Power Financial Corporation Reports 2011 Third Quarter Financial Results and Dividends

Readers are referred to the sections entitled "Forward-looking Statements" and "Non-IFRS Financial Measures" at the end of this release. The Corporation's financial results are reported under International Financial Reporting Standards (IFRS) and all comparative figures have been restated accordingly.

TORONTO, Nov. 11, 2011 /CNW Telbec/ - Power Financial Corporation's operating earnings for the nine-month period ended September 30, 2011 were $1,385 million or $1.84 per share, compared with $1,294 million or $1.73 per share in the corresponding period of 2010. This represents a 6.8% increase on a per share basis.

The increase in operating earnings reflects primarily the increase in the contribution from the Corporation's subsidiaries Great-West Lifeco Inc. (Lifeco) and IGM Financial Inc. (IGM).

For the nine-month period ended September 30, 2011, other items represented a charge of $118 million and consisted mainly of the Corporation's share (in the amount of $133 million) of Pargesa Holding SA's (Pargesa) impairment charge recorded in the third quarter on its indirect investment in Lafarge S.A. In the corresponding nine-month period of 2010, other items were a charge of $142 million and consisted mainly of Power Financial's share of a litigation provision recorded by Lifeco, established in the third quarter.

Net earnings attributable to common shareholders (including other items and after dividends on perpetual preferred shares) for the nine-month period ended September 30, 2011 were $1,189 million or $1.68 per share, compared with $1,079 million or $1.53 per share in the corresponding period of 2010.

THIRD QUARTER RESULTS
For the quarter ended September 30, 2011, operating earnings of the Corporation were $454 million or $0.60 per share, compared with $465 million or $0.62 per share in the third quarter of 2010.

Other items for the third quarter of 2011 were a charge of $116 million, compared with a charge of $144 million for the same quarter in 2010.

Net earnings attributable to common shareholders (including other items and after dividends on perpetual preferred shares) for the quarter ended September 30, 2011 were $312 million or $0.44 per share, compared with $294 million or $0.42 per share in the corresponding period of 2010.

RESULTS OF SUBSIDIARIES AND PARJOINTCO
GREAT-WEST LIFECO INC.
Lifeco reported operating earnings attributable to common shareholders of $1,398 million or $1.473 per share for the nine-month period ended September 30, 2011, compared with $1,354 million or $1.429 per share in the corresponding period of 2010. This represents an increase of 3% on a per share basis.

For the three-month period ended September 30, 2011, Lifeco reported operating earnings attributable to common shareholders of $457 million or $0.481 per share, compared with $471 million or $0.497 per share in the same period in 2010.

Operating earnings for the third quarter of 2010 exclude the impact of an incremental litigation provision, established in the quarter, in the amount of $225 million after tax ($204 million attributable to Lifeco's common shareholders or $0.216 per common share, and $21 million to Lifeco's non-controlling interests).

Lifeco's contribution to Power Financial's operating earnings was $956 million for the nine-month period ended September 30, 2011, compared with $930 million in the corresponding period in 2010. For the three-month period ended September 30, 2011, Lifeco's contribution to Power Financial's operating earnings was $312 million, compared with $323 million in the same period in 2010.

IGM FINANCIAL INC.
IGM reported operating earnings available to common shareholders for the nine months ended September 30, 2011 of $637 million or $2.46 per share, compared with $549 million or $2.08 per share in the same period in 2010, an increase of 18.3% on a per share basis.

For the three-month period ended September 30, 2011, IGM reported operating earnings available to common shareholders of $213 million or $0.82 per share, compared with $181 million or $0.69 per share for the same period in 2010, an increase of 18.8% on a per share basis.

On September 2, 2011, Mackenzie Financial Corporation, a subsidiary of IGM, announced that it had entered into an agreement to sell M.R.S. Trust Company and M.R.S. Inc. (together, MRS). Other items for the three and nine months ended September 30, 2011 consisted of the net earnings of MRS of $31 million and $33 million, respectively, which have been classified as discontinued operations.

Net earnings available to common shareholders, including other items, for the nine months ended September 30, 2011 were $670 million or $2.58 per share, compared with $541 million or $2.05 per share in the corresponding period in 2010. Net earnings available to common shareholders, including other items, for the three months ended September 30, 2011 were $244 million or $0.94 per share, compared with $173 million or $0.66 per share in the same period of 2010.

IGM's contribution to Power Financial's operating earnings was $367 million for the nine-month period ended September 30, 2011, compared with $313 million in the same period in 2010. For the three-month period ended September 30, 2011, IGM's contribution to Power Financial's operating earnings was $121 million, compared with $104 million in the corresponding period of 2010.

PARJOINTCO N.V.
Power Financial holds a 50% interest in Parjointco N.V., which in turn held a 56.5% interest in Pargesa as at September 30, 2011. Pargesa reported operating income for the nine-month period ended September 30, 2011 of SF319 million, compared with SF440 million in the corresponding period in 2010. For the three-month period ended September 30, 2011, operating income was SF109 million, compared with SF219 million in the corresponding period of 2010.

Pargesa's operating income declined in 2011 mainly as a result of the weakening of the euro against the Swiss franc.

Expressed in Canadian dollars, the contribution from Pargesa to Power Financial's operating earnings was $103 million for the nine-month period ended September 30, 2011, compared with $114 million for the corresponding period in 2010. For the three-month period ended September 30, 2011, the contribution from Pargesa to Power Financial's operating earnings was $36 million, compared with $59 million in the third quarter of 2010.

Pargesa's non-operating income (other items) was a charge of SF423 million for the nine-month period ended September 30, 2011 and is composed mainly of its share of the impairment charge on its indirect investment in Lafarge. Non-operating income of Pargesa was SF8 million in the nine-month period ended September 30, 2010.

Pargesa reported a net loss of SF104 million in the nine-month period ended September 30, 2011, compared with net earnings of SF448 million in the same period of 2010. For the third quarter of 2011, Pargesa reported a net loss of SF306 million, compared with net earnings of SF218 million in the third quarter of 2010.

DIVIDENDS ON PREFERRED SHARES
The Board of Directors today declared quarterly dividends on the Corporation's preferred shares, as follows:

TYPE OF SHARES RECORD DATE PAYMENT DATE AMOUNT
Series A January 25, 2012 February 15, 2012 To be determined in accordance with the articles of the Corporation
Series D January 10, 2012 January 31, 2012 34.375¢
Series E January 10, 2012 January 31, 2012 32.8125¢
Series F January 10, 2012 January 31, 2012 36.875¢
Series H January 10, 2012 January 31, 2012 35.9375¢
Series I January 10, 2012 January 31, 2012 37.50¢
Series K January 10, 2012 January 31, 2012 30.9375¢
Series L January 10, 2012 January 31, 2012 31.875¢
Series M January 10, 2012 January 31, 2012 37.50¢
Series O January 10, 2012 January 31, 2012 36.25¢
Series P January 10, 2012 January 31, 2012 27.50¢

DIVIDEND ON COMMON SHARES
The Board of Directors also declared a quarterly dividend of 35 cents per share on the Corporation's common shares payable February 1, 2012 to shareholders of record December 30, 2011.

For purposes of the Income Tax Act (Canada) and any similar provincial legislation, all of the above dividends on the Corporation's preferred and common shares are eligible dividends.

Forward-Looking Statements
Certain statements in this News Release, other than statements of historical fact, are forward-looking statements based on certain assumptions and reflect the Corporation's current expectations, or with respect to disclosure regarding the Corporation's public subsidiaries, reflects such subsidiaries' disclosed current expectations. Forward-looking statements are provided for the purposes of assisting the reader in understanding the Corporation's financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of the Corporation and its subsidiaries, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipates", "plans", "believes", "estimates", "seeks", "intends", "targets", "projects", "forecasts" or negative versions thereof and other similar expressions, or future or conditional verbs such as "may", "will", "should", "would" and "could".

By its nature, this information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond the Corporation's and its subsidiaries' control, affect the operations, performance and results of the Corporation and its subsidiaries and their businesses, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, management of market liquidity and funding risks, changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates), the effect of applying future accounting changes, business competition, operational and reputational risks, technological change, changes in government regulation and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, the Corporation's and its subsidiaries' ability to complete strategic transactions, integrate acquisitions and implement other growth strategies, and the Corporation's and its subsidiaries' success in anticipating and managing the foregoing factors. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including that the foregoing list of factors, collectively, are not expected to have a material impact on the Corporation and its subsidiaries. While the Corporation considers these assumptions to be reasonable based on information currently available to management, they may prove to be incorrect.

Other than as specifically required by applicable Canadian law, the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.

Additional information about the risks and uncertainties of the Corporation's business and material factors or assumptions on which information contained in forward-looking statements is based is provided in its disclosure materials, including its most recent Management's Discussion and Analysis and Annual Information Form, filed with the securities regulatory authorities in Canada, available at www.sedar.com.

Non-IFRS Financial Measures
In analyzing the financial results of the Corporation and consistent with the presentation in previous years, net earnings are subdivided into the following components:

  • operating earnings; and
  • other items, which include the after-tax impact of any item that management considers to be of a non-recurring nature or that could make the period-over-period comparison of results from operations less meaningful, and also include the Corporation's share of any such item presented in a comparable manner by Lifeco or IGM.

Management has used these financial measures for many years in its presentation and analysis of the financial performance of Power Financial, and believes that they provide additional meaningful information to readers in their analysis of the results of the Corporation.

Operating earnings and operating earnings per share are non-IFRS financial measures that do not have a standard meaning and may not be comparable to similar measures used by other entities.

POWER FINANCIAL CORPORATION          
           
CONDENSED CONSOLIDATED BALANCE SHEETS          
(unaudited)
[in millions of Canadian dollars]
September 30,
2011
  December 31,
2010
  January 1,
2010
Assets          
Cash and cash equivalents 2,973   3,656   4,855
Investments          
  Bonds 79,714   73,582   67,388
  Mortgages and other loans 20,947   20,209   20,613
  Shares 6,218   6,415   6,392
  Investment properties 3,238   2,959   2,615
  110,117   103,165   97,008
Loans to policyholders 7,144   6,827   6,957
Funds held by ceding insurers 10,118   9,856   10,984
Reinsurance assets 2,220   2,533   2,800
Investment in associates 2,135   2,448   2,829
Deferred tax assets 1,269   1,249   1,300
Other assets 7,211   7,179   7,065
Assets held for sale 898   -   -
Intangible assets 4,311   4,231   4,359
Goodwill 8,771   8,713   8,655
Segregated funds for the risk of unit holders 94,053   94,827   87,495
Total assets 251,220   244,684   234,307
           
Liabilities          
Insurance contract liabilities 114,070   107,367   104,988
Investment contract liabilities 784   791   841
Deposits and certificates 149   835   907
Funds held under reinsurance contracts 177   149   331
Obligation to securitization entities 3,554   3,505   3,310
Debentures and other borrowings 5,887   6,313   5,931
Capital trust securities and debentures 531   535   540
Preferred shares of the Corporation -   -   300
Preferred shares of subsidiaries -   -   199
Deferred tax liabilities 1,126   1,136   1,018
Other liabilities 7,782   7,636   6,967
Liabilities held for sale 659   -   -
Insurance and investment contracts on account of unit holders 94,053   94,827   87,495
Total liabilities 228,772   223,094   212,827
           
Equity          
Stated capital          
  Perpetual preferred shares 2,005   2,005   1,725
  Common shares 639   636   605
Retained earnings 10,478   10,005   9,546
Reserves 190   188   969
Total shareholders' equity 13,312   12,834   12,845
Non-controlling interests 9,136   8,756   8,635
Total equity 22,448   21,590   21,480
Total liabilities and equity 251,220   244,684   234,307



CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
  Three months ended September 30   Nine months ended September 30
(unaudited)
[in millions of Canadian dollars, except per share amounts]
2011   2010   2011   2010
Revenues              
Premium income              
  Gross premiums written 5,059   4,956   14,980   15,091
  Ceded premiums (667)   (643)   (2,021)   (1,953)
Total net premiums 4,392   4,313   12,959   13,138
Net investment income              
  Regular net investment income 1,338   1,496   4,208   4,265
  Change in fair value 2,091   2,641   2,615   5,387
  3,429   4,137   6,823   9,652
Fee income 1,305   1,261   4,047   3,854
Total revenues 9,126   9,711   23,829   26,644
               
Expenses              
Policyholder benefits 3,704   3,557   11,484   11,305
Policyholder dividends and experience refunds 385   382   1,115   1,116
Change in insurance and investment contract liabilities 2,737   3,418   4,104   7,226
  6,826   7,357   16,703   19,647
Commissions 564   529   1,742   1,623
Operating expenses 861   1,219   2,587   2,971
Financing charges 100   107   309   325
Total expenses 8,351   9,212   21,341   24,566
  775   499   2,488   2,078
Share of earnings (losses) of investment in associates (97)   59   (32)   116
Earnings before income taxes 678   558   2,456   2,194
Income taxes 116   73   477   412
Net earnings before non-controlling interests -
continuing operations
562   485   1,979   1,782
Net earnings before non-controlling interests -
discontinued operations        
31   -   33   -
Net earnings before non-controlling interests 593   485   2,012   1,782
Attributable to non-controlling interests (255)   (164)   (745)   (630)
Net earnings attributable to shareholders 338   321   1,267   1,152
Perpetual preferred share dividends (26)   (27)   (78)   (73)
Net earnings attributable to common shareholders 312   294   1,189   1,079
               
Earnings per common share              
  Net earnings attributable to common shareholders              
    - Basic 0.44   0.42   1.68   1.53
    - Diluted 0.44   0.41   1.66   1.52
               
  Net earnings from continuing operations to common shareholders              
    - Basic 0.41   0.42   1.65   1.53
    - Diluted 0.41   0.41   1.63   1.52
               

SEGMENTED INFORMATION
                   
INFORMATION ON PROFIT MEASURE
Three months ended September 30, 2011 Lifeco   IGM   Parjointco   Other   Total
Revenues                  
Premium income 4,392   -   -   -   4,392
Net investment income                  
  Regular net investment income 1,330   34   -   (26)   1,338
  Change in fair value 2,080   11   -   -   2,091
  3,410   45   -   (26)   3,429
Fee income 704   628   -   (27)   1,305
  8,506   673   -   (53)   9,126
Expenses                  
Policyholder benefits, dividends and experience refunds, and change in
insurance and investment contract liabilities
6,826   -   -   -   6,826
Commissions 372   219   -   (27)   564
Operating expenses 693   156   -   12   861
Financing charges 72   24   -   4   100
  7,963   399   -   (11)   8,351
  543   274   -   (42)   775
Share of operating earnings of investment in associates -   -   36   -   36
Share of non-operating earnings of investment in associates -   -   (133)   -   (133)
Earnings before income taxes 543   274   (97)   (42)   678
Income taxes 54   62   -   -   116
Contribution to net earnings before non-controlling interests -
continuing operations
489   212   (97)   (42)   562
Contribution to net earnings before non-controlling interests -
discontinued operations
-   31   -   -   31
Contribution to net earnings before non-controlling interests 489   243   (97)   (42)   593
Attributable to non-controlling interests (176)   (106)   -   27   (255)
Contribution to net earnings attributable to common shareholders 313   137   (97)   (15)   338
                   
Three months ended September 30, 2010 Lifeco   IGM   Parjointco   Other   Total
Revenues                  
Premium income 4,313   -   -   -   4,313
Net investment income                  
  Regular net investment income 1,493   16   -   (13)   1,496
  Change in fair value 2,629   12   -   -   2,641
  4,122   28   -   (13)   4,137
Fee income 681   604   -   (24)   1,261
  9,116   632   -   (37)   9,711
Expenses                  
Policyholder benefits, dividends and experience refunds, and change in
insurance and investment contract liabilities
7,357   -   -   -   7,357
Commissions 346   207   -   (24)   529
Operating expenses 1,057   149   -   13   1,219
Financing charges 71   28   -   8   107
  8,831   384   -   (3)   9,212
  285   248   -   (34)   499
Share of operating earnings of investment in associates -   -   55   -   55
Share of non-operating earnings of investment in associates -   -   4   -   4
Earnings before income taxes 285   248   59   (34)   558
Income taxes -   73   -   -   73
Contribution to net earnings before non-controlling interests -
continuing operations
285   175   59   (34)   485
Contribution to net earnings before non-controlling interests -
discontinued operations
-   -   -   -   -
Contribution to net earnings before non-controlling interests 285   175   59   (34)   485
Attributable to non-controlling interests (101)   (76)   -   13   (164)
Contribution to net earnings attributable to common shareholders 184   99   59   (21)   321
                   
Nine months ended September 30, 2011 Lifeco   IGM   Parjointco   Other   Total
Revenues                  
Premium income 12,959   -   -   -   12,959
Net investment income                  
  Regular net investment income 4,173   106   -   (71)   4,208
  Change in fair value 2,600   15   -   -   2,615
  6,773   121   -   (71)   6,823
Fee income 2,163   1,963   -   (79)   4,047
  21,895   2,084   -   (150)   23,829
Expenses                  
Policyholder benefits, dividends and experience refunds, and change in
insurance and investment contract liabilities
16,703   -   -   -   16,703
Commissions 1,139   682   -   (79)   1,742
Operating expenses 2,068   482   -   37   2,587
Financing charges 216   80   -   13   309
  20,126   1,244   -   (29)   21,341
  1,769   840   -   (121)   2,488
Share of operating earnings of investment in associates -   -   103   -   103
Share of non-operating earnings of investment in associates -   -   (135)   -   (135)
Earnings before income taxes 1,769   840   (32)   (121)   2,456
Income taxes 284   197   -   (4)   477
Contribution to net earnings before non-controlling interests -
continuing operations
1,485   643   (32)   (117)   1,979
Contribution to net earnings before non-controlling interests -
discontinued operations
-   33   -   -   33
Contribution to net earnings before non-controlling interests 1,485   676   (32)   (117)   2,012
Attributable to non-controlling interests (528)   (293)   -   76   (745)
Contribution to net earnings attributable to common shareholders 957   383   (32)   (41)   1,267
                   
Nine months ended September 30, 2010 Lifeco   IGM   Parjointco   Other   Total
Revenues                  
Premium income 13,138   -   -   -   13,138
Net investment income                  
  Regular net investment income 4,245   75   -   (55)   4,265
  Change in fair value 5,365   22   -   -   5,387
  9,610   97   -   (55)   9,652
Fee income 2,108   1,820   -   (74)   3,854
  24,856   1,917   -   (129)   26,644
Expenses                  
Policyholder benefits, dividends and experience refunds, and change in
insurance and investment contract liabilities
19,647   -   -   -   19,647
Commissions 1,064   633   -   (74)   1,623
Operating expenses 2,480   452   -   39   2,971
Financing charges 215   83   -   27   325
  23,406   1,168   -   (8)   24,566
  1,450   749   -   (121)   2,078
Share of operating earnings of investment in associates -   -   112   -   112
Share of non-operating earnings of investment in associates -   -   4   -   4
Earnings before income taxes 1,450   749   116   (121)   2,194
Income taxes 215   198   -   (1)   412
Contribution to net earnings before non-controlling interests -
continuing operations
1,235   551   116   (120)   1,782
Contribution to net earnings before non-controlling interests -
discontinued operations
-   -   -   -   -
Contribution to net earnings before non-controlling interests 1,235   551   116   (120)   1,782
Attributable to non-controlling interests (444)   (243)   -   57   (630)
Contribution to net earnings attributable to common shareholders 791   308   116   (63)   1,152

 

 

 

SOURCE POWER FINANCIAL CORPORATION

For further information:

Attachments:  Financial Information
 
For further information, please contact:  Mr. Edward Johnson
Senior Vice-President,
General Counsel and Secretary
514-286-7400

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POWER FINANCIAL CORPORATION

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