Power Financial Corporation Reports 2011 Financial Results and Dividends

Readers are referred to the sections entitled "Forward-looking Statements" and "Non-IFRS Financial Measures" at the end of this release. The Corporation's financial results are reported under International Financial Reporting Standards (IFRS) and all comparative figures have been restated accordingly.

MONTREAL, March 14, 2012 /CNW Telbec/ - Power Financial Corporation (TSX: PWF) today reported operating earnings attributable to common shareholders for the year ended December 31, 2011 of $1,729 million or $2.44 per share, compared with $1,625 million or $2.30 per share in 2010. This represents an increase of 6.2% on a per share basis.

The increase in operating earnings reflects primarily the increase in the contribution from the Corporation's subsidiaries, Great-West Lifeco Inc. (Lifeco) and IGM Financial Inc. (IGM).

For the year ended December 31, 2011, other items were a charge of $7 million and consisted mainly of the Corporation's share of an impairment charge recorded by Pargesa Holding SA (Pargesa) in the third quarter on its indirect investment in Lafarge SA, offset by the Corporation's share of non-operating earnings of Lifeco and IGM, as discussed below. In 2010, other items were a charge of $157 million and consisted mainly of Power Financial's share of a litigation provision recorded in the third quarter by Lifeco.

As a result, net earnings attributable to common shareholders for the year ended December 31, 2011 were $1,722 million or $2.43 per share, compared with $1,468 million or $2.08 per share in 2010.

FOURTH QUARTER RESULTS
For the quarter ended December 31, 2011, operating earnings attributable to common shareholders of the Corporation were $422 million or $0.60 per share, compared with $404 million or $0.57 per share in the corresponding quarter of 2010, an increase of 4.6% on a per share basis.

Other items for the fourth quarter of 2011 were a contribution of $111 million, compared with a charge of $15 million for the same period in 2010:

• In the fourth quarter of 2011, Lifeco re-evaluated and reduced a litigation provision established in the third quarter of 2010. The re-evaluation positively impacted common shareholders' net earnings of Lifeco by $223 million. Additionally, Lifeco established a $99 million after-tax provision in respect of the settlement of litigation relating to its ownership in a U.S.-based private equity firm. The net impact to Power Financial of these two unrelated matters was a contribution of $88 million.
• Other items at IGM represent the after-tax gain on the sale of M.R.S. Trust Company and M.R.S. Inc. by Mackenzie Financial Corporation.

As a result, net earnings attributable to common shareholders for the quarter ended December 31, 2011 were $533 million or $0.75 per share, compared with $389 million or $0.55 per share in the corresponding quarter of 2010.

RESULTS OF SUBSIDIARIES AND PARJOINTCO
GREAT-WEST LIFECO INC.
For the year ended December 31, 2011, Lifeco reported operating earnings attributable to common shareholders of $1,898 million, compared with $1,819 million in 2010. This represents $2.000 per common share for 2011, compared with $1.920 per common share in 2010, an increase of 4%.

For the three-month period ended December 31, 2011, Lifeco reported operating earnings attributable to common shareholders of $500 million or $0.528 per share, compared with $465 million or $0.491 per share in the same period in 2010.

Operating earnings exclude the net impact of two unrelated litigation provisions which increased earnings of Lifeco by $124 million in the fourth quarter of 2011.

Net earnings attributable to common shareholders were $2,022 million or $2.129 per share for the year ended December 31, 2011, compared with $1,615 million or $1.704 per share in 2010. For the three-month period ended December 31, 2011, net earnings attributable to common shareholders were $624 million or $0.657 per share, compared with $465 million or $0.491 per share in the same period in 2010.

Lifeco's contribution to Power Financial's operating earnings was $1,298 million for the twelve-month period ended December 31, 2011, compared with $1,249 million in the corresponding period of 2010. For the three-month period ended December 31, 2011, Lifeco's contribution to Power Financial's operating earnings was $342 million, compared with $319 million in the same period in 2010.

IGM FINANCIAL INC.
IGM reported operating earnings available to common shareholders for the year ended December 31, 2011 of $833 million or $3.22 per share, compared with $759 million or $2.89 per share for the same period in 2010, an increase of 11.4% on a per share basis.

For the three months ended December 31, 2011, IGM reported operating earnings available to common shareholders of $196 million or $0.76 per share, compared with $210 million or $0.80 per share for the same period in 2010, a decrease of 5.0% on a per share basis.

Other items for the year ended December 31, 2011 represent primarily an after-tax gain on the sale of M.R.S. Trust Company and M.R.S. Inc. by Mackenzie Financial Corporation (a subsidiary of IGM) for an amount of $30 million, as well as a $29 million positive one-time tax adjustment.

Net earnings available to common shareholders for the year ended December 31, 2011 were $901 million or $3.48 per share, compared with $731 million or $2.78 per share in the corresponding period of 2010. Net earnings available to common shareholders for the three months ended December 31, 2011 were $231 million or $0.89 per share, compared to net earnings available to common shareholders of $190 million or $0.73 per share in the same period of 2010.

For the twelve-month and three-month periods ended December 31, 2011, IGM contributed $480 million and $113 million, respectively, to Power Financial's operating earnings, compared with $432 million and $119 million, respectively, in the corresponding periods of 2010.

PARJOINTCO N.V.
Power Financial held a 50% interest in Parjointco N.V., which in turn held a 56.5% equity interest in Pargesa at December 31, 2011. Pargesa reported operating earnings of SF343 million for the year ended December 31, 2011, compared with SF466 million in 2010. For the three-month period ended December 31, 2011, operating earnings were SF24 million, compared with SF26 million in the corresponding quarter of 2010.

The results for Pargesa for the twelve-month period ended December 31, 2011 reflect (i) that although in 2011 Imerys reported earnings growth of 25% over 2010, Imerys' contribution to Pargesa's results decreased by 13% due to a reduced percentage of ownership, since Pargesa's direct interest in Imerys was sold to its subsidiary Groupe Bruxelles Lambert (GBL) in April 2011, and due to the weakening of the euro against the Swiss franc; (ii) a decrease in the contribution from Lafarge due to lower operating earnings and currency effects; and (iii) a foreign currency loss of SF55 million related to the proceeds of the disposal by Pargesa of the Imerys shareholding referred to above which was received in euros.

Including other items composed primarily of Pargesa's share of the impairment charge recorded by GBL on its Lafarge investment in the amount of SF417 million, Pargesa reported a net loss of SF65 million for the year ended December 31, 2011, compared with net earnings of SF466 million in 2010.

Expressed in Canadian dollars, the contribution from Pargesa to Power Financial's operating earnings, which exclude other items, was $110 million for the year ended December 31, 2011, compared with $121 million in 2010. For the three-month period ended December 31, 2011, the contribution from Pargesa to Power Financial's operating earnings was $7 million, the same as in the corresponding quarter of 2010.

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

SERIES - STOCK SYMBOL	RECORD DATE	PAYMENT DATE	AMOUNT
Series A - PWF.PR.A	April 24, 2012	May 15, 2012	To be determined in accordance with the articles of the Corporation
Series D - PWF.PR.E	April 10, 2012	April 30, 2012	34.375¢
Series E - PWF.PR.F	April 10, 2012	April 30, 2012	32.8125¢
Series F - PWF.PR.G	April 10, 2012	April 30, 2012	36.875¢
Series H - PWF.PR.H	April 10, 2012	April 30, 2012	35.9375¢
Series I - PWF.PR.I	April 10, 2012	April 30, 2012	37.50¢
Series K - PWF.PR.K	April 10, 2012	April 30, 2012	30.9375¢
Series L - PWF.PR.L	April 10, 2012	April 30, 2012	31.875¢
Series M - PWF.PR.M	April 10, 2012	April 30, 2012	37.50¢
Series O - PWF.PR.O	April 10, 2012	April 30, 2012	36.25¢
Series P - PWF.PR.P	April 10, 2012	April 30, 2012	27.50¢
Series R - PWF.PR.R	April 10, 2012	April 30, 2012	25.24¢

DIVIDEND ON COMMON SHARES
The Board of Directors also declared a quarterly dividend of 35 cents per share on the Corporation's common shares payable May 1, 2012 to shareholders of record March 30, 2012.

For purposes of the Income Tax Act (Canada) and any similar provincial legislation, all of the above dividends on 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 current expectations, or with respect to disclosure regarding the Corporation's public subsidiaries, reflects such subsidiaries' disclosed current expectations. Forward-looking statements are provided for the purposes of assisting the reader in understanding the Corporation's financial performance, financial position and cash flows 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, 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 applicable Canadian law, the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.

Additional information about the risks and uncertainties of the Corporation's business and material factors or assumptions on which information contained in forward-looking statements is based is provided in its disclosure materials, including its most recent Management's Discussion and Analysis and Annual Information Form, filed with the securities regulatory authorities in Canada and available at www.sedar.com.

Non-IFRS Financial Measures
In analyzing 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 or non-operating earnings, 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 its subsidiaries.

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.

Operating earnings and operating earnings per share are non-IFRS financial measures that do not have a standard meaning and may not be comparable to similar measures used by other entities.

 

CONSOLIDATED BALANCE SHEETS
[in millions of Canadian dollars]		December 31, 2011	December 31, 2010	January 1, 2010
Assets
Cash and cash equivalents		3,385	3,656	4,855
Investments
	Bonds	78,759	73,582	67,388
	Mortgages and other loans	21,518	20,209	20,613
	Shares	6,402	6,415	6,392
	Investment properties	3,201	2,957	2,615
	Loans to policyholders	7,162	6,827	6,957
		117,042	109,990	103,965
Funds held by ceding insurers		9,923	9,856	10,984
Reinsurance assets		2,061	2,533	2,800
Investment in associates		2,222	2,448	2,829
Owner-occupied properties		541	489	479
Capital assets		197	176	190
Derivative financial instruments		1,056	1,029	775
Other assets		4,653	4,679	4,774
Deferred tax assets		1,207	1,220	1,262
Intangible assets		5,023	5,024	5,206
Goodwill		8,786	8,717	8,655
Segregated funds for the risk of unit holders		96,582	94,827	87,495
Total assets		252,678	244,644	234,269
Liabilities
Insurance contract liabilities		114,730	107,405	105,028
Investment contract liabilities		782	791	841
Deposits and certificates		151	835	907
Funds held under reinsurance contracts		169	149	331
Obligation to securitization entities		3,827	3,505	3,310
Debentures and other borrowings		5,888	6,313	5,931
Capital trust securities		533	535	540
Derivative financial instruments		427	244	359
Preferred shares of the Corporation		-	-	300
Preferred shares of subsidiaries		-	-	199
Other liabilities		5,516	7,383	6,608
Deferred tax liabilities		1,258	1,105	978
Insurance and investment contracts on account of unit holders		96,582	94,827	87,495
Total liabilities		229,863	223,092	212,827
Equity
Stated capital
	Perpetual preferred shares	2,005	2,005	1,725
	Common shares	639	636	605
Retained earnings		10,743	9,982	9,523
Reserves		134	188	969
Total shareholders' equity		13,521	12,811	12,822
Non-controlling interests		9,294	8,741	8,620
Total equity		22,815	21,552	21,442
Total liabilities and equity		252,678	244,644	234,269

CONSOLIDATED STATEMENTS OF EARNINGS
For the years ended December 31 [in millions of Canadian dollars, except per share amounts]			2011	2010
Revenues
Premium income
	Gross premiums written		20,013	20,404
	Ceded premiums		(2,720)	(2,656)
Total net premiums			17,293	17,748
Net investment income
	Regular net investment income		5,610	5,815
	Change in fair value		4,154	3,785
			9,764	9,600
Fee income			5,343	5,174
Total revenues			32,400	32,522
Expenses
Policyholder benefits
	Insurance and investment contracts
		Gross	16,591	17,550
		Ceded	(1,217)	(2,208)
			15,374	15,342
Policyholder dividends and experience refunds			1,424	1,466
Change in insurance and investment contract liabilities			6,245	6,417
Total paid or credited to policyholders			23,043	23,225
Commissions			2,312	2,216
Operating and administrative expenses			3,006	3,837
Financing charges			409	432
Total expenses			28,770	29,710
			3,630	2,812
Share of earnings (losses) of investment in associates			(20)	121
Earnings before income taxes - continuing operations			3,610	2,933
Income taxes			706	523
Net earnings - continuing operations			2,904	2,410
Net earnings - discontinued operations			63	2
Net earnings			2,967	2,412
Attributable to
	Non-controlling interests		1,141	845
	Perpetual preferred shareholders		104	99
	Common shareholders		1,722	1,468
			2,967	2,412
Earnings per common share
	Net earnings attributable to common shareholders
		- Basic	2.43	2.08
		- Diluted	2.41	2.06
	Net earnings from continuing operations attributable to common shareholders
		- Basic	2.38	2.08
		- Diluted	2.36	2.06

SEGMENTED INFORMATION
INFORMATION ON PROFIT MEASURE
For the year ended December 31, 2011		Lifeco		IGM		Parjointco		Other		Total
Revenues
Premium income, net		17,293		-		-		-		17,293
Investment income, net		9,702		161		-		(99)		9,764
Fee income		2,903		2,571		-		(131)		5,343
		29,898		2,732		-		(230)		32,400
Expenses
Total paid or credited to policyholders		23,043		-		-		-		23,043
Commissions		1,548		895		-		(131)		2,312
Operating and administrative expenses		2,314		638		-		54		3,006
Financing charges		289		103		-		17		409
		27,194		1,636		-		(60)		28,770
		2,704		1,096		-		(170)		3,630
Share of earnings (losses) of investment in associates		-		-		(20)		-		(20)
Earnings before income taxes - continuing operations		2,704		1,096		(20)		(170)		3,610
Income taxes		465		250		-		(9)		706
Contribution to net earnings - continuing operations		2,239		846		(20)		(161)		2,904
Contribution to net earnings - discontinued operations		-		63		-		-		63
Contribution to net earnings		2,239		909		(20)		(161)		2,967
Attributable to
	Non-controlling interests	855		392		-		(106)		1,141
	Perpetual preferred shareholders	-		-		-		104		104
	Common shareholders	1,384		517		(20)		(159)		1,722
		2,239		909		(20)		(161)		2,967
For the year ended December 31, 2010		Lifeco		IGM		Parjointco		Other		Total
Revenues
Premium income, net		17,748		-		-		-		17,748
Investment income, net		9,534		146		-		(80 )		9,600
Fee income		2,821		2,468		-		(115 )		5,174
		30,103		2,614		-		(195 )		32,522
Expenses
Total paid or credited to policyholders		23,225		-		-		-		23,225
Commissions		1,477		854		-		(115)		2,216
Operating and administrative expenses		3,150		636		-		51		3,837
Financing charges		288		111		-		33		432
		28,140		1,601		-		(31)		29,710
		1,963		1,013		-		(164)		2,812
Share of earnings (losses) of investment in associates		-		-		121		-		121
Earnings before income taxes - continuing operations		1,963		1,013		121		(164)		2,933
Income taxes		254		270		-		(1)		523
Contribution to net earnings - continuing operations		1,709		743		121		(163)		2,410
Contribution to net earnings - discontinued operations		-		2		-		-		2
Contribution to net earnings		1,709		745		121		(163)		2,412
Attributable to
	Non-controlling interests	600		330		-		(85)		845
	Perpetual preferred shareholders	-		-		-		99		99
	Common shareholders	1,109		415		121		(177)		1,468
		1,709		745		121		(163)		2,412

 

Attachments: Financial Information

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