Readers are referred to the Forward-looking Statements and Non-GAAP
Financial Measures sections at the end of this release.
MONTREAL, Nov. 8 /CNW Telbec/ - Power Corporation of Canada's operating earnings for the nine-month period ended September 30, 2007 were $1,149 million or $2.47 per share, compared with $866 million or $1.85 per share in the corresponding period of 2006. This represents a 33.1% increase on a per share basis.
Growth in operating earnings reflects an increase of 19% in the contribution from Power Financial, as well as a significant increase in income from investments, generated primarily by the Corporation's operations as a Qualified Foreign Institutional Investor in China, its portfolio of investment funds in North America, its interest in Sagard 1 Fund in Europe and dividends received from its investment in Citic Pacific.
Other income was a charge of $36 million or $0.08 per share for the nine-month period in 2007, reflecting primarily the Corporation's share of a $97 million after tax provision recorded in the third quarter by Great-West Lifeco for certain Canadian retirement plans, as well as other items. Other income was $238 million or $0.53 per share in 2006, primarily composed of the Corporation's share, in the amount of $236 million, of the gain resulting from the sale by Groupe Bruxelles Lambert of its 25.1% interest in Bertelsmann AG.
Net earnings for the nine months ended September 30, 2007 were $1,113 million or $2.39 per share, compared with $1,104 million or $2.38 per share in the same period of 2006.
THIRD-QUARTER RESULTS
---------------------
For the quarter ended September 30, 2007, operating earnings of the Corporation were $392 million or $0.84 per share, compared with $273 million or $0.58 per share in the third quarter of 2006. This represents an increase of 44.6% on a per share basis.
Other items for the third quarter of 2007 were a charge of $38 million or $0.08 per share reflecting primarily the impact of the provision recorded by Great-West Lifeco as described above. For the corresponding period in 2006, other items were $236 million or $0.52 per share, representing essentially the Corporation's share of the gain recorded by GBL from the sale of its interest in Bertelsmann.
Net earnings for the quarter were $354 million or $0.76 per share in 2007, compared with $509 million or $1.10 per share in 2006.
RESULTS OF POWER FINANCIAL CORPORATION
--------------------------------------
Power Financial Corporation's operating earnings for the nine-month period ended September 30, 2007 were $1,583 million or $2.16 per share, compared with $1,330 million or $1.81 per share in the corresponding period in 2006. This represents a 19.3% increase on a per share basis.
Growth in operating earnings reflects primarily growth in the contribution from Power Financial's subsidiaries as well as from its affiliate, which also benefited from a favourable timing difference in dividend income compared with the previous year.
Other income was a charge of $71 million or $0.10 per share for the nine-month period ended September 30, 2007, reflecting primarily Power Financial's share of a provision recorded by Great-West Lifeco in the third quarter. Other items not included in operating earnings in 2006 were $351 million or $0.50 per share, reflecting primarily Power Financial's share, in the amount of $356 million, of the gain recorded by Groupe Bruxelles Lambert from the sale of its 25.1% interest in Bertelsmann.
Net earnings, including other income, for the nine-month period ended September 30, 2007 were $1,512 million or $2.06 per share, compared with $1,681 million or $2.31 per share in the same period in 2006.
For the quarter ended September 30, 2007, operating earnings of Power Financial were $531 million or $0.73 per share, compared with $439 million or $0.60 per share in the third quarter of 2006. This represents an increase of 21.7% on a per share basis.
Other items for the third quarter of 2007 were a charge of $74 million or $0.11 per share reflecting primarily the impact of the provision recorded by Great-West Lifeco. For the corresponding period in 2006, other items were $356 million or $0.50 per share, representing Power Financial's share of the gain recorded by GBL from the sale of its interest in Bertelsmann.
Net earnings for the quarter were $457 million or $0.62 per share in 2007, compared with $795 million or $1.10 per share in 2006.
DIVIDENDS ON PREFERRED SHARES
------------------------------
The Board of Directors today declared quarterly dividends on the
Corporation's preferred shares, as follows:
-------------------------------------------------------------------------
Type of shares Record Date Payment Date Amount
-------------------------------------------------------------------------
1986 Series December 21, 2007 January 15, 2008 To be determined
in accordance
with the articles
of the Corporation
-------------------------------------------------------------------------
Series A December 21, 2007 January 15, 2008 35 cents
-------------------------------------------------------------------------
Series B December 21, 2007 January 15, 2008 33.4375 cents
-------------------------------------------------------------------------
Series C December 21, 2007 January 15, 2008 36.25 cents
-------------------------------------------------------------------------
Series D December 21, 2007 January 15, 2008 31.25 cents
-------------------------------------------------------------------------
DIVIDENDS ON PARTICIPATING SHARES
---------------------------------
The Board of Directors also declared a quarterly dividend of 24.125 cents
on the Participating Preferred and Subordinate Voting Shares of the
Corporation, payable December 31, 2007 to shareholders of record December 10,
2007.
Forward-looking Statements
--------------------------
Certain statements in this news release, other than statements of
historical fact, are forward-looking statements based on certain assumptions
and reflect the Corporation's or its subsidiaries' or affiliates' current
expectations. These statements may include, without limitation, statements
regarding the operations, business, financial condition, priorities, ongoing
objectives, strategies and outlook of Power Corporation, its subsidiaries or
affiliates for the current fiscal year and subsequent periods. Forward-looking
statements include statements that are predictive in nature, depend upon or
refer to future events or conditions, or include words such as "expects",
"anticipates", "plans", "believes", "estimates", "intends", "targets",
"projects", "forecasts" or negative versions thereof and other similar
expressions, or future or conditional verbs such as "may", "will", "should",
"would" and "could".
This information is based upon certain material factors or assumptions
that were applied in drawing a conclusion or making a forecast or projection
as reflected in the forward-looking statements, including the perception of
historical trends, current conditions and expected future developments, as
well as other factors that are believed to be appropriate in the
circumstances.
By its nature, this information is subject to inherent risks and
uncertainties that may be general or specific. A variety of material factors,
many of which are beyond the Corporation's, its subsidiaries' and affiliates'
control, affect the operations, performance and results of the Corporation's,
its subsidiaries and affiliates, and their business, and could cause actual
results to differ materially from current expectations of estimated or
anticipated events or results. These factors include, but are not limited to:
the impact or unanticipated impact of general economic, political and market
factors in North America and internationally, interest and foreign exchange
rates, global equity and capital markets, management of market liquidity and
funding risks, changes in accounting policies and methods used to report
financial condition, including uncertainties associated with critical
accounting assumptions and estimates, the effect of applying future accounting
changes, business competition, technological change, changes in government
regulation and legislation, changes in tax laws, unexpected judicial or
regulatory proceedings, catastrophic events, the Corporation's, its
subsidiaries' or affiliates' ability to complete strategic transactions and
integrate acquisitions, and the Corporation's or its subsidiaries' or its
affiliates' success in anticipating and managing the foregoing risks.
The reader is cautioned that the foregoing list of factors is not
exhaustive of the factors that may affect any of the Corporation's, its
subsidiaries' and affiliates' forward-looking statements. The reader is also
cautioned to consider these and other factors carefully and not to put undue
reliance on forward-looking statements.
Other than as specifically required by law, the Corporation undertakes no
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which 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 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 includes, but is not limited to, the impact on
the Corporation's net earnings of "Other income" as presented in
the Corporation's consolidated statements of earnings (net of
income tax and non-controlling interests, if any).
Management has used these performance measures for many years in its
presentation and analysis of the financial performance of Power Corporation,
and believes that they provide additional meaningful information to readers in
their analysis of the results of the Corporation.
"Operating earnings" excludes the after-tax impact of any item that
management considers to be of a non-recurring nature or that could make the
period-over-period comparison of results from operations less meaningful, and
also excludes the Corporation's share of any such item presented in a
comparable manner by its subsidiaries. Operating earnings and operating
earnings per share are non-GAAP financial measures that do not have a standard
meaning and may not be comparable to similar measures used by other entities.
Attachments: Financial Information (unaudited)
Power Corporation of Canada
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------
September 30, December 31,
2007 2006
(in millions of dollars) (unaudited)
-------------------------------------------------------------------------
Assets
Cash and cash equivalents 5,660 5,785
-------------------------------------------------------------------------
Investments (Note 4)
Shares 8,007 5,598
Bonds 66,284 65,246
Mortgages and other loans 16,279 15,823
Loans to policyholders 6,259 6,776
Real estate 2,329 2,218
-------------------------------------------------------------------------
99,158 95,661
Funds held by ceding insurers 1,553 12,371
Investment in affiliates, at equity 3,564 2,182
Intangible assets 2,867 2,745
Goodwill (Note 2) 11,567 8,454
Future income taxes 696 471
Other assets (Note 5) 7,980 5,083
-------------------------------------------------------------------------
133,045 132,752
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Policy liabilities
Actuarial liabilities 86,425 89,490
Other 4,336 4,488
Deposits and certificates 806 778
Funds held under reinsurance contracts 1,950 1,822
Debentures and other borrowings (Note 6) 6,979 3,513
Preferred shares of subsidiaries 1,667 1,625
Capital trust securities and debentures (Note 7) 640 646
Future income taxes 887 909
Other liabilities 7,085 8,897
-------------------------------------------------------------------------
110,775 112,168
-------------------------------------------------------------------------
Non-controlling interests (Note 8) 12,488 11,983
-------------------------------------------------------------------------
Shareholders' Equity
Stated capital (Note 9)
Non-participating shares 795 795
Participating shares 473 442
Contributed surplus 74 59
Retained earnings 8,074 7,480
Accumulated other comprehensive
income (loss) (Note 10) 366 (175)
-------------------------------------------------------------------------
9,782 8,601
-------------------------------------------------------------------------
133,045 132,752
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
-------------------------------------------------------------------------
(unaudited) (in millions Three months ended Nine months ended
of dollars, except per September 30 September 30
share amounts) 2007 2006 2007 2006
-------------------------------------------------------------------------
Revenues
Premium income 3,879 4,332 13,758 12,471
Net investment income
Regular net investment
income 1,537 1,632 4,699 4,596
Change in fair value on
held for trading assets 426 - (1,921) -
--------------------------------------------
1,963 1,632 2,778 4,596
Fees and media income 1,696 1,324 4,736 3,995
-------------------------------------------------------------------------
7,538 7,288 21,272 21,062
-------------------------------------------------------------------------
Expenses
Policyholder benefits,
dividends and experience
refunds, and change in
actuarial liabilities 4,678 4,871 13,026 13,831
Commissions 574 519 1,767 1,577
Operating expenses 1,228 862 3,131 2,644
Financing charges (Note 11) 118 90 294 258
-------------------------------------------------------------------------
6,598 6,342 18,218 18,310
-------------------------------------------------------------------------
940 946 3,054 2,752
Share of earnings of
affiliates 26 9 113 84
Other income (charges),
net (Note 12) 8 356 11 348
-------------------------------------------------------------------------
Earnings before income taxes
and non-controlling
interests 974 1,311 3,178 3,184
Income taxes 187 274 704 728
Non-controlling
interests (Note 8) 433 528 1,361 1,352
-------------------------------------------------------------------------
Net earnings 354 509 1,113 1,104
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per participating
share (Note 13)
Basic 0.76 1.10 2.39 2.38
-------------------------------------------------------------------------
Diluted 0.75 1.09 2.36 2.36
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
-------------------------------------------------------------------------
Three months ended Nine months ended
(unaudited) (in millions September 30 September 30
of dollars) 2007 2006 2007 2006
-------------------------------------------------------------------------
Net earnings 354 509 1,113 1,104
-------------------------------------------------------------------------
Other comprehensive
income (loss)
Net unrealized gains
(losses) on available-for-
sale assets
Unrealized gains (losses) (86) - 371 -
Income tax on unrealized
gains (losses) (38) - (60) -
Reclassification of
realized (gains) losses
to net earnings (103) - (273) -
Income tax on
reclassification of
realized (gains) losses
to net earnings 21 - 58 -
-------------------------------------------------------------------------
(206) - 96 -
-------------------------------------------------------------------------
Net unrealized
gains (losses) on cash
flow hedges
Unrealized gains (losses) 48 - (9) -
Income tax on unrealized
gains (losses) (17) - 4 -
Reclassification of
realized (gains) losses
to net earnings 55 - 95 -
Income tax on
reclassification of
realized (gains) losses
to net earnings (19) - (26) -
-------------------------------------------------------------------------
67 - 64 -
-------------------------------------------------------------------------
Net unrealized
gains (losses) on foreign
currency translation (583) 14 (1,338) (34)
-------------------------------------------------------------------------
Other comprehensive
income (loss) before
non-controlling interests (722) 14 (1,178) (34)
Non-controlling interests 370 (4) 734 9
-------------------------------------------------------------------------
Other comprehensive
income (loss) (352) 10 (444) (25)
-------------------------------------------------------------------------
Comprehensive income 2 519 669 1,079
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------
Nine months ended September 30 2007 2006
(unaudited) (in millions of dollars)
-------------------------------------------------------------------------
Stated capital - Non-participating shares
Non-participating shares, beginning of year 795 795
Issue of non-participating shares - -
-------------------------------------------------------------------------
Non-participating shares, end of period 795 795
-------------------------------------------------------------------------
Stated capital - Participating shares
Participating shares, beginning of year 442 417
Issue of participating shares under stock option
plan 31 25
-------------------------------------------------------------------------
Participating shares, end of period 473 442
-------------------------------------------------------------------------
Contributed surplus
Contributed surplus, beginning of year 59 37
Stock options expense 21 25
Non-controlling interests (6) (9)
-------------------------------------------------------------------------
Contributed surplus, end of period 74 53
-------------------------------------------------------------------------
Retained earnings
Retained earnings, beginning of year
As previously reported 7,480 6,478
Change in accounting policy (Note 1) (181) -
-------------------------------------------------------------------------
As restated 7,299 6,478
Net earnings 1,113 1,104
Dividends to shareholders
Non-participating shares (32) (32)
Participating shares (309) (254)
Other 3 (5)
-------------------------------------------------------------------------
Retained earnings, end of period 8,074 7,291
-------------------------------------------------------------------------
Accumulated other comprehensive
income (loss) (Note 10)
Accumulated other comprehensive income (loss),
beginning of year (175) (468)
Change in accounting policy (Note 1) 985 -
Other comprehensive income (loss) (444) (25)
-------------------------------------------------------------------------
Accumulated other comprehensive income (loss),
end of period 366 (493)
-------------------------------------------------------------------------
Total Shareholders' Equity 9,782 8,088
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
Three months ended Nine months ended
(unaudited) (in millions September 30 September 30
of dollars) 2007 2006 2007 2006
-------------------------------------------------------------------------
Operating activities
Net earnings 354 509 1,113 1,104
Non-cash charges (credits)
Increase (decrease) in
policy liabilities 929 1,172 (619) 1,575
Decrease (increase) in
funds held by ceding
insurers 168 40 609 471
Increase (decrease) in
funds held under
reinsurance contracts (26) (524) 24 (621)
Amortization and
depreciation 33 28 94 83
Future income taxes 4 (15) (49) 57
Non-controlling interests 433 528 1,361 1,352
Other (416) (379) 2,103 (485)
Change in non-cash working
capital (279) 196 (1,578) 43
-------------------------------------------------------------------------
1,200 1,555 3,058 3,579
-------------------------------------------------------------------------
Financing activities
Dividends paid
By subsidiaries to
non-controlling
interests (209) (183) (606) (527)
Non-participating shares (11) (11) (32) (31)
Participating shares (109) (89) (308) (254)
-------------------------------------------------------------------------
(329) (283) (946) (812)
Issue of subordinated
voting shares - 10 31 25
Issue of common shares by
subsidiaries 4 7 30 31
Repurchase of common shares
by subsidiaries (15) (19) (64) (56)
Issue of preferred shares
by a subsidiary - 200 - 500
Repurchase of preferred
shares by a subsidiary (1) (18) (1) (30)
Issue of debentures and
other borrowings 2,590 - 3,727 336
Repayment of debentures and
other borrowings (132) (250) (164) (422)
Other 30 41 30 17
-------------------------------------------------------------------------
2,147 (312) 2,643 (411)
-------------------------------------------------------------------------
Investment activities
Bond sales and maturities 7,059 7,351 18,878 20,683
Mortgage loan repayments 458 523 1,429 1,434
Sales of shares 612 492 1,571 1,165
Real estate sales 32 129 66 174
Proceeds from
securitizations 427 386 1,085 1,019
Change in loans to
policyholders (7) (19) (167) (239)
Change in repurchase
agreements (317) 14 (584) 132
Acquisition of businesses (4,159) - (4,159) -
Acquisition of intangible
assets - (141) - (141)
Investment in bonds (5,777) (7,586) (17,082) (22,091)
Investment in mortgage
loans (1,627) (1,268) (3,682) (3,163)
Investment in shares (691) (417) (2,446) (1,192)
Investment in real estate (244) (399) (440) (515)
Other 15 (11) 2 (20)
-------------------------------------------------------------------------
(4,219) (946) (5,529) (2,754)
-------------------------------------------------------------------------
Effect of changes in exchange
rates on cash and cash
equivalents (115) 31 (297) 71
Increase (decrease) in cash
and cash equivalents (987) 328 (125) 485
Cash and cash equivalents,
beginning of period 6,647 5,489 5,785 5,332
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period 5,660 5,817 5,660 5,817
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Power Corporation of Canada
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2007
ALL TABULAR AMOUNTS ARE IN MILLIONS OF CANADIAN DOLLARS UNLESS
OTHERWISE NOTED.
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
The interim unaudited consolidated financial statements of Power
Corporation of Canada at September 30, 2007 have been prepared in
accordance with generally accepted accounting principles in Canada
(GAAP). Interim unaudited consolidated financial statements should be
read in conjunction with the audited consolidated financial statements
and notes thereto for the year ended December 31, 2006. These interim
unaudited consolidated financial statements do not include all
disclosures required for annual financial statements.
The interim unaudited consolidated financial statements have been
prepared using the same accounting policies described in Note 1 of the
Corporation's consolidated financial statements for the year ended
December 31, 2006, except for the adoption of the new rules on Financial
Instruments as described below.
A) CHANGES IN ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS
Effective January 1, 2007, the Corporation adopted the Canadian Institute
of Chartered Accountants (CICA) Handbook Section 4211, Life Insurance
Enterprises; Section 3855, Financial Instruments - Recognition and
Measurement; Section 3865, Hedges; and Section 1530, Comprehensive
Income.
Under these new standards, all financial assets, including derivatives,
must be classified as available for sale, held for trading, held to
maturity, or loans and receivables. All financial liabilities, including
derivatives, must be classified as held for trading or other. All
financial instruments classified as available for sale or held for
trading are recognized at fair value on the Consolidated Balance Sheet
while financial instruments classified as loans and receivables or other
will continue to be measured at amortized cost using the effective
interest rate method. The standards allow the Corporation to designate
certain financial instruments, on initial recognition, as held for
trading.
Changes in the fair value of financial instruments classified as held for
trading are reported in net earnings. Unrealized gains or losses on
financial instruments classified as available for sale are reported in
other comprehensive income until they are realized by the Corporation or
until the assets are other than temporarily impaired, at which time they
are recorded in the Consolidated Statements of Earnings.
The Consolidated Statements of Comprehensive Income have been included in
the Corporation's financial statements. The Consolidated Statements of
Changes in Shareholders' Equity have replaced the Consolidated Statements
of Retained Earnings in the Corporation's financial statements.
Unrealized gains and losses on financial assets classified as available
for sale, the effective portion of changes in the fair value of cash flow
hedging instruments and unrealized foreign currency translation gains and
losses are recorded in the Consolidated Statements of Comprehensive
Income on a net of tax basis. Other comprehensive income amounts arising
from using the equity method to account for the Corporation's investment
in its affiliates are recorded in the Consolidated Statements of
Comprehensive Income. Accumulated other comprehensive income forms part
of Shareholders' equity.
With respect to Great-West Lifeco Inc. (Lifeco), certain investments,
primarily investments actively traded in a public market, and certain
financial liabilities are measured at their fair value. Investments
backing actuarial liabilities, investments backing participating account
surplus in The Canada Life Assurance Company (Canada Life), and preferred
shares classified as liabilities are designated as held for trading using
the fair value option. Changes in the fair value of these investments
flow through net earnings. This impact is largely offset by corresponding
changes in the actuarial liabilities which also flow through net
earnings. Investments backing Lifeco's shareholder capital and surplus,
with the exception of the investments backing participating account
surplus in Canada Life, are classified as available for sale. Unrealized
gains and losses on these investments flow through other comprehensive
income until they are realized. Certain investment portfolios are
classified as held for trading as a reflection of their underlying
nature. Changes in the fair value of these investments flow through net
earnings. There has been no change to Lifeco's method of accounting for
real estate or loans.
The remainder of the Corporation's investments in shares was designated
as available for sale. The loans portfolio was designated as loans and
receivables and is carried at amortized cost.
Derivative instruments, previously off-balance sheet, are recognized at
their market value in the Consolidated Balance Sheet. Changes in the fair
value of derivatives are recognized in net earnings except for
derivatives designated as effective cash flow hedges.
Derivatives embedded in financial instruments, or other contracts, which
are not closely related to the host financial instrument or contract,
must be bifurcated and recognized independently. The change in accounting
policy related to embedded derivatives did not have a significant impact
on the financial statements of the Corporation.
Three types of hedging relationships are permitted under the new
standards: fair value hedges, cash flow hedges, and hedges of net
investments in self-sustaining foreign operations. Changes in fair value
hedges are recognized in net earnings. The effective portion of cash flow
hedges, and hedges of net investments in self-sustaining foreign
operations, are offset through other comprehensive income until the
variability in cash flows being hedged is recognized in net earnings.
On January 1, 2007, transition adjustments were made to certain existing
financial instruments to adjust their carrying value to market, to
recognize derivative financial instruments on the balance sheet, to
eliminate the recognition of deferred realized gains of Lifeco with
corresponding adjustments to actuarial liabilities and opening retained
earnings.
The following table summarizes the adjustments made to adopt the new
standards:
-------------------------------------------------------------------------
December 31, Change in January 1,
2006 accounting 2007
As reported policy Adjusted
-------------------------------------------------------------------------
Assets
Cash and cash equivalents 5,785 - 5,785
-------------------------------------------------------------------------
Investments
Shares 5,598 844 6,442
Bonds 65,246 1,016 66,262
Mortgages and other loans 15,823 (46) 15,777
Loans to policyholders 6,776 - 6,776
Real estate 2,218 - 2,218
-------------------------------------------------------------------------
95,661 1,814 97,475
Investment in affiliates, at equity 2,182 1,157 3,339
All other assets 29,124 (150) 28,974
-------------------------------------------------------------------------
132,752 2,821 135,573
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Policy liabilities
Actuarial liabilities 89,490 3,896 93,386
Other 4,488 - 4,488
Debentures and other borrowings 3,513 - 3,513
Preferred shares of subsidiaries 1,625 71 1,696
Capital trust securities and
debentures 646 - 646
Future income taxes 909 25 934
All other liabilities 11,497 (2,464) 9,033
-------------------------------------------------------------------------
112,168 1,528 113,696
-------------------------------------------------------------------------
Non-controlling interests 11,983 489 12,472
-------------------------------------------------------------------------
Shareholders' Equity
Stated capital
Non-participating shares 795 - 795
Participating shares 442 - 442
Contributed surplus 59 - 59
Retained earnings 7,480 (181) 7,299
Accumulated other comprehensive
income - 810 810
Foreign currency translation
adjustments (175) 175 -
-------------------------------------------------------------------------
8,601 804 9,405
-------------------------------------------------------------------------
132,752 2,821 135,573
-------------------------------------------------------------------------
-------------------------------------------------------------------------
B) FUTURE ACCOUNTING CHANGES
Capital Disclosures
-------------------
Effective January 1, 2008, the Corporation will be required to comply
with CICA Handbook Section 1535, Capital Disclosures. The Section
establishes standards for disclosing information that enables users of
financial statements to evaluate the entity's objectives, policies and
processes for managing capital.
Financial Instruments Disclosure and Presentation
-------------------------------------------------
Effective January 1, 2008, the Corporation will be required to comply
with CICA Handbook Section 3862, Financial Instruments - Disclosures, and
Section 3863, Financial Instruments - Presentation. These sections will
replace existing Section 3861, Financial Instruments - Disclosure and
Presentation. Presentation standards are carried forward unchanged.
Disclosure standards are enhanced and expanded to complement the changes
in accounting policy adopted in accordance with Section 3855, Financial
Instruments - Recognition and Measurement.
These new requirements are for disclosure only and will not impact
financial results of the Corporation.
C) COMPARATIVE FIGURES
Certain of the 2006 amounts presented for comparative purposes have been
reclassified to conform to the presentation adopted in the current year.
Comparative figures have not been restated to conform with the new
Financial Instruments accounting policies adopted January 1, 2007. CICA
guidance explicitly prohibits the restatement of comparative information
under these new standards.
NOTE 2 ACQUISITIONS
(a) Putnam Investments Trust
On August 3, 2007, Lifeco acquired the asset management business of
Putnam Investments Trust (Putnam), and The Great-West Life Assurance
Company (Great-West Life) and Canada Life acquired Putnam's 25% interest
in T.H. Lee Partners (T.H. Lee), from Marsh & MacLennan Companies Inc.
representing an aggregate transaction value of approximately $4.2 billion
including transaction costs. Financing of the transaction is described in
Note 6. The Corporation's interest in T.H. Lee is included in "Investment
in affiliates, at equity".
The initial allocation of the purchase price is summarized as follows:
Value of assets acquired:
Cash and certificates of deposit 74
Shares 441
Other assets 1,830
-----------
2,345
-----------
Value of liabilities assumed:
Other liabilities 1,535
Non-controlling interests 2
-----------
1,537
-----------
Fair value of net assets acquired 808
-----------
-----------
Total purchase consideration:
Cash 4,143
Transaction and related costs, net of income taxes 91
-----------
4,234
-----------
Goodwill and intangible assets on acquisition (1) 3,426
-----------
-----------
(1) The initial allocation of the purchase price to intangible assets
acquired should be completed in the fourth quarter of 2007.
The amounts assigned to the assets acquired and liabilities assumed and
associated goodwill and intangible assets may be adjusted when the
allocation process has been finalized. Included in other liabilities
assumed are accruals for Putnam costs of $108 million related to planned
restructuring and exit activities involving operations and systems,
compensation costs and facilities (refer to Note 3).
Results of Putnam are included in the Consolidated Statements of Earnings
from the date of acquisition. Putnam offers investment management
products and services, mainly in the United States.
(b) Crown Life Insurance Company
On July 5, 2007, Canada Life acquired all of the outstanding common share
of Crown Life Insurance Company for cash consideration of $118 million,
including transaction costs. The acquisition was pursuant to the terms of
the 1999 acquisition of the majority of the insurance operations of Crown
Life by Canada Life.
The acquisition resulted in an initial increase in invested assets of
$459 million, an increase in other assets of $25 million, an increase in
policyholder liabilities of $338 million, an increase in other
liabilities of $58 million, a decrease in non-controlling interest of
$11 million and estimated goodwill of $19 million. The amounts assigned
to the assets acquired and liabilities assumed and associated goodwill
may be adjusted when the allocation process has been finalized.
Results of Crown Life are included in the Consolidated Statements of
Earnings from the date of acquisition.
(c) Benefits Management Corporation
On May 31, 2007, Great-West Life & Annuity Insurance Company (GWL&A)
acquired an 80% equity interest in Benefits Management Corporation (BMC).
The assets acquired, liabilities assumed and Lifeco's equity interest in
the results of BMC's operations have been included in its consolidated
financial statements since that date. The acquisition will add
approximately 90,000 members to Lifeco's medical membership. BMC's
principal subsidiary, Allegiance Benefit Management, Inc., is a Montana-
based third-party administrator of employee health plans.
The value of identifiable intangible assets acquired reflects the
estimated fair value of Lifeco's interest in BMC's customer base at the
time of acquisition. The value of the identifiable intangible assets will
be amortized in relation to the expected economic benefits of the
business acquired. If actual experience differs from expectations, the
amortization will be adjusted to reflect actual experience.
NOTE 3 RESTRUCTURING COSTS
Following the acquisition of Putnam on August 3, 2007, Lifeco developed a
plan to restructure certain operations of Putnam. Lifeco expects the
restructuring to be substantially completed by the end of 2008. Costs of
$123 million (US$ 117 million) are expected to be incurred as a result
and consist primarily of restructuring activities involving operations
and systems, compensation costs and facilities. The costs include
approximately $108 million (US$ 103 million) that was recognized as part
of the purchase equation of Putnam. Costs of approximately $15 million
(US$ 14 million) will be charged to earnings as incurred.
The following details the amount and status of restructuring program
costs for the period ended September 30, 2007:
Changes in
Amounts foreign Balance
Expected Utilized - exchange September
total costs 2007 rates 30, 2007
------------ ----------- ----------- -----------
Compensation costs 100 (23) (4) 73
Exiting and consolidating
operations 13 - (1) 12
Eliminating duplicate
systems 10 - - 10
------------ ----------- ----------- -----------
123 (23) (5) 95
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
Accrued on acquisition 108 (23) (4) 81
Expense as incurred 15 - (1) 14
------------ ----------- ----------- -----------
123 (23) (5) 95
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
NOTE 4 INVESTMENTS
September 30, 2007
--------------------------------------------------
December
Market value Amortized cost Total 31,
-------------------- ------------------- ---------
Non-
Loans finan-
and cial
Available Held for recei- instru-
for sale trading vables ments 2006
-------------------------------------------------- ---------
Shares 3,616 4,391 - - 8,007 5,598
Bonds 4,341 53,010 8,933 - 66,284 65,246
Mortgages and
other loans - - 16,279 - 16,279 15,823
Loans to
policyholders - - 6,259 - 6,259 6,776
Real estate - - - 2,329 2,329 2,218
-------------------------------------------------------------------------
7,957 57,401 31,471 2,329 99,158 95,661
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 5 OTHER ASSETS
-------------------------------------------------------------------------
September 30, December 31,
2007 2006
-------------------------------------------------------------------------
Dividends, interest and other receivables 2,951 2,061
Premium in course of collection 587 566
Deferred selling commission 1,002 974
Fixed assets, net of accumulated depreciation 597 514
Accrued benefit asset 312 281
Derivative financial instruments 893 -
Other 1,638 687
-------------------------------------------------------------------------
7,980 5,083
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 6 DEBENTURES AND OTHER BORROWINGS
-------------------------------------------------------------------------
September 30, December 31,
2007 2006
-------------------------------------------------------------------------
Short term
IGM Financial Inc.
Credit facility at a rate equal to
Canadian Bankers' Acceptance rate
plus 0.375% 100 -
Great-West Lifeco Inc.
Commercial paper and other short-term debt
instruments with interest rates from
5.2% to 5.5% 97 110
Credit facility at a rate equal to
Canadian Bankers' Acceptance rate
plus 0.25% 1,233 -
Credit facility at a rate equal to LIBOR
rate plus 0.25% (US$1,221 million) 1,221 -
Revolving credit in respect of
reinsurance business with interest rates
of 6.0% maturing within one year 1 1
-------------------------------------------------------------------------
Total short term 2,652 111
-------------------------------------------------------------------------
Long term
Power Financial Corporation
6.90% debentures, due March 11, 2033 250 250
IGM Financial Inc.
6.75% debentures 2001 Series, due May 9,
2011 450 450
6.58% debentures 2003 Series, due March 7,
2018 150 150
6.65% debentures 1997 Series, due
December 13, 2027 125 125
7.45% debentures 2001 Series, due May 9,
2031 150 150
7.00% debentures 2002 Series, due
December 31, 2032 175 175
7.11% debentures 2003 Series, due March 7,
2033 150 150
Great-West Lifeco Inc.
Subordinated debentures due December 11,
2013 bearing a fixed rate of 5.80% until
2008 and, thereafter, at a rate equal to
the Canadian 90-day Bankers' Acceptance
rate plus 1%, unsecured 203 204
6.75% debentures due August 10, 2015,
unsecured 200 200
6.14% debentures due March 21, 2018,
unsecured 200 200
6.40% subordinated debentures due
December 11, 2028, unsecured 100 101
6.74% debentures due November 24, 2031,
unsecured 200 200
6.67% debentures due March 21, 2033,
unsecured 400 400
6.625% deferrable debentures due
November 15, 2034, unsecured
(US$174 million) 174 205
7.153% subordinated debentures due May 16,
2046, unsecured (US$300 million) 300 351
Subordinated debentures due June 21, 2067
bearing an interest rate of 5.691% until
2017 and, thereafter, at a rate equal to
the Canadian 90-day Bankers' Acceptance
rate plus 1.49%, unsecured 1,000 -
Notes payable with interest of 8.0% 7 8
Other
Term loan at prime plus a premium varying
between 1.0% and 1.75% or Bankers'
Acceptance plus a premium varying between
2.0% and 2.75% due May 13, 2013 60 50
Bank loan at prime plus a premium varying
between 0.375% to 1.5%, or Bankers'
Acceptance plus a premium varying
between 1.375% and 2.5% due May 13, 2010 33 33
-------------------------------------------------------------------------
Total long term 4,327 3,402
-------------------------------------------------------------------------
6,979 3,513
-------------------------------------------------------------------------
-------------------------------------------------------------------------
As part of the financing of the acquisition of Putnam, Lifeco entered
into a credit agreement with a Canadian chartered bank. The credit
agreement provides a one year facility, extendible at Lifeco's option for
an additional six months, of up to $3,000 million, fundable in Canadian
or U.S. dollars. On August 2, 2007, Lifeco drew $1,233 million and
US$1,571 million against the facility. The facility provided Lifeco with
the option to convert up to US$500 million to a five year term loan which
option Lifeco has exercised against the U.S. drawings of the facility on
October 18, 2007. The balance outstanding under this facility at
September 30, 2007 was $2,454 million ($1,233 Canadian and
US$1,221 million).
On June 20, 2007, Lifeco borrowed $124 million under an existing
revolving line of credit facility with a Canadian chartered bank. On
August 2, 2007, Lifeco fully repaid the balance of $124 million.
During the second quarter of 2007, Lifeco issued $1.0 billion of 5.691%
Subordinated Debentures through its wholly owned subsidiary Great-West
Lifeco Finance (Delaware) LP. The subordinated debentures are due
June 21, 2067 and bear an interest rate of 5.691% until June 21, 2017.
After June 21, 2017, the subordinated debentures will bear an interest
rate of the three-month Bankers' Acceptance rate plus 1.49%. The
subordinated debentures may be redeemed by Lifeco at the principal amount
plus any unpaid and accrued interest after June 21, 2017.
NOTE 7 CAPITAL TRUST SECURITIES AND DEBENTURES
-------------------------------------------------------------------------
September 30, December 31,
2007 2006
-------------------------------------------------------------------------
Capital trust debentures
5.995% senior debentures due December 31,
2052, unsecured (GWLCT) 350 350
6.679% senior debentures due June 30, 2052,
unsecured (CLCT) 300 300
7.529% senior debentures due June 30, 2052,
unsecured (CLCT) 150 150
-------------------------------------------------------------------------
800 800
Acquisition-related fair market value
adjustment 28 31
Trust securities held by consolidated group
as temporary investments (188) (185)
-------------------------------------------------------------------------
640 646
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Great-West Life Capital Trust (GWLCT), a trust established by Great-West
Life, had issued $350 million of capital trust securities, the proceeds
of which were used by GWLCT to purchase Great-West Life senior debentures
in the amount of $350 million, and Canada Life Capital Trust (CLCT), a
trust established byCanada Life, had issued $450 million of capital trust
securities, the proceeds of which were used by CLCT to purchase Canada
Life senior debentures in the amount of $450 million.
NOTE 8 NON-CONTROLLING INTERESTS
-------------------------------------------------------------------------
September 30, December 31,
2007 2006
-------------------------------------------------------------------------
Non-controlling interests include
Participating policyholders 2,063 1,884
Preferred shareholders (perpetual) of
subsidiaries 2,651 2,653
Common shareholders of subsidiaries 7,774 7,446
-------------------------------------------------------------------------
12,488 11,983
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2007 2006 2007 2006
-------------------------------------------------------------------------
Earnings attributable to
non-controlling interests
include
Earnings attributable to
participating policyholders 43 31 110 118
Dividends to preferred
shareholders (perpetual) of
subsidiaries 37 38 112 103
Earnings attributable to
common shareholders of
subsidiaries 353 459 1,139 1,131
-------------------------------------------------------------------------
433 528 1,361 1,352
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 9 CAPITAL STOCK AND STOCK OPTION PLAN
STATED CAPITAL
-------------------------------------------------------------------------
September 30, December 31,
2007 2006
-------------------------------------------------------------------------
Non-Participating Shares
Cumulative Redeemable First Preferred Shares,
1986 Series
Authorized - Unlimited number of shares
Issued - 899,878 shares 45 45
Series A First Preferred Shares
Authorized and issued - 6,000,000 shares 150 150
Series B First Preferred Shares
Authorized and issued - 8,000,000 shares 200 200
Series C First Preferred Shares
Authorized and issued - 6,000,000 shares 150 150
Series D First Preferred Shares
Authorized and issued - 10,000,000 shares 250 250
-------------------------------------------------------------------------
795 795
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Participating Shares
Participating Preferred Shares
Authorized - Unlimited number of shares
Issued - 48,854,772 shares 27 27
Subordinate Voting Shares
Authorized - Unlimited number of shares
Issued - 404,876,082 (2006 -
402,606,144) shares 446 415
-------------------------------------------------------------------------
473 442
-------------------------------------------------------------------------
-------------------------------------------------------------------------
STOCK-BASED COMPENSATION
During the first quarter of 2007, 1,209,075 options were granted under
the Corporation's stock option plan (no options were granted in the first
quarter of 2006). During the second quarter of 2006, 1,342,075 options
were granted under the Corporation's stock option plan (no options were
granted in the second quarter of 2007). During the third quarters of 2007
and 2006, no options were granted.
The fair value of these options was estimated using the Black-Scholes
option-pricing model with the following assumptions:
-------------------------------------------------------------------------
2007 2006
-------------------------------------------------------------------------
Dividend yield 2.1% 2.3%
Expected volatility 15.5% 19.0%
Risk-free interest rate 4.0% 4.3%
Expected life (years) 7 7
Fair value per option granted ($/option) $7.11 $7.29
-------------------------------------------------------------------------
Compensation expense relating to the stock options granted by the
Corporation and its subsidiaries amounted to $7 million in the third
quarter of 2007 ($9 million in 2006) and $21 million for the nine months
ended September 30, 2007 ($25 million in 2006).
Options were outstanding at September 30, 2007 to purchase, until
March 25, 2017, 11,133,972 subordinate voting shares at various prices
from $11.3625 to $37.07. During the nine months ended September 30, 2007,
2,269,938 subordinate voting shares (2,336,450 in 2006) were issued under
the Corporation's plan for an aggregate consideration of $31 million
($25 million in 2006).
NOTE 10 ACCUMULATED OTHER COMPREHENSIVE INCOME
Unrealized gains (losses), on
-------------------------------------------------------------
Foreign
Available- currency
Nine months ended for-sale Cash flow transla-
September 30, 2007 assets hedges tion Total
-------------------------------------------------------------------------
Balance, beginning of year - - (175) (175)
----------------------------------------------
Change in accounting
policy (Note 1) 1,708 (43) - 1,665
Income taxes (135) 8 - (127)
----------------------------------------------
1,573 (35) - 1,538
----------------------------------------------
Non-controlling interests (574) 21 - (553)
-------------------------------------------------------------------------
Net change in accounting
policy 999 (14) - 985
-------------------------------------------------------------------------
Other comprehensive
income (loss) 98 86 (1,338) (1,154)
Income taxes (2) (22) - (24)
----------------------------------------------
96 64 (1,338) (1,178)
----------------------------------------------
Non-controlling interests 75 (36) 695 734
-------------------------------------------------------------------------
171 28 (643) (444)
-------------------------------------------------------------------------
Balance, end of period 1,170 14 (818) 366
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Unrealized gains (losses), on
-------------------------------------------------------------
Foreign
Available- currency
Nine months ended for-sale Cash flow transla-
September 30, 2006 assets hedges tion Total
-------------------------------------------------------------------------
Balance, beginning of year - - (468) (468)
----------------------------------------------
Other comprehensive
income (loss) - - (34) (34)
Income taxes - - - -
----------------------------------------------
- - (34) (34)
----------------------------------------------
Non-controlling interests - - 9 9
-------------------------------------------------------------------------
- - (25) (25)
-------------------------------------------------------------------------
Balance, end of period - - (493) (493)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 11 FINANCING CHARGES
Financing charges include interest on debentures and other borrowings,
together with distributions and interest on capital trust securities and
debentures, and dividends on preferred shares classified as liabilities.
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2007 2006 2007 2006
-------------------------------------------------------------------------
Interest on debentures and
other borrowings 97 58 212 167
Preferred share dividends 18 18 54 55
Unrealized gains on preferred
shares classified as held
for trading (15) - (29) -
Subordinated debenture issue
costs - - 13 -
Interest on capital trust
debentures 13 13 37 37
Distributions on capital
trust securities held by
consolidated group as
temporary investments (4) (4) (9) (9)
Other 9 5 16 8
-------------------------------------------------------------------------
118 90 294 258
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 12 OTHER INCOME (CHARGES), NET
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2007 2006 2007 2006
-------------------------------------------------------------------------
Share of Pargesa's non-
operating earnings - 356 3 343
Other 8 - 8 5
-------------------------------------------------------------------------
8 356 11 348
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The share of Pargesa's non-operating earnings for the nine-month and
three-month periods of 2006 includes an amount of $356 million which
represents Power Financial Corporation's share of the gain resulting from
the disposal by Groupe Bruxelles Lambert of its 25.1% equity interest in
Bertelsmann AG.
NOTE 13 EARNINGS PER SHARE
The following is a reconciliation of the numerators and the denominators
of the basic and diluted earnings per participating share computations:
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2007 2006 2007 2006
-------------------------------------------------------------------------
Net earnings 354 509 1,113 1,104
Dividends on non-participating
shares (11) (11) (32) (32)
-------------------------------------------------------------------------
Net earnings available to
participating shareholders 343 498 1,081 1,072
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted number of
participating shares
outstanding (millions)
- Basic 453.7 450.9 453.3 450.3
Exercise of stock options 11.1 9.7 11.1 9.7
Shares assumed to be
repurchased with proceeds
from exercise of stock
options (6.5) (5.2) (6.7) (5.2)
-------------------------------------------------------------------------
Weighted number of
participating shares
outstanding (millions)
- Diluted 458.3 455.4 457.7 454.8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 14 PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS
The total benefit costs included in operating expenses are as follows:
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2007 2006 2007 2006
-------------------------------------------------------------------------
Pension plans 15 22 46 71
Other post-retirement benefits 6 6 21 22
-------------------------------------------------------------------------
21 28 67 93
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The total benefit costs exclude the pension provision described in
Note 17.
NOTE 15 SECURITIZATIONS
During the third quarter of 2007, IGM Financial Inc. (IGM) securitized
$431 million ($390 million in 2006) of residential mortgages through
sales to bank-sponsored commercial paper conduits and received net cash
proceeds of $427 million ($386 million in 2006). IGM's retained interest
in the securitized loans was valued at $8 million ($10 million in 2006).
A pre-tax gain on sale of $0 million ($4 million in 2006) was recognized
and reported in net investment income in the Consolidated Statements of
Earnings.
During the nine months ended September 30, 2007, IGM securitized
$1,096 million ($1,026 million in 2006) of residential mortgages through
sales to bank-sponsored commercial paper conduits and received net cash
proceeds of $1,085 million ($1,019 million in 2006). IGM's retained
interest in the securitized loans was valued at $21 million ($17 million
in 2006). A pre-tax gain on sale of $2 million ($1 million in 2006) was
recognized and reported in net investment income in the Consolidated
Statements of Earnings.
NOTE 16 SEGMENTED INFORMATION
Information on Profit Measure
-------------------------------------------------------------------------
Three months ended Par-
September 30, 2007 Lifeco IGM jointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 3,879 - - - 3,879
Net investment income 1,844 44 - 75 1,963
Fees and media income 921 687 - 88 1,696
-------------------------------------------------------------------------
6,644 731 - 163 7,538
-------------------------------------------------------------------------
Expenses
Policyholder benefits,
dividends and
experience refunds,
and change in
actuarial liabilities 4,678 - - - 4,678
Commissions 348 238 - (12) 574
Operating expenses 936 155 - 137 1,228
Financing charges 81 22 - 15 118
-------------------------------------------------------------------------
6,043 415 - 140 6,598
-------------------------------------------------------------------------
601 316 - 23 940
Share of earnings of
affiliates - - 30 (4) 26
Other income (charges),
net - - - 8 8
-------------------------------------------------------------------------
Earnings before income
taxes and non-
controlling interests 601 316 30 27 974
Income taxes 78 96 - 13 187
Non-controlling interests 308 140 10 (25) 433
-------------------------------------------------------------------------
Contribution to
consolidated net
earnings 215 80 20 39 354
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Information on Profit Measure
-------------------------------------------------------------------------
Three months ended Par-
September 30, 2006 Lifeco IGM jointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 4,332 - - - 4,332
Net investment income 1,577 55 - - 1,632
Fees and media income 658 588 - 78 1,324
-------------------------------------------------------------------------
6,567 643 - 78 7,288
-------------------------------------------------------------------------
Expenses
Policyholder benefits,
dividends and
experience refunds,
and change in
actuarial liabilities 4,871 - - - 4,871
Commissions 325 206 - (12) 519
Operating expenses 604 134 - 124 862
Financing charges 54 22 - 14 90
-------------------------------------------------------------------------
5,854 362 - 126 6,342
-------------------------------------------------------------------------
713 281 - (48) 946
Share of earnings of
affiliates - - 12 (3) 9
Other income (charges),
net - - 356 - 356
-------------------------------------------------------------------------
Earnings before income
taxes and non-
controlling interests 713 281 368 (51) 1,311
Income taxes 186 89 - (1) 274
Non-controlling interests 303 121 124 (20) 528
-------------------------------------------------------------------------
Contribution to
consolidated net
earnings 224 71 244 (30) 509
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Information on Profit Measure
-------------------------------------------------------------------------
Nine months ended Par-
September 30, 2007 Lifeco IGM jointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 13,758 - - - 13,758
Net investment income 2,402 152 - 224 2,778
Fees and media income 2,434 2,022 - 280 4,736
-------------------------------------------------------------------------
18,594 2,174 - 504 21,272
-------------------------------------------------------------------------
Expenses
Policyholder benefits,
dividends and
experience refunds,
and change in
actuarial liabilities 13,026 - - - 13,026
Commissions 1,100 706 - (39) 1,767
Operating expenses 2,228 466 - 437 3,131
Financing charges 185 66 - 43 294
-------------------------------------------------------------------------
16,539 1,238 - 441 18,218
-------------------------------------------------------------------------
2,055 936 - 63 3,054
Share of earnings of
affiliates - - 128 (15) 113
Other income (charges),
net - - 3 8 11
-------------------------------------------------------------------------
Earnings before income
taxes and non-
controlling interests 2,055 936 131 56 3,178
Income taxes 370 288 - 46 704
Non-controlling interests 974 409 44 (66) 1,361
-------------------------------------------------------------------------
Contribution to
consolidated net
earnings 711 239 87 76 1,113
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Information on Profit Measure
-------------------------------------------------------------------------
Nine months ended Par-
September 30, 2006 Lifeco IGM jointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 12,471 - - - 12,471
Net investment income 4,416 162 - 18 4,596
Fees and media income 1,982 1,764 - 249 3,995
-------------------------------------------------------------------------
18,869 1,926 - 267 21,062
-------------------------------------------------------------------------
Expenses
Policyholder benefits,
dividends and
experience refunds,
and change in
actuarial liabilities 13,831 - - - 13,831
Commissions 999 614 - (36) 1,577
Operating expenses 1,842 425 - 377 2,644
Financing charges 152 66 - 40 258
-------------------------------------------------------------------------
16,824 1,105 - 381 18,310
-------------------------------------------------------------------------
2,045 821 - (114) 2,752
Share of earnings of
affiliates - - 94 (10) 84
Other income (charges),
net - - 343 5 348
-------------------------------------------------------------------------
Earnings before income
taxes and non-
controlling interests 2,045 821 437 (119) 3,184
Income taxes 491 242 - (5) 728
Non-controlling interests 907 365 147 (67) 1,352
-------------------------------------------------------------------------
Contribution to
consolidated net
earnings 647 214 290 (47) 1,104
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTE 17 CONTINGENT LIABILITIES (material changes since
December 31, 2006)
In the third quarter of 2007, Great-West Life and Canada Life established
provisions for certain Canadian retirement plans in the amount of
$97 million after-tax. Actual results could differ from these estimates.
