Financial results for 2006 - Power Corporation of Canada



    Readers are referred to the Forward-looking Information and Non-GAAP
    Financial Measures at the end of this release.

    MONTREAL, March 21 /CNW Telbec/ - Power Corporation of Canada's operating
earnings for the year ended December 31, 2006 were $1,166 million or $2.49 per
participating share, compared with $1,071 million or $2.32 per participating
share in 2005, an increase of 7.6% on a per share basis.
    Growth in operating earnings reflects an increase in the contribution
from subsidiaries, as well as an increase in results from corporate activities
due to higher income from investments.
    Other income was $227 million or $0.51 per participating share in 2006,
and includes an amount of $236 million or $0.52 per share representing the
impact of the gain recorded in the third quarter in connection with the sale
by Groupe Bruxelles Lambert of its interest in Bertelsmann. In 2005, other
items not included in operating earnings were a net charge of $18 million, or
$0.04 per share.
    Power Corporation's net earnings for 2006 were $1,393 million or $3.00
per participating share, compared with $1,053 million or $2.28 per share in
2005.

    FOURTH-QUARTER RESULTS
    ----------------------

    For the three months ended December 31, 2006, Power Corporation's
operating earnings were $300 million or $0.64 per participating share,
compared with $290 million or $0.62 per share in 2005, an increase of 3.0% on
a per share basis.
    Other income in the fourth quarter of 2006 was a charge of $11 million or
$0.02 per participating share. In the fourth quarter of 2005, other items not
included in operating earnings were a net charge of $5 million or $0.01 per
share.
    Net earnings for the fourth quarter of 2006 were $289 million or $0.62
per participating share, compared with $285 million or $0.61 per share for the
same period in 2005.

    POWER FINANCIAL CORPORATION'S RESULTS
    -------------------------------------

    Power Financial Corporation's operating earnings for the year ended
December 31, 2006 were $1,802 million or $2.46 per share, compared with  
$1,694 million or $2.33 per share in 2005. This represents a 5.7 per cent
increase on a per share basis (11.6 per cent based upon Lifeco's net income on
a constant currency basis).
    The increase in operating earnings in 2006 reflects growth in the
contribution from Power Financial's subsidiaries and affiliate.
    Other items not included in operating earnings were $353 million or $0.50
per share in 2006, including primarily an amount of $356 million or $0.50 per
share, representing the impact of the gain recorded in the third quarter in
connection with the sale by Groupe Bruxelles Lambert of its interest in
Bertelsmann. In 2005, other items not included in operating earnings were a
net charge of $33 million, or $0.05 per share, and were composed primarily of
Power Financial's share, in the amount of $31 million or $0.05 per share, of
provisions for expected losses arising from hurricane damage recorded by
Lifeco.
    As a result, net earnings were $2,155 million or $2.96 per share in 2006,
compared with $1,661 million or $2.28 per share in 2005.
    Power Financial Corporation's operating earnings for the three months
ended December 31, 2006 were $472 million or $0.65 per share, compared with
$450 million or $0.61 per share in 2005.
    Other income in the fourth quarter of 2006 was $2 million. In the fourth
quarter of 2005, other items not included in operating earnings were a charge
of $9 million or $0.01 per share.
    As a result, net earnings for the fourth quarter of 2006 were
$474 million or $0.65 per share, compared with $441 million or $0.60 per share
for the same period in 2005.

    Forward-looking Information
    ---------------------------

    Certain statements in this press release, other than statements of
historical fact, are forward-looking statements based on certain assumptions
and reflect Power's or its subsidiaries' and affiliates' current expectations.
These statements may include without limitation, statements regarding the
operations, business, financial condition, priorities, ongoing objectives,
strategies and outlook of Power or its subsidiaries and affiliates 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", "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".
    This information is based upon certain material factors or assumptions
that were applied in drawing a conclusion or making a forecast or projection
as reflected in the forward-looking statements, including the perception of
historical trends, current conditions and expected future developments as well
as other factors that are believed to be appropriate in the circumstances.
    Actual results could differ materially from those projected and should
not be relied upon as a prediction of future events. By its nature, this
information is subject to inherent risks and uncertainties that may be general
or specific. A variety of material factors, many of which are beyond Power's
or its subsidiaries' and affiliates' control, affect the operations,
performance and results of Power or its subsidiaries and affiliates and their
business, 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,
technological change, changes in government regulation and legislation,
changes in tax laws, unexpected judicial or regulatory proceedings,
catastrophic events, Power's or its subsidiaries' or affiliates' ability to
complete strategic transactions and integrate acquisitions and Power's or its
subsidiaries' and its affiliates' success in anticipating and managing the
foregoing risks.
    The reader is cautioned that the foregoing list of factors is not
exhaustive of the factors that may affect any of Power's or its subsidiaries'
and affiliates' forward-looking statements. The reader is also cautioned to
consider these and other factors carefully and not to put undue reliance on
forward-looking statements.
    Other than as specifically required by law, Power 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 otherwise.
    Additional information about the risks and uncertainties of Power's
business 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-GAAP Financial Measures
    ----------------------------
    
    In analysing 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 includes, but is not limited to, the impact on the
      Corporation's net earnings of "Other Income" as presented in the
      Corporation's Consolidated Statements of Earnings (net of income taxes
      and non-controlling interests, if any).

    Management has used these performance measures for many years in its
presentation and analysis of the financial performance of Power Corporation,
and believes that they provide additional meaningful information to readers in
their analysis of the results of the Corporation. "Operating earnings"
excludes 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 excludes the Corporation's
share of any such item presented in a comparable manner by its subsidiaries.
Operating earnings and operating earnings per share are non-GAAP financial
measures that do not have a standard meaning and may not be comparable to
similar measures used by other entities.

    Attachments: Financial Information



                         Power Corporation of Canada

                         CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
                                                        December    December
                                                        31, 2006    31, 2005
    (in millions of dollars)                          (unaudited)
    -------------------------------------------------------------------------
    Assets
    Cash and cash equivalents                              5,785       5,332
    -------------------------------------------------------------------------
    Investments
      Shares                                               5,598       4,867
      Bonds                                               65,246      59,298
      Mortgages and other loans                           15,823      15,118
      Loans to policyholders                               6,776       6,646
      Real estate                                          2,218       1,844
    -------------------------------------------------------------------------
                                                          95,661      87,773
    Funds held by ceding insurers                         12,371       2,556
    Investment in affiliates, at equity                    2,182       1,554
    Intangible assets                                      2,745       2,423
    Goodwill                                               8,454       8,260
    Future income taxes                                      406         476
    Other assets                                           5,083       4,625
    -------------------------------------------------------------------------
                                                         132,687     112,999
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Policy liabilities
      Actuarial liabilities                               89,363      71,263
      Other                                                4,488       4,023
    Deposits and certificates                                778         693
    Funds held under reinsurance contracts                 1,822       4,221
    Debentures and other borrowings (Note 2)               3,402       3,427
    Preferred shares of subsidiaries                       1,625       1,656
    Capital trust securities and debentures (Note 3)         646         648
    Future income taxes                                      909         865
    Other liabilities                                      9,070       8,704
    -------------------------------------------------------------------------
                                                         112,103      95,500
    -------------------------------------------------------------------------
    Non-controlling interests                             11,983      10,240
    -------------------------------------------------------------------------

    Shareholders' Equity
    Stated capital (Note 4)
      Non-participating shares                               795         795
      Participating shares                                   442         417
    Contributed surplus                                       59          37
    Retained earnings                                      7,480       6,478
    Foreign currency translation adjustments                (175)       (468)
    -------------------------------------------------------------------------
                                                           8,601       7,259
    -------------------------------------------------------------------------
                                                         132,687     112,999
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                     CONSOLIDATED STATEMENTS OF EARNINGS

    -------------------------------------------------------------------------
    (unaudited) (in millions      Three months ended     For the years ended
     of dollars, except per              December 31             December 31
     share amounts)                 2006        2005        2006        2005
    -------------------------------------------------------------------------
    Revenues
      Premium income               6,253       4,528      18,724      16,058
      Net investment income        1,555       1,437       6,151       5,574
      Fees and media income        1,434       1,271       5,429       4,929
    -------------------------------------------------------------------------
                                   9,242       7,236      30,304      26,561
    -------------------------------------------------------------------------

    Expenses
      Paid or credited to
       policyholders and
       beneficiaries including
       policyholder dividends
       and experience refunds      6,677       4,888      20,508      17,435
      Commissions                    607         502       2,184       1,956
      Operating expenses             966         893       3,610       3,524
      Financing charges (Note 5)      86          78         344         336
    -------------------------------------------------------------------------
                                   8,336       6,361      26,646      23,251
    -------------------------------------------------------------------------
                                     906         875       3,658       3,310
    Share of earnings of
     affiliates                       26          37         110         110
    Other income (charges),
     net (Note 6)                    (10)          2         338          (7)
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-controlling
     interests                       922         914       4,106       3,413
    Income taxes                     212         244         940         902
    Non-controlling interests        421         385       1,773       1,458
    -------------------------------------------------------------------------
    Net earnings                     289         285       1,393       1,053
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per participating
     share (Note 7)
      Basic                         0.62        0.61        3.00        2.28
    -------------------------------------------------------------------------
      Diluted                       0.61        0.60        2.97        2.25
    -------------------------------------------------------------------------


                CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

    -------------------------------------------------------------------------
    For the years ended December 31
    (unaudited) (in millions of dollars)                    2006        2005
    -------------------------------------------------------------------------
    Retained earnings, beginning of year                   6,478       5,761
    Add
      Net earnings                                         1,393       1,053
    -------------------------------------------------------------------------
                                                           7,871       6,814
    -------------------------------------------------------------------------
    Deduct
      Dividends
        Non-participating shares                              42          32
        Participating shares                                 343         292
      Other                                                    6          12
    -------------------------------------------------------------------------
                                                             391         336
    -------------------------------------------------------------------------
    Retained earnings, end of year                         7,480       6,478
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    -------------------------------------------------------------------------
                                  Three months ended     For the years ended
    (unaudited)                          December 31             December 31
    (in millions dollars)           2006        2005        2006        2005
    -------------------------------------------------------------------------
    Operating activities
      Net earnings                   289         285       1,393       1,053
      Non-cash charges (credits)
        Increase (decrease) in
         policy liabilities          (15)      1,404       1,560       2,969
        Decrease (increase) in
         funds held by ceding
         insurers                    (85)       (576)        386        (219)
        Increase (decrease)
         in funds held under
         reinsurance contracts       480        (554)       (141)       (543)
        Amortization and
         depreciation                 32          27         115         112
        Future income taxes           (8)         89          49         148
        Non-controlling
         interests                   421         385       1,773       1,458
        Other                         59          18        (426)        445
      Change in non-cash
       working capital              (246)       (371)       (203)       (839)
    -------------------------------------------------------------------------
                                     927         707       4,506       4,584
    -------------------------------------------------------------------------
    Financing activities
      Dividends paid
        By subsidiaries to
         non-controlling
         interests                  (189)       (159)       (716)       (603)
        Non-participating shares     (10)         (7)        (41)        (29)
        Participating shares         (89)        (76)       (343)       (292)
    -------------------------------------------------------------------------
                                    (288)       (242)     (1,100)       (924)
      Issue of subordinate
       voting shares (Note 4)          -           -          25          28
      Issue of non-participating
       shares                          -         250           -         250
      Issue of common shares
       by subsidiaries                 7           5          38          29
      Repurchase of common
       shares by subsidiaries        (11)        (15)        (67)        (80)
      Issue of preferred shares
       by subsidiaries                 -         250         500         550
      Redemption of preferred
       shares by a subsidiary         (1)        (10)        (31)        (10)
      Issue of debentures and
       other borrowings (Note 2)      48           -         384           -
      Repayment of debentures
       and other borrowings            -           -        (400)       (186)
      Other                           64          (3)         59         (34)
    -------------------------------------------------------------------------
                                    (181)        235        (592)       (377)
    -------------------------------------------------------------------------
    Investment activities
      Bond sales and maturities    9,479       6,076      30,162      24,742
      Mortgage loan repayments       713        (133)      2,147       2,045
      Sales of shares                380         542       1,545       1,672
      Real estate sales                7         126         181         200
      Proceeds from
       securitizations (Note 9)      283          63       1,302         251
      Change in loans to
       policyholders                 221         (88)        (18)       (272)
      Change in repurchase
       agreements                    (38)         (3)         94         224
      Acquisition of intangible
       assets (Note 11)                -           -        (140)          -
      Acquisition of
       businesses (Note 11)        1,378          22       1,378          22
      Investment in bonds        (11,545)     (6,036)    (33,636)    (26,010)
      Investment in mortgage
       loans                        (899)          5      (4,062)     (2,639)
      Investment in shares          (784)       (980)     (1,976)     (2,315)
      Investment in real estate     (116)       (177)       (631)       (588)
      Other                          (66)        (33)        (87)        (63)
    -------------------------------------------------------------------------
                                    (987)       (616)     (3,741)     (2,731)
    -------------------------------------------------------------------------
    Effect of changes in
     exchange rates on
     cash and cash equivalents       209         (20)        280        (286)
    Increase in cash and
     cash equivalents                (32)        306         453       1,190
    Cash and cash equivalents,
     beginning of period           5,817       5,026       5,332       4,142
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                 5,785       5,332       5,785       5,332
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                         Power Corporation of Canada

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2006
       ALL TABULAR AMOUNTS ARE IN MILLIONS OF CANADIAN DOLLARS UNLESS
                              OTHERWISE NOTED.


                   NOTE 1 SIGNIFICANT ACCOUNTING POLICIES

    The interim unaudited consolidated financial statements of Power
    Corporation of Canada at December 31, 2006 have been prepared in
    accordance with generally accepted accounting principles in Canada
    (GAAP). These interim unaudited consolidated financial statements should
    be read in conjunction with the audited consolidated financial statements
    and notes thereto for the year ended December 31, 2005. These interim
    unaudited consolidated financial statements do not include all
    disclosures required for annual financial statements.

    The interim unaudited consolidated statements have been prepared using
    the same accounting policies described in Note 1 of the Corporation's
    consolidated financial statements for the year ended December 31, 2005.

                             COMPARATIVE FIGURES

    Certain of the 2005 amounts presented for comparative purposes have been
    reclassified to conform with the presentation adopted in the current
    year.

                   NOTE 2 DEBENTURES AND OTHER BORROWINGS

    -------------------------------------------------------------------------
                                                        December    December
                                                        31, 2006    31, 2005
    -------------------------------------------------------------------------
    Power Financial Corporation
      7.65% debentures, repaid January 5, 2006                 -         150
      6.90% debentures, due March 11, 2033                   250         250
    IGM Financial Inc.
      6.75% debentures 2001 Series, due May 9, 2011          450         450
      6.58% debentures 2003 Series, due March 7, 2018        150         150
      6.65% debentures 1997 Series, due December 13, 2027    125         125
      7.45% debentures 2001 Series, due May 9, 2031          150         150
      7.00% debentures 2002 Series, due December 31, 2032    175         175
      7.11% debentures 2003 Series, due March 7, 2033        150         150
    Great-West Lifeco Inc.
      Subordinated debentures due September 19, 2011
       bearing a fixed rate of 8% until 2006 and,
       thereafter, at a rate equal to the Canadian
       90-day Bankers' Acceptance rate plus 1%,
       unsecured, repaid September 19, 2006                     -        256
      Subordinated debentures due December 11, 2013
       bearing a fixed rate of 5.80% until 2008 and,
       thereafter, at a rate equal to the Canadian
       90-day Bankers' Acceptance rate plus 1%, unsecured     204        206
      6.75% debentures due August 10, 2015, unsecured         200        200
      6.14% debentures due March 21, 2018, unsecured          200        200
      6.40% subordinated debentures due December 11, 2028     101        101
      6.74% debentures due November 24, 2031, unsecured       200        200
      6.67% debentures due March 21, 2033, unsecured          400        400
      6.625% deferrable debentures due November 15, 2034,
       unsecured (US$175 million)                             205        205
      7.153% subordinated debentures due May 16, 2046
      unsecured (US$300 million)                              351          -
      Other notes payable with interest rate of 8.0%            8          9
    Other
      Term loan at prime plus a premium varying between
       1.0% and 1.5% or Banker's Acceptance rate plus
       a premium varying between 2.0% and 2.5% due May 13,
       2013 (effective rate of 8.22% at December 31, 2006,
       8.6% at December 31, 2005)                              50         50
       Bank loan at prime plus a premium, varying between
        0.375% to 2.5% due May 13, 2010 (effective rate
        6.08% at December 31, 2006)                            33          -
    -------------------------------------------------------------------------
                                                            3,402      3,427
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    During the second quarter of 2006, Great-West Lifeco Inc. (Lifeco) issued
    $351 million (US$300 million) in Fixed/Adjustable Rate Enhanced Capital
    Advantaged Subordinated Debentures through its wholly owned subsidiary,
    Great-West Life & Annuity Capital, LP II. The subordinated debentures are
    due May 16, 2046 and bear an annual interest rate of 7.153% until May 16,
    2016. After May 16, 2016, the subordinated debentures will bear an
    interest rate of 2.538% plus the 3-month LIBOR rate. The subordinated
    debentures are redeemable at the principal amount plus any accrued and
    unpaid interest after May 16, 2016.

               NOTE 3 CAPITAL TRUST SECURITIES AND DEBENTURES

    -------------------------------------------------------------------------
                                                        December    December
                                                        31, 2006    31, 2005
    -------------------------------------------------------------------------
    Capital trust debentures
      5.995% senior debentures due December 31, 2052,
       unsecured (GWLCT)                                     350         350
      6.679% senior debentures due June 30, 2052,
       unsecured (CLCT)                                      300         300
      7.529% senior debentures due June 30, 2052,
       unsecured (CLCT)                                      150         150
    -------------------------------------------------------------------------
                                                             800         800
    Acquisition-related fair market value adjustment          31          34
    Trust securities held by the consolidated group as
     temporary investments                                  (185)       (186)
    -------------------------------------------------------------------------
                                                             646         648
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Great-West Life Capital Trust (GWLCT), a trust established by The Great-
    West Life Assurance Company (Great-West Life), had issued $350 million of
    capital trust securities, the proceeds of which were used by GWLCT to
    purchase Great-West Life senior debentures in the amount of $350 million,
    and Canada Life Capital Trust (CLCT), a trust established by The Canada
    Life Assurance Company (Canada Life), had issued $450 million of capital
    trust securities, the proceeds of which were used by CLCT to purchase
    Canada Life senior debentures in the amount of $450 million.
    Distributions and interest on the capital trust securities are classified
    as financing charges on the Consolidated Statements of Earnings
    (see Note 5).

                 NOTE 4 CAPITAL STOCK AND STOCK OPTION PLAN
                               STATED CAPITAL

    -------------------------------------------------------------------------
                                                        December    December
                                                        31, 2006    31, 2005
    -------------------------------------------------------------------------
    Non-participating shares
    Cumulative Redeemable First Preferred Shares,
     1986 Series
      Authorized - Unlimited number of shares
      Issued - 899,878 shares                                 45          45
    Series A First Preferred Shares
      Authorized and issued - 6,000,000 shares               150         150
    Series B First Preferred Shares
      Authorized and issued - 8,000,000 shares               200         200
    Series C First Preferred Shares
      Authorized and issued - 6,000,000 shares               150         150
    Series D First Preferred Shares
      Authorized and issued - 10,000,000 shares              250         250
    -------------------------------------------------------------------------
                                                             795         795
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Participating shares
    Participating Preferred Shares
      Authorized - Unlimited number of shares
      Issued - 48,854,772 shares                              27          27
    Subordinate Voting Shares
      Authorized - Unlimited number of shares
      Issued - 402,606,144 (2005 - 400,264,694) shares       415         390
    -------------------------------------------------------------------------
                                                             442         417
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          STOCK-BASED COMPENSATION

    During the second quarter of 2006, 1,342,075 options were granted under
    the Corporation's stock option plan (no options were granted in the
    first, third and fourth quarters of 2006).

    During the fourth quarter of 2005, 108,400 options were granted under the
    Corporation's stock option plan and during the first quarter of 2005,
    1,192,500 options were granted (no options were granted in the second and
    third quarters of 2005).

    The fair value of these options was estimated using the Black-Scholes
    option-pricing model with the following assumptions:

    -------------------------------------------------------------------------
                                                            2006        2005
    -------------------------------------------------------------------------
    Dividend yield                                           2.3%        1.9%
    Expected volatility                                     19.0%       24.0%
    Risk-free interest rate                                  4.3%        4.1%
    Expected life (years)                                      7           7
    Fair value per stock option ($/option)                 $7.29       $8.64
    -------------------------------------------------------------------------


    Compensation expense relating to stock options granted by the Corporation
    and its subsidiaries amounted to $8 million in the fourth quarter of 2006
    ($5 million in 2005) and $33 million for the year ended December 31, 2006
    ($26 million in 2005).

    Options were outstanding at December 31, 2006 to purchase, until May 16,
    2016, up to an aggregate of 12,194,835 subordinate voting shares at
    various prices from $11.3625 to $33.285 per share. During the three
    months ended December 31, 2006, 5,000 subordinate voting shares (505 in
    2005) were issued under the Corporation's plan for an aggregate
    consideration of $0 million ($0 million in 2005). During the year
    ended December 31, 2006, 2,341,450 subordinate voting shares
    (4,173,630 in 2005) were issued for an aggregate consideration of
    $25 million ($28 million in 2005).

                          NOTE 5 FINANCING CHARGES

    Financing charges include interest on debentures and other borrowings,
    distributions and interest on capital trust securities and debentures,
    and dividends on preferred shares classified as liabilities.

    -------------------------------------------------------------------------
                                  Three months ended     For the years ended
                                         December 31             December 31
                                    2006        2005        2006        2005
    -------------------------------------------------------------------------
    Interest on debentures and
     other borrowings                 57          49         224         223
    Preferred share dividends         18          19          73          75
    Interest on capital trust
     debentures                       12          12          49          49
    Distributions on capital trust
     securities held by the
     consolidated group as
     temporary investments            (3)         (3)        (12)        (12)
    Other                              2           1          10           1
    -------------------------------------------------------------------------
                                      86          78         344         336
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                     NOTE 6 OTHER INCOME (CHARGES), NET

    -------------------------------------------------------------------------
                                  Three months ended     For the years ended
                                         December 31             December 31
                                    2006        2005        2006        2005
    -------------------------------------------------------------------------
    Share of Pargesa's
     non-operating earnings           (2)          -         341          11
    Restructuring costs - Lifeco       -           -           -         (22)
    Other                             (8)          2          (3)          4
    -------------------------------------------------------------------------
                                     (10)          2         338          (7)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The share of Pargesa's non-operating earnings includes an amount of
    $356 million, which represents Power Financial Corporation's share of the
    gain resulting from the disposal by Groupe Bruxelles Lambert of its 25.1%
    equity interest in Bertelsmann AG.


                          NOTE 7 EARNINGS PER SHARE

    The following is a reconciliation of the numerators and the denominators
    of the basic and diluted earnings per participating share computations:

    -------------------------------------------------------------------------
                                  Three months ended     For the years ended
                                         December 31             December 31
                                    2006        2005        2006        2005
    -------------------------------------------------------------------------
    Net earnings                     289         285       1,393       1,053
    Dividends on non-participating
     shares                          (11)        (10)        (42)        (32)
    -------------------------------------------------------------------------
    Net earnings available to
     participating shareholders      278         275       1,351       1,021
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted number of
     participating shares
     outstanding (millions)
      - Basic                      451.5       449.1       450.6       448.0
    Exercise of stock options       12.2        12.0        12.2        12.0
    Shares assumed to be
     repurchased with proceeds
     from exercise of stock
     options                        (7.0)       (6.1)       (7.5)       (6.0)
    -------------------------------------------------------------------------
    Weighted number of
     participating shares
     outstanding (millions)
      - Diluted                    456.7       455.0       455.3       454.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


           NOTE 8 PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS

    The total benefit costs included in operating expenses are as follows:

    -------------------------------------------------------------------------
                                  Three months ended     For the years ended
                                         December 31             December 31
                                    2006        2005        2006        2005
    -------------------------------------------------------------------------
    Pension plans                     34          20         102          83
    Other post-retirement benefits     5           8          27          47
    -------------------------------------------------------------------------
                                      39          28         129         130
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                           NOTE 9 SECURITIZATIONS

    During the fourth quarter of 2006, IGM Financial Inc. (IGM) securitized
    $285 million (2005 - $63 million) of residential mortgages through sales
    to commercial paper conduits that in turn issued securities to investors
    and received net cash proceeds of $283 million (2005 - $63 million).
    IGM's retained interest in the securitized loans was valued at
    $26 million (2005 - $10 million). A pre-tax gain on sale of $4 million
    (2005 - gain of $1 million) was recognized and reported in Net investment
    income in the Consolidated Statements of Earnings.

    During the twelve months ended December 31, 2006, IGM securitized
    $1,311 million (2005 - $252 million) of residential mortgages through
    sales to commercial paper conduits that in turn issued securities to
    investors and received net cash proceeds of $1,302 million (2005 -
    $251 million). IGM's retained interest in the securitized loans was
    valued at $43 million (2005 - $16 million). A pre-tax gain on sale of
    $5 million (2005 - gain of $4 million) was recognized and reported in Net
    investment income in the Consolidated Statements of Earnings.

                        NOTE 10 SEGMENTED INFORMATION

    Information on Profit Measure
    -------------------------------------------------------------------------
    Three months ended                               Par-
     December 31, 2006        Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income           6,253         -         -         -     6,253
      Net investment income    1,494        50         -        11     1,555
      Fees and media income      706       628         -       100     1,434
    -------------------------------------------------------------------------
                               8,453       678         -       111     9,242
    -------------------------------------------------------------------------
    Expenses
      Insurance claims         6,677         -         -         -     6,677
      Commissions                402       219         -       (14)      607
      Operating expenses         665       148         -       153       966
      Financing charges           50        22         -        14        86
    -------------------------------------------------------------------------
                               7,794       389         -       153     8,336
    -------------------------------------------------------------------------
                                 659       289         -       (42)      906
    Share of earnings
     of affiliates                 -         -        32        (6)       26
    Other income
     (charges), net                -         -        (2)       (8)      (10)
    -------------------------------------------------------------------------
    Earnings before the
     following:                  659       289        30       (56)      922
    Income taxes                 124        89         -        (1)      212
    Non-controlling interests    306       126        10       (21)      421
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    229        74        20       (34)      289
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Information on Profit Measure
    -------------------------------------------------------------------------
    Three months ended                               Par-
     December 31, 2005        Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income           4,528         -         -         -     4,528
      Net investment income    1,374        47         -        16     1,437
      Fees and media income      616       561         -        94     1,271
    -------------------------------------------------------------------------
                               6,518       608         -       110     7,236
    -------------------------------------------------------------------------
    Expenses
      Insurance claims         4,888         -         -         -     4,888
      Commissions                330       189         -       (17)      502
      Operating expenses         605       141         -       147       893
      Financing charges           41        22         -        15        78
    -------------------------------------------------------------------------
                               5,864       352         -       145     6,361
    -------------------------------------------------------------------------
                                 654       256         -       (35)      875
    Share of earnings
     of affiliates                 -         -        39        (2)       37
    Other income
     (charges), net                -         -         -         2         2
    -------------------------------------------------------------------------
    Earnings before the
     following:                  654       256        39       (35)      914
    Income taxes                 160        78         -         6       244
    Non-controlling interests    282       110        13       (20)      385
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    212        68        26       (21)      285
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Information on Profit Measure
    -------------------------------------------------------------------------
    For the year ended                               Par-
     December 31, 2006        Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income          18,724         -         -         -    18,724
      Net investment income    5,910       212         -        29     6,151
      Fees and media income    2,688     2,392         -       349     5,429
    -------------------------------------------------------------------------
                              27,322     2,604         -       378    30,304
    -------------------------------------------------------------------------
    Expenses
      Insurance claims        20,508         -         -         -    20,508
      Commissions              1,401       833         -       (50)    2,184
      Operating expenses       2,507       573         -       530     3,610
      Financing charges          202        88         -        54       344
    -------------------------------------------------------------------------
                              24,618     1,494         -       534    26,646
    -------------------------------------------------------------------------
                               2,704     1,110         -      (156)    3,658
    Share of earnings
     of affiliates                 -         -       126       (16)      110
    Other income
     (charges), net                -         -       341        (3)      338
    -------------------------------------------------------------------------
    Earnings before the
     following:                2,704     1,110       467      (175)    4,106
    Income taxes                 615       331         -        (6)      940
    Non-controlling interests  1,213       491       157       (88)    1,773
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    876       288       310       (81)    1,393
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Information on Profit Measure
    -------------------------------------------------------------------------
    For the year ended                               Par-
     December 31, 2005        Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income          16,058         -         -         -    16,058
      Net investment income    5,389       183         -         2     5,574
      Fees and media income    2,424     2,164         -       341     4,929
    -------------------------------------------------------------------------
                              23,871     2,347         -       343    26,561
    -------------------------------------------------------------------------
    Expenses
      Insurance claims        17,435         -         -         -    17,435
      Commissions              1,284       726         -       (54)    1,956
      Operating expenses       2,454       555         -       515     3,524
      Financing charges          187        90         -        59       336
    -------------------------------------------------------------------------
                              21,360     1,371         -       520    23,251
    -------------------------------------------------------------------------
                               2,511       976         -      (177)    3,310
    Share of earnings
     of affiliates                 -         -       121       (11)      110
    Other income
     (charges), net              (22)        -        11         4        (7)
    -------------------------------------------------------------------------
    Earnings before the
     following:                2,489       976       132      (184)    3,413
    Income taxes                 601       292         -         9       902
    Non-controlling
     interests                 1,074       430        44       (90)    1,458
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    814       254        88      (103)    1,053
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                            NOTE 11 ACQUISITIONS

    a) On April 24, 2006, Crown Life Insurance Company (Crown Life) served
       notice, pursuant to the terms of the 1999 acquisition of the majority
       of the insurance operations of Crown Life by Canada Life, commencing a
       process under which Canada Life may be required to acquire the common
       shares of Crown Life. This transaction is expected to close in the
       second quarter of 2007 and is not expected to have a material impact
       on the financial position of the Corporation.

    b) During the second quarter of 2006, Canada Life, through its wholly
       owned United Kingdom subsidiary, Canada Life Limited, reached an
       agreement to acquire the non-participating payout annuity business of
       The Equitable Life Assurance Society in the United Kingdom. Under the
       terms of the agreement, Canada Life Limited assumed this business on
       an indemnity reinsurance basis with an effective date of January 1,
       2006. The transfer closed on February 9, 2007. The transaction
       resulted in an increase in funds held by ceding insurers and a
       corresponding increase in policyholder liabilities of $10.2 billion
       ((pnds stlg)4.5 billion) on the Consolidated Balance Sheet at
       December 31, 2006.

    c) On September 22, 2006, Mackenzie Financial Corporation acquired the
       assets of Cundill Investment Research Ltd. and related entities
       (Cundill Group) for cash consideration, including transaction and
       other related costs. There is contingent consideration due if certain
       future revenue and assets under management targets are achieved and an
       amount has been placed in escrow. The total contingent consideration
       is not determinable at the present time. If additional consideration
       becomes payable, it will be recognized as an additional cost of the
       purchase.

       The acquisition has been accounted for by the purchase method and the
       results of the Cundill Group's operations have been included in the
       Consolidated Financial Statements from the date of acquisition.

       The purchase price has been allocated to intangible assets on a
       preliminary basis and will be completed as soon as Mackenzie Financial
       Corporation has gathered all the significant information considered
       necessary in order to finalize this allocation.

    d) On October 2, 2006, GWL&A acquired several parts of the full service-
       bundled, small and midsized 401(k) as well as some defined benefit
       plan business from Metropolitan Life Insurance Company and its
       affiliates (MetLife). The acquisition includes the associated
       dedicated distribution group, including wholesalers, relationship
       managers and sales associates. Under the terms of the agreement, GWL&A
       assumed the general account business on a coinsurance basis and the
       segregated account business totalling $1.7 billion (US $1.5 billion)
       of policyholder liabilities on a modified coinsurance basis with an
       effective date of October 2, 2006. Arrangements are being made to
       transfer the policies to GWL&A and the transfer is expected to take
       place over a three year period.

       Under the modified-coinsurance agreement, MetLife retains the
       approximately $2.6 billion (US $2.3 billion) of segregated account
       assets and liabilities but cedes to GWL&A all of the net profits and
       losses and related net cash flows. In addition, GWL&A acquired
       approximately $3.9 billion (US $3.4 billion) of participant account
       values for which it will provide administrative services and
       recordkeeping functions and receive fee income.

    e) On October 26, 2006, Gesca Ltée acquired an additional interest of 30%
       in Workopolis for a cash consideration of $86 million increasing its
       ownership to 50%. This acquisition, accounted for using the purchase
       method of accounting, has been reflected in the Consolidated Financial
       Statements since the date of acquisition.

    f) On November 30, 2006, Lifeco acquired all outstanding common shares of
       Indiana Healthcare Network, Inc.

    g) On December 29, 2006, GWL&A acquired the full service-bundled, defined
       contribution business from U.S. Bank. The acquired business primarily
       relates to the administration of 401(k) plans which represent more
       than $10.5 billion (US $9.0 billion) in retirement plan assets. The
       acquisition includes the retention of relationship managers and sales
       and client service specialists.

    h) During 2005, Canada Life, through its wholly owned United Kingdom
       subsidiary, Canada Life Limited, acquired the assets and liabilities
       associated with the in-force annuity in payment business of Phoenix
       and London Assurance Limited, part of the Resolution Life Group which
       is based in the United Kingdom. The transaction resulted in an
       increase in invested assets and a corresponding increase in
       policyholder liabilities of $4.4 billion on the Consolidated Balance
       Sheet.

                       NOTE 12 REINSURANCE TRANSACTION

    During the third quarter of 2006, GWL&A recaptured a reinsurance
    agreement on certain blocks of group annuity business. The recaptured
    premiums of $562 million associated with the transaction have been
    recorded in the Consolidated Statement of Earnings as an increase in
    premium income with a corresponding increase to the change in actuarial
    liabilities. For the Consolidated Balance Sheet, this transaction
    resulted in a reduction of $582 million to funds held under reinsurance
    contracts with a corresponding increase in policyholder liabilities.

    During 2006, Great-West Life and London Life recaptured 50% of a
    reinsurance agreement on certain blocks of group life and long term
    disability business. The recaptured premiums of $1,560 million associated
    with the transaction have been recorded in the Consolidated Statement of
    Earnings as an increase to premium income with a corresponding increase
    to the change in actuarial liabilities and provision for claims. For the
    Consolidated Balance Sheet, this transaction resulted in a reduction of
    $1,671 million to funds held under reinsurance contracts with a
    corresponding increase in policyholder liabilities.

                          NOTE 13 SUBSEQUENT EVENT

    On February 1, 2007, Lifeco announced that it had entered into agreements
    with Marsh & McLennan Companies, Inc. whereby Lifeco will acquire the
    asset management business of Putnam Investment Trust (Putnam), and Great-
    West Life will acquire Putnam's 25% interest in T.H. Lee Partners for
    approximately $410 million (U.S. $350 million). The parties will make an
    election under section 338(h)(10) of the U.S. Internal Revenue Code that
    will result in a tax benefit that Lifeco intends to securitize for
    approximately $644 million (U.S. $550 million). In aggregate these
    transactions represent a value of approximately $4.6 billion
    (U.S. $3.9 billion).

    Funding for the transaction will come from internal resources as well as
    from proceeds of an issue of Lifeco common shares of no more than
    $1.2 billion, the issuance of debentures and hybrids, a bank credit
    facility, and an acquisition tax benefit securitization. The transaction
    is expected to close in the second quarter of 2007, subject to regulatory
    approval and certain other conditions.
    




For further information:

For further information: Edward Johnson, Senior Vice-President, General
Counsel and Secretary, (514) 286-7400


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