Six-month operating earnings increase 27.8%



    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 Corporation of Canada's operating
earnings for the six-month period ended June 30, 2007 were $757 million or
$1.62 per share, compared with $593 million or $1.27 per share in the
corresponding period of 2006. This represents a 27.8% increase on a per share
basis.
    Growth in operating earnings reflects an increase of 18% in the
contribution from Power Financial, as well as a significant increase in income
from investments generated primarily by the Corporation's portfolio of
investment in funds in North America, its interest in Sagard 1 Fund in Europe,
and its operations as a Qualified Foreign Institutional Investor in China.
    Other income was $2 million or $0.01 per share for the six-month period
in 2007. Other income was also $2 million for the corresponding period in
2006.
    As a result, net earnings for the six months ended June 30, 2007 were
$759 million or $1.63 per share, compared with $595 million or $1.27 per share
in the same period of 2006.

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

    For the quarter ended June 30, 2007, operating earnings of the
Corporation were $394 million or $0.84 per share, compared with $339 million
or $0.73 per share in the second quarter of 2006. This represents an increase
of 15.4% on a per share basis.
    Other income for the second quarter of 2007 was $2 million or $0.01 per
share, compared with $2 million for the same quarter of 2006.
    Net earnings for the quarter were therefore $396 million or $0.85 per
share in 2007, compared with $341 million or $0.73 per share in 2006.

    RESULTS OF POWER FINANCIAL CORPORATION
    --------------------------------------

    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 of 2006. This
represents an 18.1% increase on a per share basis.
    Growth in operating earnings reflects primarily growth in the
contribution from Power Financial'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 of 2006.
    For the quarter ended June 30, 2007, operating earnings of Power
Financial 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 of 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.

    DIVIDENDS ON PREFERRED SHARES
    -----------------------------

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

    
    -------------------------------------------------------------------------
    Type
    of shares    Record Date         Payment Date         Amount
    -------------------------------------------------------------------------
    1986 Series  September 24, 2007  October 15, 2007     To be determined
                                                          In accordance
                                                          with the articles
                                                          of the Corporation
    -------------------------------------------------------------------------
    Series A     September 24, 2007  October 15, 2007     35 cents
    -------------------------------------------------------------------------
    Series B     September 24, 2007  October 15, 2007     33.4375 cents
    -------------------------------------------------------------------------
    Series C     September 24, 2007  October 15, 2007     36.25 cents
    -------------------------------------------------------------------------
    Series D     September 24, 2007  October 15, 2007     31.25 cents
    -------------------------------------------------------------------------

    DIVIDENDS ON PARTICIPATING SHARES
    ---------------------------------

    The Board of Directors also declared a quarterly dividend of 24.125 cents
on the Participating Preferred and Subordinate Voting Shares of the
Corporation, payable September 28, 2007 to shareholders of record September 7,
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 or its subsidiaries' or affiliates' current
expectations. These statements may include, without limitation, statements
regarding the operations, business, financial condition, priorities, ongoing
objectives, strategies and outlook of Power Corporation, its subsidiaries or
affiliates for the current fiscal year and subsequent periods. Forward-looking
statements include statements that are predictive in nature, depend upon or
refer to future events or conditions, or include words such as "expects",
"anticipates", "plans", "believes", "estimates", "intends", "targets",
"projects", "forecasts" or negative versions thereof and other similar
expressions, or future or conditional verbs such as "may", "will", "should",
"would" and "could".
    This information is based upon certain material factors or assumptions
that were applied in drawing a conclusion or making a forecast or projection
as reflected in the forward-looking statements, including the perception of
historical trends, current conditions and expected future developments, as
well as other factors that are believed to be appropriate in the
circumstances.
    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 affiliates'
control, affect the operations, performance and results of the Corporation's,
its subsidiaries and affiliates, and their business, and could cause actual
results to differ materially from current expectations of estimated or
anticipated events or results. These factors include, but are not limited to:
the impact or unanticipated impact of general economic, political and market
factors in North America and internationally, interest and foreign exchange
rates, global equity and capital markets, management of market liquidity and
funding risks, changes in accounting policies and methods used to report
financial condition, including uncertainties associated with critical
accounting assumptions and estimates, the effect of applying future accounting
changes, business competition, technological change, changes in government
regulation and legislation, changes in tax laws, unexpected judicial or
regulatory proceedings, catastrophic events, the Corporation's, its
subsidiaries' or affiliates' ability to complete strategic transactions and
integrate acquisitions, and the Corporation's or its subsidiaries' or its
affiliatc cautioned that the foregoing list of factors is not exhaustive of
the factors that may affect any of the Corporation's, its subsidiaries' and
affiliates' forward-looking statements.
    The reader is also cautioned to consider these and other factors carefully
and not to put undue reliance on forward-looking statements.
    Other than as specifically required by law, the Corporation undertakes no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which 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 disclosatels, including its most
recent Management's 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 Corporation,
and believes that they provide additional meaningful information to readers in
their analysis of the results of the Corporation.
    "Operating earnings" excludes the after-tax impact of any item that
management considers to be of a non-recurring nature or that could make the
period-over-period comparison of results from operations less meaningful, and
also excludes the Corporation's share of any such item presented in a
comparable manner by its subsidiaries. Operating earnings and operating
earnings per share are non-GAAP financial measures that do not have a standard
meaning and may not be comparable to similar measures used by other entities.


    Attachments: Financial Information (unaudited)


                         Power Corporation of Canada

                         CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007          2006
    (in millions of dollars)                        (unaudited)
    -------------------------------------------------------------------------
    Assets
    Cash and cash equivalents                            6,647         5,785
    -------------------------------------------------------------------------
    Investments (Note 2)
      Shares                                             7,423         5,598
      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
    -------------------------------------------------------------------------
                                                       101,360        95,661
    Funds held by ceding insurers                        1,720        12,371
    Investment in affiliates, at equity                  3,538         2,182
    Intangible assets                                    2,697         2,745
    Goodwill                                             8,486         8,454
    Future income taxes                                    455           471
    Other assets                                         6,245         5,083
    -------------------------------------------------------------------------
                                                       131,148       132,752
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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)             4,354         3,402
    Preferred shares of subsidiaries                     1,682         1,625
    Capital trust securities and debentures (Note 4)       638           646
    Future income taxes                                    933           909
    Other liabilities                                    6,254         9,008
    -------------------------------------------------------------------------
                                                       108,624       112,168
    -------------------------------------------------------------------------
    Non-controlling interests (Note 5)                  12,630        11,983
    -------------------------------------------------------------------------

    Shareholders' Equity
    Stated capital (Note 6)
      Non-participating shares                             795           795
      Participating shares                                 473           442
    Contributed surplus                                     68            59
    Retained earnings                                    7,840         7,480
    Accumulated other comprehensive income (loss)
     (Note 7)                                              718          (175)
    -------------------------------------------------------------------------
                                                         9,894         8,601
    -------------------------------------------------------------------------
                                                       131,148       132,752
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                     CONSOLIDATED STATEMENTS OF EARNINGS

    -------------------------------------------------------------------------
    (unaudited) (in millions        Three months ended      Six months ended
    of dollars, except per                 June 30               June 30
    share amounts)                     2007       2006       2007       2006
    -------------------------------------------------------------------------
    Revenues
      Premium income                  4,266      4,444      9,879      8,139
      Net investment income
        Regular net investment
         income                       1,601      1,590      3,162      2,964
        Change in fair value on
         held for trading assets     (1,931)         -     (2,347)         -
                                    -----------------------------------------
                                       (330)     1,590        815      2,964

      Fees and media income           1,524      1,341      3,040      2,671
    -------------------------------------------------------------------------
                                      5,460      7,375     13,734     13,774
    -------------------------------------------------------------------------
    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                935        878      1,903      1,782
      Financing charges (Note 8)         90         86        176        168
    -------------------------------------------------------------------------
                                      4,386      6,449     11,620     11,968
    -------------------------------------------------------------------------
                                      1,074        926      2,114      1,806
    Share of earnings of affiliates      75         68         87         75
    Other income (charges), net           3         (8)         3         (8)
    -------------------------------------------------------------------------
    Earnings before income taxes
     and non-controlling interests    1,152        986      2,204      1,873
    Income taxes                        266        200        517        454
    Non-controlling interests
     (Note 5)                           490        445        928        824
    -------------------------------------------------------------------------
    Net earnings                        396        341        759        595
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per participating
     share (Note 9)
      Basic                            0.85       0.73       1.63       1.27
    -------------------------------------------------------------------------
      Diluted                          0.84       0.73       1.62       1.26
    -------------------------------------------------------------------------


               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    -------------------------------------------------------------------------
                                    Three months ended      Six months ended
    (unaudited)                            June 30               June 30
    (in millions of dollars)           2007       2006       2007       2006
    -------------------------------------------------------------------------
    Net earnings                        396        341        759        595
    -------------------------------------------------------------------------

    Other comprehensive income (loss)

      Net unrealized gains (losses)
       on available-for-sale assets
        Unrealized gains (losses)       437          -        457          -
        Income tax on unrealized
         gains (losses)                 (18)         -        (22)         -
        Reclassification of realized
         (gains) losses to net
         earnings                       (98)         -       (170)         -
        Income tax on reclassification
          of realized (gains) losses
          to net earnings                22          -         37          -
    -------------------------------------------------------------------------
                                        343          -        302          -
    -------------------------------------------------------------------------
    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   (640)      (116)      (695)       (48)
    -------------------------------------------------------------------------
    Other comprehensive income
     (loss) before non-controlling
     interests                         (324)      (116)      (396)       (48)
    Non-controlling interests           247         42        304         13
    -------------------------------------------------------------------------
    Other comprehensive income (loss)   (77)       (74)       (92)       (35)
    -------------------------------------------------------------------------

    Comprehensive income                319        267        667        560
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

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

    Stated capital - Non-participating shares
    Non-participating shares, beginning of year            795           795
    Issue of non-participating shares                        -             -
    -------------------------------------------------------------------------
    Non-participating shares, end of period                795           795
    -------------------------------------------------------------------------

    Stated capital - Participating shares
    Participating shares, beginning of year                442           417
    Issue of participating shares under stock
     option plan                                            31            15
    -------------------------------------------------------------------------
    Participating shares, end of period                    473           432
    -------------------------------------------------------------------------

    Contributed surplus
    Contributed surplus, beginning of year                  59            37
    Stock options expense                                   14            16
    Non-controlling interests                               (5)           (6)
    -------------------------------------------------------------------------
    Contributed surplus, end of period                      68            47
    -------------------------------------------------------------------------

    Retained earnings
    Retained earnings, beginning of year
      As previously reported                             7,480         6,478
      Change in accounting policy (Note 1)                (181)            -
    -------------------------------------------------------------------------
    As restated                                          7,299         6,478
      Net earnings                                         759           595
      Dividends to shareholders
          Non-participating shares                         (21)          (21)
          Participating shares                            (199)         (165)
      Other                                                  2            (3)
    -------------------------------------------------------------------------
    Retained earnings, end of period                     7,840         6,884
    -------------------------------------------------------------------------

    Accumulated other comprehensive income (loss)
     (Note 7)
    Accumulated other comprehensive income (loss),
     beginning of year                                    (175)         (468)
    Change in accounting policy (Note 1)                   985             -
    Other comprehensive income (loss)                      (92)          (35)
    -------------------------------------------------------------------------
    Accumulated other comprehensive income (loss),
     end of period                                         718          (503)
    -------------------------------------------------------------------------

    Total Shareholders' Equity                           9,894         7,655
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    -------------------------------------------------------------------------
                                    Three months ended      Six months ended
    (unaudited)                            June 30               June 30
    (in millions of dollars)           2007       2006       2007       2006
    -------------------------------------------------------------------------
    Operating activities
      Net earnings                      396        341        759        595
      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                    29         28         61         55
        Future income taxes             (59)        (3)       (53)        72
        Non-controlling interests       490        445        928        824
        Other                         1,920        297      2,519       (106)
      Change in non-cash working
       capital                          137        344     (1,299)      (153)
    -------------------------------------------------------------------------
                                      1,594      2,086      1,858      2,024
    -------------------------------------------------------------------------
    Financing activities
      Dividends paid
        By subsidiaries to non-
         controlling interests         (202)      (174)      (397)      (344)
            Non-participating shares    (11)       (10)       (21)       (20)
            Participating shares       (109)       (89)      (199)      (165)
    -------------------------------------------------------------------------
                                       (322)      (273)      (617)      (529)
      Issue of subordinated voting
       shares                             1          4         31         15
      Issue of common shares by
       subsidiaries                       7          6         26         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      1,013        336
      Repayment of debentures and
       other borrowings                  (5)         -         (5)      (150)
      Other                              77        (53)        97        (46)
    -------------------------------------------------------------------------
                                        727        293        496        (99)
    -------------------------------------------------------------------------
    Investment activities
      Bond sales and maturities       5,287      6,200     11,819     13,332
      Mortgage loan repayments          502        473        971        911
      Sales of shares                   546        312        959        673
      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             (980)      (375)    (1,755)      (775)
      Investment in real estate         (83)       (44)      (196)      (116)
      Other                              (4)        (8)       (13)        (9)
    -------------------------------------------------------------------------
                                       (814)    (1,619)    (1,310)    (1,808)
    -------------------------------------------------------------------------
    Effect of changes in exchange
     rates on cash and cash
     equivalents                       (166)        10       (182)        40
    Increase (decrease) in cash
     and cash equivalents             1,341        770        862        157
    Cash and cash equivalents,
     beginning of period              5,306      4,719      5,785      5,332
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                    6,647      5,489      6,647      5,489
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                         Power Corporation of Canada
     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
    Corporation of Canada 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 affiliates 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                5,785            -        5,785
    -------------------------------------------------------------------------
    Investments
      Shares                                 5,598          844        6,442
      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
    -------------------------------------------------------------------------
                                            95,661        1,814       97,475
    Investment in affiliates, at
     equity                                  2,182        1,157        3,339
    All other assets                        29,124         (150)      28,974
    -------------------------------------------------------------------------
                                           132,752        2,821      135,573
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Policy liabilities
      Actuarial liabilities                 89,490        3,896       93,386
      Other                                  4,488            -        4,488
    Debentures and other borrowings          3,402            -        3,402
    Preferred shares of subsidiaries         1,625           71        1,696
    Capital trust securities and
     debentures                                646            -          646
    Future income taxes                        909           25          934
    All other liabilities                   11,608       (2,464)       9,144
    -------------------------------------------------------------------------
                                           112,168        1,528      113,696
    -------------------------------------------------------------------------
    Non-controlling interests               11,983          489       12,472
    -------------------------------------------------------------------------
    Shareholders' Equity
    Stated capital
      Non-participating shares                 795            -          795
      Participating shares                     442            -          442
    Contributed surplus                         59            -           59
    Retained earnings                        7,480         (181)       7,299
    Accumulated other comprehensive
     income                                      -          810          810
    Foreign currency translation
     adjustments                              (175)         175            -
    -------------------------------------------------------------------------
                                             8,601          804        9,405
    -------------------------------------------------------------------------
                                           132,752        2,821      135,573
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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-
                                                    finan-
                                         Loans       cial           December
                 Available  Held for    and re-      ins-                 31,
                  for sale   trading ceivables  truments                2006
                 -------------------------------------------------- ---------
    Shares           2,714     4,709         -         -     7,423     5,598
    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
    -------------------------------------------------------------------------
                     7,777    59,802    31,572     2,209   101,360    95,661
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                   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 of 8.0%                   7             8
    Other
      Term loan at prime plus a premium varying
       between 1.0% and 1.75% Acceptance plus a
       premium varying between 2.0% and 2.75% due
       May 13, 2013                                         50            50
      Bank loan at prime plus a premium, varying
       between 0.375% to 1.5%, or Bankers' Acceptance
       plus a premium varying between 1.375% and 2.5%
       due May 13, 2010                                     41            33
    -------------------------------------------------------------------------
                                                         4,354         3,402
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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                                      2,652         2,653
      Common shareholders of subsidiaries                7,957         7,446
    -------------------------------------------------------------------------
                                                        12,630        11,983
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                    Three months ended      Six months ended
                                           June 30               June 30
    Three months ended March 31        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                      38         35         75         65
      Earnings attributable to
       common shareholders of
       subsidiaries                     414        353        786        672
    -------------------------------------------------------------------------
                                        490        445        928        824
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                 NOTE 6 CAPITAL STOCK AND STOCK OPTION PLAN
                               STATED CAPITAL

    -------------------------------------------------------------------------
                                                       June 30,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------
    Non-Participating Shares
    Cumulative Redeemable First Preferred Shares,
     1986 Series
      Authorized - Unlimited number of shares
      Issued - 899,878 shares                               45            45
    Series A First Preferred Shares
      Authorized and issued - 6,000,000 shares             150           150
    Series B First Preferred Shares
      Authorized and issued - 8,000,000 shares             200           200
    Series C First Preferred Shares
      Authorized and issued - 6,000,000 shares             150           150
    Series D First Preferred Shares
      Authorized and issued - 10,000,000 shares            250           250
    -------------------------------------------------------------------------
                                                           795           795
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Participating Shares
    Participating Preferred Shares
      Authorized - Unlimited number of shares
      Issued - 48,854,772 shares                            27            27
    Subordinate Voting Shares
      Authorized - Unlimited number of shares
      Issued - 404,876,082 (2006 - 402,606,144) shares     446           415
    -------------------------------------------------------------------------
                                                           473           442
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                           STOCK-BASED COMPENSATION

    During the first quarter of 2007, 1,209,075 options were granted under
    the Corporation's stock option plan (no options were granted in the first
    quarter of 2006). During the second quarter of 2006, 1,342,075 options
    were granted under the Corporation's stock option plan (no options were
    granted in the second quarter of 2007).

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


    -------------------------------------------------------------------------
                                                          2007          2006
    -------------------------------------------------------------------------
    Dividend yield                                         2.1%          2.3%
    Expected volatility                                   15.5%         19.0%
    Risk-free interest rate                                4.0%          4.3%
    Expected life (years)                                    7             7
    Fair value per option granted ($/option)             $7.11         $7.29
    -------------------------------------------------------------------------


    Compensation expense relating to the stock options granted by the
    Corporation and its subsidiaries amounted to $8 million in the second
    quarter of 2007 ($9 million in 2006) and $14 million for the six months
    ended June 30, 2007 ($16 million in 2006).

    Options were outstanding at June 30, 2007 to purchase, until March 25,
    2017, 11,133,972 subordinate voting shares at various prices from
    $11.3625 to $37.07. During the six months ended June 30, 2007,
    2,269,938 subordinate voting shares (1,485,015 in 2006) were issued under
    the Corporation's plan for an aggregate consideration of $31 million
    ($15 million in 2006).


                NOTE 7 ACCUMULATED OTHER COMPREHENSIVE INCOME

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

    Balance, beginning of year            -          -       (175)      (175)
                                ---------------------------------------------

    Change in accounting policy
     (Note 1)                         1,708        (43)         -      1,665
    Income taxes                       (135)         8          -       (127)
                                ---------------------------------------------
                                      1,573        (35)         -      1,538
                                ---------------------------------------------
    Non-controlling interests          (574)        21          -       (553)
    -------------------------------------------------------------------------
    Net change in accounting
     policy                             999        (14)         -        985
    -------------------------------------------------------------------------

    Other comprehensive income
     (loss)                             287        (17)      (695)      (425)
    Income taxes                         15         14          -         29
                                ---------------------------------------------
                                        302         (3)      (695)      (396)
                                ---------------------------------------------
    Non-controlling interests           (26)        (1)       331        304
    -------------------------------------------------------------------------
                                        276         (4)      (364)       (92)
    -------------------------------------------------------------------------

    Balance, end of period            1,275        (18)      (539)       718
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                    Unrealized gains (losses), on
    --------------------------------------------------------------
                                                          Foreign
                                  Available-      Cash   currency
    Six months ended               for-sale       flow    transla-
     June 30, 2006                   assets     hedges       tion      Total
    -------------------------------------------------------------------------

    Balance, beginning of year            -          -       (468)      (468)
                                ---------------------------------------------

    Other comprehensive income
     (loss)                               -          -        (48)       (48)
    Income taxes                          -          -          -          -
                                ---------------------------------------------
                                          -          -        (48)       (48)
                                ---------------------------------------------
    Non-controlling interests             -          -         13         13
    -------------------------------------------------------------------------
                                          -          -        (35)       (35)
    -------------------------------------------------------------------------

    Balance, end of period                -          -       (503)      (503)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                           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                    59         56        115        109
    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                                 2          2          7          3
    -------------------------------------------------------------------------
                                         90         86        176        168
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                          NOTE 9 EARNINGS PER SHARE

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


    -------------------------------------------------------------------------
                                    Three months ended      Six months ended
                                           June 30               June 30
                                       2007       2006       2007       2006
    -------------------------------------------------------------------------
    Net earnings                        396        341        759        595
    Dividends on non-participating
     shares                             (11)       (10)       (21)       (21)
    -------------------------------------------------------------------------
    Net earnings available to
     participating shareholders         385        331        738        574
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted number of participating
     shares outstanding (millions)
      - Basic                         453.7      450.5      453.0      450.0
    Exercise of stock options          11.1       10.4       11.1       10.4
    Shares assumed to be repurchased
     with proceeds from exercise of
     stock options                     (6.6)      (5.5)      (6.8)      (5.4)
    -------------------------------------------------------------------------
    Weighted number of participating
     shares outstanding (millions)
      - Diluted                       458.2      455.4      457.3      455.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


           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                        15         24         31         49
    Other post-retirement benefits        8          7         15         15
    -------------------------------------------------------------------------
                                         23         31         46         64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                           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         -        69      (330)
      Fees and media income      749       677         -        98     1,524
    -------------------------------------------------------------------------
                               4,571       722         -       167     5,460
    -------------------------------------------------------------------------
    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         -       156       935
      Financing charges           53        22         -        15        90
    -------------------------------------------------------------------------
                               3,816       413         -       157     4,386
    -------------------------------------------------------------------------
                                 755       309         -        10     1,074
    Share of earnings of
     affiliates                    -         -        80        (5)       75
    Other income (charges),
     net                           -         -         3         -         3
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-controlling
     interests                   755       309        83         5     1,152
    Income taxes                 154        93         -        19       266
    Non-controlling
     interests                   346       135        28       (19)      490
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    255        81        55         5       396
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Information on Profit Measure
    -------------------------------------------------------------------------
    Three months ended                               Par-
    June 30, 2007             Lifeco       IGM   jointco     Other     Total
    -------------------------------------------------------------------------
    Revenues
      Premium income           4,444         -         -         -     4,444
      Net investment income    1,516        50         -        24     1,590
      Fees and media income      667       587         -        87     1,341
    -------------------------------------------------------------------------
                               6,627       637         -       111     7,375
    -------------------------------------------------------------------------
    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         -       124       878
      Financing charges           51        22         -        13        86
    -------------------------------------------------------------------------
                               5,954       370         -       125     6,449
    -------------------------------------------------------------------------
                                 673       267         -       (14)      926
    Share of earnings of
     affiliates                    -         -        72        (4)       68
    Other income (charge),
     net                           -         -       (13)        5        (8)
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-controlling
     interests                   673       267        59       (13)      986
    Income taxes                 136        66         -        (2)      200
    Non-controlling
     interests                   322       126        20       (23)      445
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    215        75        39        12       341
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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         -       149       815
      Fees and media income    1,513     1,335         -       192     3,040
    -------------------------------------------------------------------------
                              11,950     1,443         -       341    13,734
    -------------------------------------------------------------------------
    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         -       300     1,903
      Financing charges          104        44         -        28       176
    -------------------------------------------------------------------------
                              10,496       823         -       301    11,620
    -------------------------------------------------------------------------
                               1,454       620         -        40     2,114
    Share of earnings of
     affiliates                    -         -        98       (11)       87
    Other income (charges),
     net                           -         -         3         -         3
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-controlling
     interests                 1,454       620       101        29     2,204
    Income taxes                 292       192         -        33       517
    Non-controlling
     interests                   666       269        34       (41)      928
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    496       159        67        37       759
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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         -        18     2,964
      Fees and media income    1,324     1,176         -       171     2,671
    -------------------------------------------------------------------------
                              12,302     1,283         -       189    13,774
    -------------------------------------------------------------------------
    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         -       253     1,782
      Financing charges           98        44         -        26       168
    -------------------------------------------------------------------------
                              10,970       743         -       255    11,968
    -------------------------------------------------------------------------
                               1,332       540         -       (66)    1,806
    Share of earnings of
     affiliates                    -         -        82        (7)       75
    Other income (charge),
     net                           -         -       (13)        5        (8)
    -------------------------------------------------------------------------
    Earnings before income
     taxes and non-controlling
     interests                 1,332       540        69       (68)    1,873
    Income taxes                 305       153         -        (4)      454
    Non-controlling interests    604       244        23       (47)      824
    -------------------------------------------------------------------------
    Contribution to
     consolidated net
     earnings                    423       143        46       (17)      595
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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