Power Financial Corporation - Financial results for 2006 and dividends



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

    MONTREAL, March 21 /CNW Telbec/ - 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.

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

    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.

    SUBSIDIARIES' AND AFFILIATE'S RESULTS
    -------------------------------------

    Great-West Lifeco Inc.

    Great-West Lifeco reported net income attributable to common shareholders
of $1,875 million for the twelve months ended December 31, 2006, compared with
$1,742 million in 2005. On a per share basis, this represented $2.104 per
common share for 2006, an increase of 8 per cent (15 per cent on a constant
currency basis) compared with $1.955 per common share for 2005. The 2005
results included restructuring charges and provisions for expected losses
arising from hurricane damage for an aggregate amount of $60 million after
tax, or $0.067 per common share.
    For the quarter ended December 31, 2006, net income attributable to
common shareholders was $491 million, compared with $456 million reported a
year ago. On a per share basis, this result represents $0.550 per common share
for the three months ended December 31, 2006, an increase of 7 per cent,
compared with $0.512 per common share for 2005. Results for the fourth quarter
of 2005 included a charge of $13 million or $0.014 per share.

    IGM Financial Inc.

    IGM Financial reported net income for the year ended December 31, 2006 of
$776.7 million. This amount included a $13.7 million ($0.05 per share) non
cash income tax benefit recorded in the second quarter resulting from
decreases in the federal corporate income tax rates and their effect on the
future income tax liability related to certain intangible assets. Diluted
earnings per share on this basis were $2.90. Net income for 2006, excluding
this item, was $763.0 million compared with net income of $682.4 million in
2005, an increase of 11.8 per cent. Diluted earnings per share on the same
basis were $2.85 compared with earnings per share of $2.56 in 2005, an
increase of 11.3 per cent.
    Net income for the three months ended December 31, 2006 was
$199.6 million, compared with net income $177.2 million in 2005, an increase
of 12.6 per cent. Earnings per share were $0.75, compared with $0.66 in 2005,
an increase of 13.6 per cent.

    Pargesa Holding S.A.

    Power Financial holds a 54.1 per cent equity interest in Pargesa,
together with the Frère group of Belgium. Pargesa reported in 2006 operating
earnings of SF539 million, compared with SF509 million in 2005. Growth in
operating earnings reflects an increase in the contribution from all of
Pargesa's holdings, the impact of dividends received for the first time from
Lafarge, and higher contribution from corporate activities, partly offset by
the fact that Bertelsmann contributed to earnings for only six months in 2006.
    In addition, Pargesa recorded non-operating earnings in 2006 of SF1,754
million, comprised primarily of the impact of the gain resulting from the sale
by GBL of its interest in Bertelsmann. In 2005, non-operating earnings were
SF24 million.
    As a result, net earnings reported by Pargesa were SF2,293 million in
2006, compared with SF533 million in 2005.


    PREFERRED SHARE DIVIDENDS
    -------------------------

    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          April 25, 2007   May 15, 2007      To be determined
                                                         In accordance with
                                                         the articles of the
                                                         Corporation
    -------------------------------------------------------------------------
    Series C          April 9, 2007    April 30, 2007    32.50 cents
    -------------------------------------------------------------------------
    Series D          April 9, 2007    April 30, 2007    34.375 cents
    -------------------------------------------------------------------------
    Series E          April 9, 2007    April 30, 2007    32.8125 cents
    -------------------------------------------------------------------------
    Series F          April 9, 2007    April 30, 2007    36.875 cents
    -------------------------------------------------------------------------
    Series H          April 9, 2007    April 30, 2007    35.9375 cents
    -------------------------------------------------------------------------
    Series I          April 9, 2007    April 30, 2007    37.50 cents
    -------------------------------------------------------------------------
    Series J          April 9, 2007    April 30, 2007    29.375 cents
    -------------------------------------------------------------------------
    Series K          April 9, 2007    April 30, 2007    30.9375 cents
    -------------------------------------------------------------------------
    Series L          April 9, 2007    April 30, 2007    31.875 cents
    -------------------------------------------------------------------------

    COMMON SHARE DIVIDEND
    ---------------------

    The Board of Directors also declared a quarterly dividend of 26.75 cents
per share on the Corporation's common shares payable May 1, 2007 to
shareholders of record April 9, 2007.

    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 Power Financial's or its subsidiaries' and affiliate's current
expectations. These statements may include without limitation, statements
regarding the operations, business, financial condition, priorities, ongoing
objectives, strategies and outlook of Power Financial or its subsidiaries and
affiliate 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
Financial's or its subsidiaries' and affiliate's control, affect the
operations, performance and results of Power Financial or its subsidiaries and
affiliate 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 Financial's or its subsidiaries' or
affiliate's ability to complete strategic transactions and integrate
acquisitions and Power Financial's or its subsidiaries' and affiliate's
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 Financial's or its
subsidiaries' and affiliate's 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 Financial 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
Financial's business is provided in its disclosure materials, including its
most recent Management Discussion and Analysis of Operating Results 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 Financial, and
believes that they provide additional meaningful information to readers in
their analysis of the results of the Corporation.
    "Operating earnings" exclude 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 Lifeco or IGM. 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 Financial Corporation

                         CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
                                                   December 31,  December 31,
                                                          2006          2005
    (in millions of dollars)                        (unaudited)
    -------------------------------------------------------------------------

    Assets
    Cash and cash equivalents                            5,138         4,642
    -------------------------------------------------------------------------
    Investments
      Shares                                             4,602         3,930
      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
    -------------------------------------------------------------------------
                                                        94,665        86,836

    Funds held by ceding insurers                       12,371         2,556
    Investment in affiliate, at equity                   2,137         1,501
    Intangible assets                                    2,615         2,357
    Goodwill                                             8,342         8,199
    Future income taxes                                    390           460
    Other assets                                         4,763         4,345
    -------------------------------------------------------------------------
                                                       130,421       110,896
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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)             3,319         3,377
    Preferred shares of the Corporation (Note 4)           300           300
    Preferred shares of subsidiaries                     1,325         1,356
    Capital trust securities and debentures (Note 3)       646           648
    Future income taxes                                    853           830
    Other liabilities                                    8,892         8,503
    -------------------------------------------------------------------------
                                                       111,786        95,214
    -------------------------------------------------------------------------

    Non-controlling interests                            7,213         6,284
    -------------------------------------------------------------------------

    Shareholders' Equity
    Stated capital (Note 4)
      Perpetual preferred shares                         1,400         1,200
      Common shares                                        593           593
    Contributed surplus                                     56            38
    Retained earnings                                    9,621         8,249
    Foreign currency translation adjustments              (248)         (682)
    -------------------------------------------------------------------------
                                                        11,422         9,398
    -------------------------------------------------------------------------
                                                       130,421       110,896
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                     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  1,524         1,404         6,036         5,492
      Fee income             1,319         1,160         5,030         4,534
    -------------------------------------------------------------------------
                             9,096         7,092        29,790        26,084
    -------------------------------------------------------------------------
    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       828           761         3,136         3,063
      Financing charges
       (Note 5)                 84            77           338           330
    -------------------------------------------------------------------------
                             8,196         6,228        26,166        22,784
    -------------------------------------------------------------------------
                               900           864         3,624         3,300
    Share of earnings of
     affiliate                  32            39           126           121
    Other income (charges),
     net (Note 6)                2             -           345           (11)
    -------------------------------------------------------------------------
    Earnings before income
     taxes and
     non-controlling
     interests                 934           903         4,095         3,410

    Income taxes               210           237           937           886
    Non-controlling
     interests                 250           225         1,003           863
    -------------------------------------------------------------------------
    Net earnings               474           441         2,155         1,661
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common
     share (Note 7)
      Basic                   0.65          0.60          2.96          2.28
    -------------------------------------------------------------------------
      Diluted                 0.64          0.60          2.94          2.27
    -------------------------------------------------------------------------


                 CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

    -------------------------------------------------------------------------
    For the years ended December 31                       2006          2005
    (unaudited) (in millions of dollars)
    -------------------------------------------------------------------------

    Retained earnings, beginning of year                 8,249         7,267
    Add
      Net earnings                                       2,155         1,661
    -------------------------------------------------------------------------
                                                        10,404         8,928
    -------------------------------------------------------------------------
    Deduct
      Dividends
        Perpetual preferred shares                          70            55
        Common shares                                      705           613
      Other                                                  8            11
    -------------------------------------------------------------------------
                                                           783           679
    -------------------------------------------------------------------------
    Retained earnings, end of year                       9,621         8,249
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    -------------------------------------------------------------------------
                              Three months ended         For the years ended
    (unaudited)                      December 31                 December 31
    (in millions of dollars)  2006          2005          2006          2005
    -------------------------------------------------------------------------
    Operating activities
      Net earnings             474           441         2,155         1,661
      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           27            24            99            99
        Future income taxes    (12)           85            48           144
        Non-controlling
         interests             250           225         1,003           863
        Other                    9            33          (479)          401
      Change in non-cash
       working capital        (202)         (406)         (188)         (847)
    -------------------------------------------------------------------------
                               926           676         4,443         4,528
    -------------------------------------------------------------------------
    Financing activities
      Dividends paid
        By subsidiaries to
         non-controlling
         interests            (110)          (95)         (419)         (353)
        Perpetual preferred
         shares                (19)          (13)          (68)          (51)
        Common shares         (176)         (153)         (680)         (592)
    -------------------------------------------------------------------------
                              (305)         (261)       (1,167)         (996)
      Issue of perpetual
       preferred shares
       (Note 4)                  -           250           200           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 a
       subsidiary                -             -           300           300
      Redemption of
       preferred shares by
       a subsidiary             (1)          (10)          (31)          (10)
      Issue of subordinated
       debentures (Note 2)      15             -           351             -
      Repayment of
       debentures and other
       borrowings                -             -          (400)         (150)
      Other                     57             2            52           (37)
    -------------------------------------------------------------------------
                              (238)          (29)         (724)         (694)
    -------------------------------------------------------------------------
    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          374           533         1,492         1,605
      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)  1,467            22         1,467            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    (697)         (886)       (1,781)       (2,095)
      Investment in real
       estate                 (116)         (177)         (631)         (588)
      Other                    (62)          (27)          (80)          (14)
    -------------------------------------------------------------------------
                              (813)         (525)       (3,503)       (2,529)
    -------------------------------------------------------------------------
    Effect of changes in
     exchange rates on cash
     and cash equivalents      209           (20)          280          (286)
    Increase in cash and
     cash equivalents           84           102           496         1,019
    Cash and cash
     equivalents, beginning
     of period               5,054         4,540         4,642         3,623
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                  5,138         4,642         5,138         4,642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                         Power Financial Corporation

     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
    Financial Corporation at December 31, 2006 have been prepared in
    accordance with Canadian generally accepted accounting principles (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 to the presentation adopted in the current year.

                   NOTE 2 DEBENTURES AND OTHER BORROWINGS

    -------------------------------------------------------------------------
                                                   December 31,  December 31,
                                                          2006          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             -
       Notes payable with interest of 8.0%                   8             9
    -------------------------------------------------------------------------
                                                         3,319         3,377
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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 31,  December 31,
                                                          2006          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

                                 AUTHORIZED

    Unlimited number of first preferred shares, issuable in series, of second
    preferred shares, issuable in series and of common shares.

                           ISSUED AND OUTSTANDING

    -------------------------------------------------------------------------
                               December 31, 2006           December 31, 2005
    -------------------------------------------------------------------------
                         Number of        Stated     Number of        Stated
                            shares       capital        shares       capital
    -------------------------------------------------------------------------
    Preferred Shares
     (classified as
     liabilities)
    Series C First
     Preferred Shares    6,000,000           150     6,000,000           150
    Series J First
     Preferred Shares    6,000,000           150     6,000,000           150
    -------------------------------------------------------------------------
                                             300                         300
    -------------------------------------------------------------------------
    Perpetual Preferred
     Shares
    Series A First
     Preferred Shares    4,000,000           100     4,000,000           100
    Series D First
     Preferred Shares    6,000,000           150     6,000,000           150
    Series E First
     Preferred Shares    8,000,000           200     8,000,000           200
    Series F First
     Preferred Shares    6,000,000           150     6,000,000           150
    Series H First
     Preferred Shares    6,000,000           150     6,000,000           150
    Series I First
     Preferred Shares    8,000,000           200     8,000,000           200
    Series K First
     Preferred Shares   10,000,000           250    10,000,000           250
    Series L First
     Preferred Shares    8,000,000           200             -             -
    -------------------------------------------------------------------------
                                           1,400                       1,200
    -------------------------------------------------------------------------
    Common Shares      704,813,680           593   704,813,680           593
    -------------------------------------------------------------------------


    During the third quarter of 2006, the Corporation issued 8,000,000 5.10%
    Non-Cumulative First Preferred Shares, Series L for cash proceeds of
    $200 million. The 5.10% Non-Cumulative First Preferred Shares, Series L
    are entitled to fixed non-cumulative preferential cash dividends at a
    rate equal to $1.2750 per share per annum. On and after October 31, 2011
    the Corporation may redeem for cash the Series L First Preferred Shares
    in whole or in part, at the Corporation's option, at $26.00 per share if
    redeemed prior to October 31, 2012, $25.75 if redeemed thereafter and
    prior to October 31, 2013, $25.50 if redeemed thereafter and prior to
    October 31, 2014, $25.25 if redeemed thereafter and prior to October 31,
    2015 and $25.00 if redeemed thereafter, in each case together with all
    declared and unpaid dividends to, but excluding, the date of redemption.

                           STOCK-BASED COMPENSATION

    During the year ended December 31, 2006, no options were granted under
    the Corporation's stock option plan. During the second quarter of 2005,
    2,015,000 options were granted under the Corporation's stock option plan
    (no options were granted in the first, third and fourth quarters of
    2005).

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

    -------------------------------------------------------------------------
                                                                        2005
    -------------------------------------------------------------------------
    Dividend yield                                                       2.4%
    Expected volatility                                                 21.0%
    Risk-free interest rate                                              4.3%
    Expected life (years)                                                  9
    Fair value per stock option ($/option)                             $8.10
    -------------------------------------------------------------------------

    Compensation expense relating to stock options granted by the Corporation
    and its subsidiaries amounted to $6 million in the fourth quarter of 2006
    ($3 million in 2005) and $25 million for the year ended December 31, 2006
    ($20 million in 2005).

    Options were outstanding at December 31, 2006 to purchase, until May 11,
    2015, up to an aggregate of 8,425,000 common shares, at various prices
    from $6.65938 to $32.235 per share. During the years ended December 31,
    2006 and 2005, no common shares were issued under the Corporation's plan.

                           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       55            48           219           217
    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             9             1
    -------------------------------------------------------------------------
                                84            77           338           330
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                     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                        4             -             4             -
    -------------------------------------------------------------------------
                                 2             -           345           (11)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    The share of Pargesa's non-operating earnings includes an amount of
    $356 million, which represents the 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 common share computations:

    -------------------------------------------------------------------------
                              Three months ended         For the years ended
                                     December 31                 December 31
                              2006          2005          2006          2005
    -------------------------------------------------------------------------
    Net earnings               474           441         2,155         1,661
    Dividends on perpetual
     preferred shares          (19)          (17)          (70)          (55)
    -------------------------------------------------------------------------
    Net earnings available
     to common shareholders    455           424         2,085         1,606
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted number of
     common shares
     outstanding (millions)
      - Basic                704.8         704.8         704.8         704.8
    Exercise of stock
     options                   8.4           8.4           8.4           8.4
    Shares assumed to be
     repurchased with
     proceeds from exercise
     of stock options         (4.8)         (5.5)         (5.2)         (5.4)
    -------------------------------------------------------------------------
    Weighted number of
     common shares
     outstanding (millions)
      - Diluted              708.4         707.7         708.0         707.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


           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               28            17            91            74
    Other post-retirement
     benefits                    4             8            23            44
    -------------------------------------------------------------------------
                                32            25           114           118
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           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         -       (20)    1,524
      Fee income                 706       628         -       (15)    1,319
    -------------------------------------------------------------------------
                               8,453       678         -       (35)    9,096
    -------------------------------------------------------------------------
    Expenses
      Insurance claims         6,677         -         -         -     6,677
      Commissions                402       219         -       (14)      607
      Operating expenses         665       148         -        15       828
      Financing charges           50        22         -        12        84
    -------------------------------------------------------------------------
                               7,794       389         -        13     8,196
    -------------------------------------------------------------------------
                                 659       289         -       (48)      900
    Share of earnings of
     affiliate                     -         -        32         -        32
    Other income (charges),
     net                           -         -        (2)        4         2
    -------------------------------------------------------------------------
    Earnings before the
     following:                  659       289        30       (44)      934
    Income taxes                 124        89         -        (3)      210
    Non-controlling interests    190        89         -       (29)      250
    -------------------------------------------------------------------------
    Contribution to
     consolidated net earnings   345       111        30       (12)      474
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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         -       (17)    1,404
      Fee income                 616       561         -       (17)    1,160
    -------------------------------------------------------------------------
                               6,518       608         -       (34)    7,092
    -------------------------------------------------------------------------
    Expenses
      Insurance claims         4,888         -         -         -     4,888
      Commissions                330       189         -       (17)      502
      Operating expenses         605       141         -        15       761
      Financing charges           41        22         -        14        77
    -------------------------------------------------------------------------
                               5,864       352         -        12     6,228
    -------------------------------------------------------------------------
                                 654       256         -       (46)      864
    Share of earnings of
     affiliate                     -         -        39         -        39
    Other income (charges),
     net                           -         -         -         -         -
    -------------------------------------------------------------------------
    Earnings before the
     following:                  654       256        39       (46)      903
    Income taxes                 160        78         -        (1)      237
    Non-controlling interests    174        77         -       (26)      225
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    320       101        39       (19)      441
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Information on Profit Measure
    -------------------------------------------------------------------------
    Year ended                                       Par-
    December 31, 2006         Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income          18,724         -         -         -    18,724
      Net investment income    5,910       212         -       (86)    6,036
      Fee income               2,688     2,392         -       (50)    5,030
    -------------------------------------------------------------------------
                              27,322     2,604         -      (136)   29,790
    -------------------------------------------------------------------------
    Expenses
      Insurance claims        20,508         -         -         -    20,508
      Commissions              1,401       833         -       (50)    2,184
      Operating expenses       2,507       573         -        56     3,136
      Financing charges          202        88         -        48       338
    -------------------------------------------------------------------------
                              24,618     1,494         -        54    26,166
    -------------------------------------------------------------------------
                               2,704     1,110         -      (190)    3,624
    Share of earnings of
     affiliate                     -         -       126         -       126
    Other income (charges),
     net                           -         -       341         4       345
    -------------------------------------------------------------------------
    Earnings before the
     following:                2,704     1,110       467      (186)    4,095
    Income taxes                 615       331         -        (9)      937
    Non-controlling interests    770       345         -      (112)    1,003
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                  1,319       434       467       (65)    2,155
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Information on Profit Measure
    -------------------------------------------------------------------------
    Year ended                                       Par-
     December 31, 2005        Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income          16,058         -         -         -    16,058
      Net investment income    5,389       183         -       (80)    5,492
      Fee income               2,424     2,164         -       (54)    4,534
    -------------------------------------------------------------------------
                              23,871     2,347         -      (134)   26,084
    -------------------------------------------------------------------------
    Expenses
      Insurance claims        17,435         -         -         -    17,435
      Commissions              1,284       726         -       (54)    1,956
      Operating expenses       2,454       555         -        54     3,063
      Financing charges          187        90         -        53       330
    -------------------------------------------------------------------------
                              21,360     1,371         -        53    22,784
    -------------------------------------------------------------------------
                               2,511       976         -      (187)    3,300
    Share of earnings of
     affiliate                     -         -       121         -       121
    Other income (charges),
     net                         (22)        -        11         -       (11)
    -------------------------------------------------------------------------
    Earnings before the
     following:                2,489       976       132      (187)    3,410
    Income taxes                 601       292         -        (7)      886
    Non-controlling interests    661       302         -      (100)      863
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                  1,227       382       132       (80)    1,661
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                            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 co-insurance basis and the
       segregated account business totalling $1.7 billion (US $1.5 billion)
       of policyholder liabilities on a modified-co- insurance 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-co-insurance 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 record
       keeping functions and receive fee income.

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

    f) 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.

    g) 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: Mr. Edward Johnson, Senior Vice-President,
General Counsel and Secretary, (514) 286-7400


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