Power Financial Corporation - Nine-Month Earnings and Dividends

Readers are referred to the sections entitled "Forward-looking Statements" and "Non-GAAP Financial Measures" at the end of this release.

MONTREAL, Nov. 12 /CNW Telbec/ - Power Financial Corporation's operating earnings for the nine-month period ended September 30, 2009 were $1,149 million or $1.54 per share, compared with $1,540 million or $2.10 per share in the corresponding period in 2008.

The decrease in operating earnings reflects primarily the decrease in the contribution from the Corporation's subsidiaries and Parjointco.

Other items were a charge of $50 million or $0.07 per share for the nine-month period ended September 30, 2009 and consisted mainly of Power Financial's share of non-operating results recorded by Pargesa, as discussed below. For the nine-month period of 2008, other items were earnings of $570 million or $0.81 per share and consisted of Power Financial's share of non-operating earnings recorded by Lifeco and Pargesa, also discussed below.

Net earnings, including other items, for the nine-month period ended September 30, 2009 were $1,099 million or $1.47 per share, compared with $2,110 million or $2.91 per share in 2008.

    
    THIRD-QUARTER RESULTS
    ---------------------
    

For the quarter ended September 30, 2009, operating earnings of the Corporation were $455 million or $0.61 per share, compared with $459 million or $0.62 per share in the third quarter of 2008.

Other items for the third quarter of 2009 were a charge of $3 million, compared with a charge of $2 million for the same quarter in 2008.

Net earnings for the quarter were $452 million or $0.61 per share in 2009, compared with $457 million or $0.62 per share in 2008.

    
    RESULTS OF SUBSIDIARIES AND PARJOINTCO
    --------------------------------------
    

Great-West Lifeco Inc.

Great-West Lifeco reported adjusted net income attributable to common shareholders of $1,184 million or $1.254 per share for the nine-month period ended September 30, 2009, compared with $1,536 million or $1.717 per share in the corresponding period of 2008. For the three-month period ended September 30, 2009, Lifeco reported adjusted net income attributable to common shareholders of $445 million or $0.471 per share, compared with $436 million or $0.487 per share in the same period in 2008.

The above amounts exclude the following non-recurring items recorded by Lifeco in the nine-month period ended September 30, 2008. In the first quarter of 2008, Lifeco recorded two non-recurring items totalling $118 million or $0.132 per share after tax consisting of (a) a gain realized in connection with the termination of a long-standing assumption reinsurance agreement for an amount of $176 million, and (b) a reserve strengthening in Great-West Life & Annuity Insurance Company's continuing operations for a charge of $58 million. In the second quarter of 2008, Lifeco recorded a gain of $649 million or $0.726 per share, representing the gain on the sale of its U.S. healthcare business.

Including these non-recurring items, net income attributable to Lifeco's common shareholders for the nine-month period ended September 30, 2009 was $1,184 million or $1.254 per share, compared with $2,303 million or $2.575 per share in the corresponding period of 2008. Net income attributable to Lifeco's common shareholders for the three-month period ended September 30, 2009 was $445 million or $0.471 per share, compared with $436 million or $0.487 per share in the corresponding period of 2008.

Lifeco's contribution to Power Financial's operating earnings was $815 million for the nine-month period ended September 30, 2009, compared with $1,079 million for the corresponding period in 2008. For the three-month period ended September 30, 2009, Lifeco's contribution to Power Financial's operating earnings was $307 million, compared with $306 million in 2008.

IGM Financial Inc.

IGM Financial reported adjusted net income for the nine months ended September 30, 2009 of $445 million, compared with $626 million in 2008. Adjusted net income for the nine months ended September 30, 2008 excluded $25 million which represented IGM's proportionate share of Lifeco's after-tax gain on the sale of Great-West Healthcare recorded in the second quarter. Adjusted earnings per share were $1.69 in 2009, compared with $2.36 in 2008. Net income for the nine months ended September 2009 was $445 million or $1.69 per share, compared with $651 million or $2.45 per share in the corresponding period of 2008.

Net income for the three months ended September 30, 2009 was $167 million or $0.63 per share, compared with $199 million or $0.75 in 2008.

For the nine-month and three-month periods ended September 30, 2009, IGM contributed $248 million and $95 million to Power Financial's operating earnings, compared with $349 million and $112 million in 2008.

Parjointco N.V.

Power Financial holds a 50% interest in Parjointco N.V., which in turn holds a 54.1% interest in Pargesa Holding SA. Pargesa reported operating earnings of SF504 million in the nine-month period ended September 30, 2009, compared with SF694 million for the corresponding period in 2008. The decrease is mainly due to lower contribution from Imerys and Lafarge. For the three-month period ended September 30, 2009, Pargesa's operating earnings were SF262 million, compared with SF256 million in the corresponding period of 2008.

Expressed in Canadian dollars, the contribution from the investment at equity to Power Financial's operating earnings was $140 million for the nine-month period ended September 30, 2009, compared with $181 million for the corresponding period in 2008. For the third quarter of 2009, the contribution from Pargesa to Power Financial's operating earnings was $72 million, compared with $64 million in the third quarter of 2008.

Non-operating earnings were SF304 million in the nine-month period ended September 30, 2009, which essentially consisted of the charge resulting from the adjustment of the carrying value of Pernod Ricard and Iberdrola recorded in the first quarter of 2009 and a partial reversal under International Financial Reporting Standards (IFRS) of an impairment charge taken on Lafarge in the third quarter of 2008, for an amount of SF509 million. This latter amount is however not recognized under Canadian Generally Accepted Accounting Principles. This compared with non-recurring earnings of SF102 million in 2008. As a result, the net earnings reported by Pargesa were SF808 million in the nine-month period ended September 30, 2009, compared with SF796 million in the same period of 2008. For the third quarter of 2009, Pargesa reported net earnings of SF760 million, compared with SF261 million in the third quarter of 2008.

    
    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   January 25, 2010  February 15, 2010   To be determined
                                                     In accordance with the
                                                     articles of the
                                                     Corporation
    -------------------------------------------------------------------------
    Series C   January 8, 2010   January 31, 2010    32.50 cents
    -------------------------------------------------------------------------
    Series D   January 8, 2010   January 31, 2010    34.375 cents
    -------------------------------------------------------------------------
    Series E   January 8, 2010   January 31, 2010    32.8125 cents
    -------------------------------------------------------------------------
    Series F   January 8, 2010   January 31, 2010    36.875 cents
    -------------------------------------------------------------------------
    Series H   January 8, 2010   January 31, 2010    35.9375 cents
    -------------------------------------------------------------------------
    Series I  	January 8, 2010   January 31, 2010    37.50 cents
    -------------------------------------------------------------------------
    Series J   January 8, 2010   January 31, 2010    29.375 cents
    -------------------------------------------------------------------------
    Series K   January 8, 2010   January 31, 2010    30.9375 cents
    -------------------------------------------------------------------------
    Series L   January 8, 2010   January 31, 2010    31.875 cents
    -------------------------------------------------------------------------
    Series M   January 8, 2010   January 31, 2010    37.50 cents
    -------------------------------------------------------------------------
    Series O   January 8, 2010   January 31, 2010    45.288 cents
    -------------------------------------------------------------------------

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

The Board of Directors also declared a quarterly dividend of 35 cents per share on the Corporation's common shares payable February 1, 2010 to shareholders of record December 31, 2009.

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

    
    Forward-looking Statements
    --------------------------
    

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

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 perception of historical trends, current conditions and expected future developments, as well as other factors that are believed to be appropriate in the circumstances.

By its nature, this information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of material factors, many of which are beyond the Corporation's and its subsidiaries' control, affect the operations, performance and results of the Corporation and its subsidiaries, and their businesses, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, management of market liquidity and funding risks, changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates), the effect of applying future accounting changes (including adoption of International Financial Reporting Standards), business competition, operational and reputational risks, technological change, changes in government regulation and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, the Corporation's and its subsidiaries' ability to complete strategic transactions, integrate acquisitions and implement other growth strategies, and the Corporation's and its subsidiaries' success in anticipating and managing the foregoing factors.

The reader is cautioned that the foregoing list of factors is not exhaustive of the factors that may affect the Corporation's and its subsidiaries' forward-looking statements. The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements.

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

Additional information about the risks and uncertainties of the Corporation's business 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 include the after-tax impact of any item that
        management considers to be of a non-recurring nature or that could
        make the period-over-period comparison of results from operations
        less meaningful, and also include the Corporation's share of any such
        item presented in a comparable manner by Lifeco or IGM.
    

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

As a consequence of the announcement by Lifeco of the signing of a definitive agreement by GWL&A to sell its healthcare insurance business, the results from Lifeco's U.S. healthcare insurance business are presented in the consolidated financial statements as "discontinued operations" in accordance with GAAP. Power Financial's share of these results is included in operating earnings.

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 (unaudited)

    
                         POWER FINANCIAL CORPORATION

                         CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
                                                  September 30,
                                                          2009   December 31
    (in millions of Canadian dollars)               (unaudited)         2008
    -------------------------------------------------------------------------
    Assets
    Cash and cash equivalents                            4,970         4,689
    -------------------------------------------------------------------------
    Investments
      Shares                                             6,302         5,359
      Bonds                                             68,173        66,801
      Mortgages and other loans                         17,643        18,034
      Loans to policyholders                             7,058         7,622
      Real estate                                        3,135         3,190
    -------------------------------------------------------------------------
                                                       102,311       101,006
    Funds held by ceding insurers                       11,258        11,447
    Investment at equity                                 2,603         2,814
    Intangible assets                                    4,415         4,659
    Goodwill                                             8,636         8,613
    Future income taxes                                  1,395         1,766
    Other assets                                         6,279         6,524
    -------------------------------------------------------------------------
                                                       141,867       141,518
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Policy liabilities
      Actuarial liabilities                             99,033        97,895
      Other                                              4,547         4,732
    Deposits and certificates                              953           959
    Funds held under reinsurance contracts                 122           192
    Debentures and other borrowings                      5,742         5,658
    Preferred shares of the Corporation                    300           300
    Preferred shares of subsidiaries                     1,310         1,269
    Capital trust securities and debentures                782           658
    Future income taxes                                    988           768
    Other liabilities                                    6,650         7,254
    -------------------------------------------------------------------------
                                                       120,427       119,685
    -------------------------------------------------------------------------

    Non-controlling interests                            8,437         8,414
    -------------------------------------------------------------------------
    Shareholders' Equity
    Stated capital
      Perpetual preferred shares                         1,575         1,575
      Common shares                                        605           595
    Contributed surplus                                    100            91
    Retained earnings                                   11,105        10,811
    Accumulated other comprehensive income (loss)         (382)          347
    -------------------------------------------------------------------------
                                                        13,003        13,419
    -------------------------------------------------------------------------
                                                       141,867       141,518
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                     CONSOLIDATED STATEMENTS OF EARNINGS

    -------------------------------------------------------------------------
                                      Three months ended   Nine months ended
                                            September 30        September 30
    -------------------------------------------------------------------------
    (unaudited) (in millions of
     Canadian dollars, except
     per share amounts)                   2009      2008      2009      2008
    -------------------------------------------------------------------------
    Revenues
    Premium income                       4,336     3,912    13,709    25,225
    Net investment income
      Regular net investment income      1,606     1,571     4,820     4,645
      Change in fair value on held-
       for-trading assets                3,743    (2,258)    4,019    (4,793)
    -------------------------------------------------------------------------
                                         5,349      (687)    8,839      (148)
    Fee income                           1,288     1,398     3,650     4,288
    -------------------------------------------------------------------------
                                        10,973     4,623    26,198    29,365
    -------------------------------------------------------------------------
    Expenses
    Policyholder benefits, dividends
     and experience refunds, and
     change in actuarial liabilities     8,687     2,173    19,526    21,959
    Commissions                            502       556     1,509     1,646
    Operating expenses                     886       906     2,687     2,687
    Financing charges                      134       111       391       364
    -------------------------------------------------------------------------
                                        10,209     3,746    24,113    26,656
    -------------------------------------------------------------------------
                                           764       877     2,085     2,709
    Share of earnings of investment
     at equity                              73        64       140       181
    Other income (charges), net             (3)       (1)      (50)       12
    -------------------------------------------------------------------------
    Earnings from continuing operations
     before income taxes and non-
     controlling interests                 834       940     2,175     2,902
    Income taxes                           170       266       481       709
    Non-controlling interests              212       217       595       586
    -------------------------------------------------------------------------
    Earnings from continuing operations    452       457     1,099     1,607
    Earnings from discontinued
     operations                              -         -         -       503
    -------------------------------------------------------------------------
    Net earnings                           452       457     1,099     2,110
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common share
      - Basic                             0.61      0.62      1.47      2.91
    -------------------------------------------------------------------------
      - Diluted                           0.61      0.62      1.46      2.90
    -------------------------------------------------------------------------



                            SEGMENTED INFORMATION

                        INFORMATION ON PROFIT MEASURE

    -------------------------------------------------------------------------
    Three months ended                               Par-
     September 30, 2009       Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
    Premium income             4,336         -         -         -     4,336
    Net investment income
      Regular net investment
       income                  1,591        31         -       (16)    1,606
      Change in fair value
       on held-for-trading
       assets                  3,734         9         -         -     3,743
    -------------------------------------------------------------------------
                               5,325        40         -       (16)    5,349
    Fee income                   728       582         -       (22)    1,288
    -------------------------------------------------------------------------
                              10,389       622         -       (38)   10,973
    -------------------------------------------------------------------------
    Expenses
    Policyholder benefits,
     dividends and experience
     refunds, and change in
     actuarial liabilities     8,687         -         -         -     8,687
    Commissions                  319       205         -       (22)      502
    Operating expenses           726       148         -        12       886
    Financing charges             93        30         -        11       134
    -------------------------------------------------------------------------
                               9,825       383         -         1    10,209
    -------------------------------------------------------------------------
                                 564       239         -       (39)      764
    Share of earnings of
     investment at equity          -         -        73         -        73
    Other income (charges),
     net                           -         -        (3)        -        (3)
    -------------------------------------------------------------------------
    Earnings from continuing
     operations before
     income taxes and non-
     controlling interests       564       239        70       (39)      834
    Income taxes                  98        72         -         -       170
    Non-controlling interests    158        73         -       (19)      212
    -------------------------------------------------------------------------
    Contribution to
     consolidated earnings
     from continuing
     operations                  308        94        70       (20)      452
    Contribution to
     consolidated earnings
     from discontinued
     operations                    -         -         -         -         -
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    308        94        70       (20)      452
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Three months ended                               Par-
     September 30, 2008       Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
    Premium income             3,912         -         -         -     3,912
    Net investment income
      Regular net investment
       income                  1,539        49         -       (17)    1,571
      Change in fair value
       on held-for-trading
       assets                 (2,258)        -         -         -    (2,258)
    -------------------------------------------------------------------------
                                (719)       49         -       (17)     (687)
    Fee income                   778       635         -       (15)    1,398
    -------------------------------------------------------------------------
                               3,971       684         -       (32)    4,623
    -------------------------------------------------------------------------
    Expenses
    Policyholder benefits,
     dividends and
     experience refunds,
     and change in
     actuarial liabilities     2,173         -         -         -     2,173
    Commissions                  341       230         -       (15)      556
    Operating expenses           732       155         -        19       906
    Financing charges             76        22         -        13       111
    -------------------------------------------------------------------------
                               3,322       407         -        17     3,746
    -------------------------------------------------------------------------
                                 649       277         -       (49)      877
    Share of earnings of
     investment at equity          -         -        64         -        64
    Other income (charges),
     net                           -         -        (1)        -        (1)
    -------------------------------------------------------------------------
    Earnings from continuing
     operations before
     income taxes and non-
     controlling interests       649       277        63       (49)      940
    Income taxes                 187        78         -         1       266
    Non-controlling interests    156        87         -       (26)      217
    -------------------------------------------------------------------------
    Contribution to
     consolidated earnings
     from continuing
     operations                  306       112        63       (24)      457
    Contribution to
     consolidated earnings
     from discontinued
     operations                    -         -         -         -         -
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    306       112        63       (24)      457
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Nine months ended                                Par-
     September 30, 2009       Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
    Premium income            13,709         -         -         -    13,709
    Net investment income
      Regular net investment
       income                  4,718       148         -       (46)    4,820
      Change in fair value
       on held-for-trading
       assets                  4,039       (20)        -         -     4,019
    -------------------------------------------------------------------------
                               8,757       128         -       (46)    8,839
    Fee income                 2,074     1,641         -       (65)    3,650
    -------------------------------------------------------------------------
                              24,540     1,769         -      (111)   26,198
    -------------------------------------------------------------------------
    Expenses
    Policyholder benefits,
     dividends and experience
     refunds, and change in
     actuarial liabilities    19,526         -         -         -    19,526
    Commissions                  979       595         -       (65)    1,509
    Operating expenses         2,187       465         -        35     2,687
    Financing charges            274        81         -        36       391
    -------------------------------------------------------------------------
                              22,966     1,141         -         6    24,113
    -------------------------------------------------------------------------
                               1,574       628         -      (117)    2,085
    Share of earnings of
     investment at equity          -         -       140         -       140
    Other income (charges),
     net                           -         -       (62)       12       (50)
    -------------------------------------------------------------------------
    Earnings from continuing
     operations before
     income taxes and non-
     controlling interests     1,574       628        78      (105)    2,175
    Income taxes                 298       183         -         -       481
    Non-controlling interests    460       198         -       (63)      595
    -------------------------------------------------------------------------
    Contribution to
     consolidated earnings
     from continuing
     operations                  816       247        78       (42)    1,099
    Contribution to
     consolidated earnings
     from discontinued
     operations                    -         -         -         -         -
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    816       247        78       (42)    1,099
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Nine months ended                                Par-
     September 30, 2008       Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
    Premium income            25,225         -         -         -    25,225
    Net investment income
      Regular net investment
       income                  4,539       166         -       (60)    4,645
      Change in fair value
       on held-for-trading
       assets                 (4,793)        -         -         -    (4,793)
    -------------------------------------------------------------------------
                                (254)      166         -       (60)     (148)
    Fee income                 2,381     1,954         -       (47)    4,288
    -------------------------------------------------------------------------
                              27,352     2,120         -      (107)   29,365
    -------------------------------------------------------------------------
    Expenses
    Policyholder benefits,
     dividends and experience
     refunds, and change in
     actuarial liabilities    21,959         -         -         -    21,959
    Commissions                  993       700         -       (47)    1,646
    Operating expenses         2,140       485         -        62     2,687
    Financing charges            259        66         -        39       364
    -------------------------------------------------------------------------
                              25,351     1,251         -        54    26,656
    -------------------------------------------------------------------------
                               2,001       869         -      (161)    2,709
    Share of earnings of
     investment at equity          -         -       181         -       181
    Other income (charges),
     net                           -         -        12         -        12
    -------------------------------------------------------------------------
    Earnings from continuing
     operations before
     income taxes and non-
     controlling interests     2,001       869       193      (161)    2,902
    Income taxes                 466       242         -         1       709
    Non-controlling interests    418       260         -       (92)      586
    -------------------------------------------------------------------------
    Contribution to
     consolidated earnings
     from continuing
     operations                1,117       367       193       (70)    1,607
    Contribution to
     consolidated earnings
     from discontinued
     operations                  503         -         -         -       503
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                  1,620       367       193       (70)    2,110
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE Power Financial Corporation

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


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