Readers are referred to the disclaimers regarding Forward-looking
Information and Non-GAAP Financial Measures at the end of this release.
MONTREAL, QC, March 29 /CNW Telbec/ - Power Corporation of Canada's
operating earnings for the year ended December 31, 2005 were $1,071 million or
$2.32 per participating share, compared with $954 million or $2.08 per
participating share in 2004, an increase of 11.3 per cent on a per share
basis.
Growth in operating earnings reflects primarily a substantial increase in
the contribution from subsidiaries, driven by operating results at Power
Financial Corporation, and to a lesser extent improved results for corporate
activities.
Other income was $3 million or $0.01 per participating share in 2005. In
2004, other income was a charge of $5 million or $0.01 per share.
Power Corporation's share of a specific charge recorded by Lifeco related
to hurricane activity was $21 million or $0.05 per share.
Power Corporation's net earnings, for 2005 were $1,053 million or $2.28
per participating share, compared with $949 million or $2.07 per share in
2004.
FOURTH-QUARTER RESULTS
----------------------
For the three months ended December 31, 2005, Power Corporation's
operating earnings were $290 million or $0.62 per participating share,
compared with $242 million or $0.53 per share in 2004, an increase of
17.8 per cent on a per share basis. Results in the fourth quarter of 2005
include $20 million of pre-tax revenue resulting from the distribution by
investments funds.
Including other income of $2 million and the Corporation's share of the
specific charge recorded by Lifeco for $7 million, net earnings for the
quarter were $285 million or $0.61 per share. In the fourth quarter 2004, net
earnings were $232 million or $0.51 per share including a charge to other
income of $10 million or $0.02 per share.
POWER FINANCIAL CORPORATION'S RESULTS
-------------------------------------
Power Financial Corporation's operating earnings for the year ended
December 31, 2005 were $1,694 million or $2.33 per share, compared with
$1,538 million or $2.11 per share in 2004, an increase of 10.1 per cent on a
per share basis.
Growth in operating earnings reflects a substantial increase in the
contribution from Power Financial's subsidiaries and affiliate.
Other income was a charge of $2 million in 2005, compared with a gain of
$5 million or $0.01 per share in the preceding year. Results for 2005 also
include Power Financial 's share, in the amount of $31 million or $0.05 per
share, of a specific charge recorded by Lifeco.
Net earnings, after taking into account other income and the share of the
specific charge recorded by Lifeco, were $1,661 million or $2.28 per share in
2005, compared with $1,543 million or $2.12 per share in 2004.
Power Financial Corporation's operating earnings for the three months
ended December 31, 2005 were $450 million or $0.61 per share, compared with
$406 million or $0.56 per share in 2004, for an increase of 10.1 per cent on a
per share basis.
In the fourth quarter of 2005 Power Financial's share of a specific
charge recorded by Lifeco was $9 million or $0.01 per share. Other income in
the fourth quarter of 2004 was a charge $6 million or $0.01 per share.
Net earnings for the fourth quarter of 2005 were $441 million or
$0.60 per share, compared with $400 million or $0.55 per share for the same
period in 2004.
Forward-looking Information
---------------------------
Certain statements in this, other than statements of historical fact, are
forward-looking statements based on certain assumptions and reflect Power's
current expectations. These statements may include without limitation,
statements regarding the operations, business, financial condition,
priorities, ongoing objectives, strategies and outlook of Power 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.
Actual results could differ materially from those projected and should
not be relied upon as a prediction of future events. 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 Power's
or its subsidiaries and affiliates' control, affect the operations,
performance and results of Power or 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, Power's or its subsidiaries' or affiliates' ability to
complete strategic transactions and integrate acquisitions and Power's or its
subsidiaries' and 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 Power's 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, Power 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 otherwise.
Additional information about the risks and uncertainties about Power's
business 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, available at www.sedar.com.
Non-GAAP Financial Measures
---------------------------
Operating earnings and operating earnings per share are non-GAAP
financial measures that do not have standard meanings and may not be
comparable to similar measures used by other issuers.
Attachments: Financial Information
<<
Power Corporation of Canada
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------
December December
31, 2005 31, 2004
(in millions of dollars) (unaudited) (restated)
-------------------------------------------------------------------------
Assets
Cash and cash equivalents 5,332 4,142
-------------------------------------------------------------------------
Investments
Shares 4,867 4,073
Bonds 59,298 54,960
Mortgages and other loans 15,118 15,051
Loans to policyholders 6,646 6,499
Real estate 1,844 1,649
-------------------------------------------------------------------------
87,773 82,232
Funds held by ceding insurers 2,556 2,337
Investment in affiliates, at equity 1,554 1,698
Goodwill and intangible assets 10,683 10,721
Future income taxes 476 573
Other assets 4,625 4,237
-------------------------------------------------------------------------
112,999 105,940
-------------------------------------------------------------------------
Liabilities
Policy liabilities
Actuarial liabilities 71,263 65,822
Other 3,787 4,273
Deposits and certificates 693 711
Funds held under reinsurance contracts 4,325 4,108
Debentures and other borrowings (Note 2) 3,427 3,640
Preferred shares of subsidiaries (Note 1) 1,656 1,666
Capital trust securities and debentures (Note 3) 648 651
Future income taxes 865 852
Other liabilities 8,836 8,423
-------------------------------------------------------------------------
95,500 90,146
-------------------------------------------------------------------------
Non-controlling interests 10,240 9,192
-------------------------------------------------------------------------
Shareholders' Equity
Stated capital (Note 4)
Non-participating shares 795 545
Participating shares 417 389
Contributed surplus 37 16
Retained earnings 6,478 5,761
Foreign currency translation adjustments (468) (109)
-------------------------------------------------------------------------
7,259 6,602
-------------------------------------------------------------------------
112,999 105,940
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
-------------------------------------------------------------------------
Three months ended For the years ended
December 31 December 31
2005 2004 2005 2004
(unaudited) (in millions
of dollars, except per
share amounts) (restated) (restated)
-------------------------------------------------------------------------
Revenues
Premium income 4,543 3,764 16,048 14,202
Net investment income 1,447 1,415 5,609 5,558
Fee and media income 1,260 1,208 4,956 4,583
-------------------------------------------------------------------------
7,250 6,387 26,613 24,343
-------------------------------------------------------------------------
Expenses
Paid or credited to
policyholders and
beneficiaries including
policyholder dividends
and experience refunds 4,888 4,001 17,435 15,490
Commissions 506 535 1,973 1,880
Operating expenses 893 893 3,524 3,523
Financing charges (Note 5) 78 93 336 364
-------------------------------------------------------------------------
6,365 5,522 23,268 21,257
-------------------------------------------------------------------------
885 865 3,345 3,086
Share of earnings of
affiliates 37 33 110 118
Other income (charges),
net (Note 6) 2 (37) (7) (49)
-------------------------------------------------------------------------
Earnings before income
taxes and non-controlling
interests 924 861 3,448 3,155
Income taxes 246 227 910 837
Non-controlling interests 393 402 1,485 1,369
-------------------------------------------------------------------------
Net earnings 285 232 1,053 949
-------------------------------------------------------------------------
Earnings per participating
share (Note 7)
Basic 0.61 0.51 2.28 2.07
-------------------------------------------------------------------------
Diluted 0.60 0.50 2.25 2.03
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
-------------------------------------------------------------------------
For the years ended December 31
(unaudited) (in millions of dollars) 2005 2004
-------------------------------------------------------------------------
Retained earnings, beginning of year 5,761 5,089
Add
Net earnings 1,053 949
-------------------------------------------------------------------------
6,814 6,038
-------------------------------------------------------------------------
Deduct
Dividends
Non-participating shares 32 29
Participating shares 292 246
Premium on subordinated voting shares purchased
for cancellation - 3
Other, including share issue costs of $6 million
in 2005 12 (1)
-------------------------------------------------------------------------
336 277
-------------------------------------------------------------------------
Retained earnings, end of year 6,478 5,761
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------
Three months ended For the years ended
December 31 December 31
2005 2004 2005 2004
(unaudited) (in millions
of dollars) (restated) (restated)
-------------------------------------------------------------------------
Operating activities
Net earnings 285 232 1,053 949
Non-cash charges (credits)
Increase (decrease) in
policy liabilities 1,160 512 2,725 685
Decrease (increase) in
funds withheld by ceding
insurers (576) (54) (219) 1,805
Increase (decrease) in
funds held under
reinsurance contracts (34) (548) (23) (548)
Amortization and
depreciation 27 51 112 123
Future income taxes 92 145 157 210
Non-controlling interests 393 402 1,485 1,369
Other (640) (211) (706) (1,205)
-------------------------------------------------------------------------
707 529 4,584 3,388
-------------------------------------------------------------------------
Financing activities
Dividends paid
By subsidiaries to
non-controlling interests (159) (135) (603) (502)
Non-participating shares (7) (7) (29) (29)
Participating shares (76) (64) (292) (246)
-------------------------------------------------------------------------
(242) (206) (924) (777)
Issue of subordinated
voting shares - 2 28 16
Issue of non-participating
shares 250 - 250 -
Repurchase of subordinate
voting shares for
cancellation - - - (3)
Repurchase of
non-participating shares
for cancellation - (1) - (4)
Issue of common shares by
subsidiaries 5 4 29 66
Issue of preferred shares
by subsidiaries 250 - 550 300
Redemption of preferred
shares by subsidiaries (10) (130) (10) (130)
Repurchase of common shares
by subsidiaries (15) (13) (80) (156)
Issue of debentures and
other borrowings - 210 - 210
Repayment of debentures and
other borrowings - (390) (186) (863)
Other (3) 16 (34) (72)
-------------------------------------------------------------------------
235 (508) (377) (1,413)
-------------------------------------------------------------------------
Investment activities
Bond sales and maturities 8,315 8,210 36,671 35,867
Mortgage loan repayments (133) 950 2,045 2,650
Sale of shares 542 428 1,672 1,497
Real estate sales 126 86 200 150
Proceeds from
securitization 63 107 251 207
Change in loans to
policyholders (88) 118 (272) (47)
Change in repurchase
agreements (3) (62) 224 195
Reinsurance transactions - 3 - (430)
Acquisition of Investment
Planning Counsel (1) 1 (1) (63)
Investment in subsidiaries 22 - 22 -
Investment in bonds (8,275) (8,191) (37,939) (37,640)
Investment in mortgage loans 5 (923) (2,639) (2,422)
Investment in shares (980) (408) (2,315) (1,698)
Investment in real estate (177) (110) (588) (197)
Other (32) (1) (62) (14)
-------------------------------------------------------------------------
(616) 208 (2,731) (1,945)
-------------------------------------------------------------------------
Effect of changes in
exchange rates on cash
and cash equivalents (20) (23) (286) (47)
Increase (decrease) in cash
and cash equivalents 306 206 1,190 (17)
Cash and cash equivalents,
beginning of period 5,026 3,936 4,142 4,159
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period 5,332 4,142 5,332 4,142
-------------------------------------------------------------------------
Power Corporation of Canada
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 2005
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 December 31, 2005 have been prepared in accordance
with generally accepted accounting principles in Canada, using the accounting
policies described in Note 1 of the Corporation's consolidated financial
statements for the year ended December 31, 2004, except as noted below. These
interim consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto in the Corporation's
annual report dated December 31, 2004.
CONSOLIDATION OF VARIABLE INTEREST ENTITIES
Effective January 1, 2005, the Corporation adopted the Canadian Institute
of Chartered Accountants (CICA) Handbook Accounting Guideline 15 on
Consolidation of Variable Interest Entities. As a result, Great-West Lifeco
Inc. (Lifeco) no longer consolidates Great-West Life Capital Trust (GWLCT) and
Canada Life Capital Trust (CLCT) but recognizes the related debentures on the
Consolidated Balance Sheets (refer to Note 3). This change in accounting
policy had no impact on net earnings available to participating shareholders
or basic earnings per participating share.
FINANCIAL INSTRUMENTS - DISCLOSURE AND PRESENTATION
Effective for fiscal years beginning on or after November 1, 2004, CICA
3860, Financial Instruments - Disclosure and Presentation was amended to
require obligations that an entity must or can settle by issuing a variable
number of the issuer's own equity instruments to be presented as liabilities
rather than equity. On January 1, 2005, the Corporation adopted the amended
standard retroactively with restatement of prior periods. Some of the
subsidiaries' preferred shares ($1,666 million) were reclassified from Non-
controlling interests to liabilities and the associated preferred dividends
were reclassified to Financing Charges in the Consolidated Statements of
Earnings. The change does not have any impact on earnings per share or net
earnings available to participating shareholders since preferred share
dividends were previously deducted from net earnings in determining net
earnings available to participating shareholders.
INVESTMENT COMPANIES
In January 2004, the CICA issued Accounting Guideline No. 18 - Investment
Companies which became effective January 1, 2005. Under this Guideline,
investment companies are required to account for all their investment at fair
value, including investments that would otherwise be consolidated or accounted
for using the equity method. The Guideline sets out the criteria for
determining whether a company is an investment company and also provides
guidance on the circumstances in which the parent company of, or equity method
investor in, an investment company should account for the investment company's
investments at fair value. The Corporation has determined that the new
guideline did not have a material impact on the consolidated financial
statements of the Corporation in 2005.
COMPARATIVE FIGURES
Certain of the 2004 amounts presented for comparative purposes have been
reclassified to conform with the presentation adopted in the current year.
NOTE 2 DEBENTURES AND OTHER BORROWINGS
-------------------------------------------------------------------------
December December
31, 2005 31, 2004
-------------------------------------------------------------------------
Power Financial Corporation
7.65% debentures, due January 5, 2006 150 150
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.
Five-year term facility at Canadian 90-day
Bankers' Acceptance (2004 - $118 million) and at
90-day LIBOR rate (2004 - $31 million) - 149
Subordinated debentures due September 19, 2011
bearing a fixed rate of 8% until 2006 and,
thereafter, at a rate equal to the Canadian
90-day Bankers' Acceptance rate plus 1%, unsecured 256 275
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 206 209
6.75% debentures due August 10, 2015, unsecured 200 200
6.14% debentures due March 21, 2018, unsecured 200 200
6.40% debentures due December 11, 2028, unsecured 101 101
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$175 million) 205 210
Other notes payable with interest of 8.0% 9 10
Other
Term loan at prime plus a premium varying between
1.0% and 1.5% or Banker's Acceptance plus a premium
varying between 2.0% and 2.5% due May 13, 2013
(effective rate of 8.6% at December 31, 2005) 50 -
Bank loan at prime plus a premium varying between
0.875% and 3.750% due December 31, 2007 (effective
rate of 8.6% at December 31, 2004) - 86
-------------------------------------------------------------------------
3,427 3,640
-------------------------------------------------------------------------
NOTE 3 CAPITAL TRUST SECURITIES AND DEBENTURES
-------------------------------------------------------------------------
December December
31, 2005 31, 2004
-------------------------------------------------------------------------
Capital trust securities
Trust securities issued by GWLCT - 350
Trust securities issued by CLCT - 450
-------------------------------------------------------------------------
- 800
Capital trust debentures
5.995% senior debentures due December 31, 2052,
unsecured (GWLCT) 350 -
6.679% senior debentures due June 30, 2052,
unsecured (CLCT) 300 -
7.529% senior debentures due June 30, 2052,
unsecured (CLCT) 150 -
-------------------------------------------------------------------------
800 -
Acquisition-related fair market value adjustment 34 37
Trust securities held by the consolidated group
as temporary investments (186) (186)
-------------------------------------------------------------------------
648 651
-------------------------------------------------------------------------
GWLCT, a trust established by the Great-West Life Assurance Company
(Great-West), had issued $350 million of capital trust securities, the
proceeds of which were used by GWLCT to purchase Great-West senior debentures
in the amount of $350 million, and CLCT, a trust established by Canada Life
Assurance Company (Canada 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. Effective January 1, 2005,
the Corporation does not consolidate GWLCT and CLCT (see Note 1). The impact
of this change is to not recognize the capital trust securities issued by
GWLCT and CLCT and to recognize the debentures issued to the trusts by Great-
West and Canada Life. As a result, distributions and interest on the capital
trust securities have been reclassified to Financing Charges on the
Consolidated Statements of Earnings (see Note 5).
NOTE 4 CAPITAL STOCK AND STOCK OPTION PLAN
STATED CAPITAL
-------------------------------------------------------------------------
December December
31, 2005 31,2004
-------------------------------------------------------------------------
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 250 150
Series D First Preferred Shares
Authorized and issued - 10,000,000 shares 250 -
-------------------------------------------------------------------------
795 545
-------------------------------------------------------------------------
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 - 400,264,694 (2004 - 396,091,064) shares 390 362
-------------------------------------------------------------------------
417 389
-------------------------------------------------------------------------
During the fourth quarter, the Corporation issued 10,000,000 5.00% Non-
Cumulative First Preferred Shares, Series D for cash proceeds of $250 million.
The 5.00% Non-Cumulative First Preferred Shares, Series D are entitled to
fixed non-cumulative preferential cash dividends at a rate equal to $1.25 per
share per annum. On and after October 31, 2010, the Corporation may redeem for
cash the Series D First Preferred Shares in whole or in part, at the
Corporation's option at $26.00 per share if redeemed prior to October 31,
2011, $25.75 if redeemed thereafter and prior to October 31, 2012 $25.50 if
redeemed thereafter and prior to October 31, 2013, $25.75 if redeemed
thereafter and prior to October 31, 2014 and $25.00 if redeemed thereafter, in
each case together with all declared and unpaid dividends to, but excluding,
the date of redemption.
STOCK-BASED COMPENSATION
During the fourth quarter of 2005, 108,400 options were granted under the
Corporation's stock option plan and during the first quarter of 2005,
1,192,500 options were granted (no options were granted in the second and
third quarters of 2005).
During the second quarter of 2004, 1,162,100 options were granted under
the Corporation's stock option plan (no options were granted in the first,
third and fourth quarters of 2004).
The fair value of these options was estimated using the Black-Scholes
option-pricing model with the following assumptions:
2005 2004
-------------------------------------------------------------------------
Dividend yield 2% 2%
Expected volatility 24% 24%
Risk-free interest rate 4% 5%
Expected life (years) 7 7
Fair value per stock option ($/option) $8.64 $7.92
-------------------------------------------------------------------------
Compensation expense of $26 million has been recognized for the twelve
months ended December 31, 2005 ($20 million in 2004). In addition, stock
options were granted by subsidiaries in 2005 and 2004.
Options were outstanding at December 31, 2005 to purchase, until
November 30, 2015, up to an aggregate of 13,194,210 subordinate voting shares
at various prices from $5.38125 to $32.025. During the twelve months ended
December 31, 2005, 4,173,630 shares (2,367,164 in 2004) were issued under the
Corporation's plan for an aggregate consideration of $28 million ($16 million
in 2004). During the three months ended December 31, 2004, 418,000 shares (505
in 2005) were issued for an aggregate consideration of $2 million ($0 million
in 2005).
NOTE 5 FINANCING CHARGES
Financing charges include interest on debentures and other borrowings,
together with distribution and interest on capital trust securities and
debentures and dividends on preferred shares now classified as liabilities, as
described in Notes 1 and 3.
-------------------------------------------------------------------------
Three months ended For the years ended
December 31 December 31
2005 2004 2005 2004
-------------------------------------------------------------------------
Interest on debentures and
other borrowings 50 64 224 253
Preferred share dividends 19 20 75 80
Distributions and interest
on capital trust securities
and debentures 12 12 49 49
Distributions on capital
trust securities held by the
consolidated group as
temporary investments (3) (3) (12) (18)
-------------------------------------------------------------------------
78 93 336 364
-------------------------------------------------------------------------
NOTE 6 OTHER INCOME (CHARGES), NET
-------------------------------------------------------------------------
Three months ended For the years ended
December 31 December 31
2005 2004 2005 2004
-------------------------------------------------------------------------
Share of Pargesa's
non-operating earnings - 15 11 29
Gain resulting from the
dilution of Power Financial
Corporation's interest in
a subsidiary - 1 - 9
Restructuring costs - Lifeco
(Note 8) - (18) (22) (44)
IGM unitholder compensation
charge - (29) - (29)
Other 2 (6) 4 (14)
-------------------------------------------------------------------------
2 (37) (7) (49)
-------------------------------------------------------------------------
NOTE 7 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 For the years ended
December 31 December 31
2005 2004 2005 2004
-------------------------------------------------------------------------
Net earnings 285 232 1,053 949
Dividends on
non-participating shares (10) (7) (32) (29)
-------------------------------------------------------------------------
Net earnings available to
participating shareholders 275 225 1,021 920
-------------------------------------------------------------------------
Weighted number of
participating shares
outstanding (millions)
- Basic 449.1 444.8 448.0 444.0
Exercise of stock options 12.0 16.1 12.0 16.1
Shares assumed to be
repurchased with proceeds
from exercise of stock
options (6.1) (7.2) (6.0) (7.7)
-------------------------------------------------------------------------
Weighted number of
participating shares
outstanding (millions)
- Diluted 455.0 453.7 454.0 452.4
-------------------------------------------------------------------------
NOTE 8 RESTRUCTURING COSTS
The plan to restructure and integrate the operations of Canada Life
Financial Corporation (CLFC) with Lifeco's wholly owned subsidiaries Great-
West, London Life and GWL&A has been completed at the end of December 2005 at
a total cost of $446 million. Restructuring costs related to the acquisition
of CLFC incurred for the year ended December 31, 2005 were $101 million (2004 -
$220 million). Of this amount, $22 million before tax ($17 million after tax)
(2004 - $44 million before tax ($30 million after tax)) was charged to
earnings and $79 million (2004 - $176 million) was charged against the amount
accrued as part of the purchase equation of CLFC. These restructuring costs
are related to the elimination of duplicate systems, exiting and consolidating
operations and compensation costs.
NOTE 9 PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS
The total benefit costs included in operating expenses are as follows:
-------------------------------------------------------------------------
Three months ended For the years ended
December 31 December 31
2005 2004 2005 2004
-------------------------------------------------------------------------
Pension benefits 21 17 83 67
Other post retirement benefits 8 14 47 54
-------------------------------------------------------------------------
29 31 130 121
-------------------------------------------------------------------------
NOTE 10 SECURITIZATIONS
During the fourth quarter, IGM securitized $64 million (2004 -
$108 million) of residential mortgages through sales to commercial paper
conduits that in turn issued securities to investors and received net cash
proceeds of $63 million (2004 - $107 million).
During the twelve months ended December 31, 2005, IGM securitized
$252 million (2004 - $208 million) of residential mortgages through sales to
commercial paper conduits that in turn issued securities to investors and
received net cash proceeds of $251 million (2004 - $207 million).
NOTE 11 ACQUISITION OF BUSINESS
During 2005, Canada Life (a subsidiary of Lifeco), through its wholly
owned United Kingdom subsidiary, Canada Life Limited, acquired the assets and
liabilities associated with the in-force annuity in payment business of
Phoenix and London Assurance Limited, part of the Resolution Life Group which
is based in the United Kingdom. The transaction resulted in an increase in
invested assets and a corresponding increase in policyholder liabilities of
$4.4 billion on the Consolidated Balance Sheet.
NOTE 12 SEGMENTED INFORMATION
Information on Profit Measure
-------------------------------------------------------------------------
Three months ended
December 31, 2005 Lifeco IGM Parjointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 4,543 4,543
Net investment income 1,374 47 26 1,447
Fee and media income 601 561 98 1,260
-------------------------------------------------------------------------
6,518 608 - 124 7,250
-------------------------------------------------------------------------
Expenses
Insurance claims 4,888 4,888
Commissions 330 189 (13) 506
Operating expenses 605 141 147 893
Financing charges 41 22 15 78
-------------------------------------------------------------------------
5,864 352 - 149 6,365
-------------------------------------------------------------------------
654 256 - (25) 885
Share of earnings
of affiliates 39 (2) 37
Other income
(charges) - net - - - 2 2
-------------------------------------------------------------------------
Earnings before the
following 654 256 39 (25) 924
Income taxes 160 78 8 246
Non-controlling
interests 282 110 13 (12) 393
-------------------------------------------------------------------------
Contribution to
consolidated net
earnings 212 68 26 (21) 285
-------------------------------------------------------------------------
Information on
Profit Measure
-------------------------------------------------------------------------
Three months ended
December 31, 2004 Lifeco IGM Parjointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 3,764 3,764
Net investment income 1,378 47 (10) 1,415
Fee and media income 599 501 108 1,208
-------------------------------------------------------------------------
5,741 548 - 98 6,387
-------------------------------------------------------------------------
Expenses
Insurance claims 4,001 4,001
Commissions 379 164 (8) 535
Operating expenses 630 124 139 893
Financing charges 53 24 16 93
-------------------------------------------------------------------------
5,063 312 - 147 5,522
-------------------------------------------------------------------------
678 236 - (49) 865
Share of earnings
of affiliates 38 (5) 33
Other income
(charges) - net (18) (29) 15 (5) (37)
-------------------------------------------------------------------------
Earnings before the
following 660 207 53 (59) 861
Income taxes 158 64 5 227
Non-controlling
interests 311 90 18 (17) 402
-------------------------------------------------------------------------
Contribution to
consolidated net
earnings 191 53 35 (47) 232
-------------------------------------------------------------------------
Information on
Profit Measure
-------------------------------------------------------------------------
For the year ended
December 31, 2005 Lifeco IGM Parjointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 16,048 16,048
Net investment
income 5,389 183 37 5,609
Fee and media income 2,434 2,164 358 4,956
-------------------------------------------------------------------------
23,871 2,347 - 395 26,613
-------------------------------------------------------------------------
Expenses
Insurance claims 17,435 17,435
Commissions 1,284 726 (37) 1,973
Operating expenses 2,454 555 515 3,524
Financing charges 187 90 59 336
-------------------------------------------------------------------------
21,360 1,371 - 537 23,268
-------------------------------------------------------------------------
2,511 976 - (142) 3,345
Share of earnings
of affiliates 121 (11) 110
Other income
(charges) - net (22) - 11 4 (7)
-------------------------------------------------------------------------
Earnings before the
following 2,489 976 132 (149) 3,448
Income taxes 601 292 17 910
Non-controlling
interests 1,074 430 44 (63) 1,485
-------------------------------------------------------------------------
Contribution to
consolidated net
earnings 814 254 88 (103) 1,053
-------------------------------------------------------------------------
Information on
Profit Measure
-------------------------------------------------------------------------
For the year ended
December 31, 2004 Lifeco IGM Parjointco Other Total
-------------------------------------------------------------------------
Revenues
Premium income 14,202 14,202
Net investment
income 5,396 163 (1) 5,558
Fee and media income 2,273 1,956 354 4,583
-------------------------------------------------------------------------
21,871 2,119 - 353 24,343
-------------------------------------------------------------------------
Expenses
Insurance claims 15,490 15,490
Commissions 1,281 617 (18) 1,880
Operating expenses 2,533 515 475 3,523
Financing charges 205 96 63 364
-------------------------------------------------------------------------
19,509 1,228 - 520 21,257
-------------------------------------------------------------------------
2,362 891 - (167) 3,086
Share of earnings
of affiliates 126 (8) 118
Other income
(charges) - net (44) (29) 29 (5) (49)
-------------------------------------------------------------------------
Earnings before the
following 2,318 862 155 (180) 3,155
Income taxes 566 265 6 837
Non-controlling
interests 1,003 377 52 (63) 1,369
-------------------------------------------------------------------------
Contribution to
consolidated net
earnings 749 220 103 (123) 949
-------------------------------------------------------------------------
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