 60,181 1,327,158 87% 192,536 1,192,53654 99 0 1,567,989 2,567,989 0 63,040 1,390,198 89% 177,791 1,177,79155 100 0 1,618,071 2,618,071 0 66,034 1,456,232 90% 161,839 1,161,839

Maximum Loan Ratio at Age 100:


Loan as a % of Fund

ValueFund Value Death Benefit Loan AmountNet of Loan

Shared Ownership : Loan Details (page 2)

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Company GENESIS Details :

Death Benefit Split at Issue: 100% Death Benefit Type:

Death Benefit Transfer at Age: Cost Type: Level

Premium Split Basis : Trad. Insurance - T100 Bonus: Low Fees Option

Canadian Controlled Private Corporation? Y Province: British Columbia


Pre-payment Discount Rate: 2.00% 2.00% Projected Growth Rate: 5.00%

Year Age 2.00% Year Age 2.00%1 46 7,890 24,028 16,138 323 16,461 36 81 7,890 0 30,043 601 30,6442 47 7,890 24,028 32,599 652 33,251 37 82 7,890 0 22,754 455 23,2093 48 7,890 24,028 49,389 988 50,377 38 83 7,890 0 15,319 306 15,6254 49 7,890 24,028 66,515 1,330 67,845 39 84 7,890 0 7,735 155 7,8905 50 7,890 24,028 83,983 1,680 85,663 40 85 7,890 0 0 0 06 51 7,890 24,028 101,801 2,036 103,837 41 86 0 0 0 0 07 52 7,890 24,028 119,975 2,400 122,375 42 87 0 0 0 0 08 53 7,890 24,028 138,513 2,770 141,283 43 88 0 0 0 0 09 54 7,890 24,028 157,421 3,148 160,570 44 89 0 0 0 0 0

10 55 7,890 24,028 176,708 3,534 180,242 45 90 0 0 0 0 011 56 7,890 0 172,352 3,447 175,799 46 91 0 0 0 0 012 57 7,890 0 167,909 3,358 171,267 47 92 0 0 0 0 013 58 7,890 0 163,377 3,268 166,645 48 93 0 0 0 0 014 59 7,890 0 158,755 3,175 161,930 49 94 0 0 0 0 015 60 7,890 0 154,040 3,081 157,121 50 95 0 0 0 0 016 61 7,890 0 149,231 2,985 152,215 51 96 0 0 0 0 017 62 7,890 0 144,325 2,887 147,212 52 97 0 0 0 0 018 63 7,890 0 139,322 2,786 142,108 53 98 0 0 0 0 019 64 7,890 0 134,218 2,684 136,903 54 99 0 0 0 0 020 65 7,890 0 129,013 2,580 131,593 55 100 0 0 0 0 021 66 7,890 0 123,703 2,474 126,177 0 0 0 0 0 0 022 67 7,890 0 118,287 2,366 120,653 0 0 0 0 0 0 023 68 7,890 0 112,763 2,255 115,018 0 0 0 0 0 0 024 69 7,890 0 107,128 2,143 109,271 0 0 0 0 0 0 025 70 7,890 0 101,381 2,028 103,408 0 0 0 0 0 0 026 71 7,890 0 95,518 1,910 97,429 0 0 0 0 0 0 027 72 7,890 0 89,539 1,791 91,329 0 0 0 0 0 0 028 73 7,890 0 83,439 1,669 85,10829 74 7,890 0 77,218 1,544 78,76330 75 7,890 0 70,873 1,417 72,29031 76 7,890 0 64,400 1,288 65,688 Explanation of calculations:

32 77 7,890 0 57,798 1,156 58,95433 78 7,890 0 51,064 1,021 52,085 $220,151.43

34 79 7,890 0 44,195 884 45,07935 80 7,890 0 37,189 744 37,933

Premium Paid is payment of present value of Insurance Costs spread over premium paying period at

Pre-Payment Growth Rate.

Pre-payment Growth Rate:

Excess + Interest @

Total Pre-Payment by CompanyInsurance Cost

Premium Paid

Insurance Costs is based on selection made on Premium Split Basis x Company %

Present value of Insurance Costs at Pre-Payment Discount Rate:

Pre-Payment Reconciliation Report Pre-Payment Reconciliation Report

Insurance CostPremium

Paid

Excess Paid by

Company

Excess + Interest @

Total Pre-Payment by Company

Excess Paid by

Company

Key Shareholder

0%

85

N

Face Amount + Fund

Shared Ownership : Pre-Payment Details

03-02-2010 15:55

This presentation is incomplete without the LEGAL NOTICE that appears on the last page of this document.


A company with a solid presence in CanadaLife and health insurance company whose origins go back to 1912Operates in Canada, primarily in the western provinces and Ontario,as well as in the Western United StatesMother company: Industrial Alliance Insurance and Financial services Inc. is listed on the Toronto Stock Exchange (symbol: IAG)

A financially solid companyThe Industrial Alliance group manages over $49 billion in assetsExcellent solvency ratios that exceed standardsOne of the 100 largest public companies in CanadaA network of 1,600 exclusive agents and 12,000 brokers

The IA group contributes to the financial wellbeing of over three million Canadians and employs more than 3,400 people

About Industrial Alliance Pacific

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LEGAL NOTICE

Note: Use of this presentation is subject to the following conditions, by which you are legally bound. This presentation is not complete unless it is accompanied by the official illustration prepared by Industrial Alliance.

Reliability of InformationThis presentation is intended for information purposes only, to provide you with a better understanding of the product. Although all efforts have been made to ensure the quality of the financial information, Industrial Alliance may not, under any circumstances, be held liable for any consequences resulting from inaccurate information, or for any damages suffered as a result of using this information. The data used in this presentation should not be taken as a guarantee of future performance, since this performance may fluctuate, upwards or downwards, depending on the actual returns generated by your investments.

The Conceptia presentation and the official illustration prepared by Industrial Alliance are not part of the contract. In the event of discrepancy between these presentations and your contract, your contract shall prevail.

No LiabilityIndustrial Alliance and the member companies of the Industrial Alliance Group, along with their administrators, directors, employees and representatives, may not be held liable for any damages resulting directly or indirectly from actions or measures taken on the basis of the information contained in this presentation. Industrial Alliance does not guarantee the interest rate, the deductibility of interest on the loan, or the taxation rate. It is the client's responsibility to examine the tax rules in place in order to validate the interest rate, the deductibility of the interest and the taxation rate. The information contained in this presentation is not intended to take the place of legal, accounting, tax or other advice, and is not to be used for such purposes. As a result, Industrial Alliance strongly encourages its clients to consult an accountant, tax specialist or legal counsel for independent professional advice on the tax implications of this concept on their financial situation.

Ownership and Prohibited UseThe Conceptia presentation is owned by Industrial Alliance and the member companies of the Industrial Alliance Group. Any use of the illustration software for purposes other than those prescribed by Industrial Alliance is prohibited.

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