Six-month operating earnings increase 18.1%



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

    WINNIPEG, Aug. 2 /CNW Telbec/ - Power Financial Corporation's operating
earnings for the six-month period ended June 30, 2007 were $1,052 million or
$1.43 per share, compared with $891 million or $1.22 per share in the
corresponding period in 2006. This represents an 18.1% increase on a per share
basis.
    Growth in operating earnings reflects primarily growth in the
contribution from the Corporation's subsidiaries and affiliate.
    Other income was $3 million for the six-month period ended June 30, 2007
or $0.01 per share, compared with a charge of $5 million or $0.01 per share
for the same period in 2006, and therefore net earnings, including other
income, for the six-month period ended June 30, 2007 were $1,055 million or
$1.44 per share, compared with $886 million or $1.21 per share in the same
period in 2006.

    SECOND-QUARTER RESULTS
    ----------------------

    For the quarter ended June 30, 2007, operating earnings of the
Corporation were $570 million or $0.78 per share, compared with $483 million
or $0.66 per share in the second quarter of 2006. This represents an increase
of 17.9% on a per share basis.
    Other items for the second quarter of 2007 were $3 million or $0.01 per
share, compared with a charge of $5 million or $0.01 per share for the same
quarter in 2006.
    Net earnings for the quarter were therefore $573 million or $0.79 per
share in 2007, compared with $478 million or $0.65 per share in 2006.

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

    Great-West Lifeco Inc.

    Great-West Lifeco reported net income attributable to common shareholders
of $1,058 million for the six months ended June 30, 2007, compared with net
income of $907 million reported a year ago. On a per share basis, this result
represents $1.186 per common share for the six months ended June 30, 2007, an
increase of 17%, compared with $1.017 per common share for the same period in
2006.
    For the three months ended June 30, 2007, net income attributable to
common shareholders was $544 million, compared with net income of $461 million
reported a year ago. On a per share basis, this result represents $0.610 per
common share for the three months ended June 30, 2007, an increase of 18%,
compared with $0.516 per common share the corresponding period in 2006.

    IGM Financial Inc.

    IGM Financial reported net income for the six months ended June 30, 2007
of $426 million, compared with adjusted net income of $372 million in 2006.
Earnings per share were $1.59 in 2007, compared with adjusted earnings per
share of $1.39 in 2006, an increase of 14.4%.
    For the three-month period ended June 30, 2007, IGM reported net income
of $216 million, compared with adjusted net income of $187 million in 2006.
Earnings per share for the three months ended June 30, 2007 were $0.81,
compared with adjusted earnings per share of $0.70 in the corresponding period
in 2006, which represents an increase of 15.7%.
    Adjusted net income and earnings per share in 2006 excluded a non-cash
income tax. Including this item, net income for the six-month and three-month
periods ended June 30, 2006 was $386 million or $1.44 per share and
$200 million or $0.75 per share, respectively.

    Pargesa Holding S.A.

    Parjointco N.V. holds Power Financial's interest in Pargesa Holding S.A.
Pargesa reported operating earnings of SF411 million in the six-month period
in 2007, compared with SF346 million for the corresponding period in 2006. For
the three month period ended June 30, 2007, Pargesa's operating earnings were
SF333 million, compared with SF301 million in the corresponding period in
2006. The contribution from the European affiliate to Power Financial's
operating earnings was $98 million and $80 million, respectively, in the
six-month and three-month periods in 2007, compared with $82 million and
$72 million, respectively, in 2006.
    The contribution from Pargesa to other income was $3 million in both the
six month and three-month periods in 2007, compared with a charge of
$13 million for each of the corresponding periods in 2006.


    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         October 25, 2007  November 15, 2007  To be determined
                                                          In accordance with
                                                          the articles of the
                                                          Corporation
    -------------------------------------------------------------------------
    Series C         October 10, 2007  October 31, 2007   32.50 cents
    -------------------------------------------------------------------------
    Series D         October 10, 2007  October 31, 2007   34.375 cents
    -------------------------------------------------------------------------
    Series E         October 10, 2007  October 31, 2007   32.8125 cents
    -------------------------------------------------------------------------
    Series F         October 10, 2007  October 31, 2007   36.875 cents
    -------------------------------------------------------------------------
    Series H         October 10, 2007  October 31, 2007   35.9375 cents
    -------------------------------------------------------------------------
    Series I         October 10, 2007  October 31, 2007   37.50 cents
    -------------------------------------------------------------------------
    Series J         October 10, 2007  October 31, 2007   29.375 cents
    -------------------------------------------------------------------------
    Series K         October 10, 2007  October 31, 2007   30.9375 cents
    -------------------------------------------------------------------------
    Series L         October 10, 2007  October 31, 2007   31.875 cents
    -------------------------------------------------------------------------


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

    The Board of Directors also declared a quarterly dividend of 29 cents per
share on the Corporation's common shares payable November 1, 2007 to
shareholders of record September 28, 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 the Corporation's, its subsidiaries' or affiliate's current
expectations. These statements may include, without limitation, statements
regarding the operations, business, financial condition, priorities, ongoing
objectives, strategies and outlook of the Corporation's, its subsidiaries' or
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.
    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 the Corporation's, its subsidiaries' and affiliate's
control, affect the operations, performance and results of the Corporation,
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, the Corporation's, its
subsidiaries' or affiliate's ability to complete strategic transactions and
integrate acquisitions, and the Corporation's, its subsidiaries' or
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 the Corporation's, 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, 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 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 tax
         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" excludes the after-tax impact of any item that
management considers to be of a non recurring nature or that could make the
period-over-period comparison of results from operations less meaningful, and
also excludes the Corporation's share of any such item presented in a
comparable manner by 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 (unaudited)


                         Power Financial Corporation

                         CONSOLIDATED BALANCE SHEETS
    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    (in millions of dollars)                        (unaudited)
    -------------------------------------------------------------------------
    Assets
    Cash and cash equivalents                            5,959         5,138
    -------------------------------------------------------------------------
    Investments (Note 2)
      Shares                                             6,006         4,602
      Bonds                                             69,456        65,246
      Mortgages and other loans                         15,776        15,823
      Loans to policyholders                             6,496         6,776
      Real estate                                        2,209         2,218
    -------------------------------------------------------------------------
                                                        99,943        94,665

    Funds held by ceding insurers                        1,720        12,371
    Investment in affiliate, at equity                   3,501         2,137
    Intangible assets                                    2,569         2,615
    Goodwill                                             8,373         8,342
    Future income taxes                                    479           455
    Other assets                                         5,929         4,763
    -------------------------------------------------------------------------
                                                       128,473       130,486
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Policy liabilities
      Actuarial liabilities                             87,773        89,490
      Other                                              4,268         4,488
    Deposits and certificates                              778           778
    Funds held under reinsurance contracts               1,944         1,822
    Debentures and other borrowings (Note 3)             4,263         3,319
    Preferred shares of the Corporation (Note 6)           300           300
    Preferred shares of subsidiaries                     1,382         1,325
    Capital trust securities and debentures (Note 4)       638           646
    Future income taxes                                    875           853
    Other liabilities                                    6,048         8,830
    -------------------------------------------------------------------------
                                                       108,269       111,851
    -------------------------------------------------------------------------

    Non-controlling interests (Note 5)                   7,386         7,213
    -------------------------------------------------------------------------

    Shareholders' Equity
    Stated capital (Note 6)
      Perpetual preferred shares                         1,400         1,400
      Common shares                                        594           593
    Contributed surplus                                     62            56
    Retained earnings                                    9,977         9,621
    Accumulated other comprehensive income (loss)
     (Note 7)                                              785          (248)
    -------------------------------------------------------------------------
                                                        12,818        11,422
    -------------------------------------------------------------------------
                                                       128,473       130,486
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                     CONSOLIDATED STATEMENTS OF EARNINGS

    -------------------------------------------------------------------------
                              Three months ended          Six months ended
                                    June 30                    June 30
    (unaudited)               2007          2006          2007          2006
    (in millions of dollars,
     except per share amounts)
    -------------------------------------------------------------------------
    Revenues
      Premium income         4,266         4,444         9,879         8,139
      Net investment income
        Regular net
         investment income   1,513         1,544         2,976         2,900
        Changes in fair
         value on held for
         trading assets     (1,931)            -        (2,347)            -
                            -------------------------------------------------
                              (418)        1,544           629         2,900

      Fee income             1,414         1,242         2,822         2,476
    -------------------------------------------------------------------------
                             5,262         7,230        13,330        13,515
    -------------------------------------------------------------------------

    Expenses
      Policyholders
       benefits, dividends
       and experience
       refunds, and change
       in actuarial
       liabilities           2,764         4,959         8,348         8,960
      Commissions              597           526         1,193         1,058
      Operating expenses       793           767         1,632         1,556
      Financing charges
       (Note 8)                 87            85           172           166
    -------------------------------------------------------------------------
                             4,241         6,337        11,345        11,740
    -------------------------------------------------------------------------
                             1,021           893         1,985         1,775
    Share of earnings of
     affiliate                  80            72            98            82
    Other income (charges),
     net                         3           (13)            3           (13)
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-
     controlling interests   1,104           952         2,086         1,844
    Income taxes               247           200           484           453
    Non-controlling
     interests (Note 5)        284           274           547           505
    -------------------------------------------------------------------------
    Net earnings               573           478         1,055           886
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per common
     share (Note 9)
      Basic                   0.79          0.65          1.44          1.21
      Diluted                 0.78          0.65          1.43          1.21
    -------------------------------------------------------------------------


               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    -------------------------------------------------------------------------
                              Three months ended          Six months ended
                                    June 30                    June 30
    (unaudited)               2007          2006          2007          2006
    (in millions of dollars)
    -------------------------------------------------------------------------

    Net earnings               573           478         1,055           886
    -------------------------------------------------------------------------

    Other comprehensive income
     (loss)
      Net unrealized gains
       (losses) on available-
       for-sale assets
        Unrealized gains
         (losses)              240             -           227             -
        Income tax on
         unrealized gains
         (losses)               19             -            22             -
        Reclassification of
         realized (gains)
         losses to net
         earnings              (32)            -          (104)            -
        Income tax on
         reclassification of
         realized (gains)
         losses to net
         earnings               10                          25
    -------------------------------------------------------------------------
                               237             -           170             -
    -------------------------------------------------------------------------

      Net unrealized gains
       (losses) on cash flow
       hedges
        Unrealized gains
         (losses)              (59)            -           (57)            -
        Income tax on
         unrealized gains
         (losses)               21             -            21             -
        Reclassification of
         realized (gains)
         losses to net
         earnings               13             -            40             -
        Income tax on
         reclassification of
         realized (gains)
         losses to net
         earnings               (2)            -            (7)            -
    -------------------------------------------------------------------------
                               (27)            -            (3)            -
    -------------------------------------------------------------------------
    Net unrealized gains
     (losses) on foreign
     currency translation     (639)         (137)         (697)          (70)
    -------------------------------------------------------------------------

    Other comprehensive income
     before non-controlling
     interests                (429)         (137)         (530)          (70)
    Non-controlling interests  154            41           188            32
    -------------------------------------------------------------------------
    Other comprehensive
     income (loss)            (275)          (96)         (342)          (38)
    -------------------------------------------------------------------------

    Comprehensive income       298           382           713           848
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

    -------------------------------------------------------------------------
    Six months ended June 30                              2007          2006
    (unaudited) (in millions of dollars)
    -------------------------------------------------------------------------

    Stated capital - Perpetual preferred shares
    Perpetual preferred shares, beginning of year        1,400         1,200
    Issue of perpetual preferred shares                      -             -
    -------------------------------------------------------------------------
    Perpetual preferred shares, end of period            1,400         1,200
    -------------------------------------------------------------------------

    Stated capital - Common shares
    Common shares, beginning of year                       593           593
    Issue of common shares under stock option plan           1             -
    -------------------------------------------------------------------------
    Common shares, end of period                           594           593
    -------------------------------------------------------------------------

    Contributed surplus
    Contributed surplus, beginning of year                  56            38
    Stock options expense                                    9            12
    Non-controlling interests                               (3)           (4)
    -------------------------------------------------------------------------
    Contributed surplus, end of period                      62            46
    -------------------------------------------------------------------------

    Retained earnings
    Retained earnings, beginning of year
      As previously reported                             9,621         8,249
      Change in accounting policy (Note 1)                (272)            -
    -------------------------------------------------------------------------
    As restated                                          9,349         8,249
      Net earnings                                       1,055           886
      Dividends to shareholders
        Perpetual preferred shares                         (38)          (32)
        Common shares                                     (393)         (340)
      Other                                                  4            (4)
    -------------------------------------------------------------------------
    Retained earnings, end of period                     9,977         8,759
    -------------------------------------------------------------------------

    Accumulated other comprehensive income (loss)
     (Note 7)
    Accumulated other comprehensive income (loss),
     beginning of year                                    (248)         (682)
    Change in accounting policy (Note 1)                 1,375             -
    Other comprehensive income (loss)                     (342)          (38)
    -------------------------------------------------------------------------
    Accumulated other comprehensive income (loss),
     end of period                                         785          (720)
    -------------------------------------------------------------------------

    Total Shareholders' Equity                          12,818         9,878
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    -------------------------------------------------------------------------
                              Three months ended          Six months ended
                                    June 30                    June 30
    (unaudited)               2007          2006          2007          2006
    (in millions of dollars)
    -------------------------------------------------------------------------
    Operating activities
      Net earnings             573           478         1,055           886
      Non-cash charges
       (credits)
        Increase (decrease)
         in policy
         liabilities        (1,496)          274        (1,548)          403
        Decrease (increase)
         in funds held by
         ceding insurers       153           379           441           431
        Increase (decrease)
         in funds held under
         reinsurance
         contracts              24           (19)           50           (97)
        Amortization and
         depreciation           25            25            52            49
        Future income taxes    (58)            -           (49)           75
        Non-controlling
         interests             284           274           547           505
        Other                1,835           265         2,553          (163)
      Change in non-cash
       working capital         222           352        (1,331)         (101)
    -------------------------------------------------------------------------
                             1,562         2,028         1,770         1,988
    -------------------------------------------------------------------------
    Financing activities
      Dividends paid
        By subsidiaries to
         non-controlling
         interests            (119)         (103)         (232)         (201)
        Perpetual preferred
         shares                (19)          (16)          (38)          (33)
        Common shares         (189)         (164)         (377)         (328)
    -------------------------------------------------------------------------
                              (327)         (283)         (647)         (562)
      Issue of common shares     -             -             1             -
      Issue of common shares
       by subsidiaries           7             6            25            24
      Repurchase of common
       shares by subsidiaries  (31)          (15)          (49)          (37)
      Issue of preferred
       shares by a subsidiary    -           300             -           300
      Repurchase of preferred
       shares by a subsidiary    -           (12)            -           (12)
      Issue of debentures
       and other borrowings  1,000           336         1,000           336
      Repayment of
       debentures and other
        borrowings               -             -             -          (150)
      Other                     78           (54)           98           (52)
    -------------------------------------------------------------------------
                               727           278           428          (153)
    -------------------------------------------------------------------------
    Investment activities
      Bond sales and
       maturities            5,287         6,200        11,819        13,332
      Mortgage loan
       repayments              502           473           971           911
      Sales of shares          461           294           826           641
      Real estate sales         15           (74)           34            45
      Proceeds from
       securitizations         347           547           658           633
      Change in loans to
       policyholders          (126)         (133)         (160)         (220)
      Change in repurchase
       agreements              160             4          (267)          118
      Investment in bonds   (5,362)       (7,412)      (11,305)      (14,505)
      Investment in
       mortgage loans       (1,116)       (1,109)       (2,055)       (1,895)
      Investment in shares    (830)         (325)       (1,513)         (688)
      Investment in real
       estate                  (83)          (44)         (196)         (116)
      Other                     (2)           (5)           (7)           (9)
    -------------------------------------------------------------------------
                              (747)       (1,584)       (1,195)       (1,753)
    -------------------------------------------------------------------------
    Effect of changes in
     exchange rates on cash
     and cash equivalents     (166)           10          (182)           40
    Increase (decrease) in
     cash and cash
     equivalents             1,376           732           821           122
    Cash and cash
     equivalents, beginning
     of period               4,583         4,032         5,138         4,642
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                  5,959         4,764         5,959         4,764
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                         Power Financial Corporation

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2007
        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 June 30, 2007 have been prepared in accordance
    with generally accepted accounting principles in Canada (GAAP). 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, 2006. These interim unaudited consolidated
    financial statements do not include all disclosures required for annual
    financial statements.

    The interim unaudited consolidated financial 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, 2006, except for the adoption of the new rules on Financial
    Instruments as described below.

    A) CHANGES IN ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS

    Effective January 1, 2007, the Corporation adopted the Canadian Institute
    of Chartered Accountants (CICA) Handbook Section 4211, Life Insurance
    Enterprises; Section 3855, Financial Instruments - Recognition and
    Measurement; Section 3865, Hedges; Section 1530, Comprehensive Income.

    Under these new standards, all financial assets, including derivatives,
    must be classified as available for sale, held for trading, held to
    maturity, or loans and receivables. All financial liabilities, including
    derivatives, must be classified as held for trading or other. All
    financial instruments classified as available for sale or held for
    trading are recognized at fair value on the Consolidated Balance Sheet
    while financial instruments classified as loans and receivables or other
    will continue to be measured at amortized cost using the effective
    interest rate method. The standards allow the Corporation to designate
    certain financial instruments, on initial recognition, as held for
    trading.

    Changes in the fair value of financial instruments classified as held for
    trading are reported in Net earnings. Unrealized gains or losses on
    financial instruments classified as available for sale are reported in
    Other comprehensive income until they are realized by the Corporation or
    until the assets are other than temporarily impaired, at which time they
    are recorded in the Consolidated Statements of Earnings.

    The Consolidated Statements of Comprehensive Income have been included in
    the Corporation's financial statements. The Consolidated Statements of
    Changes in Shareholders' Equity have replaced the Consolidated Statements
    of Retained Earnings in the Corporation's financial statements.
    Unrealized gains and losses on financial assets classified as available
    for sale, the effective portion of changes in the fair value of cash flow
    hedging instruments and unrealized foreign currency translation gains and
    losses are recorded in the Consolidated Statements of Comprehensive
    Income on a net of tax basis. Other comprehensive income amounts arising
    from using the equity method to account for the Corporation's investment
    in its affiliate are recorded in the Consolidated Statements of
    Comprehensive Income. Accumulated other comprehensive income forms part
    of Shareholders' equity.

    With respect to Great-West Lifeco Inc. (Lifeco), certain investments,
    primarily investments actively traded in a public market, and certain
    financial liabilities are measured at their fair value. Investments
    backing actuarial liabilities, investments backing participating account
    surplus in The Canada Life Assurance Company (Canada Life), and preferred
    shares classified as liabilities are designated as held for trading using
    the fair value option. Changes in the fair value of these investments
    flow through Net earnings. This impact is largely offset by corresponding
    changes in the actuarial liabilities which also flow through Net
    earnings. Investments backing Lifeco's shareholder capital and surplus,
    with the exception of the investments backing participating account
    surplus in Canada Life, are classified as available for sale. Unrealized
    gains and losses on these investments flow through Other comprehensive
    income until they are realized. Certain investment portfolios are
    classified as held for trading as a reflection of their underlying
    nature. Changes in the fair value of these investments flow through Net
    earnings. There has been no change to the Lifeco's method of accounting
    for real estate or loans.

    The remainder of the Corporation's investments in shares was designated
    as available for sale. The loans portfolio was designated as loans and
    receivables and is carried at amortized cost.

    Derivative instruments, previously off-balance sheet, are recognized at
    their market value in the Consolidated Balance Sheet. Changes in the fair
    value of derivatives are recognized in Net earnings except for
    derivatives designated as effective cash flow hedges.

    Derivatives embedded in financial instruments or other contracts, which
    are not closely related to the host financial instrument or contract,
    must be bifurcated and recognized independently. The change in accounting
    policy related to embedded derivatives did not have a significant impact
    on the financial statements of the Corporation.

    Three types of hedging relationships are permitted under the new
    standards: fair value hedges, cash flow hedges, and hedges of net
    investments in self-sustaining foreign operations. Changes in fair value
    hedges are recognized in net earnings. The effective portion of cash flow
    hedges, and hedges of net investments in self-sustaining foreign
    operations, are offset through Other comprehensive income until the
    variability in cash flows being hedged is recognized in Net earnings.

    On January 1, 2007, transition adjustments were made to certain existing
    financial instruments to adjust their carrying value to market, to
    recognize derivative financial instruments on the balance sheet, to
    eliminate the recognition of deferred realized gains of Lifeco with
    corresponding adjustments to actuarial liabilities and opening retained
    earnings.

    The following table summarizes the adjustments made to adopt the new
    standards:

    -------------------------------------------------------------------------
                                         December 31,  Change in  January 1,
                                                2006  accounting       2007
                                         As reported      policy   Adjusted
    -------------------------------------------------------------------------

    Assets
    Cash and cash equivalents                  5,138           -       5,138
    -------------------------------------------------------------------------
    Investments
      Shares                                   4,602         757       5,359
      Bonds                                   65,246       1,016      66,262
      Mortgages and other loans               15,823         (46)     15,777
      Loans to policyholders                   6,776           -       6,776
      Real estate                              2,218           -       2,218
    -------------------------------------------------------------------------
                                              94,665       1,727      96,392
    Investment in affiliate, at equity         2,137       1,157       3,294
    All other assets                          28,546        (150)     28,396
    -------------------------------------------------------------------------
                                             130,486       2,734     133,220
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Policy liabilities
      Actuarial liabilities                   89,490       3,896      93,386
      Other                                    4,488           -       4,488
    Debentures and other borrowings            3,319           -       3,319
    Preferred shares of the Corporation          300           -         300
    Preferred shares of subsidiaries           1,325          71       1,396
    Capital trust securities and debentures      646           -         646
    Future income taxes                          853          10         863
    All other liabilities                     11,430      (2,464)      8,966
    -------------------------------------------------------------------------
                                             111,851       1,513     113,364
    -------------------------------------------------------------------------

    Non-controlling interests                  7,213         118       7,331
    -------------------------------------------------------------------------

    Shareholders' Equity
    Stated capital
      Perpetual preferred shares               1,400           -       1,400
      Common shares                              593           -         593
    Contributed surplus                           56           -          56
    Retained earnings                          9,621        (272)      9,349
    Accumulated other comprehensive income         -       1,127       1,127
    Foreign currency translation adjustments    (248)        248           -
    -------------------------------------------------------------------------
                                              11,422       1,103      12,525
    -------------------------------------------------------------------------
                                             130,486       2,734     133,220
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    B) FUTURE ACCOUNTING CHANGES

    Capital Disclosures
    -------------------
    Effective January 1, 2008, the Corporation will be required to comply
    with CICA Handbook Section 1535, Capital Disclosures. The section
    establishes standards for disclosing information that enables users of
    financial statements to evaluate the entity's objectives, policies and
    processes for managing capital.

    Financial Instruments Disclosure and Presentation
    -------------------------------------------------
    Effective January 1, 2008, the Corporation will be required to comply
    with CICA Handbook Section 3862, Financial Instruments - Disclosures, and
    Section 3863, Financial Instruments - Presentation. These sections will
    replace existing Section 3861, Financial Instruments - Disclosure and
    Presentation. Presentation standards are carried forward unchanged.
    Disclosure standards are enhanced and expanded to complement the changes
    in accounting policy adopted in accordance with Section 3855, Financial
    Instruments - Recognition and Measurement.

    These new requirements are for disclosure only and will not impact
    financial results of the Corporation.


    C) COMPARATIVE FIGURES

    Certain of the 2006 amounts presented for comparative purposes have been
    reclassified to conform to the presentation adopted in the current year.

    Comparative figures have not been restated to conform with the new
    Financial Instruments accounting policies adopted January 1, 2007. CICA
    guidance explicitly prohibits the restatement of comparative information
    under these new standards.


                             NOTE 2 INVESTMENTS

                                            June 30, 2007
                         -----------------------------------------

                           Market value     Amortized cost   Total
                         -----------------  ---------------  -----
                                                       Non-
                                             Loans   finan-
                                      Held     and    cial          December
                         Available     for   recei- instru-               31,
                          for sale trading  vables   ments              2006
                         -----------------------------------------  ---------

    Shares                   1,297   4,709       -       -   6,006     4,602
    Bonds                    5,063  55,093   9,300       -  69,456    65,246
    Mortgages and other
     loans                       -       -  15,776       -  15,776    15,823
    Loans to policyholders       -       -   6,496       -   6,496     6,776
    Real estate                  -       -       -   2,209   2,209     2,218
    -------------------------------------------------------------------------
                             6,360  59,802  31,572   2,209  99,943    94,665
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                   NOTE 3 DEBENTURES AND OTHER BORROWINGS

    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    Power Financial Corporation
      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 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  203           204
      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,
       unsecured                                           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)                          184           205
      7.153% subordinated debentures due May 16, 2046,
       unsecured (US$300 million)                          318           351
    Subordinated debentures due June 21, 2067 bearing an
     interest rate of 5.691% until 2017 and, thereafter,
     at a rate equal to the Canadian 90-day Bankers'
     Acceptance rate plus 1.49%, unsecured               1,000             -
      Notes payable with interest rate of 8.0%               7             8
    -------------------------------------------------------------------------
                                                         4,263         3,319
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the second quarter of 2007, Lifeco issued $1.0 billion of 5.691%
    Subordinated Debentures through its wholly-owned subsidiary Great-West
    Lifeco Finance (Delaware) LP. The subordinated debentures are due
    June 21, 2067 and bear an interest rate of 5.691% until June 21, 2017.
    After June 21, 2017, the subordinated debentures will bear an interest
    rate of the three month bankers' acceptance rate plus 1.49%. The
    subordinated debentures may be redeemed by Lifeco at the principal amount
    plus any unpaid and accrued interest after June 21, 2017.


               NOTE 4 CAPITAL TRUST SECURITIES AND DEBENTURES

    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    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        29            31
    Capital trust securities held by consolidated
     group as temporary investments                       (191)         (185)
    -------------------------------------------------------------------------
                                                           638           646
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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.


                       NOTE 5 non-controlling interests

    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    Non-controlling interests include
      Participating policyholders                        2,021         1,884
      Preferred shareholders (perpetual) of
       subsidiaries                                      1,252         1,253
      Common shareholders of subsidiaries                4,113         4,076
    -------------------------------------------------------------------------
                                                         7,386         7,213
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                              Three months ended          Six months ended
                                    June 30                    June 30
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Earnings attributable to
     non-controlling interests
     include
      Earnings attributable to
       participating
       policyholders            38            57            67            87
      Dividends to preferred
       shareholders
       (perpetual) of
       subsidiaries             19            19            37            33
      Earnings attributable
       to common shareholders
       of subsidiaries         227           198           443           385
    -------------------------------------------------------------------------
                               284           274           547           505
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                 NOTE 6 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
    -------------------------------------------------------------------------
                                June 30, 2007            December 31, 2006
    -------------------------------------------------------------------------
                         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     8,000,000           200
    -------------------------------------------------------------------------
                                           1,400                       1,400
    -------------------------------------------------------------------------

    Common shares      704,893,680           594   704,813,680           593
    -------------------------------------------------------------------------

                           STOCK-BASED COMPENSATION

    During the six-months ended June 30, 2007 and 2006, no options were
    granted under the Corporation's stock option plan. Compensation expense
    relating to the stock options granted by the Corporation and its
    subsidiaries amounted to $5 million in the second quarter of 2007
    ($7 million in 2006) and $9 million for the six-months ended
    June 30, 2007 ($12 million in 2006).

    Options were outstanding at June 30, 2007 to purchase, until May 11,
    2015, up to an aggregate of 8,345,000 common shares, at various prices
    from $13.13125 to $32.235 per share. During the six-months ended June 30,
    2007, 80,000 (nil in 2006) common shares were issued under the
    Corporation's plan for an aggregate consideration of $1 million (nil in
    2006).


                NOTE 7 ACCUMULATED OTHER COMPREHENSIVE INCOME

                              Unrealized gains (losses), on
    -----------------------------------------------------------
                         Available-                    Foreign
    Six months ended      for-sale     Cash flow      currency
     June 30, 2007          assets        hedges   translation         Total
    -------------------------------------------------------------------------

    Balance, beginning of
     year                        -             -          (248)         (248)
                         ----------------------------------------------------
    Change in accounting
     policy (Note 1)         1,620           (43)            -         1,577
    Income taxes              (120)            8             -          (112)
                         ----------------------------------------------------
                             1,500           (35)            -         1,465
                         ----------------------------------------------------
    Non-controlling
     interests                (105)           15             -           (90)
    -------------------------------------------------------------------------
    Net change in
     accounting policy       1,395           (20)            -         1,375
    -------------------------------------------------------------------------

    Other comprehensive
     income (loss)             123           (17)         (697)         (591)
    Income taxes                47            14             -            61
                         ----------------------------------------------------
                               170            (3)         (697)         (530)
                         ----------------------------------------------------
    Non-controlling
     interests                  46            (4)          146           188
    -------------------------------------------------------------------------
                               216            (7)         (551)         (342)
    -------------------------------------------------------------------------

    Balance, end of period   1,611           (27)         (799)          785
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                              Unrealized gains (losses), on
    -----------------------------------------------------------
                         Available-                    Foreign
    Six months ended      for-sale     Cash flow      currency
     June 30, 2006          assets        hedges   translation         Total
    -------------------------------------------------------------------------
    Balance, beginning of
     year                        -             -          (682)         (682)
                         ----------------------------------------------------

    Other comprehensive
     income (loss)               -             -           (70)          (70)
    Income taxes                 -             -             -             -
                         ----------------------------------------------------
                                 -             -           (70)          (70)
                         ----------------------------------------------------
    Non-controlling interests    -             -            32            32
    -------------------------------------------------------------------------
                                 -             -           (38)          (38)
    -------------------------------------------------------------------------

    Balance, end of period       -             -          (720)         (720)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                           NOTE 8 FINANCING CHARGES

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

    -------------------------------------------------------------------------
                              Three months ended          Six months ended
                                    June 30                    June 30
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Interest on debentures
     and other borrowings       57            55           112           107
    Preferred share dividends   18            18            36            37
    Unrealized gains on
     preferred shares
     classified as held for
     trading                   (12)            -           (14)            -
    Subordinated debenture
     issue costs                13             -            13             -
    Interest on capital trust
     debentures                 12            12            24            24
    Distributions on capital
     trust securities held by
     consolidated group as
     temporary investments      (2)           (2)           (5)           (5)
    Other                        1             2             6             3
    -------------------------------------------------------------------------
                                87            85           172           166
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          NOTE 9 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          Six months ended
                                    June 30                   June 30
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Net earnings               573           478         1,055           886
    Dividends on perpetual
     preferred shares          (19)          (16)          (38)          (32)
    -------------------------------------------------------------------------
    Net earnings available to
     common shareholders       554           462         1,017           854
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted number of common
     shares outstanding
     (millions)
      - Basic                704.9         704.8         704.9         704.8
    Exercise of stock
     options                   8.3           6.4           8.3           6.4
    Shares assumed to be
     repurchased with
     proceeds from exercise
     of stock options         (4.3)         (3.4)         (4.4)         (3.4)
    -------------------------------------------------------------------------
    Weighted number of common
     shares outstanding
     (millions)
      - Diluted              708.9         707.8         708.8         707.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


           NOTE 10 PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS

    The total benefit costs included in operating expenses are as follows:
    -------------------------------------------------------------------------
                              Three months ended          Six months ended
                                    June 30                    June 30
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Pension plans              14             22            27            45
    Other post-retirement
     benefits                   7              6            13            13
    -------------------------------------------------------------------------
                               21             28            40            58
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                           NOTE 11 SECURITIZATIONS

    During the second quarter of 2007, IGM Financial Inc. (IGM) securitized
    $351 million ($550 million in 2006) of residential mortgages through
    sales to commercial paper conduits and received net cash proceeds of
    $347 million ($547 million in 2006). IGM's retained interest in the
    securitized loans was valued at $5 million ($6 million in 2006). A pre-
    tax loss on sale of $1 million ($3 million in 2006) was recognized and
    reported in Net investment income in the Consolidated Statements of
    Earnings.

    During the six-months ended June 30, 2007, IGM securitized $664 million
    ($639 million in 2006) of residential mortgages through sales to
    commercial paper conduits and received net cash proceeds of $658 million
    ($633 million in 2006). IGM's retained interest in the securitized loans
    was valued at $14 million ($8 million in 2006). A pre-tax gain on sale of
    $2 million (a loss of $2 million in 2006) was recognized and reported in
    Net investment income in the Consolidated Statements of Earnings.

                        NOTE 12 SEGMENTED INFORMATION

    Information on Profit Measure
    -------------------------------------------------------------------------
    Three months ended                               Par-
     June 30, 2007            Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income           4,266         -         -         -     4,266
      Net investment income     (444)       45         -       (19)     (418)
      Fee income                 749       677         -       (12)    1,414
    -------------------------------------------------------------------------
                               4,571       722         -       (31)    5,262
    -------------------------------------------------------------------------
    Expenses
      Policyholders benefits,
       dividends and
       experience refunds,
       and change in
       actuarial liabilities   2,764         -         -         -     2,764
      Commissions                374       237         -       (14)      597
      Operating expenses         625       154         -        14       793
      Financing charges           53        22         -        12        87
    -------------------------------------------------------------------------
                               3,816       413         -        12     4,241
    -------------------------------------------------------------------------
                                 755       309         -       (43)    1,021
    Share of earnings of
     affiliate                     -         -        80         -        80
    Other income (charges),
     net                           -         -         3         -         3
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-
     controlling interests       755       309        83       (43)    1,104
    Income taxes                 154        93         -         -       247
    Non-controlling interests    217        95         -       (28)      284
    -------------------------------------------------------------------------
    Contribution to
     consolidated net earnings   384       121        83       (15)      573
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Information on Profit Measure
    -------------------------------------------------------------------------
    Three months ended                               Par-
     June 30, 2006            Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income           4,444         -         -         -     4,444
      Net investment income    1,516        50         -       (22)    1,544
      Fee income                 667       587         -       (12)    1,242
    -------------------------------------------------------------------------
                               6,627       637         -       (34)    7,230
    -------------------------------------------------------------------------
    Expenses
      Policyholders benefits,
       dividends and
       experience refunds,
       and change in
       actuarial liabilities   4,959         -         -         -     4,959
      Commissions                332       206         -       (12)      526
      Operating expenses         612       142         -        13       767
      Financing charges           51        22         -        12        85
    -------------------------------------------------------------------------
                               5,954       370         -        13     6,337
    -------------------------------------------------------------------------
                                 673       267         -       (47)      893
    Share of earnings of
     affiliate                     -         -        72         -        72
    Other income (charges),
     net                           -         -       (13)        -       (13)
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-
     controlling interests       673       267        59       (47)      952
    Income taxes                 136        66         -        (2)      200
    Non-controlling interests    212        89         -       (27)      274
    -------------------------------------------------------------------------
    Contribution to
     consolidated net earnings   325       112        59       (18)      478
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Information on Profit Measure
    -------------------------------------------------------------------------
    Six months ended                                 Par-
     June 30, 2007            Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income           9,879         -         -         -     9,879
      Net investment income      558        108        -       (37)      629
      Fee income               1,513      1,335        -       (26)    2,822
    -------------------------------------------------------------------------
                              11,950      1,443        -       (63)   13,330
    -------------------------------------------------------------------------
    Expenses
      Policyholders benefits,
       dividends and
       experience refunds,
       and change in
       actuarial liabilities   8,348         -         -         -     8,348
      Commissions                752       468         -       (27)    1,193
      Operating expenses       1,292       311         -        29     1,632
      Financing charges          104        44         -        24       172
    -------------------------------------------------------------------------
                              10,496       823         -        26    11,345
    -------------------------------------------------------------------------
                               1,454       620         -       (89)    1,985
    Share of earnings of
     affiliate                     -         -        98         -        98
    Other income (charges),
     net                           -         -         3         -         3
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-
     controlling interests     1,454       620       101       (89)    2,086
    Income taxes                 292       192         -         -       484
    Non-controlling interests    415       189         -       (57)      547
    -------------------------------------------------------------------------
    Contribution to
     consolidated net earnings   747       239       101       (32)    1,055
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Information on Profit Measure

    Six months ended                                 Par-
     June 30, 2006            Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income           8,139         -         -         -     8,139
      Net investment income    2,839       107         -       (46)    2,900
      Fee income               1,324     1,176         -       (24)    2,476
    -------------------------------------------------------------------------
                              12,302     1,283         -       (70)   13,515
    -------------------------------------------------------------------------
    Expenses
      Policyholders benefits,
       dividends and
       experience refunds,
       and change in
       actuarial liabilities   8,960         -         -         -     8,960
      Commissions                674       408         -       (24)    1,058
      Operating expenses       1,238       291         -        27     1,556
      Financing charges           98        44         -        24       166
    -------------------------------------------------------------------------
                              10,970       743         -        27    11,740
    -------------------------------------------------------------------------
                               1,332       540         -       (97)    1,775
    Share of earnings of
     affiliate                     -         -        82         -        82
    Other income (charges),
     net                           -         -       (13)        -       (13)
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-
     controlling interests     1,332       540        69       (97)    1,844
    Income taxes                 305       153         -        (5)      453
    Non-controlling interests    389       172         -       (56)      505
    -------------------------------------------------------------------------
    Contribution to
     consolidated net earnings   638       215        69       (36)      886
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    NOTE 13 ACQUISITIONS

    (a) Putnam Investments Trust

    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 Investments Trust (Putnam), and
    Great-West Life will acquire Putnam's 25% interest in T.H. Lee Partners
    for approximately $371 million (US$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 $583 million (US$550 million). In aggregate these
    transactions represent a value of approximately $4.1 billion
    (US$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. Also refer to
    note 14, subsequent events.

    (b) Other Acquisitions

    On May 31, 2007, Great-West Life & Annuity Insurance Company (GWL&A)
    acquired an 80% equity interest in Benefits Management Corporation (BMC).
    The assets acquired, liabilities assumed and Lifeco equity interest in
    the results of BMC's operations have been included in its consolidated
    financial statements since that date. The acquisition will add
    approximately 90,000 members to Lifeco's medical membership. BMC's
    principal subsidiary, Allegiance Benefit Management, Inc., is a Montana-
    based third party administrator of employee health plans.

    The value of identifiable intangible assets acquired reflects the
    estimated fair value of Lifeco's interest in BMC's customer base at the
    time of acquisition. The value of the identifiable intangible assets will
    be amortized in relation to the expected economic benefits of the
    business acquired. If actual experience differs from expectations, the
    amortization will be adjusted to reflect actual experience.


    NOTE 14 SUBSEQUENT EVENTS

    (a) On July 5, 2007, Canada Life acquired all of the remaining
    outstanding common shares of Crown Life Insurance Company (Crown Life)
    for cash consideration of $115 million. The allocation of the purchase
    price to the assets acquired and liabilities assumed is expected to be
    completed during the remainder of 2007. It is anticipated that the
    acquisition will result in an increase in invested assets of
    approximately $533 million, an increase in other assets of approximately
    $32 million, an increase in policyholder liabilities of approximately
    $383 million and an increase in other liabilities of approximately
    $67 million. Results of Crown Life will be included in the Consolidated
    Statements of Earnings from the date of acquisition and are not expected
    to have a material impact to the financial results of the Corporation.

    (b) Putnam Investments trust

    Related to the aquisition of Putnam Investments Trust, all regulatory
    approvals have been received and the pre-closing conditions have been
    satisfied. The transaction is expected to close the third quarter.




For further information:

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


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