MONTREAL, May 15 /CNW Telbec/ - Power Corporation of Canada's share of operating earnings of its subsidiaries increased eight per cent or $13 million in the first quarter of 2003 over the same period of 2002. In the first quarter of last year, the Corporation recorded significant gains from the sale of securities. No such gains occurred in the first quarter of 2003 and therefore income from investment was substantially lower in 2003 compared with 2002. This has been partly offset by a reduction in provision for income taxes.
Operating earnings for the quarter ended March 31, 2003 were $174 million compared with $171 million in 2002. On a per share basis, operating earnings were $0.75 for both years.
Power Corporation also recorded a charge of $7 million or $0.03 per share, representing its share of non-operating items recorded within the Pargesa group during the quarter.
Therefore, net earnings for the three months ended March 31, 2003 were $167 million or $0.72 per share, compared with $171 million or $0.75 per share in 2002.
RESULTS OF POWER FINANCIAL CORPORATION
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Power Financial Corporation's operating earnings for the quarter ended March 31, 2003 were $263 million or $0.71 per share, compared with $237 million or $0.65 per share for the same period in 2002. This represents a 9 per cent increase on a per share basis.
Power Financial's share of operating earnings from subsidiaries and affiliate amounted to $263 million for the quarter, compared with $240 million a year ago. This result is mainly due to increases in earnings at Great-West Lifeco Inc. and Investors Group Inc., partly offset by a decrease at Pargesa Holding S.A.
Power Financial also recorded a charge of $10 million or $0.03 per share, representing its share of non-operating items recorded within the Pargesa group during the quarter.
Therefore, net earnings for the three months ended March 31, 2003 were $253 million or $0.68 per share, compared with $237 million or $0.65 per share in 2002.
DIVIDENDS
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The Board of Directors today declared a dividend on the First Preferred Shares, 1986 Series, payable July 15, 2003 to shareholders of record June 23, 2003 in an amount per share to be determined in accordance with the Articles of Continuance of the Corporation.
A dividend of 35 cents per share was declared on the First Preferred Shares, Series A, payable July 15, 2003 to shareholders of record June 23, 2003.
A dividend of 33.4375 cents per share was declared on the First Preferred Shares, Series B, payable July 15, 2003 to shareholders of record June 23, 2003.
A dividend of 36.25 cents per share was declared on the First Preferred Shares, Series C, payable July 15, 2003 to shareholders of record June 23, 2003.
A dividend of 24.375 cents per share was declared on the Participating Preferred and on the Subordinate Voting Shares, payable June 30, 2003 to shareholders of record June 9, 2003. This represents an increase of 3.75 cents on a quarterly basis, or 18 per cent.
Attachments: Financial Information (unaudited)
POWER CORPORATION OF CANADA
CONSOLIDATED BALANCE SHEETS
March 31 December 31
(in millions of dollars) 2003 2002
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(unaudited)
ASSETS
Cash and cash equivalents $ 3,779 $ 3,001
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Investments
Shares 2,161 2,349
Bonds 33,886 33,766
Mortgages and other loans 8,183 8,399
Loans to policyholders 5,869 6,177
Real estate 1,218 1,270
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51,317 51,961
Investment in affiliates, at equity 1,489 1,562
Goodwill and intangible assets
(Note 2) 5,222 5,206
Future income taxes 264 402
Other assets 8,145 8,004
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$ 70,216 $ 70,136
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LIABILITIES
Policy liabilities
Actuarial liabilities $ 43,332 $ 44,508
Other 3,713 3,788
Deposits and certificates 759 709
Long-term debt (Note 3) 3,322 2,393
Future income taxes 457 553
Other liabilities 5,420 5,237
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57,003 57,188
Non-controlling interests 7,875 7,561
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SHAREHOLDERS' EQUITY
Stated capital (Note 4)
Non-participating shares 552 553
Participating shares 370 369
Retained earnings 4,233 4,126
Foreign currency translation
adjustments 183 339
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5,338 5,387
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$ 70,216 $ 70,136
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POWER CORPORATION OF CANADA
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
For the three months
ended March 31
(in millions of dollars, except per
share amounts) 2003 2002
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REVENUES
Premium income $ 2,949 $ 2,908
Net investment income 999 1,025
Fees and media income 929 1,010
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4,877 4,943
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EXPENSES
Paid or credited to policyholders
and beneficiaries including
policyholder dividends and
experience refunds 3,322 3,302
Commissions and operating expenses 972 1,040
Interest expense 42 43
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4,336 4,385
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541 558
Share of earnings (losses) of
affiliates (4) 1
Other income (charges), net (Note 7) (10) -
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Earnings before income taxes and
non-controlling interests 527 559
Income taxes 149 192
Non-controlling interests 211 196
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Net earnings $ 167 $ 171
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Earnings per participating share (Note 6)
Basic $ 0.72 $ 0.75
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Diluted $ 0.71 $ 0.74
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POWER CORPORATION OF CANADA
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(unaudited)
For the three months
ended March 31
(in millions of dollars) 2003 2002
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Retained earnings, beginning
of year $ 4,126 $ 3,700
Add
Net earnings 167 171
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4,293 3,871
Deduct
Dividends
Non-participating shares 7 5
Participating shares 46 39
Other 7 -
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60 44
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Retained earnings, end of
period $ 4,233 $ 3,827
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POWER CORPORATION OF CANADA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the three months
ended March 31
(in millions of dollars) 2003 2002
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Operating activities
Net earnings $ 167 $ 171
Non-cash charges (credits)
Increase (decrease) in policy
liabilities 114 (113)
Decrease (increase) in funds
withheld by ceding insurers (5) 215
Amortization and depreciation 24 12
Future income taxes 29 89
Non-controlling interests 211 196
Other 324 (895)
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Cash from operating activities 864 (325)
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Financing activities
Dividends paid
By subsidiaries to
non-controlling interests (98) (86)
Non-participating shares (6) (4)
Participating shares (46) (39)
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(150) (129)
Issue of subordinate voting
shares 1 6
Repurchase of
non-participating shares for
cancellation (1) (1)
Issue of common shares by
subsidiaries 10 10
Issue of preferred shares by
subsidiaries 350 -
Repurchase of common shares by
subsidiaries (25) (38)
Issue of long-term debt 1,150 -
Repayment of long-term debt (200) (46)
Other 18 9
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1,153 (189)
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Investment activities
Bond sales and maturities 6,831 5,593
Mortgage loan repayments 333 431
Sale of shares 272 121
Change in loans to policyholders (18) (19)
Change in repurchase agreements (262) 34
Investment in subsidiaries (5) 72
Investment in bonds (8,165) (5,612)
Investment in mortgage loans (156) (297)
Investment in shares (111) (53)
Other 42 50
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(1,239) 320
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Increase (decrease) in cash
and cash equivalents 778 (194)
Cash and cash equivalents,
beginning of period 3,001 2,590
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Cash and cash equivalents,
end of period $ 3,779 $ 2,396
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POWER CORPORATION OF CANADA
Notes to consolidated financial statements
(unaudited)
March 31, 2003
Note 1. Significant accounting policies
The interim unaudited consolidated financial statements of Power
Corporation of Canada at March 31, 2003 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, 2002, 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, 2002.
Disclosure of Guarantees
In February 2003, the CICA issued Accounting Guideline 14 (AcG-14),
Disclosure of Guarantees, which identifies disclosure requirements for
certain guarantees, for financial statements of interim and annual
periods starting on or after January 1, 2003.
In the normal course, the Corporation and its subsidiaries may enter into
agreements which may contain features which meet the AcG-14 definition of
a guarantee, and while the maximum guarantee cannot always be determined,
given the nature of the future events which may or may not occur, any
such arrangements that were material have been previously disclosed by
the Corporation and its subsidiaries.
Comparative figures
Certain of the 2002 amounts presented for comparative purposes have been
reclassified to conform with the presentation adopted in the current
year.
POWER CORPORATION OF CANADA
Notes to consolidated financial statements
(unaudited)
Note 2. Goodwill and intangible assets
A summary of changes in the Corporation's goodwill and intangible assets
for the three months ended March 31, 2003 is as follows:
Intangible
(in millions of dollars) Goodwill assets Total
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Balance, beginning of year $ 3,748 1,458 5,206
Other 16 16
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Balance, end of period $ 3,764 1,458 5,222
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Intangible assets represent the fair value of mutual fund management
contracts, trade names, brands and trademarks and the shareholders'
portion of acquired future participating profits. These are, for the most
part, indefinite life intangible assets and are not subject to
amortization.
Note 3. Long-term Debt
March 31 December 31
(in millions of dollars) 2003 2002
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Power Financial Corporation
7.65% debentures, due January 5, 2006 $ 150 $ 150
6.90% debentures, due March 11, 2033 250 -
Investors Group
Floating Bankers'
Acceptance, due May 30, 2006 250 450
6.75% Debentures 2001 Series, due
May 9, 2011 450 450
6.58% Debentures 2003 Series, due
March 7, 2018 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 -
Great-West Lifeco Inc.
First mortgages secured by real estate and
limited recourse mortgages at interest rate
from 6.4% to 11.7% maturing at various dates
to 2014 121 122
7.25% subordinated capital income securities
redeemable on or after June 30, 2004,
due June 30, 2048. Unsecured (US$ 175) 257 276
6.75% debentures due August 10, 2015,
unsecured 200 200
6.14% debentures due March 21, 2018,
unsecured 200 -
6.74% debentures due November 24, 2031,
unsecured 200 200
6.67% debentures due March 21, 2033,
unsecured 400 -
Other notes payable at interest rates
from 8.0% to 9.0% 14 15
Other
Bank loan at prime plus a premium
varying between 0.625% and 2.750% 80 80
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$ 3,322 $ 2,393
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Note 4. Capital stock and Stock option plan
Stated Capital
March 31 December 31
(in millions of dollars) 2003 2002
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Non-participating shares
Cumulative Redeemable First Preferred Shares,
1986 Series
Authorized - Unlimited number of shares
Issued - 2003 1,039,878 shares $ 52 $ 53
Issued - 2002 1,059,878 shares
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
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$ 552 $ 553
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Participating shares
Participating Preferred Shares
Authorized - Unlimited number of shares
Issued - 2003 24,427,386 shares $ 27 $ 27
Issued - 2002 24,427,386 shares
Subordinate Voting Shares
Authorized - Unlimited number of shares
Issued - 2003 197,798,552 shares 343 342
Issued - 2002 197,704,052 shares
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$ 370 $ 369
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Stock-Based Compensation
As permitted by the CICA Handbook Section 3870 - Stock-based Compensation
and Other Stock-based Payments, the Corporation has chosen to continue to
account for stock-based compensation using the intrinsic value method.
When the fair value-based method of accounting is not used for stock-
based transactions with employees, pro-forma net income and pro-forma
earnings per share must be disclosed as if the fair value-based method of
accounting had been used to account for stock-based compensation cost.
Although the Corporation did not grant stock options during the three
months period ended March 31, 2003, stock options were granted by
subsidiaries. Had the fair value based accounting method been applied to
options granted in the period, net earnings would have been reduced by
less than $1 million and earnings per common share would have been
reduced by less than $0.01.
Options were outstanding at March 31, 2003 to purchase, until October 21,
2011, 9,092,600 subordinate voting shares at various prices from $9.15625
to $35.325 per share.
Note 5. Segmented information
Information on profit measure
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For the three months ended March 31, 2003
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LIFECO INVESTORS PARJOINTCO OTHER TOTAL
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(in millions of dollars)
REVENUES
Premium income 2,949 - - 2,949
Net investment income 948 37 14 999
Fees and media income 433 418 78 929
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4,330 455 - 92 4,877
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EXPENSES
Insurance claims 3,322 - - 3,322
Commissions, other
operating expenses 630 246 96 972
Interest expense - 21 21 42
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3,952 267 - 117 4,336
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378 188 - (25) 541
Share of earnings of affiliates (4) - (4)
Other income - net - - (10) - (10)
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Earnings before the following 378 188 (14) (25) 527
Income taxes 106 63 - (20) 149
Non-controlling interests 140 78 (5) (2) 211
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Contribution to consolidated
net earnings 132 47 (9) (3) 167
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Information on profit measure
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For the three months ended March 31, 2002
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LIFECO INVESTORS PARJOINTCO OTHER TOTAL
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(in millions of dollars)
REVENUES
Premium income 2,908 - 2,908
Net investment income 942 30 53 1,025
Fees and media income 463 469 78 1,010
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4,313 499 - 131 4,943
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EXPENSES
Insurance claims 3,302 - 3,302
Commissions, other
operating expenses 669 277 94 1,040
Interest expense - 20 23 43
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3,971 297 - 117 4,385
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342 202 - 14 558
Share of earnings of affiliates 1 - 1
Other income - net - - - -
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Earnings before the following 342 202 1 14 559
Income taxes 104 80 8 192
Non-controlling interests 123 75 1 (3) 196
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Contribution to consolidated
net earnings 115 47 - 9 171
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Note 6. Earnings per share
The following is a reconciliation of the numerators and the denominators
of the basic and diluted earnings per paticipating share computations:
For the three months ended March 31
(in millions of dollars) 2003 2002
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Net earnings 167 171
Dividends on non-participating shares (7) (5)
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Net earnings available to
participating shareholders 160 166
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Weighted number of participating shares
outstanding (millions)
Basic 222.2 221.4
Exercise of stock options 9.1 9.5
Shares assumed to be repurchased with
proceeds from exercise of stock options (5.5) (5.3)
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Weighted number of participating shares outstanding
(denominator) (millions)
Diluted 225.8 225.6
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Note 7. Other income (charges), net
For the three months
ended March 31
(in millions of dollars) 2003 2002
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Share of Pargesa's non-operating earnings (10) -
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(10) -
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Note 8. Acquisition of Canada Life
On February 14, 2003, Great-West Lifeco Inc. (Lifeco) entered into an
agreement with Canada Life Financial Corporation, the parent company of
The Canada Life Assurance Company, to acquire 100% of Canada Life
Financial Corporation's outstanding Common Shares. The transaction is
valued at $44.50 per Canada Life Financial Corporation Common Share,
representing an aggregate transaction value of $7.3 billion.
The terms of the agreement allow Canada Life Financial Corporation
shareholders to elect from one of the following alternative per Common
Share.
- $44.50 in cash (to an aggregate maximum of approximately $4.4 billion);
or
- 1.78 4.80% Non-Cumulative First Preferred Shares, Series E of Lifeco
(to an aggregate maximum of 24 million Lifeco Series E Shares); or
- 1.78 5.90% Non-Cumulative First Preferred Shares, Series F of Lifeco
(to an aggregate maximum of 8 million Lifeco Series F Shares); or
- 1.1849 Common Shares of Lifeco (to an aggregate maximum of
approximately 56 million Lifeco Common Shares); or
- a combination of the foregoing;
In each case subject to election and proration as a result of the stated
maximums.
The transaction was approved by a majority of Canada Life Financial
Corporation's common shareholders on May 5, 2003. The transaction is
subject to approval by regulatory authorities in jurisdictions where the
Companies operate. The transaction is expected to close in the third
quarter of 2003.
To support the transaction, Power Financial Corporation has committed to
invest $800 million to purchase 21.302 million Common Shares of Lifeco
from treasury via private placement. Investors Group Inc. has also agreed
to invest $100 million by purchasing 2.662 million Lifeco Common Shares
from treasury.
Lifeco also entered into a commitment with a Canadian chartered bank (the
"Bank") pursuant to which the Bank agreed to underwrite a credit facility
in favour of Lifeco or one or more of its subsidiaries. The credit
facility provides short-term funding alternatives, and also offers up to
$600 million of five year term financing.
For further information: Edward Johnson, Vice-President, General Counsel and Secretary, (514) 286-7400
