Power Financial Corporation - Financial results for 2009 and dividends
Readers are referred to the sections entitled "Forward-looking Statements" and "Non-GAAP Financial Measures" at the end of this release.
MONTREAL, March 11 /CNW Telbec/ - Power Financial Corporation's operating earnings for the year ended December 31, 2009 were $1,533 million or $2.05 per share, compared with $1,974 million or $2.69 per share in 2008.
The decrease in operating earnings reflects primarily the decrease in the contribution from the Corporation's subsidiaries and Parjointco.
Other items, not included in operating earnings, were a net charge of $94 million or $0.13 per share in 2009, compared with a net charge of $637 million or $0.90 in 2008. Other items in 2009 essentially consisted of the Corporation's share of non-recurring amounts recorded by IGM and Pargesa as discussed below. The main components of other items in 2008 included the write-down of intangible assets and goodwill relating to the acquisition of Putnam in 2007 for an amount of $983 million; the gain from the sale of health business at Great-West Life & Annuity for an amount of $472 million, and the write-down of Pargesa's investments in Lafarge and Pernod Ricard for an amount of $328 million for 2008.
As a result, net earnings were $1,439 million or $1.92 per share in 2009, compared with $1,337 million or $1.79 per share in 2008.
FOURTH-QUARTER RESULTS
----------------------
Power Financial Corporation's operating earnings for the three-month period ended December 31, 2009 were $384 million or $0.51 per share, compared with $434 million or $0.59 per share in the same period in 2008.
Other items in the fourth quarter of 2009 were a charge of $44 million or $0.06 per share, compared with a charge of $1,207 million or $1.71 per share in the same period in 2008. The 2009 charge consists mainly of non-operating items of IGM, as discussed below. The 2008 charge is mainly composed of the write-down of intangible assets and goodwill relating to the acquisition of Putnam and the write-down of certain of Pargesa's investments, as discussed above.
As a result, net earnings for the fourth quarter of 2009 were $340 million or $0.45 per share, compared with a net loss of $773 million or $1.12 per share for the same period in 2008.
RESULTS OF SUBSIDIARIES AND PARJOINTCO
--------------------------------------
Great-West Lifeco Inc.
Great-West Lifeco reported net income attributable to common shareholders of $1,627 million or $1.722 per share in 2009, compared with adjusted net income from continuing operations attributable to common shareholders of $2,018 million or $2.255 per share in 2008.
For the three months ended December 31, 2009, Lifeco reported net income attributable to common shareholders of $443 million, compared with adjusted net income from continuing operations attributable to common shareholders of $525 million for the same period in 2008. This represents $0.468 per common share for the period in 2009, compared with $0.586 for the corresponding period in 2008.
Adjusted net income from continuing operations in 2008 excludes income from discontinued operations and is before the impact of certain charges that totalled $665 million after tax or $0.743 per common share for the twelve months ended December 31, 2008 and a charge of $1,432 million after tax or $1.597 per common share for the three months ended December 31, 2008. These items include a non-cash impairment charge recorded in the fourth quarter of 2008 of $1,353 million after tax or $1.508 per common share in connection with Putnam goodwill and intangible assets.
Earnings from discontinued operations in 2008 include the gain from the disposal of the U.S. Healthcare operations for an amount of $649 million or $0.725 per common share.
Lifeco's contribution to Power Financial's operating earnings was $1,120 million for the twelve-month period ended December 31, 2009, compared with $1,447 million for the corresponding period in 2008. For the three-month period ended December 31, 2009, Lifeco's contribution to Power Financial's operating earnings was $305 million, compared with $368 million in 2008.
IGM Financial Inc.
IGM Financial reported adjusted net income for the year ended December 31, 2009 of $622 million, compared with $766 million in 2008. Adjusted earnings per share were $2.35 in 2009, compared with $2.89 in 2008. Adjusted net income in 2009 excludes the following items: a non-cash impairment charge of $66 million after tax on available for sale equity securities related to the market environment, a non-cash income tax benefit of $18 million resulting from decreases in Ontario corporate income tax rates and their effect on the future income tax liability related to indefinite life intangible assets arising from the acquisition of Mackenzie Financial Corporation in 2001, and a premium of $14 million paid on the redemption of the Series A preferred shares on December 31, 2009.
Net income without adjustment for the year ended December 31, 2009 was $559 million, compared with $731 million in 2008. Earnings per share on this basis were $2.12 in 2009, compared with $2.76 in 2008.
For the three months ended December 31, 2009, adjusted net income was $177 million or $0.67 per share, compared with adjusted net income of $140 million or $0.53 per share for the same period in 2008. Net income without adjustment for the three months ended December 31, 2009 was $114 million, compared with $80 million in 2008. Earnings per share on this basis were $0.43 in 2009, compared with $0.30 in 2008.
For the twelve-month and three-month periods ended December 31, 2009, IGM contributed $347 million and $99 million to Power Financial's operating earnings, compared with $426 million and $77 million in 2008.
Parjointco N.V.
Power Financial holds a 50% interest in Parjointco N.V., which in turn holds a 54.1% interest in Pargesa Holding SA. Pargesa reported operating earnings of SF512 million in the twelve-month period ended December 31, 2009, compared with SF708 million for the corresponding period in 2008. The decrease is mainly due to lower contribution from Imerys and Lafarge. For the three-month period ended December 31, 2009, Pargesa's operating earnings were SF8 million, compared with SF14 million in the corresponding period of 2008.
Expressed in Canadian dollars, the contribution from the investment at equity to Power Financial's operating earnings was $141 million for the twelve-month period ended December 31, 2009, compared with $183 million for the corresponding period in 2008. For the fourth quarter of 2009, the contribution from Pargesa to Power Financial's operating earnings was $1 million, compared with $2 million in the fourth quarter of 2008.
Non-operating earnings of Pargesa were SF280 million in the twelve-month period ended December 31, 2009, which essentially consisted of the charge resulting from the adjustment of the carrying value of Pernod Ricard and Iberdrola recorded in the first quarter of 2009 and a partial reversal under International Financial Reporting Standards (IFRS) of an impairment charge taken on Lafarge in the third quarter of 2008, for an amount of SF510 million. This latter amount is however not recognized under Canadian Generally Accepted Accounting Principles. This compared with non-recurring charges of SF1,229 million in 2008. As a result, the net earnings reported by Pargesa were SF792 million in the twelve-month period ended December 31, 2009, compared with a loss of SF521 million in the same period of 2008. For the fourth quarter of 2009, Pargesa reported a loss of SF16 million, compared with a loss of SF1,317 million in the fourth quarter of 2008.
PREFERRED SHARE DIVIDENDS
-------------------------
The Board of Directors today declared quarterly dividends on the Corporation's preferred shares, as follows:
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Type of
Shares Record Date Payment Date Amount
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Series A April 23, 2010 May 15, 2010 To be determined
In accordance with the
articles of the Corporation
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Series C April 9, 2010 April 30, 2010 32.50 cents
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Series D April 9, 2010 April 30, 2010 34.375 cents
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Series E April 9, 2010 April 30, 2010 32.8125 cents
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Series F April 9, 2010 April 30, 2010 36.875 cents
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Series H April 9, 2010 April 30, 2010 35.9375 cents
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Series I April 9, 2010 April 30, 2010 37.50 cents
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Series J April 9, 2010 April 30, 2010 29.375 cents
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Series K April 9, 2010 April 30, 2010 30.9375 cents
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Series L April 9, 2010 April 30, 2010 31.875 cents
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Series M April 9, 2010 April 30, 2010 37.50 cents
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Series O April 9, 2010 April 30, 2010 36.25 cents
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COMMON SHARE DIVIDEND
---------------------
The Board of Directors also declared a quarterly dividend of 35 cents per share on the Corporation's common shares payable April 30, 2010 to shareholders of record March 31, 2010.
For purposes of the Income Tax Act (Canada) and any similar provincial legislation, all of the above dividends of the Corporation's preferred and common shares are eligible dividends.
Forward-looking Statements
--------------------------
Certain statements in this News Release, other than statements of historical fact, are forward-looking statements based on certain assumptions and reflect the Corporation's and its subsidiaries' current expectations. Forward-looking statements are provided for the purposes of assisting the reader in understanding the Corporation's financial position and results of operations as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of the Corporation and its subsidiaries, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipates", "plans", "believes", "estimates", "seeks", "intends", "targets", "projects", "forecasts" or negative versions thereof and other similar expressions, or future or conditional verbs such as "may", "will", "should", "would" and "could".
By its nature, this information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond the Corporation's and its subsidiaries' control, affect the operations, performance and results of the Corporation and its subsidiaries and their businesses, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, management of market liquidity and funding risks, changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates), the effect of applying future accounting changes (including adoption of International Financial Reporting Standards), business competition, operational and reputational risks, technological change, changes in government regulation and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, the Corporation's and its subsidiaries' ability to complete strategic transactions, integrate acquisitions and implement other growth strategies, and the Corporation's and its subsidiaries' success in anticipating and managing the foregoing factors. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including that the foregoing list of factors, collectively, are not expected to have a material impact on the Corporation and its subsidiaries. While the Corporation considers these assumptions to be reasonable based on information currently available to management, they may prove to be incorrect.
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 about the Corporation's business is provided in its disclosure materials, 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 include the after-tax impact of any item that
management considers to be of a non-recurring nature or that could make
the period-over-period comparison of results from operations less
meaningful, and also include the Corporation's share of any such item
presented in a comparable manner by Lifeco or IGM.
Management has used these financial measures for many years in its presentation and analysis of the financial performance of Power Financial, and believes that they provide additional meaningful information to readers in their analysis of the results of the Corporation.
As a consequence of the announcement by Lifeco of the signing of a definitive agreement by GWL&A to sell its healthcare insurance business, the results from Lifeco's U.S. healthcare insurance business are presented in the consolidated financial statements as "discontinued operations" in accordance with GAAP. Power Financial's share of these results is included in operating earnings.
Operating earnings and operating earnings per share are non-GAAP financial measures that do not have a standard meaning and may not be comparable to similar measures used by other entities.
Attachments: Financial Information
POWER FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
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As at December 31
(in millions of Canadian dollars) 2009 2008
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Assets
Cash and cash equivalents 4,855 4,689
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Investments
Shares 6,392 5,359
Bonds 67,388 66,801
Mortgages and other loans 17,356 18,034
Loans to policyholders 6,957 7,622
Real estate 3,101 3,190
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101,194 101,006
Funds held by ceding insurers 10,839 11,447
Investment at equity 2,675 2,814
Intangible assets 4,366 4,659
Goodwill 8,655 8,613
Future income taxes 1,268 1,766
Other assets 6,379 6,552
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140,231 141,546
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Liabilities
Policy liabilities
Actuarial liabilities 98,059 97,895
Other 4,592 4,732
Deposits and certificates 907 959
Funds held under reinsurance contracts 186 192
Debentures and other borrowings 5,967 5,658
Preferred shares of the Corporation 300 300
Preferred shares of subsidiaries 360 1,269
Capital trust securities and debentures 540 658
Future income taxes 1,098 768
Other liabilities 6,294 7,282
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118,303 119,713
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Non-controlling interests 8,721 8,414
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Shareholders' Equity
Stated capital
Perpetual preferred shares 1,725 1,575
Common shares 605 595
Contributed surplus 102 91
Retained earnings 11,165 10,811
Accumulated other comprehensive income (loss) (390) 347
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13,207 13,419
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140,231 141,546
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For additional information, refer to the 2009 Audited Consolidated
Financial Statements.
CONSOLIDATED STATEMENTS OF EARNINGS
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Three months ended
December 31 For the years ended
(unaudited) December 31
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(in millions of Canadian
dollars, except per
share amounts) 2009 2008 2009 2008
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Revenues
Premium income 4,324 4,782 18,033 30,007
Net investment income
Regular net investment
income 1,383 1,469 6,203 6,114
Change in fair value on
held-for-trading assets (556) (368) 3,463 (5,161)
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827 1,101 9,666 953
Fee income 1,348 1,252 4,998 5,540
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6,499 7,135 32,697 36,500
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Expenses
Policyholder benefits,
dividends and experience
refunds, and change in
actuarial liabilities 4,283 4,815 23,809 26,774
Commissions 579 526 2,088 2,172
Operating expenses 920 918 3,607 3,605
Financing charges 103 74 494 438
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5,885 6,333 29,998 32,989
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614 802 2,699 3,511
Share of earnings of
investment at equity 1 2 141 183
Other income (charges), net (8) (2,414) (58) (2,402)
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Earnings from continuing
operations before income
taxes and non-controlling
interests 607 (1,610) 2,782 1,292
Income taxes 84 (693) 565 16
Non-controlling interests 183 (144) 778 442
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Earnings from continuing
operations 340 (773) 1,439 834
Earnings from discontinued
operations - - - 503
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Net earnings 340 (773) 1,439 1,337
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Earnings per common share
- Basic 0.45 (1.12) 1.92 1.79
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- Diluted 0.45 (1.12) 1.91 1.78
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SEGMENTED INFORMATION
INFORMATION ON PROFIT MEASURE
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Three months ended
December 31, 2009
(unaudited)
(in millions of Par-
Canadian dollars) Lifeco IGM jointco Other Total
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Revenues
Premium income 4,324 - - - 4,324
Net investment income
Regular net investment
income 1,461 (59) - (19) 1,383
Change in fair value
on held-for-trading
assets (549) (7) - - (556)
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912 (66) - (19) 827
Fee income 765 609 - (26) 1,348
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6,001 543 - (45) 6,499
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Expenses
Policyholder benefits,
dividends and experience
refunds, and change in
actuarial liabilities 4,283 - - - 4,283
Commissions 391 213 - (25) 579
Operating expenses 759 149 - 12 920
Financing charges 62 29 - 12 103
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5,495 391 - (1) 5,885
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506 152 - (44) 614
Share of earnings of
investment at equity - - 1 - 1
Other income (charges),
net - - (8) - (8)
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Earnings from continuing
operations before
income taxes and non-
controlling interests 506 152 (7) (44) 607
Income taxes 47 38 - (1) 84
Non-controlling interests 157 49 - (23) 183
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Contribution to
consolidated earnings
from continuing
operations 302 65 (7) (20) 340
Contribution to
consolidated earnings
from discontinued
operations - - - - -
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Contribution to
consolidated net
earnings 302 65 (7) (20) 340
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Three months ended
December 31, 2008
(unaudited)
(in millions of Par-
Canadian dollars) Lifeco IGM jointco Other Total
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Revenues
Premium income 4,782 - - - 4,782
Net investment income
Regular net investment
income 1,423 36 - 10 1,469
Change in fair value
on held-for-trading
assets (368) - - - (368)
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1,055 36 - 10 1,101
Fee income 743 549 - (40) 1,252
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6,580 585 - (30) 7,135
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Expenses
Policyholder benefits,
dividends and experience
refunds, and change in
actuarial liabilities 4,815 - - - 4,815
Commissions 360 206 - (40) 526
Operating expenses 746 163 - 9 918
Financing charges 37 25 - 12 74
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5,958 394 - (19) 6,333
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622 191 - (11) 802
Share of earnings of
investment at equity - - 2 - 2
Other income (charges),
net (2,248) - (376) 210 (2,414)
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Earnings from continuing
operations before
income taxes and non-
controlling interests (1,626) 191 (374) 199 (1,610)
Income taxes (744) 51 - - (693)
Non-controlling
interests (244) 95 - 5 (144)
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Contribution to
consolidated earnings
from continuing
operations (638) 45 (374) 194 (773)
Contribution to
consolidated earnings
from discontinued
operations - - - - -
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Contribution to
consolidated net
earnings (638) 45 (374) 194 (773)
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For the year ended
December 31, 2009
(in millions of Par-
Canadian dollars) Lifeco IGM jointco Other Total
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Revenues
Premium income 18,033 - - - 18,033
Net investment income
Regular net investment
income 6,179 89 - (65) 6,203
Change in fair value
on held-for-trading
assets 3,490 (27) - - 3,463
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9,669 62 - (65) 9,666
Fee income 2,839 2,250 - (91) 4,998
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30,541 2,312 - (156) 32,697
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Expenses
Policyholder benefits,
dividends and experience
refunds, and change in
actuarial liabilities 23,809 - - - 23,809
Commissions 1,370 808 - (90) 2,088
Operating expenses 2,946 614 - 47 3,607
Financing charges 336 110 - 48 494
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28,461 1,532 - 5 29,998
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2,080 780 - (161) 2,699
Share of earnings of
investment at equity - - 141 - 141
Other income (charges),
net - - (70) 12 (58)
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Earnings from continuing
operations before
income taxes and non-
controlling interests 2,080 780 71 (149) 2,782
Income taxes 345 221 - (1) 565
Non-controlling interests 617 247 - (86) 778
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Contribution to
consolidated earnings
from continuing
operations 1,118 312 71 (62) 1,439
Contribution to
consolidated earnings
from discontinued
operations - - - - -
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Contribution to
consolidated net
earnings 1,118 312 71 (62) 1,439
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For the year ended
December 31, 2008
(in millions of Par-
Canadian dollars) Lifeco IGM jointco Other Total
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Revenues
Premium income 30,007 - - - 30,007
Net investment income
Regular net investment
income 5,962 202 - (50) 6,114
Change in fair value
on held-for-trading
assets (5,161) - - - (5,161)
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801 202 - (50) 953
Fee income 3,124 2,503 - (87) 5,540
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33,932 2,705 - (137) 36,500
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Expenses
Policyholder benefits,
dividends and experience
refunds, and change in
actuarial liabilities 26,774 - - - 26,774
Commissions 1,353 906 - (87) 2,172
Operating expenses 2,886 648 - 71 3,605
Financing charges 296 91 - 51 438
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31,309 1,645 - 35 32,989
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2,623 1,060 - (172) 3,511
Share of earnings of
investment at equity - - 183 - 183
Other income (charges),
net (2,248) - (364) 210 (2,402)
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Earnings from continuing
operations before
income taxes and non-
controlling interests 375 1,060 (181) 38 1,292
Income taxes (278) 293 - 1 16
Non-controlling interests 174 355 - (87) 442
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Contribution to
consolidated earnings
from continuing
operations 479 412 (181) 124 834
Contribution to
consolidated earnings
from discontinued
operations 503 - - - 503
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Contribution to
consolidated net
earnings 982 412 (181) 124 1,337
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For further information: Mr. Edward Johnson, Senior Vice-President, General Counsel and Secretary, (514) 286-7400
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