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    PWF   CA73927C1005

POWER FINANCIAL CORPORATION

(PWF)
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Power Financial : Reports Fourth Quarter and 2013 Financial Results and Dividends

03/19/2014 | 08:49am EDT

March 19, 2014

Power Financial Corporation Reports Fourth Quarter and 2013 Financial Results and Dividends

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Readers are referred to the sections entitled "Non-IFRS Financial Measures" and "Forward-Looking Statements" at the end of this release.

MONTREAL , March 19, 2014 /CNW Telbec/ - Power Financial Corporation (TSX : PWF ) today reported earnings results for the fourth quarter and the year ended December 31, 2013 .

FOURTH QUARTER RESULTS
Operating earnings attributable to common shareholders (a non-IFRS financial measure) for the quarter ended December 31, 2013 were $403 million or $0.57 per share, compared with $405 million or $0.57 per share in 2012.

Excluding the impact of acquisition and restructuring costs associated with the Irish Life Group Limited (Irish Life) acquisition by Great-West Lifeco Inc. (Lifeco) and mark-to-market losses on macro capital hedges, operating earnings attributable to common shareholders were $455 million or $0.64 per share, compared with $405 million or $0.57 per share in 2012.

Other items, not included in operating earnings, resulted in a contribution of $190 million , compared with a net charge of $128 million in 2012. Additional details on other items can be found in the section entitled "Other Items" below.

Net earnings attributable to common shareholders were $593 million or $0.84 per share, compared with $277 million or $0.39 per share in 2012.

2013 RESULTS
Operating earnings attributable to common shareholders for the year ended December 31, 2013 were $1,708 million or $2.40 per share, compared with $1,678 million or $2.37 per share in 2012.

Excluding the impact of acquisition and restructuring costs associated with the Irish Life acquisition and mark-to-market losses on macro capital hedges, operating earnings attributable to common shareholders were $1,812 million or $2.55 per share.

Other items, not included in operating earnings, were a contribution of $188 million , compared with a net charge of $60 million in 2012.

Net earnings attributable to common shareholders were $1,896 million or $2.67 per share, compared with $1,618 million or $2.29 per share in 2012.

RESULTS OF SUBSIDIARIES AND PARGESA

GREAT -WEST LIFECO INC .
For the quarter ended December 31, 2013 , Lifeco reported operating earnings attributable to common shareholders of $491 million or $0.491 per share, compared with $491 million or $0.517 per share in 2012. Net earnings attributable to common shareholders for the fourth quarter were $717 million or $0.717 per share, compared with $351 million or $0.370 per share in 2012. Net earnings include a litigation provision recovery of $226 million after tax in the fourth quarter of 2013 relating to the London Insurance Group Inc. acquisition in 1997, compared with a litigation provision of $140 million in 2012 related to the same legal matter.

Irish Life contributed $44 million (excluding restructuring and acquisition costs) to Lifeco's earnings in the fourth quarter of 2013 ($85 million in 2013).

Excluding the impact of the acquisition and restructuring costs associated with the Irish Life acquisition and mark-to-market losses on a macro capital hedge, operating earnings were $540 million or $0.540 per common share in the fourth quarter of 2013, up 10% from operating earnings of $491 million or $0.517 per common share in 2012.

For the year ended December 31, 2013 , Lifeco reported operating earnings attributable to common shareholders of $2,052 million or $2.108 per share, compared with $1,946 million or $2.049 per share in 2012. Operating earnings exclude the impact of the litigation recovery adjustment discussed above. Net earnings attributable to common shareholders for the year ended December 31, 2013 were $2,278 million or $2.340 per share, compared with $1,806 million or $1.902 per share in 2012.

As at December 31, 2013 , Power Financial and IGM Financial Inc. (IGM ) held 67.0% and 4.0%, respectively, of Lifeco's common shares. Lifeco's contribution to Power Financial's operating earnings was $330 million for the quarter ended December 31, 2013 , compared with $336 million in 2012. For the year ended December 31, 2013 , Lifeco's contribution to Power Financial's operating earnings was $1,391 million , compared with $1,329 million in 2012.

IGM FINANCIAL INC .
For the quarter ended December 31, 2013 , IGM reported operating earnings available to common shareholders of $199 million or $0.79 per share, compared with $183 million or $0.72 per share in 2012. Other items, not included in operating earnings, represented a net charge of $2 million , compared with a contribution of $19 million in the fourth quarter of 2012. Net earnings available to common shareholders of IGM were $197 million or $0.78 per share, compared with $202 million or $0.80 per share in 2012.

For the year ended December 31, 2013 , IGM reported operating earnings available to common shareholders of $764 million or $3.02 per share, compared with $746 million or $2.92 per share in 2012. Other items, not included in operating earnings, represented a net charge of $2 million , compared with a contribution of $12 million in 2012. Net earnings available to common shareholders were $762 million or $3.02 per share, compared with $759 million or $2.97 per share in 2012.

As at December 31, 2013 , Power Financial and The Great-West Life Assurance Company, a subsidiary of Lifeco, held 58.6% and 3.6%, respectively, of IGM 's common shares. IGM contributed $115 million to Power Financial's operating earnings for the quarter ended December 31, 2013 , compared with $106 million in 2012. For the twelve months ended December 31, 2013 , IGM contributed $446 million to Power Financial's operating earnings, compared with $433 million in 2012.

PARGESA
For the quarter ended December 31, 2013 , Pargesa Holding SA (Pargesa) reported operating earnings of SF63 million, compared with SF33 million in 2012. Other items, not included in operating earnings, were a contribution of SF154 million, which mainly consisted of Pargesa's gain on its subsidiary's (Groupe Bruxelles Lambert - GBL ) partial disposal of its investment in Total SA , compared with a net charge of SF175 million in 2012. Net earnings were SF217 million, compared with a net loss of SF142 million in 2012.

For the year ended December 31, 2013 , operating earnings were SF251 million, compared with SF346 million in 2012. Operating earnings for the year include Pargesa's share of a non-cash charge recorded by GBL in the amount of SF83 million. This non-cash charge results from the increase in value of call options on shares implicitly embedded in the exchangeable and convertible bonds issued by GBL in 2012 and 2013. Other items, not included in operating earnings, were a contribution of SF143 million, compared with a contribution of SF59 million for 2012. Net earnings were SF394 million, compared with SF405 million in 2012.

Power Financial has a 50% interest in Parjointco N.V., which in turn held a 55.6% equity interest in Pargesa at December 31, 2013 . Pargesa's contribution to Power Financial's operating earnings, expressed in Canadian dollars, was $21 million for the three-month period ended December 31, 2013 , compared with $10 million in 2012. For the year ended December 31, 2013 , Pargesa's contribution to Power Financial's operating earnings was $76 million , compared with $102 million in 2012.

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

SERIES - STOCK SYMBOL RECORD DATE PAYMENT DATE AMOUNT
Series A - PWF .PR .A April 24, 2014 May 15, 2014 At a floating rate equal to one quarter of 70%
of the average prime rate of two major
Canadian chartered banks [1]
Series D - PWF .PR .E April 9, 2014 April 30, 2014 34.375¢
Series E - PWF .PR .F April 9, 2014 April 30, 2014 32.8125¢
Series F - PWF .PR .G April 9, 2014 April 30, 2014 36.875¢
Series H - PWF .PR .H April 9, 2014 April 30, 2014 35.9375¢
Series I - PWF .PR .I April 9, 2014 April 30, 2014 37.50¢
Series K - PWF .PR .K April 9, 2014 April 30, 2014 30.9375¢
Series L - PWF .PR .L April 9, 2014 April 30, 2014 31.875¢
Series O - PWF .PR .O April 9, 2014 April 30, 2014 36.25¢
Series P - PWF .PR .P April 9, 2014 April 30, 2014 27.50¢
Series R - PWF .PR .R April 9, 2014 April 30, 2014 34.375¢
Series S - PWF .PR .S April 9, 2014 April 30, 2014 30¢
Series T - PWF .PR .T April 9, 2014 April 30, 2014 40.274¢
[1] In accordance with the articles of the Corporation


DIVIDEND ON COMMON SHARES
The Board of Directors also declared a quarterly dividend of 35 cents per share on the Corporation's common shares payable May 1, 2014 to shareholders of record March 31, 2014 .

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


EARNINGS SUMMARY
(unaudited) Twelve months ended Three months ended
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Contribution to operating earnings from:
Lifeco 1,391 1,329 330 336
IGM 446 433 115 106
Pargesa (1) 76 102 21 10
1,913 1,864 466 452
Results from corporate activities (74) (69) (30) (17)
Dividends on perpetual preferred shares (131) (117) (33) (30)
Operating earnings attributable to common shareholders 1,708 1,678 403 405
Other items (see below)
Lifeco 151 (95) 151 (95)
IGM (1) 7 (1) 11
Pargesa 38 28 40 (44)
188 (60) 190 (128)
Net earnings attributable to common shareholders 1,896 1,618 593 277
Earnings per share (attributable to common shareholders)
- operating earnings 2.40 2.37 0.57 0.57
- non-operating earnings 0.27 (0.08) 0.27 (0.18)
- net earnings 2.67 2.29 0.84 0.39
OTHER ITEMS
(unaudited) Twelve months ended Three months ended
December 31,
2013
December 31,
2012
December 31,
2013
December 31,
2012
Lifeco
Litigation provision 151 (96) 151 (96)
Share of IGM other items - 1 - 1
IGM
Non-cash income tax charge - (4) - -
Changes in the status of certain income tax filings - 14 - 14
Restructuring and other charges (6) - (6) -
Share of Lifeco other items 5 (3) 5 (3)
Pargesa
Impairment charges on GDF Suez (13) (48) - (48)
Gain on partial disposal of GDF Suez 15 - - -
Gain on partial disposal of Total SA 38 - 38 -
Gain on partial disposal of Pernod Ricard - 46 - -
Gain on disposal of Arkema - 43 - -
Other (charge) income (2) (13) 2 4
188 (60) 190 (128)
(1) Power Financial has a 50% interest in Parjointco N.V., which in turn held a 55.6% equity interest in Pargesa at December 31, 2013.


Non-IFRS Financial Measures
In analyzing the financial results of the Corporation and consistent with the presentation in previous years, net earnings attributable to common shareholders are classified as follows:

  • operating earnings attributable to common shareholders; 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 and Pargesa.

Management uses these financial measures in its presentation and analysis of the financial performance of Power Financial, and believes that they provide additional meaningful information to readers in their analysis of the results of the Corporation. Operating earnings, as defined by the Corporation, helps the reader to compare the current period's results to those of previous periods as items of a non-recurring nature have been excluded from this non-IFRS measure.

The Corporation also uses the equity method to present and explain its results, financial position and cash flows. This method is useful as it isolates the corporate activities from those of operating subsidiaries and shows their respective contributions separately.

Operating earnings attributable to common shareholders 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.

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, reflect 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 list of factors in the previous paragraph, collectively, are not expected to have a material impact on the Corporation and its subsidiaries. While the Corporation considers these assumptions to be reasonable based on information currently available to management, they may prove to be incorrect.

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

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

SOURCE POWER FINANCIAL CORPORATION

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P/E ratio 2020 11,8x
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