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Press release from CNW Group

POWER FINANCIAL CORPORATION - 2010 FINANCIAL RESULTS AND DIVIDENDS

Thursday, March 10, 2011

POWER FINANCIAL CORPORATION - 2010 FINANCIAL RESULTS AND DIVIDENDS10:41 EST Thursday, March 10, 2011Readers are referred to the sections entitled "Forward-looking Statements" and "Non-GAAP Financial Measures" at the end of this release.MONTREAL, March 10 /CNW Telbec/ - Power Financial Corporation reported today operating earnings for the year ended December 31, 2010 of $1,733 million or $2.31 per share, compared with $1,533 million or $2.05 per share in the corresponding period in 2009. This represents an increase of 12.8% 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 (Lifeco) and IGM Financial (IGM).For the twelve month period ended December 31, 2010, other items represent a charge of $149 million and consisted mainly of Power Financial's share of a litigation provision established by Lifeco in the third quarter. In the corresponding period of 2009, other items were a charge of $94 million which essentially consisted of the Corporation's share of non-recurring amounts recorded by IGM and Pargesa Holding SA (Pargesa), as discussed below.As a result, net earnings including other items were $1,584 million or $2.10 per share for the year ended December 31, 2010, compared with $1,439 million or $1.92 per share in the corresponding period of 2009. << FOURTH QUARTER RESULTS ---------------------- >>Power Financial Corporation's operating earnings for the three-month period ended December 31, 2010 were $452 million or $0.60 per share, compared with $384 million or $0.51 per share in the same period in 2009, an increase of 17.6% on a per share basis.For the three-month period ended December 31, 2010, other items represent a charge of $9 million consisting of the Corporation's share of Pargesa's non-operating results, compared with a charge of $44 million in the same period in 2009. The 2009 charge consists mainly of non-operating items of IGM, as discussed below.As a result, net earnings including other items for the three months ended December 31, 2010 were $443 million or $0.59 per share, compared with $340 million or $0.45 per share for the same period in 2009. << RESULTS OF SUBSIDIARIES AND PARJOINTCO -------------------------------------- >>Great-West Lifeco Inc.For the twelve months ended December 31, 2010, Lifeco reported operating earnings attributable to common shareholders of $1,861 million, compared with $1,627 million a year ago, an increase of 14.4%. On a per share basis, this represents $1.964 per common share for 2010, compared with $1.722 per common share in the corresponding period of 2009.Lifeco reported net earnings attributable to common shareholders of $508 million for the three months ended December 31, 2010, compared with $443 million for the same period in 2009, an increase of 14.7%. On a per share basis, this represents $0.535 per common share for the three months ended December 31, 2010, compared with $0.468 per common share for the corresponding period in 2009.Operating earnings exclude the impact of an incremental litigation provision established in the third quarter of 2010 in the amount of $225 million after tax ($204 million attributable to the common shareholders of Lifeco and $21 million to Lifeco's non-controlling interests).Net earnings attributable to common shareholders were, respectively, $1,657 million or $1.748 per share for the twelve-month period ended December 31, 2010 and $508 million or $0.535 per share for the three-month period ended December 31, 2010.For the twelve months ended December 31, 2010, the strengthening of the Canadian dollar against the U.S. dollar, the British pound and the euro had a negative currency impact on Lifeco's net earnings of $103 million. For the three months ended December 31, 2010, negative currency impact on net earnings of Lifeco was $17 million. Power Financial's share of this currency effect is $73 million or $0.10 per share for the twelve-month period ended December 31, 2010, and $12 million or $0.02 per share for the three-month period ended December 31, 2010.Lifeco's contribution to Power Financial's operating earnings was $1,276 million for the twelve-month period ended December 31, 2010, compared with $1,120 million for the corresponding period in 2009. For the three-month period ended December 31, 2010, Lifeco's contribution to Power Financial's operating earnings was $347 million, compared with $305 million in 2009.IGM Financial Inc.IGM reported operating earnings available to common shareholders for the twelve-month period ended December 31, 2010 of $734 million or $2.79 per share, compared with $622 million or $2.35 per share in the same period in 2009. This represents an increase of 18.7% on a per share basis.For the three months ended December 31, 2010, IGM reported operating earnings available to common shareholders of $198 million or $0.76 per share, compared with operating earnings available to common shareholders of $177 million or $0.67 per share for the same period in 2009. This represents an increase of 13.4% on a per share basis.Other items for the year ended December 31, 2010 represent a charge of $8 million representing IGM's share of Lifeco's after-tax charge relating to the incremental litigation provision recorded in the third quarter. Other items for the year ended December 31, 2009 consisted of a non-cash impairment charge of $66 million after tax on available for sale equity securities, a non-cash income tax benefit of $18 million resulting from decreases in corporate income tax rates and their effect on the future income tax liability related to indefinite life intangible assets, and a premium of $14 million paid on the redemption of preferred shares.Net earnings available to common shareholders, including other items, for the year ended December 31, 2010 were $726 million or $2.76 per share, compared to net earnings available to common shareholders, including other items, of $559 million or $2.12 per share in 2009. Net earnings available to common shareholders for the three months ended December 31, 2010 were $198 million or $0.76 per share compared to operating earnings available to common shareholders of $177 million or $0.67 per share in the corresponding period of 2009.For the twelve-month and three-month periods ended December 31, 2010, IGM contributed $416 million and $112 million to Power Financial's operating earnings, compared with $347 million and $99 million in the corresponding periods of 2009.Parjointco N.V.Power Financial holds a 50% interest in Parjointco N.V., which in turn holds a 54.1% interest in Pargesa. Pargesa reported operating earnings of SF465 million in the twelve-month period ended December 31, 2010, compared with SF512 million for the corresponding period in 2009. The results for Pargesa for the twelve-month period ended December 31, 2010 reflect (i) increased earnings from Imerys, (ii) offset by the fact that GDF Suez had paid a special one-time dividend of SF73 million in the second quarter of 2009 and (iii), to a lesser extent, a decrease in the contribution from Lafarge. For the quarter ended December 31, 2010, Pargesa's operating earnings were SF26 million, compared with SF8 million in the corresponding period of 2009.Operating earnings of Pargesa exclude net non-recurring charges of SF1 million for the twelve-month period ended December 31, 2010, consisting principally of Pargesa's share of non-operating earnings of Imerys and Lafarge of SF24 million less non-operating charges at the holding company level consisting of impairment charges of SF16 million principally on GBL's investment in Iberdrola S.A. (SF15 million) as a result of a decline in the market value of the investment. Included in the non-operating earnings of Imerys is a gain recorded under International Financial Reporting Standards (IFRS) of SF25 million representing negative goodwill which is not recognized under Canadian GAAP. This gain will be reflected in the Corporation's 2010 IFRS financial statements.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 IFRS of an impairment charge taken on Lafarge in the third quarter of 2008, for an amount of SF510 million. This latter amount was not recognized by the Corporation under Canadian GAAP.Expressed in Canadian dollars, the contribution from Parjointco to Power Financial's operating earnings was $120 million for the twelve-month period ended December 31, 2010, compared with $141 million for the corresponding period in 2009. For the fourth quarter of 2010, the contribution from Parjointco to Power Financial's operating earnings was $7 million, compared with $1 million in the fourth quarter of 2009. << PREFERRED SHARE DIVIDENDS ------------------------- >>The Board of Directors today declared quarterly dividends on the Corporation's preferred shares, as follows: << ------------------------------------------------------------------------- Type of shares Record Date Payment Date Amount ------------------------------------------------------------------------- Series A April 22, 2011 May 15, 2011 To be determined in accordance with the articles of the Corporation ------------------------------------------------------------------------- Series D April 8, 2011 April 30, 2011 34.375 cents ------------------------------------------------------------------------- Series E April 8, 2011 April 30, 2011 32.8125 cents ------------------------------------------------------------------------- Series F April 8, 2011 April 30, 2011 36.875 cents ------------------------------------------------------------------------- Series H April 8, 2011 April 30, 2011 35.9375 cents ------------------------------------------------------------------------- Series I April 8, 2011 April 30, 2011 37.50 cents ------------------------------------------------------------------------- Series K April 8, 2011 April 30, 2011 30.9375 cents ------------------------------------------------------------------------- Series L April 8, 2011 April 30, 2011 31.875 cents ------------------------------------------------------------------------- Series M April 8, 2011 April 30, 2011 37.50 cents ------------------------------------------------------------------------- Series O April 8, 2011 April 30, 2011 36.25 cents ------------------------------------------------------------------------- Series P April 8, 2011 April 30, 2011 27.50 cents ------------------------------------------------------------------------- COMMON SHARE DIVIDEND --------------------- >>The Board of Directors also declared a quarterly dividend of 35 cents per share on the Corporation's common shares payable May 2, 2011 to shareholders of record April 1, 2011.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.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 ------------------------------------------------------------------------- As at December 31 (in millions of Canadian dollars) 2010 2009 ------------------------------------------------------------------------- Assets Cash and cash equivalents 3,656 4,855 ------------------------------------------------------------------------- Investments Shares 6,415 6,392 Bonds 73,635 67,388 Mortgages and other loans 16,736 17,356 Real estate 3,275 3,101 ------------------------------------------------------------------------- 100,061 94,237 Loans to policyholders 6,827 6,957 Funds held by ceding insurers 9,860 10,839 Investment at equity 2,279 2,675 Intangible assets 4,238 4,366 Goodwill 8,726 8,655 Future income taxes 1,174 1,268 Other assets 6,434 6,379 ------------------------------------------------------------------------- 143,255 140,231 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Policy liabilities Actuarial liabilities 100,394 98,059 Other 4,723 4,592 Deposits and certificates 835 907 Funds held under reinsurance contracts 152 186 Debentures and other borrowings 6,348 5,967 Capital trust securities and debentures 535 540 Preferred shares of the Corporation - 300 Preferred shares of subsidiaries - 203 Future income taxes 1,167 1,098 Other liabilities 6,861 6,294 ------------------------------------------------------------------------- 121,015 118,146 ------------------------------------------------------------------------- Non-controlling interests 9,056 8,878 ------------------------------------------------------------------------- Shareholders' Equity Stated capital Perpetual preferred shares 2,005 1,725 Common shares 636 605 Contributed surplus 105 102 Retained earnings 11,641 11,165 Accumulated other comprehensive income (loss) (1,203) (390) ------------------------------------------------------------------------- 13,184 13,207 ------------------------------------------------------------------------- 143,255 140,231 ------------------------------------------------------------------------- ------------------------------------------------------------------------- >>For additional information, refer to the 2010 Audited Consolidated Financial Statements. << CONSOLIDATED STATEMENTS OF EARNINGS ------------------------------------------------------------------------- Three months ended For the years December 31 ended (unaudited) December 31 ------------------------------------------------------------------------- (in millions of Canadian dollars, except per share amounts) 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenues Premium income 4,610 4,324 17,748 18,033 Net investment income Regular net investment income 1,499 1,383 5,783 6,203 Change in fair value on held-for-trading assets (1,564) (556) 3,646 3,463 ------------------------------------------------------------------------- (65) 827 9,429 9,666 Fee income 1,342 1,348 5,250 4,998 ------------------------------------------------------------------------- 5,887 6,499 32,427 32,697 ------------------------------------------------------------------------- Expenses Policyholder benefits, dividends and experience refunds, and change in actuarial liabilities 3,553 4,283 23,063 23,809 Commissions 616 579 2,277 2,088 Operating expenses 821 920 3,834 3,607 Financing charges 105 103 427 494 ------------------------------------------------------------------------- 5,095 5,885 29,601 29,998 ------------------------------------------------------------------------- 792 614 2,826 2,699 Share of earnings of investment at equity 7 1 120 141 Other income (charges), net (9) (8) (5) (58) ------------------------------------------------------------------------- Earnings before income taxes and non-controlling interests 790 607 2,941 2,782 Income taxes 119 84 497 565 Non-controlling interests 228 183 860 778 ------------------------------------------------------------------------- Net earnings 443 340 1,584 1,439 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per common share - Basic 0.59 0.45 2.10 1.92 ------------------------------------------------------------------------- - Diluted 0.59 0.45 2.10 1.91 ------------------------------------------------------------------------- SEGMENTED INFORMATION INFORMATION ON PROFIT MEASURE ------------------------------------------------------------------------- Three months ended December 31, 2010 (unaudited) (in millions of Par- Canadian dollars) Lifeco IGM jointco Other Total ------------------------------------------------------------------------- Revenues Premium income 4,610 - - - 4,610 Net investment income Regular net investment income 1,475 48 - (24) 1,499 Change in fair value on held-for-trading assets (1,555) (9) - - (1,564) ------------------------------------------------------------------------- (80) 39 - (24) (65) Fee income 729 654 - (41) 1,342 ------------------------------------------------------------------------- 5,259 693 - (65) 5,887 ------------------------------------------------------------------------- Expenses Policyholder benefits, dividends and experience refunds, and change in actuarial liabilities 3,553 - - - 3,553 Commissions 430 227 - (41) 616 Operating expenses 650 159 - 12 821 Financing charges 71 28 - 6 105 ------------------------------------------------------------------------- 4,704 414 - (23) 5,095 ------------------------------------------------------------------------- 555 279 - (42) 792 Share of earnings of investment at equity - - 7 - 7 Other income (charges), net - - (9) - (9) ------------------------------------------------------------------------- Earnings before income taxes and non- controlling interests 555 279 (2) (42) 790 Income taxes 41 78 - - 119 Non-controlling interests 166 89 - (27) 228 ------------------------------------------------------------------------- Contribution to consolidated net earnings 348 112 (2) (15) 443 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Three months ended December 31, 2009 (unaudited) (in millions of Par- Canadian dollars) Lifeco IGM jointco Other Total ------------------------------------------------------------------------- Revenues Premium income 4,324 - - - 4,324 Net investment income Regular net investment income 1,461 (55) - (23) 1,383 Change in fair value on held-for-trading assets (549) (7) - - (556) ------------------------------------------------------------------------- 912 (62) - (23) 827 Fee income 765 609 - (26) 1,348 ------------------------------------------------------------------------- 6,001 547 - (49) 6,499 ------------------------------------------------------------------------- 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 33 - 8 103 ------------------------------------------------------------------------- 5,495 395 - (5) 5,885 ------------------------------------------------------------------------- 506 152 - (44) 614 Share of earnings of investment at equity - - 1 - 1 Other income (charges), net - - (8) - (8) ------------------------------------------------------------------------- Earnings 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 ------------------------------------------------------------------------- Contribution to consolidated net earnings 302 65 (7) (20) 340 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the year ended December 31, 2010 (in millions of Par- Canadian dollars) Lifeco IGM jointco Other Total ------------------------------------------------------------------------- Revenues Premium income 17,748 - - - 17,748 Net investment income Regular net investment income 5,743 119 - (79) 5,783 Change in fair value on held-for-trading assets 3,633 13 - - 3,646 ------------------------------------------------------------------------- 9,376 132 - (79) 9,429 Fee income 2,874 2,491 - (115) 5,250 ------------------------------------------------------------------------- 29,998 2,623 - (194) 32,427 ------------------------------------------------------------------------- Expenses Policyholder benefits, dividends and experience refunds, and change in actuarial liabilities 23,063 - - - 23,063 Commissions 1,523 869 - (115) 2,277 Operating expenses 3,145 636 - 53 3,834 Financing charges 283 111 - 33 427 ------------------------------------------------------------------------- 28,014 1,616 - (29) 29,601 ------------------------------------------------------------------------- 1,984 1,007 - (165) 2,826 Share of earnings of investment at equity - - 120 - 120 Other income (charges), net - - (5) - (5) ------------------------------------------------------------------------- Earnings before income taxes and non- controlling interests 1,984 1,007 115 (165) 2,941 Income taxes 227 271 - (1) 497 Non-controlling interests 620 325 - (85) 860 ------------------------------------------------------------------------- Contribution to consolidated net earnings 1,137 411 115 (79) 1,584 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- For the year ended December 31, 2009 (in millions of Par- Canadian dollars) Lifeco IGM jointco Other Total ------------------------------------------------------------------------- Revenues Premium income 18,033 - - - 18,033 Net investment income Regular net investment income 6,179 105 - (81) 6,203 Change in fair value on held-for-trading assets 3,490 (27) - - 3,463 ------------------------------------------------------------------------- 9,669 78 - (81) 9,666 Fee income 2,839 2,250 - (91) 4,998 ------------------------------------------------------------------------- 30,541 2,328 - (172) 32,697 ------------------------------------------------------------------------- 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 336 126 - 32 494 ------------------------------------------------------------------------- 28,461 1,548 - (11) 29,998 ------------------------------------------------------------------------- 2,080 780 - (161) 2,699 Share of earnings of investment at equity - - 141 - 141 Other income (charges), net - - (70) 12 (58) ------------------------------------------------------------------------- Earnings 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 ------------------------------------------------------------------------- Contribution to consolidated net earnings 1,118 312 71 (62) 1,439 ------------------------------------------------------------------------- ------------------------------------------------------------------------- >>For further information: Mr. Edward Johnson, Senior Vice-President, General Counsel and Secretary, (514) 286-7400