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Press release from PR Newswire

Power Financial Corporation Reports 2011 Financial Results and Dividends

Wednesday, March 14, 2012

Power Financial Corporation Reports 2011 Financial Results and Dividends10:35 EDT Wednesday, March 14, 2012 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 /PRNewswire/ - 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   SOURCE POWER FINANCIAL CORPORATIONFor further information: <p> </p> <p> <b>Attachments:</b> Financial Information </p> <p> <b>For further information, please contact:</b> <br/> Mr. Edward Johnson<br/> Senior Vice-President,<br/> General Counsel and Secretary<br/> 514-286-7400 </p>