Power Corporation of Canada Reports 2011 Financial Results and Dividends

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

MONTREAL, March 14, 2012 /PRNewswire/ - Power Corporation of Canada (TSX: POW) today reported operating earnings attributable to participating shareholders for the year ended December 31, 2011 of $1,152 million or $2.50 per share, compared with $957 million or $2.09 per share in 2010. This represents an increase of 19.9% on a per share basis.

The increase in operating earnings reflects a higher contribution from Power Financial Corporation (Power Financial), a subsidiary of the Corporation, and an increase in income from investments.

Subsidiaries contributed $1,150 million to Power Corporation's operating earnings for the year ended December 31, 2011, compared with $1,097 million in 2010. Results from corporate activities were a contribution of $43 million for the year ended December 31, 2011, compared with a net charge of $99 million in 2010. This increase is mainly due to income from investments generated by the Corporation's interest in the Sagard 1 fund in Europe which is managed by Sagard SAS, a wholly owned subsidiary of the Corporation, and income from other investment funds.

Other items, not included in operating earnings, represented a charge of $77 million for the year ended December 31, 2011, compared with a charge of $230 million in 2010.

Other items in 2011 include the Corporation's share of non-operating earnings of Power Financial's subsidiaries Great-West Lifeco Inc. (Lifeco) for an amount of $58 million and IGM Financial Inc. (IGM) for an amount of $23 million, as follows:

  • In the fourth quarter of 2011, Lifeco re-evaluated and reduced a litigation provision established in the third quarter of 2010. The re-evaluation positively impacted common shareholders' net earnings of Lifeco by $223 million. Additionally, Lifeco established a $99 million after-tax provision in respect of the settlement of litigation relating to its ownership in a U.S.-based private equity firm. The net impact to Power Corporation of these two unrelated matters was a positive contribution of $58 million.
  • Other items at IGM represent the after-tax gain on the sale of M.R.S. Trust Company and M.R.S. Inc. by Mackenzie Financial Corporation as well as a one-time tax adjustment.

Other items in 2011 also include the Corporation's $87 million share of an impairment of €650 million recorded by Groupe Bruxelles Lambert on its investment in Lafarge SA, and an impairment charge on the Corporation's investment in CITIC Pacific Limited for an amount of $72 million recorded in the third quarter.

As a result, net earnings attributable to participating shareholders for the year ended December 31, 2011 were $1,075 million or $2.34 per share, compared with $727 million or $1.59 per share in 2010.

FOURTH QUARTER RESULTS

Operating earnings attributable to participating shareholders for the three-month period ended December 31, 2011 were $241 million or $0.52 per share, compared with $232 million or $0.51 per share in the corresponding period of 2010. This represents an increase of 3.4% on a per share basis.

Power Corporation's share of operating earnings from its subsidiaries was $279 million for the three-month period ended December 31, 2011, compared with $274 million for the same period in 2010. Corporate activities represented a net charge of $28 million in the three-month period ended December 31, 2011, compared with a net charge of $32 million in the corresponding period of 2010.

Other items were a contribution of $73 million in the three-month period ended December 31, 2011, as detailed above, compared with a charge of $3 million in the corresponding period of 2010.  

As a result, net earnings attributable to participating shareholders for the three-month period ended December 31, 2011 were $314 million or $0.68 per share, compared with $229 million or $0.50 per share in the corresponding period of 2010.

RESULTS OF POWER FINANCIAL CORPORATION

Power Financial reported operating earnings attributable to common shareholders for the year ended December 31, 2011 of $1,729 million or $2.44 per share, compared with $1,625 million or $2.30 per share in 2010. This represents an increase of 6.2% on a per share basis.

The increase in operating earnings of Power Financial reflects primarily the increase in the contribution from Lifeco and IGM.

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

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

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

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

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

DIVIDENDS ON PREFERRED SHARES

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

SERIES - STOCK SYMBOL RECORD DATE PAYMENT DATE AMOUNT
1986 Series - POW.PR.F  23-Mar-12 15-Apr-12 To be determined in accordance
with the articles of the Corporation
Series A - POW.PR.A 23-Mar-12 15-Apr-12 35¢
Series B - POW.PR.B 23-Mar-12 15-Apr-12 33.4375¢
Series C - POW.PR.C 23-Mar-12 15-Apr-12 36.25¢
Series D - POW.PR.D 23-Mar-12 15-Apr-12 31.25¢
Series G - POW.PR.G 23-Mar-12 15-Apr-12 18.027¢

DIVIDENDS ON PARTICIPATING SHARES

The Board of Directors also declared a dividend of 29 cents per share on the Participating Preferred and Subordinate Voting Shares of the Corporation, payable March 30, 2012 to shareholders of record March 23, 2012.

For purposes of the Income Tax Act (Canada) and any similar provincial legislation, all of the above dividends on the Corporation's preferred shares (including the Participating Preferred Shares) and Subordinate Voting Shares are eligible dividends.

Forward-Looking Statements
Certain statements in this News Release, other than statements of historical fact, are forward-looking statements based on certain assumptions and reflect the Corporation's current expectations, or with respect to disclosure regarding the Corporation's public subsidiaries, reflects such subsidiaries' disclosed current expectations. Forward-looking statements are provided for the purposes of assisting the reader in understanding the Corporation's financial performance, financial position and cash flows as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of the Corporation and its subsidiaries, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects", "anticipates", "plans", "believes", "estimates", "seeks", "intends", "targets", "projects", "forecasts" or negative versions thereof and other similar expressions, or future or conditional verbs such as "may", "will", "should", "would" and "could".

By its nature, this information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of factors, many of which are beyond the Corporation's and its subsidiaries' control, affect the operations, performance and results of the Corporation and its subsidiaries and their businesses, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, management of market liquidity and funding risks, changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates), the effect of applying future accounting changes, business competition, operational and reputational risks, technological change, changes in government regulation and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, the Corporation's and its subsidiaries' ability to complete strategic transactions, integrate acquisitions and implement other growth strategies, and the Corporation's and its subsidiaries' success in anticipating and managing the foregoing factors. The reader is cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. Information contained in forward-looking statements is based upon certain material assumptions that were applied in drawing a conclusion or making a forecast or projection, including management's perceptions of historical trends, current conditions and expected future developments, as well as other considerations that are believed to be appropriate in the circumstances, including that the foregoing list of factors, collectively, are not expected to have a material impact on the Corporation and its subsidiaries. While the Corporation considers these assumptions to be reasonable based on information currently available to management, they may prove to be incorrect.

Other than as specifically required by applicable Canadian law, the Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.

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

Non-IFRS Financial Measures

In analyzing the financial results of the Corporation and consistent with the presentation in previous years, net earnings are subdivided into the following components:

  • operating earnings; and
  • other items or non-operating earnings, which include the after-tax impact of any item that management considers to be of a non-recurring nature or that could make the period-over-period comparison of results from operations less meaningful, and also include the Corporation's share of any such item presented in a comparable manner by its subsidiaries.

Management has used these financial measures for many years in its presentation and analysis of the financial performance of Power Corporation, and believes that they provide additional meaningful information to readers in their analysis of the results of the Corporation.

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

 

CONSOLIDATED BALANCE SHEETS
  December 31,   December 31,   January 1,
[in millions of Canadian dollars] 2011   2010   2010
Assets          
Cash and cash equivalents 3,741   4,016   5,383
Investments          
  Bonds 79,186   74,250   67,942
  Mortgages and other loans 21,541   20,209   20,613
  Shares 7,876   7,737   7,584
  Investment properties 3,201   2,957   2,615
  Loans to policyholders 7,162   6,827   6,957
  118,966   111,980   105,711
Funds held by ceding insurers 9,923   9,856   10,984
Reinsurance assets 2,061   2,533   2,800
Investments in associates 2,341   2,565   2,948
Owner-occupied properties 565   511   502
Capital assets 340   320   305
Derivative financial instruments 1,056   1,030   782
Other assets 4,759   4,774   4,920
Deferred tax assets 1,227   1,244   1,294
Intangible assets 5,107   5,111   5,279
Goodwill 8,828   8,759   8,686
Segregated funds for the risk of unit holders 96,582   94,827   87,495
Total assets 255,496   247,526   237,089
           
Liabilities          
Insurance contract liabilities 114,730   107,405   105,028
Investment contract liabilities 782   791   841
Deposits and certificates 151   835   907
Funds held under reinsurance contracts 169   149   331
Obligation to securitization entities 3,827   3,505   3,310
Debentures and other borrowings 6,296   6,720   6,339
Capital trust securities 533   535   540
Derivative financial instruments 430   244   359
Preferred shares of subsidiaries -   -   499
Other liabilities 5,668   7,530   6,763
Deferred tax liabilities 1,293   1,134   1,003
Insurance and investment contracts on account of unit holders 96,582   94,827   87,495
Total liabilities 230,461   223,675   213,415
           
Equity          
Stated capital          
  Non-participating shares 779   783   787
  Participating shares 571   549   526
Retained earnings 8,119   7,557   7,374
Reserves 356   541   894
Total shareholders' equity 9,825   9,430   9,581
Non-controlling interests 15,210   14,421   14,093
Total equity 25,035   23,851   23,674
Total liabilities and equity 255,496   247,526   237,089


CONSOLIDATED STATEMENTS OF EARNINGS
For the years ended December 31    
[in millions of Canadian dollars, except per share amounts] 2011 2010
Revenues    
Premium income    
  Gross premiums written 20,013 20,404
  Ceded premiums (2,720) (2,656)
Total net premiums 17,293 17,748
Net investment income    
  Regular net investment income 5,720 5,723
  Change in fair value 4,154 3,785
  9,874 9,508
Fee and media income 5,745 5,564
Total revenues 32,912 32,820
     
Expenses    
Policyholder benefits    
  Insurance and investment contracts    
    Gross 16,591 17,550
    Ceded (1,217) (2,208)
  15,374 15,342
Policyholder dividends and experience refunds 1,424 1,466
Change in insurance and investment contract liabilities 6,245 6,417
Total paid or credited to policyholders 23,043 23,225
Commissions 2,312 2,216
Operating and administrative expenses 3,501 4,299
Financing charges 443 465
Total expenses 29,299 30,205
  3,613 2,615
Share of earnings (losses) of investments in associates (20) 124
Earnings before income taxes - continuing operations 3,593 2,739
Income taxes 711 532
Net earnings - continuing operations 2,882 2,207
Net earnings - discontinued operations 63 2
Net earnings 2,945 2,209
     
Attributable to    
  Non-controlling interests 1,829 1,441
  Non-participating shareholders 41 41
  Participating shareholders 1,075 727
  2,945 2,209
     
Earnings per participating share    
  Net earnings attributable to participating shareholders    
    - Basic 2.34 1.59
    - Diluted 2.32 1.57
     
  Net earnings from continuing operations attributable to participating shareholders    
    - Basic 2.29 1.59
    - Diluted 2.27 1.57


SEGMENTED INFORMATION
                   
INFORMATION ON PROFIT MEASURE
For the year ended December 31, 2011 Lifeco   IGM   Parjointco   Other   Total
Revenues                  
Premium income, net 17,293   -   -   -   17,293
Investment income, net 9,702   161   -   11   9,874
Fee and media income 2,903   2,571   -   271   5,745
  29,898   2,732   -   282   32,912
Expenses                  
Total paid or credited to policyholders 23,043   -   -   -   23,043
Commissions 1,548   895   -   (131)   2,312
Operating and administrative expenses 2,314   638   -   549   3,501
Financing charges 289   103   -   51   443
  27,194   1,636   -   469   29,299
  2,704   1,096   -   (187)   3,613
Share of earnings (losses) of investments in associates  -   -   (20)   -   (20)
Earnings before income taxes - continuing operations 2,704   1,096   (20)   (187)   3,593
Income taxes 465   250   -   (4)   711
Contribution to net earnings - continuing operations 2,239   846   (20)   (183)   2,882
Contribution to net earnings - discontinued operations -   63   -   -   63
Contribution to net earnings 2,239   909   (20)   (183)   2,945
                   
Attributable to                  
  Non-controlling interests 1,324   566   (7)   (54)   1,829
  Non-participating shareholders -   -   -   41   41
  Participating shareholders 915   343   (13)   (170)   1,075
  2,239   909   (20)   (183)   2,945


                   
For the year ended December 31, 2010 Lifeco   IGM   Parjointco   Other   Total
Revenues                  
Premium income, net 17,748   -   -   -   17,748
Investment income, net 9,534   146   -   (172)   9,508
Fee and media income 2,821   2,468   -   275   5,564
  30,103   2,614   -   103   32,820
Expenses                  
Total paid or credited to policyholders 23,225   -   -   -   23,225
Commissions 1,477   854   -   (115)   2,216
Operating and administrative expenses 3,150   636   -   513   4,299
Financing charges 288   111   -   66   465
  28,140   1,601   -   464   30,205
  1,963   1,013   -   (361)   2,615
Share of earnings (losses) of investments in associates  -   -   121   3   124
Earnings before income taxes - continuing operations 1,963   1,013   121   (358)   2,739
Income taxes 254   270   -   8   532
Contribution to net earnings - continuing operations 1,709   743   121   (366)   2,207
Contribution to net earnings - discontinued operations -   2   -   -   2
Contribution to net earnings 1,709   745   121   (366)   2,209
                   
Attributable to                  
  Non-controlling interests 976   470   41   (46)   1,441
  Non-participating shareholders -   -   -   41   41
  Participating shareholders 733   275   80   (361)   727
  1,709   745   121   (366)   2,209

 

 

 

SOURCE POWER CORPORATION OF CANADA



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