For the period ended March 31, 2020 Report First Quarter 1
FIRST QUARTER REPORT 2020 POWER FINANCIAL CORPORATION
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POWER FINANCIAL CORPORATION GREAT-WEST LIFECO INC. IGM FINANCIAL INC. PARGESA HOLDING SA 4 1 - 5 0 - 0 2 0 22020-05-14 5:59 PM 1 PART A PART B PART C PART D led with the securities the securities led with
requesting shareholders of the Corporation in accordance with applicable securities laws. with applicable securities in accordance of the Corporation shareholders requesting regulatory authorities in each of the provinces and territories of Canada and mailed to to of Canada and mailed and territories authorities in each of the provinces regulatory condition, financial performance and cash flows of Power Financial Corporation (the (the Financial Corporation of Power and cash flows financial performance condition, the as at and for of the Corporation financial statements consolidated condensed POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER three months ended March 31, 2020. This document has been fi This 31, 2020. March months ended three Corporation) for the three months ended March 31, 2020 and the unaudited interim interim and the unaudited 31, 2020 ended March months the three for Corporation) POWER FINANCIAL CORPORATION POWER HOLDINGPARGESA SA IGM FINANCIAL INC. GREAT-WEST LIFECO INC. GREAT-WEST POWER FINANCIAL CORPORATION FINANCIAL POWER This document contains management’s discussion and analysis of the financial of the financial and analysis discussion management’s document contains This TABLE OF CONTENTS TABLE 1
d d n i . C F P _ 1 0 G N E _ 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd 1 The trademarks contained in this report are owned by Power Financial Corporation or by a Member of the Power Corporation Group of Companies®. Trademarks that are not owned by Power Financial are used with permission.
2 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2 0 22020-05-14 5:59 PM 1 A POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER PAGE A 44 PAGE A 2 PART A FINANCIAL STATEMENTS AND NOTES FINANCIAL STATEMENTS MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S POWER FINANCIAL CORPORATION FINANCIAL POWER 1 B
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0 POWER FINANCIAL CORPORATION 2 0 _ Q U statements. Information containedin forward-looking statements is bas The reader is cautioned toconsider these and other factors, uncertainties and potential eventscarefully and nottoputundue other growth strategies, and the Corporation’s and its subsidiaries’ success in anticipating and managing the foregoing factors in transactions, strategic complete to ability subsidiaries’ its and Corporation’s the COVID-19), as (such crises health public regulatory proceedings, catastrophic events, man-made disasters, terrorist attacks, wars and other conflicts, or an outbreak of reputational risks, technological changes, cybersecurity risks, changes in government regulation and legislation, changes in ta associated with significant judgments, estimates and assumptions), the effectofapplying future accounting changes, business c securities, risks associated with financial instruments, changes in accounting policies and methods used to report financial co local andglobal equity markets,management ofmarketliquidity andcapital policies, monetary rates, exchange and foreign inflation rates, ininterest fluctuations internationally, and America North in anticipated events or results. These factors include, butare not limited to: the impact orunanticipated impact ofgeneral eco results of the Corporation and its subsidiaries and their businesses, and could cause actual results to differ materially from priorities will not be achieved. Avariety offactors, many of which arebeyond the Corporation’s and its subsidiaries’ control forecasts, predictions, projections or conclusions will not prove to beaccurate, that assumptions may notbecorrect and that r give which and specific or general be may that uncertainties and risks inherent to subject is information this nature, its By “could”. “targets”, “projects”, “forecasts” or negative versions thereof and other similar expressions, or future orconditional verbss nature, depend upon or refer to future events or conditions, or include words such as“expects”, “anticipates”, “plans”, “belie the Corporation and Power Corporation ofcertain classes oftheir First Preferred Shares. Forward-looking statementsinclude st economies for the current fiscal year and subsequent periods, the intended effectsof the Reorganization (as defined herein) an the COVID-19 pandemic onthe Corporation and its subsidiaries’ operations, results and dividends, aswell as the outlook forNo priorities, targets, goals, ongoing objectives, strategies and outlook ofthe Corporation and its subsidiaries including the fi include, without limitation, statements regarding the operations, business, financial condition, expected financialresults, pe expectations and plansrelating tothe futureand the reader is cautioned thatsuch statements may forother notbeappropriate financial performance, financial position and cashas atand flows forthe periods ended oncertain dates and topresent inform subsidiaries’ disclosed currentexpectations. Forward-looking statementsare provided ofassisting forthe purposes the reader assumptions and reflect the Corporation’s current expectations, or with respecttodisclosure regarding the Corporation’s publi STATEMENTS FORWARD-LOOKING reporting issuerin all of theprovinces and territories of financial condition and financial performance of Power Financial Co followingThe presents Management’sDiscussion CANAD OF MILLIONS AREIN AMOUNTS ALL TABULAR MAY 14, 2020 Management’s Discussion and Analysis POWER FINANCIALCORPORATION Other thanasspecificallyrequir these assumptions to bereasonable based oninformation currently available tomanagement, they may proveto be incorrect. factors in the previous paragraph, collectively, arenot expected tohave amaterial impact onthe Corporation and its subsidia considerations that arebelieved tobeappropriate in thecircumstances, including the availability ofcashtoredeem First Pre making aforecastorprojection, including management’sperceptions ofhistorical trends, current conditions and expected futur Corporation’s website at www.powerfinancial.com and on SEDAR at www.sedar.com. at www.sedar.com. andonSEDAR www.powerfinancial.com at website Corporation’s Additional information relating to Power Financial, including itsAnnual Information Form, maybe found onthe financial statements and notes thereto for the year ended31, 2019 (theDecember 2019 Consolidated Financial Statements). Statements), theMD&A for the March ended period three-month the for thereto notes and Financial Financial Consolidated Interim (the 31, 2020 Power of statements financial consolidated condensed interim unaudited the with conjunction in read be should MD&A The following abbreviations areused throughout this report: securities regulatory authorities in atwww.sedar.com. Canadaandavailable Inf Annual recent most its and MD&A this including materials, disclosure its in provided is isbased statements forward-looking Additional information aboutthe risks and uncertainties ofthe Corporation’s business and material factors orassumptions onw information, future events or results, or otherwise. events or circumstances after the date onwhich such statement is made, or to reflect the occurrence ofunanticipated events, w London Life Life London Lifeco LafargeHolcim Koho Life Irish Investment Planning IG WealthManagement Financial IGM or IGM IFRS Great-West Life &Annuity Great-West Life GEA GBL EPA EBR China AMC Canada Life BME adidas A Counsel or Empower Retirement T 1 _ E
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B 2 Madrid Stock Exchange StockExchange Madrid AG adidas London Life Insurance Company Company Insurance Life London Great-West Lifeco Inc. LafargeHolcim Ltd KOHO Financial Inc. Limited Group Life Irish Investment Planning Counsel Inc. Investors Group Inc. IGM Financial Inc. International Financial Reporting Standards Great-West Life &Annuity Insurance Company The Great-West Life Assurance Company GEA Group Groupe Bruxelles Lambert Euronext Paris Euronext Brussels China AssetManagementCo., Ltd. The CanadaLife Assurance Company ed by applicable Canadianlaw,ed byapplicable th › Certain statements in this MD&A, other than statements of historical fact, are forward-looking statements based oncertain year ended December 31, 2019(the An
IAN DOLLARS, UNLESS OTHERWISE NOTED. OTHERWISENOTED. UNLESS DOLLARS, IAN and Analysis (MD&A)ofthe unaudited interim condensed consolidated e Corporationundertakes noobligati
ed uponcertain material assumptions that were applied in Canada,for the three-month period ended March 31, 2020. This and funding risks, risks funding and related to investments in XETR Webhelp Wealthsimple Umicore TSX Total SIX SGS Sagard Holdings Putnam Power Corporation Portag3 II Portag3 Personal Capital Parques Parjointco Pargesa PanAgora Ontex Mackenzie or Mackenzie Investments
rporation (Power Financial orthe Corporation), a nual MD&A), andtheaudited consolidated on to update anyforward- XETRA Stock Exchange XETRA StockExchange Webhelp Group Wealthsimple Financial Corp. Umicore, NV/SA Toronto Stock Exchange Total SA Swiss Stock Exchange SGS SA Sagard Holdings ULC Putnam Investments, LLC Power Corporation ofCanada Portag3 Ventures II Limited Partnership Portag3 Ventures Limited Partnership Personal Capital Corporation Parques Reunidos Servicios Centrales, S.A. Parjointco N.V. Pargesa HoldingSA PanAgora Asset Management,Inc. Ontex N.V. Mackenzie Financial Corporation uch as“may”, “will”, “should”, “would” and , affectthe operations, performance and ntech strategy, the expected impact of
business investment and the health of ise tothe possibility that expectations, current expectationsestimated of or tegrate acquisitions and implement implement and acquisitions tegrate ries. While the Corporation considers rformance, prospects, opportunities, a public health pandemic or other nomic, political and market factors in understanding the Corporation’s ation aboutmanagement’scurrent . ves”, “estimates”, “seeks”, “intends”, ferred Sharesandthatthelistof purposes. These statements may e developments, aswell asother ndition (including uncertainties atements that arepredictive in rth American and international international rth Americanand d the proposed redemption by private companies and illiquid andilliquid companies private x laws, unexpected judicial or objectives, strategic goals and hich information contained in ormation Form, filed with the ompetition, operational and looking statement toreflect reliance onforward-looking c subsidiaries, reflect such reflect c subsidiaries, hether asaresult ofnew drawingaconclusionor 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2 0 e 22020-05-14 5:59 PM 6 8 ѶѶ Ѷѷ Ѷ Ѷ ѶѼ ѷѳ ѷѳ ѷѳ ѷѳ ѷѴ ѷѴ ѷѵ ѷѵ ѷѵ ѷѶ Pag 3 A of Canada (TSX: POW; POW.PR.E) is an international an international is POW.PR.E) POW; (TSX: of Canada consistent in its approach to base decisions on what is is on what base decisions to approach in its consistent
Net Asset Value Net Asset Value Cash Flows Liabilities Contingent Obligations Contractual and Commitments Income Taxes Income Taxes Changes in Accounting Policies Policies Accounting in Changes Transactions with Related Parties Related Parties with Transactions and Judgments Estimates Accounting Summary of Critical fintech strategy. Power Financial also has significant holdings has also significant Financial Power strategy. fintech e 56 Future Accounting Changes 7 Reporting Financial over Control Internal Results of Quarterly Summary Ѷ ѷ Ѽ Ѵѳ Ѵѳ Ѵѷ ѵѼ Ѵѵ ѴѶ Ѵ Ѵ Ѵ 4 with the ambition of creating an integrated financial services group, Power Power group, services financial an of creating integrated ambition the 4 with ѝ
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R O C
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Ѷ P R _ take a long-term perspective and investment horizon; horizon; and investment perspective long-term a take profiles; growth attractive with leaders build industry and companies; of its oversight governance and strong active provide position. financial a strong and maintain aware be risk prudence, use 1 E 0 G W N Power Financial Corporation Corporation Power Financial Reorganization Reorganization Lifeco 7 Risk Management Management COVID- 7 Lifeco Financial IGM Risk GBL Pargesa and Portag IFRS FinancialMeasures and Presentation 8 8 Instruments Other and Instruments Financial Arrangements Sheet Off-Balance Non-IFRS Financial Measures and Presentation Presentation and Measures Financial Non-IFRS Measures Financial Non-IFRS and IFRS of Reconciliation of Earnings Statements Consolidated of Earnings Statements Non-Consolidated Net Earnings Adjusted and Earnings to Net Contribution O E _ in the best long-term interestof Corporation. the Throughout its history, PowerFinancial has managed to thesame basic principles: objective is tocreate superior shareholdervalue over thelong term. remained has Financial Power of leadership the Since its inception, managementandholding company with interests in financial services and asset managementbusinesses Canada, in the in 19 Founded and Europe. States United Financial interests in its controlling remained hascommitted toand through evolutiongrowth the holdings primary of its active an implemented has years recent and in IGM, and Lifeco Financial’sPower in Pargesa. historicand ongoinginvestment Europe through its in based companies of global in a portfolio POWER FINANCIAL CORPORATION CORPORATION FINANCIAL POWER Corporation of Power subsidiary owned a wholly Financial, Power Overview P Organization of the Interim MD&A Pag Overview Basis of Presentation of Presentation Basis Results of Power Financial Financial of Power Results Position Financial
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0 POWER FINANCIAL CORPORATION 2 0 _ Q U broader set of strategic initiatives expected todeliver further value to shareholders. and structure corporate group’s the simplifies Reorganization The SharesCorporation’s andthe investment provides Power Financial with a vehicle to create value in the European market. potential for long-term value creation. Pargesa shares the values and prudent investing approach of Power Financial. This from the TSX.The Corporationremains reporting a issuer all in PowerCorporation now holdsthe100%issued of andoutstanding common sharesCorporation, ofthe which were delisted commonshares ofthe Corporation andissued 2 environment to be more effective. The fintech strategy has three objectives: the in changes to react to how and business current the affect will models business disruptive these how understand of financial services. The fintech strategy enables the group to learn from, adopt andintegrate new technologies and generation next the of part be to are expected that platforms leading building to contributed have date to investments The businesses transform their models. Pargesa group has positioned itsportfolio with aview to strengthening itsgrowthprofile and consequently optimizing its The investor. professional active an as creation value to contribute can it which through sector, respective their in leaders which, through its subsidiary GBL,maintains a diversifiedhigh-quality portfolio composed of global companies that are a interestinPargesa, Belgium controlling a of Group holding Frère withcompany holds the jointly also Financial Power On February 13, 2020, the Corporation successfully completed the Reorganization. Power Corporation acquired 23 acquired Power Corporation Reorganization. the completed successfully Corporation the 13, 2020, February On approximately $1 Corporation’s, respectivePreferred First Shares available with cash,which completion of the Reorganization, to redeem anaggregate of$3 following intention, the announced also Corporation andPower Corporation the time, same Atthe incash. and$0.01 Shares) Shareholders), would be exchanged for 1.0 common shares ofthe Corporation other than Power Corporati a reorganization transaction (Reorganization), pursuant to whi 13, 2019,theCorporationOn December and Power Corporation REORGANIZATION The fintech strategy aims atprovidinganattractive return on them. suits best that time the at means and the by them to available and consumers to accessible more services investment group believes that fintech willchange business models infinancial services, makingfinancial advice, insurance and Power Financial, in partnership with Lifecoprincipal markets: Canada, and the U.S. and Europe. IGM, has been actively participatingLifeco and IGM are leaders across the insurance, asset management, and wealth andretirement business sectors in their in the emerging fintech Holdings industry. The P A O T 1 W _ E E Make significant investmentsinleadingdigital financial services providers including Wealthsimple, one of Canada’s potential for global impact; ThroughPortag3 thecreatefunds, anecosystemearly- of companies. Develop afintech venture builder to support the creation ofthe next generation of Canadian-based global fintech largest digital financial advisors; and A N R G
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C O R P O R A T ћ I .9% debentures dueMarch O N
њ subordinate voting shares of Powe њ 0, ћ 2 ѝ ,1 ќ 3 PCC Subordinate Voting Shares to PFC Minority Shareholders. 11, 2033remain outstanding. the capital invested while helping the existing financialservic ch each commonsharethe Corporation of held byholders of of the provincesof the andterritories ofCanadaits as Preferr First stage investments in promising fintech companies that have announced the execution of adefinitive agreement to effect њ 0 million of certain classes0 of the Corporation’s and Power is intended to serve as the foundation and catalyst for a for catalyst and foundation the as serve to intended is on andits wholly owned subsidiaries (PFC Minority is anticipated to reduce annual financing costs of r Corporation (PCCSu bordinate Voting ѝ , ћ 93, њѝ ed es 0 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2 , 0 e d 22020-05-14 5:59 PM 5 A erm future. erm future. to the “Summary reasonable time, the reasonable time, governments worldwide worldwide governments s in the near-t s in the periods. Refer 2 of the Interim Consolidated2 of Financial recovery within a , has resulted in , has resulted subject to restrictionsout subject in relevant corporat set al financial Grand Montréal. be no assurance, to the extent that the pandemic abates abates pandemic the that extent the to assurance, no be s. At Power Financial and its group companies, the focus focus the companies, group and its Financial Power At s. monetaryand fiscal interventions designed tostabilize pend on the duration of the COVID-19 pandemic and the and the pandemic COVID-19 of the duration on the pend andmillionacontribution joint IGM, announced to support $1 d has no material debt maturitie has no material d on and its operating subsidiaries in future future in subsidiaries on and its operating and Centraide du lead to a sustained glob a to lead rus, specifically identified as “COVID-19” identified rus, specifically health and government directives; directives; and government health Judgments” section in this MD&A and to Note MD&A and Judgments” section in this
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R O novel strain of coronavi of novel strain C
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P R _ The BusinessContinuity team, comprisedofcross-functional leaders, is actively monitoring thesituation and itseffect on employees and operations, in accordance with updated government guidance; A work-from-home policyhas been implemented forall employees, suspendingall business travelandholding all meetings virtually; the ensuring of priority Corporation’s the with consistent employees with and updates communications Frequent risk; and information to technology related communications including of employees, and well-being health on a based and prudently managed will be offices Corporation’s the to returning employees for A plan and timeline public including of factors, number Monitoringthe liquidity and capitalofthe Corporation, the Corporation held $1 billion of cashand cash equivalents an 31, 2020 at March including fixed income securities 1 E 0 G W N O E _ Statements for additional disclosure of the impact on the Corporation’s significant judgments, estimates and assumptions. assumptions. and estimates judgments, significant Corporation’s the on impact of the disclosure additional for Statements at exposures potential the and uncertainty on measurement discussion further include also MD&A of this C and B Parts Lifeco and IGM. along 2020, Canada with Corporation, On March 23, Life Power crisis relief efforts. The funding is being used to: support the immediate needs of local and national foodbanks, which are are which foodbanks, and national of local needs the immediate to: support used is being The funding efforts. crisis relief through people of vulnerable needs pressing other for resources provide and demand; with increased cope to struggling utilizing the unique expertise of the Way United of Critical Accounting Estimates andCriticalof Estimates Accounting P COVID-19 the of The outbreak and insurance laws and regulations, which require that solvency and capital ratios be maintained. IGM’s subsidiaries are also also are subsidiaries IGM’s maintained. be ratios and capital solvency that require which regulations, and laws insurance and enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of of the implementation include which measures, These the virus. of the spread combat to measures emergency enacting globally businesses to disruption material caused have distancing, social and periods quarantine self-imposed bans, travel weakness. and significant volatility experienced have markets equity Global slowdown. in an economic resulting Governmentsandcentral banks have reactedwith significant economic conditions. a joint and and IGM of Lifeco each in interest a controlling including holdings its principal through Corporation, The associate risks the bears Pargesa, in GBL through interest controlling a holds itself which interest in Parjointco, controlling subject to minimum capital requirements. The requirements imposed by the regulators in any jurisdiction may change from change from may in any jurisdiction regulators the by imposed The requirements requirements. capital to minimum subject pay dividends. to subsidiary operating the of ability the impact and thereby time, time to and directors of its discretion at the remains periods in future Corporation the by declaration and payment of dividends The subsidiaries operating of its and creditworthiness position financial profitability, performance, operating on the is dependent as well as on their ability to pay dividends which will turn in de which pay to as on ability dividends as well their can there Although impacts. financial the of and duration severity taken by the governments and the actions Corporationcurrently expects thatability its topay dividends at currentlevels willadverselybe not impacted. The duration and impact of on impact the and developments thethese of severity and length the estimate reliably to possible not It is interventions. COVID-19bank pandemic is unknown at re the financial this time, as is the efficacy of the government and central from its principal operating subsidiaries. Lifecoand are its subsidiaries subsidiaries. operating from principal its As a holding company, the Corporation’s ability to pay dividends is dependent upon the Corporation receiving dividends dividends receiving Corporation upon the dependent dividends is to pay ability Corporation’s the holding company, As a with being a significant shareholder of these operating companie operating these of shareholder significant a being with ensuring effectiveness, operational maintaining people, of its and well-being safety the on managing be to has continued for different potential capital, planning and liquidity on earnings, impacts assessing customers, its serve can group the that responsible are and GBL Pargesa IGM, of Lifeco, directors of boards respective The stakeholders. with engaging and scenarios by the presented impacts potential and risk the of management the oversee to and processes structures governance for the current economic slowdown and other potential consequences todue COVID-19. Parts B and C of this MD&A further IGM, respectively. and Lifeco to related in place and processes risks describe by the taken been have actions the following and its employees, Corporation on the of COVID-19 the impact to In response Corporation: 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B5 PPFC_2020_QUAT1_ENG01_PFC.indd B6 F C
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0 POWER FINANCIAL CORPORATION 2 0 _ Q U The following chart reflects the economic interests held 31,2020. March company listed onthe Swiss Stock Exchange (SIX: PARG). Market capitalizations reported in the following sections are at Lifeco (TSX: GWO) and IGM (TSX: IGM) are public companies listed on the Toronto Stock Exchange. Pargesa isa public The Corporation’s MD&A consists of four parts: parts: four of consists MD&A Corporation’s The ORGANIZATION OF THEMD&A P investments at March 31,2020. A O T 1 [ [ [5] Power Financial holds a20. Financialholds Power [5] [ [ holdings listed Publicly In bold: W ѷ Ѷ ѵ Ѵ _ ] Power Financial holds a 63% interest, and Lifeco and IGM also hold equal interests of 18. of interests equal also hold andIGM andLifeco a63%interest, holds Financial Power ] companies. in public investments alist of for section andGBL” “Pargesa the to Refer ] Held through Parjointco, a jointly controlled corporation (5 ] ] On January E E press release. Further information on Pargesa’s results is available on its website (www.pargesa.ch). results,financial Part D– Pargesa’s and whichis also availabledirectly eitherfrom SEDAR (www.s Part C – IGM’s interim MD&A, as prepared and disclosed by IGM in accordance with applicable securities legislation, (www.greatwestlifeco.com); (www.greatwestlifeco.com); legislation, and whichis also available either directly from Part B – by disclosed Lifeco’sprepared and interimMD&A,as Part A–Power Financial, presented on a consolidated and non-consolidated basis; A N of 7.7%inPortag and IGM holds a and IGM R G
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ѳ II. C % interest inLifeco. % interest , Great-West Life, London Life and Canada Life amalgamated into a single company: Canada Life. Canada Life holds a holds Life Canada Life. Canada a company: single into amalgamated Life Canada and Life London Life, , Great-West O R P O ў % interest, and Portag3 and IGM also hold interests of 16. R A T I O N
derived from publicly disclosed information,derived frompubliclydisclosed ѳ %). %). by the Corporation initsoperating subsidiariesand certain other edar.com) or from IGM’s website ќ % and 46.3%, respectively, in Wealthsimple. inWealthsimple. respectively, % and46.3%, њ %, inPortag SEDAR (www.sedar.com)from or Lifeco’s website Lifeco in accordance with applicable securities securities applicable with inaccordance Lifeco Ѷ . Power Financial, Lifeco and IGM also hold equal interests interests hold equal also andIGM Financial,Lifeco . Power as issuedby Pargesa in itsfirstquarter (www.igmfinancial.com); (www.igmfinancial.com); Ѷ .9% interest in .9% interest IGM, 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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2 0 22020-05-14 5:59 PM ness ness 7 it offers A Insurance . Empower t management t management nds Canada Life, Life, nds Canada business un Europe and Capital Europe and Capital e reportable segments: segments: e reportable unit offers savings and savings unit offers Management rvices, asse as well as investment and as well as and investment an international financial services services financial an international Company and The Canada Life The and Company orting segments – orting segments vestment se vestment Europe underthe bra products. The German The German products. return and alternative strategies. PanAgora, a l Services and Asset on services for life assurance companies, to the companies, on services life assurance for investments (including life bonds, retirement retirement life bonds, (including investments e. The Ireland business business The Ireland e. ces in Canada across all of its lines of business. On On business. of lines of its all across Canada in ces ounts, fund management ounts, fund management %. ies and simplifies Lifeco’s capital structure to allow for porting purposes, Lifeco has Lifeco fiv purposes, porting business units, Lifeco offers a broad portfolio of financial of financial portfolio a broad offers units, Lifeco business .9% and 4.0%, respectively, in Lifeco’s common shares, shares, common Lifeco’s respectively, in and 4.0%, .9% ћњ ive functions, and distribution services as well as offers a offers as well as services and distribution functions, ive ћћ bmitted to the relevant authorities and the transaction is is transaction and the authorities relevant to the bmitted at March billion 2020, is 31, ћ
ovider of employer-sponsored defined contribution plans, plans, contribution defined employer-sponsored of ovider ness units, Financia e Company, Life Insurance London outsourced administrati outsourced alth insurance, retirement and in retirement alth insurance, sk Solutions, and Corporate, which reflect geographic lines as well as the as the well as lines geographic reflect which and Corporate, sk Solutions, al benefit and individual protection products. products. protection and individual benefit al s, businesses and organizations, including life, disability and critical ill critical and life, disability including organizations, and s, businesses ted Europe segment into two separate rep into ted Europe segment ates in Canada, the United States and United States the Canada, ates in on Life and Canada Life, and their holding companies,holding CanadaCanada their Life, and on Life and Life Financial
ts, including equity, fixed income, absolute absolute income, ts, including fixed equity,
l Customer and Group Customer Customer Group and Customer l market capitalization of $22. capitalization of market N % of thevoting rightsattached to all outstanding Lifeco voting shares. The O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER ћњ operates two primary busi T A R O sses. Lifeco oper sses. Lifeco P The Great-West Life Assuranc The R O C
L A limits voting rights in life insurance companies to companies insurance rights in life voting limits I 7 C B
N d A d n i N . I C F F
P R _ 1 E 0 G W N O E _ pension, lifetime guaranteed minimum withdraw guaranteed lifetime pension, On February 10, 2020, Irish Life announced the sale of Irish Progressive Services International Limited, a wholly owned owned wholly a Limited, International Services Progressive Irish of sale the announced Life Irish 2020, 10, February On of provision is the activity principal whose subsidiary FNZ Group. The necessary regulatory approvals have been su been have approvals regulatory necessary The FNZ Group. expectedto be completed in thesecond quarter of 2020, subjectto regulatoryapproval. Lifeco expectsto recognize a gain related to thistransaction, although itnot expected is tohave a materialimpact on Lifeco’s financial results. operates which unit business reinsurance of the results operating the includes segment Risk Solutions and Capital The and Ireland. Barbados U.S., in the primarily of held interests and IGM Financial 31, 2020, Power At March P LIFECO GWO; TSX: Inc., Lifeco Great-West administrative and record-keeping services, individual retirement acc individual retirement services, and record-keeping administrative Retirement, theFinancial Services unit,a is leading pr advisory services. Following the close of the reinsurance transaction in the second quarter of 2019, Financial Services also Protective by administered are now which policies, participating predominately insurance, of life block includes a retained unit, Management Asset The life insurance. of block retrocession a closed as well as Life), (Protective Company Life Insurance administrat certain management, investment provides Putnam, produc range of investment broad Putnam affiliate,offers broad a range of investmentsolutions usingsophisticated quantitative techniques. insurance life individual the of all substantially reflects segment U.S. the of unit Business Annuity & Insurance Reinsured The and pension health insurance group life insurance, and individual investments, and annuity business sold, through indemnity reinsurance, to Protective Life effective June 1, 2019. These products include include products These 1, 2019. June Life effective to Protective reinsurance, indemnity through business sold, annuity and segment. U.S. by the offered no longer are which benefits, executive and annuity life insurance, unit business U.K. The and Germany. Ireland Kingdom, United units: business distinct three comprises segment Europe The mortgages, equity-release annuities, payout bulk and individual offers insuranc group individual protection and pension), and drawdown representing approximately approximately representing Companies Act and reinsurance busine and reinsurance holding company with interests in life insurance, he life insurance, in with interests company holding For re Life. and Irish Investments Putnam Retirement, Empower and Ri Capital Europe, States, the United Canada, management and corporate structure of the companies. Effective January 1, 2020, as a result of strategic operational operational strategic of result as a 1, 2020, January Effective companies. of the structure and corporate management repor Lifeco its previously divided changes, and Risk Solutions. the Individua In Canada, through life Canadian three Lifeco’s 2019, In products. speciality other and and income savings wealth as well as products insurance insurance companies, Corporation and London Insurance Group Inc., amalgamated into a single life insurance company: The Canada Life Life Canada The company: life insurance a single into amalgamated Inc., Group Insurance London and Corporation Assurance Company. This amalgamation creates operating efficienc and benefit plan solutions for individuals, familie solutions benefit plan and the which brand under the become has Life Canada Life. Canada in Canada: brand to one moved Company, Assurance servi and products communicates and delivers creates, organization 1, 2020, Great-West Life, Lond January moreefficient use ofcapital, although itnot is expected to havea material financial impact. The United States segment See Part B of this MD&A for additional information on Lifeco. on information additional for MD&A of this B See Part 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B7 PPFC_2020_QUAT1_ENG01_PFC.indd B8 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U See Part Cof this MD&A for additional information on IGM. IGM’s common shares. Parjointco. At March 31, 2020, Parjointco held a a held Parjointco 31,2020, At March Parjointco. At March 31, 2020,PowerFinancial Investment Planning Coun and accountfortheir interests asanassociateusing the method. equity proposed transaction is expected to close in the fourth quarter of 2020. voting rights, a condition of thetransaction, atGBL’s Extraordinary Shareholders Meeting held on April 2 with respect to atleast 90% ofPargesa’s totalvoting rights already ownedbyParjointco, under group structure. Asper the agreement, a public exchange offer willbe initiatedby Parjointco for all Pargesa shares not the simplify would that transaction proposed a for March On an agreement announced andPargesa Parjointco 11, 2020, shareholder. comprised of global industrial andservices companies, leaders in their markets, in which GBL plays its role of professional company focused on long-term value creation, GBLrelies on a stable and supportive familyshareholder base. Its portfolio is Power Financial EuropeB.V., a wh PARGESA AND GBL IGM Financial Inc., TSX: IGM; mark IGM FINANCIAL P SIX and Parjointco is ret expected to Parjointco SIX and Pargesa bearer share they hold. Following the proposed transaction, itisanticipated that Pargesa will bedelisted from the GBL, EBR: GBLB;GBL, EBR: market capitalization of €11. in GBL,representing SF of capitalization market PARG; SIX: Pargesa, Corporation and IGMhold a combined 2 Power Corporati company, parent Financial’s Power excluding subsidiary management, maintained itsposition among the market leaders in China’s asset management industry. China AMC’s assets under GBL of 2 IGM holds a 13.9% interest in China AMC, one of the first fu advisors.Mackenzie to seeks beCanada’s preferredglobalas Mackenzie distribut mandates through a boutique structure using multiple distribution channels: Retail, Strategic Alliances and Institutional. Invest Mackenzie relationships. distinguish itself fromits competition by offering to strives It Canada. IG across consultants of network exclusive its through services its provides Management Wealth retirement and estate planning, investments, andtax strate families andindividuals.TheIG LivingPlan™ provides integraa single, holistic, client-centric approachfinancial to planning thatrefle insurance, securities, mortgage products and other financial services. IG WealthManagement offers IG Living Plan™, a investmentfunds andother vehicles,range ofwide anda Wealth Managementof mutual family offersIG anexclusive subsidiaries IG Wealth Management, Mackenzie Investments and Investment Planning Counsel. distinctly,primarily within theadvicesegment ofthe financial servicesmarket. Its activities carriedare out throughits management company which serves the financial needs of Canadians through its principal subsidiaries, each operating A O T 1 W _ E E A N R G
0 F 8 1 ѝ _ I POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 N P %. Theproposed transaction will besubject to Parjointco holding or having received shareholder acceptances F A C N . i n C d d I
A
ments is a diversifie is a ments B L 8
C es itsproductsandservices primarily throug O њ 1.9% of the voting rights. GBL, a Belgian holding company, is listed onthe Brussels Stock Exchange. R P O R sel is pr an independent distributor financial of A T I O N olly owned subsidiary of Power Financial, andtheFrèreGroup each holda
and CanadaLife, asubsidiary of Lifeco, held interests of assets under management, were RMB¥1,032 billion management, were RMB¥1,032 assets under ain de facto control and maintain approxim and control facto de ain et capitalization of $ d investment which Pargesa shareholders will be entitled ќ . ѝ % interestinAMC.China Power Corporation and IGMhavesignificant influence ћ billion, isone ofthe largest њ .4 billion,31, 2020, is held a aholding company, which, at March њњ . њ management solutions solutions provider and management comprehensive planning toitsclients within thecontext of long-term % interest in Pargesa, representing on, directlyholds a13.9% equity inter nd management companiesinChina, њ . set management solutions provider and business partner. . GBL shareholders approved the implementation of double- ћ gies, creating atruly synchronized and comprehensive plan. billion atMarch 31, 2020, isaleading wealth and asset cts the evolving needs, goal h a diversified distribution network network h adiversifieddistribution ted view of allaspects of a client’s finances, includi oducts, services and oducts, servicesand listed holdingcompaniesin Europe.As a holding ately the same economic to receive 0.93 sh (C$192 billion) at December 31, 2019. 31, December at billion) (C$192 ќњ offers a wide range of investment range of a wide offers .4% of the voting rights..4%of the voting ћ s and aspirations of Canadian 2.1% and3.9%,respectively,in advice in Canada. advice in Canada. est in China AMC. Power which hasdeveloped and of third-party financial financial of third-party ares of GBL for each equity interest in њ 0% interestin ѝ њ , 2020. The The , 2020. 0% interest ng 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2 l 0 22020-05-14 5:59 PM 9 A by Power Financial, an by Power 1 million ($143 million at 4 million at December 31, 0 fintech companies and and companies 0 fintech ћ ћ њ billion. On January 23, 2020, 2020, 23, On January billion. million at December 31, 2019. 31, 2019. at December million ѝ . ћ ћ 0,000 clients across the Canadian, Canadian, the across clients 0,000 a limited partnership controlled by by controlled partnership a limited њ .3% and a fully diluted equitya fully interest diluted and .3% ѝњ million (same as at December 31, 2019). 31, asat December (same million њ million, of which Power Financial, Lifeco and Lifeco Financial, of which Power million, ќ mited partnership controlledmited partnership Umicore (EBR: UMI) – materials Umicore (EBR: of recycling technology and precious metals GEA (XETR: G1A) of equipment and project – supplier industries processing a wide range of for management sectors and beverage food the primarily in disposableOntex (EBR: ONTEX) – products hygiene parks – operation of regional leisure Parques 2 at March million ($ 31, 2020 d W4A. At March 31, 2020, W4A had over $1.1 billion in in billion $1.1 over had W4A 31, 2020, March At W4A. d ћ ings, a subsidiary of Power Corporation. Corporation. of Power a subsidiary ings, % interest% Total in through forward sales contracts maturing in oup), are anchor investors in funds managed by an affiliate, Portag3 Portag3 affiliate, by an managed in funds investors anchor are oup), ћ ,300million, compared with SF10,94 ѝ million, compared with €20,349 million at December 31, 2019. at December 31, 2019. million with €20,349 million, compared at December 31, 2019), respectively. respectively. at December 31, 2019), is focused on early stage investments in specific verticals within the globa the within verticals in specific investments is focused on early stage ѝќњ , њ 3.9%, representing a voting interest of of interest a voting 3.9%, representing ѝ , Power Financial, Lifeco and IGM, through IGM, through and Lifeco Financial, Power ,
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R ments in consolidated subsidiaries Wealthsimple and Koho discussed below. Wealthsimple and Koho discussed subsidiaries consolidated ments in 4.4% equity interest in Koho. Koho is a Canada-based digital platform offering a suite of financial financial of suite a offering platform digital Canada-based a is Koho Koho. in interest equity 4.4% O њ P R O C Ventures’ second Ventures’ fintech fund,
L A I 9 C B
N d A d n i N . I C F F
P R _ Pernod Ricard (EPA: RI) – wines and spirits Ricard (EPA: Pernod – cement, HOLN and EPA: LHN) LafargeHolcim (SIX: aggregates and concrete business Webhelp – provider and of customer experience process outsourcing Imerys (EPA: NK) – mineral-based NK) Imerys (EPA: solutions for specialty industry SGS (SIX: SGSN) inspection and certification – testing, adidas (XETR: ADS) distribution of sportswear – design and 1 E 0 0.1%. Wealthsimple is one of Canada’s leading financial technology companies, and operates one of the country’s largest largest of country’s the one operates and companies, technology financial leading of Canada’s is one Wealthsimple 0.1%. G W ќ N O E PRIVATELY HELD HELD PRIVATELY PUBLICLY LISTED LISTED PUBLICLY _ IGM have each committed $33 million for a total of $99 million. At March 31, 2020, the fair valuemillion. and cost ofPortag3 Atmillion March II’s for a total of $99 IGM have each committed$33 investment portfolio, excluding the investment in the consolidated subsidiary Koho, were $1 subsidiary Koho, the consolidated in investment excluding the portfolio, investment investment funds. Portag3 Ventures is managed by Sagard Hold by Sagard is managed Ventures Portag3 funds. investment of $ held investments (Portag3) Ventures’ first fintech fund Portag3 financial technology sector. Portag3 II has total capital commitments of $42 See Part D of this MD&A for additional information on Pargesa. Pargesa. on information additional for MD&A this of D See Part KOHOAND WEALTHSIMPLE PORTAG3, gr (the and Lifeco IGM with together Financial, Power In addition, through its subsidiary through In Sienna Capital, of private addition, a is GBL debt and thematic funds. equity, portfolio developing 0. GBL sold its of 2019, second quarter the During 2020. of quarter first in the million of €411 gain a GBL realized 2020. January 31, 2020, Pargesa’s netAt March asset value was SF the have that companies services financial innovative to backing dedicated funds investment operates which Ventures, than more in invested has Ventures Portag3 date, To impact. global and change for potential P following: in the of investments comprised was mainly portfolio GBL’s 31, 2020, At March 2019), excluding the invest 2019), excluding Portag3 II, Portag3 million ($110 and $124 million 2019) 31, December of Wealthsimple interest in equity undiluted of services. digital investing and fastest-growing and of investment of a suite offering and diversify its marketplace in the presence expand its to continues Wealthsimple for Advisors Wealthsimple Trade, Save, Wealthsimple Wealthsimple Invest, Wealthsimple include which savings products, 3 over had Wealthsimple 31, 2020, At March (W4W). Work for Wealthsimple and (W4A) At March 31, 2020, Portag3, Power Financial and IGM held, through a held, throughand31, 2020, li IGM Portag3,Power Financial At March United States and United Kingdom markets with assets under administration of over $ over of administration under assets with markets Kingdom and United United States GBL’s net asset value at March 31, 2020 was €1 was 31, 2020 March at value asset GBL’s net Power Financial, held a servicestoprovide consumers an experience thatan is alternative toatraditional 31, 2020, bank. the At March costofthe 2019). 31, December as at (same was $32 million Koho in group’s investment Wealthsimple announced that Purpose Advisor Solutions acquire Solutions Advisor Purpose that announced Wealthsimple under administration. assets was $31 Wealthsimple in investment group’s of the cost the 31, 2020, At March II and Portag3 Portag3 2020, 31, At March 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B9 PPFC_2020_QUAT1_ENG01_PFC.indd B10 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U Power Financial’s investment inPargesa is held through Parjointc intercompanysubsidiaries)afterelimination of balances the andtransactions. Financial(parent) andLifeco,IGM, Wealthsimple, Kohoand flows of theparentcompany The anditssubsidiaries. financial statementsConsolidated presen in whichtheinvestment isinitially recognized Power Financial and the Frère Group. Power Financial’s Accounting Standard 34 Corporati the of Statements Financial Interim Consolidated The IFRS FINANCIALMEASURES AND PRESENTATION Basis ofPresentation P The followingThe tablesummarizes the accounting Investment or jointcontrol Significant influence in theentity Controlling interest C A O o T n 1 W _ t E r E Power Financial’s share of: A Dividends received from Parjointco. from Parjointco. received Dividends o N R l G
Pargesa’s other changes in equity. Other comprehensive income orloss in Pargesa; and in Pargesa; Net earningsloss or
0 F 10 1 _ I N P POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 F A C N . i n C d d I
A
B L 1
0 C O R vial o ae(F) Earningsconsistof of Corporation’sshare Availableforsale(AFS) Equitymethod Consolidated with non- Consolidation
P A O ൞ c
R Interim Financial Reporting c A o u T n I O t i N n g
M e t h o d t, as asingle economic entity, the assets, liabilities, revenues, expenses and cash
at cost andadjuste cost at presentationfor the Corporation’sholdings: C if any impairment charges, Earnings arereduced by comprehensive income through other marked tomarket The investmentsare disposals gains orlosseson dividends received and comprehensive income earnings andother controlling interests E a o r m n consolidated financial statements pres statements financial consolidated i p n r g e (IAS 34)andare presentedin Canadian dollars. investment in Parjointco isaccounted for using the equity method, s h
e a n n s d i
v O e t
the Portag3 funds (Power Financial’s controlled operating I h n e on have been prepared in accordance with International International with in accordance prepared been have on c r d thereafter for: for: d thereafter o o. Parjointcois a m e I impairment leads toafurther impairment charge subsequent toan A sharepricedecrease impairment charge investment results inan the value ofthe prolonged decline in A significantor investment level done attheindividual Impairment testingis tested forimpairment Entire investment is for impairment tested atleastannually life intangibleassets are Goodwill andindefinite m p a i r m e n t
holding company joint T e s t i n g ent the financial results Power of ent thefinancial Asubsequentrecoveryof is Reversedifthere Impairment ofgoodwill
reversal value doesnotresultina has recovereditsvalue evidence the investment of value is evidenceofrecovery assets isreversed ifthere Impairment ofintangible cannot bereversed I m p a i r m e n ly controlled by t
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g g n n i i t t n n u u o o c c c c
A A t t n n e e m m % and 32.1%, respectively, in Koho. in Koho. % and 32.1%, respectively, t t s ќ s e e ); v v ѝ n n i i
f f o o
e e r r u u t t a a N InvestmentSignificant influence Available for sale Equity method Controlling interestControlling interestInvestment Consolidation Consolidation Investment Available for sale Investment Available for sale Available for sale Controlling interest Consolidation Controlling interest Consolidation N Controlling interest Consolidation Controlling interestControlling Consolidation Controlling interestControlling Consolidation
t t c c ѳ Ѵ Ѽ ѳ ѳ ѳ ѳ ѳ Ѽ . . . .7. Controlling interest Consolidation . ѳ Ѽ i Ѵ s i s . . . e 6.87.57.6 Investment8.5 Investment Investment Investment Available for sale Available for sale Available for sale Available for sale e ѳ ѷ 8. 8. Ѷ 7.8 control Joint Equity method Ѷ ѵ r m r m 0%). 5 5 Ѵ Ѵ ѵѳ 6 ѵѶ < 5. ѵѳ ѵ e o e o њ Ѵѳѳ t t n n n n o o i i c c e .3%, respectively, in Wealthsimple. .3%, respectively, Wealthsimple. in e
ћ % % % in Portag3. % in % and Portag3 and Portag3 II hold interests of 2. of interests hold Portag3 II Portag3 and % and % in Portag3 II. Portag3 % in њ . њ ќ . . ѝ ћ ќ % and 4
ќ . ћ N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T s (Note s (Note 20).
A ’s main holdings were as follows: holdings main ’s R ); O ћ P R O C
] L Ѵ [ A 1 I 1
C B ]
ћ
N [ d A d n 7.7 Controlling interest Consolidation 7.7 Controlling i ] N . њ I [
C 6 F
F
[3] [4] s s 66. P ] 6.5 Controlling interest Consolidation 6.5 Controlling R ] _ g g Ѵ ќ [ 6 Investments (Note (Note Investments (Note associates and corporations controlled jointly in Investments Basis of presentation and summary of significant accounting policies (Note 2); 2); (Note policies accounting of significant and summary presentation of Basis Goodwill and intangible assets (Note 11); and 11); and (Note assets and intangible Goodwill interest Non-controlling 1 E [ n n Imerys Imerys Sienna Capital 0 i i Pernod Ricard Ricard Pernod LafargeHolcim Umicore Ontex SGS adidas GEA Other investments Parques Webhelp [2]
G d d W L l l Privately held Privately held N Publicly listed ] Sienna Capital holds a portfolio of investments in alternative investment funds. funds. investment alternative in investments of a portfolio holds Capital ] Sienna ] 1 of interests equal hold also IGM and Lifeco ] Lifeco. in interest a 4.0% also holds IGM ] in IGM. Life also holds a 3.9% interest Canada ] ( corporation controlled a jointly Parjointco, through Held o o B O E ѷ Ѵ Ѵ ѵ Ѷ _ Koho Wealthsimple Portag3 Portag3 II Pargesa [ [5] of interests equal also hold IGM and Lifeco [7] of interests equal also hold IGM and Lifeco [ This summary of accounting presentation should beread in conjunction with the following notes tothe Corporation’s 2019 Statements: Financial Consolidated [6] 1 of Portag3 and IGM also hold interests H G [ [ [ 31, 2020, Pargesa At March P as follows: were holdings Corporation’s the 31, 2020, At March H Lifeco IGM 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B11 PPFC_2020_QUAT1_ENG01_PFC.indd B12 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U financial measures used in this MD&A are defined as follows: provide additional meaningful information to readers intheir analysis of the results of the Corporation. The non-IFRS financial measures initspresentation and analysis of the financial perform This MD&A presents and discusses financial measures which are not inaccordance with IFRS. Management uses these ANDPRESENTATION MEASURES FINANCIAL NON-IFRS P Net assetvaluepershare Net assetvalue Adjusted netearnings pershare Adjustments Adjusted netearnings of presentation Non-consolidated basis N A O o T 1 n W _ - E I E A F N R R G
S 0 F 12 1
f _ I i N P n POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 F A a C n N . i c n C d i a d I
l A
m B L 1
e 2 C a O s u R r P e
O R A T I O N
omnsae usadn. common shares outstanding. Net assetvaluedividedbythenumberof per sharebasis. Net assetvaluecalculatedona management’s estimate offair value. private entitiesare measured at their market value andinvestments in (Lifeco, IGMandPargesa)are measured at The investmentsheldinpublicentities its netdebtandpreferred shares. Financial’s non-consolidated assets less Net assetvalueis thefairvalueof Power shares outstanding. weighted average numberofcommon Adjusted netearnings dividedby the adjusted net earnings. Earnings pershare calculatedusing a jointlycontrolledcorporation. include those identified byasubsidiaryor of theunderlyingbusinessresultswhich management believesarenotindicative hedging, aswellitemsthat on insurance contractliabilitiesnetof equity andinterestratemarket impacts changes andmanagement actions, direct Lifeco’s impactofactuarialassumption Includes theCorporation’sshare of results fromoperations lessmeaningful. the period-over-period comparison of management’s judgment would make After-tax impactofanyitemthat in Net earnings excludingAdjustments. method. Koho areaccounted forusingtheequity Portag3, Portag3 II,Wealthsimpleand Power Financial’s interestsinLifeco,IGM, D e f i n i t i o n
ance of Power Financial, and believes that they
neligbsns eut. underlying business results. that arenotconsidered ofthe to bepart and itssubsidiaries andexcludes items operating performance oftheCorporation as itreflectsmanagement’sviewofthe period’s resultstothoseofpreviousperiods Assists inthecomparisonof current earnings foreach subsidiary. assess theimpactofcontributionto This presentation isusefultothe readerto net earnings andadjustednet earnings. each operating company’scontributionto reviews andassesses theperformance of As aholdingcompany,management consolidated operatingcompanies. results separately fromtheresults ofits Presents theholding company’s(parent) cash flows. analyze itsresults, financialposition and Used bytheCorporation topresentand value onapersharebasis. Assists thereader incomparingnetasset overall fairvalue. investments heldbythecompanyorits determining orcomparing thefair valueof This measure may beusedbyinvestorsin in assessingvalue. the holding companyandisused toassist Presents thefair valueofthenet assets of on apersharebasis. Assists incomparingadjustednet earnings not reflectiveof underlying business results. assessing currentresultsastheseitemsare assists management andthereader in management. Theexclusionofthese items part ofoperating performance by Identifies itemsthat arenotconsidered P u r p o s e
22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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2 ) ) ) ) ) , , Թ Թ Թ Թ 0 6 8) ѵ ѷ ѳ ѵ 22020-05-14 5:59 PM Ѷ ѳ ѳѴ ѳѼ 7 ѶѴ ѶѴ .75 . . . .66 (6 (6 5 ѳ ѳ ѳ ( ( ( ѵѳѴѼ ѵѳѴѼ 13 March March A , on January 1,, on January , , ѳѳ Ѽ Ѷ ѷѷ 5 ѵѷ ѶѶ ѳѴ ѳѷ ѳѴ ѶѼ ѼѼ ѳ ѶѴ ѶѴ .6 ...... ѷѳѴ ѵѴѵ ѵ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѵѳѴѼ ѵѳѴѼ gement believes are not believes gement December December 8( 65 , , Թ Թ Թ 5 Ѵ 5 ѳ ѳ Ѵ 7 ѵѳ ѳѴ ѵѴ ѶѴ ѶѴ .5 . . . .7 ѶѵѼ ѴѶ ѴѷѴ ѷ ѳ ѳ ѳ ѳ ѳ ѵѳѵѳ ѵѳѵѳ Insurance Contracts March March , ќ lity of results between reporting periods of between periods results lity reporting of base earnings by Lifeco which was introduced in in was introduced which Lifeco by of base earnings hedging, and items that mana and items hedging, aning and may not be comparable to similar measures used used measures to similar comparable may not be and aning o’s impact of actuarial assumption changes and management and management changes assumption of actuarial o’s impact on insurance contract liabilities net of hedging. The definition of hedging. The definition of net liabilities on insurance contract
] Ѵ [ ] Ѵ [ being adopted to enhance comparabiadopted to being
] Ѵ [ pact of actuarial assumption changes and management actions, direct equity and and equity direct actions, management and changes assumption of actuarial pact
]
Ѵ [ N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R Non-IFRS financial measure , net of tax , net , net of tax , net O – C [2] [2]
in Adjusted net earnings is in Adjusted net earnings L A 3 I 1 C B
N d A d n i N . I C F F
P R _ 1 E 0 Pargesa Pargesa IGM Pargesa Pargesa IGM G W Lifeco Lifeco Corporate operations Lifeco Lifeco Corporate operations N ] Financial. of Power shareholders to common Attributable ] on Adjustments more details for “Adjustments” section the Refer to operations. corporate and IGM, Pargesa from Lifeco, ] Financial. of Power shareholders to common Attributable ] operations. corporate and IGM, Pargesa from Lifeco, on Adjustments more details for “Adjustments” section the Refer to O E Ѵ ѵ Ѵ ѵ _ Three months ended per share – IFRS financial measure Net earnings Share of Adjustments measure per share – Non-IFRS financial Adjusted net earnings [ [ Net earnings – IFRSNet earnings financial measure Share of Adjustments Adjusted net earnings [ [ RECONCILIATION OF IFRS AND NON-IFRS FINANCIAL MEASURES MEASURES FINANCIAL NON-IFRS AND OF IFRS RECONCILIATION financial to non-IFRS IFRS with accordance in reported earnings net of a reconciliation present tables following The net and adjusted earnings net Adjusted amounts. share per and related adjustments earnings, net adjusted measures: of Earnings”: Statements “Non-Consolidated section the in presented are share per earnings Three months ended P Effectivethe first quarterof2020, theCorporation introduced an enhanced definitionof its non-IFRSearnings measure, introduction the with consistent This change is earnings. net Adjusted earnings base defines Lifeco of Lifeco. performance the operating of view management’s reflect to of 2020 first quarter the im the excluding earnings as net (loss) net of contract liabilities on insurance impacts market rate interest indicative of the company's underlying businessresults. The definitionof Adjustments includeswhat theCorporation Lifec includes also and items other as presented previously market impacts rate and interest equity actions, and direct andanticipation in of Lifeco’s implementationof accounting changesrelated to IFRS 1 2023. The comparative periods have been restated to reflect the introduction of this enhanced measure. measure. enhanced of this the introduction to reflect restated been have periods comparative The 2023. me a standard have not do measures financial non-IFRS These in presentation the with of presentation basis non-IFRS the and value asset net the of Reconciliations entities. by other accordance with IFRS are included throughout this MD&A. Adjustments used 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B13 PPFC_2020_QUAT1_ENG01_PFC.indd B14 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U presentation and a reconciliation of IFRS and non-IFRS financial measures. measures. financial andnon-IFRS IFRS of reconciliation a and presentation of basis non-consolidated the of description a for Presentation” and Measures Financial “Non-IFRS section the to Refer 201 In May DEFERRAL OFIFRS 9, This section presents: Power Financial Results of P the specific discussion included inthe IGM and Pargesa sections “Contribution to net earnings and adjusted net earnings”. consolidation, the Corporation has adjusted theresults of bo retrospectively. InJune 2019, the IASBissued policies in accordance with IAS39, which is Corpo corporation accounted for The method. using the equity controlled ajointly or by an associate applied policies accounting the retain to required not but 9,ispermitted IFRS of 1, 201 and adopted IFRS 9on January IGM, a subsidiary, and Pargesa, held throughParjointco, a jointly controlled corporation, do not qualifyfor the exemption date. financial instruments the standard, IFRS 9, apply to insurers for exemption the 2023 1, January to extended IASB the addition, In 2023. 1, January to standard the of during the comment period on the exposure draft, on March 1 deferrala ofoneyear 2022. ofthe1, effective Dueto thedate responses standard ofthe received January to from stakeholder A O T 1 W _ E E to the netto the earnings andadjustednet earnings of Power Financial. “Non-Consolidated Statementsthe ofEarnings”, which present and IFRS”; with inaccordance Earnings of Statements “Consolidated the A N R G
0 F 14 1 _ I N P ќ POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 F A , the IASBissuedIFRS1 C N . i n C d d I
A
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4 C O R FINANCIAL INSTRUMENTS P O R A T I O N ќ
,
Insurance Contracts ѝ . The Corporation, in accordance with the amendment of IFRS 4 todefer the adoption Financial Instruments: Recognition andMeasurement, Financial Instruments an Exposure draft, which provided targeted amendments toIFRS 1 (IFRS 9) 9) (IFRS , which will replace IFRS 4, th IGM and Pargesa to be inaccordance withIAS39. Refer to , so that both IFRS 9 and IFRS 1 9 IFRS and IFRS both , sothat ќ , 2020, the IASBapproved the deferral of the effective date the contributions of operating subsidiaries and Pargesa ration decided to continue applying accounting accounting applying continue to decided ration Insurance Contracts ќ will have the same effective toPargesa’sresults. On and will be applied ќ including s
22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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8 5 8 , Ѷ 5 5 7 5 ѵ ѳ Ѽ 8 86 8 earnings
85 85 Ѵѵ ѷ ѷѷ ѷѷ 67) 5,86 Ѷ Ѷ 7 8 ѶѴ ith IAS 39 have been ith IAS ѷ ѷ ѵ ѵ ѼѴ ѴѴѳ ѵѳѶ ѵѳ ѷѳѴ , ,67 , , ,876 ѵѳѴѼ Ѽ ѵ Ѵ ѴѴ Ѵѳ s, corporate operations and operations s, corporate VOCI by Pargesa. December Power Financial Power
) ( 7,76 8 8 6 6 , Ѷ 6 5 ѵ 5 ѵ ѵ 5 Ѷ Consolidated net Consolidated ѳ 88 8 Ѷ Ѷ ѴѼ ѵѼ 86 ѳ 6 ѶѴ 88 ѴѳѶ 5 588 55 Ѵ ѶѵѼ 55 Ѵ ѳ ѳѵѷ ѼѳѴ , ,5 , , ,8 , ѵѳѵѳ ѵ 7,7 Ѵ ѵ ( ѴѴ Ѵѳ Ѵѳ March ) ) ) )
) ) ) ] ) Թ Ѷ ѳ Ѵ ѳ Ѵ [ 5) 6 Ѽ Ѵ 6) 5 Ѵ ѵ ѴѶ ѷ ѴѴ ѷѷ Ѷ Ѷ Ѵѵ Corporate Corporate ( ( (6 ( (5) ( (8) ] Թ Թ Թ Թ Թ Թ Թ Թ Թ Թ Թ Թ Թ ѵ [ ree months ended March 31, 2020 are presented below. below. presented are 31, 2020 March ended months ree a. This table reflects the contributions from Lifeco, IGM and and IGM Lifeco, from contributions the reflects table This a. Pargesa 78 (7 78 (7 78
78 (7 78 78 (7 78
]
Թ Թ Թ 7 Ѷ Ѵ Ѵ Ѵ [ ѳ Ѷ 8 6 6 Ѽѷ ѵ ѵѶ 76 7 ѷ Ѵ ѵѳѼ Ѵ
ѵ ѵ ѵѳѶ 57 )
776 6 78 ( 78 6 . The Corporation’s share of earnings of Pargesa includes adjustments in accordance with IAS IAS with in accordance adjustments includes of Pargesa of earnings share Corporation’s . The 75
)
7 ѷ ѷ Ѵ Ѷ ѷ Թ Թ Ѽ 7 6 5 Ѵ 5 S IN ACCORDANCE IFRSWITH 8 7 57 67 7 8 7 ѳ ѵ 7 ѳ ѴѶ ѵѵ Ѽѳѵ Ѷ ѳ Ѷ Ѵ ѵ Ѷ , , , Ѽѳ ѷѷѴ ,5 Ѷ , , Ѽ ѵ Lifeco IGM Ѵ Ѵ Ѵѳ Ѵѳ
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R O C
L A 5 I 1 C B
N 6
d
o s A d t
n g i N . e I l n C i
F b s F s n
a r P e e t R _ a s u Power Financial Power Financial 1 u E e n n 0
b t i e e Common shareholders of of Common shareholders Perpetual preferred shareholders shareholders preferred Perpetual G Non-controlling interests Non-controlling interests recognized on consolidation and included in “Corporate”. “Corporate”. in included and on consolidation recognized including the Corporation’s share of a gain realized on the sale of an investment and impairment on investments classified as as F classified on investments impairment and of an investment sale on the realized of a gain share Corporation’s the including consolidation entries. W r e v controlled corporations and associates, controlled corporations and associates, taxes and income controlled corporations and associates p N t ] Results reported by IGM are in accordance with IFRS 9. As the Corporation has not adopted IFRS 9, adjustments in accordance w accordance 9, adjustments in IFRS not adopted has 9. Corporation As the ] IFRS with IGM accordance are in by reported Results ] IFRS with accordance are in Pargesa by reported Results ] “Corporate” is comprised of the results of Portag3, Portag3 II, Wealthsimple and Koho, the Corporation’s investment activitie investment Corporation’s the Koho, ] and Wealthsimple II, of Portag3, Portag3 results of the comprised is “Corporate” e O t x E Financing charges Financing charges 65 Total expenses Net investment income Net investment income Total revenues Commissions ( N Earnings before income taxes income taxes Earnings before Operating and administrative expenses Operating and administrative Fee income Ѵ ѵ Ѷ _ [ net to its contribution on based segment of each performance the evaluates Corporation the company, As a holding to “Contribution the in provided is Pargesa and IGM Lifeco, of results the of A discussion earnings. net adjusted and earnings below. section earnings” net and adjusted net earnings Earnings before investments in jointly investments in jointly Earnings before of investments in jointly Share of earnings Income taxes A ( [ R Total net premiums E Total paid or credited to policyholders 7,7 P CONSOLIDATED STATEMENTS OF EARNING th the for of earnings statements consolidated Financial’s Power and Parges IGM are Lifeco, segments operating Corporation’s The common shareholders. Power Financial’s to attributable earnings net the to Pargesa ended – Three months net earnings Consolidated [ 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B15 PPFC_2020_QUAT1_ENG01_PFC.indd B16 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U oprt prtos [ N Lifeco A Corporate operations Lifeco A ended months Three Contribution to adjustedand netearnings pershare [ N Lifeco A Corporate operations Lifeco A ended months Three Contribution to adjustedand netearnings method. equity the forusing accounted are shareholders common Financial’s In thissection, thecontributions from Lifeco andIGMto the net earnings andadjusted netearnings attributable to Power EARNINGS OF STATEMENTS NON-CONSOLIDATED P [ [ [ [ [ [ Ѵ Ѵ ѵ ѵ ѷ Ѷ ѷ Ѷ A iied npreulpeerdsae Pargesa Dividends onperpetual preferred shares IGM A Pargesa IGM Pargesa IGM Dividends onperpetual preferred shares IGM A Pargesa oprt prtos Corporate operations Corporate operations d d d d O e e For a reconciliation ofLifeco and IGM’s non-IFRS adjusted net earnings per share to their net earnings per share, refer to] t Forareconciliation ofLifeco, IGMPargesa’s non-IFRS and adjusted netearnings to their netearnings, refer to the “Contrib ] See“Adjustments” section below. ] Attributable to common shareholders. ] The contributions from Lifeco and IGM include anallocation ofthe results ofWealthsimple, Koho, Portag3and Portag3 II, bas ] See“Adjustments” section below. ] Attributable to common shareholders. ] The contributions from Lifeco and IGM include anallocation ofthe results ofWealthsimple, Koho, Portag3and Portag3 II, bas ] T d d t t j j j j 1 W Contributions from IGM and Pargesareflect adjustments in accordance with IAS 39. adjusted netearnings” section below. Contributions from IGM and Pargesareflect adjustments in accordance with IAS 39. net earnings” section below. u u u u
j j _ e e u u [ [2] s s s s E ѵ E a a t t t t s s A ] N
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March March ѵѳѵѳ ѵѳѵѳ ( ( ( ( ( ( ( ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѴѷѴ ѴѶ ѶѵѼ ѷ 5 Ѷ ( ( .8 . . .5 .5 .7 . . . . . ѶѴ ѶѴ Ѵѵ Ѵ ѳ ѳ ѵѴ ѳѴ ѵѳ Ѷ Ѷ 7 ѼѼ 7 ѷѳ 6 ( (5 5 5 5 Ѵ ѷ ѳ Ѵ 5 ѳ ѵ 5 5 Ѽ Ѵ Թ Թ Թ , , ) ( ( ( ) ( ) ( ) ( ) ( ) ( ( ) ( ) (8) ) ( 65 ) ( ) ( 7 56 55 he “Contribution to net earnings and ution to net earnings and adjusted December December ed on their respective interest. ed on their respective interest. ѵѳѴѼ ѵѳѴѼ ѳ ѳ Ѵ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѷѳѴ ѵ ѵѴѵ ѴѴ .6 . . . . .8 ...... ѶѴ ѶѴ ѼѼ Ѵѳ ѳ Ѵ ѵѷ Ѷ Ѷ ѶѼ ѳѴ ѳѷ ѳѴ ѶѶ ѳ ѳ ѵ 5 )( ( 5) 6) 7 5 ѳ 8 8 ѷ Ѷ Ѽ ( ( ѷ 5) 8) 8 Ѷ , , ) ) ) ) ) 5 )6 ) ) )6 March March ѵѳѴѼ ѵѳѴѼ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѳ ѷ Ѵѳ Ѷ . . . .75 .75 .66 .75 . . .5 . . ѶѴ ѶѴ ѳѼ ѳѴ ѳ ѳ Ѵѷ ѷ Ѷ ѵѼ Ѷ ѳ ѳѷ 7 8 Ѷ 8 8 5) 7 ѵ ѵ ѳ ѷ 6 8 ѷ ѷ 6 5) Թ Թ Թ Թ , ,
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, , 0 ѷ ѵ ѳ Ѽ 22020-05-14 5:59 PM 8 86 8 ѶѴ ѶѴ Ѷ ѷѷѷ Ѷ ѳ . .665 .576 ѵѳѴѼ ѵѳѴѼ % ѳ ѳ ѳ 17 ћ . ќ March March %, and A њ )( )6 ) , , Ѷ Ѷ ѵ 5 Insurance Contracts , Ѽ ѶѴ ѶѴ ќ ѵѴѵ ѶѷѴ ѶѷѶ .8 . .55 ѵѳѴѼ ѵѳѴѼ eing adopted to enhance to enhance adopted eing ѳ ѳ ѳ FRS 1 December December ntroduced an enhanced non-IFRS non-IFRS an enhanced ntroduced 556 ) ( 55 ) ( ) (
, , Ѵ Ѷ ѵ 7 5 Ѽ 6 ( 6 6 6 ѶѴ ѶѴ Ѷ Ѷ ѵѵ ѴѶ Ѷ ѵѴ . .585 . ( ѵѳѵѳ ѵѳѵѳ % in the corresponding period in 2019). 2019). in period corresponding % the in ѳ ѳ ѳ ( ѝ . March March ћќ 9 a 1 s 0 e 2 g r 4 a Q P
d million in the corresponding period in 2019, an increase of period in in the corresponding million d n ѝ n a
3 a
њ 9 1 M per share in the corresponding period the corresponding per share in in 2019, a decrease of 33.3% per share in the corresponding period in 2019, an increase period in 2019, an per share in the corresponding of 0 G I 2
, ќњ 1 ћћ o Q c
. 00 period in 2019, a decrease million in the corresponding of 33. e s f i ћ v L
0 .9% for the quarter ended March 31, 2020 ( 31, 2020 March ended quarter .9% for the 2 m ћћ 0 o r 2 f
1 s million or $0. million Q g ћ n i 4 million or $0. 3 ќ n њ r a e
t 0 per share in the fourth quarter of 2019. of 2019. quarter 0 in the fourth share per e ћ 40 million, compared with $ 40 million, compared n
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t s N u j
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[ d A n R a 4 million or $0.99 per share in the fourth quarter of 2019. of 2019. quarter in the fourth or $0.99 per share 4 million
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a
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0 r
s e t t 3 million in the fourth quarter of 2019. 3 million in the
0 million or $0. G N u on January 1, 2023. The comparative periods have been adjusted to reflect this change. change. this reflect to been adjusted have periods comparative The 1, 2023. on January earnings measure to reflect management’s view of the operating performance of Lifeco. The measure – base earnings (loss) – is b – is (loss) earnings measure – base The of Lifeco. performance operating of the view management’s to reflect measure earnings I to related changes of accounting implementation of the anticipation in and periods reporting between of results comparability W j t n e Adjustments Adjustments Adjusted net earnings Adjusted net earnings ѝ ќ N ] shareholders. common to Lifeco Attributable i Lifeco 2020, of ] quarter first the MD&A. Effective this of Part B to refer Lifeco; by share” per Earnings “Base as Described ] was Lifeco in of Power Financial ownership average direct The ] below. section See “Adjustments” e O d o E N Ѵ ѵ Ѵ Ѷ _ C on a per share basis, and $ on a per share basis, and $4 $ of earnings adjusted net Contribution to 0.4%, and $ Adjusted and net earnings per share as reported by Lifeco Three months ended per share Adjusted net earnings Adjustments [ [ Three months ended Power Financial’s Contribution to [ Contribution to net earnings of $399 million, compared with $ compared of $399 million, net earnings Contribution to A discussionof the resultsof the Corporation is provided in thesections “Contribution to net earningsand adjusted net below. and “Adjustments” operations”, “Corporate earnings”, CONTRIBUTION TO NET EARNINGS AND ADJUSTED NET EARNINGS LIFECO Contribution P N $0. or $329 million $4 [ on a per share basis, on a per share $0. and $401 million or A 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B17 PPFC_2020_QUAT1_ENG01_PFC.indd B18 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U [ [ [ N A A Three months ended reportedbyLifeco Adjusted andnetearningsas P Referto the “Adjustments” section. [5] [ Ѷ ѵ Ѵ ѷ A N d d O e ] Effective January 1, 2020, asa result of strategic operational changes, Lifeco has divided the previously reported Europe s Described as earnings” “Base by Lifeco, refer toPart Bof this MD&A. ] Attributable toLifeco commonshareholders. ] Described as “items excluded frombase earnings” by Lifeco; refer to PartB of thisMD&A. ] T Canada Actuarial assumption changesandmanagement actions Canada e t j j 1 W Comparative figures have beenreclassified toreflect the new composition of the reportable segments. segments –Europe and Capital andRisk Solutions. Lifeco’s other reportable segments –Canada, United and Lifeco States Corpora u u e ano h ctihFinl rnato Europe Net gainonthe Scottish Friendly transaction Restructuring charges Net chargeonthe revaluation of adeferred taxasset Europe United States ieoCroae Lifeco Corporate Capital andRiskSolutions United States Market-related impacts Lifeco Corporate Capital andRiskSolutions
t _ e s s e E e E a t t A N m e a r R G n d r n
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F n 18 1 n i n n _ I g e t N P g s s POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 t F A
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March ѵѳѵѳ ( ( ѵѳѴ ѴѷѼ Ѷѷѵ Ѵ 5 ѴѴѼ ѴѶѵ ѵ (5 ѶѴ ѼѶ ѼѴ Ѵ 5 ѷѶ 7 Ѵ Ѷ ѵ 7 ѵ 5 ѵ Թ Թ Թ , ()(6) 5 (6) ( ) ( 8 ( ( ) ( (6) ) (78) 8 (6) 8 egment into two separate reporting December ѵѳѴѼ ѴѴ ѶѶ ѴѵѴ Ѵ ѶѴ ѴѼѼ Ѵ ѶѴ ѵ ѶѴ Ѷ ѴѶ ѴѶ ѶѴ 88 57 7 7 7 5 88 8) 6) 7 Ѽ ѷ te –areunchanged. , 657 )( 56 )8 ) 8 March ѵѳѴѼ ѵ Ѵѳ ѴѼѷ ѴѵѼ Ѵ ѵ ѶѴ ѷѴ 57 57 6 8 Ѽ Ѵ Ѵ 5 Ѷ Ѷ ѷ Թ Թ Թ , )
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657 657 )8 )8 5 )( )8 ) , Թ te – are unchanged. te – are unchanged. earnings and 8 ( 6 5 5 8 7 88 ѴѶ ѴѶ Ѵ Ѷ ѴѴ ѶѴ ѴѴѷ Ѵ Ѵѳѳ ѵѶѼ ѴѵѴ ѵѳ ѶѶ Ѵѵ ѴѴ ѵѳѴѼ December nce agreement effective on June on June effective nce agreement 1, gment into two separate reporting reporting separate two into gment 87 ) ( ) ( ( ) 88 ) 6 ( ) ( (6) 5 (6) , Թ Ѷ 5 ѵ Ѷ Ѵ 6 7 Ѵ (8 ( ( 5 Ѵѵ ѷѷ ѼѴ ѴѼ ѼѴ Ѽѷ ѼѶ ѷѵ Ѵ ѶѴ ( ( Ѵѷ Ѵ Ѷѷѵ ѵѳѵѳ March
9 1 0 2
4 Q
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per share in the corresponding period in 2019, anper share in the corresponding period in increase of per share in the corresponding period 2019, a decrease in per share in the corresponding of
9 1 0 њќћ 2 ћћњ
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1 million or $0. Q 9$0. million or 2 per share in the fourth quarter of 2019. the fourth2 per share in quarter per share in the fourth quarter of 2019. quarter in the fourth per share њ њћ ћњќ њњ 9 ѝ
] ѵ [
N O I 13 million or $0. POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T њ 31 million or $0. A ѝ R
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s R n O o per share, compared with $ compared with per share,
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9 per share, compared with $ compared with 9 per share,
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G c t o u Comparative figures have been reclassified to reflect the new composition of the reportable segments. segments. reportable the of composition new the to reflect been reclassified have figures Comparative segments – Europe and Capital and Risk Solutions. Lifeco’s other reportable segments – Canada, United States and Lifeco Corpora States Lifeco and United – Canada, segments reportable other Lifeco’s Solutions. and Risk Capital and – Europe segments 2019. Comparative figures have been adjusted to reflect the current presentation. presentation. current the adjusted to reflect been have figures 2019. Comparative W i j t t њ r n p 43 million or $0. 43 million % on a per share basis, and $ N e ] Effective January 1, 2020, as a result of strategic operational changes, Lifeco has divided the previously reported Europe se Europe ] reported previously the divided has Lifeco changes, operational strategic of result as a 2020, 1, January Effective ] The Reinsured Insurance & Annuity Business unit reflects business transferred to Protective Life under an indemnity reinsura an indemnity under Life to Protective transferred business ] reflects unit Business & Annuity Insurance Reinsured The ] shareholders. common to Lifeco Attributable e e f n O d a a u њ E ћ Ireland Group Customer Corporate Canada Asset Management U.S. Corporate Business & Annuity Insurance Reinsured Ireland Europe Corporate Germany Germany Capital and Risk Solutions Corporate i ѵ Ѷ Ѵ _ [ [ N $342 million or $0.3 $ Reinsurance C Reinsurance L N [ 44. U Financial Services E United Kingdom of 2019, Lifeco’s net business during quarter the second and annuity As a result of the sale of U.S. individual insurance life P by Lifeco as reported segment by Net earnings ended months Three C Individual Customer quarter of 2020 do not include $33 milli for the first from this business, which contributed earnings earnings any adjusted net of 2019. in the first quarter net earnings and adjusted earnings A 1. 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B19 PPFC_2020_QUAT1_ENG01_PFC.indd B20 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U same quarter last year. Thedecrease was primarily due to: in 2019, there were no additional sales, fee and other inco no additionalfee andother there were sales, 2019, in same quarter last year. Thedecrease was primarily due to: the with $91 by$31 compared to decreased million, million March 31,ended 2020 period three-month inthe earnings Net U earnings impact of $31million. and excludedmillion. Adjustme Adjustments, discussed below, of$41 corresponding quarter in2019. Adjustednetearnings inthe Net earnings in thethree-month period E US$2 March ended period three-month the For was there 31, 2020, R US$2 of loss net the in increase The year. last quarter same the in million) (C$4 million US$3 of loss net a with compared US$31 (C$42 was loss million), net million March the 31, 2020, ended period three-month the For A For thethree-monthperiod endedMarch 31, 2020,netearnings F Net earnings in the three-month period ended March 31, 2020decreased by$ U Net earnings in the three-month period ended March 31, 2020decreased by$4 million to$14 G Net earnings inthethree-m I positive earnings impact of $2 and excluded Adjustments of $122 million asdiscussed below. Adjustments inthe corresponding periodin2019 were a corresponding quarter in2019. Adjustednetearnings were $2 millionNet earnings into $1 thethree-month31, 2020 decreased by$132 period ended March C P and unfavourable morbidity experience, partially offset by favourable mortality experience. changes basis liability contract insurance from contributions lower due to primarily was decrease The year. last quarter same US$2 million from the corresponding quarter in2019. in the first quarter of 2020 also includes financing and other expenses of US$ lower net investment income onseed capital driven bythe decline in markets during thefirst quarter of 2020. The net loss businessgrowth andhigher contributionsfrominvestment experience. net by offset partially benefits, withdrawal lifetime guaranteed to related losses ineffectiveness hedge creating volatility (C$ million US$40 Adjustments in the corresponding period in 2019. 2019. in period corresponding the in Adjustments three-monthende period earnings of$ n A i O s U e r A n n N T d o s i 1 i W a N R n e i t I u _ v T n e t E s O i p A E
d driven by equity market impacts. Groupand Health protectionchanges,partially offset bythe insuran from Lower contributions experience; and segregated fund guarantees and their Other market-related impacts,primarily driven by the impact of the eq for products with long-tail cash flows, driven bythe significant equity market decline in the quarter; and Unfavourable contributions from insurance Lower impactLower of new business andunfav d E u A c њ N M
R D P i G u r
C million (C$33 million) for the same quarter last year. Followi year. last quarter same (C$33 the for million million) D a K e a
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s
n
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T B ћ I u O million. s N i n
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ce contract liability liability basis changesce contract rela ended March 31, 2020decreased by$103 ended March related hedging ineffectiveness. contract liability basis changes related to updated economic assumptions ourable investmentourable experience, parti me andnet earnings related to this business unit. three-month period endedMarch 31, 2020were$132 million, ќ 3 millionthe three-month in March period ended 2020, 31, ng the sale, via indemnity reinsurance, to Protective Life Life Protective to reinsurance, indemnity via sale, ng the no earnings impact, compared with net earnings of of earnings net with compared impact, earnings no favourableimpact ofchanges to certain taxestimates nts inthe corresponding period in2019were a positive were US$33 million (C$44 millio uity market declines and volatility in-quarter on ted to equity-release mortgages basisreview ќћ millionto$12milli million to $ to million million to $91 million, co million to$91 ќ ќ million (C$10 million), a decrease ofdecrease a million), (C$10 million million was primarilydue tomarket ally offset by favourable mortality њ ѝ њ ќ 1 million, compared with the the with compared million, 1 millionto wasprimarilydue million, comparednet with million, compared withthe million, compared on, compared with the n), compared with n), comparedwith ќ mpared withthe million inthe 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
5 : 5 9
P M M P
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POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2 0 22020-05-14 5:59 PM 21 A impacts which impacts market impacts market impacts million; 2 million. ќѝ њ million related to legacy blocks of due to unfavourable ћѝ ted to in-quarter market ted to in-quarter million, resulting in a net negative impact net negative a in resulting million, ћ assumption actuarial to which related million ѝѝ ributions from insurance contract liability basis basis liability contract insurance from ributions market-related impacts of $41 million. million. of $41 impacts market-related creased by $21 million to $19 million, compared with the the with compared million, $19 to million creased by $21 ive impact of $4 the equity market declines and volatility and lower interest interest volatility and lower and market declines equity the termination of adjusted net earnings by Lifeco’s management. management. by Lifeco’s earnings net adjusted of termination impacted the value of segregated fund and variableof and fund annuity segregated the value impacted million consist of: of: million consist million) recorded in the Corporate business unit of the U.S. segment; and and segment; U.S. of the unit business Corporate in the million) recorded ѝ ѝ which had a positwhich had te. Of the $149 million total impact, $ million Of the $149 te. million, partially offset by updates to modelling refinements, other economic economic other refinements, to modelling by updates offset million, partially ѝ year. The decrease of $49 million was primarily of $49 million The decrease year. 1 million) on revaluation of a deferred tax asset recorded in the Corporate business unit unit business Corporate in the recorded asset tax of a deferred 1 on revaluation million) of $129 million, offset by negative of $129 million, offset њ
million (US$2 pacts of $149 million. of $149 million. pacts
ћ N S 2020, Lifeco updated economic assumptions rela updated economic assumptions 2020, Lifeco O I ated hedging ineffectiveness, as well as the valuation of insurance contract liabilities which liabilities contract of insurance as the valuation as well ated hedging ineffectiveness, N POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T million in the three-month period ended March 31, 2020, compared with net earnings of of with net earnings 2020, compared 31, March ended period three-month in the million O A I ћ R T O U L P R O O S million on the Scottish Friendly transaction recorded in the Corporate business unit of the Europe d market movements, partially offset by higher cont by higher offset partially movements, d market
C ѝ
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N A d N e n E 2 million on net earnings. earnings. on net 2 million i N . A c I њ
C M n F L F y
a T P
n r A R _ S a d u of the U.S. segment; segment; U.S. of the of $3 charges Restructuring Net gain of $ Net gain Actuarial assumption changes and management actions that had a negative impact of $ impact a negative had that actions and management changes assumption Actuarial Actuarial assumption changes and management actions that had a negative impact of $ impact a negative had that actions management and changes assumption Actuarial During the first quarter of During the first quarter $9 of impact negative a had segregated fund guarantee business. business. guarantee fund segregated of $13 million; impacts market-related Negative of $199 million (US$1 A charge Negative market-related im market-related Negative decline of a impacts unfavourable the reflecting of 2020, first quarter in the were $149 million impacts Market-related marketsin equity and interest rateswhich in-period of $ guarantees, including rel and real esta by equities are supported assumptions and morbidity assumptions assumptions and morbidity assumptions segment. segment. 1 T E I s 0 U n m J G n P a W r i l N D A e e O e E r _ same quarter last year, primarily due to unfavourable equity market impacts related to variable annuity guarantees and and guarantees annuity variable to related impacts market equity unfavourable to due primarily year, last quarter same ineffectiveness. includes related hedging R changes and management actions actions and management changes of $31 Adjustments 2019, of quarter fourth In the C Net earnings in the three-monthperiod ended 2020 31, Marchmillion decreasedmillion, to by $11 compared $94 with the same quarterlast year. The decrease was primarily dueto lowercontributions from insurancecontract liability basis changes, negative reflecting guarantees performance investment with of business block a legacy on liabilities actuarial in an increase These life business. the in experience claims favourable of 2020 and less quarter during the first experience market-related volumes. business and higher business new from impacts favourable by offset partially were decreases A de the in earnings net from excluded are items Adjustments of: consist $201 million of Adjustments of 2020, quarter first In the P I of $1 net loss a was There G 2020 de 31, ended March period three-month the in earnings Net In the first quarter of 2019, Adjustments were a positive earnings impact of $ impact earnings a positive were of 2019, Adjustments first quarter In the $33 million for the same quarter last the same for million $33 The information above has been derived from Lifeco’s interim MD&A; see Part B of this MD&A for additional information on on information additional of this MD&A for B see Part MD&A; interim Lifeco’s from derived been above has information The Lifeco’s results. related to unhedge related to of driven by the impact are primarily impacts Market changes. hedgingrelated ineffectiveness. their and guarantees fund segregated on rates in-quarter 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B21 PPFC_2020_QUAT1_ENG01_PFC.indd B22 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U GWat aaeet Described as“Other items” by IGM, refer to PartCof this MD&A. [5] [ [ [ [ Adjustments Interest expense, incometaxes,preferred share Mackenzie IG WealthManagement ended months Three segmentsasreportedbyIGM Adjusted andnetearningsby [ [ [ Adjustments Adjusted netearnings pershare ended months Three shareasreportedbyIGM Adjusted andnetearningsper [ Contribution to Power Financial’s ended months Three Contribution to Power Financial IGM FINANCIAL P [ [ ѷ Ѷ ѵ Ѵ Ѷ ѵ Ѵ Ѵ Ѷ ѵ A Adjusted netearnings (beforeinterest, income taxes, oprt n te Adjusted netearnings Corporate andother N N O IGMdoes notallocate Adjustments to segments. ] AvailabletoIGMcommon shareholders. ] Interest expense includes interest on long-term debt and interest on leases. ] Non-IFRS financialmeasure described in PartCofthis MD&A. ] Described as“Other items” by IGM, refer to PartCof this MD&A. ] See“Adjustments” section below. ] AvailabletoIGMcommon shareholders. ] The averagedirect ownership Financial ofPower in IGM was ] ] IncludesIGM’s shareofLi Contribution to Power Financial includes adjustments in accordance with IAS39and the allocation ofthe results ofWealthsim ] T dividends andother dutdnterig Adjusted netearnings Adjustments 1 e e W resulted in again in accordance with IAS 39.The contribution toPower Financial was adjusted toinclude the Corporation’s sha the first quarter of2019,IGMattained significant influence ofPersonalCapital, and reclassified its investment fromavailab section. section. contract liabilities,in accordance with the Corporation’s definition ofAdjusted netearnings. Referto the “Non-IFRS Financia preferred share dividends andother) N _ t t E srpre yIM Consolidation entries As reportedbyIGM
e E e e A N t a a R
G e r r
0 n n a F 22 1 i i r _ I n n n N P g g i F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 n A [ [ [ s s C Ѷ ѷ ѵ g
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ћ 2.1% forthe quarter ended March 31,2020 (
(in accordance with IFRS9)
(in accordance withIFRS9)
ћ 1.4% in the corresponding period in 2019). in2019). period corresponding the 1.4% in
March March March ѵѳѵѳ ѵѳѵѳ ѵѳѵѳ ѳ ѳ ѵѶ Ѵ Ѵ Ѵ Ѵѳѳ (75 ѶѴ .68 .68 ѵ Ѷ 7 6 6 ѶѴ ѶѴ Ѽѷ ѼѼ (5 ( 6 Ѷ Ѵ Ѵ 7 6 Ѵ Թ Թ , , , 8)(7 ( ) (87) 7 5 ) (8) ) (7) ( December December December le forsaletoanassociate, which re of this gain. l Measures andPresentation” ple, Portag3 and Portag3 II. In ѵѳѴѼ ѵѳѴѼ ѵѳѴѼ ѳ ѳ ѳ ѴѼѵ ѵѳѴ ѵ ѵѳ ѴѴѳ ѴѴ Ѵѵ t impacts on insurance insurance on impacts t .8 .8 ѶѴ . ѷѳ ѷѵ 88 ѶѴ ѶѴ ѳѷ 6 Ѽ 8 5 ѳ ѷ , , ,
)
)
March March March ѵѳѴѼ ѵѳѴѼ ѵѳѴѼ ѳ ѳ ѴѴѳ Ѵѳ ѴѳѶ Ѵ Ѵ ѵѷѳ Ѵ .7 .7 ѶѴ ѶѴ ѶѴ ѷѴ Ѷ 68 68 6 ѵ 8 ѵ 6 Ѷ ѳ ѳ Թ Թ , , ,
)
22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
5 : 5 9
P M M P
9 5 PART A : 5
POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2 0 22020-05-14 5:59 PM 23 sses on A realized lo , compared with the , compared 31, 2020, compared with the with the 31, 2020, compared million. The increase was primarily primarily was The increase million. ed primarily from the movement of of the movement ed primarily from basis points of average assets under assets of average points basis reverse the impact of the application application of the the impact reverse ћѝ ћ 2. ћ ended March 31, 2020 March ended
9 1 $9 million, primarily due to un due to primarily million, $9 0 2
sed by 1.9 basis points to 102.1 basis points due to a due basis points 102.1 to points 1.9 basis by sed 4 e sales of investment products are capitalized in 2020 2020 in capitalized are products of investment e sales Q
%, as well as one more calendar day in the first quarter quarter first the in day calendar more one as well as %, d њ million, duean to increasetotal in average assets under basis points to 1 to points basis of $10 millionto $3 of $10 n Power Financial has deferred the adoption of IFRS of 9 adoption IFRS and the deferred has Financial Power a њ ќћ
e-month period ended March 9 1 0 2
0 period in 2019, share in the corresponding a decrease per of 2.9% 0 period in 2019, in the corresponding share a decrease per 2.9% of million. Net investment income and other includes investment million. Net investment income 1 ќ ќ ќ Q 3 million. The decrease result
. ќ s v
million in the three-month period, mainly due to a decrease in to mainly due in the three-month period, million 0 њ 2 million to $1 0 ѝ 2
4 million, mainly due to an increase in trailing commissions. trailing commissions. in an increase due to 4 million, mainly 1 ћ Q million or $0. million or $0. nt and advisory nt and advisory fees 3 million in the thre ћѝ ћѝ ќ Financial Instruments. Instruments. Financial n to Power Financial includes adjustments to adjustments includes Financial to Power n 4 per share in the fourth quarter of 2019. of 2019. 4 per quarter share in the fourth 0 per share in the fourth quarter of 2019. of 2019. 0 per quarter in the fourth share million in the three-month period period in the three-month million ѝ ѝ ћ million to $31 million њ
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T
A T R N O %, as well as one more calendar day in the first quarter of 2020, offset by a decline in the effective effective in the by a decline offset of 2020, quarter first the in day calendar more one as well %, as E ќ P . R њ M E O
C G s
, IGM adopted IFRS 9, IFRS adopted , IGM per share, compared with $1 per share, with $1 per share, compared L A g ѝ n A 3 N i ћѝ ћѝ I 2 n A C B r
a
N M d e
E
A
d I t s n H i N . e Z g I T C n n F
L N F i
P d n A E R _ r e due to an increase in average assets under management of 4. of management under assets average in increase an to due management,reflectingand 2019;and changes in product during mix pricing reductions $ by expenses in A decrease of 2020. The average management fee rate decreased by 4. by decreased rate fee management average of 2020. The th of $22 on paid expense commissions commission all as million due to changes in how IG consultant commissions are paid. The decrease in commission expense was partially offset offset was partially expense in commission decrease The paid. are commissions consultant IG in how changes due to in implemented changes compensation to due primarily compensation, in asset-based of $14 million by an increase expenses. non-commission in of $3 million an increase and administration, under assets in increase and the 2020 from fee income to lower distribution due primarily million, to $39 million of $2 income fee distribution in A decrease fees; redemption and lower products insurance $ to million $1 of fees administration in decrease A by offset in part an increase was This fees. administration certain charged not are which products unbundled into assets and management; under assets average from higher resulting in fees million to of $1 and other income A decrease in net investment IG Wealth Management’sequity securities andproprietary mutual funds. An increase in income from manageme income from An increase in An increasemanagement in fee revenue$ of management of An increase in expenses of $3 million to $1 of $3 expenses in An increase returns related to Mackenzie’s investments in proprietary funds; and and funds; proprietary in investments Mackenzie’s related to returns management fee rate. The average management fee rate decrea rate fee management average The fee rate. management and management; under of assets composition in the change fees of $2 million; administration in An increase of $ other and income net investment in A decrease 1 E t K a E 0 s e C
G u W 1 million or $0. 1 million or 1 million or $0. W j t
N A ћ ћ Partially offset by: offset Partially by: offset Partially e O d E G _ of IFRS 9 by IGM. of IFRS 9 by IGM. earnings: net segment’s of each summary a is following The continues to apply IAS 39. The contributio The 39. apply IAS to continues corresponding quarter in 2019, primarily due to: primarily due in 2019, quarter corresponding A Net earnings remained stable at $3 at stable remained M earnings Net on a per share basis, on a per share $0. and $192 million or on a per share basis, and $201 million or $0. 201 1, January On I $1 to million by $10 increased earnings Net P N $1 $1 corresponding quarter in 2019, due to: in 2019, corresponding quarter 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B23 PPFC_2020_QUAT1_ENG01_PFC.indd B24 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U results. The informationabovehasbeenderived from IGM’sinterim MD&A;see Part C of this MD&A formore information on IGM’s Adjustments. exclude anet charge of$9 million inthe fourth quarter of There were no Adju There wereno Adjustmentsitemsfrom net excluded are earningsinth A [ Mackenzie IG WealthManagement (In billions ofdollars) investm Total averagedaily [ Mackenzie IG WealthManagement (In billions ofdollars) Total assets underadministration consist ofassetsin clien [ Mackenzie IG WealthManagement (In billions ofdollars) follows: as were management under assets Total A P M Ѵ Ѵ Ѵ A Corporate andother Total Total Corporate andother Corporate andother Total O S D IncludesInvestment Planning Counsel’s assets under managementle ] Includes Investment Planning Counsel’s assets under administration less an adjustment for assets subadvised by Mackenzie onb ] IncludesInvestment Planning Counsel’s assets under managementle ] T A 1 S W J N _ E U E E A A N T S R G G S T
0
F E 24 M 1 U _ I M N P N E F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A E N C D N N . T i E n C S d T R d I
A
M B L 2
[ [ [ A Ѵ Ѵ Ѵ 4 C ] ] ] stments in thefirstquarter ofand 2020 in the
N O A R P G O E R M ent fundassets under mana A E T N I O T N
A
N D
U N D E R
A D M I N I gement were S e determinatione ofadjustedmanagement.net earningsIGM’s by ss an adjustmentforassetssubadvisedMackenzie by onbehal ss an adjustmentforassetssubadvisedMackenzie by onbehal T t accountst administeredfollows:and wereas byIGM, R A T I O 2019, consisting ofIGM’s proportionate share of Lifeco’s N
A March March corresponding quarter in Adjustednet corresponding 2019. earnings N as follows: as D Ѵ Ѵѷ Ѵ ѵѳѵѳ ѵѳѵѳ ѵѳѵѳ ѴѼ 6 86. 6 8 68.5 6 Ѽѳ 58.5
I 7.5 Ѷ Ѷ Ѵ ѵ Ѷ ѷ ѶѴ ѶѴ Q N . . . . .5 . .5 . ѷ Ѵ ѳ Ѵ Ѽ Ѽ Ѵ Ѵ V , , E S T December December M E Ѵ N 6 ѼѴ 5 Ѽ Ѷ ѷ Q T .5 . . .6 ѴѼѳ Ѵ ѼѼѳ ѳ ѷ
ѵѳѴѼ ѵѳѴѼ F ѵѵ 7 Ѽ 7 ѼѶ 66.8 U ѳ 7. ѳ Ѷ ѶѴ ѶѴ . .7 . . . . N ѵѴ ѵ ѶѼѶ ѵ ѵ ѷѶ , , D
A Ѵ 6 56.8 S Ѵ ѷ S Q . 86 .8 .6 E ѷѼѳ Ѷ March March March T S ehalf ofother segments. Ѵ
ѵѳѴѼ ѵѳѴѼ U 786 ѵѵ 67.8 6 67.8 8 8 6 N ѵ ѳ Ѽ f ofother segments. f ofother segments. ѶѴ ѶѴ .8 .5 . . . . ѳѵѴ ѳ ѷ ѶѶ D Ѵ , , 55.7 E ѳ ѷ Q R . 858. .8 .7 ѵ ѵ
December December Ѵ ѴѷѼ ѴѷѼ ѵѳѴ ѵѳѴ ѵѳѴѼ 86. 8 7 87. ѳ ѵ ѵ Ѷ ѶѴ ѶѴ ѷ Q . . . .7 .7 . . . .7 Ѵ Ѵ Ѵ Ѷ Ѵ Ѷ 8 8 Ѽ ѳ ѵ Ѵ , ,
22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
5 : 5 9
P M M P
9 5 PART A : 5
POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2
) )
, , Թ Թ Թ Թ 0 Թ ѳ 7 Ѽ Ѵ Ѷ 22020-05-14 5:59 PM 6 6 ѵѷ ѴѴ Ѵ Ѽѷ ѼѴ ѶѴ Ѷѷ Ѵѵ ѷ ѷ ѶѴ ѵѳѴѼ ѵѳѴѼ 25 March March A 5 ) 86 )(
) , , Թ Թ 6 Ѷ ѷ Ѵ ѵ 6) ѷ Ѵ 6 Ѵ ѵѵ Ѵ ѶѴ ѵѷ Ѷѵ ѶѴ Ѵѵѵ Ѵ ѴѶѼ ѵѳѴѼ ѵѳѴѼ er IAS 39 as described 39 IAS er below. received from Engie and from Engie Totalreceived December December ) ( ) ) ( ) (7) ) (6 75 ( 5 5 56 ) ( , , Թ Թ ѷ 7 6 5 ѳ 7 Ѷ ѷ Ѵ Ѽ (8 (5 (6 (5 ( Ѵ 6 Ѵ ѴѴ 75 7 78 ѶѴ ѶѴ (7 ѵѳѵѳ ѵѳѵѳ March March million in the fourth quarter of 2019. quarter million in the fourth
ќњ 9 1 0 2
4 Q
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0 2 0 % for the quarter ended March 31, 2020. 31, 2020. March ended quarter % for the (in accordance with IFRS 9) (in accordance with 2 ѝ .
1 ќ Q
N : : O ] I Ѵ [ POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O
] P ѵ [
R . O [2, 3] ќ
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F i
n e r P d
n R _ t r a e Total Parques Total Other Pernod Ricard Ricard Pernod Imerys Imerys Webhelp SGS 1 t e a E e Consolidation entries Consolidation As reported by Pargesa 0
s e million, compared with SF91 million SF in the corresponding period in 2019, and t Dividends: Dividends: N
G Contribution from private equity activities funds private equity and other investment Contribution from
u between 201 between W j t e ћ Share of earnings of: Share of earnings Adjustments Adjustments Adjusted net earnings Adjusted net earnings N ] MD&A. of this in Part D operating income” Described as “Economic ] to Pargesa shareholders. Attributable ] to dividends relating tax authorities French the from taxes to be received of withholding of a reimbursement consists Mainly ] 2 was Pargesa in Financial of Power average ownership The ] und Pargesa for account to adjustment an includes Financial Power to contribution 9. The IFRS adopted not has Corporation The e O d E General expenses and taxes General expenses Adjusted net earnings N ѵ Ѷ Ѵ Ѵ ѵ _ [ [ N SF A SF11 million million, compared with SF94 corresponding period in 2019, and SF139in the of 2019. quarter million in the fourth Adjustments (charges) income Net financial Adjustments [ [ Adjusted and net earnings as reported by Pargesa Three months ended francs) Swiss of millions (In the portfolio to adjusted net earnings Contribution from P PARGESA Financial Power to Contribution Three months ended dollars) of Canadian millions (In Financial’s Power to Contribution [ 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B25 PPFC_2020_QUAT1_ENG01_PFC.indd B26 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U [5] During the first quarter of2020, aninvestment held through private equityfunds, classified asFVPL with in accordance I [6] Pargesa classifies private equity investments at inacc FVPL investments privateequity classifies Pargesa [6] [ [ follows: as declared usually are which investments, non-consolidated its from dividends of Other than the share of earnings ofImerys, Webhelp an [ Reversal ofunrealized onprivateequityfunds and (gains)losses other equityfunds andDisposal ofprivate other Impairment charges Partial disposal of interestinadidas Disposal ofinterestinTotal (In millions dollars) ofCanadian Three months ended transition requirements of IFRS 9required that all unrealized gains and losses at January 1, 201 The investments inprivate equity and other inv OCI. classifiedFVOCI, anelectiveas classificationfor equityinstruments in whichfair value all changes remainpermanentlyin On January 1, 201 Adjustments tothe contributionof Pargesa P classified asavailable forsale remain permanently inequity. Starting January 1, 201 [ to the contributionto the Pargesa of toPower Financial’s earningsin accordance39: withIAS adjustments presents table following The 39. IAS apply to and continues 9 IFRS of adoption the deferred has Financial Power recorded in earnings. ѷ ѵ Ѵ Ѷ A Total Partial disposal of interestinLafargeHolcim O UnderIFRS9,Pargesaclassifies the majority ofits investments in public entities asFVOCI, and asaresultimpairmentchar ] During the first quarter of 2019, aportion ofthe investment in adidas was disposedmillion. of,resulting in again ofSF49 ] During the second quarter of2019, GBL sold its 0. ] During the fourth quarter of 2019, a portion of the investment in LafargeHolcim was disposed of, resulting in again] from the T 1 W of another investment in the amount of$10 million, which resulted from the reversal ofaprevious impairment. gain. Power Financial’s share ofthe realized gain in accordance withIAS 39was million. $10 Aswell, Power Financial recogniz Power Financial recognized impairment charges on the following investments: investments: following on the charges impairment recognized Financial Power IAS 39. does not recognize these unrealized fair value changes in earnings as it continues to classify these private equity funds asav of SF earnings as the investment is classified asFVOCI. Power Financial’s share of the realized gain was $1 $ s Financial’s Power FVOCI. as classified is investment as the its earnings in reflected not was million SF321 of gain Pargesa’s _ Umicore (second andthirdquarters) adidas (second quarter) SGS (firstquarter) LafargeHolcim (second quarter) ќ E 0 million. E the share price decreased to€33.41, resulting in an impairment charge ofSF49 million. Power Financial’s share was $2 LafargeHolcim -TheinvestmentinLafargehasbeen price decreased to €1 GEA – The investment in GEA has been previously impaired, resulting in an adjusted cost of €22. cost an adjusted in resulting impaired, previously been has inGEA Theinvestment – GEA A N R G ћњ
0 F 26 1 million. This gain was not reflected in Pargesa’s earnings as the investment is classified as FVOCI. Power Financial’s share w share Financial’s Power FVOCI. as is classified investment as the earnings Pargesa’s in reflected not was gain This million. _ I N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C N . i n C d d I
A
B ѝ L 2
, Pargesa adopted IFRS 9, [ ѷ 6 C ]
O ѝ R . ќ P 3, resulting in an impairment charge of SF30 million. Power Financial’s share was $13 million. million. $13 was share Financial’s Power million. SF30 of charge in impairment an resulting 3, [ Ѵ O ]
R A T I O [ ѵ N ]
[ њ [ ]
Ѷ ]
ћ % interest in Total through forward salescontracts, which in matured January 2020 and resulted in a gain. previously impair Financial Instruments ordance with IFRS 9,and IFRS recogn with ordance estmentfunds are classifiedfairva as d Parques, a significant portion of Pargesa’snetearnings is composed
ed, resultinginan [ ћ ]
Ontex (secondquarter) GEA (secondquarter) Pernod Ricard(second andfourth quarters) . The majority of its investmentsinpublic entities are adjusted costof€3 izes unrealized changes in fair infair changes unrealized izes ѝ million. њ 0 per share. During the first quarter of 2020, the share
ѝ , subsequent changes infair value are lue throughlue profitloss or (FVPL). The њ . March March ѝ 3 per share. During the first quarter of 2020, ѵѳѵѳ This gain was not reflected in Pargesa’s Pargesa’s in reflected was not gain This ( ѶѴ ѷѳ 75 ѵ ѵѳ 7 FRS 9,wasdisposed of,resulting in a ѝ 5 ѳ ќ Թ Թ , ges are not recognized in earnings. oninvestments previously million. 5 ( ) value in earnings. Power Financial Financial Power in earnings. value ailable for saleinaccordance with reversal of previous impairments impairments previous of reversal December ed its share ofagain onthe sale hare of this realized gain was was gain realized this of hare as $24million. ѵѳѴѼ ѶѴ ѴѼ ѵѷ Թ Թ Թ Թ , )(6) March ѵѳѴѼ ѶѴ Ѵѵ Ѵ 8 Թ Թ Թ Թ , 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
5 : 5 9
P M M P
9 5 PART A : 5
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0 ѵ 22020-05-14 5:59 PM . (5.7) 27 million Change % Change њ A , . ќ ѶѴ ѴѶѵ ѶѶѷ ѷ . . ѵѳѴѼ Ѵ Ѵ March 4 million, primarily due million, comparedmillion, with ѝ ion in the corresponding ion corresponding the in and 201 ћ ћ , sed below, were a charge of a charge were sed below, 67 ѶѴ ѳ ѶѼѳ . . ѵѳѵѳ Ѵ Ѵ market conditions;and March million to SF 1 in period corresponding million in the ѝњ њ
with a charge of SF3 mill of SF3 a charge with on of adjusted net earnings by Pargesa’s management. Pargesa’s management. net earnings by of adjusted on es due to the current es due to the recognized by GBL following the acquisitionof Webhelp, in 2019. Adjustments, discus Adjustments, 2019. in 2 with SF million, compared 4 million and4 million mainly consistedof: ћ ћ million, compared with no significant adjustments in the corresponding corresponding the in adjustments with no significant million, compared quarter corresponding March million at in the nil with compared 31, 2020, њ million relating to costs incurred by Imerys as part of its transformation transformation its as part of by Imerys incurred costs to relating million ѝ ѝ
million relatesto the reimbursement ofwithholding taxes to be receivedfrom ќ
N O
I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T S ded from net earnings in the determinati the in net earnings ded from A E T R A O P R
R E O G C
N L A A 7
I H 2 S C B
C
T
N X d N million was recognized from Total which primarily reflects the impact of the forward sales which matured in which the forward sales reflects the impact of primarily which million was recognized from Total A d E n E
њ i N .
I E C M S F F
G T T P R _ S L A which primarily consisted of GBL’s share of transaction costs to complete the acquisition. Pargesa’s share of non-recurring expenses recorded by Parques of SF22 million; and million; and of SF22 by Parques recorded expenses non-recurring of share Pargesa’s million related to the contributionPargesa’s share of SF11 program and depreciation of non-core assets due to due the assets deconsolidation of of the non-core American talc subsidiaries; North and depreciation program Pargesa’s share of charges of Imerys, Parques and Webhelp. Webhelp. and Imerys, of Parques of charges share Pargesa’s SF2 of charges of Imerys’ share Pargesa’s An increase in dividends of SF11 million to SF to million SF11 of dividends in increase An by SF10 from SGS increased Dividends 2019. impact A negative 2020. interest in in equity increase the to due million of SF January 2020.Other dividends of SF in 2019; the Frenchtax authorities relating to dividends received fromTotal Engie and between 201 at March 31, 2020, primarily due to a decline in Imerys’ revenu in Imerys’ decline a to due 31, 2020,at March primarily of SF Parques from contribution A negative tonegative fair valueadjustments of the non-consolidated funds. A decreasethe in million contributionto SF1 million, from Imerys fromadjusted SF24 to net earnings of SF9 A decrease inthe contribution from privateequity activities andother investment funds of SF 1 E R 0 U U million in the three-month period ended March 31, 2020, compared 31, 2020, March ended period the three-month in million J G E S W њ N Partially offset by: offset Partially E V D O E _ Adjustments in the fourth quarter of 2019 were SF were 2019 of quarter fourth the in Adjustments quarter of 2019, and mainly consisted of: of: consisted and mainly 2019, of quarter A follows: as 2019 were and 31, 2020 March ended periods three-month for the rates exchange average The Euro/SF SF/CAD MD&A for of this D see Part release; press of 2020 first quarter from Pargesa’s been derived has above information The results. on Pargesa’s information additional A are items exclu Adjustments were SF of 2020 quarter first the in Adjustments P R by SF decreased 2020 31, ended March period three-month the in earnings Net the corresponding quarter in 2019. Adjusted netearningsin the three-month period ended March 31, 2020were SF11 million, quarter corresponding in the million with SF94 compared SF quarter in 2019. The decrease in net earnings is mainly due to: due earnings is mainly net in The decrease in 2019. quarter 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B27 PPFC_2020_QUAT1_ENG01_PFC.indd B28 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U oprt prtos above. sections “Adjustments” Pargesa IGM Lifeco, and the to refer information, additional For 2019. of quarter fourth inthe fees, advisor financial and legal to primarily related $9 Reorganization, to the incurred related Corporation The costs of million C [ Corporate operations Pargesa IGM Lifeco ended months Three followingThe tablepresents Corporation’s the shareAdjustments: of ADJUSTMENTS Corporate operations Operating andother expenses Income (loss)from investments ended months Three taxes.income Corporate operations include income (loss) fromin OPERATIONS CORPORATE P Ѵ A
O o ] Includes IGM’s share ofLifeco’s Adjustments forthe impact ofactuarial assumption changes and managementactions and marke cura supincagsadmngmn cin Actuarial assumption changesandmanagement actions T r e hreo h eauto fadfre a se Net chargeonthe revaluation of adeferred taxasset
eraiaincags Reorganization charges Imerys –Impairments, restructuring chargesand other Share ofLifeco’sadjustments Market-related impacts 1 W contract liabilities, in accordance with the Corporation’s definition ofAdjusted netearnings. aqe n te hre Parques andother charges Net gainonthe Scottish Friendly transaction Restructuring charges iacn hre Financing charges prtn xess Depreciation Operating expenses p noetxs Income taxes _ E o E A N r R G a
0 t F 28 e 1 _ I
N P o F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 p A C e N . i r n C a d d t I
i A
o (NOT INCLUDED IN ADJUSTED NETEARNINGS) INADJUSTED (NOT INCLUDED
B L n 2
s 8 C
O R P O R A [ Ѵ T ]
I O N
vestments, operating expenses, financing charges, depreciationand
March March ѵѳѵѳ ѵѳѵѳ ( ( ( ѴѷѴ ѴѶ Ѵѳѳ ( ( ( ( ѶѴ ѶѴ Ѷ Ѷ ѵ ѵѶ ( ( (5 (5 ( ( (7 5 5 5 8 Ѵ Ѵ Ѵ ѷ Թ Թ Թ Թ Թ Թ , , ) ( ( ) ( ) ( ( ) (8) ) (8) ) ( 6 ( ( ) ( ) (5 ) ( ) ( ( ) ( ) ( ) ( ) (6) December December ѵѳѴѼ ѵѳѴѼ ѵ ѵѴѵ ѴѶѶ t impacts on insurance on t impacts ѶѴ ѶѴ ѵѷ ѴѶ ѴѴ ѵѷ Ѷ Ѷѵ ѵ 5 Ѷ Ѽ Ѽ ѵ ( 8) ( Ѵ ѷ 7) Թ , , ) ) ) ) )( )6 ) )6 ) )( )88 ) )(5) ( March March ѵѳѴѼ ѵѳѴѼ ѶѴ ѶѴ ѵ ѵ ѵѼ ѴѼ 5) ѵ ѵ ѵ ѳ 8) ѷ Ѵ Թ Թ Թ Թ Թ Թ Թ Թ , , ) ) ) )
22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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9 5 PART A : 5
POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2 , Թ Թ 0 8 ѵ ѵ ѳ ѷ 7 5 7 7 8 ѵ ѳ ѵ 22020-05-14 5:59 PM 85 ѳ Ѽ Ѵѵ Ѵѷ 7 7 5 Ѷѳ 5 7 77 7 ѶѴ Ѽѷ ѵ Ѵ ѼѴѷ ѵ Ѽ ѼѴѳ ѵѼ Ѽ ѷѵ ѵѷ ѳѵѵ Ѷ Ѵ ѳѵѵ Ѷ ,7 , ,8 ,7 , , ,8 , , , , , ѵѳѴѼ 5, 7, 6, Ѷ 8,7 5, Ѽ 6, 8, ѵ Ѵ Ѵ 7,66 Ѵ ѵѳ ѴѶ Ѵ Ѵ Ѵѵ ѶѶ 7 7 76, 7 29 Ѵ ѵѶѴ ѷ Ѵ ѵѶѴ ѷѶ ѷ A December
, Թ Թ ѵ 6 6 ѳ 5 8 5 7 Ѵ 8 Ѽ 7 Ѽ 8 ѵѼ Ѷѳ 8 7 ѷѵ ѶѴ ѵ ѷѳ ѳѵ ѶѶ ѷѼ ѳѵ ѳѴ Ѷѳѷ ѷ ѵѳ Ѷѷ ѵѵѶ Ѷ ѵѵѶ , , , , , , ,8 ,767 ,577 ,577 ,7 ѵѳѵѳ Power Financial Power 5, 6,55 8, 7, Ѷ Ѵ 8,58 5, 6,7 8, ѵ ѵ ѵѴ Ѵ Ѵѳ Ѵ Ѵ ѴѶ Ѷѷ 7 57, 78, 57, Ѵ ѵѴѵ ѷ Ѵ ѵѴѵ ѷѵѵ ѷ March Consolidated balance sheets balance sheets Consolidated althsimple and Koho. ) ) )
)
) ) ]
Թ Թ Թ Թ Թ Թ Թ Ѽ Ѷ ѳ ѵ Ѽ ) Ѵ [ 5 Ѷ Ѵ 5 7 7 7 Ѽ ѵѷ 55) 55) Ѵѷ 6 68) 68) ѷ Ѽ 55) 55) ѵ Ѷ Ѽ Ѷѳ Ѵ ѳ , , ,7 Ѽ 5, 7,77 6, Ѷ ѵ 5, 6, ѵ Ѵ Ѵ Ѵѳ Ѵ Ѵ and other other and adjustments ( ( (7 6 ( 8 (
( (
as consolidation entries. entries. as consolidation 5 7 8 786 786 (8 ( Ѷ Թ Թ Թ Թ Թ Թ Թ Թ Թ 7 ( ѳ ѵ Ѷ ѷѵ ѷѵ ѵѼ 8 Ѽѳ ѳѼ ѶѷѶ Ѵѳѳ ѵѶѶ ѼѴѴ ,6 , , , ,6 Ѽѳ ѼѴѴ ,66 ѳ , ,7 ѷ ѵ 5,55 Ѵ ѷ ѵ ѵ Ѵ 5,55 Ѵѳ Ѵ Ѵ 7,
6,7
8
ѵ Թ Թ Թ ѷ ѳ 5 Ѽ ѳ ѵ 5 7 ѳѼ 6 Ѵѵ 7 85 Ѵѵ 5 ѵѵѴ Ѵѷ Ѷ ѳѶѼ ѷѷѴ ѷ ѼѳѶ ,7 , , ѼѼѼ ѳѵ Ѷ , , ,577 ,577 ѵ Ѷ ѼѳѶ , ,5 ,7 6, ѷ 6, Lifeco IGM Consolidation ѵ 65,5 ѵѳ ѵ 6, ѵ ѵѴ 78, ѴѶ Ѵѵ Ѵ ѷѴѳ ѷѶ ѵѴѵ Ѵ ѵѴѵ ѷѶ
6,
6 8,58 6,6
7 ѳ Ѵ
5 Թ Թ Թ Թ Թ Թ Թ Թ Թ 5 Ѵ 6 5 7 5,6 77 77 ѷ ѵѵ II, Wealthsimple and Koho, as well and Koho, as II, Wealthsimple
6 ѴѶ ѵѵ ѴѼѷ Ѷѷ ѵ Ѷѳ Ѵ , ,7 ѵѼ Ѵѵѳ Ѵ ѷѳ ѳѵ , ,8 , ,7 8, ,8 , Power ѵ Ѷ Ѵ ѵ Ѵ ѵѴ ѵѴ Ѵѷ ѵѴ Financial (CONDENSED)
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R
O P and other includes Portag3, Portag3 Portag3 includes Portag3, and other [3, 4] [3, 4] R O C
L
A 9 I 2 C B
N d A d
n i N . I
C
F F
[2] s P e R _ i
t 1 E y s i 0 l t t i i policyholders policyholders account of segregated fund policyholders account of segregated fund policyholders G e Other W b u s N Lifeco Lifeco IGM Parjointco ] Consolidation adjustments ] Consolidation a O s Funds held by ceding insurers Funds held by ceding insurers Investments Investments Goodwill Other liabilities Reinsurance assets Common shareholders’ equity equity Common shareholders’ Debentures and other debt instruments other debt instruments Debentures and Investments on account of segregated fund Investments on account of segregated q Insurance and investment contracts on contracts investment Insurance and Non-controlling interests Intangible assets Other assets Total equity Investment in: Investment in: Obligations to securitization entities Obligations to securitization entities Total assets Total liabilities 5 E i Ѵ _ [2] Includes investment in jointly controlled corporations associates. and [3] Lifeco’s non-controlling interests include the Participating Account surplus in subsidiaries. [4] We IGM, of Lifeco, equity the in interests non-controlling represent adjustments consolidation in interests Non-controlling E shares preferred Perpetual Total liabilities and equity [ L liabilities contract investment Insurance and A equivalents Cash and cash P PositionFinancial CONSOLIDATED BALANCE SHEETS presented are sheet balance non-consolidated Financial’s Power and and IGM, Lifeco of sheets balance condensed The below. Thistable reconcilesthe non-consolidated balance sheet,which is notaccordance in with IFRS, withthecondensed 31, at 2020. March of Corporation the sheet balance consolidated 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B29 PPFC_2020_QUAT1_ENG01_PFC.indd B30 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U [ Total liabilitiesandequity Perpetual preferred shares E L Cash andcash equivalents A assist the reader byidentifying changes in Power Financial’s non-consolidated balance sheets. and the MD&A enhance IFRS, with in accordance not are which sheets, balance non-consolidated These method. equity the using Corporation the by presented IGM and are Lifeco below, shown presentation of basis non-consolidated the In SHEETS BALANCE NON-CONSOLIDATED $4 to decreased Corporation the of assets Total P Parts B and C of this MD&Athisinclude PartsB andCof discussion a the consolidatedbalance of sheets ofIGM,Lifecorespectively. and Liabilities decreased to$422. 2019, primarily due to the impact partia movement, market of [3] Other liabilities at December 31, 2019 include the fourth quarter dividend of $33 of dividend quarter fourth the include 2019 31, at December liabilities Other [3] [ the following, as disclosed by Lifeco: byLifeco: disclosed as following, the Ѵ ѵ A i Total equity Debentures Other assets Investments Common shareholders’ equity Total liabilities Other liabilities Total assets q s O a Cash equivalents include $1 ] Includes Power Financial’s investments in Portag3, Portag3 II, Wealthsimple and Koho presented using the equity method. ] T s Other Parjointco IGM Lifeco u b 1 W with IFRS, these areclassified asinvestments in the Consolidated Financial Statements. e _ i i t t l E i s y E t Other general fundliabilities, includedinotherliabilities, increased by$1.1 billion, primarilydue to an increase in adjustments. against Britishdollar the euro, dollar pound, andthe impact and U.S. and investmentInsurance contractliabilitiesbillion,primarilydue totheincreased weakeningthe by $2.2 Canadian of derivative financial instruments, partially offset by lower accounts payable. payable. accounts lower by offset partially instruments, financial derivative currency movement of $ $2 of income investment and losses value market net of impact the to due Insurance andinvestment contracts onaccount ofsegregated fundpolicyholders decreased by$1 A N
i R e G [2] s
0
F
30 1 _ I N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C N . i [ n Ѷ C d ] d I
A
B L 3
0 C O R P ќћ [ Ѵ O ]
million ($200 million at December 31, 2019) of fixedmillion income securities atDecembermillion with ($200 maturities ofmore than three months. In accordanc R A ќ T ќ billion at March 31, 2020,compared with $43 I O .0 billion. N
њќ .2 billion atMarch 31, 2020,compared with $4 lly offset by the impact bytheimpact lly offset ќ million declared by the Corporation and paid onJanuary 31,2020. ќ . of business,of partiall new ќ billion at December 31, 2019,mainlydueto
њ .3 billion, partially offset bythe impact of of currency movement. movement. of currency
ќ 1.4 billion atDecember 31, March March y offset by fair value value fair by y offset ѵѴ ѵѴ Ѵ ѵѴ Ѵѷ ѝ ѵ Ѷ ѵ Ѵ 8, ѵѳѵѳ .4 billion,primarily ,8 , ,8 , ,7 , ,7 , Ѵ Ѷѷ Ѵ ѷѳ ѳѵ 5 ѵѼ ѵ ѴѵѴ ѴѼѷ ѶѴ Ѷѳ ѴѶ ѵѵ 77 ѵѵ 6 ѷ 5 7 Ѵ 6 7 5 5 ѳ , 875 6 December ѵѴ ѵѳ Ѵ ѵѴ ѴѶ ѵ Ѷ ѵ Ѵ 7, ѵѳѴѼ ,8 , ,7 , ,6 ,8 ,6 ,65 Ѽ ѵ ѴѶ ѵѳѶ Ѽ ѳѵѴ ѶѴ 5 Ѷѳ ѵѳ Ѽѳ Ѵ Ѽѳ 85 5 ѵ 5 ѳ 8 ѷ ѷ 5 e , 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2 ) ) ) 0 6 8 8 ѳ 22020-05-14 5:59 PM ѷѳ ѵ 55 Ѵ 8 ( 5 ѴѷѴ Ѷ Ѷѵ Ѷ Total , , ( ( 31 ѵѳ ѵѳ A ) ) Թ Թ Ѵ Ѽ 6 ѷ 6 ( 7 ѵ 5 Ѽ ѷѳ , , (6 Ѷ Ѷ Parjointco assets and amounted to and amounted assets to the Corporation’s 2019 2019 Corporation’s to the ѝ million. Dividends declared in њ ) ) ) Ѵ Ѷ Ѷ ( (5 8 ѼѼ ѴѶ ѵѳ (8 IGM ,8 ,7 ѵ ѵ million at March 31, 2020,31, compared with atmillion March ќ ) ) ) 0 are included in other 0 are included 7 Ѽ ѵ ѵ 5 Ѵ ѷ million at December 31, 2019: million at 6 7 Ѵ 6 ( 56 Ѷ ѵ ѴѶ Ѵ ѝ , ,65 ative Fixed Rate First Preferred Shares, two series of of series two Shares, Preferred First Rate Fixed ative ( ( Lifeco Ѵѷ ѴѶ , IGM and Parjointco, accountedusing for the equitymethod, 30 at March million 31, 2020 (same as at December 31, 2019). All ѝ
N , 2020 are included in other liabilities and amounted to to and are $3 amounted other liabilities in 2020 included ,
O њ I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R ѵѳѵѳ , O P ѶѴ R O 0 million at March 31, 2020, compared with $20,32 compared 2020, 31, March at 0 million C
ѝ -Year Rate Reset First Preferred Shares, and two series of Floating Rate First Preferred Shares, one of which which of one Shares, Preferred First Rate of Floating series and two Shares, Preferred Reset First Rate -Year L њ A 1 I 3 C B
N d A d n i N . I C F F
P R _ 1 E Share of adjustments Share of adjustments (loss) income Share of other comprehensive Dividends Other 0 Share of adjusted net earnings net earnings Share of adjusted G W 3 million (see “Non-consolidated Statements of Cash Flows” below for details). details). for below Flows” Cash of Statements “Non-consolidated (see 3 million N O ѝ Carrying value, at March value, at Carrying E _ is Non-Cumulative, with an aggregate stated capital of $2, capital stated aggregate an with is Non-Cumulative, specified from option Corporation’s at the solely in part or in whole are redeemable and shares preferred perpetual are series dates. The terms and conditionsof the outstanding FirstPreferred Sharesare described in Note 1 the first quarter by IGM and received by the Corporation on April 30, 202 30, on April Corporation by the received by IGM and first quarter the increased to $20,3 Non-Cumul of 11 series of consist Corporation of the shares Preferred Non-Cumulative Statements. Financial Consolidated The carrying valueofFinancial’s Power investments in Lifeco beginning of the year the value, at Carrying EQUITY shares Preferred P cash equivalentsCash and amounted $1,02 to cash Cash and held by Power equivalents Financial in the Shares Preferred First on its Corporation the by declared The 2019. dividends end of December at the million $1,021 1 on May paid and first quarter $ Parjointco and Investments in Lifeco, IGM 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B31 PPFC_2020_QUAT1_ENG01_PFC.indd B32 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U SIB overthe statedSIB capital of$1. at a purchase price of$33.00 per common share for an aggregate amount of $1. On April 1 of $ Corporation issued and subsequently cancelled 4 cancelled and subsequently issued Corporation substantial issuer bid (PFC SIB offer), which the Corporation also offered toother shareholders, pursuant to which the Power Corporation effectedits tenderoffer through aQualifying Power Corporation, the parent company of interests. non-controlling in decrease corresponding a with reserve income outstanding to purchase common shares of the Corporation. Corporation. the of shares common topurchase outstanding acquire Subordinate Voting Shares of Power Corporation. As such, at the date of thisMD&A, there were no options outstanding atFebruary 13,202 result, the Corporation’s equityinterest decreased from Reorganization. 31, 2019. All of theDecember common shares ofthe Corporation are held byPower Corporation since the completion of the connection with the PFC SIB of$ ownership in Lifeco resulted inadilution gain of $10 On April 1 Substantial issuerbids assu theReorganization,Power Corporation of As part S were there MD&A, of this date the At number ofcommon shares Outstanding 2019. $2 was Corporation the of share common per value book The Common shareholders’ equity, at March31 Changes inreserves Changes inretained earnings Common shareholders’ equity, at thebeginning oftheyear Three months ended March Common shareholders’ equity was $1 equity Common shareholders’ P common shares at a purchase price of $33. A T O T Other comprehensive income (loss) O 1 W Share-based compensation, including theeffect of subsidiaries Effects ofchanges ofsubsidiaries, and incapital andownership other Dividends declared Net earnings before dividends on perpetualpreferred shares _ C њњћ E E K A N Share of Pargesa andotherassociates Actuarial gains(losses) ondefined benefitplans Investment revaluation andcash flowhedges Foreign currency translationadjustments R
G O
0 million and a corresponding decrease in retained earnings, with no impact toequity. F 32 1 P _ I ќ T ќ N P I , 2019, the Corporation completed the PFC SIB and purchased for cancellation 49,999,9 for cancellation SIBandpurchased PFC the completed Corporation , 2019,the F , 2019, Lifeco , 2019,Lifeco completed issuer bida substantial SIB) (Lifeco cancellation and purchasedfor POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 O A C N N . i n C d P d I L
A
A B L 3 N
2 C
ѶѴ O
R P O R A T I O њњ N 0 underPower Financial’s Emplo њ million were recorded inretained earnings. billion wasrecognized asareductionretained to earnings. Transactioncostsincurred in
ѝ ,34 ћћ ќ the Corporation, participated inthe Corpor million atMarch 31,2020, compared with $1 њ 4,09 0 commonper share. The Corporation participatedLifecoin the SIB andas a ћ ћќ , њ 0 , ѝ ћ 39,29 common shares of the Corporation outstanding, the same as at same as the outstanding, Corporation the of shares common ѝ med the Corporation’s stock option plan. The 13,0 The optionplan. stock med theCorporation’s mlin recorded million ћќ ћ . common shares. This resulted in a net increase in stated capital capital instated increase in net a resulted This shares. common ѝ % to ќ . ћ 3 at March 3 atMarch 31, 2020, compared with $2 yee Stock Option Planwere ћћ Holdco Alternative, as described inthe Corporation’s . ѝ % (excluding IGM’s4.0%interest).Thedecreasein in retained earnings and othercomprehensive
ћњ billion. The excess paid under the PFC ation’s substantial ќ ,9 ѝњ million at December 31, 2019: millionatDecember31,2019: exchanged foroptions to ќ Ѵ Ѵ 3 ofits common shares 8, 7, ѵѳѵѳ (588 Ѷѷ Ѽ ѵѳ ѷ ѶѶѴ Ѷ ( (5 ( 85 Ѵ Ѷ ѶѴ 8 6 7 issuer bid (PFC SIB). issuer bid(PFC 6 Ѷ ѷ 6 ѷ 5 ѵ ќ ) ) (8 ) 5 ( (6 ) ( 57 .0 њ 9, ќ ѝ 9, ќ attheend of 00,9 ѝѝѝ options ќ 4 ofits Ѵ Ѵ 8, 8,67 ѵѳѴѼ ѴѶѶ ѵ ѴѶѳ Ѵѷ Ѷ Ѽ ѴѴ 8 6 5 ѳ ѳ ѵ 8 Ѷ ѳ Ѵ ѳ Ѵ ) ) ) )
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POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2
0 5 8 ѳ 5 22020-05-14 5:59 PM 5 ѳ 5 ѵ Ѷѳ ѳ 7 75 Ѷѳ ѷѴ Ѵ .86 .4% ѳѵѴ ѴѶ ѵ , ,8 ,7 ѶѶѳ ѷ Ѵ ѵѳѴѼ ,6 , ,5 value ѝ , Ѵ ѵ Ѷ 6, ѵ ѶѼ 33 ѵѳ ѵ Ѷѳ ѶѴ Net asset A 6 ) ber 31, 2019). ber 31, Թ Թ Թ Թ Թ Թ 5 5,5 7 December 76 76 Ѽ 85 85 85 85 Ѽ ѷ ѷѴѶ Ѵѵ ѷ ,7 , ѵ Ѵ Fair value adjustment at December 31, 2019, 2019, 31, at December 6, ( 8, ѝћ ѷ 5 8 ѷ 8 ѳ 5 Ѽѳ 858, ѳ 5 ѵ ѵѳ Ѷѳ ѳ 5 Ѽ Ѽ ѵѳѶ ѳѵѴ ѴѶ ѵ ,65 ,6 ,7 , , ,8 ,7 7. 7, ѵ Ѷ Ѵ ѵ Ѷ ѵ ѴѶ ѵѴ Ѵ balance sheetbalance ments would result result in a change ments would in the Non-consolidated Non-consolidated
6 8 ѳ 5 ѷ 8 7 Ѽ Ѵ 6 5 78 75 5 Ѷѳ Ѷ . Ѷѵ ѴѵѴ ѵ ѵѼ Ѷ ѷ ѵѴ ѳѵ ѳ ѵѵ , , , , , ,8 8 value ѵѳѵѳ , 8,85 5, Ѷ Ѷ ѵ Ѵ ѵ ѵ Ѵ Ѵ ѵѵ ѶѴ Net asset March
) Թ Թ Թ Թ Թ Թ 7 ѳѷ ѷѴ ѳѷ 88 5 ѼѴ 6 ѴѶѷ 5 Ѵ , Ѵ ( .0% of the total assets at fair value at March 31, 2020 (9 2020 31, at March value at fair assets total .0% of the Fair value ѝ adjustment
t ѳ 5 6 7 Ѷ 7 Ѵ 5 6 ѵѵ 75 ѴѶ Ѷѳ 6 . .39 at March 31, 2020, compared with $39. 31, 2020, compared at .39 March ѴѼѷ ѴѵѴ ѵ ѵѼ Ѷ ѷѳ ѳѵ Ѷѷ Ѵ , ,7 , ,8 , , ,8 7 ѝ 8, Ѷ ѵ Ѷ Ѵ ѵ ѵ Ѵ Ѵѷ ѵѴ balance shee balance market value of publicly traded invest traded value of market publicly Non-consolidated
million or $3.12 per share. in subsidiaries, jointly controlled corporations associatesat fair value is not jointly and in in subsidiaries, ќњ
N %. O I ѝ . POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T ѝ A
R s investments e O r P a A 10% change in the h R s
O d C
e r L r A e 3 f I 3 e C B r
N
p ]
d 3 million of dividends declared in the first quarter by IGM and received by the Corporation on April 30, 2020 (same as at Decem as at (same 2020 30, April on Corporation the by received and IGM by quarter first the in declared of dividends 3 million ѵ A d [
d ѝ n i N n . I a C
F ] F
s e e Ѵ P [ r
e u R _ i l
a t 1 E s i a Investments in private entities are valued at fair value based on management’s estimate using consistently applied applied consistently using estimate on management’s based value fair at valued are entities private in Investments by are prepared valuations Certain flows. cash discounted or multiple on a valuation based either models valuation external valuatorsor subject to reviewbyexternal valuators. Market-comparabletransactions aregenerally used to corroborate the estimated fair value.The valueof investments in private entities is presentednet ofany management incentives; or interest carried of net is which fund by the reported value fair at the valued are funds investment in Investments incentives. other Investments in publicly traded companies are valued at their market value, measured as the closing share price on the the on price share closing the as measured value, market their at valued are companies traded publicly in Investments date; reporting 0 h l t v i s
G Net asset value
e W t b r s Other IGM Parjointco Parjointco Lifeco Lifeco N ] Koho. and Wealthsimple Portag3 II, Portag3, in investments Financial’s Power to related is value adjustment Fair $ ] Includes e a O s e Other assets shares Total liabilities and preferred Total assets Other liabilities Other liabilities Perpetual preferred shares shares preferred Perpetual E i Common shareholders’ equity / equity Common shareholders’ Debentures Cash and cash equivalents equivalents Cash and cash Ѵ ѵ _ representing a decrease of 2 of a decrease representing The presentation of the of presentation The accordance with IFRS; net asset value is a non-IFRS financial measure. $2 was per share value asset net Corporation’s The [ [ 9 represent and cash value market at measured Investments 31, 2019). at December L N P A Investments of $2,0 value asset net Corporation’s P Net Asset Value Corporation. the of equity shareholders’ common the of value fair of the estimate management’s represents value asset Net Net asset value is the fair value of the assets of Power Financial’s non-consolidated balancesheet less its net debt and and corporations controlled jointly subsidiaries, in investments assets, of value fair the determining In shares. preferred as follows: value fair to adjusted are associates 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B33 PPFC_2020_QUAT1_ENG01_PFC.indd B34 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U Parts B and C of thisMD&A include a discussion of the cash flows of Lifeco and IGM, respectively. corresponding period in2019. inflow of $24 million in the three-month period ended March 31 The Corporation decreased its level of fixed income securities with maturities of morethanthree months, resulting in anet 2020, compared with a net outflow of$11 ahfosfo: Cash flows from investing activities resulted in a net outflow of $ with a net inflow of$ Operating activities produced anet inflow of$1,9 $4 of anincrease with compared Consolidated cashand [ atthebeginning oftheyear Cash andcash equivalents, Cash flowsfrom: Three months ended March The condensed cashfl FLOWS OF CASH STATEMENTS CONSOLIDATED Cash Flows P consolidated statement of cash flows of the Corporat condensed the to IFRS, with in accordance not is which flows, cash of statement non-consolidated the reconciles table period ended March 31,2020,compar dividendsand in paidbysubsidiariesnon-controlling to Cash flowsfromfinancing activities, which include dividends paid on the Ѵ A nrae(erae ncs n aheuvlns 6 Increase (decrease) andcash equivalents incash andcashequivalents ratesoncash Effect ofchangesinexchange Cash andcash equivalents, atMarch O ] Consolidationadjustments andother in T Operating activities 1 W iacn ciiis ( Financing activities Investing activities _ E E A N R G
0 F 34 1 _ I N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C N . i n C d d I
A
B L 3
4 C O ќ ѶѴ R 9 ows of LifecoandIGM, and Power Financial’s non-cons ћ P
million in the corresponding period in2019. period millioninthecorresponding O R A T equivalents increasedby$1,010 periodthree-month ended March millionthe in 2020, 31, I O N cludes Portag3, Portag3 II,WealthsimpleandKoho,aswell as consolidation entries. ќ ѶѴ 0 million inthe corresponding period in2019.
ed with a net outflow of $1 a netoutflow ed with of ќ millioninthe corresponding period in2019. Financial ѝ Ѵ Power Power 4 million in the three-month period ended March 31, 2020, compared (CONDENSED) Ѵ , ѳѵѴ Ѷѷѷ , ѶѶ ѳѵ ion for the three-monthion for period endedMarch2020. 31, terests, represented Թ Թ )( 8) 7 5,6
(7 ѷ Ѵ ieoIMConsolidation IGM Lifeco Ѵ ,6 , ѼѶѳ ѵ ћ , ѷ ѳѳ ѵ
, 2020, compared with anet outflow of$1 million inthe 55 ѴѴ 1 millionin the corresponding period in2019. њ Ѷ 7 ( 67) 8 7 09 in thethree-monthmillion periodended March 31, 7 ( 5 7
) commonCorporation,preferred sharesof andthe a net outflow of $ a netoutflow of ѴѼѶ ѵѼѷ olidated cash flows,are ѵѳ Ѽѳ ѴѴ ѳѼ Թ ( (
) )8 (8 adjustments and other Ѷ ќ Ѷ Ѽ 8 20 millionin the three-month 20 7 7) 7) ѳ Ѽ [ Ѽ Ѽ Ѵ ) Թ
]
) presented below. Thispresented below. 7, 6, Ѵ Ѵ Power Financial ѵѳѵѳ (5 (7 , , ѵ ѵ ѳѴѳ Ѽ ѵ Consolidated 8 7 8 ѳѼ ѵѳ 55 ѵ ѵ ѷ 6, 5,6 ( )( )( 7 ѵѳѴѼ ѳѼѷ ѷ ѴѴ Ѵ ѵѷ ѷ Ѽ 7 6 6 ѳ 8) 7) Ѵ ) 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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) ) ) ) 0 Թ Ѷ ѳ 5) ѷ 5 22020-05-14 5:59 PM 77 6 ѵѳ Ѷ per ѵ Ѷ Ѷѷѳ ѶѳѼ Ѷѷѷ ѳѵ ѳѵѴ , , ,032. ѵѳѴѼ њ ѝ Ѵ Ѵ 2 35 %, to be њћ ќ A .4% or 49,31 million in the ќ 8 ) ( ) ( ) ( ) ) ( ( ќќ 6 Ѵ Ѷ 5 ѵ 8 7 ( 7 55 8 ѴѴ Ѷ ( ( ѵ Ѷ Ѷѷѷ Ѷѳѵ ѶѶ ѳѵѴ ѳѵ , , ( ( ѵѳѵѳ Ѵ Ѵ creased by by creased the parent company.
million, compared with $344 million in with $344 million, compared ќ 2 million, with $2 compared million, 2 Power Financial, Power Financial,
ќ in 2019, representing an increase of 2. increase an in 2019, representing million in the three-month period ended March ended March period million in the three-month 31, њћ ћ -month period ended March March were $0. 31, 2020 ended period -month ows are primarily comprised of dividends received of from received dividends comprised Lifeco, primarily ows are ng the three-month period ended March 31, 2020, the same as as in 31, same 2020, the March ended period ng three-month the lion in the corresponding period in 2019, and included: included: period in 2019, and corresponding lion in the 3 million, the same as in the corresponding period in 2019. in period the corresponding in as same the 3 million, ѝ per share, comparedwith $0.4330 per sharethe in corresponding period њњњ e reader as they isolate the cash flows of the cash flows as they isolate e reader
N Ѵ a net inflow of $344 million in the three-month period ended March 31, 2020, compared 31, 2020, compared March period ended million in the three-month net inflow of $344 a 3 per bearer3 share, comparedwith SF2. Ѷ O
I ћ h POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T c r A a R M
O t P a
, R
s t O n ѶѴ C e l
a L
v
i s A s 5 I u e 3 e i i q C B t t
i e i
N v v i d i 0 per share, compared with $0.4130 in the corresponding period in 2019. In the three-month period ended ended period three-month the in 2019. In period corresponding in the with $0.4130 compared per share, 0 h t A t d s ѝ c n c a i N . a a c I
]
C Ѵ F g F d g [
P n n n i R _ i a t Pargesa declares and pays an annual dividend in the second quarter. The board of directors of Pargesa approved a approved of Pargesa of directors board The quarter. second in the dividend annual an and pays declares Pargesa of 2020dividend in SF2. share, the same as in the corresponding period in 2019. In the three-month period ended March 31, 2020, the the 31, 2020, March ended period the three-month In 2019. in period the corresponding as in same the share, of $ from IGM dividends received Corporation in 2019. corresponding period in 2019. in 2019. period corresponding three during the shares common by IGM on its Dividends paid Dividends paid by Lifeco on its common shares during the three-month period ended March 31, 2020 were Dividendspaid by Lifecoon its common shares during the three-monthperiod ended March $0.43 March 31, 2020, the Corporation received dividends from Lifeco of Lifeco $2 dividends from Corporation received the 31, 2020, March paidon May 19, 2020. $33 of Corporation the by shares common and preferred on paid Dividends the on paid 2020, dividends 31, March ended period three-month the In 2019. in period corresponding the $0.4 were shares common Corporation’s
1 million, compared with of a with outflow $344 net million, compared mil c E a 0 h r n ѝ Lifeco IGM s G W e a a N ] de Financial Power by held shares number of the of 2019, quarter second the in SIB Lifeco the in participated Corporation The n p O E Dividends paid on common shares on common shares Dividends paid C Other i Ѵ _ the corresponding period in 2019. 2019. in period corresponding the The Corporation did not have any investing activities duri activities any investing not have did Corporation The IGM and Parjointco and income (loss) from cash and cash equivalents, less operating expenses, financing charges, income income charges, financing expenses, operating less equivalents, cash and cash from (loss) and income Parjointco IGM and and common and taxes, share dividends. preferred with accordance in presented not are which Corporation, of the flows cash of statements non-consolidated following The th to assist IFRS, have been prepared Increase (decrease) in cash and cash equivalents equivalents in cash and cash Increase (decrease) at equivalents, year the beginning of the Cash and cash [ by $ increased equivalents basis, cash and cash On a non-consolidated O Dividends items net of non-cash Corporate operations, F shares on perpetual preferred Dividends paid P NON-CONSOLIDATED STATEMENTS OF CASH FLOWS fl cash corporate company, holding a is Financial As Power March ended months Three 2020, compared with a decrease of $4 million in the corresponding period in 2019. in 2019. period corresponding the in of $4 million a decrease with compared 2020, in resulted activities Operating innet inflow of $340with the million a corresponding period in 2019. The Corporation’s financing activities during the three-month period ended March 31, 2020 were a net outflow of of outflow net a were 31, 2020 ended March period three-month the during activities financing Corporation’s The $33 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B35 PPFC_2020_QUAT1_ENG01_PFC.indd B36 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U subsidiaries, as well as subsidiaries, as repurchaseof common shares,perpetual preferredshares and Board ofDirectors of the Corporation reviews and approves capital transactions such as the issuance, redemption and responsible for establishing capital management procedures and The Board of Directors of the Corporation isresponsible for capital management. Management ofthe Corporation is capital. issue or shareholders to capital to maintain or adjust its capital structure, the Corporation may adjust the amount of dividends paidto shareholders, return capital. permanent of source effective common shareholders’ equity, andnon-controlling interests. The Corporation viewsperpetual preferred shares asacost- term nature of itsinvestments. The capital structure of the Corporation consists of: debentures, perpetual preferred shares, long- the matching ispermanent, capital Corporation’s the instruments, debt other and debentures of exception the With management. managesitsca The Corporation Financial’s objectives in managing its capital are to: to: are capital its inmanaging objectives Financial’s Corporation. The Corporation’s preferred shares and debt the of shares common outstanding and issued the of 100% holds Corporation Power Reorganization, the to Subsequent Management Capital P A O T 1 W _ E E maintain an appropriate credit rating to to en rating credit appropriate an maintain capital; and structure that maintain acapital and other investments as opportunities present; provide sufficient financialflexibility topursue itsgrowth strategy to Corporation; the of shareholder the to returns long-term attractive provide A N R G
0 F 36 1 _ I N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C N . i n C d d I
A
B L 3
6 C O R those of Pargesa and GBL, oversee and have and GBL, oversee and those ofPargesa P O R A T I O pital taking into consideration the risk the charac consideration pital takinginto N
matches the long-term nature of its of long-term nature matches the sure stable access to the capital markets. markets. capital the to access stable sure securities remain outstanding. As a holding company, Power debentures. The boardsof director for implementing and monitoring its capital plans. The the responsibility for their respective company’s capital invest on atimely inits basis operating companies investments by maximizing theuse teristics andliquidity itsholdings.of Inorder s of theCorporation’ss of permanent of 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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2 ) , 0 ѳ ѳ Ѷ ѵ 22020-05-14 5:59 PM 5 85 8 68 6 ѼѶ 5 Ѷѳ Ѵѷ ѷѷ ѶѴ ѵ ѼѼѶ Ѵѳѳ ѳѳѳ ѵ Ѽ Ѵ Ѵ Ѽ , , , ,8 ,7 ѵѳѴѼ 7, 8, ѵ ѵ ѵ 37 Ѵ Ѵѳ ѵ ѷѴ A December 5, ) ( 8, 8, 5,5 , Ѷ ѳ 8 8 Ѽ 7 7 regulatory capital capital regulatory 5 7 Ѽѳ Ѷѳ Ѵѷ ѷѷ ѶѴ (7 ѵ ѵѵѴ Ѵѳѳ ѵѷ ѷѼ Ѽ Ѷѷ ѼѶ ,5 , , ,8 ,7 ѵѳѵѳ 8, 8, 6, ѵ 8, 8, ѵ ѵ 5,5 Ѵ Ѵѳ ѵ ѷѵ Lifeco and certain of its March are shown in this table as preferred table as preferred this in are shown IGM are non-recourse to the the to are non-recourse IGM
subsidiaries are subject to subsidiaries are subject
tal requirements; however, however, tal requirements; ents issued by Lifeco and Lifeco by ents issued entures, preferred shares other and debt instruments issued
9% debentures at par, maturing on May14, 2030.The netproceeds ќ rnally imposed regulatory capi regulatory rnally imposed
s
t n N 00 million of 10-year 2.3 of 10-year million 00 e ћ O I m POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T u r A t s R n O i
t P ] Ѵ b R [ e O d
C r
e L h A t 7 0% of consolidated capitalization at March 31, 2020. 31, 2020. at March capitalization consolidated of 0% I 3 o ѝ
C B
s
d
N e d n r A d a a n
i N . s h I s C e
F r F
d P u R t e _
r 1 n E y r 0 t e i e G f shares. shares. W b u N e ] which shares, preferred Lifeco’s excluding subsidiaries Corporation’s of the interests equity non-controlling the Represents e O r q E Non-controlling interests Lifeco Lifeco adjustments and consolidation Other subsidiaries Lifeco Ѵ _ [ Lifeco EVENT SUBSEQUENT On May 14, 2020, Lifeco issued $ IGM P Power Financial E equity Common shareholders’ P The Corporation’s consolidated capitalization includes the deb debt instrum other and Debentures subsidiaries. by its consolidated equity total and shares preferred Perpetual subsidiaries. by its issued debt guarantee not does Corporation The Corporation. for accounted D Power Financial will be used by Lifeco to repay upcoming long-term debt maturities and for general corporate purposes. purposes. corporate for general and maturities debt long-term upcoming repay to Lifeco by used be will to exte is not subject itself Corporation The main subsidiaries, IGM’s subsidiaries and certain of the Corporation’s other other Corporation’s of the IGM’s subsidiaries and certain main subsidiaries, requirements. Parts B and C of this MD&A further describe the capital management activities of Lifeco and IGM, respectively. respectively. IGM, and Lifeco of activities management capital the Parts describe requirements. and further B MD&A this of C information. additional for Statements Financial Consolidated 2019 Corporation’s the to 21 See Note 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B37 PPFC_2020_QUAT1_ENG01_PFC.indd B38 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U members oftheseboardsand oversight and carries out its risk management mandate through various committees. Certain officers ofthe Corporation are quality than AA, and may be vulnerable to future events, altho events, to future may bevulnerable AA,and than quality term debt. A long-term debenture rated “A(High)” implies that the capacity for repayment is substantial, but of lesser credit The “A(High)” rating assigned tothe Corporation’s debentures by DBRS isthefifth highest of the 2 commitmentobligation onthe is stillstrong. financial its meet to capacity obligor’s the however, categories; in higher-rated obligations than conditions economic A long-term debenture ratedis somewhat “A+” more susceptible to the adverse effects of changes incircumstances and The “A+”rating assigned to the Corporation’s debentures by S&Pisthefifth highest of the 22ratings usedfor long-term debt. securitiesand aresubject to revision orwithdrawalratingby the atany time organization. of Lifeco, IGM, Pargesa and GBL are and IGM,respectively. the risk oversight function at the operating companies. Parts B and C of this MD&A further describe risks related to Lifeco committee of the board of directors of Lifeco isresponsible for Following theReorganizat maintain acomprehensiveappropriate and policiesset of and controls. responsibility for risk management associated with the investm oversight of its investments. The Board of Directors and executive officers of the Corporation have overall oversight and The Corporation believes that aprudent approach to riskis achieved through a governance model that focuses on the active RISK OVERSIGHT A companies. complete description of Pargesa. As a result, the Corporation bears the risks associated with being a significant shareholder ofthese operating of Lifeco and IGM and a joint controlling interest in management businessesin Canada, the UnitedStates andEurope. Its principal holdingsare a in eachinterestcontrolling andasset services financial in interests with company holding and management international is an Financial Power Risk Management specific security foraparticular investor. Theratings also may not reflect the potential impact of allrisks on the value of hold the securities of a corporation and do not address market price or other factors that might determine suitability of a have been obtained from the respective rating agencies’ websites. These ratings are not a recommendation to buy, sellor accordance with the terms ofeach obligation. Descriptionsrating ofthe categories eachfor ofthe agenciesforthset below corporation and areindicators of the likelihood ofpayment and the capacity of a corporation to meetits obligations in a of securities the of quality credit the of measure independent an with investors provide to intended are ratings Credit Rating Service’s (DBRS) current rating onthe Corporation’s debentures is“A(High)” with a stable rating trend. The current rating by Standard&Poor’s (S&P) of th RATINGS P and management of the specific risks describedinthe AnnualMD&A.2019 During thefirstquarter of 20 maytherebe other risks ofwhichCorporation the isnot currently aware. reflecte Corporation, and certain risksthatcoul which investors should carefully consider before investing in securities of the Corporation. The 2019 Annual MD&A reviews There are certain risksinherent inaninvestment inthe securities ofthe Corporation and inthe activities ofthe Corporation its Audit Committee. ri operational It addresses mandate. A O T 1 W _ E E A N R G
0 F 38 1 _ I N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C N . i n C d d I
A
B L 3
8 C O R d impactthefinancialcondition andfinancial pe P O d the effectsofRe d R ion, the Board of Directorsion,the Boardof co A 20, there were nochangesto T I O committees oftheseboards and,consequently,intheir role as directors, theyparticipate in N
sks including the risks therisks sks including responsible for the risk oversight function at these risks ispresentedin these risks organization. Thisdescription risk of e Corporation’sdebentures Parjointco, whichitselfhold ntinues toprovide oversight an related to financ to related the Corporation’s risk oversight ugh qualifying negative factors factors negative qualifying ugh its risk oversight, and the board of directors of IGMprovides ent activitiesand operations the of holdingcompany and their public disclosures. disclosures. their public ial reporting and cybersecurity primarily and ial reporting through rformance, and the value of the equity ofthe is “A+” with a stable outlook. Dominion Bond s acontrolling interest inGBL through s does not include their respective companies. risk The theirrespective companies. d carries out its d carriesout The respective boards approach, and theidentification are considered manageable. manageable. considered are ћ ratings usedfor long- all possiblean risks, riskmanagement of directors d ,
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) ) ) 0 – 22020-05-14 5:59 PM ѵ 6) ѼѶѵ ѼѶѳ Ѽѵ Total Total ( ( ѵѳѴѼ , 39 fair value ѶѴ A – 5( Ѵ ѵ 5 667 ( Ѵ December ѷ ѷ ѷ 1 million at March 31, credit risk credit Maximum ћ
66 66 8 ѳ Ѷ 5 7 Ѷѷ ѳ ѵѶ ѵ ѵ ,6 , , ,6 ѵ ѵѴ ѵѷ ѵѷ Notional .0 billion in the notional amount of of amount notional the in billion .0 ћ ) ) ) 8 ) ) – Ѷ (7 ѶѶ ѵѶ ( Total ,7 ,756 ,76 ѵѳѵѳ Ѵ Ѵ Ѵ , ( ( ( fair value ѶѴ to theCorporation’s Interim ConsolidatedFinancial
ћ March – – Ѵ Ѵ , 2020. The following table provides a summary of the of the summary a provides table following The , 2020. 6 6 Ѷѵ ies have each established operating policies, guidelines guidelines policies, operating established each have ies 9. These changes did not have a material impact on the the on impact material a not have did changes These 9. ѼѵѼ Ѽ Ѽ credit risk credit Maximum rward-settling mortgage-backed security transactions (“to-be-
Ѷ ѷ 8 87 Ѷѳ as market makers in such derivatives. derivatives. in such market makers as nsistency with risk management policies; ѷ ѵѵѳ Ѷѳѷ , , ,7 7, ѵ ѵ Ѷѳ Ѷѳ Notional
tivein particularinstruments, financial which focus on:
of the hedging relationships; and and relationships; hedging the of
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R O C
L A 2 million at December 31, 2019. The increase was primarily driven by the impact of the U.S. dollar U.S. dollar of the the impact primarily driven by was increase The 2019. 31, at December million 2 9 I 3 ќ C B
N to the Corporation’s 2019 Consolidated Financial Statements for additional information. information. additional for Statements Financial Consolidated 2019 Corporation’s to the d A d ћ n i N . I C F F
P R _ monitoring the hedging relationships. relationships. hedging the monitoring demonstrating the effectiveness effectiveness the demonstrating prohibiting the use of derivative instruments for speculative purposes; purposes; speculative for instruments of derivative the use prohibiting documentingtransactions and ensuring their co 1 E 0 G W N O
E Other subsidiaries Other subsidiaries _
The use of derivatives is monitored and reviewed on a regular basis by senior management of the Corporation and by senior and Corporation of the management by senior basis a regular on reviewed and monitored is derivatives of use The subsidiar and its The Corporation subsidiaries. its of management Power Financial Lifeco IGM DERIVATIVE FINANCIAL INSTRUMENTS INSTRUMENTS FINANCIAL DERIVATIVE such using When instruments. financial derivative use subsidiaries and its Corporation the activities, their of course In the as and not they only act end-users limited derivatives, P and Other Instruments Instruments Financial MEASUREMENT VALUE FAIR 31, 2020,At March there have beenchanges to the carryingamounts and fair valueof theCorporation and its subsidiaries’ 31, 201 December since at value fair recorded and liabilities assets 1 See Note subsidiaries. and its Corporation of the condition financial measurement. fair value Corporation’s of the disclosure additional for Statements strengtheningagainst the Britishpoundcross-currencyon swaps that pay British pounds andreceive U.S. dollars. and IGM, used by Lifeco instruments financial of derivative types on the information provide MD&A of this C and B Parts respectively. 2 See Note derivativesoutstanding, primarily due to an increase in fo During the three-month period ended March 31, 2020, there was an increase of $ March period ended the three-month During to derivative exposure subsidiaries’ its and Corporation The hedging activities. regular and securities”) announced to $9 increased gain position) a in of instruments value market the represents (which risk counterparty Corporation and its subsidiaries’ derivatives portfolio: subsidiaries’ derivatives portfolio: and its Corporation Therewere no major changestothe Corporation and its subsidiaries’policies and procedureswith respect tothe use of 31 March ended period three-month the in instruments derivative and procedures relating to the use of deriva relating to the and procedures 2020 from $4 from 2020 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B39 PPFC_2020_QUAT1_ENG01_PFC.indd B40 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U See also “Transactions with Related Parties” below. Parties” Related with “Transactions also See gains. indefinitely tooffsetcapital $ losses of 31, 2020, capital March had, at The Corporation 202 from expire losses These gains). capital (including income taxable future reduce to available recognized) Statements. the Corporation. See also Parts B and C ofthis MD&A andNote 31 tothe Corporation’s 2019 Consolidated Financial The Corporation had, at March The Corporationhad, at Income Taxes from those reported in the 2019 Annual MD&A. subsidiaries its and Corporation the of obligations contractual inthe changes material no been have there 31, 2020, March At ContractualObligations Commitments and actions, either individually or in legal existing the of any that expected not is it known, presently information on based However, Corporation. the of position financial consolidated onthe effect adverse a material have could resolution adverse an that possible is andit certainty, arising in the normal courseThe Corporation and its subsidiaries are from time to time subject to legal actions, including arbitrations of andclass actions, business. It is inherently difficult to predict the outcome Liabilities Contingent of any of these proceedings with Lifeco. amountsliabilities duefrom cededto or mayLifeco berequired will typically hold aletter of credit as collateral in order Abenefi orbeneficiaries. parties other to of credit letters provides Lifeco business, reinsurance its of course normal the In LETTERSCREDIT OF determined. amounts are dependent on the outcome offuture contingent events, the nature andlikelihood ofwhich cannot be subsidiary couldberequired to pay third parties, assome of thes of whichprecludes thepossibility ofmaking areasonable estim In the normal course of their operations, the Corporation andits subsidiaries may enter into certain agreements, the nature GUARANTEES Off-Balance SheetArrangements P Financial Statements. existing letters ofcredit on maturity. See also Part B of this MD&A and Note 32 to the Corporation’s 2019Consolidated A O T 1 W _ E E A N R G
0 F 40 1 _ I N P F A POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 C N . i n C d d I
A
B L 4
(Non-Consolidated Basis) 0 C O R P O R A T I 31, 2020,non-capital$32 lossesof O the aggregate, will a have material adverse effe N
ѝ to secure statutory credit for insurance and investment contract 4 million (none of which have been recognized) that can be used used be can that recognized) been have which of (none million 4 њ ate ofthemaximumpotentia e agreements do not specify a maximumdo notspecifya e agreements amount andthe million ($31 to seek collateral seek to ќ million for which the benefits have not been been not have benefits the which for million ct on the consolidated financial position position of financial ct ontheconsolidated
alternatives alternatives l amount theCorporation or if itisunab ѝ to2040. le to rene le to ciary w
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2 0 22020-05-14 5:59 PM to feco’s 41 A d investment within the Power within d, insurance an ents), the valuation of goodwill of goodwill the valuation ents), ces of estimation uncertainty and and of uncertainty estimation ces ly, toother companies and intangible assets, income taxes and taxes and assets, income and intangible additional information. information. additional loss consolidation transactions with a subsidiary of of with a subsidiary loss consolidation transactions for using the equity metho equity using the for nce products and (iii) the sale of residential mortgages sale the and (iii) nce products Lifeco and its subsidiaries. These transactions are market at are transactions These and its subsidiaries. Lifeco terms and conditions. These transactions are reviewed by by reviewed are transactions These conditions. and terms credit rating. Given rapid market changes, third-party credit rating. Given rapid credit ial Statements. ial Statements. y services,respective Financial Statements for for Statements Financial come andcome related disclosures. Key sour appropriate related party and conduct review committee. reviewconduct and party related appropriate of the Interim Consolidated Financial Statem Financial Consolidated of the Interim ћ Consolidated Financ ements, investment impairment, goodwill ements, investment impairment,
at do not have a third-party a third-party not have at do N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A it losses within Lifeco’s insurance contract liabilities relies upon investment credit ratings. Li ratings. credit investment upon liabilities relies contract Lifeco’s insurance within it losses R O global credit, equity and foreign exchange market conditions. exchange market and foreign equity credit, global P R O C
L A 1 , IGM obtained advance tax rulings which permitted tax , IGM obtained advance tax rulings alized throughout the year the shares in the subsidiary are acquired. acquired. are the subsidiary shares in the year the alized throughout I 4 ќ C B
N d A d n i N . I C F F
P R _ 1 E 0 G W N O E _ rating changes may lag developments in the current environment. environment. current the in developments may lag changes rating 1 (Note investments of portfolio value The fair andother intangibleassets and the recoverabilityof deferredasset tax valuescarrying reflectthe judgments of the managements of theCorporation and its subsidiaries. made the estimates could differ from results financial actual the environment, current the surrounding uncertainty Given the Corporation’sof the in preparation 2019 practice is to use third-party independent credit ratings where available. Management judgment is required when setting setting when required is judgment Management available. where ratings credit independent third-party use is to practice th for instruments ratings credit Canada Life. These transactions are at market terms and conditions and are reviewed by the appropriate related party and and party related appropriate by the are reviewed and conditions and terms market at are transactions These Life. Canada conduct review committee. 201 In October up to year each IGM by in be acquired may losses tax generated has that a subsidiary of shares whereby Corporation, Power and including2020. acquisitions The are expected toclose the in fourthquarter ofeach year. IGM recognizesthe benefit of tax losses re the OnFebruary 13, 2020, the Corporation and PowerCorporation completed the Reorganization. Refer tothe section “Overview” details. for more a non-interest-bearing exchange for in Corporation to Power million $332 advanced 30, 2020, Power Financial On April of each of directors by the board and approved was reviewed transaction on demand. This payable note, promissory corporation. Consolidated 2019 Corporation’s the to 30 See Note areas where significant judgments are made by the management of the Corporation and the managements of its and the managements Corporation of the are made by management the judgments significant where areas be consolidatedaccounted or to entities the include: subsidiaries In the preparation of the financial statements, management of the Corporation and the managements of its subsidiaries – subsidiaries of its managements and the Corporation the of management statements, financial of the preparation In the Lifecoandare IGM – required tosignificant make judgments,estimates andassumptions thataffect the reportedamounts in earnings, comprehensive net of assets, liabilities, Summary of Critical AccountingEstimates and Judgments value fair measur liabilities, contract P Transactions with Related Parties loans and group the of subsidiaries to paid fees management base and performance In the normalcourse of business, PowerFinancial and its subsidiariesenter into varioustransactions funds, which includecapital investment to commitments and party related appropriate by the are reviewed and conditions and terms market at are transactions Such employees. to conduct review committee. In the normalcourse ofbusiness, Canada Lifeand Putnam enter into various transactions with related companies which benefits and subadvisor group insurance include providing Corporation’s the to notes and in the MD&A Annual 2019 Corporation’s in the described are These benefits. future employee Statements. Financial 2019 Consolidated regarding subsidiaries its and Corporation the of managements of the judgments the reflect Corporation of the results The prevailing of the impact cred future for The provision Financial group of companies. Such transactions are at market market at are transactions Such of companies. group Financial conductcommittee. and review party related the appropriate other and to pension plans relating benefit for employee services administrative and management asset provides Lifeco and Financial, Power of employees for benefits post-employment and conditionsthe terms and are reviewed by insura (ii) distributing services, administrative certain (i) providing IGM enters into transactions with subsidiaries of Lifeco. These transactions are in the normal course of operations and include and of operations course normal the in are transactions These of Lifeco. subsidiaries with transactions into IGM enters 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B41 PPFC_2020_QUAT1_ENG01_PFC.indd B42 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U Board (IASB) for potential impact on the Corporation. Standards Accounting International by the and released, both proposed inIFRS, monitors changes actively Corporation The a have didnot amendments narrow-scope these of adoption control over financial reporting. internal Corporation’s the affect, materially to likely reasonably or are affected, materially have which 31,2020 March ended co internal Corporation’s inthe changes no been have There presentation. determined tobeeffe have inherent limitations and maybecome ineffective because of changes in conditions. Therefore, even those systems responsible for establishing and maintaining effective internal control over financial reporting. All internal control systems IFRS. The Corporation’smanagement, underthesupervision Executive oftheChief Officer andis the ChiefFinancialOfficer, reliability of financial reporting and that th the regarding assurance reasonable provide to designed is reporting financial over control internal Corporation’s The Reporting overFinancial Control Internal to the disclosure in the 2019 Annual MD&A and the 2019 Consolidated Financial Statements. in addition subsidiaries, its and Corporation the impact could that policies accounting future the to nochanges were There effect that changes in the standards may have on their consolidated financial statements when they become effective. the analyze theIASBand by proposed changes potential the monitor continuously subsidiaries its and Corporation The Future AccountingChanges Instruments: Recognitionand Measurement Financial Statements The Corporation adopted the narrow-scope amendment toIFRS for IFRS 3, There were no changes to the Corporation’s accounting policies from those reported atDecember 31,2019,except for: Policies Accounting Changes in P A O T 1 W _ E E A N R G
0 F 42 1 _ I N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C N . i n C d d I
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N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R justed net earnings per share attributable to share attributable per earnings justed net O P
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_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U T Non-controlling interests Stated capital[Note8] E L Funds heldbycedinginsurers Cash andcash equivalents A [in millions ofCanadian dollars] (unaudited) Sheets ConsolidatedBalance Condensed POWER FINANCIALCORPORATION A i o T Total shareholders’equity Reserves Retained earnings T Insurance and investment segregatedfund contracts onaccountof policyholders[Note Deferred taxliabilities Other liabilities Derivative financial instruments Debentures and otherdebtinstruments Obligations tosecuritizationentities Investment contractliabilities[Note Insurance contract liabilities[Note T policyholdersInvestments onaccountofsegregated fund [Note Goodwill Intangible assets Deferred taxassets Other assets andcapitalassets Owner-occupied properties Investments injointly controlled corporationsandassociates[Note Derivative financial instruments Reinsurance assets[Note Investments [Note q s a T o o o s t Bonds u b 1 a e t t t Perpetual preferred shares Shares Mortgage andotherloans Common shares Loans topolicyholders Investment properties _ i i l a a a t t l E
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0 POWER FINANCIAL CORPORATION 2 0 _ Q U C O O N [in millions ofCanadian dollars] (unaudited) ofComprehensiveIncome Statements Consolidated Condensed P A A o O e t t T h h I Total Income tax(expense)benefit Share ofothercomprehensive income(losses)ofinvestments foreign operations Net unrealized foreign ontranslationof exchange gains(losses) Net unrealized gains(losses)oncashflowhedges t m t 1 t W t
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A N Unrealized gains (losses) on euro debt designatedUnrealized ashedge ofnetinvestments gains(losses)oneurodebt Income tax(expense)benefit Income tax(expense)benefit Income tax(expense)benefit Income taxexpense(benefit) Realized (gains) losses transferred tonetearnings Unrealized gains(losses) r m c c r R u e G s n j o o ointly controlledcorporationsandassociates – –
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22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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0 POWER FINANCIAL CORPORATION 2 0 _ Q U Cash andcash beginning equivalents, ofyear Increase incash and cashequivalents Effect ofchanges oncashandequivalents inexchangerates Investment inbonds Bond salesand maturities I Issue ofcommon sharesandlimited-life fund units bysubsidiaries Dividends paid F Earnings before income taxes O [in millions ofCanadian dollars] (unaudited) ofCashFlows Statements Consolidated Condensed P n A i Interest paid Interest anddividends received N C Investment ininvestment propertiesandother Change in cashandequivalents classifiedas heldforsale Investments injointly controlled corporationsandassociates[Note Investment inshares Investment inmortgage andotherloans Business acquisitions, andcashequivalents netofcash acquired Change inloanstopolicyholders properties Sale ofinvestment Sale ofshares Mortgage andotherloanrepayments entitiesRepayments of andotherobligations tosecuritization Increase inobligationstosecuritization entities Repayment oflease liabilities Decrease inotherdebtinstruments Increase inother debtinstruments Issue ofdebentures Repurchase ofcommon shares bysubsidiaries Adjusting items Income taxpaid,netofrefunds
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Ventures Limited Partnership Partnership Limited Ventures Partnership Limited II Ventures Ѷ Ѷ (unaudited) Mackenzie Financial Corporation Corporation Financial Mackenzie Pargesa Holding SA N.V. Parjointco Portag of Canada Corporation Power Corporation Financial Power Putnam Investments, LLC Corp. Financial Wealthsimple
II Portag
Ѷ Ѷ Capital Management Capital Risk Management Management Risk Benefits and Post-Employment Plans Other Pension Income Taxes Income Income Comprehensive Other Per Share Earnings Subsequent Events Events Subsequent Value Measurement Fair 8 Segmented Information Information Segmented 8 were delisted from the Toronto Stock Exchange. Power Power Exchange. Stock Toronto the from delisted were Mackenzie Investments Investments Mackenzie Corporation the Ѵѳ ѴѴ Ѵѵ ѴѶ Ѵѷ ѴѸ Ѵѹ ѴѺ Ѵ Pargesa Putnam Portag Corporation Power Parjointco Capital Personal Portag Corporation Capital Personal or Financial Power Wealthsimple London Life or Mackenzie London Life Insurance Company ements (financial statements) of Power Financial as at and of Power Financial statements) (financial ements announced the execution of a definitive agreement to effect to effect agreement a definitive of execution the announced
Note Note Note Note Note Note Note Note Note
0 the provinces and territories of Canada, of territories incorporatedthe provinces and is and domicile 5 Ѹѵ ѸѶ Ѹѷ ѸѸ Ѹѹ ѸѺ Ѹѝ ing issuer in all of ing issuer in all
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O The Great-West Life Assurance Company Assurance Life Great-West The Company Insurance & Annuity Life Great-West Standards Reporting Financial International Inc. Financial IGM Group Inc. Investors Irish Life Group Limited Canadian Asset Liability Method Company Assurance Canada Life The Management Ltd. Asset China Co., P R O
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A d Corporate Information 0 Power0Financial Common Shares. Subsequent to the Reorganization,Power Corporation holdsof 100% the n i N . ѝ
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G W ѝ N O O E _ Great-West Life & Annuity Life Great-West IFRS IGM or IGM Financial ManagementIG Wealth Irish Life Lifeco Inc. Lifeco Great-West Canada Life China AMC Life Great-West Power Financial Corporation, Power Financial a report N Statements: Financial Consolidated used in are these abbreviations The following CALM P Notes to the Interim Condensed Consolidated Statements Financial (ALL TABULAR AMOUNTS MILLIONS ARE IN OF CANADIAN DOLLARS, UNLESS OTHERWISE NOTED.) Note in Canada and located at 751 Victoria Square, Montréal,in Canadaat 751 Québec, Canada,and located H2Y 2J3. Power Financialan is international managementholding and companywith interests in financial services and asset of global in a portfolio holdings significant has also It and Europe. States United the Canada, in businesses management in Europe. based companies Corporation the On December and Corporation 13, 2019, Power which Financial, Power of Shares Common and outstanding issued Financial’s preferred sharescontinue to be listedon the Toronto Stock Exchange11, and the 6.9% debentures due March outstanding. 2033 remain Stat Financial Consolidated Condensed Interim unaudited The 14, 2020. on May of Directors Board by its approved were 31, 2020 March ended months three for the a reorganization transaction (Reorganization) pursuant to which each common share of the Corporation held by holders holders held by Corporation of the share common each which to pursuant (Reorganization) transaction a reorganization of Shares Voting Subordinate for 1.05 exchanged be would subsidiary owned wholly its and Corporation Power than other in cash. and $0.01 Corporation Power acquired Corporation and Power Reorganization the completed successfully Corporation 2020, the 13, On February 23 Note Note Accounting Policies Accounting Note Note and Associates and Note Note Note 8 Note 8 Stated Capital Note 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B49 PPFC_2020_QUAT1_ENG01_PFC.indd B50 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U [ oprtos Primary business operation [ IGM FinancialInc. Great-West LifecoInc. Corporations are: Corporation the principal subsidiariesof The operating control listed above. of elements the of or more one to changes are there indicate circumstances and iffacts entity an it controls not or whether reassesses Corporation The ceases. control such date the until consolidated be to continue and control, obtains Corporation entity.Subsidiariesthe oftheCorporationar rights to variable returnsfromitsinvolvement; and (iii)it has theability to affect thosereturns through its use of power Subsidiaries are entities the Corporation controls when: (i) the Corporation has power over the entity; (ii)itisexposed orh SUBSIDIARIES elimination ofintercompanybalances, transactions and includeThe financial statements the accounts 2019 except as described in the section Change inAccounting Policies below. with IFRS,asset out inNote 2 to the consolidated financial statements of the Corporation for the year ended December 31, Accounting Standard 34 – The financial statementsB of Power Financial as at MarchN 31, 2020 have been prepared in accordance withP International [ [ [ ѵ Ѵ Ѷ Ѹ ѷ A Wealthsimple Financial Corp. O ] Power Financial holds a66.9%equity interest and IGM Financial holds a4.0% equity interest in Lifeco (sameatDecember 31, ] Power Financialholdsa62.1% ] ] Power Financial, Portag3and IGM Financial hold anequity] interest of20.9%, 46.3%,respectively, 16.7%and in Wealthsimple ( companies subsidiary operating principal IGM’s ] A T O
1 W respectively, at December 31,2019). Canada Life. Canada Life. January Asof Putnam. and &Annuity Life Great-West Life, Canada are companies subsidiary operating principal Lifeco’s and CanadaLife,theirhold S _ T E E I A E N S R G
2 0 F O 50 1
_ I N P F F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A
Basis of Presentation and Summary of Significant Accounting Policies Policies Accounting ofSignificant Summary and Presentation Basis of C P N . i n R C d d E I
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] Wealthandasset management 0 C [ N Ѵ O ][ ѵ T R ] Financialservices holdingcompanywithinterests ininsuranceand A P O T equity interest andCanad R [ I Interim Financial Reporting Ѹ O ing companies, CanadaLifeFinancialCorporati ] A Technology-driven investment manager T N I O
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wealth managementcompanies are IG Wealth Managem Wealth IG are e thedate consolidated from a Lifeholds3.9%equi of PowerFinancialof anditssubsidiariesonaconsolidated basis after (IAS 34) using the same accounting policies, which are consistent consistent are which policies, accounting same the using 34) (IAS and certain consolidati ent andMackenzie. ty interestinIGM Fi on andLondon Insurance Group Inc.,amalgamated in of acquisition, of nancial (sameatDecember on adjustments. being the date being the Ѵ , ѵѳѵѳ 2019). 31, 2019). , Great-West Life, London Life Life London Life, , Great-West March March 21.2%, 16. ѵѳѵѳ 8 ѹѹ Ѻѳ Ѷ to a single company: ѶѴ . . . ѳѹѹѼѺѳ Ѽ % equity interest on whichthe , ѝ December % and 46.9%, 46.9%, % and ѵѳѴѼ over over 8 ѷ ѶѴ as . . . ѳ Ѽ Ѽ ,
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A Financial Financial December sociates are are sociates , % equity interest % equity ѳѸѳ ѼѴѶ . . Presentation of Presentation ѶѴ Ѹѳ ѴѶ ѵѳѵѳ ; IAS 39, (continued) March IAS 1, IAS ents of Lifeco and IGM ion’s financialstatements. , effective January 1, 2020. The The 1, 2020. January , effective es in equity and consolidated and es consolidated equity in corporations and as corporations
S N Business Combinations; Business O olidated financial statem olidated financial I intly controlled T P M U S dated basis, the results of Lifeco and IGM Financial, both both Financial, and IGM Lifeco of results the basis, dated S A
sed and released, by the International Accounting Standards Standards Accounting International the by released, and sed significant impacton theCorporat D olidated statements of chang olidated statements N in Pargesa Holding SA. in Pargesa Holding SA. A Financial Instruments: Disclosures Instruments: Financial
blicly disclosed cons S ment of the Corporation and the management are of its subsidiaries E T A M I T and IFRS 7, IFRS and S joint control. Investments in jo Investments control. joint 2019) equity interest 2019)
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S , E S I T Associate company Asset management C I N L E Accounting Policies, Changes in Accounting Estimates and Errors and Estimates Accounting in Changes Policies, Accounting
O , M N ѝ ] P G ѵ
O [ I D POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER G T A U N I R J
T O T P N and IAS N R U O A O C C
C I L F sh flows are mainly derived from the pu the from derived mainly are sh flows C A 1 I I 5 Joint control Holding company A ] C B
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E 0 T A E G W N O S H ] 31, Parjointco N.V. holds a 55.5% (same at December ] IGM Financial. by Held O E Ѵ ѵ _ Financial Statements Financial Measurement; Recognition and Instruments: Financial,all as at and for the three months ended31, 2020. March Certain notes to Power Financial’s financial statements Financial. and IGM of Lifeco statements financial to the notes the from are derived propo in IFRS, both changes monitors actively Corporation The Board (IASB) for potential impact on the Corporation. Corporation. the on impact potential for Board (IASB) U In the preparationof the financial statements,management ofCorporation the and managementof its subsidiariesare liabilities, assets, of amounts reported the affect that and assumptions estimates judgments, significant make to required where and areas uncertainty of estimation sources Key disclosures. related and income comprehensive earnings, net significantbeenhave by the judgments made manage notes and statements financial Corporation’s the in described as policies accounting relevant the in further described 31, 2019. December ended year the for thereto Parjointco N.V. Parjointco Asset Management Co., Ltd. China [ C The Corporationadopted the narrow-scope amendment3, to IFRS for IFRS public companies. The amounts shown on the consolidated balance sheets, consolidated statements of earnings, earnings, of statements consolidated sheets, balance consolidated the on shown amounts The companies. public cons income, comprehensive of statements consolidated ca statements of JOINTLY CONTROLLED CORPORATIONS AND ASSOCIATES relevant to relating for decisions is required consent unanimous in which entities are corporations controlled Jointly and operating entity’s the over influence significant exercises Corporation the which in entities are Associates activities. or having control without financial policies, earnings of net share its recognizes Corporation the method, equity the Under method. equity using the for accounted (losses), othercomprehensive income (loss), the changesin equity of thejointly controlled corporationsand associates, and dividends received. are: Corporation the of associates and corporations controlled jointly principal The Corporations Classificationadoptionof these narrow-scope amendments did nothave a operation business Primary P N on a consoli include, Financial of Power statements The financial [ 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B51 PPFC_2020_QUAT1_ENG01_PFC.indd B52 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U in the preparation of these financial statements. Given the uncertainty sur deferred tax asset carrying values reflect the judgments of th ofinvestments (Notefair value The 16), thegoodwill valuation of an rating changes maylag developments in the current environment. credit ratings for instruments thatdonot have practice isto use third-party independent credit ratings where available. Management judgment is required when setting The provision for future credit the impact of prevailing The results of the Corporation reflect the judgments of the managements of the Corporation and itssubsidiaries regarding the financial results and condition of the Corporation and its operating subsidiaries in future periods. bank interventions. Itis not possible to reliably estimate th durationimpactthe and of COVID-19 pandemicis unknown atthis On February10,2020,IrishLife Sale ofIrishProgressiveServicesInternational Limited materiallyis notexpectedto impactthecon matter this but certainty, with matter this of outcome the topredict difficult is it known, presently information onthe Based Agreement requires the parties to attempt to resolve these differences in aninformal manner andthat process is ongoing. Transaction Master The adjustments. proposed these to objected formally Lifeco 2019, InDecember transferred. liabilities Lifeco provided Life 2019, Protective InOctober adjustments. future to subject are transaction this of the closing at received commission ceding and transferred liabilities The individual life insurance and annuity business in the United Stat its of all substantially reinsurance, indemnity via sell, to Life) (Protective Company Insurance Life Protective with agreement On January a 24, 2019,Great-WestLife&Annuity, wholly owned subsidiary U.S. individuallifeinsurance and annu LIFECO N disclosed was what from statements. financial consolidated annual 2019 31, Corporation December the in the impact could that policies accounting future to changes significant no been have effect that changes in the standards may have onthe consolidated financial statements when they become effective. There the analyze IASBand bythe proposed changes potential the monitor continuously subsidiaries its and Corporation The F banks havereacted with significant mo economic slowdown. Global equity markets have experi imposed quarantine periods have caused andsocialdistancing, materi specifically identified asthe“COVID-19”virus. Th Governments worldwide have enacted emergency measures to combat the spread of anovel strain ofcoronavirus, Impact of Covid-19 on Significant judgments, estimates and Assumptions N P earnings of the business are immaterial to the Corporation. the to immaterial are business the of earnings and value carrying The transaction. this to related gain a recognize to expects Lifeco approval. regulatory to subject 2020 andis approvals conditions includingregulatory exp required receipt of companies, to amember of the FNZ group of companies. The proposed transaction will be subject to customary closing subsidiary of Lifeco whose principal activity isthe provision of ou A O U T O O 1 W T _ T T E U E A E E N R G R
3 2 0 F E 52 1
_ I
N P A F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A Basis of Presentation and Summary of Significant Accounting Policies Policies Accounting ofSignificant Summary and Presentation Basis of Disposals and Other Transactions Transactions and Other Disposals C C N . i n C C d d O I
A
B U L 5
N 2 C O T R I N P global credit, equity andforeign market exchange conditions. rounding thecurrent environment, O G R
C A T H losses within Lifeco’sinsurance contract liabilities relies upon investment credit ratings. Li I O A N N announced thesale ofIrishannounced Progressive Servi
G E S ity businessrein
netary andfiscalinterventions design solidated financial position of Lifeco. Lifeco. of solidated financialposition a third-party creditrating. Givenrapid ese measures, whichinclude im the surance agreement enced significant volatility andweakness. Governments and central e length and severity of these developments and the impact on
the actualfina e managements of the Corporation and itssubsidiaries. with its listing of proposed adjustments with respect to the to the respect with proposed adjustments listing of its with es. The transaction was completed on June1,2019. time, asis the efficacy of the government and central tsourced administration services for life assurance d other intangible assets, al disruption to businesses globally resulting inan ected to be completed in becompleted ected to ncial results could differfrom theestimates made of Lifeco, announced that it had of Lifeco,announcedthatit ces International Li ed tostabilize economic conditions. The market changes,th plementationself- oftravelbans,
andthe recoverability of mited,a wholly owned the second quarter of (continued) entered into an ird-party credit
feco’s feco’s
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2 – 0 Ѻ 8 Ѹ 22020-05-14 5:59 PM 8 88 Fair ѴѺѶ ѵѹѶ ѺѴѺ ѶѴѷ ѺѸѵ ѹѳѴ Ѵѵ ѼѴѳ Ѷѷѷ ѳ ѶѼѼ Ѵ ѳѼѼ ѴѺѷ , , , , , , , , , ,88 , , value ѵѳѴѼ ѷ Ѵ Ѵ Ѽ Ѹ 8, , 8 ѴѴ ѴѼ ѶѴ Ѷѵ Ѵѳ 53 ѶѴ ѴѴѺ ѴѺѷ A
December – Ѻ 8 8 88 ѴѺѶ ѵѹѶ ѺѴѺ ѶѴѷ ѺѸѵ ѹѳѴ Ѵѵ ѼѴѳ ѶѺѵ ѴѶѴ ѷѷѸ Ѵ ѴѵѺ ѵѷ , , , , , , , , , ,88 , , value ѷ Ѵ Ѵ Ѽ Ѹ 8, 8 ѴѴ ѴѺ Ѷѳ ѶѴ Ѵѳ Carrying Carrying ѴѴѸ ѴѺѴ ѵ ѹ 8 Ѹ 8 Ѷѵ Ѷѹ 8 ѵѸ 8 Fair Ѵ ѵѸѸ ѷѶѶ ѼѼѵ ѷѵѼ Ѵ ѳѷѳ ѺѺѷ ѵѶѼ ѷѸ ѵѺѵ ѵ ѸѼѸ , , , , , , , ,8 , ,8 , , value ѵѳѵѳ Ѹ Ѵ 8, Ѽ Ѹ Ѽ Ѵ , ѶѴ ѶѶ 8 ѴѴ ѴѼ ѶѴ ѴѺѸ ѴѴѺ March ѵ ѹ 8 Ѻ 8 Ѷѵ Ѷѹ 8 ѵѸ 8 Ѵ ѵѸѸ ѷѶѶ ѼѼѵ ѷѵѼ Ѵ ѳѷѳ Ѹѹѷ ѳѵѼ ѷѸ Ѽѹѷ ѵ ѺѹѺ , , , , , , , ,8 , ,8 , , value Ѹ Ѵ 8, Ѽ Ѹ Ѽ Ѵ Ѷѳ Ѷѵ 8 ѴѴ ѴѺ Carrying Carrying ѴѺѵ ѴѴѹ
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R O C
]
Ѵ L [ A 3 I 5 C B
N d Investments A d n i N . I
C F F 4
P R _ E 1 E 0 T G W Available for sale Designated as fair value through profit or loss profit or value through Designated as fair or loss value through profit fair as Classified Available for sale Loans and receivables Loans and receivables loss profit or value through Designated as fair or loss through profit value as fair Classified profit or loss value through Designated as fair or loss through profit value as fair Classified N O ] cost. at are held investments these therefore measured, reliably be cannot sale shares available for Fair value of certain O E Ѵ _ Investment properties Loans to policyholders [ Bonds Bonds Mortgage and other loans Shares P N VALUES FAIR AND VALUES CARRYING as follows: are investments of fair values estimated and Carrying values 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B53 PPFC_2020_QUAT1_ENG01_PFC.indd B54 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U of double-voting rights, a cond implementation the approved shareholders GBL rights. voting total Pargesa’s 90%of least at to respect with acceptances The proposed transaction is expected to close inthe fourth quarter of 2020. equity interest inGBL of 2 SIX SwissExchangeand Pargesa bearer share they hold. Following the proposed transaction, alreadyby Parjointco owned under whichPargesa shareholders willbeentitled toreceive 0.93 sharesofforGBL each group structure.perAs the agreement,a publicexchange offerinitiatedbe will by Parjointcofor Pargesa all shares not On March an agreemen announced andPargesa Parjointco 11, 2020, PARJOINTCO Carrying value,beginningofyear Carrying value,end ofperiod Carrying value,beginningofyear co injointly investments the of values carrying The N P A Carrying value,end ofperiod O T O Acquisition Share ofothercomprehensive income (loss) Share ofearnings (losses) Investments 1 W Share ofearnings (losses) Investments Share ofothercomprehensive income (loss) Dividends anddistributions Effects ofchanges inownershipandother _ T E E A E N R G
5 0 F 54 1
_ I N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A Investments in Jointly Controlled Corporations and Associates Associates Corporations and JointlyControlled in Investments C N . i n C d d I
A
B L 5
4 C O R P Parjointco is ex O ѝ R %. The proposed transaction will be subject to Parjointco holding or having received shareholder shareholder received orhaving holding Parjointco to subject be will transaction proposed %. The A T I ition of the transaction, at GBL’s Extraordinary Shareholders meeting held on April 2 O N
pected toreta ntrolled corporations and associates are as follows: follows: as are and associates corporations ntrolled in de facto controlmaintainin de and ajitoChina AMC Parjointco Parjointco it isanticipated that Pargesa will bedelisted from the t for a proposed transaction that would simplify that would the transaction a proposed t for Ѷ Ѷ Ѷ Ѷ , Ѽ ѹ ѵѼѴ ( , , ѷѳѹ ѼѸѷ ѹѵѹ , ѹѴ ѵ Ѻ ѹѺ ѷѹ 8 8 8 ѴѶ – – – – – ) China AMC ѺѳѶ ѹѹѶ Ѽ ѵѴѷ ѹѼѶ 8 ( Ѵѷ ѷѸ Ѷ Ѽ – – – – ) approximately thesame economic Personal Personal Capital Capital ѵѴѺ ѵѳ ѴѼѷ ѴѺ ( ( 8 Ѷ Ѷ OhrTotal Other – – – – – –
) (
) Other ѴѴѸ Ѹѷ ѶѸ Ѹѷ ѶѸ ѵѴ ѼѴ March ( ѵ ѵѵ Ѵ Ѵ Ѷ March – – – ) ) ѶѴ ѝ ѶѴ , 2020. , 2020. , ѵѳѴѼ , ѷ ѷ ѵѳѵѳ , , ( , , ѳѳѼ Ѹѹѳ ѵ Total ѷѶѵ Ѽѳѵ ѸѹѴ ѵѴѺ ( 8 Ѵѷ Ѹѳ 8 ѵѴ ѵ Ѷ Ѵ ) )
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, ) 2 ) ) ) ) ) ) 0 ѹ Ѹ 22020-05-14 5:59 PM , ѶѴ 8 ѵѷ ѴѸ Ѻѹ ѸѳѴ ѼѺѶ ѺѺѼ Ѽ ѹѺѳ ѶѶѳ ѵѶѼ ѶѺѶ ѺѶѺ ѴѷѺ ѳѵѵ , , , , , , , , , , ѴѴѹ ѴѴѺ ѷѺѴ ѴѴѶ ѵѹѹ ѸѵѺ Ѻѵѹ ѴѺѴ ѼѴѵ ѺѼѶ ѶѴ , , , , , , , ѵѳѴѼ ѵѳѴѼ ѵ Ѷ Ѵ Ѹ Ѷ Ѹ Ѵѵ ѷѷ ѸѸ Ѵѵ 55 ѴѶ Ѵѳ Ѵѳѷ ѵѶѶ ѵѶѴ ѵѳѼ ѵѴѼ A December , )(
) ( ) ( ( ( ( ) ( ) – Ѽ ѷ Ѹ ѶѴ 8 Ѻѳ 88 8 ѷѸѹ Ѽѷѳ ѺѳѼ ѹ ѳѳѷ ѺѳѴ ѺѼѺ ѶѴѸ Ѷѷѷ ѸѺѺ , , , , , , ,8 , as the COVID-19 virus has ѺѶѶ Ѻѷѷ ѵѶѷ ѵѳѺ ѵѼѷ ѳѳѶ ѸѸѶ ѷѷѸ Ѻ ѳѵѵ ѸѺѺ , , , , ѵѳѵѳ , , ( ѵѳѵѳ 8, ѵ ѷ ( ѹ Ѻ 8, ѹ ( ѴѸ ѷѸ Ѽѳ ѷ ѴѶ ѵѹ Ѵ ( ( ѵѴѸ ѵѴѵ March ѵѶѴ ѵѴѵ Three months ended March ended months Three
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R
] O Ѵ [ C
L A 5 I 5 C B
N d Segregated Funds Segregated A d n i N . I
C F F 6
P R _ E 1 E 0 T Policyholder deposits capital gains on investments Net realized (losses) gains on investments capital Net unrealized exchange rates (losses) due to gains changes in foreign Unrealized General Fund investment in segregated fund fund in segregated investment General Fund General Fund from Net transfer interest Non-controlling mutual fund Net investment income Policyholder withdrawals withdrawals Policyholder General Fund investment in Segregated fund Assets held for sale G impacted the global property market and made it difficult to value the properties with the same degree of certainty as usual. as usual. of certainty same degree the with properties the value difficult to it made and market property global the impacted W N O ] Canada Life has temporarily suspended contributions to, and redemptions and transfers from, its real estate investment funds funds ] investment real estate its from, transfers and redemptions and to, contributions suspended temporarily has Life Canada O E Mortgage loans Investment properties Shares and units in unit trusts Shares and units Mutual funds Other liabilities Non-controlling mutual fund interest interest Non-controlling mutual fund
Ѵ _ Balance, end of period of period Balance, end INSURANCE AND INVESTMENT CONTRACTS ON ACCOUNT OF SEGREGATED FUND POLICYHOLDERS FUND OF SEGREGATED ON ACCOUNT CONTRACTS INVESTMENT AND INSURANCE of year Balance, beginning Additions (deductions): Cash and cash equivalents equivalents Cash and cash Bonds Accrued income [ P N reporting statutory relevant the with accordance in determined investments, of the details presents following The policyholders: fund of segregated on account operations, of Lifeco’s region of each requirements INVESTMENTS ON ACCOUNT SEGREGATED FUNDOF POLICYHOLDERS 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B55 PPFC_2020_QUAT1_ENG01_PFC.indd B56 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U which Lifeco has utilized Level3inputsto determine fair value: The following presents additional information about Lifeco’s investments on account of segregated fund policyholders for investment fund. an within details asset underlying the to access have not does Lifeco where and markets active in prices quoted to Investment contractliabilities Insurance contract liabilities INSURANCEAND INVESTMENT CONTRACT LIABILITIES N market prices with multiple pricingvendors. There were notransfers out ofLevel 3duringtheperiod31, 2020. endedMarch Level 3 are dueprimarily to increased observability of inputsinva Transfers into Level 3 are due primarily to decreased observability of inputs in valuation methodologies. Transfers out of Balance, end ofperiod Balance, beginning ofyear include the assets whereis notavailablefair value fromnormal market pricingsources,whereinputsare utilizedinaddition change inuse ofinputsinadditionto quot on Lifeco based primarily 31,2019), December 2 at Level 1 to from Level transferred were million 2 ($153 1 to Level Level from During thethreemonths ended March [ fundpolicyholders Investments onaccountofsegregated [ fundpolicyholders Investments onaccountofsegregated POLICYHOLDERS OF SEGREGATEDFUND ACCOUNT ON INVESTMENTS N P Ѵ Ѵ A
O ] Excludes other liabilities, net other Excludes ] Excludes other liabilities, net of other assets, of$3,302 million. ] T O O Total gains(losses)included in 1 W Transfers intoLevel Purchases Sales _ T T E segregated fund investmentincome E A E E N R G
7 6 0 F 56 1
_ I N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A Insurance and Investment Contract Liabilities Contract Investment Insurance and Segregated Funds C N . i n C d d I
A
B L 5
6 C Ѷ O
R P O of other assets, of $3,000 million. $3,000million. of other assets, of R A T I O N
(continued) 31, 2020,certainforeign equity holdings valued at$1,94 ed pricesinactive marketsforcertainforeign equity holdings. Level 2 assets
[ [ Ѵ Ѵ ] ] ѴѺ ѴѺѹ liability 8, Ѵ Gross , , ѶѺѼ ѹѶѷ ѺѷѸ luation methodologies as Reinsurance ѵѴ ѵѳ segregated fund March Investments on on Investments assets , ,8 policyholders ѳѵѸ ѴѸѹ ѹѼ account o Ѵѷѹ Ѵѵ ѶѴ March Level Level (by fairvaluehierarchy level) Ѵѷ ѴѶ Level Level 8, , ѵѳѵѳ ,8 ѴѷѸ , , ѶѹѶ Ѽ ѶѳѼ ѴѺѶ ѹѴ ( 88 Ѵ ѷѵ ѶѸ ѺѶ ѴѸѺ ѴѸѸ ѶѴ Ѵ f )( , Ѵ ѵѳѵѳ , , , ѶѸѷ ѺѹѸ Ѹ on account o Net 8 policyholders Investments Investments Ѽ segregated Level Level ѺѶ ѴѶ ѴѶ Level Level , evidenced by corroboration evidenced of , ѴѺѶ ѴѺѹ ѴѺѷ ѶѺѴ , , ѵ Ѽ ѶѺѴ Ѻѹѳ ѴѷѴ fund 8 ѵ 88 liability Ѵ ѵ ѷ Gross –
f , , ,
ѴѺѺ ѸѵѴ ѹѸѹ 8 ( ) (8)
(
ѝ million were transferred transferred were million on account o policyholders policyholders
Investments Investments edfrsl Total sale for held segregated
Reinsurance ѴѶ Level Level Ѵѷ Level Level ѵѳ ѵѳ , Ѽ , December ѶѹѶ fund 88 sesNet assets December December Ѷ , , ѳ ѴѸѸ ѺѳѺ Ѹ ѵ Ѵ ѴѵѺ Ѷ ѼѴѶ Ѵ 8 – – – f )
March ѳѴѸѶ ѶѴ ѵѶѷ ѵѴѸ ѶѴ ѶѴ ѶѴ , ѴѶ ѵѳѴѼ , , Total , ѵѳѵѳ , ѵѳѴѼ ѵѳѴѼ ѳѵѵ ,8 , Total , , , ѵѼѵ Ѷ , Ѵѷѳ ѷѺѳ ѼѷѴ ѸѵѼ Ѽ Ѻѹѳ ѺѼ 8 88 ѳ ’s ’s – )
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2 ) ) , $ 0 ѝ 22020-05-14 5:59 PM Ѷѳ Ѹѹ ѶѶ ѼѺ Ѵѳѳ ѴѸѳ ѵѳѳ ѴѸѳ ѴѸѳ ѵѳѳ ѵѳѳ ѴѸѳ ѵѵѷ ѵѳѳ ѵѸѳ ѵѸѳ Ѷѳѳ ѵѸѳ ѷѹѹ ѵѼѵ ѼѴѳ ,8 , , ѵѳѴѼ Stated Stated ѵ capital Ѵ Ѵ , 57 ѶѴ A
December
) ( 8 ) ( Ѹ 8 ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѷ ѸѴѸ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѼѺѶ ѷѺѼ ѵѼѹ Ѹѳѹ ѵѼѹ , , , , , , , , , , , , , , , , , , , , ѶѼ ѶѼ Number of shares ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѼѹѸ ѵѶѷ ѳѳѳ ѳѼѹ ѳѼѹ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѼѼѼ , , , , , , , , , , , , ,8 , ,8 ѷ ѹ 8, ѹ ѹ 8, 8, ѹ 8, ѵ 8, Ѵѳ Ѵѳ Ѵѵ Ѵѳ ѷѼ ( ѺѴѷ ѷѹѺ ѹѹѷ ѷѹѺ ( – – – $ Ѹѹ Ѷѳ ѴѸѳ ѴѸѳ ѵѳѳ ѵѸѳ ѵѳѳ ѴѸѳ ѵѵѷ ѵѸѳ Ѷѳѳ ѵѳѳ ѵѸѳ Ѵѳѳ ѴѸѳ ѵѳѳ ѵѼѵ ѵѼѵ , ,8 , ѵѳѵѳ Ѵ ѵ Ѵ Stated Stated capital , ѶѴ number of common shares. of common number March – – – Ѹ 8 Ѹѳѹ ѳѳѳ ѳѳѳ ѳѳѳ ѸѴѸ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѷ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ Ѹѳѹ , , , , , , , , , , , , , , , , , Number of shares ѳѼѹ common share, for an aggregate amount of $1.65 billion. ѳѳѳ ѳѳѳ ѳѳѳ ѵѶѷ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ ѼѹѸ ѳѳѳ ѳѳѳ ѳѼѹ ѳѳѳ ѳѳѳ ѳѳѳ ѳѳѳ , , , , , , , , , , , , ѹ ѹ 8, 8, ѹ 8, ѵ 8, ѷ ѹ 8, Ѵѳ Ѵѳ Ѵѵ Ѵѳ ѹѹѷ ѹѹѷ series; and an series; and unlimited dividends declared on the Corporation’s common shares amounted to amounted shares common Corporation’s on the dividends declared
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER ded March 31, 2019, ded March T
) l A a R u t O e P p R r e O p C (
s L e A r 7
I a 5 s C B e h
r
S N
a d Stated Capital A d d h n i e S N
.
r I
r C n F F e 8
o f
P e R _ Issuance through effect of Qualifying Holdco Alternative of Qualifying effect Issuance through r m Cancellation of shares of shares Cancellation Purchase for cancellation Purchase E 1 E 0 P T
m Series A Series D Series E Series F Series H Series I Series K Series O Series P Series Q Series V Series R G Series L Series S Series T Substantial issuer bid Substantial issuer t W o s N O r O E C of year Balance, beginning i
Balance, end of period of period Balance, end _ Common Shares and issued of the all acquired Corporation Power 13, 2020, on February transaction reorganization of the Upon completion subsidiary. owned wholly its and Corporation Power than other by shareholders held shares common outstanding 1 of February close the as of effective Exchange Stock Toronto the from delisted were shares Financial Power Accordingly, 1). (Note 2020 en During the three months per share. $0.4555 Substantial Issuer Bid On April 17, 2019, the Corporationcompleted its substantial issuer bid (the PFCSIB) and purchased for cancellation common49,999,973 ofat $33.00 of shares, a purchase its price per F The excess paid underthe PFC SIB overthestated capitalof $1.55 billionwas recognized as a reduction to retained earnings. P N AUTHORIZED an series; in issuable Shares, Preferred First number of of an unlimited consists Financial of Power capital authorized The in issuable Shares, Preferred of Second number unlimited ISSUED AND OUTSTANDING 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B57 PPFC_2020_QUAT1_ENG01_PFC.indd B58 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U based now is PDSU and on the PSU share price of a Power Corporation each Subordinate of Voting Share. value The 1.05. by PDSUs or PSUs of number such multiplying by adjusted was (PDSUs) during the respective periods ended is as follows: and aswasapplica conditions terms same the under continues Plan (PSU) Unit Share Performance Financial Power the Reorganization, the of part as Also PLAN UNIT SHARE PERFORMANCE administrative expenses in the statements ofearnings. options granted by its subsidiaries amounted to $24 million ($13 million in2019) andisrecorded inoperatingand stock and to employees Power Financial of infavour byPower Corporation granted and to transferred tooptions relating grant date, amortized over the vesting period. For the Compensationexpense isrecorded based fairthe on valuethe of optionsfair orthevalue ofthe equityinstruments atthe employees. In addition, other subsidiaries of the Corporation have established share-based compensation plans. Lifeco and IGM have established stock option plans pursuant to which options may be granted tocertain officers and expense Compensation employees. During the three months ended March 31, 2020, Power Corporation granted options infavour of certainPower Financial Options exercisable, endofperiod Outstanding, beginningofyear A summary status Employee of Financial’s the of Power and expiryofoptionstermination ofemployment. terms ofthe Replacement Options are the same asthe terms ofthe Existing Options, including terms with respect to vesting other The 1.05. by divided Plan, Option Stock Employee Power Financial existing the under Share, PFC per price subscription Shares) for each common share of Power Financial (PFC Shares) at a subscription price per PCC Share equal to the The Replacement Options entitle the option holders to receive 1.05 Subordinate Voting Shares of Power Corporation (PCC for options to acquire Subordinate Voting Shares of Power Corporation (Replacement Options). outstanding at February 13,2020 under the Power Financial Em part oftheAs Reorganization, Power Corporation assumedthe Corporation’s stock optionplan. 13,079, The STOCK OPTION PLAN N P A Outstanding, endofperiod O T O 1 W Options assumed byPowerCorporation _ T E E A E N R G
9 0 F 58 1
_ I N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A Share-Based Compensation C N . i n C d d I
A
B L 5
8 C O R P O R A T ble, exceptthatthe number existingof PS I O N
three months endedMarch 31, 2020, Stock Option Plan as at Ma at Option Planas Stock ployee Stock Option Plan (Existing Options) were exchanged ( ѴѶ ѴѶ , , ѳѺѼ ѳѺѼ Options ,888 ,888 Us andexisting Performance Deferred Share Units – – ) Weighted-average March March exercise price ѶѴ , Ѷѵ Ѷѵ ѵѳѵѳ rch 31, 2020 andchanges and 2019, . . ѷѺ ѷѺ $ – – total compensationexpense ѴѴ ѴѴ ѹ ,8 , , ѵѼѵ ѵѼѵ ѹѼ Options , , , ѺѺѺ ѹѵѸ ѹѵѸ –
Weighted-average March March ѝѝѝ exercise price options ѶѴ ѶѴ Ѷѵ Ѷѵ , ѵѳѴѼ .8 . . Ѷѹ Ѷѹ ѵ $ –
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2 0 22020-05-14 5:59 PM 59 A g jurisdiction, the views bject to regulatorybject capital liquidity of its holdings.liquidity In order and report all material risks. Management of Management risks. all material and report s in the relevantoperatin Lambert, oversee and have the responsibility for their their for responsibility the have and oversee Lambert, pital transactions such as the issuance, redemption and redemption issuance, the as such transactions pital as at the individual operating subsidiary level. The primary The primary level. subsidiary operating individual at the as y adjustthe amount ofdividends paid to shareholders, return on the risk characteristics and on thecharacteristics risk for capital management. Management of the Corporation is Corporation of the Management management. for capital Corporation’s other subsidiaries su are Corporation’s other rm nature of its investments by maximizing the use of permanent of permanent maximizing the use investments by of its rm nature bsidiaries is assessed by considering various factors such as the the as such factors considering various by assessed is bsidiaries erred shares and debentures. The boards of directors of the Corporation’s the Corporation’s of The boards of directors and debentures. shares erred sure stable access to thecapital markets. ocedures designed to identify, measure designed ocedures
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R cture that matches the long-te the matches that cture O P R O C
L A 9 I 5 C B
Capital Management Management Capital N d A d n
i N . I C 0 F F 1
P R _ E 1 E 0 T G to maintain the capitalization of its regulated operating subsidiaries at a level that will exceed the relevant minimum minimum relevant the exceed will that a level at subsidiaries operating regulated of its capitalization the to maintain operate; they which in the jurisdictions in requirements regulatory capital and markets; capital to access stable ensuring Lifeco of ratings strength financial and credit strong to maintain to provide an efficient capital structure to maximize shareholder value in the context of Lifeco’s operational risks and plans. strategic maintain a capital stru maintain and capital; maintainanappropriate credit ratingen to provide attractive long-term returns to the shareholder of the Corporation; of the Corporation; shareholder to the returns long-term provide attractive companies operating in its basis a timely on invest to strategy its growth to pursue flexibility financial provide sufficient present; opportunities as investments other and W N O O E
_ toor adjust maintain its capitalstructure, the Corporation ma The plans. its capital and monitoring and for implementing procedures management capital establishing for responsible ca and approves reviews Corporation of the of Directors Board pref perpetual shares, repurchase of common Bruxelles Groupe and of Pargesa as those well as subsidiaries, management. capital company’s respective TheCorporation itself is not subject toexternally imposed regulatorycapital requirements. However, Lifecoandcertain of the of its main subsidiaries, and certain IGM’s subsidiaries The Corporation manages its capital into taking considerati capital to shareholders or issue capital. The capital structure of the Corporation consists of debentures, perpetual preferredshares, common shareholders’ equity of permanent source a cost-effective as shares preferred perpetual views Corporation The interests. and non-controlling and cash as well as investments in long-term positions holds such as and investor a long-term is Corporation The capital. purposes. liquidity for securities fixed income is responsible Corporation of the Directors of Board The expressed by variouscredit rating agenciesthat provide financialstrength andother ratings to Lifeco, and the desireto hold Lifeco has established policies and pr has established Lifeco below falling of regulatorycapitalprobability the minimum requirement requirements and they manage their capital as described below. plan. capital the and monitoring implementing for procedures management capital establishing for responsible is Lifeco and its su Lifeco for of capitalization level target The sufficient capital to be able to honour all policyholder and other obligations of Lifeco with a high degree of confidence. LIFECO as well basis consolidated a on both capital its manages Lifeco objectives of Lifeco’s capital management strategy are: P N POWER FINANCIAL to: are its capital managing objectives in Financial’s Power company, holding As a 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B59 PPFC_2020_QUAT1_ENG01_PFC.indd B60 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U in their respective jurisdictions. requirements solvency or capital local with comply to required are Lifeco of subsidiaries andforeign foreign operations Other was133%(135%atDecember 31,2019). 31,2020 LICAT ratio March at established a supervisory target total ratio of 100%, and a super capitaltotal resources are providedbythe sumofavailable The requirements. capital defined all of aggregate the as byOSFI defined capital, required toits company a of resources subsidiaries known as the Life Insurance Capital Adequacy Test (LICAT). The LICAT ratio compares theregulatory capital measurement for life insurance companies incorporated under the the under incorporated companies insurance life for measurement regulatory capital requirements. working capital, liquidity or shareholders’ equity. At March 31, 2020, these other subsidiaries have complied with all and anorder-execution-onlybroker. Theseother subsidiaries ar Certain othersubsidiaries are subject to regulatory SUBSIDIARIES OTHER requirements. capital regulatory all with complied have IGM subsidiaries 2020, required to maintain minimum levels of capital based on either working capital, liquidity31, or shareholders’ equity. At March exempt market dealers, portfolio managers, investment fundmanagers and a trust company. These IGMsubsidiaries are The IGMsubsidiariesthat are investmentsIGM, business madeby and other expansionstrategic objectives. IGM’s capitalis primarilyusedinitsongoing businessoperations to conditions. a strong balance sheet. IGM regularly management practicesfo are which appropriately supports manner in a IGMis capitalized that ensuring while returns shareholder maximize to is objective management capital IGM’s IGM FINANCIAL Canada,In Office the ofthe Superintendent ofFinancialInstitutions N P A O T O 1 W _ T E E A E N R G
1 0 F 60 1 0 _ I N P
F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C N Capital Management . i n C d d I
A
B L 6
0 C O R P O R A T cused on preserving the quality of its financialits quality of positionpreservingcused on the maintaining byand asolidcapitalbase regulatory subject to regulatory subject regulatory capital requirements include to I O N
assesses its capital management practices in response to changing economic capital requirements,capital working capital needs andbusinessexpansion. IGM’scapital (continued) capital requirements, includingamutual funddealer,portfolio managers,
visory minimum total ratio of 90%. Canada Life’s consolidated capital,surplus allowance andeligibledeposits. OSFIhas e required to maintain levels of capital based on their (OSFI) hasestablishedare support working capitalrequirements, long-term Insurance Companies Act investment dealers, mut gulatory capital adequacy (Canada) and their ual fund dealers,
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2 s 0 22020-05-14 5:59 PM 61 A date. Actual the valuation to financial instruments are liquidity liquidity are instruments to financial if a counterparty in a transaction fail in a transaction a counterparty if estimates of the underlying sensitivities for the for sensitivities underlying of the estimates d and market prices asat would not be able to meet all cash outflow obligations obligations outflow all cash to meet able would not be riesjointly and its controlled corporationsandassociates guidelines and proceduresand measure, to designed guidelines identify, wed as directional wed as directional l instruments. The key risks related risks related key The l instruments. ct on net earningsasbe will indicated. ncial loss to the Corporation and its subsidiaries subsidiaries its and the Corporation to loss ncial
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER ial loss associated with the sensitivity of the market price of a financial instrument arising from arising from instrument a financial of of price the market with the sensitivity ial loss associated ivities should only be vie be only ivities should T A associated with financia with associated R O P R O C
L A 1 I 6 C B
N d Risk Management Risk Management A d n i N .
I C 1 F F 1
P R _ operating in different currencies and converting non-Canadian investments and earnings at different points in time in points at different earnings and investments non-Canadian converting and currencies in different operating occur. rates exchange currency in foreign changes adverse when levels exchange foreign at different Foreign exchange risk relates to theCorporation, its subsidia Interest rate risk is the risk that the fair value of a financial instrument will fluctuate following changes in the interest interest in the changes following will fluctuate instrument a financial of fair value the that risk is the rate risk Interest rates. Equity risk is the potent markets. equity volatility in E 1 E 0 T
G assessment of the circumstances that led to the scenario may lead to changes in (re)investment approaches and interest interest and approaches (re)investment in to changes may lead scenario the to led that circumstances the of assessment considered; rate scenarios assumptions; activity future investment and return investment in actuarial, changes assumptions; the from differing experience actual factors; market other and rates tax mix, effective business in changes and changes; one than more when assumptions and factors these among interactions models. of internal limitations general the as they come due or be able to, in a timely manner, raise capital or monetize assets at normal market conditions. conditions. market at normal assets or monetize capital to, due or be able raise a timely manner, in as they come fina for potential the is risk Credit Market riskthe is risk thatthe market valueor future cash flowsof a financial instrumentwill fluctuate as a result of equity and risk rate interest risk, exchange foreign risks: of types three include factors Market factors. in market changes risk. Liquidity risk is the risk that the Corporation and its subsidiaries subsidiaries and its risk that the Corporation Liquidity risk is the to meet its payment obligations. Credit risk can be related to the default of a single debt issuer, the variation of credit of credit variation the issuer, debt of a single default to the related can be risk Credit obligations. payment its to meet products. derivative to relating risk to counterparty also and securities fixed income on tradable spreads W N O O E
_ For these reasons, the sensit For these reasons, respective factors based on the assumptions outlined above. Given the nature of these calculations, the Corporation cannot cannot Corporation the calculations, these of nature the Given above. outlined assumptions the on based factors respective provide assurance that the actual impa This note to the financial statements includes estimates of sensitivities and risk exposure measures for certain risks, such as such certain risks, for measures and risk exposure of sensitivities estimates includes statements financial the to note This including: of reasons, variety a for estimates from these can differ significantly results the sensitivity due to specific changes in interest rate levels projecte in interest changes due to specific the sensitivity P N The Corporationand subsidiaries its policies, established have monitor and mitigate risks mitigate monitor and risk, credit risk and market risk. and market risk risk, credit 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B61 PPFC_2020_QUAT1_ENG01_PFC.indd B62 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U changedmaterially since 2019. December 31, ofcredit liquidityrisk, andmarketrisk not risk have andmanagement exposure other subsidiaries’ and Financial Power Corporation’s sharePargesa's of unrealized losses. in equitymarkets would have resulted inanother determine whether there is investments are recorded in other comprehensive income until realized. These investments are reviewed periodically to Pargesa indirectly holds substantial investments classified asav due toCOVID-19. is dependent on the operating performance, profitability, financi infuture dividends of andpayment by the declaration Corporation The time to time, and thereby impact the ability ofthe operating subsidiary to pay dividends subject to minimum capital requirements. The requirements imposed by the regulators in any jurisdiction may change from and insurance laws and regulations, which require that solvency andcapital ratios bemaintained. IGM’s subsidiaries are also its from principal operating subsidiaries. Lifeco itssubsidiaries are and su dividends receiving Corporation the upon dependent is dividends pay to ability Corporation’s the company, holding a As established policies identify,meas designedto and procedures The risk committee of the board of directors of Lifeco isres LIFECO Corporation’s Consolidated Fin The riskmanagementpolicies and proced SUBSIDIARIES AND OTHER FINANCIAL POWER The following is asummary of risks over N P b) lines of credit are sufficient to address its liquidity needs. Power Financial believes its ongoing cash severity andduration of the financial impacts. as well asontheir ability to pay dividends which in turn will depend on the duration ofthe COVID-19 pandemic and the a) Lifeco has the followingpolicies Lifeco has Liquidity risk statements. financial 31,2019 December Corporation’s in the note Management Risk the to refer approach, management risk and structure governance risk Lifeco’s of discussion detailed more a For below. presented is risks the of summary instruments.Life financial significant changes have occurred from the year ended December 31, 2019. 31,2019. December ended year from the occurred have changes significant have similar creditrisk characteristics inthatthey operate inthe sa Concentrations of credit risk arise from exposures to a single debtor, a group of related debtors or groups ofdebtors that Credit risk A
O T O
1 W market transactions. Lifeco maintains committed lines of credit with Canadian chartered banks. banks. chartered Canadian with credit of lines committed maintains Lifeco transactions. market requirements at the holding company. Additional liquidity is av Lifeco of Management requiredyields,and to ensure consistency betweenpolicyholder requirements yield ofassets. andthe Lifeco closely _ T E Equity risk risk Equity Liquidity and funding funding and Liquidity E A E N R G
1 0 F 62 1 1 _ I
N P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C Risk Management N . i n C d d I
A
manages operating liquidity through cash flow matching operatingcash flow liquiditythroughmanages
B L 6
2 C O R P O closely monitors thesolvency monitors and closely capita co’s approach to risk management no has riskmanagement to co’s approach R objectiveevidenceimpairment ofan in value.As A T I ancial Statements forthe year O and procedures inplace to manage liquidity risk: N
(continued) the Corporation and its subsidiaries the Corporationits and flows from operations, available cash balances and liquidity available through its ures of Power Financial andothersubsidi of PowerFinancial ures
comprehensive loss ofapproximately $300 million representing the endedDecembe al position and creditworthiness of itsoperating subsidiaries ponsible for the oversight of Lifeco’s key risks. Lifeco has ure, andre manage, monitor ailable for sale. Unrealized gains andlosses on these ailable through establishedlines ofcreditvia or capital l positionsits principall of subsidi t changed significantlysi periods remains in the dis inthe remains periods me geographic region orin similarindustries. No bject set restrictions to ofassets and liabilities andforecasting earned at March 31, 2020, the impact of a 10%2020,decline theimpactofa 31, March at ’ financial instruments’ financial including the impacts r 31,2019. aries are discussedinNote 22 tothe nce December 31, 2019. Ance December31, 2019. port risksassociatedwithport cretion of its directors and directors its of cretion out in relevantcorporat out aries opposite liquidity opposite aries e ,
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) 2 0 22020-05-14 5:59 PM ѴѴ om om ѹѴѼ ( ѵѳѴѼ , 63 ѶѴ % decrease A Ѵ rticipating )8 ѵѶѳ ѴѺѸ These margins are These margins % increase Ѵ rease non-pa ges in foreign exchange ges in foreign l equity.Correspondingly, ( ) December ѺѼѳ ѹѳѸ ( ѵѳѵѳ , ѶѴ % decrease Ѵ March ) in the best estimate assumptionsestimate and in the best ofessional standards. standards. ofessional ѵѵѶ ѵѼѵ ( 1% parallel decrease in the yield curve on the in decrease 1% parallel % increase Ѵ ate 1% parallel increase in the yield curve on the rates impactstota Lifeco’s nadian dollars, euros and U.S. dollars. In accordance with In accordance dollars. nadian dollars, euros and U.S. future deterioration currencies would be expected be expected would currencies to dec ies are chan not by currency, matched are used in the CALM to determine insurance contract liabilities. contract liabilities. insurance to determine the CALM used in are ’s range of scenarios covered. The following provides information information provides following The scenarios covered. ’s of range act liabilities cover a range of possible outcomes. Margins are reviewed reviewed are Margins outcomes. of possible cover a range act liabilities
e regarding rates of returns on supporting assets, fixed income, equity and inflation. inflation. and assets, fixed income, equity on supporting of returns e regarding rates (continued)
shift could impact Lifeco N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R margins for adverse deviation set in accordance with pr accordance with set in deviation for adverse margins O P R for possibilities of misestimation and/or offor possibilities misestimation
O s C e
t L a r A
3 I t 6 wever, the parallel wever, the s C B
e
r
N d Risk Management Risk Management e A d t n i tes outlined in actuarial standards. in actuarial standards. outlined tes n N . i
I
C 1 F n F 1
i
P R _ e E 1 E g Interest rate risk Foreign exchange risk 0 T n G At March 31, 2020 and December 31, 2019, the effect of an immediate an immediate of effect 31, 2020 and December 31, 2019, the At March prescribed scenarios results in interest ratechanges toassets and liabilities thatwill offset each other withno impact to net earnings. At March 31, 2020andDecember of an 31, 2019, immedi the effect At March A 10% weakening of the Canadian dollar against foreign currencies would be expected to increase non-participating non-participating to increase expected be would currencies foreign against dollar Canadian the of weakening A 10% resulting same the amount, by assets approximately and supporting their liabilities contract and investment insurance earnings. to net change in an immaterial foreign against dollar Canadian the of A 10% strengthening prescribed scenarios results in interest ratechanges toassets and liabilities thatwill offset each other withno impact to net earnings. insurance and investment contract liabilities and their supporting assets by approximately the same amount, resulting resulting same the amount, by assets approximately and supporting their liabilities contract and investment insurance earnings. net to change in an immaterial W a
and investment contract liabilities and investment N O O h E
Increase (decrease) in net earnings in net earnings Increase (decrease) _ The total provision for interest rates is sufficientcover to orbroader a severe more setof risks the thanarisingminimum fr the current Canadian Institute of Actuaries-prescribed scenarios. The range of interest rates covered by these provisions is annually. review a full with quarterly, monitored and is results historical of long-term consideration set in interest of range the of view Lifeco’s on impact material a have not would curve yield the in shift parallel 1% immediate An rates to be covered by the provisions. ho If sustained, on the effect of an immediate 1% increase or 1% decrease in the interest rates at both the low and high end of the range of range the of end high and low the at both rates interest the in or 1% decrease 1% increase of an immediate effect the on shift in ultimate of a parallel impact the include in the table The sensitivities rates recognized in the provisions. interest interest ra b) and liabilities assets the current flows from cash Projected Valuation assumptions have been mad Valuation assumptions have The valuation assumptions use best estimates of future reinvestment rates and inflation assumptions with an assumed assumed an with assumptions and inflation rates reinvestment of future estimates best use assumptions valuation The with correlation together periodically for continued appropriateness. continued appropriateness. for periodically assess to is done rates) fluctuating and decreasing increasing, (including scenarios rate of interest a number under Testing reinvestment risk. The total provision for interest ratesalso considers the impactof theCanadian Institute of Actuaries-prescribed scenarios: provide reasonable assurance that insurance contr insurance that assurance provide reasonable necessary to provide C insurance in non-participating Increase (decrease) P N Marketrisk a) If the assets backing insurance and investment contract liabilit contract investment and backing insurance If the assets in investments has net Lifeco decreases. by liability offset not losses exchange foreign of risk the to Lifeco expose can rates Lifeco’s book value per share and capital ratios monitored by rating agencies are also impacted. also impacted. are by rating agencies monitored and capital ratios per share book Lifeco’s value foreign operations. Lifeco’s debt obligations are denominated in Ca Lifeco’s debt obligations operations. foreign hedging related net of operations, net in foreign investments from and losses gains translation currency IFRS, foreign activities and tax effects,are recorded in other comprehensive income. Strengthening or weakening of theCanadian dollar U.S. dollar,to the spotand pound euro British rate compared spot 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B63 PPFC_2020_QUAT1_ENG01_PFC.indd B64 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U expected impacts take into account the expected change in hedge assets. assets. inhedge change expected the into account take impacts expected value ofpublicly traded common shares oninsurance andinvestment contractliabilities andon thenet earnings. The The following table provides information on the expected impacts of animmediate 10%or20% increase or decrease inthe relativ that the and other non-fixed income assets that will cause the liabilities to fluctuate differently than the equity values. This means There may be additional market and liability impacts as a result of changes in the value of publicly traded common shares equity values. supporting assets. The liabilities for other products such as segregated fund products with guarantees also fluctuate with private equities, and equity release mortgages. The value ofthe liabilities may fluctuate with changes in the value of the shares andinvestments in ot common traded publicly by supported are flows cash long-tail with liabilities contract investment and insurance Some mitigated through a hedging program using equity futures, rate derivatives. currencyforwards, andinterest The risks associated with segregated fund guarantees on lifetime Guaranteed Minimum Withdrawal Benefits have been limits tomitigate price risk. defined clearly with markets inequity investment prudent for provide that inplace guidelines policy investment has Lifeco 1% decrease in the best estimate assumptions: based onlong-term primarily are assets income non-fixed other and shares common traded publicly for assumptions return estimate best The decreases. market following limits in these changes indices. market on returns historical based on generally Increase (decrease) innon-participating insurance contractliabilities C the investmentre The Canadian Institute of Actuaries Standards of Practice forthe valuation ofinsurance contract liabilities establish limits Increase (decrease) innon-participating insurance C The following table provides information on Increase (decrease) in C c) N P of other non-fixedof income assetsinsurance investment on contract and liabilitiesnet and onthe earnings. A Increase (decrease) innetearnings Increase (decrease) innet earnings Increase (decrease) innet earnings h h h O T O
and investment contractliabilities investment contract liabilities non-participating insuranceand c a a a 1 W o _ n n n T m E Equity risk risk Equity g g g E A E N e e e R m G
i i i
1 0 n n n F o 64 1 1
_ I n
o p b N P
t u e s F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A h h s C b Risk Management e t N a . l i
r n i e r c C d e impactonliabilities ofdecr e n s l d I y
t o
v A i
m
a t n B L r l - 6 a turn assumptions for publicly traded commonshare u
a f 4 C d i e t x historical averages. Thefollowing e O e s e
d d r R e
P i t n u O c r n R o m
A a her non-fixed income assets, primarily comprised of comprised of her non-fixedincome assets,primarily s T e s I
u O a m s N s e p
t t
i v o (continued) a n l u s ( ѵѳ ѵѳѶ ѴѹѶ
e
s %
) eases inmarket values incre the expectedimpactsof
Increase ( Ѵѳ Ѵѹѳ Ѵѵ % 8 ) provides information on the expected 1%increase impactsof a or a The sensitivities shown in the tables above allow for the impact impact for ofthe shownin above allow tables the sensitivities The ( Ѵѳ ѴѶѼ ѴѺѷ % March ) ѶѴ Decrease an immediate10% ases with la ases with , ѵѳѵѳ Ѵѳ ( s and othernon-fixedinco ѵѳ ѶѴѶ ѶѼѳ Ѵ % increase % increase % ) ( ѺѸѴ ѸѼѸ ( ѹѹ 8 ѷ investment properties, rger decreases. ) ) March March ѵѳ Ѵѳ ( ѷѵѺ Ѹѷ ѹѶ Ѵ % % decrease % decrease )( ѶѴ ѶѴ increase ordecrea , , ѵѳѵѳ ѵѳѵѳ ( ( ѹ 8 Ѵѷѵ Ѵ nraeDecrease Increase 8 ѺѼ 8 Ѻ Ѻ Ѵѳ ) ( December ) December ѶѶ % Ѵѳ ( ) Ѵ me assets which are % increase % increase real estate funds, funds, estate real ѸѳѼ ѹѷѸ ( December ѹѳ Ѻѷ Ѵѳ se inthevalue ѶѼ ѸѵѵѶ ѷѸ ) ) % )( Ѵѳ Ѵ % decrease % decrease ѶѴ ѶѴ ѶѴ , , , ѵѳѴѼ ѵѳѴѼ ѵѳѴѼ ( ѵѳ Ѵ Ѹ ѺѸѵ ѴѴѺ ( on 8 8 Ѽѳ % ѵ Ѹ ) ) )
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2 r t 0 22020-05-14 5:59 PM 65 A ration’s Consolidated Consolidated ration’s oration’s Management’soration’s Note Note 22 to the Corpo the economic impact of COVID-19 and Canada’s Canada’s COVID-19 and impact of the economic the IGM section the of the Corp section IGM
million at March 31, 2020, compared to $0.7 million at December 31, 2019, and is December million at to $0.7 compared 2020, 31, at March million ѝ (continued)
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R icies and procedures of IGM are in anddiscussed procedures icies art C) for the three months ended March March ended months three C) for the art and in 31, 2020 O P R O C
L A 5 I 6 C B
N d Risk Management Risk Management A d n i N .
I C 1 F F 1
P R _ E 1 E Liquidity and funding Credit risk 0 T G W
N O O E _ Discussion and Analysis (P Discussion period three-month the in significantly changed not and have 31, 2019 December ended year the for Statements Financial ended March 31, 2020. a) are sufficient to address its liquidity needs. needs. liquidity its address to sufficient are b)
The Government of Canada has introduced measures to support Canadians through the COVID-19 crisis where mortgage mortgage where crisis COVID-19 the through Canadians support to measures introduced has Canada of Government The paymentsbe can deferred and repaid for upto six months of the over the mortgage. life As IGM securitizes mortgages throughthe National Housing Act Mortgage-Backed Securitiesprogram, (NHA MBS) it is the between timing difference a create will which payments, principal and of interest payment make timely to obligated amounts. those of program MBS NHA the to payment the and payments mortgage deferring clients from cash of receipt default. against insured are program MBS NHA in the All mortgages credi of lines its through available liquidity and balances cash available operations, from flows cash ongoing its IGM believes P N IGM FINANCIAL The risk managementpol IGM’s allowance for credit losses was $0. losses credit for IGM’s allowance considered adequate by IGM’s management to absorb all credit-related losses in the mortgage portfolios based on: on: based portfolios mortgage the in losses credit-related all absorb to management IGM’s by adequate considered including trends ii) recent experience, performance credit historical i) and other metrics credit portfolio businesses, iii) current and Canadians Plan to support Response Economic COVID-19 unde losses of testing stress and v) clients, with its relationship planning financial strong its iv) characteristics, relevant conditions. market estate real adverse IGM’s exposure toand managementofcredit risk related to mortgage portfolios havenot changed materially since 2019. 31, December 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B65 PPFC_2020_QUAT1_ENG01_PFC.indd B66 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U are as follows:are as employeeplans. benefit Corporation and itssubsidiaries recorded anetactuarial gain in other comprehensive income of $425 million ontheir the 2020, of quarter first the during a result, As reductions. by market caused in assets decrease by the offset partially was rates discount increased the from resulting gain The COVID-19. of impacts market to due bonds corporate high-quality on yields in increase the to due primarily 2020, of quarter first the during 1.1% and 0.7% between increased rates discount The Total expense(income) Expense recognizedinnet earnings Post-employment benefits Pension plans post-emp other and plan pension The N P A Expense (recovery)recognized in othercomprehensiveincome Remeasurements O T O Pension plans Service costs Net interestcost Service costs 1 W Curtailment Post-employment benefits Net interestcost _ T E E A E N Actuarial (gains) losses Actuarial (gains) losses Change intheassetceiling Return onassetsless(greater)thandiscountrate R G
1 0 F 66 1 2 _ I N
P F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C Pension Plans and Other Post-Employment Benefits PensionOther Post-Employment Plansand N . i n C d d I
A
B L 6
6 C O R P
O R A T I O N
loyment benefits expense included expense innet benefits loyment ear nings and other comprehensive income income nings andother comprehensive
Three months ended March ( Ѵ ѵѳѵѳ ( ( , ѴѳѼ Ѷѷѹ ѷѵѸ ѹѸѹ ( ѷѴ ѹѼ ѺѼ ѺѸ ѹѺ ( Ѵ ѷ Ѷ Ѵ Ѽ ) ) ) ( ( ) ) ѵѳѴѼ ѵѵ ѴѸѶ ѷѳ ѸѸѸ ѶѴ ѵѷ Ѵ ѺѸ Ѻѳ Ѵѳ ѹѳ 8 8) Ѹ ѷ Ѵ 8) – ,
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POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0
2 , 0 ѷ ѳ 22020-05-14 5:59 PM ѷѺ 8 Ѽѳ Ѽѳ ѶѴ ѼѴѳ Ѵѵѵ ѼѶѴ 88 Total Total , ,88 , Ѵ ѵѳѴѼ Ѻ Ѵ , Ѵ Ѵ Ѵ 67 A )
) ) f f – – y y ) ѴѺ ѵѶ ѵѶ ( ( and and ѴѺ ointl ointl j j ) 8 Share o Share Share o Share ѹ Ѷѹ Ѷѵ ( associates associates controlled controlled ѵѳѵѳ corporations corporations corporations corporations ) ( ) ) to lower rates in foreign ) ) ( 8 Three months ended March March ended months Three ѳ ѹѴѸ ѵѳѹ ѷѹѵ ѹѹ (8 ( ( ( plans plans ѸѶѸ Items that will not be not will that Items ( benefit benefit Items that will not be not will that Items pension pension Actuarial Actuarial Actuarial Actuarial on defined on defined reclassified to net earnings reclassified reclassified to net earnings reclassified gains (losses) gains (losses)
) f f y y Ѻ ѳ 8 88 and and 8 Ѷ , Ѹ ѹѶѳ ѳѷѵ , , ( ointl ointl ѵ ѴѳѺ j j , Ѵ Ѵ Share o Share Share o Share associates associates controlled controlled corporations corporations corporations corporations
) y y Ѷ ѵѼ 8 ѳѹѳ Ѵ , 8 ѷ ѶѴѵ , ѴѶѳ ѴѼѳ Ѵ , ( Ѵ amount of income subject Foreign Foreign currenc currenc translation translation subsequently to net earnings to net subsequently x estimates in Lifeco, primarily related to a favourable tax tax a favourable to related primarily Lifeco, in x estimates subsequently to net earnings to net subsequently Items that may be reclassified Items that may be reclassified ) Items that may be reclassified Items that may be reclassified ѼѸ Ѵ ѹѵ Ѹѷ ( Ѹѵ ѷѶ Ѵ ѴѴѹ and cash and cash revaluation revaluation Investment revaluation revaluation Investment flow hedges flow hedges ign jurisdictions and results from jointly controlled corporations and and corporations jointly controlled from and results jurisdictions ign certain fore
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER
T A R O ѵѳѵѳ ѵѳѴѼ , , P R come, lower tax in ѶѴ ѶѴ O C
L A 7 I 6 C B
N Other ComprehensiveIncome Income TaxesIncome d A d n i
N . I C 4 3 F F 1 1
P R _ E E 1 E 0 T T G W Other comprehensive income (loss) income Other comprehensive (loss) income Other comprehensive N O O O Balance, end of period of period Balance, end E
_
associates that arenot taxable. of year Balance, beginning of period Balance, end March ended months Three of year Balance, beginning N March ended months Three Deferred taxes taxes Deferred RATE TAX INCOME EFFECTIVE to compared March 6.1%, was ended 31, 2020 months three for the Corporation for the tax rate income effective overall The March ended 15.9% 31, 2019. 2019the three months for year and 17.6% the full for The overall effective incometax rate for the three months ended March31, 2020 is lower than theeffective incometax rate ta in certain to changes mainly last period due year for same the increasean in the and movements, by market U.K driven item in the jurisdictions,as an increaseas well the results in from jointlycontrolled corporationsandassociates thatare not taxable. The effective income tax rates are generally lower thantheCorporation’s statutory income tax rate of 26.5% due to non- taxable investment in P N INCOME TAX EXPENSE are: in net earnings recognized tax expense of income The components taxes Current 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B67 PPFC_2020_QUAT1_ENG01_PFC.indd B68 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U earningsshare per were asthey anti-dilutive. diluted of computation the from been excluded have options stock 31, 2019,9.1 million endedMarch months three the For N N Net earnings adjusted fordilutive effect outstandingDilutive effect ofsubsidiaries’ stockoptions Net earnings attributabletoshareholders E the of numerators and reconciliation isa following The N P A Diluted Basic Weighted averageof commonshares number outstanding Weighted averageof commonshares number outstanding Net earnings attributabletocommonshareholders Dividends onperpetual preferred shares a O e u T O r t m 1 W n
Potential exercise ofoutstanding stockoptions _ e T i E b n E a A E N g e r R G n r s
1 0 i
o F n 68 1 5 f _ I g
N P
c s F o POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020
A p C m Earnings Per Share Share Earnings Per N . e i n r m C d
c d I o
A o
n B m L 6
s 8 m C h O a o r R n e
P s s
h O [millions] a R r e A
T I O N
– – Diluted Basic the denominators used in the computations of earnings per share: earnings per of computations in the used denominators the Three months ended March ѹѹѷ ѹѹѷ ѵѳѵѳ ѳ ѳ ѶѵѼ ѶѵѼ Ѷѹѷ ( . . Ѹѳ Ѹѳ ѶѸ . . Ѵ Ѵ – – )( ѺѴѷ ѺѴѷ ѵѳѴѼ ѳ ѳ ѶѴ ѸѶѹ ѸѶѹ ѸѺѴ ѳ . . ѺѸ ѺѸ ѶѸ . . . , Ѵ ѵ Ѵ – )
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2 0 22020-05-14 5:59 PM
69
A
s e i t i l i
b a i l
d n a
s t e
s s a
l a i c n assets and liabilities priced using a matrix which is a matrix which is priced using assets and liabilities life; average and based on credit quality agency securities; government and restricted shares; funds; certain private bonds and investment corporate and high-yield most investment-grade bonds; most asset-backed securities; most over-the-counter derivatives; most mortgage and other loans; deposits and certificates; instruments; and other debt most debentures that are measured contracts most of the investment loss. profit or at fair value through certain bonds; securities; certain asset-backed certain private equities; including and other loans, certain mortgage mortgages; equity-release where segregated funds mutual and investments in restrictions; redemption there are derivatives; certain over-the-counter investment properties; obligations to securitization entities; instruments. debt certain other actively exchange-traded equity securities; equity actively exchange-traded futures; exchange-traded which have available segregated funds mutual and no redemption with prices in an active market restrictions; other liabilities and units fund open-end investment prices available are quoted there in instances where from active markets. a
n i F
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R
O n o C i
t i L n i A f 9 I e 6 C B D observable market inputs and include situations where there there where inputs and include situations observable market activityis little, if any, market the asset or liability. for were obtained 3 securities The values of the majority of Level pricing models, external quotes, internal from single-broker cash flows. appraisers or by discounting projected for identical assets or liabilities assets that the Corporation has the for identical ability to access. or indirectly. either directly or liability, observable for the asset and Level 2 inputs include quoted assets prices for similar prices liabilities in active markets, and inputs other-than-quoted that are observable for the asset or liability, such as interest rates at commonly quoted that are observable and yield curves intervals. from were obtained some Level 2 securities values for The fair a pricing service. The but are not pricing service inputs include, reported trades, broker/dealer yields, limited to, benchmark markets, benchmark two-sided quotes, issuer spreads, data. and reference offers securities,
N Fair Value MeasurementFair Value d A d n i
N . I C 6 F F 1
P R _ E 1
E l 0 T e G W v N O e O E
Level 3 that are not based on inputs or more significant one Utilize Level 2 1 that are in Level included Utilize other-than-quoted prices L Level 1 markets prices in active quoted Utilize observable, unadjusted _
P N value fair following the upon based categorized been have value fair at recorded liabilities and assets Corporation’s The hierarchy: 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B69 PPFC_2020_QUAT1_ENG01_PFC.indd B70 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U There were no significant transfers between Level 1and Level 2in these periods. L Bonds A December Other liabilities Derivative instruments Investment contractliabilities L Other assets Reinsurance assets Derivative instruments Funds heldbycedinginsurers Investment properties Shares Mortgage andotherloans Bonds A March values. The calculations estimates and aregenerally calculated using market information at a specific point in time and may not reflect future fair of the Corporation’s December31, 2019 Consolidated Financial St hierarchyvalue usingthevalu The following tables present the Corporation’s assets and N P Investment contractliabilities A Reinsurance assets i i Shares Funds heldbycedinginsurers Investment properties Mortgage andotherloans Other liabilities Derivative instruments Derivative instruments Other assets s s O a a T O s s Fair valuethrough profitorloss Available forsale Fair valuethrough profitorloss Fair valuethrough profitorloss Available forsale Fair valuethrough profitorloss b b 1 W e e Available forsale Fair valuethrough profitorloss Available forsale Fair valuethrough profitorloss _ i i T t t l l E i i s s E t t A ѶѴ E N
i i
R e e G
s s
1 , 0 F
ѵѳѵѳ 70 1 6 ѶѴ
_ I N P
, F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A ѵѳѴѼ C
Fair Value Measurement Fair ValueMeasurement N . i n C d d I
A
B L 7
0 C
O
R P are subjective innature,andinvolve uncertainties and matters of significant judgment(Note 2). O R A T ation methods and as I O N
(continued) sumptions described in thesummarysumptionsdescribed ofsignificantpolicies accounting
liabilities recorded at fair value, including their levels in the fai atements and above. Fairvalues represent management’s Level Level Level Level 8, Ѻ Ѽ Ѽ , , ѷ ѼѵѶ Ѷѷ ѵѳѹ , Ѵ ѹ ѵѴѹ Ѵ ѴѴ ѳѴѴ Ѵ Ѵѳѹ ѹѴѷ Ѻ Ѵ ѶѺѸ 8 Ѵ Ѵѷ ѵѷѵ Ѵѵ ѹѶ ѶѸѸ ѷѹ ѷѶ Ѵ ѹ 8 8 ѷ Ѷ ѹ Ѵ ѶѴ – – – – – – – – – – – – – Ѵѳѹ Level Level ѴѴ 8 ѴѴ 8 Level Level Ѵ Ѹ ѷ ѵ Ѵ ѹ ѹ , , , , , , , , , , , ѼѴѳ ѺѺ ѹѸѹ ѷѹѷ , , , ѴѵѺ ѷѹ ѷѸ ѺѼѺ , ѷ ѹ ѺѷѸ ѵѶѴ ѺѵѶ ѴѸѹ ѼѸѹ ѷѷѸ ѶѼѳ ѷѳѴ ѳѳѶ ѴѴѸ 8 8 ѷѼ ѷѹ ѹѸ Ѷѵ ѵ 8 8 8 ѳ ѹ 8 ѵ
– – –
8,
Level Level Level Level Ѹ Ѵ 8, Ѹ Ѵ Ѵ ,88 , ,8 , , Ѵ Ѵ ѶѴѷ Ѽ Ѽ ѺѼѹ Ѹ Ѵ ѷѶѶ ѵ ѴѵѶ ѴѵѺ ѹѺ ѼѴѴѶ ѸѼ 8 8 Ѷѹ Ѷ Ѵѷ ѵѷ Ѹѹ ѹ ѶѷѴѴ Ѵ ѴѶ Ѷ ѷѷѺѵ ѺѸ Ѵ ѹ 8 8 ѵ Ѷ ѸѴ 8 – – – – – – – – – – fair value ѴѵѶ fair value 8 ѴѴ ѴѴ 8 Ѹ Ѵ Ѵ ѹ Ѷ Total ѷ ѵ Ѵ Ѵ ѹ Ѹ Ѽ Ѵ ѹ ,8 ,88 , , , , , , , , , ѶѴѷ ѼѵѸ , , , , , , ,8 , , , ,8 Total ѼѴѳ ѶѼ ѹѸѹ ѷѼѳ ѹѹѴ Ѻѷѷ ѷѹѸ ѴѵѺ ѸѶѴ ѷѸ ѸѶѹ Ѻѵѷ ѺѷѸ ѳѺѴ ѷѶѺ ѴѺѷ ѷѹѸ ѴѸѹ ѼѹѴ Ѵѳ ѷѸ Ѷѹ ѹѸ ѹѺ Ѻ 8 8 8 r 22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
5 : 5 9
P M M P
9 5 PART A : 5
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) 2 0 Ѹ 22020-05-14 5:59 PM ѳ ѹѴ Ѻѹ ѹѼ Ѷѹ ѵѳ Ѷѵ Ѵѵ ѴѸ 8 ( ( ( ( ѵѴѺ ѶѸѺ ѵѼѵ ѵѵѴ ѴѳѼ ѸѷѶ ѴѷѼ Ѽ Total , ( ( Ѻѵѵ , 8, 8, ѹ ѹ 71 A ) ) ) ) ) )Total – – – – – – – – – – )8 ) Ѵ 8 Ѵ ( Ѷ ѴѶ Ѵѷ ѵ ѷѴ ( ( ѹѺ Other assets assets Assets Assets (liabilities (liabilities and other (liabilities) (liabilities) prices with multiple prices held for sale ) ) )
) (
)
– – – – – – – – – –
) (
(
Ѹ Ѵ Ѵ Ѵ ( ( vable, quoted prices. prices. quoted vable, vable, quoted prices. prices. quoted vable, ( Ѽ ѵѵ ѵѵ net net net net ( ( . Derivatives, Derivatives, ) ) ) – – – – – – – )( Ѵ Ѻ Ѻ ( ( Ѹ ѴѶ ѷѺ Ѷѹ ( ѷѷѼ ѴѴѳ , ,8 ,88 ( ѵѷѺ Ѹ , Ѹ Ѹ Ѹ properties properties properties properties Investment Investment ) ) ) ) – – – – – – – 8 Ѵ ѵ ѵ ѴѵѴѷ ( ( ual and segregated funds. ual and segregated funds. Ѹѹ ѸѼ ѵѼ ( ѵѵ ѴѸѳ ( Shares by corroboration of market for sale for for sale for Shares Available Available ] ] ѵ ѵ ) [ [ ) – – – – – – – Ѻ Ѹ 8 ѹ ( 8 ѹѴ Ѻ ѶѸ 8 ( ѶѸѺ ѺѼѹ Ѵ , Ѵ through through through through Fair value Fair value profit or loss profit profit or loss profit ) ) ) – – – – – – – Ѵѵ ѵѳ ѴѶ Ѽѳ ѹѼ ( ( ( ѸѸ Ѵ ѴѶ ѷѸѶ ѵѳѷ Ѹ and Ѽѵѷ Ѹѷѷ ѷ
and ѵѴѺ ѷѶѶ ѶѴѷ on investments in mut in investments on , , 8 Ѵ Ѵ through through Fair value Fair value Mortgages other loans other Mortgages other loans other profit or loss profit profit or loss profit ) ) – – – – – – – – – – ѷ Ѷ Ѷ 8 ѵ ( ( ѹѹ ѹ ѹѺ (continued) ѹѺ Bonds through through Fair value Fair value profit or loss profit profit or loss profit ] ]
Ѵ Ѵ [ [ N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R
O Ѷ C
L A 1 I 7 C B
N Fair Value MeasurementFair Value
d A d n i
N .
I ] C 6 ѵѳѴѼ ѵѳѵѳ Ѷ F [ F , , 1
P R _ In other comprehensive income income In other comprehensive E ѶѴ ѶѴ 1 E In net earnings In net earnings In net earnings In net earnings In other comprehensive income income In other comprehensive 0 T Settlements Settlements into Level Transfer Sales Purchases Purchases Settlements Issues Other G W Total gains (losses) Total gains (losses) Total gains (losses) Total gains (losses) Purchases Issues Sales N O ] exchange. on foreign (losses) gains unrealized includes income comprehensive Other ] exchange. on foreign (losses) gains unrealized includes income comprehensive Other ] on obser based value is fair The restrictions. redemption are there where funds segregated and mutual in investments Includes ] on obser based is value fair The restrictions. redemption are there where funds segregated and mutual in investments Includes ] associate an in investment an to for sale from available reclassified was Capital Personal in investment 2019, the In January O E Balance, end of period of period Balance, end Ѵ Ѵ ѵ ѵ Ѷ _ [ of placement or the methodologies in valuation of inputs observability decreased to primarily are due Level 3 into Transfers to primarily 3 are due of Level out Transfers funds. segregated and mutual in investments on restrictions redemption as evidenced of methodologies inputs in valuation observability increased Bonds ended months Three March of year Balance, beginning Three months ended ended months Three March of year Balance, beginning of period Balance, end [ P N basis a recurring on value fair at measured liabilities and assets about information additional present tables following The ended months three the for value fair to determine 3 inputs Level have utilized subsidiaries and its Corporation the for which March 2020 31, and 2019. [ [ pricing vendors or the lifting of redemption restrictions of pricing vendors or the redemption lifting [ 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B71 PPFC_2020_QUAT1_ENG01_PFC.indd B72 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U categorized as Level 3in the fair value hierarchy. The following table sets informationout about significant inpuunobservable N P A hrs Thedetermination ofthefair Shares profit orloss) (fair value through release mortgages other loans–equity- Mortgage and Investment properties T O T O y 1 p W _ e T E
E o A E N R f G
a
1 0 s F 72 1 6 s _ I e N P
t
F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 A C Fair Value Measurement Fair ValueMeasurement N . i n C d d I
A
B L 7
2 C O R V transactions. earnings multiples,orrecent flows, discountrates,projected of estimatessuch asfuturecash value ofsharesrequires theuse care oftheloanholders. death/entering intolong-term voluntarily oronthe redemption oftheloaneither monthly until expected date. Theprojection isdone to thevaluation cash flowsback discount those all loansandto loan, toaggregatetheseacross guarantee foreach individual the no-negative-equity costof stochastically calculated asset cashflows,includingthe to determinetheprojected use aninternal valuationmodel equity-release mortgages isto The valuationapproach for on currentmarket rates. assetbased applicable tothe overall capitalizationrates discount, reversionary and operating expenditures) and rental rates,capital and leasing assumptions, future cashflows (suchasfuture the useofestimatessuchas of investmentproperty requires determination ofthefair value net cashflows.The that discountexpected future capitalization rates andmodels based onexpected property valuationmodels are generally determined using Investment propertyvaluations P a O l u R a t A i o T n I
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a c h
(continued) icutrt Various Discount rate Discount rate Rangeof1.9% Discount rate S u Vacancy rate Weighted average of 2.1% A decrease in the the in decrease A Weighted average of 2.1% rate Vacancy Rangeof4.3% Reversionary rate i n g
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v ts used atperiod-end inmeasuring assets a l u e – – – 5.2% 5.2% 14 Adecreaseinthediscount 11.4% 6. ѝ Adecreaseinthe % in adecrease infairvalue. discount ratewould result An increasein the increase infair value. rate wouldresult inan A decreaseinthediscount I n a decrease infair value. would generally result in expected vacancyrate An increasein the an increase infair value. would generally result in expected vacancyrate in adecrease infairvalue. discount ratewould result An increasein the increase infairvalue. rate wouldresult inan A decreaseinthediscount in adecrease infairvalue. discount ratewould result An increasein the increase infairvalue. rate wouldresult inan value. result inadecrease infair reversionary rate would An increasein the value. result inanincrease infair reversionary rate would v u t a e n l r o u - r b e e
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2 0 22020-05-14 5:59 PM 73 A althsimple, stments that Lifeco stments ment and investment sults of We al leisure parks; and customer and customer parks; al leisure but primarily from management from management but primarily interests in Europe-based companies companies in Europe-based interests insurance, retire insurance, oration evaluates the performance evaluates the oration based performance resulting from the inve the resulting from Power Financial and the re Power Financial debentures at par, maturing on May 14, 2030. Interest on the 14, 2030. Interest on May debentures at par, maturing IGM Financial and Pargesa. These reportable segments reflect reflect segments reportable These and Pargesa. IGM Financial ests in life insurance, health insurance, ests in life er of equipment and project management for a wide range of of a wide range for management project and equipment er of and November and 14, commencing November the date until 14, 2020 revenues from a range of sources, a range of sources, from revenues verage of sectors; operation region lty solutions for industry; testing, inspection and certification; cement, and certification; cement, inspection testing, industry; for lty solutions internal financial reporting. The Corpinternal The financialreporting. rgesa is a holding company with with rgesa diversified company is a holding segment includes the share of net earnings includes the shareof net earnings segment als-based specia als-based
N structure and O te” is comprised of corporate activities of of activities of te” corporate is comprised I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R O C
L A 3 I 7 C B
N Segmented Information Subsequent Events Subsequent d A d n i
N . I C 8 7 F F 1 1
P R _ E E 1 E 0 T T G experience and business process outsourcing. outsourcing. process business and experience management services, assetmanagement and reinsurance businesses primarilyCanada, in the United States andEurope. fees, which are charged to its mutual funds for investment advisory and management services. IGM also earns revenues revenues earns also IGM services. management and advisory for investment funds mutual its to charged are which fees, services. administrative to its mutual funds for charged from fees active in various sectors: miner of and recycling technology materials of sportswear; design and distribution and spirits; wines concrete; and aggregates suppli products; hygiene precious metals; disposable be and the food in industries primarily processing Lifeco is a financial services holding company with inter holding a financial services Lifeco is within the advice primarily in Canada operating company is a leading wealth and asset management IGM Financial IGM earns market. services financial of the segment Pa Parjointco. through is held Pargesa W N O O O E
_ Portag3 and Portag3 II. This column also includes consolidation elimination entries. consolidation and Portag3 also This column II. includes Portag3 The contribution to earnings of each adjustments. consolidation as certain in as well and other each IGM have The column entitled “Corpora The column On May 14, 2020, Lifeco issued $600 million of 10-year 2.379% 14, 2020, LifecoOn May issued $600 million N are Lifeco, operating segments reportable Corporation’s The Power Financial’s management P N POWER FINANCIAL million30, 2020,to Power Power Financial Corporation advanced On in exchange April $332 for a non-interest bearing of each of directors by the board and approved reviewed was transaction This on demand. payable note, promissory corporation. LIFECO on May arrears in 14 semi-annually payable is debentures on which the debentures are repaid. The debentures are redeemable at any time prior to February 14, 2030 in whole or in 14, whole in 2030 to February prior time at any redeemable are debentures The repaid. are debentures the on which together at par, in part or in whole 14, 2030 after February on or and and par, Price Yield Canada of the greater at the part and unpaid interest. accrued in eachwith case on the operating segment’s contribution to earnings. The following provides a brief description of the three reportable reportable the three of description a brief provides following The earnings. to contribution segment’s operating on the segments: operating 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B73 PPFC_2020_QUAT1_ENG01_PFC.indd B74 F C
_ PART A 2
0 POWER FINANCIAL CORPORATION 2 0 _ Q U [ A Income taxes Share ofearnings ofinvestmentsin Earnings before investments injointly controlled Total paidorcreditedtopolicyholders E Total netpremiums R Three months ended March [ A N Income taxes Earnings before income taxes Share ofearnings ofinvestmentsin Earnings before investments injointly controlled Total expenses Financing charges Operating andadministrative expenses Commissions Total paidorcreditedtopolicyholders E Total revenues Net investmentincome Total netpremiums R Three months ended March EARNINGS NET CONSOLIDATED N P Ѵ Ѵ A Operating andadministrative expenses N Total expenses Financing charges Total revenues Net investmentincome Commissions x x Fee income annsbfr noetxs 8 Earnings before income taxes Fee income t t O e e e Results reported by IGM include anadjustment forIFRS ] Results reported by IGM include anadjustment forIFRS ] T O t t p p Non-controlling interests oprtosadascae,adicm ae 8 corporations and associates,and incometaxes corporations and associates,and incometaxes j Common shareholders Perpetual preferred shareholders Non-controlling interests j e v v t ointly controlled corporationsandassociates ointly controlled corporationsandassociates 1 r r W impact has beenadjusted by the Corporation on consolidation and included in “Corporate”. impact has beenadjusted by the Corporation on consolidation and included in “Corporate”. Common shareholders Perpetual preferred shareholders
e e e e i i t _ e b b T
E n n n n e E a u u A E N u u s s a r R t t G e e n e e r
a a n
1 s s 0 i s s b b F n 74
1 8
i n _ l l I g e e N P
g s
F POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 t t
A s
C o o
Segmented Information Information Segmented
N . i n C d d I
A
B L 7
4 C O ѶѴ ѶѴ R P , , ѵѳѴѼ ѵѳѵѳ O R A T Lfc IGM Lifeco I O N
(continued) Ѽ Ѽ related tothe classification ofmortgageloans. As the has Corporation not yet adopted IFRS related tothe classification ofmortgageloans. As the has Corporation not yet adopted IFRS
ѴѶ Ѵѳ Ѵѳ Ѵѹ Ѵѹ Ѽ ( ѵ Ѽ Ѵ Ѻ Ѵ Ѵ Ѹ Lifeco Ѵ , , Ѷ ѷѸ ѴѶѳ ѼѴѵ Ѷ ѹѳ ѵѶѺ ѸѼѸ , , , , , , , ѵѺѶ Ѽѳѹ ѳѺѷ Ѽѳѵ ѸѳѺ ѺѳѸ ѷѷѴ Ѷ ѵѵѺ ѴѸѺ Ѷ ѶѺѴ ѶѺѴ ѹѵѸ , ,8 , ,88 , ѹ ѷ Ѵ ѷѹ ѴѴѳ ѷѷѷ ѷ ѳѺ ѹ Ѵ ѵѺѸ ѹѴѳ Ѻ ѺѶѹ ѷѺѼ ѴѵѴѴ ѴѴ ( ѴѶ ѹѸ 8 8 8 ѵѵѸ Ѻѵ ѸѷѼ ѴѸ 8 8 ѴѵѸѷѹ ѵѴѸ ѴѴ ѷ ѷ ѴѴѺѳ ѷѹ ѷѵѺѷ 8 ѴѴѺѳ ѷѹ ѼѺ – – – – ) ) ѴѹѴ ѴѹѴ ѵѳѼ ѵѳѶ ѸѺѶ ѵѺѹ ѵѺѳ ѺѺѹ ѺѸѶ ѸѺѷ IGM Ѽѷ ѹѺ ѷ ѵѺ ѵѶ 8 8 ѹ ѷѷѹ Ѹ – – – – – – [ [ Ѵ Ѵ ] ] ags oprt Total Corporate Pargesa Pargesa Ѻ Ѻ Ѻ Ѻ Ѻ 8 8 8 8 8
– – – – – – – – – – – – – – – – – – – – – – – – – –
( ( ( ( ( ( ( ( ( ( Corporate ( ( ( ( ( ( ( ( ( Ѹѹ ѹѷ ѸѶѸ ѶѸ ѵѺ Ѵѹ ѴѳѺ ѸѴ Ѵ ѵѸ Ѵѳ ѶѴ Ѵѹ ѵѹ ѵѴ Ѹѹ Ѷѹ ѴѶ ѵѸ Ѵѵ ѺѴ Ѻѳ ѶѸ ѺѴ Ѻѳ ѹѼ ѷѷ ѴѴ ѷѹ ѸѴ ( (8 ( ѸѴ Ѹ Ѵ Ѹ Ѵ – – – – )8 ) ) ) ) )8 ) ) )8 ) ) ) ) ) ) ) ) ) ) ) ) ) ѴѺ ѴѶ Ѵѳ ѴѴ Ѵѳ ( ѵ Ѽ ѵ Ѹ Ѵ Ѻ ѵ Ѵ Ѽ Ѽ , , , , , , ,8 ,8 , , , , , , , ѸѶѹ ѵѺѳ ѼѺѴ ѹѷ ѹѺѺ Ѻ ѴѼѷ ѸѼѳ Total , this , this ѼѴѵ ѸѴѼ ѳѵѷ ѼѳѴ ѳѹѶ ѺѳѸ Ѵ ѸѸѵ ѶѵѼ Ѵ ѸѸѵ Ѹ ѸѳѸ ѴѳѶ 88 ѳѵѴ 8 ѷѴ 8 ѹѼ ѷѴ ѹѷ ѵѼ 8 Ѹѳ ѶѸ Ѷѹ 8 88 88 ѳ 8 Ѽ ѹ ѵ Ѷ )
22020-05-14 5:59PM 0 2 0 - 0 5 - 1 4
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POWER FINANCIAL CORPORATION 4 1 - 5 0 - 0 2 0 ѵ 22020-05-14 5:59 PM ѴѶ 8 ѷѹ ѷѶѵ ѶѸѵ ѳѷѼ ѸѺѺ ѵѵѶ ѳѵѵ Total Ѹѵѳ ѳ ,8 , , , , , , ,8 , , ѶѺѵ Ѽѳѵ , , ѷ ѳ ѷ ѷѷ ѴѸ 8 75 Ѵ ѵѴѵ ѷѸѺ ѵѶѴ A – – 8 ѸѴ Ѷ Ѽѳѹ ѴѺѴ Ѷѳѵ ѷѶѳ ѶѳѺ ѴѺѺ ѷѳѳѴѺѴ ѷѵ ѴѸ , , , ѼѴѹ ѷѺѴ , Ѵ ѵ Ѵ Ѵ Corporate Corporate Total as not yet adopted IFRS 9, this this adopted IFRS 9, yet as not
– – – – – – – –
ѷѳѹ ѷѳѹ , , ѼѸѷ ѼѸѷ , , Ѷ Ѷ Pargesa Pargesa ] ] ѵ ѵ [ [ – – ѳѶ ѷ 8 IGM ѸѺ Ѷ 8 ѳѹѺ ѼѴѴ ѺѸѼ ѺѼѳ ѳѺѳ ѸѶѳ , , , , , Ѷ ѷѺѵ 8 Ѽ , , , Ѻ Ѵ ѷ Ѵѷ ѷѷ ѷ ѹѷ 88 ѸѺ ѸѶ ѳѵѵ ,8 , ѴѴѺ ѴѴѴ Ѽ ѸѺѺ , , , , ,8 Ѵѵѵ Ѵѷ ѼѺѷ Ѵ ѵѵѼ Ѻ , , Lifeco 8, Ѵѳ ѷѵ ѴѴ ѷѳ ѵѶѴ ѴѺѳ ѵѴѵ ѷѶѹ ѷѸѴ Ѵѹ
(continued)
N O I POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER T A R O P R O C
L A 5 Lifeco IGM I 7 C B
N Segmented Information
d ] ] ѵѳѴѼ A d Ѵ Ѵ , [ [ n i
N . s I C ѶѴ t 8 ѵѳѵѳ F F e , 1
P s R _ s E ѶѴ 1 a E
0 l T G policyholders policyholders impact has been adjusted by the Corporation on consolidation and included in “Corporate”. “Corporate”. in included and consolidation on Corporation the by been adjusted has impact W a policyholders policyholders and associates and associates and associates t N O ] Assets reported by IGM include an adjustment for IFRS 9 related to the classification of mortgage loans. As the Corporation h ] Corporation the As loans. of mortgage classification the to related 9 IFRS for adjustment an include IGM by reported Assets ] adjustments. consolidation certain and goodwill of allocation the include segments operating IGM and of Lifeco Total assets O Total assets E o Goodwill and intangible assets fund Investments on account of segregated ѵ Ѵ _ Other assets Other assets [ Other assets Other assets assets Goodwill and intangible fund of segregated Investments on account T December cash equivalents cash and Investments and corporations controlled Investments in jointly P N ASSETS TOTAL March cash equivalents cash and Investments and corporations controlled Investments in jointly [ 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG01_PFC.indd B75 Page intentionally left blank.
A 76 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG01_PFC.inddFC_2020_QUAT1_ENG01_PFC.indd B76B76 22020-05-14020-05-14 5:595:59 PMPM M P
2 0 PART B : 1
GREAT-WEST LIFECO INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:02 PM 1 B as at ows erent page numbers. erent nancial position and cash fl is subject to inherent risks and uncertainties that risks and uncertainties inherent is subject to fi nancial performance, x refers to the number of such page in the original document to x refers and the the number of such page in this document to x “B” refers c and which give rise to the possibility that expectations, forecasts, forecasts, that expectations, the possibility rise to c and which give ect the current expectations of the subsidiary as set forth therein. therein. forth of the subsidiary as set expectations ect the current er materially from the content of forward-looking statements, the material the material statements, of forward-looking the content from er materially management’s current expectations and plans relating to the future and the reader is is and the reader future the to and plans relating expectations current management’s page number without any prefi page number without any in the attached documents, statements Certain such subsidiary. publicly disclosed by may be general or specifi be general may may that assumptions be accurate, to will not prove or conclusions projections predictions, goals and priorities will not be achieved. strategic and that objectives, not be correct issued by Great-West Lifeco Inc. Lifeco Great-West by issued cautioned that such statements may not be appropriate for other purposes. for not be appropriate may such statements cautioned that statements. on forward-looking put undue reliance and not to carefully other than statements of historical fact, are forward-looking statements based on certain based on certain statements forward-looking are fact, of historical other than statements fi the subsidiary’s understanding By its nature, forward-looking information information forward-looking its nature, By For further information provided by the subsidiary as to the material factors that could cause that could factors the material the subsidiary as to by provided further information For and assumptions these factors consider is cautioned to reader The Information. Looking Please note that the bottom of each page in Part B contains two diff two B contains of each page in Part that the bottom Please note in the reader the purposes of assisting for provided are statements Forward-looking POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER actual results to diff to actual results assumptions and refl assumptions about the subsidiary’s information present and to dates the periods ended on certain and for PART B PAGE B 53PAGE PAGE B 2 B PAGE the subsidiary’s policy for updating the content of forward-looking statements, please see statements, of forward-looking content updating the for policy the subsidiary’s Forward- Regarding the attached documents, including the section entitled Cautionary Note factors and assumptions that were applied in making the forward-looking statements, and statements, applied in making the forward-looking that were and assumptions factors FINANCIAL STATEMENTS AND NOTES FINANCIAL STATEMENTS MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S A page number with the prefi GREAT-WEST LIFECO INC.GREAT-WEST The attached documents concerning Great-West Lifeco Inc. are documents prepared and documents prepared Inc. are Lifeco Great-West attached documents concerning The 1 C
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B 4 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 5
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 9
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C9C9 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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B 10 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C10C10 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 11
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C11C11 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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B 12 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C12C12 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 13
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B 14 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C14C14 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 15
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B 16 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 17
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B 18 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 19
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C19C19 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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B 20 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C20C20 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 21
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C21C21 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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B 22 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C22C22 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 23
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C23C23 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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B 24 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 25
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C25C25 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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B 26 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 27
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B 28 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C28C28 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 29
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B 30 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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B 32 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 33
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B 34 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 35
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B 36 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 37
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B 38 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C38C38 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 39
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C39C39 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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B 40 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C40C40 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 41
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C41C41 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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B 42 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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B 44 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 45
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 47
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B 48 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C48C48 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 49
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C49C49 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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B 50 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C50C50 22020-05-11020-05-11 1:021:02 PMPM .BOBHFNFOUT%JTDVTTJPOBOE"OBMZTJT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 51
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B 52 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 53
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B 54 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C54C54 22020-05-11020-05-11 1:021:02 PMPM $0/40-*%"5&%#"-"/$&4)&&54 VOBVEJUFE JO$BOBEJBONJMMJPOT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 55
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C55C55 22020-05-11020-05-11 1:021:02 PMPM $0/40-*%"5&%45"5&.&/540'$)"/(&4*/&26*5: VOBVEJUFE JO$BOBEJBONJMMJPOT
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B 56 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C56C56 22020-05-11020-05-11 1:021:02 PMPM $0/40-*%"5&%45"5&.&/540'$"4)'-084 VOBVEJUFE JO$BOBEJBONJMMJPOT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 57
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C57C57 22020-05-11020-05-11 1:021:02 PMPM $0/%&/4&%/05&450$0/40-*%"5&%*/5&3*.'*/"/$*"-45"5&.&/54 VOBVEJUFE
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B 58 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C58C58 22020-05-11020-05-11 1:021:02 PMPM #BTJTPG1SFTFOUBUJPOBOE4VNNBSZPG"DDPVOUJOH1PMJDJFT DPOUE
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 59
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B 60 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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B 62 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 63
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B 64 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 65
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B 66 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 67
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C67C67 22020-05-11020-05-11 1:021:02 PMPM 'JOBODJBM*OTUSVNFOUT3JTL.BOBHFNFOU DPOUE
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B 68 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C68C68 22020-05-11020-05-11 1:021:02 PMPM 'BJS7BMVF.FBTVSFNFOU 5IF$PNQBOZaTBTTFUTBOEMJBCJMJUJFTSFDPSEFEBUGBJSWBMVFIBWFCFFODBUFHPSJ[FECBTFEVQPOUIFGPMMPXJOHGBJS WBMVFIJFSBSDIZ -FWFM'BJSWBMVFNFBTVSFNFOUTVUJMJ[FPCTFSWBCMF RVPUFEQSJDFT VOBEKVTUFE JOBDUJWFNBSLFUTGPSJEFOUJDBM BTTFUTPSMJBCJMJUJFTUIBUUIF$PNQBOZIBTUIFBCJMJUZUPBDDFTT"TTFUTBOEMJBCJMJUJFTVUJMJ[JOH-FWFMJOQVUTJODMVEF BDUJWFMZFYDIBOHFUSBEFEFRVJUZTFDVSJUJFT FYDIBOHFUSBEFEGVUVSFT BOENVUVBMBOETFHSFHBUFEGVOETXIJDIIBWF BWBJMBCMFQSJDFTJOBOBDUJWFNBSLFUXJUIOPSFEFNQUJPOSFTUSJDUJPOT -FWFM'BJSWBMVFNFBTVSFNFOUTVUJMJ[FJOQVUTPUIFSUIBORVPUFEQSJDFTJODMVEFEJO-FWFMUIBUBSFPCTFSWBCMF GPSUIFBTTFUPSMJBCJMJUZ FJUIFSEJSFDUMZPSJOEJSFDUMZ-FWFMJOQVUTJODMVEFRVPUFEQSJDFTGPSTJNJMBSBTTFUTBOE MJBCJMJUJFTJOBDUJWFNBSLFUT BOEJOQVUTPUIFSUIBORVPUFEQSJDFTUIBUBSFPCTFSWBCMFGPSUIFBTTFUPSMJBCJMJUZ TVDI BTJOUFSFTUSBUFTBOEZJFMEDVSWFTUIBUBSFPCTFSWBCMFBUDPNNPOMZRVPUFEJOUFSWBMT5IFGBJSWBMVFTGPSTPNF -FWFMTFDVSJUJFTXFSFPCUBJOFEGSPNBQSJDJOHTFSWJDF5IFQSJDJOHTFSWJDFJOQVUTJODMVEF CVUBSFOPUMJNJUFEUP CFODINBSLZJFMET SFQPSUFEUSBEFT CSPLFSEFBMFSRVPUFT JTTVFSTQSFBET UXPTJEFENBSLFUT CFODINBSLTFDVSJUJFT GREAT-WEST LIFECO INC. PGGFSTBOESFGFSFODFEBUB-FWFMBTTFUTBOEMJBCJMJUJFTJODMVEFUIPTFQSJDFEVTJOHBNBUSJYXIJDIJTCBTFEPO
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 69
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C69C69 22020-05-11020-05-11 1:021:02 PMPM 'BJS7BMVF.FBTVSFNFOU DPOUE 5IFGPMMPXJOHQSFTFOUTUIF$PNQBOZaTBTTFUTBOEMJBCJMJUJFTNFBTVSFEBUGBJSWBMVFPOBSFDVSSJOHCBTJTCZIJFSBSDIZ MFWFM
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B 70 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C70C70 22020-05-11020-05-11 1:021:02 PMPM 'BJS7BMVF.FBTVSFNFOU DPOUE
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 71
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B 72 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C72C72 22020-05-11020-05-11 1:021:02 PMPM 'BJS7BMVF.FBTVSFNFOU DPOUE
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 73
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C73C73 22020-05-11020-05-11 1:021:02 PMPM 'BJS7BMVF.FBTVSFNFOU DPOUE 5IFGPMMPXJOHTFUTPVUJOGPSNBUJPOBCPVUTJHOJGJDBOUVOPCTFSWBCMFJOQVUTVTFEBUQFSJPEFOEJONFBTVSJOHBTTFUT DBUFHPSJ[FEBT-FWFMJOUIFGBJSWBMVFIJFSBSDIZ
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B 74 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C74C74 22020-05-11020-05-11 1:021:02 PMPM 4FHSFHBUFE'VOET 5IFGPMMPXJOHQSFTFOUTEFUBJMTPGUIFJOWFTUNFOUT EFUFSNJOFEJOBDDPSEBODFXJUIUIFSFMFWBOUTUBUVUPSZSFQPSUJOH SFRVJSFNFOUTPGFBDISFHJPOPGUIF$PNQBOZTPQFSBUJPOT POBDDPVOUPGTFHSFHBUFEGVOEQPMJDZIPMEFST B *OWFTUNFOUTPOBDDPVOUPGTFHSFHBUFEGVOEQPMJDZIPMEFST
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 75
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C75C75 22020-05-11020-05-11 1:021:02 PMPM 4FHSFHBUFE'VOET DPOUE D *OWFTUNFOUTPOBDDPVOUPGTFHSFHBUFEGVOEQPMJDZIPMEFSTCZGBJSWBMVFIJFSBSDIZMFWFM OPUF
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B 76 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C76C76 22020-05-11020-05-11 1:021:02 PMPM 4IBSF$BQJUBM $PNNPO4IBSFT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 77
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B 78 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C78C78 22020-05-11020-05-11 1:021:02 PMPM $BQJUBM.BOBHFNFOU DPOUE 0UIFSGPSFJHOPQFSBUJPOTBOEGPSFJHOTVCTJEJBSJFTPGUIF$PNQBOZBSFSFRVJSFEUPDPNQMZXJUIMPDBMDBQJUBMPS TPMWFODZSFRVJSFNFOUTJOUIFJSSFTQFDUJWFKVSJTEJDUJPOT
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 79
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C79C79 22020-05-11020-05-11 1:021:02 PMPM *ODPNF5BYFT B *ODPNF5BY&YQFOTF *ODPNFUBYFYQFOTF SFDPWFSZ DPOTJTUTPGUIFGPMMPXJOH
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B 80 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 81
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B 82 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
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POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 B 83
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B 84 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG02_GWL.inddFC_2020_QUAT1_ENG02_GWL.indd C84C84 22020-05-11020-05-11 1:021:02 PMPM M P
1 0 PART C : 1
IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 1 C ows erent page numbers. erent nancial position and cash fl is subject to inherent risks and uncertainties that risks and uncertainties inherent is subject to x refers to the number of such page in the original to x refers nancial performance, fi nancial performance, x “C” refers to the number of such page in this document the number of such page in this document to refers x “C” er materially from the content of forward-looking statements, statements, of forward-looking the content from er materially c and which give rise to the possibility that expectations, forecasts, forecasts, that expectations, the possibility rise to c and which give ect the current expectations of the subsidiary as set forth therein. therein. forth of the subsidiary as set expectations ect the current publicly disclosed by such subsidiary. Certain statements in the attached documents, in the attached documents, statements Certain such subsidiary. publicly disclosed by may be general or specifi be general may may that assumptions be accurate, to will not prove or conclusions projections predictions, goals and priorities will not be achieved. strategic and that objectives, not be correct cause actual results to diff to cause actual results other than statements of historical fact, are forward-looking statements based on certain based on certain statements forward-looking are fact, of historical other than statements fi the subsidiary’s understanding document issued by IGM Financial Inc. by document issued statements, and the subsidiary’s policy for updating the content of forward-looking of forward-looking updating the content for policy and the subsidiary’s statements, including the section entitled please see the attached documents, statements, subsidiary’s management’s current expectations and plans relating to the future and and the future to and plans relating expectations current management’s subsidiary’s By its nature, forward-looking information information forward-looking its nature, By that could factors the material to the subsidiary as by provided further information For and these factors consider is cautioned to reader The Statements. Forward-Looking Please note that the bottom of each page in Part C contains two diff two C contains of each page in Part that the bottom Please note in the reader the purposes of assisting for provided are statements Forward-looking POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER assumptions carefully and not to put undue reliance on forward-looking statements. on forward-looking put undue reliance and not to carefully assumptions and the page number without any prefi and the page number without any and refl assumptions about the information present and to dates the periods ended on certain as at and for PAGE C 50 PAGE C 2 the reader is cautioned that such statements may not be appropriate for other purposes. for not be appropriate may is cautioned that such statements the reader applied in making the forward-looking that were and assumptions factors the material PART C FINANCIAL STATEMENTS AND NOTES FINANCIAL STATEMENTS MANAGEMENT’S DISCUSSION AND ANALYSIS MANAGEMENT’S A page number with the prefi IGM FINANCIAL INC.IGM FINANCIAL The attached documents concerning IGM Financial Inc. are documents prepared and and documents prepared IGM Financial Inc. are concerning attached documents The 1 D
d d n i . M G I _ 3 0 G N E _ 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D1 PPFC_2020_QUAT1_ENG03_IGM.indd D2 F C
_ PART C 2
0 IGM FINANCIAL INC. 2 0 _ Q U (EBITDA aftersalescommissions)arealsonon-IFRS measures.EBIT, financial EBITDA “earnings beforeinterest,taxes,depreciationandamortizationaftersalescommissions” and amortizationbeforesalescommissions”(EBITDAcommissions), and “Earnings beforeinterestandtaxes”(EBIT),“ similar measuresusedbyothercompanies. have standardmeaningsprescribedbyIFRSandmaynotbedirectlycomparable to measures toassessearningsperformance.Thesenon-IFRS measuresdonot financial measureswhichareused to providemanagementandinvestorswithadditional financial per share” (EPS)and“adjustedreturnonaveragecommonequity”(ROE) arenon-IFRS “Adjusted netearningsavailabletocommonshareholders”,“adjusteddiluted • • accordance withIFRS,maybesubdividedintotwocomponentsconsistingof: Net earningsavailabletocommonshareholders,whichisanadditionalmeasurein subsidiaries’ control,affecttheoperations,performanceandresultsofCompany, and A varietyofmaterialfactors,manywhicharebeyondtheCompany’s andits may notbecorrectandthatobjectives,strategicgoalsprioritieswillachieved. predictions, projectionsorconclusionswillnot andwhichgiverisetothepossibilitythatexpectations,forecasts, be generalorspecific By itsnature,thisinformationissubjecttoinherentrisksanduncertaintiesthatmay based oninformationcurrentlyavailabletomanagement,theymayprovebeincorrect. in thecircumstances.WhileCompany considerstheseassumptionstobereasonable expected futuredevelopments,aswellotherfactorsthatarebelievedtobeappropriate looking statements,includingtheperceptionofhistoricaltrends,currentconditionsand in drawingaconclusionormakingforecast This informationisbaseduponcertain materialfactorsorassumptionsthatwereapplied conditional verbssuchas“may”,“will”,“should”, “would”and“could”. “forecasts” ornegativeversionsthereofandothersimilarexpressions,future “anticipates”, “plans”,“believes”,“estimates”, “seeks”, “intends”,“targets”,“projects”, depend uponorrefertofutureeventsconditions,includewordssuchas“expects”, periods. Forward-lookingstatementsincludethatarepredictiveinnature, yearandsubsequent North Americanandinternationaleconomies,forthecurrentfiscal ongoing objectives,strategiesandoutlookoftheCompany, aswelltheoutlookfor results,performance,prospects,opportunities,priorities,targets,goals, expected financial condition, without limitation,statementsregardingtheoperations,business,financial statements maynotbeappropriateforotherpurposes.Theseinclude, current expectationsandplansrelatingtothefuture.Readers arecautionedthatsuch the periodsendedoncertaindatesandtopresentinformationaboutmanagement’s understanding theCompany’s positionandresultsofoperationsasatfor financial expectations. Forward-lookingstatementsareprovidedtoassistthereaderin current looking statementsbasedoncertainassumptionsandreflectIGM Financial’s Certain statementsinthisreport,otherthanofhistoricalfact,areforward- been prepared inaccordancewithInternational AccountingStandard 34, whicharethebasisofinformationpresentedinCompany’s MD&A,have The InterimFinancialStatementsofIGM Financial, 2020isasofMay8,2020. March 31, onwww.sedar.com. Inc.AnnualReport filed Commentary2019 IGM Financial intheMD&Aasatandforthreemonthsended conjunction withtheunauditedInterimCondensed Consolidated FinancialStatements(InterimStatements)aswellth 2020andshouldbereadin or theCompany) asatandforthethreemonthsendedMarch 31, Inc.(IGM Financial of IGM Financial condition The Management’sDiscussionandAnalysis(MD&A)presentsmanagement’sviewoftheresultsoperationsfinancial Canadian dollars(Note2oftheInterimFinancialStatements). NON-IFRS FINANCIAL MEASURES FORWARD-LOOKING STATEMENTS BASIS OFPRESENTATION AND MANAGEMENT’S DISCUSSIONANDANALYSIS A T comparison ofresultsfromoperationslessmeaningful. considers tobeofanon-recurringnatureorthatcouldmake theperiod-over-period Other items,whichincludetheafter-taximpactofanyitemthatmanagement Adjusted netearningsavailabletocommonshareholders;and 1 _ E C N G 0 2 3 _ POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 I G M . i n d d
D 2 AND ADDITIONALIFRSMEASURES earnings before interest, taxes, depreciation earnings beforeinterest,taxes,depreciation or projectionasreflectedintheforward- prove to be accurate, that assumptions prove tobeaccurate,thatassumptions SUMMARY OFACCOUNTING POLICIES IGM FINANCIALINC.FIRST results inaccordancewithIFRSTables 1,2and3. Refer totheappropriatereconciliationsofnon-IFRS measurestoreported financial performance. IFRS andarerelevanttoanunderstandingoftheentity’sfinancial additional IFRSmeasuresastheyare inadditiontotheminimumlineitemsrequiredby additional measurestoassessearningsperformance.These additional IFRSmeasureswhichareusedtoprovidemanagementandinvestorswith “Earnings beforeincometaxes”and“netearnings comparable tosimilarmeasuresusedbyothercompanies. measures donothavestandardmeaningsprescribedbyIFRSandmaybedirectly before salescommissionsandEBITDAaftercommissions.Thesenon-IFRS financial of resultsfromoperationslessmeaningful,arefurtherexcludedtoarriveatEBITDA items ofanon-recurringnature,orthatcouldmake theperiod-over-periodcomparison commissions includesallsalesandhighlightsaggregatecashflows.Other mutual fundsalescommissionsandiscomparabletopriorperiods.EBITDAafter and analyzetheCompany’s results.EBITDAbeforesalescommissionsexcludesall of performanceutilizedbymanagement,investorsandinvestmentanalyststoevaluate before salescommissionsandEBITDAafter securities regulatoryauthoritiesinCanada,availableatwww.sedar.com. withthe Discussion andAnalysisitsmostrecentAnnualInformationForm,filed statements isbasedprovidedinitsdisclosurematerials,includingthisManagement’s material factorsorassumptionsonwhichinformationcontainedinforward-looking Additional informationabouttherisksanduncertaintiesofCompany’s businessand or otherwise. unanticipated events,whetherasaresultofnewinformation,futureeventsorresults, after thedateonwhichsuchstatementsaremade,or no obligationtoupdateanyforward-lookingstatementsreflecteventsorcircumstances requiredbyapplicableCanadianlaw,theCompany Other thanasspecifically undertakes place unduerelianceonforward-lookingstatements. to considertheseandotherfactors,uncertaintiespotentialeventscarefullynot affect anyoftheCompany’s forward-lookingstatements.The readerisalsocautioned The readeriscautionedthattheforegoinglistnotexhaustiveoffactorsmay the foregoingfactors. strategies, andtheCompany’s anditssubsidiaries’successinanticipating andmanaging to completestrategictransactions,integrateacquisitionsandimplementothergrowth events, outbreaksofdiseaseorpandemics(suchasCOVID-19), theCompany’s ability legislation, changesintaxlaws,unexpectedjudicialorregulatoryproceedings,catastrophic risks, businesscompetition,technologicalchange,changesingovernmentregulationsand estimates), theeffectofapplyingfutureaccountingchanges,operationalandreputational condition (includinguncertaintiesassociatedwithcriticalaccountingassumptionsand and fundingrisks,changesinaccountingpoliciesmethodsusedtoreportfinancial exchange rates,globalequityandcapitalmarkets, managementofmarket liquidity political andmarket factorsinNorthAmericaandinternationally,interestforeign include, butarenotlimitedto:theimpactorunanticipatedofgeneraleconomic, from currentexpectationsofestimatedoranticipatedeventsresults.Thesefactors its subsidiaries,andtheirbusinesses,couldcauseactualresultstodiffermaterially Interim FinancialReporting QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS (IFRS)andarepresentedin commissions are alternative measures commissions arealternativemeasures available to common shareholders” are available tocommonshareholders”are to reflect the occurrence of to reflecttheoccurrenceof measures are considered measures areconsidered e
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 3 C preparedness committee esses and following government guidance – planning and responding to events including pandemics. planning, and benefitssupport, workforce and employee assistance program support. Distribution and client communication committee – and IPC distribution IG Consultant network, Mackenzie conditions. and client communication specific to market where necessary, leadership committees and forums to where necessary, leadership committees and issues with the following mandates. address COVID-19 3) and leader Human resources committee – employee 4) 2) Business continuity and emergency across the country, suspending all non-essential business using virtual technology) all internal travel, and postponing (or and external events involving employees and/or clients. their teams and temporarily closing all offices Canada across and globally. protocols and proc on these matters. processes issues, and establishing new committees and where required: 1) committee – focusing, or establishing Executive COVID-19 • Implementing a work at home policy for our employees • and Implementing a work at home policy for our Consultants have reacted with significanthave reacted monetary and fiscal interventions stabilize economic conditions. designed to in in global equity markets unprecedented volatility Despite the the last fivethe month of March, over an quarters there has been Composite In 2019 the S&P-TSX markets. overall increase in those in the firstindex rose by 19.1% and quarter of 2020 declined by for those same periods increased by equity markets 21.6%. U.S. 20.0%. Our clients experienced an average28.9% and declined by in 2019 and negative 11.7% in theinvestment return of 13.0% first quarter of 2020. The decline in IGM Financial under assets from $166.8 billionmanagement of 11.6% at December 31, 2019 to $147.5 billion March 31, at 2020 was not as severe as overall reflecting the diversified declines, nature of IGM Financial’smarket overall asset mix. pandemic is unknown The duration and impact of the COVID-19 at this time, as is the efficacy of the government and central bank reliably estimateinterventions. As a result, it is not possible to and the impact the length and severity of these developments and its on the financial results and condition of the Corporation operating subsidiaries in future periods. clients, on the Company’s In response to the impact of COVID-19 the we have taken and shareholders, employees, Consultants following actions: • and business continuity Adhering to crisis management • and managing COVID-19 addressing Focusing our teams on MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 3 D
d d n i . M DEVELOPMENTS G I _ 3 0 G N E IGM FINANCIALINC. SUMMARY OF CONSOLIDATED OPERATING RESULTS OPERATING CONSOLIDATED OF SUMMARY COVID-19 IGM FINANCIAL INC. FIRST 2020 IGM Financial and asset is a leading wealth Inc. (TSX:IGM) are principal businesses company. The Company’s management each Financial Corporation, Inc. and Mackenzie Investors Group of the the advice segment primarily within operating distinctly financial services market. IGM Financial’s were $168.5 billion assets under administration as at March 31, compared with $182.8 billion 2020, at March 31, 2019 and $190.2 billion at December 31, 2019. were $147.5 billion assets under management at March 31, Total $160.5 billion2020 compared with at March 31, 2019 and 5.$166.8 billion at December 31, as detailed in Table 2019, assets under management for the first total quarter of Average 2020 were $163.3 billion compared to $155.9 billion first in the quarter of 2019. were $143.2 billionInvestment fund assets under management at March 31, 2020 compared with $154.3 billion at March 31, 2019 and $161.8 billion at December 31, 2019. Average for the firstinvestment fund assets under management quarter of 2020 were $158.5 billion compared to $149.9 billion in the first quarter of 2019. was primarily due to The decrease in assets under management in the last particularly decreases in the level of financial markets, month of the quarter. for the three Net earnings available to common shareholders months ended March 31, 2020 were $160.9 million or 68 cents to common per share compared with net earnings available per share for the shareholders of $167.5 million or 70 cents 2.9% in earnings comparative period in 2019, a decrease of per share. March 31,Shareholders’ equity was $4.6 billion as at 2020, compared to $4.5 billion at December 31, on 2019. Return for the three average common equity based on net earnings months ended March 31, with 2020 was 14.1% compared 15.2% for the comparative period in 2019. The quarterly first declared in the dividend per common share quarter of 2020 of 2019. the fourth quarter was 56.25 cents, unchanged from Governments worldwide have enacted emergency measures to Governments worldwide have enacted emergency combat the spread of a novel strain of coronavirus (COVID-19). These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused significant volatility and weakness in global equity and material disruption to businesses globally resulting markets in an economic slowdown. Governments and central banks _ 1 T A U Q _ 6 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D3 PPFC_2020_QUAT1_ENG03_IGM.indd D4 F C
_ PART C 2
0 IGM FINANCIAL INC. 2 0 _ Q U mriaino aiaie ae omsin 231.0 Interest Amortizationofcapital,intangibleand otherassets expense Amortizationofcapitalizedsales commissions Sales-basedcommissionspaidsubject toamortization EBITDA aftersalescommissions–Non-IFRSmeasure 2 Interestexpenseincludesinterestonlong-termdebtandleases. (2) Dilutedearningspershare. (1) 0.68 $ 160.9 $ 271.7 0.68 $ $ 160.9 $ Sales-basedcommissionspaid EBITDA beforesalescommissions–Non-IFRSmeasure Net earningsavailabletocommonshareholders–IFRS Proportionateshareofassociate’sone-timecharges Non-IFRSmeasure Adjusted netearningsavailabletocommonshareholders– ($ millions) faced bysmallbusinessesacross Canada. Centraide duGrandMontreal;andassistwiththepressures through utilizingtheuniqueexpertiseofUnitedWay and provide resources tootherpressingneedsofvulnerablepeople foodbanks, whicharestrugglingtocopewithincreaseddemand; being usedto:supportimmediateneedsoflocalandnational Thefundingis joint contributiontosupportcrisisreliefefforts. and PowerCorporation ofCanadaannounceda$1 million On March23,2020,theCompany alongwithCanadaLife Establishingexpensemanagementplanstoprudentlymanage • Changingtheformatofplannedeventsandconferences • Establishingregularandongoingmarket updatesfor •
Icm ae 160.9 $ Net earningsavailabletocommonshareholders–IFRS Perpetual preferred 208.9 Income share taxes dividends Proportionateshareofassociate’s one-timecharges Adjusted earningsbeforeincometaxes–Non-IFRSmeasure THREE MONTHSENDED TABLE 1: RECONCILIATIONOF A T discretionary spending. on strategicpriorities,andd)seekingopportunitiestocurtail advisors,c)delivering right byouremployeesandfinancial expenses while:a)nurturingclientrelationships,b) doing shareholders onFriday, May8,2020toavirtual-onlyformat. leadership conferenceandtheCompany’s annualmeetingof Networkfield to beremote,includingtheIG Consultant planningengagement. communications andfinancial our clientsandincreasingthelevelextentofclient Earnings beforeincometaxes 1 _ E C N G 0 4 3 _ POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 I G M . i n d d
(2)
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4 NON-IFRS FINANCIALMEASURES IGM FINANCIALINC.FIRST EARNINGS
• to segments: Certain itemsreflectedinTables 2and3are notallocated reportingandperformancemeasurement. internal financial These segments,asshowninTables 2and3reflecttheCompany’s Corporate andOther • Mackenzie Investments (Mackenzie InvestmentsorMackenzie) • ManagementorIG) Management(IG Wealth IG Wealth • reportablesegmentsare: IGM Financial’s further detailintheRiskManagementsectionofthisMD&A. developments; andpeoplerisk.Theserisksarediscussedin risk; governance, oversightandstrategicrisk;regulatory and risksrelatedtoassetsundermanagement;operational activities. Theseinclude:liquidityrisk;creditbusinessrisk the Company toanumberofrisksinherentinourbusiness COVID-19 hasthecurrent andongoing potentialtoexpose REPORTABLE SEGMENTS 208.9 (20.1) (40.7) (27.3) (48.0) 33.0 (7.7) debt andinterestexpenseonleases.Thechangein Interest expense – – – QUARTER REPORT
MARCH 31 (99 (20.0) (19.9) 213 252.2 291.3 (6.5) 23.5 (4.8) 12.6 (52 (43.7) (45.2) 3. $295.9 $336.5
(98 (45.1) (59.8) (25.2) (27.8) 9. $167.5 $191.6 214.8 251.4 214.8 260.6 – (2.2) (9.2) – 2020 EPS – (1) EARNINGS EPS – representsinterestexpenseonlong-term 2020 $ 191.6 $ 0.80 $ 167.5 $ 0.70 $167.5 0.80 $ $ 191.6 $ 0.70 $167.5 0.84 $ $ 200.8 (9.2) – – (0.04) | MANAGEMENT’SDISCUSSIONANDANALYSIS EEBR3 MARCH 31 DECEMBER 31 2019 (1) EARNINGS EPS (1) 22020-05-11 1:01PM 0 2 0 - 0 7 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 2019 2019 2019 2019 DEC. 31 MAR. 31 5 $ 191.6 169.7 $ 167.5 59.8 (9.2) 251.4 $ 167.5 $ 778.8 53.9 832.7 278.3 $ 736.2 52.9 789.1 274.7 45.1 214.8 2.2 240.0 288.4 (27.8) (25.2) 274.4 549.1 266.0 544.3 C $ 200.8 $ – – 2020 2020 48.0 29.5 29.5 48.0 (27.3) (27.3) 160.9 208.9 782.1 270.0 782.1 270.0 208.9 236.2 236.2 275.9 545.9 275.9 545.9 MAR. 31 MAR. 31 $ 160.9 $ 160.9 $ 752.6 $ 752.6 $ 160.9 $
$ 160.9 $ 2019 2019 DEC. 31 MAR. 31 36.5 36.5 107.0 44.8 38.7 38.7 108.7 45.2 $ 70.5 $ 70.0 $ 40.8 $ 40.8 $ 40.7 22.7 22.7 67.9 21.5 66.3 ies is allocated proportionately between ies is allocated proportionately between
on-IFRS financial measures. ion, which was recorded in Proportionate share of 2020 2020 23.6 94.2 45.1 23.6 94.2 45.1 22.0 67.1 22.0 67.1 MAR. 31 MAR. 31 $ 70.6 $ 70.6 $ 27.1 $ 27.1
OTHER & CORPORATE TOTAL CORPORATE & OTHER OTHER & CORPORATE TOTAL 2019 2019 DEC. 31 MAR. 31 207.9 73.9 0.6 0.6 197.2 72.5 $ 207.3 4.2 4.2 $ 193.0 88.8 88.8 92.6 161.3 166.5 $ 35.9 $ 41.4
(2.8) (2.8) Q1 2020 VS. Q1 2019 VS. Q1 Q1 2020 VS. Q4 2019 Q1 2020 2020 2020 75.4 75.4 88.5 88.5 199.6 199.6 163.9 163.9 MAR. 31 MAR. 31
$ 202.4 $ 202.4
$ 35.7 $ 35.7
2019 2019 (3)
SEGMENT – SEGMENT SEGMENT – DEC. 31 MAR. 31 16.8 16.8 517.8 159.6 $ 501.0 10.0 10.0 483.2 157.0 $ 473.2 151.9 162.9 319.9 $ 163.3 311.5 $ 206.3
8.7 8.7 2020 2020 MANAGEMENT’S DISCUSSION AND ANALYSIS 488.3 149.5 488.3 149.5 165.4 165.4 314.9 314.9 | MAR. 31 MAR. 31 $ 479.6 $ 479.6 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT
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d d n CONSOLIDATED OPERATING RESULTS BY CONSOLIDATED OPERATING RESULTS CONSOLIDATED OPERATING RESULTS BY RESULTS OPERATING CONSOLIDATED i . M 3: 2: G I _ 3 0 associates’ earnings in the Consolidated Statements of Earnings. the segments. the segments. G N E TABLE TABLE TABLE IGM FINANCIAL INC. FIRST THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS Adjusted net earnings available to common shareholders Perpetual preferred share dividends shareholders Adjusted net earnings available to common Net earnings available to common shareholders income and other Net investment Expenses Commission Non-commission and other investment income Net Expenses Commission Non-commission (2) on long-term debt and interest on leases. Interest expense includes interest (3) Measures and Additional IFRS Measures in this MD&A for an explanation of the Company’s use of n Refer to Non-IFRS Financial The fourth quarter of 2019 adjusted net earnings excluded the proportionate share of associate’s one-time charges of $9.2 mill (2) Interest expense includes interest on long-term debt and interest on leases. Earnings before income taxes income before taxes Earnings Income Net earnings Income taxes Net earnings available to common shareholders Interest expense Interest expense Proportionate share of associate’s one-time charges Proportionate share of associate’s one-time charges (1) management functions reside at Mackenzie Investments and the cost of investment management activit The Company’s investment Earnings before income taxes Earnings before income (1) the cost of investment management activit The Company’s investment management functions reside at Mackenzie Investments and ($ millions) Revenues income Fee MANAGEMENT IG WEALTH MACKENZIE INVESTMENTS ($ millions) Revenues income Fee MANAGEMENT IG WEALTH MACKENZIE INVESTMENTS and taxes Earnings before interest $ 173.4 Earnings before interest and taxes $ 173.4 _ 1 T A U Q _ 8 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D5 PPFC_2020_QUAT1_ENG03_IGM.indd D6 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U fetv noetxrt e anns 29 % 22.99 Effective incometaxrate–netearnings Proportionateshareofassociate’s one-timecharges Tax loss consolidation (1) See Note 26 – Related Party Transactions of the Consolidated Financial Statements included in the 2019 IGM Financial Inc.A SeeNote26–RelatedPartyTransactionsoftheConsolidatedFinancialStatementsincludedin2019IGM Financial (1) Proportionateshareofassociates’earnings Effect of: Income taxesatCanadianfederalandprovincialstatutoryrates • • • Effective incometaxrate–adjustednetearnings Other items HE OTSEDD THREE MONTHSENDED TABLE 4: EFFECTIVE A T shares onApril30,2019. inpreferred reflects theredemptionof$150.0 million preferred shares.Thedecreasein declared ontheCompany’s 5.90%non-cumulativefirst Perpetual preferredsharedividends effective incometaxratesonforeign operations. which alsoincludes,butisnotlimitedto,theeffectoflower reported inadjustednetearningsisreflectedOtheritems, year. Theeffectofchangesinmanagement’sbestestimates taxes recordedinprioryearsmaybeadjustedthecurrent of itsprovisionforincometaxesand,asaresult, andregularlyassessestheoveralladequacy income taxfilings levels ofincometaxes.Managementmonitorsthestatusits Tax planningmayresultintheCompany recordinglower Table 4. Income taxes– Friendly transaction. tax asset,restructuringcostsandthenetgainonScottish after-tax adjustmentsrelatedtotherevaluationofadeferred the Company’s proportionateshareinGreat-West Lifeco Inc.’s recordedinthefourthquarterwhichrepresented $9.2 million 2019 Proportionateshareofassociate’sone-timecharges 4.206%debenturesonMarch20,2019 of $250 million expense intheperiodresultedfromimpactofissuance 1 _ E C N G 0 6 3 _ POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 I G M . i n d changesintheeffectivetaxratesare shownin d
D 6 INCOME TAXRATE (1)
–represents the dividends the preferredsharedividends
IGM FINANCIALINC.FIRST –
foreign markets andnetsalesoftheCompany. Table 6,largelyreflecttheimpactofchangesindomesticand management overtheeightmostrecentquarters,asshownin Changes inaveragedailyinvestmentfundassetsunder measurestonetearningsinaccordance withIFRS. financial eight mostrecentquartersandthereconciliationofnon-IFRS The SummaryofQuarterlyResults inTable 6includesthe respective Review oftheBusinesssectionsinMD&A. and Mackenzie Investmentsarediscussedfurtherineachoftheir Management Changes inassetsundermanagementforIG Wealth administration aredetailedinTable 5. a decreaseof8.1%.Changesinassetsundermanagementand 2019, atMarch 31, 2020comparedto$160.5 billion March 31, of 7.8%.Total at assetsundermanagementwere$147.5 billion 2019,adecrease atMarch 31, 2020 compared to$182.8 billion atMarch 31, Assets underadministrationwere $168.5 billion SUMMARY OF QUARTERLY RESULTS MANAGEMENT ANDADMINISTRATIONUNDER SUMMARY OF CHANGESIN TOTAL ASSETS QUARTER REPORT MAR. 31 MAR. 26.65 % 22.99 (2.34) (0.02) (1.30) 2020 2020 – DEC. 31 MAR. 31 MAR. 31 DEC. nnual Report(AnnualFinancialStatements). | 0.99 – 22.80 20.97 (3.43) (3.95) 0.83 (0.32) (1.36) (1.55) MANAGEMENT’SDISCUSSIONANDANALYSIS 37 20.97% 23.79% 67 26.79% 26.76 % 2019 22020-05-11 1:01PM 0 2 0 - 0 9 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 2019 2019 MAR. 31 7 $ 160,467 149,066 11,401 11,248 $ 153 $ 153 $ 160,467 228 118 (107) 260 6,132 3,330 154,335 $ 5,074 $ 182,819 $ 152,531 (1,526) (86) C (86) 224 306 (933) 2020 1,015 4,275 5,255 (2,919) (19,310) (19,530) MAR. 31 166,808 143,223 $ 147,498 $ 220 $ 220 $ 147,498 $ 6,535 $ 168,473 $ 140,887 CONSOLIDATED (2) 2019 MAR. 31 $ (2,146) (1,924) (1,924) (222) (222) (132) (132) $ (90) $ (90) $ (2,146) – – – – (4) (4) (86) (86) (1,518) (1,518) – – (628) (628) $ – $ (5,020) $ – (628) (628) (86) (86) – $2.1 billion) and net sales of $443 million – – – ales of $378 million in the three months ending 188 112 (255) (555) (555) 2020 (1,949) (1,051) (1,153) (1,153) MAR. 31 $ (2,204) $ (443) $ (443) $ (2,204) $ – $ (4,953) $ – ngs made fund allocation changes which resulted in sales (1)
2019 MAR. 31 $ 5,426 5,125 5,125 301 301 317 317 $ (16) $ (16) $ 5,426 (16) (16) (16) (16) 5,426 5,426 $ 219 $ 27,064 $ 5,426 (81) (81) (693) (612) 2020 5,391 4,698 MAR. 31 $ 4,698 $ (81) $ (81) $ 4,698 $ 193 $ 24,372 $ 4,698
Q1 2020 VS. Q1 2019 VS. Q1 Q1 2020 2019 MAR. 31 $ 67,776 62,728 62,728 5,048 5,048 4,775 4,775 $ 273 $ 273 228 $ 67,776 (103) (103) 148 148 7,650 3,330 376 376 60,126 60,126 $ 2,505 $ 67,776 57,694 (898) (898) – 355 992 (198) (378) 2020 1,015 5,326 5,255 (7,102) (7,896) (1,766) 70,205 57,777 MAR. 31 $ 63,103 $ 794 $ 794 $ 63,103 $ 3,656 $ 63,103 $ 54,288
MANAGEMENT’S DISCUSSION AND ANALYSIS | 2019 UNDER MANAGEMENT – – MANAGEMENT UNDER MAR. 31 2020 2020 $ 89,411 83,137 83,137 6,274 6,274 6,288 6,288 $ (14) $ (14) $ 89,411 (14) (14) (14) (14) 89,411 89,411 $ 2,350 $ 92,999 $ 89,411
(50) (50) 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER 93,161 81,901 (11,260) (11,210) MAR. 31 $ (50)
$ 2,686 $ 85,951 $ 81,901 QUARTER REPORT
(2) (2) (2) (3) 7 (3)(4) D (1)
d d n CHANGE IN TOTAL ASSETS ASSETS IN TOTAL CHANGE i . M 5: G I _ 3 March 31, 2020 (2019 – nil). Included with Mackenzie’s results were advisory mandates to other segments with assets of $2.2 billion at March 31, 2020 (2019 for the first quarter of 2020 (2019 – net sales of $90 million). Included in ETFs are mutual fund investments in ETFs totalling $1.8 billion at March 31, 2020 (2019 – $898 million) and net s 0 net sales of $373 million, redemptions of $192 million and net sales of $181 million. G Investment funds Ending assets $ 81,901 ETFs Ending assets $ 81,901 Sub-advisory, institutional and other accounts Total investment fund Mutual funds N E Total assets under management consists of: funds Mutual
Beginning assets Beginning Net change in assets Investment returns Investment Change in total assets under management sales Net Assets under administration Inter-product Inter-product eliminations creations Net TABLE TABLE Combined net sales $ (50) Sub-advisory, institutional sales accounts and other Net
IGM FINANCIAL INC. FIRST THREE MONTHS ENDED THREE MONTHS Inter-product Inter-product eliminations
Net sales sales Net ETFs ETFs investment funds Total
(3) Investment Planning Counsel AUM and net sales include separately managed accounts. IG Wealth Management and (4) institutional clients which include Mackenzie mutual funds within their investment offeri During the first quarter of 2020, (1) of assets in the Company’s funds and pools. Assets under management consists Assets under administration consists of assets in client accounts administered by the Company. (2) double counting where business is reflected within multiple segments: Consolidated results eliminate – – – IG WEALTH MACKENZIE INVESTMENT INTERCOMPANY INTERCOMPANY ELIMINATIONS INVESTMENT COUNSEL MACKENZIE PLANNING WEALTH INVESTMENTS IG MANAGEMENT ($ millions) funds Investment sales Gross
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0 IGM FINANCIAL INC. 2 0 _ Q U
e anns financialmeasures Reconciliation ofNon-IFRS Net earningsavailabletocommonshareholders Perpetual preferredsharedividends Net earnings Interest Non-commission Commission Expenses noetxs Income taxes Earnings beforeincometaxes Restructuring andother Premium paidonearlyredemptionofdebentures Proportionate shareofassociate’s one-timecharges Earnings beforeundernoted e neteticm n te Netinvestmentincomeandother –D ltd RefertoNon-IFRSFinancialMeasuresandAdditionalIFRSinthisMD&AadditiontheSummaryofConsolidatedO (2) Interestexpenseincludesinterestonlong-termdebtandbeginninginQ12019alsoleasesasaresult (1) Average dailyinvestmentfundassets – Diluted – Basic Net earningsavailabletocommonshareholders – Diluted – Basic commonshareholders Adjusted netearningsavailableto shareholders–non-IFRS measure Adjusted netearningsavailabletocommon Managementandadvisoryfees Revenues Consolidated statementsofearnings Assets underadministration Total assetsundermanagement undermanagement Total investmentfundassets Earnings perShare commonshareholders–IFRS Net earningsavailableto Restructuring andother, netoftax debentures,netoftax Premiumpaidonearlyredemptionof one-timecharges Proportionateshareofassociate’s Other items: Distribution fees Administration fees TABLE 6: SUMMARYOFQUARTERLY RESULTS A T 1 the 2019 IGM Financial Inc.AnnualReportforanexplanationofOtheritemsusedtocalculatetheCompany’sNon-IFRSfinancial the 2019IGM Financial _ E C N G 0 8 3 (1) _ POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 I G M . i n d d
(¢) D (2) 8 ($ millions) ($ billions) (1) ($ billions) ($ billions) ($ millions) ($ billions) $ 160.9
$ 168.5 $ 147.5 $ 143.2 $ 158.5 $ 160.9 $ 562.1 $
160.9 275.9 270.0 782.1 208.9 208.9 573.2 160.9 101.9 IGM FINANCIALINC.FIRST 48.0 29.5 27.3 88.6 2020 68 68 68 68 Q1 – – – – – – – 59.8 59.2 55.6 45.1 43.9 55.2 58.5 . . . 2.2 2.2 2.2 2.2 – – – $ 191.6 202.5 185.1 169.7 182.1 200.4 205.9 53.9 46.5 46.1 52.9 47.8 55.8 56.2 266.0 254.3 259.7 274.4 278.3 269.0 272.4 245.9 275.8 252.7 274.7 272.4 270.1 270.1 832.7 816.1 811.9 789.1 791.5 832.0 816.0 251.4 261.7 240.7 214.8 226.0 – 255.6 264.4 – – – (9.2) 260.6 – 261.7 248.7 214.8 226.0 – 572.1 289.0 – 554.4 264.4 563.2 – 574.3 565.5 27.8 543.0 – 551.6 27.7 – (8.0) 27.7 – 25.2 24.1 – 27.0 (22.7) 28.8 (10.7) – – – – – 93.4 91.1 94.2 89.3 94.4 93.3 89.9 80 80 85 85 77 84 77 70 84 85 70 75 85 81 75 82 81 70 82 85 70 75 85 75 92 92 85 85 $ $ $ $ $ $ $ – – – – – (9.2) – – – – – – (8.0) (16.7) – (7.8) – – – – – 104.2 104.5 104.1 101.7 103.3 109.1 107.1
191.6 $ 202.5 $ 185.1 $ 167.5 $ 179.9 $ 198.2 $ 203.7 $ 198.2 $ 179.9 $ 167.5 $ 185.1 $ 202.5 191.6 190.2 $ 185.1 $ 184.7 $ 182.8 $ 170.1 $ 182.6 $ 181.6 166.8 $ 162.5 $ 162.3 $ 160.5 $ 149.1 $ 159.7 $ 159.1 161.8 $ 157.6 $ 156.3 $ 154.3 $ 143.3 $ 153.4 $ 152.5 159.5 $ 156.8 $ 155.7 $ 149.9 $ 147.0 $ 154.0 $ 150.9 200.8 $ 202.5 $ 193.1 $ 167.5 $ 179.9 $ 222.7 $ 203.7 581.2 $ 574.0 $ 567.5 $ 545.2 $ 546.0 $ 573.8 $ 562.8 191.6 $ 202.5 $ 185.1 $ 167.5 $ 179.9 $ 198.2 $ 203.7 2019 2019 2019 2019 2018 2018 2018 20192018 2019 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q3Q2Q1Q4 Q4 QUARTER REPORT 2020 of theCompany’sadoptionIFRS16,Leases. | MANAGEMENT’SDISCUSSIONANDANALYSIS perating ResultssectionincludedintheMD&Aof measures. 22020-05-11 1:01PM 0 2 0 - 11 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 9 C ors, and digitize the experience with ors, and digitize the experience investors and using those insights to shape everything we do. to shape everything using those insights investors and our clients’ lifetimes. personalized throughout experiences and a deliver an engaging experience advisors to constantly to deliver superior outcomes. holistic plan that seeks high-performing of well-constructed, comprehensive suite solutions. and competitively priced to simplify client and advisor interactions Re-designing processes, reduce err an appropriate cost structure. reflect Consultants with more than four years of experience. with more than four years of experience. reflect Consultants DELIVERING GAMMA We seek to deliver our value proposition through: our value proposition seek to deliver We • of Canadian a deep knowledge Advice – Acquiring Superior • – Creating segmented Client Experiences Segmented • Advisors – Inspiring our entrepreneurial Entrepreneurial • a Solutions – Providing our clients with Powerful Financial • – that are simple, easy and digitized Business processes • diverse culture. Enabled by a high-performing and sit outside of investment that efforts of all the value that the value this includes construction. portfolio and a financial advisor adds to a client relationship, of a and follow through the creation from comes financial plan. well-constructed Entrepreneurial Advisors, SuperiorOur financial advisors provide value to clients by developing Advice insight into their specific creating and implementing needs, financialwell-constructed plans and offering superior advice. IG Wealth Management has a national distribution network of more than 3,000 highly qualified financial advisors (called throughout Canada. Our advisory in communities Consultants) complicated services are most suited to individuals with financial needs. with more all Consultants IG Wealth Management requires to to have or be enrolled than four years of experience Financial Planner (CFP) or its Quebec achieve the Certified designations. The CFP and equivalent, Financial Planner (F.Pl.) designations are nationally recognized financial planning F.Pl. qualifications demonstrate that require an individual to financial education, standardized planning competence through examinations, continuing education requirements, and accountability to ethical standards. of the IG Wealth The following provides a breakdown network into its significant Management Consultant components at March 31, 2020: • practices (1,966 at March 31, 1,830 Consultant 2019), which MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT CLIENT OUTREACH 9 D
d d n i . M -19 AND DEVELOPMENTS G I _ 3 0 G N E IG WEALTH MANAGEMENT IG WEALTH REVIEW OF THE BUSINESS OF REVIEW IG WEALTH MANAGEMENT STRATEGY MANAGEMENT IG WEALTH FEE TRANSPARENCY FOR FOR FEE TRANSPARENCY CHANGES ALL CLIENTS AND PRICING COVID IGM FINANCIAL INC. FIRST IG Wealth Management’s promise is to inspire financialIG Wealth confidence. financialOur strategic mandate is to be Canada’s partner of choice. financialCanadians hold $4.4 trillion in discretionary assets, and 74% market. addressable we view these savings as IG Wealth’s of these savings are held by households with over $1 million, which we refer to as high net worth, and another 21% reside with households with between $100,000 and $1 million, which we refer to as mass affluent. These segments tend to have more complicated financial needs, and IG Wealth Management’s focus on providing comprehensive financial planning solutions positions it well to compete and grow in these segments. Our value proposition is to deliver better Gamma, better Beta and better Alpha. 2020 As a result of COVID-19 and the resulting impact to global and the resulting of COVID-19 As a result to significantly increase undertaken we have financial markets, have provided We and Consultants. communications to clients updates to and ongoing market comprehensive information have the tools they need to support so they our Consultants, financialour clients and their long-term planning needs. Our with actively reaching out and communicating are Consultants long term the importance of to reinforce our clients, continuing planning and a diversified investment portfolio. IG Wealth Management is delivering on its client-focused while introducing commitment by expanding fee transparency growth. product and pricing changes to accelerate by making fee transparency IG Wealth Management increased in the fourth unbundled solutions available to all client segments advisory fee to the quarter of 2019. This means clients pay an compensation being dealer for its services as opposed to dealer fees. Previously, these bundled within mutual fund management clients. solutions were available only to high net worth Account the IG Advisory IG Wealth introduced Management is a fee-based (IGAA) in the fourth quarter of 2019. IGAA and consolidate account that offers clients the ability to simplify while providing unbundled investments into a single account IGAA accounts fee transparency. pricing solutions and improved can hold both IG Wealth Management and eligible external assets. IG Wealth Management earns fees from these external on these assets. assets while also compensating its Consultants _ 1 T A U Q _ 12 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D9 PPFC_2020_QUAT1_ENG03_IGM.indd D10 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U a single, integrated view of all aspects of a client’s finances. It a single,integratedviewofallaspectsclient’sfinances. of Canadianfamiliesandindividuals.TheIGLivingPlanprovides planning thatreflectstheevolvingneeds,goalsandaspirations IG LivingPlan™isaholistic,client-centric approachtofinancial management, retirement,taxandestateplanningservices. IG PrivateWealth Managementwhichincludesinvestment For thedistinctneedsofhighnetworthmarket, weoffer advisor.financial increases basedonthelengthofrelationshipwith the wealth thannon-advisedhouseholds,andthatthisadvantage advisorhave greater households receivingadvice fromafinancial illustrated throughindependentstudiesdemonstratingthat advicetoallclients.Thevalueofthisapproachis financial attracting highnetworthclients,whilecontinuingtooffer context oflong-termrelationships.We focusonadvisingand by offeringcomprehensiveplanningtoitsclientswithinthe Managementdistinguishesitselffromitscompetition IG Wealth Experiences Client Segmented Canada (IIROC) licensedConsultants orspecialists. (MFDA) andInvestmentIndustryRegulatory Organizationof are servedbyourMutualFund DealersAssociationofCanada life.Clients planning acrossallelementsofaclient’sfinancial support inensuringthatweareprovidingcomprehensivefinancial and banking,insurance,securities.Thesespecialistsprovide planning,mortgages assist intheareasofadvancedfinancial through itsnetworkofproductandplanningspecialistswho ManagementalsosupportsConsultantsIG Wealth andclients selection offocusededucationalprograms. plannersandbusinessmanagersthrougha skills asfinancial client relationships.AsConsultants progress,theydeveloptheir to offernewConsultants importantbuildingblockstodevelop Our trainingcurriculumisreviewedandrefreshed eachyear likelihood ofsuccesswhilealsoenhancingourcultureandbrand. Management’srecruitingstandardsincreasethe IG Wealth ManagementhadatotalConsultant IG Wealth networkof • 1,035AssociatesandRegional Directors(1,036atMarch 31, • 2019),whichare 498NewConsultants (640atMarch 31, • A T 3,363 (3,642 at March 31, 2019). 3,363 (3,642atMarch 31, to theclienteleservedbyteam. planningservices andadvice practices whoprovidefinancial 2019). Associatesarelicensed teammembersofConsultant those Consultants withlessthanfouryearsofexperience. representing approximately 95%ofAUM. key measurementofourbusinessastheyserveclientele The levelandproductivityofConsultant practicesisa These practices mayincludeAssociatesasdescribedbelow. 1 _ E C N G 0 10 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 1 0 IGM FINANCIALINC.FIRST positions usforfuturegrowth. reporting tohelpbetterruntheirpractices.TheIGAdvisorPortal throughdigitized workflows,andaccessdata-driven efficiency our Consultants tomanageclientrelationships, improvetheir relationship managementplatformbasedonSalesforce.Itenables The IGAdvisorPortal,introducedin2019,isacustomer 2020. March 31, asat management inQuebecwereapproximately$15 billion 700 Consultants throughoutQuebec.Mutualfundassetsunder and operatingunitsformostfunctionssupportingapproximately hasapproximately175employees The QuebecGeneralOffice located inMontrealforConsultants andclientsresidinginQuebec. Management’sQuebecGeneralOffice Manitoba andIG Wealth inWinnipeg, Management’sheadoffice from bothIG Wealth This administrativesupportisprovidedforConsultants andclients more effectively. planningsystemstohelpthemserveourclients and financial our Consultants’ contactmanagementandportfolioinformation Consultant to technologyplatform,bringinggreaterefficiencies Managementcontinuallyreviewsandenhancesour IG Wealth Processes Business clients whohavemorecomplicatedandsophisticatedneeds. smaller accounts,whileourcredentialedplannersfocusonthose consistent andimprovedreal-timeexperienceforclientswith The NationalService Centre allowsustoofferatargeted, CharitableGivingProgram,adonor-advisedgivingprogram • Mortgageandbankingtodevelopmortgageother • Insurance productsthatincludeavarietyofdifferentpolicy • solutionsthatincludeinvestmentvehicles Powerfulfinancial • These productsinclude: us toprovideatailoredIGLivingPlanthatevolvesovertime. Managementhasafullrangeofproducts thatallow IG Wealth clientslocatedincommunitiesthroughoutCanada. one million Management’sConsultantsIG Wealth whoserveapproximately The IGLivingPlanleveragestheexperience andexpertiseof strategies, foratrulypersonalizedplan. incorporates integratedinvestment,taxandriskmanagement their ownprivatefoundation. expense andcomplexitythansettingupadministering enduring charitablegivinglegacywithconsiderablyless which enablesCanadianstomake donationsandbuildan plan. clientaspartoftheircomprehensivefinancial of each lending strategiesthatmeettheindividualneedsandgoals types fromtheleadinginsurersinCanada. needs andrequirements. that matchriskandinvestmentperformancetoeachclient’s QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS 22020-05-11 1:01PM 0 2 0 - 13 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 11 – The C universe † fund ranking † are an objective, † fund ranking service and 59.6% had a rating of † ™ – iProfile portfolio management program is a unique include IG Core Portfolios, IG Managed Payout Portfolios, Portfolios, Payout Portfolios, IG Managed Core include IG Risk Portfolios. and IG Managed Investors Portfolios, fee structures Account (IGAA) and unbundled IG Advisory in the fourth quarter of 2019 and is a IGAA was introduced by offering client experience improves fee-based account that and consolidate selected investments the ability to simplify while providing all of our clients with into a single account fee IGAA accounts increase unbundled pricing solutions. hold both IG Wealthtransparency and can Management and eligible external assets. iProfile with investments held at that is available for households IG Wealth Management in excess of $250,000. iProfile have been designed to maximize investment portfolios asset classes, returns and manage risk by diversifying across management styles and geographic regions. benefitgrowth potential combined with risk management, guarantee features and estate planning efficiencies. accounts. accounts) and fee-based brokerage • • • long-term investment Segregated funds that provide for • dealer-managed Separately managed accounts (discretionary A growing portion of IG Wealth client assets are Management’s in the process of migrating are in unbundled fee structures. We our clients to unbundled fee products, a significant change for IG Wealth Management and the Canadian mutual fund industry advisory fee that overall. Unbundled fee products separate the a client’s account from the fees charged to to directly is charged provides clients the underlying investment funds. This separation pay, and allows with greater transparency into the fees they IG Wealth particularly Management to offer competitive pricing, competitive are introducing more for high net worth clients. We consolidation of pricing to reward client loyalty, encourage our clients’ assets with IG Wealth Management, and attract new clients. to offer bundled purchase options for are discontinuing We substantially all investment products. IG Wealth Management monitors its investment performance by comparing to certain benchmarks. Morningstar of 71.4% for three stars or better and 37.4% for four and five star funds at March 31, 2020. These are available within the IG Advisory to which we are in the process of migrating Account all IG client Ratings accounts. Morningstar service is one of the rankings monitored when determining fund performance. At March 31, 2020, 97.0% of IG Wealth Management mutual fund unbundled series had a rating of three stars or better from Morningstar four or five to the Morningstar stars. This compared MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 1 1 D
d d n i . M G I _ 3 0 G manager, asset category, investment style, geography, market asset category, investment style, geography, market manager, capitalization and sector. a chosen mix of risk and return is maintained. These solutions N E BETA AND ALPHA BETA IGM FINANCIAL INC. FIRST Powerful Financial Solutionsan extensive suite of well-constructed provide clients with We regularly and competitively priced financial solutions. We enhance the scope and diversity of our investment offering with new funds and product changes that enable clients to achieve their goals. Our solutions include: • A deep and broad selection of mutual funds, diversified by • Managed portfolios that rebalance investments to ensure that Enabled by a High-Performing offer competitive compensation and It is essential that we and Diverse Culture benefits people. Our training to attract and retain outstanding along with our use of feedback and development approach, surveys, positions our employees and from periodic employee our clients. advisors to better serve investment well-constructed by created – the value beta – achieving expected investment returns for portfolios the lowest possible risk. of active management – achieving alpha – the value with a similar benchmarks returns superior to passive and risk profile. composition IG Wealth Management strives to achieve expected investment well-constructed returns for the lowest possible risk through value for clients investment portfolios (Beta), and to create do this, we select and through active management (Alpha). To our clients have engage high-quality global sub-advisors so and solutions. access to a diverse range of investment products proven and rigorous Each asset manager is selected through a that their oversee all sub-advisors to ensure process. We philosophies and activities are consistent with their investment of the products with the investment objectives and strategies they advise. IG Wealth Management’s relationships include Mackenzie firmsInvestments and other world class investment such as China AMC and JP Morgan Price, PIMCO, Rowe T. BlackRock, Asset Management. IG Wealth Management’s dealer platform provides increased IG Wealth increased platform provides Management’s dealer licensed and IIROC and supports both MFDA automation on our investment dealer well as new products advisors as of high net worth segment to support the platform designed our client base. _ 1 T A U Q _ 14 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D11 PPFC_2020_QUAT1_ENG03_IGM.indd D12 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U nigast $ 85,951 $ 94,184 $ Average assetsunderadministration Ending assets Beginning assets Net changeinassets Investment returns Gross clientinflows ($ millions) quarter of2019. inthefirst administration comparedtoanincreaseof$6.7 billion inassetsunder returns resultedinadecreaseof$11.7 billion quarter,comparable periodin2019.Duringthefirst investment inthe from$62 million quarter,first anincreaseof$319 million inthe comparable periodin2019.Netflowswere $381 million inthe anincreaseof21.8%from$2.5 billion $3.0 billion, Managementassetsunderadministration were of IG Wealth 2020,grossclientinflows For thequarterendedMarch 31, into theIGAdvisoryAccountandotherfee-basedprograms. Our Consultants’ compensationisalsobasedonassetscontributed Account areearnedoneligibleexternalassetsunderadministration. to understandingourbusiness.Revenues fromtheIG Advisory Account, assetsunderadministrationwillbecomeakey driver As moreandofourclientsmigratetotheIGAdvisory review arereflectedinTable 7. Changes inassetsunderadministrationfortheperiods sales, redemptionsandinvestmentreturns. administration andmanagementareinfluenced bythreefactors: Thelevelofassetsunder management were$81.9 billion. 2020andmutualfundassetsunder atMarch 31, $86.0 billion Management’sassetsunderadministration were IG Wealth for theCompany. under administrationare thereforeakey performance indicator charged oneligibleexternalassetsunderadministration.Assets Accountmeansthatfeesare The introductionoftheIG Advisory adjusted performancerelativetocomparablefunds. andtenyearrisk- quantitative measureofafund’sthree,five rs letotlw Net flows Gross clientoutflows THREE MONTHSENDED TABLE 7: CHANGEIN AND MANAGEMENT ASSETS UNDER ADMINISTRATION A T 1 _ E C N G
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D 1 2 ASSETS UNDERADMINISTRATION IGM FINANCIALINC.FIRST $ 3,006 (11,326) (11,707) MAR. 31 MAR. 97,277 2,625 – IG WEALTHMANAGEMENT 2020 381 DEC. 31 MAR. 31 DEC. 31 MAR. 31 MAR. 31 DEC. 31 MAR. 31 DEC. 2019 2019 2019 2019 2019 $ 21.9 2,465 $ 21.8 2,467 % % SeriesUisavailabletoallclientsandprovidesapricing • 47% oftotalsalesupfrom46%in2019. of 2020,anincrease18.0%fromayearago,andrepresented quarter forthefirst high networthsolutionstotalled$1.3 billion represented 54%oftotalassetsundermanagement.Sales 2020,adecreaseof3.0%fromoneyearago,and at March 31, management forclientsinthiscategorytotalled$44.1 billion to providefurtherofferingsthissegment.Assetsunder segment ofourclientbase,andcontinuestolookatways needs ofhighnetworthclients,whorepresentagrowing Managementhasseveralofferingsto addressthe IG Wealth mutual fundsales. representing 86%oftotalhighnetworthsalesand41% quarterof2019, fromthefirst an increaseof$273 million quarterof2020, forthefirst worth clientstotalled$1.1 billion assets undermanagement.Salesoftheseproductstohighnet 2019whichrepresented32.4%of atMarch 31, $29.0 billion in productswithunbundledfeestructures,up12.3%from Management’s mutualfundassetsundermanagementwere or39.8%ofIG Wealth 2020,$32.6 billion, At March 31, periods underrevieware reflectedinTable 8. Changes inmutualfundassetsundermanagementforthe HIGH NETWORTH OFFERINGS $18.2 billion at March 31, 2019,anincrease of0.4%. atMarch 31, $18.2 billion compared to of $500,000hadincreasedto$18.3 billion, Managementfundsinexcessinvestments inIG Wealth assets undermanagementrelatedtohouseholdswith 2020,Series U underlying investmentfunds.AtMarch 31, directly toaclient’saccount, fromthefeescharged tothe structure whichseparatestheadvisoryfee,ischarged 534 004 12 4.6 % (7.6) (1.2) % % 12.7 (11.6) % 3.0 $90,084 $92,999 $ 95,324 86,287 $ 97,277 6,712 94,456 2,821 6,650 2,932 256 245 . 9.1 1.9 2,405 2,576 QUARTER REPORT 11 62 (111) 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS % CHANGE / N/M N/M N/M N/M N/M N/M 22020-05-11 1:01PM 0 2 0 - 15 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM N/M 13 C N/M N/M N/M N/M 2020 VS. Q4 2019 2020 VS. Q4 % CHANGE % (247) (14) 79.8 2,498 2,364 2,629 6,288 2,382 9.5 90,779 6,274 15.7 $ 93,161 83,137 $ 91,931 $ 89,411 $ 86,989 2.6 % (12.1) 12.1 % % (1.1) (8.4) % 4.5 $ 2,251 $ 2,350 % 19.3 % 14.3 CHANGE IN ASSETS UNDER MANAGEMENT MANAGEMENT UNDER CHANGE IN ASSETS – Q1 AND ADMINISTRATION IG Wealth assets under administration were Management’s $86.0 billion at March 31, of 11.6% from 2020, a decrease $97.3 billion at December 31, 2019. IG Wealth Management’s mutual fund assets under management were $81.9 billion at March 31, 2020, a decrease of 12.1% from $93.2 billion at December 31, daily mutual fund assets 2019. Average were $90.9 billion in the first quarter of 2020 compared to $91.9 billion of 1.1%. in the fourth quarter of 2019, a decrease For the quarter ended March 31, of IG Wealth 2020, sales network Management mutual funds through its Consultant were $2.7 billion,fourth quarter an increase of 19.3% from the of 2019. Mutual fund redemptions, which totalled $2.7 billion 9.5% from the previous quarter increased for the first quarter, an increase of 15.7% from 2019. IG Wealth Management mutual fund net redemptions for the first quarter of 2020 were $50 million compared with net redemptions of $14 million in investment returns resulted in a 2019. During the first quarter, decrease of $11.2 billion in mutual fund assets compared to an increase of $6.3 billion in the first quarter of 2019. IG Wealth rate Management’s annualized quarterly redemption for long-term funds was 11.7% in the first quarter of 2020, compared to 10.4% in the first quarter of 2019. IG Wealth rate for long- Management’s twelve month trailing redemption term funds was 10.7% at March 31, 2020, compared to 9.5% at March 31, and remains well below the corresponding 2019, of the average redemption rate for all other members Institute of Canada (IFIC) of approximately Investment Funds 17.1% at March 31, 2020. IG Wealth Management and the significantmutual fund industry experienced increases in COVID-19. redemptions in March 2020 as a result of 2019 2019 2019 2019 2019 2019 2019 2019 DEC. 31 MAR. 31 DEC. 31 MAR. 31 (50) 2020 2,736 93,161 MAR. 31 (11,210) (11,260) – IG WEALTH MANAGEMENT –
$ 2,686 MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 a decrease of 8.4% from 2020 VS. Q1 2019 2020 VS. Q1 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER ASSETS UNDER MANAGEMENT MANAGEMENT ASSETS UNDER QUARTER REPORT 3 1 D
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G I _ 3 0 G available for households with investments held at IG Wealthavailable for households with investments of $250,000. The iProfileManagement in excess program has fee, which is a pricing structure which separates the advisory to a client’s account, from the fees charged charged directly to the underlying investment funds. At March 31, 2020, the iProfile $14.3 billion, program assets under management were an increase of 32.4% from $10.8 billion at March 31, 2019. had assets ofManagement funds in excess of $500,000 and $11.5 billion at March 31, 2020, a decrease of 30.1% from $16.4 billion at March 31, as a result of transfer 2019, largely Series J pricing structure bundles activity from Series J to Series U. one fee. the cost of asset management and advice into N E TABLE 8: CHANGE IN TABLE 8: NATIONAL SERVICE CENTRE SERVICE NATIONAL MANAGEMENT UNDER CHANGE IN ASSETS – Q1 AND ADMINISTRATION THREE MONTHS ENDED THREE MONTHS IGM FINANCIAL INC. FIRST Net sales (redemptions) Net sales (redemptions) Ending assets fund assets Daily average mutual $ 90,909 $ 81,901 IG Wealth assets under administration were Management’s $86.0 billion at March 31, 2020, representing a decrease of 7.6% from $93.0 billion at March 31, 2019. IG Wealth Management’s mutual fund assets under management were $81.9 billion at March 31, 2020, representing $89.4 billion at March 31, daily mutual fund 2019. Average assets were $90.9 billion in the first quarter of 2020, up 4.5% from $87.0 billion in the first quarter of 2019. For the quarter ended March 31, 2020, sales of IG Wealth network Management mutual funds through its Consultant were $2.7 billion,from the comparable an increase of 14.3% period in 2019. Mutual fund redemptions totalled $2.7 billion, Investment returns Net change in assets Beginning assets • iProfile™ – is a unique portfolio management program that is • in IG Wealth Series J is available for households with investments ($ millions) Sales Redemptions Our National Service Centre supports more than 200,000 clients Our National Service Centre and $1.5 billion assets under management. _ 1 T A U Q _ 16 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D13 PPFC_2020_QUAT1_ENG03_IGM.indd D14 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U of $247 million inthepreviousquarter. of $247 million forthecurrentquartercompared tonetredemptions $50 million Managementmutualfundnetredemptionswere IG Wealth quartercomparedto10.2%inthefourthof2019. first and theannualizedquarterlyredemptionratewas11.7%in located throughouteachprovinceinCanada,andworkwithour ManagementMortgagePlanningSpecialistsare IG Wealth Investors GroupSecuritiesInc. to oneofourWealth Planning Specialistsavailablethrough ManagementConsultantsplanning. IG Wealth canreferclients andinvestment securities services tocomplement theirfinancial in allCanadianprovinces andterritoriesprovidingclientswith Investors GroupSecuritiesInc.isaninvestmentdealerregistered with advancedestateplanningsolutionsforhighnetworth clients. Specialists, locatedthroughoutCanada,whoassistConsultants Management’sInsurancePlanning enhanced throughIG Wealth compared to2.2in2019.Distributionofinsuranceproductsis 2020, Consultant was2.1forthequarterendedMarch 31, The averagenumberofpoliciessoldbyeachinsurance-licensed single company,TheCanadaLifeAssurance Company. Great-West, LondonLifeandCanadaLife,amalgamatedintoa Company’s insuranceproducts.EffectiveasofJanuary1,2020, The CanadaLifeAssuranceCompany isaleadingproviderofthe term care,personalhealthcarec of term,universallife,wholedisability,criticalillness,long- Managementoffersabroadrange insurance companies,IG Wealth of lifeinsuranceinCanada.Throughitsarrangementswithleading Managementcontinuestobealeader in thedistribution IG Wealth 2019. March 31, at comparedto$1.7 billion fund assetswere$1.4 billion, 2020,totalsegregated Management.AtMarch 31, IG Wealth components ofthesesegregatedfundsaremanagedby provide guaranteedretirement incomeforlife.Theinvestment (LIB)optionto GIF policiesallowforaLifetimeIncomeBenefit the IGSeriesofGuaranteedInvestmentFunds (GIFs). Select Managementofferssegregatedfunds whichinclude IG Wealth MORTGAGE ANDBANKINGOPERATIONS SECURITIES OPERATIONS INSURANCE SEGREGATED FUNDS OTHER PRODUCTS AND SERVICES A T 1 _ E C N G 0 14 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 1 4 overage and group insurance. overage andgroupinsurance. IGM FINANCIALINC.FIRST Banking ManagementclientsintheSolutions products ofIG Wealth planningplatform.Totalthrough abroadfinancial lending solutionsforourclients approach todeliveringtotalfinancial deposit account,isalsoofferedthroughSolutionsBanking features ofamortgage,termloan,revolvinglinecreditand comprehensive cashmanagementsolutionthatintegratesthe a long-termdistributionagreement.AnAll-in-Oneproduct, accounts, andcreditcards.ThroughSolutionsBanking credit,personalloans,creditorinsurance,deposit lines of Available creditassociatedwithSolutionsBanking 2019,adecreaseof4.2%. atMarch 31, to $10.6 billion compared offered throughbothsourcestotalled$10.2 billion, 2020,mortgages in 2019,adecreaseof7.9%.AtMarch 31, compared to$203 million 2020were $187 million March 31, 2020, thebalanceoutstandingofSolutionsBanking in2019.AtMarch 31, comparedto$135 million $209 million 2020were accounts originatedforthequarterendedMarch 31, Management’s SolutionsBanking Other productsandservicesoffered throughIG Wealth associated withtheseaccounts. and representedapproximately50%oftotalavailablecredit oneyearago, comparedto$2.6 billion products was$3.0 billion, Solutions Banking private labeledclientwebsiteandservice centre.The have access toanetwork ofbankingmachines,aswella and throughSolutionsBanking Management Mortgage fundingsofferedthroughIG Wealth plan. client needsandinthecontextoftheiroverallfinancial assessment isbeingmadeonacasebybasis,subjectto result oftheeconomicdisruptioncausedbyCOVID-19. This mortgage paymentsenactedtosupporthomeownersasa The Company supportsandisparticipatinginthedeferralof Solutions Banking national mortgagelender, Management’s andthroughIG Wealth Management,a Mortgages areofferedtoclientsbyIG Wealth plan. each clientaspartoftheircomprehensivefinancial lending strategiesthatmeettheindividualneedsandgoalsof clients andtheirConsultants todevelopmortgageandother at March 31, 2019. at March 31, 2020,comparedto$4.2 billion atMarch 31, totalled $4.7 billion QUARTER REPORT † offering,includingSolutionsBanking † † , providedbyNationalBankofCanadaunder offering supports IG Wealth Management’s offeringsupportsIG Wealth 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS † for the first quarterended forthefirst † includeinvestmentloans, † mortgages † All-in-One † All-in-One † , clients † . 22020-05-11 1:01PM 0 2 0 - 17 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 15 . † C % CHANGE % $ 381.7 75.3 44.0 $ 358.2 73.9 41.1 16.8 % (3.3) 10.0 (3.6) (12.0) (1.5) (5.8) % (48.2) 2.8 6.5 (13.0) 16.1 4.8 30.7 23.4 53.3 29.6 18.5 60.4 (100.0) 57.8 (100.0) (8.1) (32.6) (4.7) (37.9) 501.0 473.2 517.8 483.2 (4.3) (5.7) 1.4 106.3 1.1 151.9 99.2 311.5 162.9 $ 206.3 319.9 $ 163.3 6.9 8.9 1.1 14.5 % 1.5 (15.9) (1.6) % 6.2 Services Inc. deferred sales charge. Securities Inc. points of average assets under management compared to 167.1 to 167.1 compared assets under management points of average and in product mix in 2019, reflecting changes basis points during 2019. pricing reductions administration fees for providingIG Wealth receives Management and trusteeship to its mutual funds administrative services mutual funds, which also depend largelyservices to its unit trust of mutual fund assets underon the level and composition fees totalled $72.8 millionmanagement. Administration in the $73.9 million down 1.5% from current quarter, a year ago. The from the movement of assets intodecrease resulted primarily are not charged certain administrationunbundled products which part by an increase in fees resulting fromfees. This was offset in under management. higher average assets Distribution fees are earned from: • Insurance products through I.G. Distribution of insurance • fees on mutual funds that were sold with a Redemption fees. distribution fund • Portfolio • Investors Group provided through Securities trading services • provided through Solutions Banking Banking services 2019 2019 2019 2019 2019 2019 2019 2019 DEC. 31 MAR. 31 DEC. 31 MAR. 31 – 8.7 7.7 2020 72.8 38.7 28.2 35.9 479.6 488.3 113.6 165.4 314.9 MAR. 31 $ 368.1 products and † MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 – IG WEALTH MANAGEMENT – POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 5 1 D
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G I _ 3 0 G N E REVIEW OF SEGMENT OPERATING RESULTS OPERATING SEGMENT OF REVIEW Q1 2020 VS. Q1 2019 Q1 VS. Q1 2020 TABLE 9: OPERATING RESULTS OPERATING RESULTS TABLE 9: FEE INCOME THREE MONTHS ENDED IGM FINANCIAL INC. FIRST ($ millions) Revenues and advisory fees Management fees Administration fees Distribution commissions Other expensed as incurred Mutual fund sales commissions compensation Asset-based IG Wealth Management’s earnings before interest and taxes are IG Wealth before interest Management’s earnings 9. in Table presented Net investment income and other Expenses Commission amortization Commission Non-commission Earnings before interest and taxes $ 173.4 Fee income is generated from the management, administration from the management, administration Fee income is generated and distribution of IG Wealth The Management mutual funds. and Solutions Banking distribution of insurance the provision of securities services provide additional fee income. the provision of securities fees include fees for investment Management and advisory provided to its mutual funds and advisory management services on the which depend largely provided to clients, fees for advice under management level and composition of mutual fund assets fees were and administration. Management and advisory $368.1 million in the first quarter of 2020, an increase of $9.9 million or 2.8% from $358.2 million in 2019. fees in the firstThe net increase in management and advisory in average quarter of 2020 was primarily due to the increase 8. In in Table assets under management of 4.5%, as shown in the firstaddition, there was one more calendar day quarter to the firstof 2020 compared of 2019, which resulted quarter in additional management fees of $3.3 million. The average management fee rate for the first quarter was 162.6 basis _ 1 T A U Q _ 18 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D15 PPFC_2020_QUAT1_ENG03_IGM.indd D16 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U Ohr Mortgage salesto: Other Securitizations Average mortgagesserviced Other 1 Representssalestoinstitutionalinvestorsthroughprivateplacements,InvestorsMortgageandShortTermIncomeFund,a (1) Securitizations Fair value adjustments Interest Netinterest incomeonsecuritizedloans income Total mortgagebankingincome ($ millions) review ispresentedinTable 10. summary ofmortgagebankingoperationsforthequarterunder in2019.A quarterof2020compared to$7.3 million the first for mortgage bankingoperationswhichtotalled$9.7 million Management’s in netinvestmentincomerelatedtoIG Wealth These losseswereoffsetinpartbyanincreaseof$2.4 million our equitysecuritiesandproprietarymutualfunds. 2019. Thedecrease wasprimarilyduetounrealizedlosseson in from$10.0 million quarter of2020,adecrease$1.3 million inthefirst Net investmentincomeandotherwas$8.7 million intermediary operations. mortgage bankingoperationsandnetinterestincome relatedto Net investmentincomeandotherincludes relatedto deferred saleschargeattributabletofee-basedredemptions. funds. Redemption feeincome variesdependingonthelevelof longer offersthedeferred salespurchaseoptionforitsmutual Managementno products andlowerredemptionfees.IG Wealth primarily duetolowerdistributionfeeincomefrominsurance in2019, from$41.1 million of 2020decreased by$2.4 million quarter forthefirst Distribution feeincome of$38.7 million Other Gains on Net sales interest income Interest expense 2 Representsprincipalamountssold. (2) THREE MONTHSENDED TABLE NET INVESTMENTINCOME ANDOTHER A T 1 as gainsrealizedonthosesales. _ E C N G 10: (1)
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$ 248 $ 47.9 $ 474 MAR. 31 MAR. 2,772 39.8 2020 (2.7) 226 2.5 1.8 8.1 DEC. 31 MAR. 31 DEC. 31 MAR. 31 MAR. 31 DEC. 31 MAR. 31 DEC. 2019 2019 2019 2019 2019 Management mutualfundswithbundledpricingwereexpensed Previously, commissionsassociatedwithsalesofIG Wealth as theyreflectincrementalcoststoobtainaclientcontract. All commissionpaymentswillnowbecapitalizedandamortized Management mutualfunds. based upongrosssalesofIG Wealth (subject toeligibilityrequirements),where previouslytheywere Management contributed toclientaccountsatIG Wealth sales commissionsarebaseduponthelevelofnewassets Management ConsultantEffective January1,2020,IG Wealth capitalized in2020. all commissionspaidonthesalesofinvestmentproductsare in2019as from$57.8 million 2020, adecreaseof$21.9 million quarterof forthefirst Commission expensewas$35.9 million investment productsalesareexpensedasincurred. a feedirectly fromtheclient.Allothercommissionspaidon over theirestimatedusefulliveswheretheCompany receives the saleofinvestmentproductsarecapitalizedandamortized and fluctuatewiththelevelofsales.Commissions paidon products. Commissions arepaidonthesaleoftheseproducts services and connection withthedistributionofitsfinancial Managementincurscommissionexpense in IG Wealth EXPENSES 970 1,5 (.)% (7.4)% (2.5)% (2.9) 10,257 (9.1) $ 1.0 % (3.8) % 9,740 $ 32.9 2,855 (24.2) $7,402 2,744 % % $ 6,996 7.3 $ (10.7) 25.0 $ 12.8 2.0 2.8 06 03 200.0 0.3 0.6 8 $47 (12.7) (43.2) (11.7) % % 242.4 $437 256 66 $ 284 (8.9) 0.2 (3.5) (5.1) % % $52.6 $ 50.5 92 85 (12.0) (4.7) 8.5 9.2 4 $53 1.)% (5.8) (12.2) % % $503 $ 540 (9.8) (3.6) 44.1 41.3 QUARTER REPORT 2020 nd toInvestorsCanadianCorporateBondFundaswell | MANAGEMENT’SDISCUSSIONANDANALYSIS % CHANGE N/M 22.9 N/M 22020-05-11 1:01PM 0 2 0 - 19 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 17 C NET INVESTMENT INCOME AND OTHER NET INVESTMENT INCOME EXPENSES Administration fees were $72.8 million fees were Administration in the first quarter decrease of $2.5 millionof 2020, a $75.3 in the fourth from to fees decreased due 2019. The administration quarter of of and the movement assets under management decreased certain products which are not charged assets into unbundled administration fees. of $38.7 millionDistribution fee income in the first quarter of by $5.3 million2020 decreased $44.0 million from in the fourth to a decrease in distribution fee income quarter primarily due sales. from insurance product $8.7 million and other was Net investment income the first in quarter of 2020 compared to $16.8 million in the previous a decrease of $8.1 million.quarter, related to IG Wealth Management’s Net investment income mortgage banking operations totalled $9.7 million in the first of $3.1 million a decrease quarter, from $12.8 million in the in net 10. The decrease previous quarter as shown in Table to unrealized losses investment income and other was also due mutual funds. on our equity securities and the proprietary quarter was $35.9 million expense in the current Commission compared with $53.3 million The in the previous quarter. on the sales of decrease was due to all commissions paid investment products being capitalized in 2020. Non-commission expenses increased to $165.4 million in the current quarter compared to $151.9 million in the prior quarter primarily due to the seasonality of expenses. MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 7 1 D
d d n i . M G I _ 3 0 G N E Q1 2020 VS. Q4 2019 VS. Q1 2020 FEE INCOME IGM FINANCIAL INC. FIRST as incurred as these commissions were deemed to be fulfillment were deemed to be as these commissions as incurred fund. contract with a mutual of an existing of is based on the value compensation, which Asset-based $14.4 million by increased assets under management, for the first March 31, quarter ended 2020 to $113.6 million, compared was primarily due to compensation to 2019. The increase in assets in 2020 and the increase changes implemented under administration. incurred by IG WealthNon-commission expenses Management network, support of the Consultant primarily relate to the and management of its mutual the administration, marketing as well as sub-advisory fees related funds and other products, under management. Non-commission to mutual fund assets $165.4 millionexpenses were for the first quarter of 2020 compared to $162.9 million of $2.5 million in 2019, an increase or 1.5%. Management and advisory fee income decreased by $13.6 millionManagement and advisory fee income decreased or 3.6% to $368.1 million in the first quarter of 2020 compared in managementwith the fourth quarter of 2019. The decrease and advisory fees in the first quarter was primarily due to the of 1.1% fordecrease in average assets under management 8, as well as the decrease of Table as shown in the quarter, approximately $4.4 million resulting from one less calendar day in the first to the fourth quarter of 2019 and the quarter compared impact of the leap year in the first quarter of 2020. The average management fee rate for the first quarter was 162.6 basis points to 165.2 basisof average assets under management compared points in the fourth quarter of 2019. _ 1 T A U Q _ 20 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D17 PPFC_2020_QUAT1_ENG03_IGM.indd D18 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U Boston, DublinandHongKong. Inadditiontoourown management teamsarelocatedinToronto, Montreal,Winnipeg, distinct focusesanddiversestyles.Ourresearch andportfolio a boutiquestructure,withseparatein-houseteamshaving Our investmentmanagementcapabilitiesaredeliveredthrough and clientexperience. of ourstrategicmandate:investmentmanagement,distribution focusing ourresourcesinareas Mackenzie seekstomaximizereturnsonbusinessinvestmentby Enableahigh-performinganddiverseculture • Driveoperationalexcellence anddiscipline • Advancebrandleadership • • Accelerate distribution Offerinnovativeandhighqualityinvestment solutions • Delivercompetitiveandconsistentrisk-adjustedperformance • strive to: To supportthisvisionandstrategicmandateouremployees and continuingtodeliverinstitutionalqualityineverythingwedo. advisors andinvestorswithdistinctiveinnovativesolutions, investment industry,respondingtochangingneedsoffinancial this mandatebyattractingandfosteringthebestmindsin build meaningfulstrategicrelationships.We aimtoachieve mandate istwo-fold:winintheCanadianretailspaceand priorities anddrivesfuturebusinessgrowth.Ourstrategic of investors,through Mackenzie’s vision: We success arecommittedtothefinancial management solutionsproviderandbusinesspartner. Mackenzie seekstobeCanada’s preferredglobalasset right solutioninanymarket condition. the multi-boutique approach ensuresthatinvestorscanfind the toolsandresourcestheyneedtosupporttheirclients.Our and accesstoinvestmentmanagementensuretheyhave capital market andeconomicupdates,ongoingcommentary, and ourinstitutionalclients.Ourfocushasbeentoprovide advisors communications tosupporttheindependentfinancial markets,financial wehaveundertaken increase tosignificantly As aresultofCOVID-19 andtheresultingimpacttoglobal multiple distributionchannels. investment mandatesthroughaboutiquestructureanduse solutions providerfoundedin1967.We offerawiderangeof Mackenzie assetmanagement Investmentsisadiversified MACKENZIE STRATEGY COMMUNICATIONCOVID-19 AND REVIEW OFTHEBUSINESS MACKENZIE INVESTMENTS A T 1 _ E C N G 0 18 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 1 their 8 eyes.Thisvisionimpactsourstrategic that directlyimpactthesuccess IGM FINANCIALINC.FIRST on clientexperience and investmentexcellence. broad productshelf,competitively investment professionals,strengthofitsdistributionnetwork, its distributionrelationshipsgiventeamofexperienced Mackenzie ispositionedtocontinuebuildandenhance changeinthelevelofassetsundermanagement. a significant to ongoingreviewsandrebalance activitieswhichmayresultin relationships oftheseaccounts. Theseaccountsarealsosubject channel giventherelativesizeandnatureofdistribution institutional accountscanbemore Gross salesandredemptionactivityinstrategicalliance and relationships withpensionandmanagementconsultants. institutions. We attractnewinstitutionalbusinessthroughour management servicestopensionplans,foundationsandother In theinstitutionalchannel,Mackenzie providesinvestment respective bank,insurancecompanyorinvestmentcompany. ofthe primary distributionrelationshipiswiththeheadoffice Quadrus. Withinthestrategicalliancechannel,Mackenzie’s a privatelabelmutualfundarrangementwithLifecosubsidiary and Great-West LifecoInc.(Lifeco) subsidiaries,andalsoinclude Management,InvestmentPlanningCounselservices toIG Wealth Strategic allianceswithrelatedpartiesincludeprovidingadvisory banks, insurance companiesandotherinvestmentcompanies. third-party andrelatedpartyinvestmentprogramsofferedby series ofourmutualfundsandprovidessub-advisoryservicesto Within thestrategicalliance channel,Mackenzie offerscertain institutional marketplace. has specialtyteamsfocusedonstrategicalliancesandthe In additiontoourretaildistributionteam,Mackenzie also to provideenhancedinvestmentsolutions. new fundsandwemaymergeorstreamlineourfundofferings meet theevolvingneedsoftheirclients.We regularlyintroduce products andinvestmentsolutionsdesignedtohelpadvisors classes andpartsoftheglobe.We offerarangeofrelevant comprehensive lineupofinvestmentsolutionscoversallasset acrossCanada.Ourinnovative, advisors andtheirfirms with manyofthemorethan30,000independentfinancial advisors.Oursalesteamswork through third-partyfinancial Mackenzie primarilydistributesitsretailinvestmentproducts strategic alliancesandinstitutional. Our businessfocusesonthreekey distributionchannels:retail, needs ofinvestors. products isakey strengthinsupportingtheevolvingfinancial The developmentofabroadrangeinvestmentcapabilitiesand with strategicpartners(thirdpartysub-advisors)inselectedareas. investment teams,wesupplementourcapabilities QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS priced productsanditsfocus pronounced thanintheretail 22020-05-11 1:01PM 0 2 0 - 21 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM N/M N/M 19 C 139.9 163.8 N/M N/M N/M N/M N/M N/M were $1.0 billion compared % CHANGE % er management and net sales. (1) und allocation changes: 2,569 2,357 28.5 40.1 4,749 3,330 10.7 57.8 $ 2,587 $ 2,505 148 18 % 41.3 % 265 45.9 376 1,576 4,242 1,841 4,618 $ 60,838 $ 57,694 (1,596) $ 63,991 (898) % $ 62,969 $ 60,126 (10.8) (10.7) $ 58,184 % (5.9) (96.7) % (9.7) % 0.8 % (3.9) % 9.1 62,150 $ 63,991 55,508 $ 60,126 3.0 % (9.7) 15.3 % (3.9) (399) – 5.3 646 228 57.1 from March 31, fund assets under mutual 2019. Mackenzie’s were $54.3 billionmanagement at March 31, 2020, a decrease $57.7 billionof 5.9% from March 31, at Mackenzie’s 2019. were $5.3 billionETF assets at March 31, of 2020, inclusive $1.8 billion mutual funds, from Mackenzie in investments compared to $3.3 billion at March 31, 2019, inclusive of $898 million mutual funds. from Mackenzie in investments March 31,In the three months ended 2020, Mackenzie’s were $3.7 billion,mutual fund gross sales the highest first the company’s history and an increase quarter gross sales in of 45.9% from $2.5 billion in 2019. Mutual fund redemptions quarter were $3.3 billion,in the current of 40.1% an increase from $2.4 billion fund net sales for the three Mutual year. last months ended March 31, 2020 were $355 million, as compared to net sales of $148 million In the three months ended last year. March 31, 2020, ETF net creations to $228 million inclusive of $378 million last year, in investments mutual funds in 2020. Investment fund net from Mackenzie $992 million quarter were sales in the current compared to net sales of $376 million During the current last year. returns resulted in investment fund assets investment quarter, 2019 2019 2019 2019 2019 2019 2019 2019 DEC. 31 MAR. 31 DEC. 31 MAR. 31 355 2020 (378) 3,301 5,255 1,015 (7,206) (6,214) (1,766) 63,991 MAR. 31 $ 54,288 $ 57,777
ASSETS UNDER MANAGEMENT – MACKENZIE MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 (2) POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER (3) (3) QUARTER REPORT Q1 2020 VS. Q1 2019 9 1 D
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11: G I _ $ 3,656 $ 3 0 G N E ASSETS UNDER MANAGEMENT ASSETS CHANGE IN ASSETS UNDER UNDER CHANGE IN ASSETS MANAGEMENT – TABLE THREE MONTHS ENDED IGM FINANCIAL INC. FIRST Mutual fund net sales (redemptions) eliminations Inter-product Redemptions Redemptions Investment returns ETFs funds Investment Daily average investment fund assets (1) investments into Mackenzie mutual funds by IG Wealth Management mutual funds from its assets und Mackenzie segment excludes (2) clients, which include Mackenzie mutual funds within their investment offerings, made f During 2020 and 2019, institutional – First quarter of 2020 – resulted in sales of $373 million, redemptions of $192 million net sales of $181 million and – Fourth quarter of 2019 – resulted in sales of $129 million, redemptions of $165 million $36 million and net redemptions of (3) and assets under management exclude Mackenzie mutual fund investments in ETFs. Total investment fund net sales $ 63,459 Inter-product eliminations Inter-product Investment fund net sales (redemptions) Net change in assets Beginning assets 992 ($ millions) Sales Ending assets Consists of: funds Mutual $ 57,777 The changes in investment fund assets under management are assets under management in investment fund The changes total assets under and the changes in 11 in Table summarized 12. in Table management are summarized At March 31, investment fund assets under 2020, Mackenzie’s were $57.8 billion funds, ETFs) management (mutual and total (including sub-advisory, institutionalassets under management $63.1 billion.and other accounts) were in Mackenzie’s The change is determined by investment returnsassets under management and net contributions from our clients. generated for our clients management at March 31, total assets under Mackenzie’s 2020 were $63.1 billion, a decrease of 6.9% from $67.8 billion at March 31, sub-advisory, institutional and Mackenzie’s 2019. other accounts at March 31, 2020 were $5.3 billion, a decrease of 30.4% from $7.7 billion last year. assets under management investment fund Mackenzie’s were $57.8 billion at March 31, 2020, a decrease of 3.9% ETF net creations _ 1 T A U Q _ 22 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D19 PPFC_2020_QUAT1_ENG03_IGM.indd D20 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U netetrtrs Investment returns of $4.8 billion lastyear. Excludingthemutualfundallocation of $4.8 billion compared toanincrease in assetsdecreasing by$7.9 billion year. Duringthe current quarter, investmentreturnsresulted last compared tonetsalesof$273 million were $794 million, Total 2020 netsalesforthethreemonthsendedMarch 31, lastyear. mutual fundnetsalesof$148 million in2020comparedto mutual fundnetsalesof$174 million 2020comparedtolastyearand months endedMarch 31, and mutualfundredemptionsincreased 31.9%inthethree transactions in2020,mutualfundgrosssalesincreased31.1% Excludingthese and netsalesof$181 million. of $192 million redemptions changes resultingingrosssalesof$373 million, which includeMackenzie mutualfunds,madefundallocation quarterof2020,certainthirdpartyprograms, During thefirst last year. comparedtoanincreaseof$4.2 billion decreasing by$7.2 billion Basedondailyaverageinvestmentfundassetsandmonth-endsub-advisory,institutional andotherassets. (4) TotalinvestmentfundnetsalesandassetsundermanagementexcludeMackenziemutual investmentsinETFs. (3) andnetredemptionsof$36 million redemptionsof$165 million –Fourthquarterof2019resultedinsales$129 million, 63,103 $ andnetsalesof$181 million redemptionsof$192 million –Firstquarterof2020resultedinsales$373 million, During2020and2019,institutionalclients,whichincludeMackenziemutualfundswithin theirinvestmentofferings,madef (2) Mackenziesegmentexcludesinvestments intoMackenziemutualfundsbyIGWealthManagementfromitsassetsund (1) Sub-advisory,institutionalandotheraccounts Investment funds Mutual funds Consists of: Ending assets Beginning assets Net changeinassets Investment funds Inter-product eliminations Mutual funds Net sales(redemptions) ($ millions) EF Average totalassets Total assetsundermanagement Inter-product eliminations ETFs Total netsales(redemptions) Sub-advisory,institutionalandotheraccounts ETF net creations THREE MONTHSENDED TABLE A T 1 _ E C N G 12:
0 20 3 _ I G CHANGE INTOTALASSETS POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i (2) n d d
D (4) 2 0 (3) (3) UNDERMANAGEMENT–MACKENZIE IGM FINANCIALINC.FIRST $ 69,366 $ 355 $ 54,288 $ 63,103 MAR. 31 MAR. 57,777 70,205 (7,896) (1,766) (7,102) 5,326 5,255 1,015 (378) (198) 2020 992 794 DEC. 31 MAR. 31 DEC. 31 MAR. 31 MAR. 31 DEC. 31 MAR. 31 DEC. 2019 2019 2019 2019 2019 twelve monthtrailingredemptionrateforlong-termfunds, 2020,consistentwithlastyear. Mackenzie’sat March 31, trailing redemptionrateforlong-termmutualfundswas17.0% quarterof2020.Mackenzie’s20.6% inthefirst twelve-month term mutualfundsexcludingrebalance transactionswas Mackenzie’s annualizedquarterly redemptionrateforlong- quarterof2019. of 2020,comparedto16.4%inthefirst quarter rate forlong-termmutualfundswas22.0%inthefirst 2020.Mackenzie’sMarch 31, annualizedquarterly redemption inthethreemonthsended party programswere$3.0 billion excluding mutualfundallocationchangesmadebythird lastyear. Redemptions oflong-termmutualfunds $2.2 billion ascomparedto 2020,were$3.2 billion, ended March 31, Redemptions oflong-term mutualfundsinthethreemonths lastyear. compared tonetsalesof$273 million inthecurrentquarter of 2020,totalnetsaleswere$613 million quarter changes madebythirdpartyprogramsduringthefirst 175 4,775 1,755 917 563 . 5.7 % 0.3 % (3.9) $65,613 (9.7) (96.7) $ 69,137 (10.7) (6.9) 60,126 % 11.9 (898) 63,991 (10.1) % (1,596) 2.8 $67,776 62,728 $ 70,205 5,048 68,271 1,934 5.3 – (399) $ $ 18 148 624 760 1.) (30.4) (14.3) (5.9) % 7,650 (10.8) % 6,214 $57,694 $ 60,838 376 265 025 776 1.)% (6.9) % (10.1) % $67,776 57.8 $ 70,205 10.7 3,330 4,749 273 179 (130.2) (92.2) (86) (103) 57.1 228 646 QUARTER REPORT (1) 2020 und allocationchanges: | MANAGEMENT’SDISCUSSIONANDANALYSIS er managementandnetsales. % CHANGE / N/M N/M N/M N/M N/M N/M N/M 163.8 139.9% % 190.8 N/M N/M 22020-05-11 1:01PM 0 2 0 - 23 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 21 C process intended to promote INVESTMENT MANAGEMENT quarter were $3.0 billion,quarter were to $2.3 billion compared fourth in the redemption annualized quarterly 2019. Mackenzie’s quarter of was for the current quarter mutual funds rate for long-term Mackenzie’s quarter. 16.4% for the fourth to 22.0% compared rate for long-term mutual annualized quarterly redemption fund allocation changes made by funds excluding the mutual was 20.6% during the current quarter third party programs Net sales of long- the previous quarter. compared to 15.3% in $257 million quarter were term funds for the current compared $19 millionto net redemptions of in the previous quarter. March 31,For the quarter ended ETF net Mackenzie 2020, creations were $1.0 billion, compared to $646 million in the ETF net creations were In the current quarter, fourth quarter. inclusive of $378 million mutual investments from Mackenzie in funds compared to $399 million in the fourth quarter. were Investment fund net sales in the current quarter $992 million compared to net sales of $265 million in the fourth allocation changes made by Excluding the mutual fund quarter. sales of $811 millionthird party programs, investment fund net of $301 millionin the current quarter compared to net sales in the prior quarter. Mackenzie has $126.2 billionMackenzie in assets under management at March 31, including $63.1 billion 2020, of advisory mandates to the IG Wealth Management family of funds. Our investment in Toronto, team consists of fourteen boutiques located Kong. Montreal, Winnipeg, Boston, Dublin and Hong continue to deliver our investment offerings through a We investment teams boutique structure, with separate in-house approach. This which each have a distinct focus and investment boutique approach promotes diversification of styles and ideas with a breadth of capabilities. Oversight and provides Mackenzie is conducted through a common is focused superior risk-adjusted returns over time. This process performance upon i) identifying and encouraging each team’s construction, and in portfolio edge, ii) promoting best practices iii) emphasizing risk management. supplementsIn addition to our own investment teams, Mackenzie investment capabilities through the use of third party sub-advisors in selected areas. These sub-advisors include Putnam Investments China AMC, Impax Asset Management LLC, Inc., TOBAM, Capital Management and Greenchip Financial. Rockefeller measure of Long-term investment performance is a key At March 31, ongoing success. Mackenzie’s 2020, 77.1% of mutual fund assets were rated in the top two Mackenzie performance quartiles for the one year time frame, 69.3% for the MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER ch 31, The corresponding 2019. QUARTER REPORT Q1 2020 VS. Q4 2019 1 2 D
d d n i . M G I _ 3 0 G N E CHANGE IN ASSETS UNDER UNDER CHANGE IN ASSETS MANAGEMENT – IGM FINANCIAL INC. FIRST excluding rebalance transactions, was 16.3% at March 31, transactions, excluding rebalance 2020, to 15.6% at Mar compared rate for long-term trailing redemption average twelve-month of IFIC was approximately for all other members mutual funds 16.7% at March 31, fund and the mutual 2020. Mackenzie redemptions in March 2020 as a result industry saw increased redemption twelve-month trailing Mackenzie’s of COVID-19. weighted average redemption rate for rate is comprised of the and low load assets sales charge deferred front-end load assets, and deferred sales charge assets without with redemption fees, assets). Generally, redemption rates redemption fees (matured higher than and matured assets are for front-end load assets and low load sales charge for deferred the redemption rates fees. assets with redemption management at March 31, total assets under 2020, Mackenzie’s were $63.1 billion, a decrease of 10.1% from $70.2 billion at December 31, sub-advisory, institutional and Mackenzie’s 2019. other accounts at March 31, 2020 were $5.3 billion, a decrease of 14.3% from $6.2 billion at December 31, 2019. investment fund assets under management were Mackenzie’s $57.8 billion at March 31, of 9.7% from 2020, a decrease $64.0 billion at December 31, mutual fund 2019. Mackenzie’s assets under management were $54.3 billion at March 31, 2020, a decrease of 10.8% from $60.8 billion at December 31, 2019. ETF assets were $5.3 billionMackenzie’s at March 31, 2020, inclusive of $1.8 billion mutual in investments from Mackenzie funds compared to $4.7 billion at December 31, 2019, inclusive of $1.6 billion mutual funds. in investments from Mackenzie For the quarter ended March 31, fund mutual 2020, Mackenzie gross sales were $3.7 billion, an increase of 41.3% from the which totalled fourth quarter of 2019. Mutual fund redemptions, $3.3 billion increased by 28.5% from the for the first quarter, mutual funds for the Net sales of Mackenzie previous quarter. current quarter were $355 million compared with net sales of $18 million Excluding the mutual fund in the previous quarter. allocation changes made by third party programs during the first quarter of 2020 and the fourth quarter of 2019, mutual fund gross sales increased 33.6% and mutual fund redemptions quarter compared to the increased 29.3% in the current previous quarter and mutual fund net sales of $174 million in of $54 million quarter compared to net sales the current in the previous quarter. of long-term mutual fund assets in the current Redemptions quarter were $3.2 billion, to $2.5 billion compared in the fourth quarter of 2019. Excluding rebalance transactions, redemptions of long-term mutual fund assets in the current _ 1 T A U Q _ 24 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D21 PPFC_2020_QUAT1_ENG03_IGM.indd D22 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U compared totheMorningstar stars.This stars orbetterand59.2%hadaratingoffourfive 2020. TheseratingsexcludetheQuadrusGroupof Funds starfundsatMarch 31, or betterand46.0%forfourfive option to utilize in building long-term diversified portfolios. option toutilizeinbuildinglong-termdiversified personal goals.TheseETFs offerinvestorsanotherinvestment new solutionstodriveinvestoroutcomesandachievetheir investor-focused visiontoprovideadvisorsandinvestorswith Mackenzie’s broadandinnovativefundline-upreflectsits The additionofExchangeTraded Funds (ETF)hascomplemented their clients. advisorstooffer enhanced investmentsolutionsforfinancial Mackenzie continuestoevolveitsproductshelfbyproviding ratings itreceivesonitsmutualfundsfromtheMorningstar Mackenzie alsomonitorsitsfundperformancerelativetothe yeartimeframe. three yeartimeframeand69.3%forthefive fund assetsmeasuredbyMorningstar 2020,87.8%ofMackenzie mutual ranking service.AtMarch 31, EXCHANGE TRADEDFUNDS PRODUCTS A T 1 _ E C N G 0 22 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 2 2 † universeof85.0%forthreestars † hadaratingofthree IGM FINANCIALINC.FIRST † . † fund Asian Team. Growth Team, European&InternationalEquitiesTeam and America, EuropeandAsia.ThefundismanagedbyMackenzie’s proven experience insmallandmidcapinvestingNorth leveraging acombinationofregionalspecialistteamsthathave cap companies.ThisFund offersauniqueglobalapproachby adjusted performanceavailablewithinglobalsmallandmid with thepotentialtoaccessstronggrowthandrisk- Mackenzie GlobalSmall-Mid CapFund toprovideinvestors quarterof2020,MackenzieDuring thefirst launchedthe advisors andinvestors. streamline ourfundofferingstomeettheneedsoffinancial Mackenzie regularlyintroduces newfundsandmaymergeor industry forassetsundermanagement. funds. ThisranksMackenzie insixthplacetheCanadianETF ininvestmentsfromMackenzie mutual inclusive of$1.8 billion assets undermanagementendedthequarterat$5.3 billion, traditionalindexETFs.and strategicbetaETFs ETF andfifteen Mackenzie’s active currentline-upconsistsofthirtyETFs: fifteen MUTUAL FUNDS QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS 22020-05-11 1:01PM 0 2 0 - 25 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 23 C N/M N/M % CHANGE % $ 180.4 25.5 1.4 $ 168.3 23.3 1.4 % (2.4) 207.9 7.1 (2.4) 7.1 6.9 197.2 5.6 % 4.6 68.3 7.6 92.6 64.9 (4.0) 88.8 35.7 – 1.2 (0.7) (4.4) 4.5 (0.3) 207.3 0.6 193.0 4.2 (2.4) 4.9 166.5 $ 41.4 161.3 $ 35.9 % (1.6) (13.8) % (0.6) 1.6 Management fees were $176.0 millionManagement for the three months ended March 31, of $7.7 million 2020, an increase or 4.6% from $168.3 million in management The net increase last year. average assets under to an increase in total fees was due offset by a decline in the effective management of 5.7% average management Mackenzie’s management fee rate. points in the three months ended fee rate was 102.1 basis March 31, the 2020 compared to 104.0 basis points in 2019. comparative period in fee rate in the current in the average management The decrease change in the composition of assets under quarter was due to a in the impact of having a greater share management, including In addition, there was and Series F. non-retail priced products in the firstone more calendar day quarter of 2020 compared to the first of 2019, which resulted in additional quarter management fees of $1.9 million. earns administration fees primarily from providing Mackenzie fees were services to its investment funds. Administration $24.9 million for the three months ended March 31, 2020, an increase of $1.6 million or 6.9% from last year. earns distribution fee income on redemptions of Mackenzie sales charge purchase mutual fund assets sold on a deferred fees Redemption option and on a low load purchase option. from 5.5% in the charged for deferred sales charge assets range first year and decrease to zero after seven years. Redemption 3.0% in the firstfees for low load assets range from 2.0% to after two or three years, depending to zero year and decrease 2019 2019 2019 2019 2019 2019 2019 2019 DEC. 31 MAR. 31 DEC. 31 MAR. 31 1.5 7.6 (2.8) 2020 24.9 67.8 88.5 199.6 202.4 163.9 MAR. 31 $ 176.0 MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 3 2 D
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13: G I _ 3 0 G N E REVIEW OF SEGMENT OPERATING RESULTS OPERATING SEGMENT OF REVIEW Q1 2020 VS. Q1 2019 Q1 VS. Q1 2020 TABLE REVENUES THREE MONTHS ENDED IGM FINANCIAL INC. FIRST ($ millions) Revenues fees Management Administration fees Administration fees Distribution Expenses Commission commission Trailing Non-commission Mackenzie’s segment excludes revenue earned on advisory excludes revenue earned segment Mackenzie’s to IG Wealthmandates investments funds and Management mutual funds by IG Wealth Management mutual into Mackenzie have management team costs of the investment funds. The segments. been allocated across interest and taxes are presented in earnings before Mackenzie’s 13. Table Net investment income and other Earnings before interest and taxes $ 35.7 The largest component of Mackenzie’s revenues is management of Mackenzie’s The largest component fees depends on the level fees. The amount of management Management and composition of assets under management. objective and the fee rates vary depending on the investment management. For account type of the underlying assets under management example, equity-based mandates have higher fee rates than fixed mandates and retail mutual fund income than sub-advised accounts have higher management fee rates mutual Mackenzie’s and institutional accounts. The majority of purchased on a retail basis. fund assets are retail mutual fund offering, certain series are Within Mackenzie’s dealers whereby offered for fee-based programs of participating directly by the dealer compensation on such series is charged does not pay dealer to a client (primarily Series F). As Mackenzie lower management the dealer compensation, these series have fees. At March 31, 2020, these series had $10.0 billion in assets, an increase of 8.4% from the prior year. _ 1 T A U Q _ 26 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D23 PPFC_2020_QUAT1_ENG03_IGM.indd D24 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U $0.3 million or 0.3% from $88.8 million in2019. or0.3%from$88.8 million $0.3 million 2020,a decrease of in thethreemonthsendedMarch 31, management. Non-commissionexpenseswere$88.5 million administration, marketing andmanagementofitsassetsunder Non-commission expensesareincurred byMackenzie inthe mutual fundsthatdonotpaytrailingcommissions. composition ofmutualfundassetstowards thoseserieswithin 46.4 basispointslastyear. Thedeclinewasduetoachangein 2020compared to points inthethreemonthsendedMarch 31, average mutualfundassetsundermanagementwas45.3basis commission rate.Trailing commissionsasapercentageof fund assetsof7.1%offsetbyadeclineintheeffectivetrailing commissions wasduetotheincrease inaveragemutual lastyear. Thenetincrease intrailing 4.5% from$64.9 million or 2020,anincreaseof$2.9 million months endedMarch 31, low load.Trailing inthethree commissionswere$67.8 million which thefundwassold:front-end,deferred saleschargeor depending onthefundtypeandpurchaseoptionupon of mutualfundassetsundermanagement.Thesefeesvary of retailmutualfundsandare calculatedasapercentage Trailing commissionspaidtodealersareoncertainclasses 2020,unchangedfromtheprioryear. ended March 31, inthethreemonths Commission expensewas$7.6 million option. Commissions paidareexpensedasincurred. mutual fundsonadeferredsaleschargeandlowloadpurchase Mackenzie payssellingcommissionstothedealersthatsellits in2019. $161.3 million or1.6%from 2020,anincreaseof$2.6 million ended March 31, forthethreemonths Mackenzie’s expenseswere$163.9 million last year. 2020comparedto$4.2 million months endedMarch 31, forthethree investment incomeandotherwas($2.8) million a fundandaresoldasthird partyinvestorssubscribe.Net investments aregenerallymadeintheprocessoflaunching related toMackenzie’s investmentsinproprietaryfunds.These Net investmentincomeandotherincludesreturns lastyear. from$1.4 million $0.1 million anincreaseof 2020was$1.5 million, months endedMarch 31, on thepurchaseoption.Distributionfeeincomeinthree EXPENSES A T 1 _ E C N G 0 24 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 2 4 IGM FINANCIALINC.FIRST fourth quarter. inthe from$92.6 million quarter, adecreaseof$4.1 million inthecurrent Non-commission expenseswere$88.5 million points inthefourthquarter. 45.3 basispointsinthecurrentquartercomparedto45.6 commission rate.Theeffectivetrailing ratewas assets undermanagementandadeclineintheeffectivetrailing the 0.2%periodoverdecrease inaveragemutual fund fourth quarter. Thechangeintrailingcommissionsreflects inthe or0.7%from$68.3 million of$0.5 million a decrease Trailing inthecurrentquarter, commissionswere$67.8 million inthefourthquarter. to $5.6 million 2020,ascompared inthequarterendedMarch 31, $7.6 million Commission expenserelatedtosellingcommissionspaidwas the fourthquarter. in or1.6%from$166.5 million quarter, adecreaseof$2.6 million forthecurrent Mackenzie’s expenseswere$163.9 million inthefourth quarter. quarter compared to$0.6 million forthecurrent investment income andotherwas($2.8) million related toMackenzie’s investmentsinproprietaryfunds.Net Net investmentincomeandotherincludesreturns inthefourthquarter. of2.4%from$25.5 million a decrease inthecurrentquarter, Administration feeswere$24.9 million inthe Average assetsundermanagementwere$69.4 billion • quarterof2020 Therewasonefewercalendardayinthefirst • Mackenzie’s averagemanagementfeeratewas102.1basis • as follows: fourth quarter. Factors contributing tothenetdecreaseare inthe or2.4%from$180.4 million a decreaseof$4.4 million forthecurrentquarter, Management feeswere$176.0 million fourthquarter. in the or4.0%from$207.9 million quarter, adecreaseof$8.3 million forthecurrent Mackenzie’s revenueswere$199.6 million EXPENSES REVENUES Q1 2020 VS. Q42019 current quarter, anincreaseof0.3%fromthepriorquarter. decrease inmanagementfeesof$1.9 million. compared tothefourthquarterof2019,whichresultedina in thepriorquarter. points inthecurrent quartercomparedto103.8basispoints QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS 22020-05-11 1:01PM 0 2 0 - 27 0 5 - 1 1
1 : 0 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 25 C % CHANGE % $ 70.5 3.9 $ 70.0 32.6 6.0 107.0 32.7 (10.3) (41.7) % 108.7 0.1 44.8 (38.3) % 21.5 (38.5) 45.2 0.9 66.3 22.7 (12.0) $ 40.7 67.9 (13.3) 0.7 $ 40.8 2.3 (0.2) 1.2 (3.1) % (33.4) % (1.2) (33.6) Q1 2020 VS. Q4 2019 Q4 VS. Q1 2020 earnings of $14.4 million,earnings of by an increase in China offset in part to income and other decreased Net investment AMC’s earnings. $3.5 million in the first to $6.0 million of 2020 compared quarter in 2019. and taxes related to Investment PlanningEarnings before interest $0.6 million were Counsel lower in the first quarter of 2020 period in 2019. compared to the same The proportionate share of associates’ earnings was $20.1 million of associates’ The proportionate share in the first 2020, a decrease of $12.5 million quarter of the from primarily resulting from a decrease offourth quarter of 2019 $15.6 million earnings, offset in part by an increase in in Lifeco’s and other wasChina AMC’s earnings. Net investment income $3.5 million in the first compared to $3.9 million quarter of 2020, in the fourth quarter. Investment PlanningEarnings before interest and taxes related to were $0.5 millionCounsel lower in the first of 2020 quarter compared to the prior quarter. 2019 2019 2019 2019 2019 2019 2019 2019 DEC. 31 MAR. 31 DEC. 31 MAR. 31 3.5 2020 20.1 94.2 45.1 22.0 67.1 MAR. 31 $ 70.6 MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 5 2 D
d OPERATING RESULTS – CORPORATE AND OTHER OPERATING RESULTS – CORPORATE AND d n i . M
14: G I _ 3 0 G N E CORPORATE AND OTHER AND CORPORATE REVIEW OF SEGMENT OPERATING RESULTS RESULTS OPERATING SEGMENT OF REVIEW Q1 2020 VS. Q1 2019 VS. Q1 2020 TABLE THREE MONTHS ENDED IGM FINANCIAL INC. FIRST ($ millions) Revenues income Fee income and other Net investment Proportionate share of associates’ earnings Expenses Commission Non-commission Earnings before interest and taxes $ 27.1 The proportionate share of associates’ earnings decreased by The proportionate share of associates’ earnings $12.6 million in the first compared to 2019. quarter of 2020, China Lifeco, These earnings reflect equity earnings from the Consolidated AMC and Personal Capital, as discussed in in the decrease Financial Position section of this MD&A. The first in Lifeco’s quarter resulted primarily from the decrease The Corporate and Other segment includes net investment includes net investment and Other segment The Corporate allocated to the IG Wealthincome not or Management share of proportionate the Company’s segments, Mackenzie China Lifeco Inc. (Lifeco), its associates, Great-West earnings of Capital Ltd. (China AMC) and Personal Asset Management Co., Capital), operating results for Investment (Personal Corporation consolidation Inc., other income, as well as Planning Counsel elimination entries. Financial investments in Wealthsimple also has The Company LPs. Portag3 Ventures and Corporation interest and taxes are and other earnings before Corporate 14. presented in Table _ 1 T A U Q _ 28 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D25 PPFC_2020_QUAT1_ENG03_IGM.indd D26 F C
_ PART C 2
0 IGM FINANCIAL INC. 2 0 _ Q U
rpitr netetfns Proprietaryinvestmentfunds Eut euiis Equity securities Fair valuethroughprofitorloss Corporate investments Fair valuethroughothercomprehensiveincome ($ millions) Statements ofEarnings. in Netinvestmentincome andotherintheConsolidated proprietary investmentfunds.Gainsandlossesarerecorded includeequitysecurities and asFVTPL Securities classified Financial Corporation. partnership controlledbytheCompany’s parent,Power inWealthsimple through alimited a totalof$186.9 million 2020,theCompany hadinvested guidance. AsatMarch 31, investment online investmentmanagerthatprovidesfinancial Wealthsimple FinancialCorporation (Wealthsimple) isan inPortag3. Company hadinvestedatotalof$48.9 million 2020,the parent, PowerFinancialCorporation. AsatMarch 31, servicescompaniesandare financial early-stage investmentfundsdedicatedtobackinginnovating Portag3 Ventures LPandPortag3Ventures IILP(Portag3)are Ventures LPandPortag3Ventures IILP. investments inWealthsimple FinancialCorporation, andPortag3 Corporate investmentsisprimarilycomprisedoftheCompany’s Investments Corporate comprehensive income. investmentsarerecordedinOther Gains andlossesonFVTOCI in Table 15. The compositionoftheCompany’s securitiesholdingsisdetailed 2019. atDecember 31, compared to$15.4 billion 2020, atMarch 31, totalassetswere$15.6 billion IGM Financial’s FAIR VALUE THROUGHPROFITORLOSS (FVTPL) COMPREHENSIVE INCOME (FVTOCI) FAIR VALUE THROUGHOTHER TABLE OTHER INVESTMENTS CONSOLIDATED FINANCIALPOSITION IGM FINANCIAL INC. IGM FINANCIAL A T 1 _ E C N G 15: 0 26 3 _ I G OTHER INVESTMENTS POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 2 6 controlled bytheCompany’s IGM FINANCIALINC.FIRST
originated bysubsidiariesofLifeco. ofresidentialmortgages,including$2.4 billion $11.9 billion Managementserviced 2020,IG Wealth programs. AtMarch 31, Corporation (CMHC)orCanadianbanksponsored securitization serviced basis,includingCanadaMortgageandHousing are fundedprimarilythroughsalestothirdpartiesonafully Residential Management mortgagesoriginatedbyIG Wealth 2019. at December 31, 2020,compared to$344.5 million atMarch 31, $267.0 million Total loans beingheldpendingsaleorsecuritizationare Loans heldforsecuritizationarecarriedatamortizedcost. mortgages heldtemporarilybytheCompany pendingsale. measured atfairvaluethroughpr The Company holdsloanspendingsaleorsecuritization.Loans 2019. atDecember 31, to $6.9 billion 2020,compared atMarch 31, recorded andtotalled$6.7 billion offsetting liability,Obligationstosecuritizationentities,hasbeen by thirdpartiesthatinturnissuesecuritiestoinvestors.An residential mortgagessoldtosecuritizationprogramssponsored Loans measuredatamortizedcostareprimarilycomprisedof 2019. December 31, 2020,comparedto46.8%at 44.9% oftotalassetsatMarch 31, Loans consistedofresidentialmortgagesandrepresented The compositionoftheCompany’s loansisdetailedinTable 16. classified asFVTPL. classified investment fund.Theunderlyingsecuritiesofthesefundsare the Company hasmadetheassessmentthatitcontrols Certain proprietaryinvestmentfundsareconsolidatedwhere LOANS 0. $365.6 $ 309.7
4. $303.6 $ 245.0 QUARTER REPORT COST FAIR VALUE 64.7 63.2 1.5 MARCH 2020
31, 2020 62.0 60.7 | MANAGEMENT’SDISCUSSIONANDANALYSIS 1.3 DECEMBER
COST FAIR VALUE ofit orlossareresidential ofit 9. $ 357.4 56.2 $ 297.9 52.9 5. 54.4 51.3 16 1.8 1.6 4. $301.2 $ 245.0 31, 2019 22020-05-11 1:01PM 0 2 0 - 29 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 -
0 2 0 22020-05-11 1:01 PM 2019 27 – $ 7,198.0 0.7 C DECEMBER 31 $ 7,198.7 $ 7,198.0 0.8 2020 31.8 6,945.7 MARCH 31 MARCH 31
$ 6,977.5 $ 6,946.5 ee month period of March 31,
INVESTMENT IN ASSOCIATES INVESTMENT IN Great-West Lifeco Inc. (Lifeco)At March 31, held a 4% equity interest 2020, the Company IGM Financialin Lifeco. and Lifeco are controlled by Power of Canada. Corporation The equity method is used to account for IGM Financial’s investment in Lifeco, as it exercises significant influence. Changes March 31,in the carrying value for the quarter ended 2020 17. compared with 2019 are shown in Table recorded an adjustment which related to In March 2020, Lifeco related impacts due to unfavourable basis changes and market declines and volatility driven by the COVID-19 significant market after-tax proportionate share of this pandemic. The Company’s and is included in adjustment was approximately $8.1 million the proportionate share of earnings. China Asset Management Co.,Founded in 1998 as one of the first fund management companies Ltd. (China AMC) a positionin China, China AMC has developed and maintained asset management industry. leaders in China’s among the market excluding China AMC’s total assets under management, subsidiary assets under management, were RMB¥ 1,032.1 billion ($192.4 billion) at December 31, 2019, representing an increase of 12.4% (CAD$ increase of 9.9%) from RMB¥ 918.1 billion ($175.1 billion) at June 30, 2019. 13.9% The equity method is used to account for the Company’s in China AMC, as it exercises significantequity interest influence. Changes in the carrying value for the three months ended 17. The change in other March 31, 2020 are shown in Table comprehensive income in the thr of the Chinese yuan 2020 was due to a 6.8% appreciation relative to the Canadian dollar.
MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 interest income and interest POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER
QUARTER REPORT 7 2
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d LOANS d n i . M 16: G I _ 3 0 G N E SECURITIZATION ARRANGEMENTS SECURITIZATION TABLE IGM FINANCIAL INC. FIRST
credit losses Less: Allowance for expected or loss Fair value through profit Through the Company’s mortgage banking operations, residential mortgage banking operations, Through the Company’s mortgages originated by IG Wealth Management mortgage trusts sponsoredplanning specialists are sold to securitization to investors. Theby third parties that in turn issue securities mortgages through the CMHC securitizes residential Company Securities sponsored National Housing Act Mortgage-Backed Program (CMB(NHA MBS) and the Canada Mortgage Bond asset-backed Program) and through Canadian bank-sponsored retains commercial paper (ABCP) programs. The Company of credit risk andservicing responsibilities and certain elements assets. Theprepayment risk associated with the transferred mortgages is partially credit risk on its securitized Company’s of financialmitigated through the use of insurance. Derecognition the transfer ofassets in accordance with IFRS is based on has retained risks and rewards of ownership. As the Company risk associatedprepayment risk and certain elements of credit through the securitization transactions with the Company’s for as secured they are accounted CMB and ABCP programs, records the transactions under these borrowings. The Company related obligationsprograms as follows: i) the mortgages and are carried at amortized cost, with ($ millions) Amortized cost overmethod, recorded expense, utilizing the effective interest rate the term of the mortgages, ii) the component of swaps entered pays into under the CMB Program whereby the Company coupons on Canada Mortgage Bonds and receives investment returns on the reinvestment of repaid mortgage principal, are recorded at fair value, and iii) cash reserves held under the ABCP program are carried at amortized cost. securitized loans In the first quarter of 2020, the Company through its mortgage banking operations with cash proceeds of $243.0 million compared to $428.7 million in 2019. Additional securitization activities, information related to the Company’s hedges of related reinvestment and including the Company’s interest rate risk, can be found in the Financial Risk section of this MD&A and in Note 5 to the Interim Financial Statements. _ 1 T A U Q _ 30 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D27 PPFC_2020_QUAT1_ENG03_IGM.indd D28 F C
_ PART C 2
0 IGM FINANCIAL INC. 2 0 _ Q U liabilities aggregated by registered users, was USD $847 billion liabilities aggregatedbyregisteredusers,wasUSD$847 billion Tracked Account Value (TAV), thegrossvalueofassetsand 2019. asatDecember 31, of 13.1%fromUSD$12.3 billion 2019andadecrease atMarch 31, of 15.7%fromUSD$9.2 billion 2020,representinganincrease asatMarch 31, USD $10.7 billion Personal Capital’stotalassetsundermanagementwere 2019. atDecember 31, 4.3% from2.41 million 2019andanincreaseof atMarch 31, 18.5% from2.12 million Capital’s freedashboard platform,representinganincreaseof registered users,individualswhohavesigneduptousePersonal 2020,PersonalCapitalhad2.52 million As atMarch 31, growth sinceitsinception. leading digitalwealthmanagerthathasexperienced significant Capital) (Personal Founded in2009theUnitedStates,PersonalCapitalisa Corporation Capital Personal TheproportionateshareofearningsfromtheCompany’sinvestmentinassociatesisrecorded inNetinvestmentincomeandot $907.0 (1) $ 703.5 $ 207.9 $ 1,818.4 Carrying (loss)andotheradjustments value, March 31 Other comprehensive income investments(FVTOCI) Transferfromcorporate $896.7 $ 662.7 $ 194.5 $ Carrying 1,753.9 value, ($ millions) January 1 Dvdns Earnings Proportionateshareof: (losses) Dividends TABLE A T 1 (Tables 2and3). _ E C N G 17:
0 28 3 _ I G INVESTMENT INASSOCIATES POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 2 (1) 8
IEOCIAAC AIA TOTAL CAPITAL LIFECO CHINA AMC (16.4) 14.3 12.4 –
IGM FINANCIALINC.FIRST (13.7) 45.6 8.9 –
PERSONAL 16.5 (3.1) US dollar relativetotheCanadiandollar. US dollar 2020wasduetoan8.6%appreciation ofthe March 31, comprehensive incomeinthethreemonthperiodended 2020areshowninTableMarch 31, 17.ThechangeinOther Changes inthecarryingvalueforthreemonthsended that itrecognizedaspartofitsinvestmentinthecompany. amortizationofintangibleassets adjusted byIGM Financial’s includes itsproportionateshareofPersonalCapital’snetloss equityearningsfrom PersonalCapital influence. IGM Financial’s equity interest inPersonalCapital,asitexercises significant The equitymethodisusedtoaccountfortheCompany’s 24.8% 2019. asatDecember 31, from USD$841 billion 2019andanincreaseof0.8% atMarch 31, USD $703 billion 2020,repr as atMarch 31, MARCH – – PERSONAL QUARTER REPORT
31, 2020 (30.1) 74.5 20.1 – LIFECO CHINA AMC TOTAL CAPITAL
MARCH 94 19 01 21.4 0.1 32.7 1.9 (3.4) $ 999.5 19.4 $ 692.8 $ 213.7 7.4 $ 1,906.0 28.7 –$ 1,651.3 683.5$ 967.8$ $ 1. 217.0 217.0 – – 1.) – – (16.4) – – (16.4) 2020 her intheCorporateandotherreportablesegment | esenting anincreaseof20.5%from MANAGEMENT’SDISCUSSIONANDANALYSIS 31, 2019 22020-05-11 1:01PM 0 2 0 - 31 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 29 C 2019 2019 2019 2019 DEC. 31 MAR. 31 $ 2.2 561.3 $ 3.3 12.3 507.6 20.4 9.6 $ 596.2 21.9 $ 542.4 $ 584.3 0.5 11.4 0.5 $ 531.6 $ 596.2 10.3 $ 542.4 0.5 2020 11.9 17.2 10.1 856.0 MAR. 31 $ 1.9 $ 887.0 $ 876.4
CASH FLOWS IGM Financial to generate significant continues cash flows from and interest, taxes, depreciation Earnings before its operations. sales (EBITDA before sales commissions before amortization totalled $271.7 millioncommissions) the first for quarter of 2020 compared to $295.9 million for the first quarter of 2019 and $336.5 million of 2019. EBITDA before for the fourth quarter the impact of both commissions sales commissions excludes 1). amortization (refer to Table paid and commission taxes, depreciation and amortization Earnings before interest, (EBITDA after sales commissions) after sales commissions totalled $231.0 million in the first to quarter of 2020 compared $252.2 million in the first quarter of 2019 and $291.3 million of 2019. EBITDA after sales commissions in the fourth quarter commission amortization (refer to excludes the impact of Table 1). Instruments Risk section of this MD&A to the Financial Refer liquidity and to for information related to other sources of of liquidity and exposure to and management the Company’s funding risk. Flows is a summary of the Consolidated 20 – Cash Table of the Interim Statements of Cash Flows which forms part March 31,Financial Statements for the quarter ended 2020. by $10.5 millionCash and cash equivalents decreased in the first of $186.9 million to an increase quarter of 2020 compared in 2019.
MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER epurchases and retirement of long- QUARTER REPORT 9 2 D
d DEPOSIT OPERATIONS – FINANCIAL POSITION d n i . M 18: G I _ 3 0 G sales commissions. banking operations. preferred shares. term debt. N E CONSOLIDATED LIQUIDITY AND CAPITAL RESOURCES CAPITAL AND LIQUIDITY CONSOLIDATED LIQUIDITY TABLE IGM FINANCIAL INC. FIRST ($ millions) Assets Cash and cash equivalents Client funds on deposit Accounts and other receivables Loans Total assets Liabilities and shareholders’ equity liabilities Deposit liabilities Other equity Shareholders’ Total liabilities and shareholders’ equity $ 887.0 Cash and cash equivalents totalled $709.5 million equivalents totalled Cash and cash at March 31, $720.0 million with 2020 compared at December 31, 2019 and $837.1 million at March 31, 2019. Cash and cash equivalents $1.9 million deposit operations were related to the Company’s at March 31, compared to $2.2 million 2020, December 31, at 18. 2019 and $3.3 million at March 31, 2019, as shown in Table held by clients represents cash balances Client funds on deposit and with the offset included accounts within their investment increase in the firstin deposit liabilities. The quarter of 2020 is that has caused clients to hold volatility primarily due to market larger cash positions. consists of current assets less current capital, which Working liabilities, totalled $591.1 million at March 31, 2020 compared with $464.3 million at December 31, $583.1 million 2019 and 19). at March 31, 2019 (Table to: capital is utilized Working • ongoing operations, including the funding of Finance • finance mortgages in its mortgage Temporarily • interest and dividends related to long-term debt and Pay • for regulated entities. Maintain liquidity requirements • quarterly dividends on its outstanding common shares. Pay • common share r Finance _ 1 T A U Q _ 32 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D29 PPFC_2020_QUAT1_ENG03_IGM.indd D30 F C
_ PART C 2
0 IGM FINANCIAL INC. 2 0 _ Q U Incometaxespaid dutet odtrientcs rmoeaigatvte Adjustmentstodeterminenetcashfromoperatingactivities Financing activities Working capital urn oto fln-emlaiiis Current portionoflong-termliabilities ahadcs qiaet,edo eid 709.5 $ Cash andcashequivalents,endofperiod Cash andcashequivalents,beginningofperiod Change incashandequivalents Investing activities Earningsbeforeincometaxes Operating activities ($ millions) Thedeductionofrestructuringprovisioncashpayments. • Changesinoperatingassetsandliabilitiesother. • Theadd-backofpensionandotherpost-employment • Thedeductionofinvestmentinassociates’equityearnings • Theadd-backofamortizationcapital,intangibleand • Theadd-backofamortizationcapitalizedsalescommissions • operating activities: consist ofnon-cashoperatingactivitiesoffsetbycash during thethreemonthperiodof2020comparedto2019 Adjustments todeterminenetcashfromoperatingactivities Accountsreceivableandotherassets Clientfundsondeposit Cashandcashequivalents Current assets ($ millions) consadohrpybe Deposits Accountsandotherpayables and certificates Current liabilities Current portionofmortgagesandother HE OTSEDD THREE MONTHSENDED TABLE TABLE A T benefits offsetbycashcontributions. benefits offset bydividendsreceived. other assets. offset bythedeductionofcapitalizedsalescommissionspaid. 1 _ E C N G 20: CASH 19: 0 30 3 _ I G WORKING CAPITAL POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
FLOWS
D 3 0 IGM FINANCIALINC.FIRST
Issuance ofdebentures$250.0 million. • financing activities: quarterof2019alsoincludedthefollowing The first Thepaymentofregularcommonshare dividendswhich • Anincreaseinobligationstosecuritizationentitiesof • 2019 relatedto: quarterof2020compared to Financing activitiesduringthefirst in 2019. in2020compared to $135.5 million totalled $134.0 million in2019. $321.0 million and repaymentsofobligationstosecuritizationentities in obligationstosecuritizationentitiesof$426.3 million in2020compared toanincrease entities of$392.4 million andrepaymentsofobligationstosecuritization $240.2 million QUARTER REPORT $ 591.1 $ 709.5
$ 208.9 2020 3,061.5 1,616.1 3,652.6 1,711.7 MAR. 31 MAR. MAR. 31 MAR. (294.2) 856.0 720.0 193.4 375.4 872.1 573.3 (42.1) (76.5) (10.5) 90.3 2020 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS (66 56.4 (96.6) (93 14.3 (89.3) 2. 212.5 28.9 207.4 3. (15.2) % $ 837.1 602 10.7 650.2 (49.4) (2.7) % $ 214.8 186.9 513 507.6 561.3 2. $ 837.1 $ $ 720.0 353 301.4 345.3 1517 1,326.1 1,531.7 6. $ 583.1 $ 2,389.1 $ 464.3 2,694.0 1531 1,304.6 1,503.1 590 524.5 579.0 3183 2,972.2 3,158.3 619 560.0 611.9 A.3 %CHANGE MAR. 31 DEC. 31 MAR. 31 MAR. 31 DEC. 2019 2019 N/M N/M N/M 22020-05-11 1:01PM 0 2 0 - 33 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 31 C FINANCIAL INSTRUMENTS unsecured debt obligations of the Company subject to standard subject to standard Company debt obligations of the unsecured not include but which do including negative pledges, covenants, any specified financial covenants. or operational firstOther activities in the included the quarter of 2020 share dividends of $134.0 milliondeclaration of common or in common share capital are $0.5625 per share. Changes in Statements of Changes Consolidated reflected in the Interim Shareholders’ Equity. senior current rating on the Company’s Standard & Poor’s (S&P) with a stable outlook. Dominion is “A” unsecured debentures (DBRS) current rating on the Company’s Bond Rating Service’s (High)” with a stable is “A senior unsecured debentures rating trend. with an Credit ratings are intended to provide investors of the securities of independent measure of the credit quality of payment and a company and are indicators of the likelihood in accordance the capacity of a company to meet its obligations of the rating with the terms of each obligation. Descriptions below have been categories for each of the agencies set forth websites. obtained from the respective rating agencies’ buy, sell or hold These ratings are not a recommendation to price market do not address and the securities of the Company of a specificor other factors that might determine suitability ratings also may not The security for a particular investor. value of securities reflect the potential impact of all risks on the any time by the and are subject to revision or withdrawal at rating organization. The A rating assigned to IGM Financial’s senior unsecured 22 ratings used debentures by S&P is the sixth highest of the view that the for long-term debt. This rating indicates S&P’s capacity to meet its financial commitment on the Company’s but the obligation is somewhat more obligation is strong, in circumstances susceptible to the adverse effects of changes and economic conditions than obligations in higher rated categories. The A (High) rating assigned to IGM Financial’s unsecured senior debentures by DBRS is the fifth ratings used highest of the 26 for long-term debt. Under the DBRS long-term rating scale, debt securities rated A (High) are of good credit quality and the capacity for the payment of financial obligations is substantial. While this is a favourable rating, entities in the A (High) category events, but qualifying negative may be vulnerable to future factors are considered manageable. Table 21 presents the carrying amounts and fair values of Table financial assets and financial The table excludes fair liabilities. MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 1 3 D
d d n i . M G I _ 3 0 G normal course issuer bid at a cost of $9.2 million. issuer bid at a cost normal course $2.2 million. with proceeds of $0.5 millionand sales of other investments $35.4 millionin 2020 compared to and $20.2 million, respectively, in 2019. loans and other of $547.1 million in 2020 compared to $293.3 million and $341.3 million, respectively, in 2019 the Company’s primarily related to residential mortgages in mortgage banking operations. in 2020 compared to $10.2 million in 2019. N E CAPITAL RESOURCES CAPITAL IGM FINANCIAL INC. FIRST The Company’s capital management objective is to maximize capital management objective The Company’s is Company shareholder returns while ensuring that the supports regulatory capitalized in a manner which appropriately and business capital requirements, working capital needs capital management practices are expansion. The Company’s focused on preserving the quality of its financial position by sheet. balance maintaining a solid capital base and a strong long-term debt and consists of Capital of the Company $6.7 billioncommon shareholders’ equity which totalled at March 31, 2020, compared to $6.6 billion at December 31, its capital management regularly assesses 2019. The Company conditions. practices in response to changing economic capital is primarily utilized in its ongoing The Company’s business operations to support working capital requirements, business long-term investments made by the Company, expansion and other strategic objectives. Subsidiaries subject investment dealers, include to regulatory capital requirements dealers, portfolio managers, mutual fund dealers, exempt market investment fund managers and a trust company. These levels of capital to maintain minimum subsidiaries are required equity. based on either working capital, liquidity or shareholders’ subsidiaries have complied with all regulatory The Company’s capital requirements. The total outstanding long-term debt was $2.1 billion at March 31, 2020, unchanged from December 31, 2019. Long-term debt is comprised of debentures which are senior • IGM Financial’s shares under of 266,093 common The purchase • which totalled preferred share dividends of perpetual Payment the firstInvesting activities during to quarter of 2020 compared to: 2019 primarily related • $19.1 million purchases of other investments totalling The • increase in loans of $321.3 million An repayments of with • Net cash used in additions to intangible assets was $10.9 million The firstof 2019 also included the additional investment quarter in Personal Capital of $66.8 million. _ 1 T A U Q _ 34 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D31 PPFC_2020_QUAT1_ENG03_IGM.indd D32 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U • Loans classified asamortized costarevaluedbydiscounting Loansclassified • asheldfortradingarevaluedusing market Loansclassified • assetsandliabilities Otherinvestmentsandotherfinancial • and assumptions: Fair valueisdeterminedusingthefollowingmethods liabilities. certain otherfinancial assets,accounts payableandaccruedliabilities financial cash equivalents,accountsandotherreceivables,certain approximation offairvalue.Theseitemsincludecashand measured atfairvalueifthecarryingamountisareasonable liabilitiesnot assetsandfinancial value informationforfinancial –Fair orloss valuethroughprofit –Fair valuethroughothercomprehensive income Other investments Financial assetsrecordedatfairvalue ($ millions) arvletruhpoi rls –Fair orloss valuethroughprofit Loans Drvtv iaca ntuet Derivative financial instruments mrie ot Derivative financial Financial liabilitiesrecordedatfairvalue instruments – Amortized Loans cost Financial assetsrecordedatamortizedcost Ln-emdb Long-term Obligationstosecuritizationentities debt Deposits and Financial liabilitiesrecordedatamortizedcost certificates TABLE A T the expectedfuturecashflowsatprevailingmarket yields. institutions. financial lendingratesoffered toretailborrowers by specifically interest ratesforloanswithsimilarcreditriskandmaturity, used inthevaluationtechniques. cash flows.Whereverpossible,observablemarket inputsare related todiscountratesandthetimingamountoffuture valuation techniquesare usedthatrequireassumptions available. Whenaquotedmarket priceisnotreadilyavailable, are valuedusingquotedprices fromactivemarkets, when 1 _ E C N G 21:
0 32 3 _ I G FINANCIAL INSTRUMENTS POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
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the three months ended March 31, 2020. the threemonthsendedMarch 31, conditionoftheCompanya materialimpactonthefinancial for instruments,thesechanges didnothave fair valuesoffinancial Although therewerechangestoboththecarryingvaluesand instruments. financial additional discussiononthedeterminationoffairvalue See Note13oftheInterimFinancialStatementswhichprovides instrumentsarevaluedbasedonquoted Derivativefinancial • Long-termdebtisvaluedusingquotedpricesforeach • arevaluedbydiscountingthe Depositsandcertificates • Obligationstosecuritizationentitiesarevaluedbydiscounting • ARIGVLE FAIR VALUE CARRYING VALUE discounted cashflowanalysis. instruments withsimilarcharacteristicsandmaturities,or market prices,whereavailable,prevailingmarket ratesfor debenture availableinthemarket. offered fordepositswithsimilartermsandcreditrisks. contractual cashflowsusingmarket interestratescurrently terms andcharacteristics. securities issuedbythesesecuritizationentitieshavingsimilar the expectedfuture cashflowsatprevailingmarket yieldsfor QUARTER REPORT 0. $303.6 $ 303.6 6,945.7 2,100.0 6,729.4 876.4 62.0 31.8 32.2 65.6 MARCH
2020 7,139.6 2,274.4 6,936.0 31, 2020 876.7 62.0 31.8 32.2 65.6 | MANAGEMENT’SDISCUSSIONANDANALYSIS CARRYING VALUE FAIR VALUE DECEMBER
0. $301.2 $ 301.2 56.2 56.2 – – 15.2 15.2 7180 7,273.8 7,198.0 543 584.7 584.3 17.2 17.2 2100 2,453.6 2,100.0 6,997.0 6,913.6 31, 2019 22020-05-11 1:01PM 0 2 0 - 35 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 33 C esses where required: gency preparedness committee – planning and responding to events including pandemics. workforce planning, and benefits and employee assistance program support. and IPC distribution and IG Consultant network, Mackenzie conditions. client communication specific to market Committee which oversees conflicts of interest as well as the oversees conflicts which Committee for and Ethics Conduct of Business of the Code administration Conduct). of Directors, Officers and Employees (Code forums to where necessary, leadership committees and issues with the following mandates. address COVID-19 • Human resources committee – employee and leader support, • Distribution and client communication committee – Management oversight for risk management resides with the Management oversight of which is comprised Committee executive Risk Management IGM Financial Executive Officer, the President and Chief and IG Wealth President and Chief Executive Management, the the Financial Officer, Investments, the Chief Mackenzie Officer, the Chief Operating Officer and the Executive General Counsel, Development and Corporate Vice President Chief Strategy responsible for providing oversight The committee is Officer. i) establishing risk management process by: of the Company’s framework and policy, ii) definingand maintaining the risk the profile risk appetite, iii) ensuring the Company’s risk Company’s and risk and processes are aligned with corporate strategy a and reinforcing appetite, and iv) establishing “tone at the top” strong culture of risk management. The Chief Executive Officers of the operating companies have of their overall responsibility for overseeing risk management respective companies. for risk management has assigned responsibility The Company model, with the First Line using the Three Lines of Defence responsibility for reflecting the business units having primary risk management risk management, supported by Second Line providing functions and a Third Line Internal Audit function effectiveness of the assurance and validation of the design and ERM Framework. is focusing the Company In response to the impact of COVID-19, issues, and our teams on addressing and managing COVID-19 establishing new committees and proc • committee – focusing, or establishing Executive COVID-19 • Business continuity and emer First Line of Defence The leaders of the various business units and support functions have primary ownership and accountability for the ongoing risk management associated with their respective activities. of business unit and support function leaders Responsibilities MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER e in place to identify and manage ontrols are implemented to manage ontrols QUARTER REPORT 3 3 D
d d n i . M G I _ 3 0 G in relation to financial disclosure, internal controls and the control environment as well as the Company’s compliance activities. which oversees Committee include: i) the Human Resource compensation policies and practices, ii) the Governance and which oversees corporate governance Nominating Committee Review and Conduct Party practices, and iii) the Related N E RISK MANAGEMENT RISK RISK MANAGEMENT FRAMEWORK RISK MANAGEMENT RISK GOVERNANCE IGM FINANCIAL INC. FIRST The Company’s risk management approach is undertaken risk management approach is undertaken The Company’s Framework through its Enterprise Risk Management (ERM) which includes five core elements: risk governance, risk appetite, risk principles, a defined risk management process, and risk is established under management culture. The ERM Framework is approved by the Risk ERM Policy, which the Company’s Management Committee. structure emphasizes a risk governance The Company’s throughout the comprehensive and consistent framework and its subsidiaries, with identified ownership of Company oversight by an risk management in each business unit and accountable to the executive Risk Management Committee of Directors. Additional oversight is provided by the Board compliance Enterprise Risk Management (ERM) Department, Audit Department. Internal groups, and the Company’s and carries The Board of Directors provides primary oversight is responsible out its risk management mandate. The Board by: i) ensuring for the oversight of enterprise risk management that appropriate procedures ar The Company is exposed to a variety of risks that are inherent of risks that are inherent is exposed to a variety The Company is key to manage these risks activities. Its ability in its business a strong risk emphasizes success. The Company to its ongoing of an effective culture and the implementation management The risk management approach risk management approach. across the organization and its coordinates risk management to ensure prudent and measured risk- business units and seeks an appropriate balance between risk taking in order to achieve to our enterprise risk management and return. Fundamental and enhancing our reputation. program is protecting that appropriate risks and establish risk tolerances, ii) ensuring policies, procedures and c risks, and iii) reviewing the risk management process on a regular basis to ensure that it is functioning effectively. Other specific risks are managed with the support of the following Board committees: • has specific risk oversight responsibilities The Audit Committee • Other committees having specific risk oversight responsibilities _ 1 T A U Q _ 36 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D33 PPFC_2020_QUAT1_ENG03_IGM.indd D34 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U management activities.TheRiskAppetiteStatement’semphasis guidance tobusinessleadersandemployeesasthey conductrisk A RiskAppetiteStatementandPrinciplesprovidefurther policies, limits,controlsandrisktransferactivities. they engageinbusinessactivities,andinformthemestablishing and managed.Theseappetitelevelsguideourbusinessunitsas exposure whileseekingtoensurethatrisksarewellunderstood minimize anylosses,tothosewheretheCompany readilyaccepts those wheretheCompany hasnoappetiteforriskandseeksto activity oftheCompany. Theseappetitelevelsrangefrom appetite levelsisestablishedforeachrisktypeandbusiness Framework. UndertheRiskAppetiteFramework, oneoffour appetite fordifferenttypesofriskthroughtheRiskAppetite The RiskManagementCommittee establishestheCompany’s policies, processesandpractices. the Board ofDirectorsontheeffectivenessriskmanagement provides independentassurancetoseniormanagementand The InternalAuditDepartmentisthethirdlineofdefenceand Defence of Line Third ensuring compliance withpolicies,lawsandregulations. corporate andcompliancegr Other oversightaccountabilitiesresidewiththeCompany’s response plansdevelopedbybusinessunitsandsupportfunctions. reviews ofriskassessments,managementpracticesand Management committees.Thesecommitteesperformcritical including theFinancialRiskManagementandOperational businessrisks, leaders whichprovideoversightofspecific The Company hasanumberofcommitteesseniorbusiness and trainingtobusinessunitsupportfunctionleaders. enterprise riskmanagementprocess, andiii)providingguidance management programandframework,ii)managingthe include: i)developingandmaintainingtheenterpriserisk appetite forallactivitiesoftheCompany. Otherresponsibilities Committee onthelevelofrisksrelativetoestablishedrisk oversight, analysisandreportingtotheRiskManagement The EnterpriseRiskManagement(ERM)Departmentprovides Defence of Line Second the RiskManagementCommittee. culture andriskappetiteoftheorganizationasestablishedby businessandoperationalstrategieswiththerisk iv) aligning opportunitiesforriskreductionortransfer, and iii) identifying of risks,ii)implementingcontrolactivitiestomitigate assessment,documentationandescalation identification, include: i)establishingandmaintainingproceduresforthe RISK APPETITEANDPRINCIPLES A T 1 _ E C N G 0 34 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 3 4 oups whichareresponsiblefor IGM FINANCIALINC.FIRST officers andemployees. officers reflected withinourCode ofConduct whichappliestodirectors, with along-termview.Ourstandardsofintegrityandethicsare practices, responsiblemanagement andmeasured risk-taking Our riskmanagementprogramemphasizesintegrity,ethical withriskmanagementobjectives. aligned specifically or rewardexcessiveinappropriate risktaking,andoftenare programs aretypicallyobjectives-based,anddonotencourage reinforces ourriskmanagementculture.Ourcompensation We haveanestablishedbusinessplanningprocesswhich incorporation ofourriskframeworkintobusiness activities. all businessunitsinworkshopstofosterawarenessand within theorganization.TheERMDepartmentengages Risk managementisintendedtobeeveryone’s responsibility of Directors. process totheRiskManagementCommittee andtotheBoard reports ontheresultsofriskassessmentsandassessment management andescalation.TheERMDepartmentregularly communication andconsultationtosupporteffectiverisk Department. TheERMDepartmentpromotesandcoordinates basis bybusinessunitsandoversightareasincludingtheERM Risk assessmentsaremonitoredandreviewedonanongoing result inactionplanstoadjusttheriskprofile. considered relativetoriskappetiteandtolerancesmay risk transferactivities.Theresultsoftheseassessmentsare the potentialriskeventafterconsiderationofcontrolsandany Risks areassessedbyevaluatingtheimpactandlikelihood of andassessmentofrisks. and businessunitsforidentification We useaconsistent methodologyacrossourorganizations through theCompany’s ongoingriskmanagementprocess. to achieveitsstrategicandbusinessobjectivesareidentified risksthatmayadverselyaffecttheCompany’sSignificant ability Timelymonitoringandescalationofrisksbasedupon • andunderstandingofexisting Appropriateidentification • Ongoingassessmentofrisksandtoleranceinachanging • The Company’s riskmanagementprocessisdesignedtofoster: flexibility,andfocusonmitigatingoperationalrisk. financial is tomaintaintheCompany’s reputationandbrand,ensure RISK MANAGEMENTCULTURE RISK MANAGEMENTPROCESS changing circumstances. emerging risksandriskresponse. operating environment. QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS 22020-05-11 1:01PM 0 2 0 - 37 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 35 C Company’s mortgage banking operations. Company’s 21, 2050. The net proceeds were used by the maturing March of $150 million to fund the redemption Company 5.90% Non- Series B and for general Preferred Shares, First Cumulative redeemed the Series B corporate purposes. The Company Preferred Shares on April 30, 2019. for proceeds of $80.4 million.2,400,255 of its shares in Lifeco insured by an insurer that is approved by CMHC. The availabilityan insurer that is approved insured by and conditions upon market insurance is dependent of mortgage change. is subject to to support has introduced measures The Government of Canada where mortgage crisis COVID-19 Canadians through the for up to six months and repaid payments can be deferred For mortgages sold to the NHA over the life of the mortgage. MBS program, IG Wealth is obligated to make Management and principal payments regardless timely payment of interest This creates a timing difference of payment by the client. cash from clients deferring mortgage between the receipt of to the NHA MBS program of those payments and the payment term renews and is refinanced.amounts until the mortgage All MBS program are insured against default. mortgages in the NHA a significantManagement believes that this will not have impact and sufficient liquidity exists to meet the cash on the Company of this program. flow requirements 2020 and 2019, As part of ongoing liquidity management during the Company: • for the funding sources to assess additional Continued • Issued $250 million in March 2019 4.206% debentures • substantial issuer bid by selling Lifeco in the Participated 22. obligations are reflected in Table contractual The Company’s In addition to IGM Financial’s and of cash balance current the Company’s cash equivalents, liquidity is available through lines of credit with various lines of credit. The Company’s Schedule I Canadian chartered banks totalled $825 million at March 31, December 31, 2020, unchanged from 2019. The lines of credit at March 31, consisted of committed 2020 lines of $650 millionlines of $175 million, and uncommitted unchanged from December 31, has Company 2019. The accessed its uncommitted lines of credit in the past; however, lines of made by a bank under the uncommitted any advances credit are at the bank’s sole discretion. As at March 31, 2020 and December 31, was not utilizing its 2019, the Company committed lines of credit or its uncommitted lines of credit. The actuarial valuation for funding purposes related to the registered defined benefitCompany’s pension plan, based on a measurement date of December 31, 2017, was completed in May 2018. The valuation determines the plan surplus or deficit on both MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 5 3 D
d d n i . M G I _ 3 0 G term liquidity needs. funding. bank and capital market ability to access Company’s funding sources. of finance a committee and other Management Committee, business leaders. N E KEY RISKS OF THE BUSINESS THE RISKS OF KEY LIQUIDITY AND FUNDING RISK LIQUIDITY AND FUNDING IGM FINANCIAL INC. FIRST 1) FINANCIAL RISK The Company identifies its businesses and risks to which The Company internal factors both could be exposed considering operations These risks are broadly grouped and external to the organization. into six categories. Liquidity and funding risk is the risk of the inability to generate Liquidity and funding or obtain sufficient timely and cost-effective manner cash in a anticipated commitments as they come to meet contractual or due or arise. include: management practices liquidity The Company’s • and lines of credit to satisfy near Maintaining liquid assets • over liquidity management processes. Ensuring effective controls • and stress testing. forecasts Performing regular cash • conditions and the assessment of capital market Regular • to diversify and expand long-term mortgage Ongoing efforts • by the Financial Risk Oversight of liquidity management of is the funding funding requirement for the Company A key paid for the distribution of network compensation Consultant financial products and services. This compensation continues to be paid from operating cash flows. also maintains sufficient liquidity to fund andThe Company securitizationtemporarily hold mortgages pending sale or and to manage any derivativeto long-term funding sources banking operations,collateral requirements. Through its mortgage residential mortgages are sold to third parties including certain mutual funds, institutional investors through private placements, by issuance securitization trusts, and Canadian bank-sponsored Securities and sale of National Housing Act Mortgage-Backed (NHA MBS) securities including sales to Canada Housing Trust maintains committed under the CMB Program. The Company capacity within certain Canadian bank-sponsored securitization trusts. Capacity for sales under the CMB Program consists of participation in new CMB issues and reinvestment of principal The Accounts. repayments held in the Principal Reinvestment continued ability to fund residential mortgages Company’s through Canadian bank-sponsored securitization trusts and conditions and NHA MBS is dependent on securitization market government regulations that are subject to change. A condition of the NHA MBS and CMB Program is that securitized loans be _ 1 T A U Q _ 38 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D35 PPFC_2020_QUAT1_ENG03_IGM.indd D36 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U biain oscrtzto niis Leases Obligations tosecuritizationentities of factors, including earnings which are significantly influenced of factors,includingearningswhicharesignificantly dividends bytheBoard of Directorsisdependentonavariety at thediscretion oftheBoard ofDirectors.Thedeclaration and paydividendstocommonshareholdersonaquarterlybasis dividends. Thecurrentpractice oftheCompany istodeclare flow requirements, itscontractualobligations,anddeclared continues tohavetheabilitymeetitsoperationalcash tomeettheCompany’ssufficient liquidityneeds.The Company cash balances andothersourcesofliquiditydescribedaboveare Management believescashflowsfromoperations,available to changefundingpolicy. requirements, changesinassumptionsandmanagement’sability affected bymanyfactorsincludingmarket performance,regulatory contribution decisionsaresubjecttochange,ascontributions intheremainderof2020.Pension approximately $18.6 million TheCompany expectstomake$5.5 million). contributionsof (2019 – of 2020,theCompany madecontributionsof$6.5 million quarter 2020.Duringthefirst measurement dateofDecember 31, valuation. Thenextrequiredactuarialvaluationwillbebasedona intheprevious comparedto$24.4 million surplus of$46.1 million years.Theregisteredpensionplanhadagoingconcern over five contribution andinvestmentreturnsisrequiredtobefunded resultedprimarilyfromhigherassetsdueto the solvencydeficit 2016.Thedecreasein on ameasurementdateofDecember 31, inthepreviousactuarialvaluation,whichwasbased $82.7 million comparedto of$47.2 million pension planhadasolvencydeficit Basedontheactuarialvaluation,registered indefinitely. cashflows,assumingtheplanwillbemaintained future benefit between theplanassetsandpresentvalueofexpected date. Agoingconcernvaluationcompares therelationship assuming thattheplaniswoundupandsettledonvaluation the relationshipbetweenplanassetsanditsliabilities a solvencyandgoingconcernbasis.Thebasisdetermines ThenextrequiredactuarialvaluationwillbecompletedbasedonameasurementdateofDecember 31,2020.Pensionfundingr (2) $ Includesremainingleasepaymentsrelatedtoofficespaceandequipmentusedinthenormal courseofbusiness. (1) 867.5 $ Total 1,639.9 $ contractual 5,248.2 $ obligations 2,133.8 $ Deposits andcertificates instruments Derivative financial 9,889.4 ($ millions) Pension funding ogtr et Long-term debt AS AT MARCH 31, 2020 ATAS MARCH 31, TABLE A T 1 market performance,regulatoryrequirements,changesinassumptionsandmanagement’sabilitytochangefundingpolicy. variability andwillbedeterminedbasedonfutureactuarialvaluations.Pensioncontributiondecisionsaresubjecttochange, _ E C N (1) G 22: 0 36 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 CONTRACTUAL OBLIGATIONS M . i n (2) d d
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$ – 25.9 $ 39.0 $ 0.7 $ 65.6 EAD ER ER 5YAS TOTAL 5 YEARS YEARS 1 YEAR DEMAND 867.5 – – – – equivalents byadheringtoitsInvestmentPolicythatoutlines The Company managescreditriskrelatedtocashand institutions. which aredepositedatCanadianfinancial representcashbalancesheldinclientaccounts 561.3 million) 2019 – (December 31, Client fundsondepositof$856.0 million $411.0 million). 2019– (December 31, chartered banksof$170.4 million acceptances andothershort-termnotesissuedbyCanadian bankers’ 2019–$206.5 million), (December 31, $115.4 million provincial governmenttreasurybillsandpromissorynotesof $34.5 million), 2019 – (December 31, bills totalling$331.0 million equivalents arecomprisedofGovernmentCanadatreasury Cash 2019–$652.0 million). (December 31, of $616.8 million on depositwithCanadiancharteredbanksandcashequivalents 2019–$68.0 million) (December 31, balances of$92.7 million consistedofcash 2019–$720.0 million) (December 31, Deposit on Funds Client 2020,cashandequivalentsof$709.5 million At March 31, and Equivalents Cash and Cash practices onanongoingbasistoevaluatetheireffectiveness. credit risk.TheCompany monitorsitscreditriskmanagement holdings, mortgageportfolios,andderivativesaresubjectto The Company’s cashandequivalents,otherinvestment counterparty toatransactionfailsmeetitsobligations. losstotheCompanyCredit riskisthepotentialforfinancial ifa 2019. December 31, of liquidityandfundingriskhavenotchangedmateriallysince expenses. TheCompany’s liquiditypositionanditsmanagement the Company’s feeincomeandcommissioncertainother by theimpactthatdebtandequitymarket performancehason CREDIT RISK
LESS THAN QUARTER REPORT 1,565.3 18.6 25.6 4.5 –
2020 5,153.2 as contributionsareaffectedbymanyfactorsincluding 52.7 | equirements beyond2020aresubjecttosignificant MANAGEMENT’SDISCUSSIONANDANALYSIS 3.3 1-5 – –
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 37 C March 31, these portfolios were mortgages on 2020, impaired $3.1 million, to $2.4 million compared at December 31, 2019. these over 90 days on non-performing mortgages Uninsured $2.6 millionportfolios were at March 31, to compared 2020, $1.6 million at December 31, 2019. risk on credit also retains certain elements of The Company the Investors Mortgage and Short mortgage loans sold to Canadian Corporate and to the Investors Income Fund Term mortgages an agreement to repurchase through Bond Fund benefitingin certain circumstances the funds. These loans are sheet as the Company balance not recorded on the Company’s all of the risks and rewards of substantially has transferred with these loans. ownership associated reviews the credit quality of the regularly The Company for expected mortgages and the adequacy of the allowance credit losses. for expected credit losses was allowance The Company’s $0.8 million at March 31, 2020, compared to $0.7 million at December 31, 2019, and is considered adequate by in the mortgage management to absorb all credit-related losses experience, portfolios based on: i) historical credit performance of COVID-19 ii) recent trends including the economic impact Plan to support Economic Response COVID-19 and Canada’s portfolio credit metrics Canadians and businesses, iii) current financialand other relevant characteristics, iv) our strong v) stress testing of planning relationship with our clients, and conditions. losses under adverse real estate market to and management of credit risk exposure The Company’s materially related to mortgage portfolios have not changed since December 31, 2019. Derivatives to credit risk through derivative is exposed The Company contracts it utilizes to hedge interest rate risk, to facilitate risk related securitization transactions and to hedge market to certain stock-based compensation arrangements. These Risk derivatives are discussed more fully under the Market section of this MD&A. the extent that the fair value of the derivatives is in To is exposed to credit risk a gain position, the Company that its counterparties fail to fulfil under their obligations these arrangements. derivative activities are managed in accordance The Company’s with its Investment Policy which includes counterparty limits and other parameters to manage counterparty risk. The aggregate credit risk exposure related to derivatives that are in a gain position of $29.9 million (December 31, 2019 – MANAGEMENT’S DISCUSSION AND ANALYSIS | e net interest income are 2020 2020 ccounts are reflected on the POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 7 3 D
d d n i . M G I _ 3 0 G portfolio default insurance held by the Company; and portfolio default insurance held by the Company; and IG Wealthown network of Mortgage Planning Specialists IG Living Plan. as part of a client’s Management Consultants timely2019 – $3.9 billion), is obligated to make the Company of whether suchpayment of principal and coupons irrespective However, borrower. payments were received from the mortgage of the loans areas required by the NHA MBS program, 100% insured by an approved insurer. sponsored securitization trusts totalling $2.9 billion (December 31, 2019 – $2.9 billion) reserve is limited to amounts held in cash accounts and future net interest income, the fair values of which were $70.0 million (December 31, 2019 – $71.9 million) and $39.1 million (December 31, 2019 – $37.9 million), respectively, at March 31, a 2020. Cash reserve balance sheet, whereas rights to futur not reflected on the balance sheet and will be recorded over the life of the mortgages. This risk is further mitigated by insurance insured at March 31, with 4.5% of mortgages held in ABCP Trusts 2020 (December 31, 2019 – 4.6%). N E IGM FINANCIAL INC. FIRST Mortgage Portfolio As at March 31, on the 2020, residential mortgages, recorded of $7.0 billion sheet, balance Company’s (December 31, 2019 – $7.2 billion) consisted of $6.7 billion sold to securitization programs (December 31, 2019 – $6.8 billion), $267.0 million held pending sale or securitization (December 31, 2019 – $344.5 million) and $21.3 million related to the Company’s intermediary operations (December 31, 2019 – $24.2 million). credit risk related to residential manages The Company mortgages through: • lending policy and underwriting standards; Adhering to its • Its loan servicing capabilities; • mortgage default insurance and mortgage of client-insured Use • of originating its mortgages exclusively through its Its practice by the terms and In certain instances, credit risk is also limited below: nature of securitization transactions as described • totalling $3.8 billion Under the NHA MBS program (December 31, • Credit risk for mortgages securitized by transfer to bank- credit risk parameters and concentration limits. The Company limits. The Company and concentration credit risk parameters The of its counterparties. the credit ratings regularly reviews financial to credit risk on these exposure maximum instruments value. is their carrying of credit risk exposure to and management The Company’s equivalents and fixedrelated to cash and cash income securities since December 31,have not changed materially 2019. At March 31, on balance mortgages recorded 2020, residential sheet were 58.2% insured (December 31, 2019 – 59.1%). As at _ 1 T A U Q _ 40 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D37 PPFC_2020_QUAT1_ENG03_IGM.indd D38 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U TheCompany hasincertaininstancesfundedfloatingrate • swaps withCanadianScheduleIchartered banksasfollows: mortgage bankingoperationsbyenteringintointerestrate The Company managesinterestrateriskassociatedwithits used intheCompany’s mortgagebankingoperations. instruments portfolio andoncertainofthederivativefinancial The Company isexposedtointerest rateriskonitsmortgage Risk Rate Interest in foreign exchangerates,interest ratesorequity prices. instrumentsduetochanges changes inthevaluesofitsfinancial Market riskisthepotentialforlosstoCompany from 22 totheAnnualFinancialStatements. Note 5totheInterimFinancialStatementsandNotes2,6 activities andutilizationofderivativecontractscanbefoundin Additional informationrelatedtotheCompany’s securitization 2019. changed materiallysinceDecember 31, 2020. Managementofcreditriskrelatedtoderivativeshasnot atMarch 31, risk relatedtoderivativeswasnotsignificant management hasdeterminedthattheCompany’s overallcredit are allCanadianScheduleIchartered banksand,asaresult, Counterparties 2019–$0.7 million). 2020 (December 31, rights tofuturenetinterestincome,wasnilatMarch 31, netting agreementsandcollateralarrangementsincluding collateral arrangements.Theexposuretocreditrisk,considering doesnotgiveeffecttoanynettingagreementsor $15.7 million) MARKET RISK A T of $2.6 billion (December 31, 2019–$2.4 billion). (December 31, of $2.6 billion on thebalance sheetandhasanoutstandingnotional amount isrecorded 2019–negative$5.8 million) 2020 (December 31, atMarch 31, fair valueoftheseswapsnegative$4.3 million Thenet 2019–$1.6 billion). 2020(December 31, at March 31, onanoutstandingnotionalamount of$1.7 billion $4.9 million), 2019–negative (December 31, swaps totalled$17.2 million and reinvestmentreturnsdecline.Thefairvalueofthese risk thattheinterestratesearnedonfloatingratemortgages swaps withCanadianScheduleIcharteredbankstohedgethe TheCompany entersintointerestrate 2019 –$0.8 billion). 2020(December 31, atMarch 31, amount of$0.8 billion andanoutstandingnotional 2019 –negative$0.9 million) (December 31, had anegativefairvalueof$21.5 million obligated topayCanadaMortgageBondcoupons.Thisswap investment returnsonreinvestedmortgageprincipalandis Company ispartytoaswapwherebyitentitledreceive As previouslydiscussed,aspartoftheCMBProgram, of thesecuritizationtransactionsunderCMBProgram. rateCanadaMortgageBondsaspart mortgages withfixed 1 _ E C N G 0 38 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 3 8 IGM FINANCIALINC.FIRST return swaps. to thisriskthroughtheuseofforward agreementsandtotal Inc.TheCompany hedgesitsexposure shares ofIGM Financial are deferred andlinked totheperformance ofthecommon arrangements foremployeeswherepaymentstoparticipants The Company sponsorsanumberofdeferredcompensation shown inTable 15. as 2019–$357.4 million), 2020(December 31, at March 31, loss. Thefairvalueoftheequityinvestmentswas$365.6 million or other comprehensiveincomeorfairvaluethrough profit aseitherfairvaluethrough investments whichareclassified The Company isexposedtoequitypriceriskonits Risk Price Equity Personal Capital’searnings(losses),recorded inProportionate The Company’s proportionateshareofChinaAMC’sand ($47.7 million). approximately $38.2 million the aggregatecarryingvalueofforeigninvestmentsby relative toforeigncurrencieswoulddecrease (increase) income. A5%appreciation(depreciation) inCanadiancurrency on theseinvestmentsarerecognizedinOthercomprehensive the carryingvalueduetochangesinforeignexchangerates investments inPersonalCapitalandChinaAMC.Changesto The Company isexposedtoforeign exchangeriskonits Risk Exchange Foreign since December 31, 2019. since December 31, management ofinterest rateriskhavenotchangedmaterially TheCompany’s exposuretoand decrease of$2.0 million). 2019 – (December 31, decrease ofapproximately $0.8 million 100 basispointincreaseininterest rateswouldhavebeena 2020,theimpacttoannualnetearningsofa As atMarch 31, TheCompany isexposedtotheimpactthatchangesin • $180.4 million). 2019– 2020(December 31, atMarch 31, $100.6 million onanoutstandingnotionalamountof positive $0.6 million) 2019 – (December 31, of theseswapswas$2.0 million Obligations tosecuritizationentities.Thenegativefairvalue investment incomeandotheroverthetermofrelated comprehensive incomeandsubsequentlyrecognizedinNet associated interest rateswapsareinitiallyrecognizedinOther activities. Theeffectiveportionoffairvaluechangesthe is appliedtothecostoffundsoncertainsecuritization or securitization.Beginningin2018,hedgeaccounting costs formortgagesheldbytheCompany pendingsale swaps tohedgetheinterestrateriskrelatedfunding funding sources. TheCompany entersintointerestrate to orheldpendingsalesecuritizationlong-term interest ratesmayhaveonthevalueofmortgagescommitted QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS 22020-05-11 1:01PM 0 2 0 - 41 0 5 - 1 1
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1.7 % 5.4 2.9 29.8 20.0 40.2 56.0 % 28.5 15.5 55.8 % 100.0 % 100.0 % 100.0 % 100.0 % INVESTMENT FUNDS TOTAL Company’s results and consistent with stakeholder expectations, with stakeholder and consistent results Company’s such in risk transfer activities it does not engage and generally in relation to these exposures. as hedging to clients and has increased its communication The Company conditions and changes. IG and others of market its Consultants out to clients to discuss their have actively been reaching and financiallight of COVID-19 planning needs and goals in also increased has The Company will continue those efforts. the independent financialcommunication to support advisors with a focus on providing capital and its institutional clients commentary, and and economic updates, ongoing market management to ensure they have the access to investment need to support their clients in light tools and resources they of COVID-19. of assets under exposure to the value The Company’s of its clients. Assets management aligns it with the experience under management are broadly diversified by asset class, investment team and style. geographic region, industry sector, the sensitivity of its assets regularly reviews The Company under management, revenues, earnings and cash flow to changes in financial markets. 2) OPERATIONAL RISK are mitigated Operational risks relating to people and processes Oversight of risks and through policies and process controls. controls is provided by ongoing evaluation of the effectiveness of Department, ERM Department and Compliance the Company’s Internal Audit Department. it has an insurance review process where The Company of insurance assesses and determines the nature and extent to provide adequate protection against that is appropriate – ASSET AND CURRENCY MIX MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT ASSETS UNDER MANAGEMENT FINANCIAL ASSETS UNDER MANAGEMENT 9 3 D
31, 2020 2020 31, d d n i . M 23: IGM G I _ 3 0 G N E RISKS RELATED TO RISKS RELATED TABLE IGM FINANCIAL INC. FIRST AS AT MARCH AS AT At March 31, 2020, IGM Financial’s total assets under management were $147.5 billion to $166.8 billion compared at December 31, 2019. of revenues are management, primary sources The Company’s applied as an annual fees which are administration and other As a result, percentage of the level of assets under management. revenues and earnings are indirectly the level of the Company’s exposed to a number of financial risks that affect the value of basis. These include assets under management on an ongoing rates and risks, such as changes in equity prices, interest market on debt securities, foreign exchange rates, as well as credit risk within our loans and credit exposures from other counterparties client portfolios. lead to a change conditions may also Changing financial market assets under management in the composition of the Company’s between equity and fixed income instruments, which could management fee result in lower revenues depending upon the and mandates. rates associated with different asset classes been significantSince the end of February 2020, there have declines and volatility, as discussed in the global market Operational Assessment section of the MD&A. long term, exposure to believes that over the The Company beneficialinvestment returns on its client portfolios is to the Cash Short-term fixed income and mortgages share of associates’ earnings in the Consolidated Statements Consolidated earnings in the share of associates’ in foreign exchange is also affected by changes of Earnings, currency in Canadian appreciation (depreciation) rates. A 5% (increase) the decrease foreign currencies would relative to of associates’ earnings (losses) share proportionate Company’s by approximately $0.3 million ($0.2 million). Other fixed income Domestic equity Foreign equity Real Property USD Other CAD _ 1 T A U Q _ 42 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D39 PPFC_2020_QUAT1_ENG03_IGM.indd D40 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U provide clientservice with minimaldisruptions. at ensuringtheCompany isabletocontinueoperationsand The Company’s businesscontinuityplanhasbeeneffective temporarily closeditsoffices. all ofitsemployeesandConsultants toworkfromhomeand COVID-19 infection,theCompany hasmovedsubstantially clients andtohelpeffortslimitthespeedspread ofthe For thehealthandsafetyofCompany’s employeesand business disruption. recovery ofcriticaloperationsandprocessesintheeventa program tosupportthesustainment,managementand The Company alsohasabusinesscontinuitymanagement scenario-dependent crisisresponseteam. ensuring appropriatesubjectmatterexpertsareengagedinthe is responsibleforsettingstrategy,overseeingresponseand andmanagement.Inaddition,thisteam crisis confirmation team comprisedofseniorleadershipwhoareresponsiblefor simulation exercises.TheCompany hasacrisisassessment brands orbusinessoperations.TheCompany executesannual impacttheorganization’s reputation, crisis thatcouldsignificantly response coordinationpoliciesandpr The Company hasacrisisresponseplanwhichoutlines operational risk. processes havebeendevelopedtosupportthemanagementof programs,policies,training,standardsandgovernance Specific day tooperationalrisksoftheirrespectivebusinessunits. The businessunitleadersare responsibleformanagementofthe Company hasaverylowappetiteforriskinthisarea. operational riskmanagementandinternalcontrol.The The Company’s riskmanagementframeworkemphasizes loss,reputationalharm orregulatoryactions. financial significant application ofinternalcontrolproc valuations, fraudandmisappropriation ofassets,andinadequate modelsand errors relatingtotransactionprocessing, financial including informationtechnologysecurityandsystemfailures, Our Company isexposedtoabroadrangeofoperationalrisks, risks oftheCompany andmaynotalwaysbeseparatelyidentified. tomeasure,giventhatitformspartofother risk canbedifficult processes inplacetomanageotherrisks.Asaresult,operational Operational riskaffectsallbusinessactivities,includingthe external events,butexcludesbusinessrisk. or failedinternalprocessessystems,humaninteraction Operational riskistheoflossresultingfrominadequate contractual agreements. unexpected losses,andwhereitisrequiredbylaw,regulatorsor OPERATIONAL RISK A T 1 _ E C N G 0 40 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 4 0 esses. The impact can result in esses. Theimpactcanresultin ocedures intheeventofa IGM FINANCIALINC.FIRST complying withlaws,contractualagreementsorregulatory Legal andregulatorycompliance riskistheofnot adverse effectontheCompany’s position. consolidatedfinancial assumptions orotherfactorsaffectingthemodelscouldhavean application ofthesemodels.However, changesintheinternal controls existoverthedevelopment,implementationand observable market inputsandavailable acquisitions. Thesemodelsincorporateinternalassumptions, of cashflows,capitalmanagement,andassessmentpotential instruments,operational scenariotesting,management financial The Company usesavarietyofmodelstoassistin:thevaluation party riskmanagement. continue toenhanceresources our reliance onexternalservice providerscontinuestogrow,we with thirdpartyserviceprovidersandonanongoingbasis.As the Company priortoenteringintocontractualrelationships risk. Duediligence andmonitoringactivitiesareperformedby address thirdpartyservice provider implemented tospecifically including asuppliercodeofconduct,havebeendevelopedand standard operatingprocedures reputational, regulatoryandotheroperationalrisks.Policies, Our exposuretothird partyserviceproviderriskcouldinclude thatsupportouroperationalactivities. expertise andefficiencies The Company regularlyengagesthirdpartiestoprovide response capabilities. and hasimplementedthreatvulnerabilityassessment programs, benchmarked capabilitiestosoundindustrypractices, the Company hasestablishedenterprise-widecybersecurity reputational damage.To remainresilient tosuchthreats, including lostrevenue,litigation,regulatoryscrutinyor other stakeholders, andcouldresultinnegativeconsequences informationoftheCompanyconfidential andthatofclientsor since theonsetofCOVID-19. Suchattackscouldcompromise The volumeoftheseactivitiesinoursocietyhasincreased the riskofdenialservice ormalicioussoftwareattacks. such asdatabreaches,identitytheftandhacking,including are exposedtorisksrelatingtechnologyandcybersecurity advisorexperience. Asaresult,we and theclientfinancial systems andtechnologytosupportitsbusinessoperations industry andourCompany’s operations.TheCompany uses risktoour management. Informationsecurityisasignificant through controlsovertechnologydevelopmentandchange Technology andcyberriskdrivenbysystemsaremanaged LEGAL AND REGULATORY COMPLIANCE MODEL RISK THIRD PARTY SERVICE PROVIDERS TECHNOLOGY ANDCYBER RISK QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS and dedicatedresources, and processestosupportthird market prices. Effective 22020-05-11 1:01PM 0 2 0 - 43 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 41 C CONTINGENCIES ACQUISITION RISK ACQUISITION Departments are responsible for providing oversight of all providing oversight are responsible for Departments The Internal Audit Department activities. regulated compliance regulatory concerning oversight and investigations also provides matters. compliance to legal actions arising in the normal is subject The Company In December 2018, a proposed class course of its business. Mackenzie against action was filed in the Ontario Superior Court company should not have paid mutual which alleges that the to order execution only dealers. fund trailing commissions Although it is difficult the outcome of any such legal to predict with legal knowledge and consultation actions, based on current does not expect the outcome of any of counsel, management to have a material these matters, individually or in aggregate, financial consolidated position. adverse effect on the Company’s 3) GOVERNANCE, OVERSIGHT and strategic risk is the risk of potential oversight Governance, AND STRATEGIC RISK or inappropriate adverse impacts resulting from inadequate and conflicts, governance, oversight, management of incentives and strategic planning. IGM Financial believes in the importance of good corporate in thegovernance and the central role played by directors governance that sound corporate believe governance process. We and its shareholders. is essential to the well-being of the Company Oversight of IGM Financial is performed by the Board of Directors directly and through its five committees. The Company’s President and Chief Executive Officer has overall responsibility activities are Company’s The for management of the Company. – Investorscarried out principally by three operating companies and Investment Financial Corporation Group Inc., Mackenzie are managed by a Inc. – each of which Planning Counsel President and Chief Executive Officer. has a business planning process that supports The Company by the Board development of an annual business plan, approved for the and targets objectives which incorporates of Directors, of management compensation are Components Company. associated with the achievement of earnings targets and other objectives associated with the plan. Strategic plans and direction are part of this planning process and are integrated into the risk management program. Company’s is also exposed to risks related to its acquisitions. The Company prior to due diligence thorough undertakes The Company that the completing an acquisition, but there is no assurance will achieve the expected strategic objectives or cost Company MANAGEMENT’S DISCUSSION AND ANALYSIS | the requirements of 2020 2020 to regulation governing product governing product to regulation POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER ols. The Company’s Compliance Compliance ols. The Company’s policies relating to the conduct of QUARTER REPORT 1 4 D
d d n i . M G I _ 3 0 G N E IGM FINANCIAL INC. FIRST requirements. These risks relate These risks relate requirements. accounting, reporting investment management, distribution, and communications. IGM Financial changing legal, taxation is subject to complex and including and regulatory requirements, provincial and territorial governmentsagencies of the federal, and its activities. the Company in Canada which regulate are also subject to the and its subsidiaries The Company organizations to which they requirements of self-regulatory regulatory bodies regularly adopt belong. These and other and policies that apply to the new laws, rules, regulations those its subsidiaries. These requirements include and Company that apply to IGM Financial traded company and as a publicly subsidiaries based on the Company’s those that apply to the related to the nature of their activities. They include regulations management and provision of financial products and services, and other activities including securities, insurance and mortgages, in which it operates. in the markets carried on by the Company and the financial affecting the Company standards Regulatory services industry are significant and continually evolve. The to reviews as part of the and its subsidiaries are subject Company various regulators. normal ongoing process of oversight by the to comply with laws, rules or regulations could lead to Failure have an adverse regulatory sanctions and civil liability, and may The Company reputational or financial effect on the Company. risk through its efforts manages legal and regulatory compliance The monitoring of to promote a strong culture of compliance. is on the Company regulatory developments and their impact by chaired Initiatives Committee overseen by the Regulatory The Company General Counsel. the Executive Vice-President, policies, also continues to develop and maintain compliance processes and oversight, including specific communications and legal matters, training, testing, monitoring on compliance receives of the Company and reporting. The Audit Committee initiatives and issues. regular reporting on compliance IGM Financial of ethics and integrity promotes a strong culture of by the Board approved of Conduct through its Code Directors, which outlines standards of conduct that apply to all IGM Financial directors, officers and employees. The Code references many of Conduct officersdirectors, and employees. Other corporate policies cover is provided on these anti-money laundering and privacy. Training of policies on an annual basis. Individuals subject to the Code attest annually that they understand the requirements Conduct and have complied with its provisions. Business units are responsible for management of legal and regulatory compliance risk, and implementing appropriate policies, procedures and contr _ 1 T A U Q _ 44 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D41 PPFC_2020_QUAT1_ENG03_IGM.indd D42 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U Domoretoclarifyforclientswhattheyshouldexpectfrom • whenmakingasuitability Puttheclient’sinterestfirst • Addressallmaterialconflictsofinterest inthebestinterestof • when implemented,willrequireregistrantsto: The ClientFocusedReforms includeruleamendments that, clients (theClientFocusedReforms). enhancements totheobligationsowedbyregistrants totheir ruleamendmentstoimplement (the CSA)publishedfinal On October3,2019,theCanadianSecuritiesAdministrators address issuesresultingfromCOVID-19. ongoing discussionswithregulatorsastheindustryworksto guidance andcommunications,hasbeenengagedin The Company continuouslymonitorsregulatorydevelopments, productsorservicesislimited. treatment offinancial subsidiaries tomitigatetheimpositionofdifferentialregulatory discuss themwithregulators,theabilityofCompany andits monitor suchinitiatives,andwherefeasiblecommentuponor compensation. WhiletheCompany anditssubsidiariesactively also impactproductstructures,pricing,anddealeradvisor or applicationofregulation.Regulatory developmentsmay other differences thatmaybeasaresultofdifferingregulation treatment, disclosure requir of theCompany’s productsincluderegulatorycosts,tax Regulatory differencesthatmayimpactthecompetitiveness providers, tothirdpartydistributionchannelsandclients. service be lesscompetitivethantheproductsofotherfinancial of makingtheproductsCompany’s subsidiariesappearto Company. Particular regulatoryinitiativesmayhavetheeffect and regulationthatcouldhaveanadverseimpactonthe The Company isexposedtotheriskofchangesinlaws,taxation impact upontheCompany’s results. businessactivitiesorfinancial regulatory, legal,ortaxrequirements thatmayhaveanadverse Regulatory developmentriskisthepotentialforchangesto DEVELOPMENTS REGULATORY 4) clients, andkey employeesofanacquiredcompany. acquisition isdependentonretainingassetsundermanagement, earnings growthorexpensereductions.Thesuccessofan factors mayaffecttheCompany’s abilitytoachieveexpected changes intheeconomicenvironment andotherunanticipated and revenuesynergiessubsequenttoanacquisition.Subsequent CLIENT FOCUSEDREFORMS A T their registrants. determination; and the client; 1 _ E C N G 0 42 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 4 2 ements, transactionprocessesor IGM FINANCIALINC.FIRST Mackenzie SegmentOperatingResults sectionsofthisMD&A. Table Management and 24 and arediscussedintheIG Wealth Redemption ratesforlong-term fundsaresummarizedin maintaining perspectiveandfocusontheirlong-termobjectives. advisorsplay akeyfinancial roleinassistinginvestors investing. Inperiodsofvolatility,Consultants andindependent andlong-term planning,diversification on themeritsoffinancial industry continuetotake stepstoeducateCanadianinvestors planningacrosseconomiccycles.TheCompanyfinancial andthe communicating withclientsandemphasizingtheimportanceof The Company, acrossitsoperatingsubsidiaries,isfocusedon this MD&A. under theRisksRelated to AssetsUnderManagementsectionof Company’s assetsundermanagement,asdescribedmorefully marketsthe levelandvolatilityoffinancial andthevalueof redeeming theirinvestments.Thesefactorsmayalsoaffect productsandservicesand/orresultininvestors IGM Financial’s levels andsavingsdecisions.Thiscouldresultinreducedsalesof income government instability,canaffectinvestorconfidence, demographics andotherfactorsincludinggeopoliticalrisk Global economicconditions,changesinequitymarkets, or otherexternalfactorsrelatingtothemarketplace. resultingfromcompetitive unfavourable impactonIGM Financial General businessconditionsriskreferstothepotentialforan 5) BUSINESS RISK BUSINESS 5) Counsel nolongerofferthedeferredsaleschargeoption. ManagementandInvestment Planning proposals, asIG Wealth The Company believesitiswellpositionedtorespondthese oftheDSCpurchaseoptioninOntario. the elimination Securities Commission willexplorealternativeapproachesto and besubjecttoatwo-yeartransitionperiod.TheOntario The ruleamendmentsareexpectedtobepublishedin2020 Sales Charge (DSC)purchaseoption. and territories,excludingOntario,willeliminatetheDeferred not provideadvice,suchasdiscount commissions paidtodealerswhoonlyexecuteordersanddo that allprovincesandterritoriesinCanadawilleliminatetrailing On December19,2019,theCSApublishedanotice announcing amendments asaresultoftheCOVID-19 pandemic. orders delayingtheimplementationofsomeaspectsrule The CanadianSecuritiesAdministratorshasrecentlypublishedrelief provided foraphasedtransitionperiodspanningovertwoyears. 2019,and The ruleamendmentscameintoforceonDecember 31, GENERAL BUSINESS CONDITIONS MUTUAL FUNDEMBEDDED COMMISSIONS QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS brokers; andallprovinces 22020-05-11 1:01PM 0 2 0 - 45 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 2019 2019 MAR. 31 43 C 9.5 % % % 9.5 17.0 20.1 could reduce the 2020 10.7 % 17.0 % 20.7 % MAR. 31 – IG Wealth BUSINESS/CLIENT RELATIONSHIPS BUSINESS/CLIENT The Company provides Consultants, independent financial independent provides Consultants, The Company and institutional clients with a high advisors, as well as retail a broad range of investment and support and level of service on building enduring relationships. products, with a focus also continually review their subsidiaries The Company’s offering and pricing to ensure respective product and service competitiveness in the marketplace. strong investment performance on strives to deliver The Company relative to benchmarks and peers. Poor investmentits products performance relative to benchmarks or peers level of assets under management and sales and asset retention,level of assets under management and sales and/oras well as adversely impact our brands. Meaningful results. Company’s sustained underperformance could affect the to cultivate investment processes objective is The Company’s advantage, andand disciplines that provide it with a competitive and productdoes so by diversifying its assets under management mandate, style andshelf by investment team, brand, asset class, geographic region. the risk potential for Business/Client relationships risk refers to unfavourable impacts on IGM Financial resulting from changes relationships. These relationships primarily include to other key Mackenzie IG Wealth Management clients and Consultants, retail distribution, strategic and significant business partners, funds, and sub-advisors and other clients of Mackenzie product suppliers. IG Wealth Management Consultant network Management derives all of its mutual fund sales through its have network. IG Wealth Management Consultants Consultant can lead to a strong contact with clients which regular direct and personal client relationship based on the client’s confidence for financial advisors The market in that individual Consultant. is extremely competitive. The loss of a significantnumber of key which could could lead to the loss of client accounts Consultants have an adverse effect on IG Wealth Management’s results of operations and business prospects. IG Wealth Management is focused on strengthening its distribution network of Consultants
FOR LONG-TERM FUNDS FOR LONG-TERM MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 3 4 D
d TWELVE MONTH TRAILING REDEMPTION RATE TRAILING REDEMPTION TWELVE MONTH d n i . M 24: G I _ 3 0 G N E CATASTROPHIC EVENTS OR LOSS CATASTROPHIC OFFERING PRODUCT/SERVICE TABLE IGM FINANCIAL INC. FIRST IGM Financial Inc. IG Wealth Management Mackenzie Counsel Catastrophic events or loss refers to the risk that events such asCatastrophic events or floods, fire, or terrorism could tornadoes, pandemics, earthquakes, financial performance. adversely affect the Company’s events can cause economic uncertainty, affect Catastrophic investor confidence, financial levels and income planning of financialdecisions. This could affect the level and volatility assets under and the level of the Company’s markets administration and management. pandemic has caused economic disruption, The global COVID-19 caused significantadversely impacted economic conditions, has and has level of financial in the volatility and reductions markets, increased unemployment in Canada and globally. has implemented its business continuity In response, the Company its employees andplans and has transitioned substantially all of home. to working from Consultants It is difficult pandemic how significant to predict the COVID-19 in response will be to world and government measures taken event could haveeconomies, our clients and our business. This a material impact on the financial positions and results of the subject to duration and severity. Company, There is potential for unfavourable impacts on IGM Financial resulting from inadequate product or service performance, quality or breadth. IGM Financial competitive and its subsidiaries operate in a highly environment, competing with other financial service providers, investment managers and product and service types. Client development and retention can be influenced by a number of by competitors, factors, including products and services offered relative service levels, relative pricing, product attributes, by competitors. This competition reputation and actions taken financial could have an adverse impact upon the Company’s Competitive Please refer to The position and operating results. Landscape section of this MD&A for further discussion. _ 1 T A U Q _ 46 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D43 PPFC_2020_QUAT1_ENG03_IGM.indd D44 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U President and above – held by women by the end of 2020. As President andabove–heldbywomentheendof2020.As Vice- have agoaltoatleast35%ofourexecutiveroles – mobility ofwomenandotherunder-representedgroups.We Our activitieshaveacurrentfocusonenablingtheupward community engagement. leadership behaviours;andbuildingexternalpartnerships on threepillarsofaction:raisingawareness; improvinginclusive and intothefuture.To achievethedesiredoutcomes,wefocus employees andclientsthatsupportsourbusinessobjectivesnow of drivinganinclusive,equitableandconsistentexperience for We haveaDiversityandInclusionStrategywiththepurpose performance. businessandfinancial IGM Financial’s personnelcouldaffect numbers ofqualified motivate sufficient loss oftheseindividualsoraninabilitytoattract,retainand The distributing productsandservices offeredbyIGM Financial. important roleindeveloping,implementing,managingand Management, investmentanddistributionpersonnelplayan ormanagepersonnelsuccessiontransition. of proficiency, key employeesorConsultants, developtoanappropriate level People riskreferstothepotentialinabilityattractorretain section ofthisMD&A. are discussedfurtherintheMackenzie Review oftheBusiness leading investmentmanagementcompanies.Thesefactors and service supporthasmadeMackenzie oneofCanada’s term investmentperformancerecord, marketing, educational Mackenzie’s productsanditslong- diverseportfoliooffinancial continue tobuildandenhance itsdistributionrelationships. Mackenzie iswellpositionedtomanagethisriskand effect onMackenzie’s operatingresultsand businessprospects. The inabilitytohavesuchaccesscouldamaterialadverse dependent oncontinuedaccesstothesedistributionnetworks. Mackenzie’s abilitytomarket itsinvestmentproductsishighly more pronouncedintheseacc size oftheseaccounts,grosssaleandredemptionactivitycanbe distribution relationshipintheserelationshipsandtherelative alliance andinstitutionalclients.Duetothenatureof sales ofitsinvestmentproductsandservicesfromstrategic and incompetitionwithMackenzie. Mackenzie alsoderives generally offertheirclientsinvestmentproductsinadditionto, advisors.Financialadvisors sales throughthirdpartyfinancial Mackenzie this MD&A. ManagementReviewIG Wealth oftheBusinesssection advice,asdiscussedinthe context ofpersonalizedfinancial by deliveringadiverserangeofproductsandservicesinthe needsofitsclients and onrespondingtothecomplexfinancial PEOPLE RISK A T 1 _ E C N G 0 44 3 _ – Mackenzie derivesthemajorityofitsmutualfund I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 4 4 ounts thaninaretailrelationship. IGM FINANCIALINC.FIRST and otherrelatedpolicies. Workplace Policy;ourDiversityEnvironmental of Conduct thatdobusinesswithus;our Respectful forthefirms for ouremployees,contractors,anddirectors;SupplierCode through variousmechanisms–includingourCode ofConduct Our commitmenttoresponsiblemanagementisdemonstrated for environmental,socialandgovernance matters. initiatives, measuringprogress,andapprovingannualreporting implementation ofpolicyandstrategy,establishinggoals executives oftheCompany whoareresponsibleforensuring The Corporate Responsibility Committee iscomprisedofsenior risksincludingtheCorporatespecific Responsibility Committee. process. Othermanagementcommitteesprovideoversightof responsible forprovidingoversightoftheriskmanagement The Company’s executiveRiskManagementCommittee is managedand monitored. identified, that materialenvironmentalandsocialrisksareappropriately The Board’s riskmanagementoversightincludesensuring Responsibility StatementapprovedbytheBoardofDirectors. management, asarticulatedintheCompany’s Corporate hasalong-standingcommitmenttoresponsible IGM Financial and communityimpacts. such ashumanrights,labourstandards, diversityandinclusion, energy, waterandotherresources. Socialrisksincludeissues biodiversity, pollution,waste,andtheunsustainableuseof Environmental risksincludeissuessuchasclimatechange, categories ofriskswithintheCompany’s ERMFramework. asoneofthesix Environmental andsocialrisksareidentified arising fromourbusinessoperationsorinvestmentactivities. loss orharmresultingfromenvironmental orsocialissues RISK Environmental andsocialriskisthepotentialoffinancial SOCIAL AND ENVIRONMENTAL 6) ProvidingEmployeeAssistance Programsandotherprograms • Providingthetoolsandprocessestoenableouremployees • Implementingaworkathomestrategytomaintainsocial • professionally andpersonally.TheCompany’s actionshave included: COVID-19 disruptioninpeoples’livesboth hascausedsignificant Women inCapitalMarkets toadvancegender equality. work withCatalyst,theInstituteforGenderandEconomy supporters oftheUNWomen’s EmpowermentPrinciplesandalso ManagementConsultants28% ofIG Wealth werewomen.We are 2020,34%oftheseroleswereheldbywomenand of March 31, employees, Consultants, andtheirfamilies. to supportthementalandphysicalwell-beingofour Consultants tocontinueoperateeffectivelyfromhome. distance forouremployeesandConsultants. QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS 22020-05-11 1:01PM 0 2 0 - 47 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 45 C omotes corporate disclosures CLIMATE CHANGE CLIMATE We believe that financial believe an important companies have services We are change. Global practices in addressing climate role to play to the identification,continually evolving relating analysis, and risks and opportunities. management of climate IGM Financial in the CDP (formerly is a long-standing participant which pr Carbon Disclosure Project), and climate change managementon greenhouse gas emissions emission reduction targets. Forincluding setting and monitoring IGM Financialthe 2018 and 2019 surveys, by was recognized in climate change disclosure with aCDP as a corporate leader Change A List. position on their Climate on Climate-related Force Task Board’s The Financial Stability was established in response Financial Disclosures (TCFD) information on climate- to investor demand for enhanced related risks and opportunities. IGM Financial and its operating recommendations which include companies support the TCFD financiala framework for consistent, voluntary climate-related to investors disclosures that provide decision-useful information and other stakeholders. MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 5 4 D
d d n i . M G I _ 3 0 G N E IGM FINANCIAL INC. FIRST IG Wealth Management and Mackenzie Investments are Investments IG Wealth Mackenzie Management and (PRI). Investment Responsible to the Principles for signatories IG Wealth to were also required Management sub-advisors PRI, end of 2019. Under the to the PRI by the be signatories to incorporate environmental, investors formally commit investment decision issues into their social and governance processes. In addition, IG Wealthmaking and active ownership Investments and Investment Planning Management, Mackenzie Policies Investment Responsible have implemented Counsel company. at each outlining the practices IGM Financial reports annually on its environmental, also social and in its management and performance governance available on our website. Report Responsibility Corporate demonstrating strong has been recognized for The Company positions earned on the FTSE4Good through performance Index Series, Knights’ 2020 Social Index, and Corporate Jantzi Global 100. _ 1 T A U Q _ 48 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D45 PPFC_2020_QUAT1_ENG03_IGM.indd D46 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U management services. planningandinvestment who offerbothfinancial IGM Financial, vertically-integratedparticipants, similarto large, diversified, services industryischaracterizedbyanumberof financial access toabroadproductshelf.Accordingly,theCanadian advice implementedthrough to offercomprehensivefinancial service providersstrive obscured asmanyofthesefinancial andinsurance agentsalesforceshavebecome planning firms between bankbranches,fullservicebrokerages, financial of proprietaryproductsandservices.Traditional distinctions service providersofferingacomprehensiverange financial Competition andtechnologyhavefostered atrendtowards most investorrequirements available inabroadrangeofmandatesandstructurestomeet professional management,flexibilityandconvenience,are ofdiversification, funds provideinvestorswiththebenefits to remainthepreferredsavingsvehicleofCanadians.Investment managers. Managementbelievesthatinvestmentfundsarelikely the Company isamongthecountry’slargestinvestmentfund 2020, investment fundassetsundermanagementatMarch 31, in closed endfundsandexchangetradedfunds.With$143 billion categories includingsegregatedfunds,hedgepooled funds arecomprisedofmutualfundproducts,withotherproduct such asstocksandbonds.Approximately77%ofinvestment Other assettypesincludedepositproductsanddirectsecurities assetclassheldbyCanadians. making itthelargestfinancial 2018, $1.8 trillionresidedininvestmentfundsatDecember 31, assetsor Approximately 40%ofCanadiandiscretionaryfinancial plansandgoals. remain focusedonlong-termfinancial the importance ofarelationshipwithanadvisortodevelopand Company adviceand activelypromotesthevalueoffinancial advisorscomparedtothosewhodonot.The use financial outcomesforCanadianswho betterfinancial significantly goals.Multiplesourcesofemergingresearchshow financial advisors astheyworkwithclientstoplanforandachievetheir of theCompany’s businessmodel istosupportthesefinancial the Company’s productsandservices, andthecore emphasis Financial advisorsrepresenttheprimarydistributionchannelfor consisted ofbankdeposits. advisoryrelationship,approximately63% outside ofafinancial longer-term savingsneedsofCanadians.Ofthe$1.5trillionheld advisor,a financial andthisistheprimarychannelserving assetsare heldwithinthecontextof arelationshipwith financial retirement purposes.Approximately65%($2.9trillion)ofthese cash managementpurposestolonger-terminvestmentsheldfor was diverse,rangingfromdemanddepositsheldforshort-term recent reportfromInvestor 2018 basedonthemost institutionsatDecember 31, financial assetswith Canadians held$4.4trillionindiscretionaryfinancial THE FINANCIALSERVICES ENVIRONMENT A T 1 _ E C N G 0 46 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 4 6 and preferences. Economics. Thenatureofholdings IGM FINANCIALINC.FIRST • Advancing and changing technology. Anevolvingcompetitivelandscape. • Changesintheregulatoryenvironment. • Publicpolicyrelatedtoretirementsavings. • Continued advisor. importanceoftherolefinancial • Changesininvestorattitudesbasedoneconomicconditions. • ShiftingdemographicsasthenumberofCanadiansintheir • continue tobeinfluencedbythefollowingtrends: servicesindustrywill Management believesthatthefinancial participants areacquired consolidation inthissegmentoftheindustryassmaller 2020.Managementanticipatescontinuing at March 31, and 73%oftotalmutualfundassetsundermanagement representing 73%ofindustrylong-termmutualfundassets andtheirsubsidiaries concentrated, withthetenlargest firms The Canadianmutualfundindustrycontinuestobevery 2020. long-term mutualfundassetsatMarch 31, represented 48%oftotalindustry firms managers andaffiliated mutual fundassetsofthe“bigsix”bank-owned one ormoremutualfundmanagementsubsidiaries.Collectively, and mutualfunds.Inaddition,eachofthe“bigsix”bankshas planning continue toplaceincreasedemphasisonbothfinancial full service anddiscountbrokerage subsidiaries.Bankbranches through theirtraditionalbankbranches,aswell productsandservices Canadian banksdistributefinancial responses asappropriate. engages inpolicydiscussionsanddevelopsproductservice Company monitorsdevelopmentsonanongoingbasis,and structures, dealerandadvisorcompensationdisclosure. The and service offeringsoftheCompany, includingpricing,product or publicpreferencesc product typesordeliverychannels,andchangesinregulations Competition service providers,alternative fromotherfinancial assets ofCanadians. bonds andotherassetclassesforashareoftheinvestment under management,andtheirproductscompetewithstocks, compete directly withother investmentmanagersforassets Management, Mackenzie andInvestmentPlanningCounsel service brokerages, banksandinsurancecompanies.IG Wealth aswellfull planningfirms, providers, includingotherfinancial Counsel service competedirectlywithotherretailfinancial ManagementandInvestment Planning environment. IG Wealth anditssubsidiariesoperateinahighlycompetitive IGM Financial THE COMPETITIVE LANDSCAPE prime savingsandretirementyearscontinuetoincrease. QUARTER REPORT 2020 ould impactthecharacteristicsofproduct by largerorganizations. | MANAGEMENT’SDISCUSSIONANDANALYSIS 22020-05-11 1:01PM 0 2 0 - 49 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 47 C BROAD PRODUCT CAPABILITIES BROAD PRODUCT ENDURING RELATIONSHIPS OF THE BENEFITS OF BEING PART OF COMPANIES GROUP POWER CORPORATION Mackenzie also, in its growing strategic alliance business, business, strategic alliance also, in its growing Mackenzie distribution manufacturing and Canadian and U.S. partners with of management to a number to provide investment complexes fund mandates. retail investment IGM Financial’s continue to develop and launch subsidiaries strategic investment planning tools to innovative products and optimized portfolios for clients. assist advisors in building IGM Financial significant enjoys advantages as a result of that advisors enjoy with clients. In the enduring relationships and subsidiaries have strong heritages addition, the Company’s to replicate. cultures which are challenging for competitors group of companies, As part of the Power Corporation IGM Financial benefits through expense savings from shared to distribution, service arrangements, as well as through access products and capital. MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 7 4 D
d d n i . M G I _ 3 0 G channels emphasizing comprehensive financialchannels emphasizing planning with a financialthrough a relationship advisor. advisory relationships. and cultures of its subsidiaries. of companies. N E BROAD AND DIVERSIFIED DISTRIBUTION BROAD AND IGM FINANCIAL INC. FIRST IGM Financial to provide on its commitment continues to focus financial and advice quality investment products, service long- and of the Company effective management innovations, believes Management for its clients and shareholders. term value to meet competitive is well-positioned that the Company on future opportunities. challenges and capitalize including: enjoys several competitive strengths, The Company • and diversified Broad distribution with an emphasis on those • quality sub- product capabilities, leading brands and Broad • and the long-standing heritages Enduring client relationships • group Benefits of being part of the Power Corporation IGM Financial’s advantage. distribution strength is a competitive financial largest planning In addition to owning two of Canada’s organizations, IG Wealth Management and Investment Planning IGM Financial access to Counsel, has, through Mackenzie, financialdistribution through over 30,000 independent advisors. _ 1 T A U Q _ 50 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D47 PPFC_2020_QUAT1_ENG03_IGM.indd D48 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U • • 2019. compared tothosereportedatDecember 31, Company’s assumptionsrelatedtocriticalestimates significant increased uncertainty duetoCOVID-19 whichcouldimpactthe 2020werecharacterizedby The threemonthsendedMarch 31, ACCOUNTING ESTIMATES SUMMARY OF CRITICAL CRITICAL ACCOUNTING ESTIMATES ANDPOLICIES A T employees, unfundedsupplementaryexecutiveretirement pensionplanforalleligible benefit registered defined plans.Theseplansincludeafunded of employeebenefit Employee benefits discount rates,andcapitalizationmultiples. marginchanges, investment returns,pricingandprofit in assetsundermanagementresultingfromnetsalesand Assumptions andestimatesemployedincludefuturechanges precedent acquisition transactionsandtradingcomparables. andoperatingmetricsbased upon multiples tofinancial discounted cashflowanalysisandapplicationofcapitalization amounts, valuationapproachesareusedthatinclude appropriate inthecircumstances. Inassessingtherecoverable These testsinvolvetheuseofestimatesandassumptions indicate thatthecarryingamountsmaynotberecoverable. impairment whenevereventsorchangesincircumstances generating units).Finitelifeintangibleassetsaretestedfor cashinflows(cashfor whichthereareseparatelyidentifiable assessing impairment,assetsaregroupedatthelowestlevels costs ofdisposalanditsvalueinuse.Forthepurposes recoverable amountisthehigherofanasset’sfairvalueless asset’s carryingamountexceeds itsrecoverableamount.The An impairmentlossisrecognizediftheamountof cash charge totheCompany’s earnings. the carryingamountofassetandacorrespondingnon- assets. Anysuchimpairmentwouldresultinanadjustmentto lifeintangible result inanimpairmentofgoodwillorindefinite tests maybebasedondifferentassumptionswhichcould position oftheCompany. Asaresult,subsequentimpairment markets couldmateriallyimpacttheresultsandfinancial economic disruptionsandresultingdepressedfinancial assets. ThedurationandseverityofCOVID-19 related determined therewasnoimpairmentinthevalueofthose informationtheCompanyBased onMarch31,2020financial event orcircumstanceindicatestheassetmaybeimpaired. impairment atleastonceayearandmorefrequentlyifan lifeintangibleassetsfor value ofgoodwillandindefinite Goodwill andintangibleassets 1 _ E C N G 0 48 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
–TheCompany maintainsanumber D 4 8 –TheCompany teststhefair IGM FINANCIALINC.FIRST the Company. Updateswillbeprovidedastheprojectsdevelop. will resultinchangestoexistingIFRSstandards thatmayaffect The IASBiscurrentlyundertakinganumberofprojectswhich may haveontheCompany’s operations. (IASB) andanalyzestheeffectthatchangesinstandards proposed bytheInternationalAccountingStandards Board The Company continuouslymonitorsthepotentialchanges policies in2020. hasnotadoptedanychangesinaccounting IGM Financial FUTURE ACCOUNTING CHANGES FUTURE ACCOUNTING CHANGES IN ACCOUNTING POLICIES ended March 31, 2020. ended March 31, aftertax) forthethreemonths ($56.7 million $77.7 million plans,were plan, theSERPSandpost-employmentbenefit pension benefit comprehensive income,includingthedefined 2019.Totalat December 31, gainsrecordedinOther 2020compared to$99.1 million atMarch 31, of $36.0 million liability pensionplanhadanaccruedbenefit benefit defined 2019.Asaresultofthesechanges,the at December 31, 2020compared to$565.6 million atMarch 31, $448.2 million pensionplanobligationwas benefit income. Thetotaldefined whichwererecorded inOthercomprehensive $118.8 million pensionplanobligationresultedinactuarialgainsof benefit increase inthediscountrateutilizedtovaluedefined which wererecordedinOthercomprehensiveincome. The COVID-19 whichresultedinactuariallossesof$54.0 million, assets wasduetomarket performance primarilycausedby 2019.Thedecrease inplan atDecember 31, $466.5 million 2020from atMarch 31, assets decreased to$412.2 million 2019.Thepensionplan compared to3.20%atDecember 31, 2020was4.30% liabilityatMarch 31, plan accruedbenefit pension benefit discount rateutilizedtovaluethedefined used tomeasure theCompany’s liability.The accrued benefit increased inQ12020therebyimpactingthediscountrate by anincrease indiscountrates.Corporate bondyields pensionplanassetswaspositivelyimpacted benefit defined quarterof2020,theperformance ofthe During thefirst eligible retirees. post-employment healthcareandlifeinsurance planfor (SERPs)andanunfunded plans forcertainexecutiveofficers QUARTER REPORT 2020 | MANAGEMENT’SDISCUSSIONANDANALYSIS 22020-05-11 1:01PM 0 2 0 - 51 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 49 C SEDAR March 31, totalled 11,672,984 of which 6,390,368 were 2020 no changes to exercisable. As at May 5, 2020, there were these amounts. Additional information relating to IGM Financial, including financial most recent statements and Annual the Company’s Information Form, is available at www.sedar.com. MANAGEMENT’S DISCUSSION AND ANALYSIS | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 9 4 D
d d n i . M G I _ 3 0 G N E OTHER INFORMATION OTHER INTERNAL CONTROL OVER FINANCIAL REPORTING FINANCIAL OVER CONTROL INTERNAL OUTSTANDING SHARE DATA OUTSTANDING TRANSACTIONS WITH RELATED PARTIES WITH RELATED TRANSACTIONS IGM FINANCIAL INC. FIRST Outstanding common shares of IGM Financial as at March 31, options as at 2020 totalled 238,308,284. Outstanding stock There were no changes to the types of related party There were no changes to the types of related transactions from those reported at December 31, 2019. For related parties, see further information on transactions involving Statements. Annual Financial Notes 8 and 26 to the Company’s During the firstDuring the in have been no changes of 2020, there quarter financial internal control over that have reporting the Company’s affect, to materially likely or are reasonably materially affected, over financial internal control reporting. the Company’s _ 1 T A U Q _ 52 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D49 PPFC_2020_QUAT1_ENG03_IGM.indd D50 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U
(See accompanyingnotestointerimcondensedconsolidatedfinancialstatements.) – Diluted – Basic Proportionateshareofassociates’earnings Netinvestmentincomeandother Distribution fees Administration Managementandadvisoryfees fees Revenues (in thousandsofCanadiandollars,exceptpershareamounts) (unaudited) e annsaalbet omnsaeodr $ 160,876 $ Earnings pershare Net earningsavailabletocommonshareholders Perpetual preferredsharedividends Net earnings Income taxes Earnings beforeincometaxes Interest Non-commission Commission Expenses CONSOLIDATED STATEMENTS OFEARNINGS INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A T 1 _ E C N G 0
50 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
(in dollars)(Note14)
D 5 0 IGM FINANCIALINC.FIRST (Note 6)
QUARTER REPORT 2020 | INTERIMCONDENSEDCONSOLIDATEDFINANCIAL STATEMENTS
THREEMONTHSENDEDMARCH31 $ 0.68 $ 0.68 $ 562,079 160,876 101,883 208,910 573,153 275,862 269,984 782,063 88,570 48,034 27,307 20,045 9,486 2020 – 20,233 101,699 $ 0.70 $ 0.70 89,274 $ 545,224 2,213 214,760 574,320 274,438 274,666 789,080 169,716 45,044 25,216 $ 167,503 32,650 2019 22020-05-11 1:01PM 0 2 0 - 53 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 2019 51 C (6,691) 29,358 (4,451) $ 165,265 $ 169,716 (7,138) (19,980) 2020 5,569 2,068 51,581 56,696 115,914 $ 276,790 $ 160,876 ENDED MARCH 31 THREE MONTHS
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INTERIM CONDENSED CONSOLIDATED FINANCIAL | et of tax of $(322) and $1,113 net of tax of $(2,277) and $(646) net of tax of nil 2020 2020 net of tax of $(20,965) and $7,388 net of tax of $(20,965) and POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER
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d d n i .
M G I _ 3 0 G N E CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME OF COMPREHENSIVE STATEMENTS CONSOLIDATED IGM FINANCIAL INC. FIRST (loss), Items that may be reclassified subsequently to Net earnings income comprehensive Other Investment in associates and other Total comprehensive income Other comprehensive income (loss), net of tax Other comprehensive n (loss), be reclassified to Net earnings Items that will not income comprehensive Other (losses), investments value through other comprehensive income Fair benefits gains Employee actuarial Net financial statements.) (See accompanying notes to interim condensed consolidated (unaudited) (in thousands of Canadian dollars) Net earnings Other comprehensive income (loss), income comprehensive Other – employee benefits and other Investment in associates
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0 IGM FINANCIAL INC. 2 0 _ Q U (See accompanyingnotestointerimcondensedconsolidatedfinancialstatements.) Other Cashandcashequivalents investments Assets (in thousandsofCanadiandollars) (unaudited) Loans Income Accountsandotherreceivables taxes recoverable Clientfundsondeposit cuuae te opeesv noe(os These interimcondensedconsolidatedfinancialstatementswereapprovedandauthorizedforissuancebytheBoardofDirectorso Accumulatedothercomprehensive income(loss) Retained earnings Contributed surplus Common shares Share capital Shareholders’ Equity Long-term debt Deferred income Lease taxes Obligationstosecuritizationentities obligations Other liabilities Deposits and Derivative certificates financial Income instruments Accountspayableandaccruedliabilities taxes payable Liabilities Goodwill Intangible assets Deferred Capitalizedsalescommissions income taxes Capital assets Investment in Other associates assets Derivative financial instruments CONSOLIDATED SHEETS BALANCE A T 1 _ E C N G 0
(Note 4) 52 3 _ I (Note 7) G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
(Note 7) D 5 (Note 3) 2
(Note 6)
IGM FINANCIALINC.FIRST QUARTER REPORT 2020 | INTERIMCONDENSEDCONSOLIDATEDFINANCIAL STATEMENTS
$ 709,463
$ 15,552,526 $ 368,668 $ 15,552,526
10,910,905 4,641,621 3,005,561 1,598,381 2,100,000 6,729,364 2,660,267 1,233,288 1,818,371 6,977,493 MARCH 31 399,688 856,028 365,590 312,934 365,529 876,407 175,164 210,082 (11,788) 35,010 49,467 85,814 65,581 37,682 42,243 32,157 6,608 2020 2019 n May8,2020. $ 720,005 394,210 561,269 11,925 357,362 305,049 441,902 584,331 4,867 149,866 216,956 $ 15,391,476 4,499,095 2,980,260 48,677 1,597,860 10,892,381 2,100,000 90,446 6,913,636 17,193 $ 434,957 $ 15,391,476 76,517 45,843 15,204 (127,702) 2,660,267 1,230,127 1,753,882 7,198,043 DECEMBER 31 22020-05-11 1:01PM 0 2 0 - 55 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 (24) 22020-05-11 1:01 PM 521 814 160,876 53 (134,048) C
EQUITY – – – – – (Note 11)
INCOME (LOSS) INCOME (LOSS) SHAREHOLDERS’ – – – 160,876 (134,048)
– – – (24) 814 THREE MONTHS ENDED MARCH 31
SURPLUS EARNINGS EARNINGS SURPLUS – – – – 521 (Note 8)
SHARE CAPITAL SHARE CAPITAL ACCUMULATED ACCUMULATED
– – – – – – – – – 160,876 115,914 276,790 – – 115,914 115,914 – – – – (1,527) – (1,527) CHANGES IN SHAREHOLDERS’ EQUITY IN SHAREHOLDERS’ CHANGES (Note 8) INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INTERIM CONDENSED CONSOLIDATED FINANCIAL | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER
QUARTER REPORT 3 5 D
d d n i . SHARES SHARES CONTRIBUTED RETAINED CONTRIBUTED SHARES SHARES M G I _ 3 0 G N E CONSOLIDATED STATEMENTS OF STATEMENTS CONSOLIDATED IGM FINANCIAL INC. FIRST PREFERRED COMMON COMPREHENSIVE TOTAL TOTAL COMPREHENSIVE OTHER COMMON PERPETUAL PREFERRED 2020 (See accompanying notes to interim condensed consolidated financial statements.) Balance, beginning of period of beginning 2019 4,595,999 Balance, $ 2,834,998 $ (45,798) 1,611,263 $ 45,536 $ 150,000 $ $ (unaudited) (in thousands of Canadian dollars) period of beginning Balance, 4,499,095 $ $ (127,702) 2,980,260 $ 1,597,860 $ $ 48,677 $ –
Common shares earnings Net Other comprehensive income (loss), shares income plan net of tax comprehensive option Total stock options cancellation under Common for Issued expense Purchased – period dividends 3,908 – Stock Current share Exercised dividends preferred – – – share Perpetual – Common (1,783) – – – Transfer out of fair value through 169,716 – (4,451) other comprehensive income 165,265 – period – – Common share cancellation – of – 169,716 excess and other end 3,908 – – – Balance, – – 923 (2,213) – 169,716 4,538,577 – $ 2,800,659 $ (71,717) 1,613,388 $ (1,783) – 46,247 $ – 150,000 $ $ – – (2,213) – – – (135,498) – – 923 – (135,498) – (212) – – – – – – (212) – (4,451) 21,468 (4,451) (21,468) – (87,812) – – (87,812) Common shares Net earnings shares Total comprehensive income Common stock option plan Issued under Stock options (loss), Other comprehensive income net of tax options expense Stock period Current Exercised Common share dividends Common share cancellation excess and other Balance, end of period of end Balance, $ 4,641,621 $ $ 3,005,561 (11,788) 1,598,381 $ 49,467 $ – $ _ 1 T A U Q _ 56 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D53 PPFC_2020_QUAT1_ENG03_IGM.indd D54 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U
ahadcs qiaet,bgnigo eid (See accompanyingnotestointerimcondensedconsolidatedfinancialstatements.) Interest Interestanddividendsreceived paid Supplemental disclosureofcashflowinformationrelatedtooperatingactivities Cash equivalents Cash Cash andcashequivalents,endofperiod Cash andcashequivalents,beginningofperiod (Decrease) increaseincashandequivalents Income Earningsbeforeincometaxes taxes paid Operating activities (in thousandsofCanadiandollars) (unaudited) omnsae ucae o aclain Purchaseofotherinvestments Investing activities Commonsharedividendspaid Perpetualpreferredsharedividendspaid Commonsharespurchasedforcancellation Issue of Issue common Repaymentsofleaseobligations of shares debentures aiaie ae omsinaotzto Capitalized sales Capitalized commissions Adjustmentstodeterminenetcashfromoperatingactivities sales paid commission amortization neteti esnlCptlCroain InvestmentinPersonalCapitalCorporation Netcashusedinadditionstointangible assets Netadditionstocapitalassets Repaymentofloansandother Increase Proceedsfromthesaleofotherinvestments in loans nraei biain oscrtzto niis Repaymentsofobligationstosecuritizationentitiesandother Increaseinobligationstosecuritizationentities Net(decrease)increaseindepositsandcertificates Financing activities Cashfromoperatingactivitesbeforerestructuringprovisionpayments Restructuring provision Changesinoperatingassetsandliabilitiesother cash payments Proportionateshareofassociates’earnings,netdividends Pension and Amortizationofcapital,intangibleandotherassets other post-employment benefits CONSOLIDATED STATEMENTS OFCASH FLOWS A T 1 _ E C N G 0
54 3 _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 5 4
IGM FINANCIALINC.FIRST QUARTER REPORT 2020 | INTERIMCONDENSEDCONSOLIDATEDFINANCIAL STATEMENTS
THREEMONTHSENDEDMARCH31 $ 65,834 $ 69,444 $ 709,463 $ 92,684 $ 709,463 $ 208,910
(294,258) (134,040) (392,383) (321,294) 616,779 193,398 720,005 547,121 240,213 (10,542) (42,113) (10,874) (19,085) (80,417) (32,982) 90,318 92,979 20,124 (6,066) (2,942) (2,480) (2,661) 7,684 1,778 9,995 2020 498 472 – – – – 780,970 (49,413) $ 64,169 $ 72,066 $ 837,089 $ 56,119 $ 837,089 $ 214,760 650,228 186,861 207,428 (135,498) (2,213) (9,152) 3,696 250,000 (5,570) (320,989) (96,629) 4,781 (66,811) (293,324) 341,255 (5,250) (10,151) 20,219 (35,351) 28,846 426,284 48,471 (66,419) 19,968 (12,550) 799 (16,239) 870 (19,625) 2019 22020-05-11 1:01PM 0 2 0 - 57 0 5 - 1 1
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address 55 C DECEMBER 3 301,196 244,989 $ $ 1,575 51,304 1,759 54,407 52,879 357,362 297,868 $ 56,166 $ FAIR FAIR VALUE COST FAIR 31, 2020 , using the accounting policies as set out MARCH
COST VALUE 1,559 1,323 $ 244,989 $ 303,586 60,681 63,160 62,004 64,719 $ 309,708 $ 365,590 Interim Financial Reporting CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FINANCIAL CONSOLIDATED NOTES TO THE INTERIM | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT (unaudited) (In thousands of Canadian dollars, except shares and per share amounts) dollars, except shares and per thousands of Canadian (unaudited) (In 5 5 D
d d CORPORATE INFORMATION CORPORATE n i . OTHER INVESTMENTS OTHER SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ACCOUNTING OF SIGNIFICANT SUMMARY M G I _ 3 0 G N E NOTES TO THE INTERIM CONDENSED TO THE INTERIM NOTES NOTE 3 NOTE 2 NOTE 1 NOTE 1 FUTURE ACCOUNTING CHANGES FUTURE ACCOUNTING IGM FINANCIAL INC. FIRST Statements should be read in conjunction with the Consolidated Financial Statements in the 2019 IGM Financial Inc. Annual Repor Statements should be read in conjunction may have on the Company’s operations. in this note and in Note 2 to the Consolidated Financial Statements for the year ended December 31,in this note and in Note 2 to the Consolidated Interim Financial 2019. The were characterized by increased uncertainty due to COVID-19 which could impact the The three months ended March 31, 2020 to critical estimates compared to those reported at December 31, 2019. Company’s significant assumptions related changes proposed by the IASB and analyzes the effect that changes in the standa The Company continuously monitors the potential Fair value through other comprehensive income (FVTOCI) Fair value through other comprehensive income investments Corporate Fair value through profit or loss (FVTPL) securities Equity Proprietary investment funds The unaudited Interim Condensed Consolidated Financial Statements of the Company (Interim Financial Statements) have been Financial Statements of the Company (Interim Financial Statements) have been The unaudited Interim Condensed Consolidated Accounting Standard 34, prepared in accordance with International March 31, 2020 March 31, The registered IGM), incorporated and domiciled in Canada. Company) is a publicly listed company (TSX: IGM Financial Inc. (the Corporation of Canada. The Company is controlled by Power Portage Avenue, Winnipeg, Manitoba, Canada. of the Company is 447 through its principal which serves the financial needs of Canadians wealth and asset management company IGM Financial Inc. is a subsidiaries, each operating distinctly within the advice segment of the financial services market. The Company’s wholly-owned of the financial services market. The Company’s distinctly within the advice segment subsidiaries, each operating Corporation. are Investors Group Inc. and Mackenzie Financial principal subsidiaries
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0 IGM FINANCIAL INC. 2 0 _ Q U Fair valuethroughprofitorloss Less: Allowance for expected credit losses also includesothermortgagebankingrelateditemsincludingportfolioinsurance,issuecosts,anditems. TheseamountswereincludedinNetinvestmentincomeandother.other negative$3.4 million). (2019 – Fairvalueadjustmentsrelatedtomortgagebankingoperationstotallednegative$2.7 millio (2019–$0.3 million). $1.8 million Gainsrealizedonthesaleofresidentialmortgagestot (2019–$44.1 million). related tosecuritizedloans,was$39.8 million Totalinterestexpense onobligationstosecuritizatio (2019–$54.5 million). Total interestincomeonloanswas$50.4 million 2019. compared to$675atDecember 31, the impactofmortgagedeferralprogramandIASBguidance,Company’sallowanceforexpectedcreditlosseswas$796 economic conditions,andcontinuousmonitoringforanypossiblechangesnewinformation.AtMarch31,2020,afterincorpora in creditrisk),developingestimatesbasedonthebestavailableinformationaboutpastevents,currentconditionsandforecas expected creditlossmechanically(forexamplethepaymentholidayextensionsshouldnotautomaticallyresultinasignificant pandemic. Recommendationsincludeassessingwhethertheriskofdefaulthaschangedoverlifemortgages,notapplyin requirements relatedtotheassessmentofexpectedcreditlossesinlightcurrentuncertaintyresultingfromCOVID-1 The InternationalAccountingStandardsBoard(IASB)hasprovidedguidanceintendedtosupporttheconsistentapplicationofIFR The CompanyisworkingwithclientsthathavebeenfinanciallyimpactedbyCOVID-19todefermortgagepaymentsforupsixmo 2019–$2,381). Total creditimpairedloansasatMarch31,2020were$3,116(December 31, Balance, endofperiod Provision forcreditlosses Write-offs, netofrecoveries Balance, beginningofperiod The changeintheallowanceforexpectedcreditlossesisasfollows: Residential mortgages Amortized cost NOTE 4 A T 1 _ E C N G 0 56 3 LOANS _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 5 6 IGM FINANCIALINC.FIRST
QUARTER REPORT $ 1,668,971 $ 3,817$ 5,273,739 $ 6,946,527 2020 RLS YAS ER TOTAL 5 YEARS YEARS OR LESS 1 YEAR | NOTESTOTHEINTERIM
CONTRACTUAL MATURITY 1 –5 CONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS OVER $ 796 $ 675 $ 6,977,493 6,945,731 MARCH 31 31,762 (337) 2020 796 458 675 – $ 7,198,718 737 $ 675 $ 801 $ $ 7,198,043 7,198,043 DECEMBER 31 TOTAL 2019 (863) alled n entities, ts of n increase 9 S g the nths. ting
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r assets 57 , 2020 C fe of the received tities which OBLIGATIONS TO TO OBLIGATIONS 2,919,513 2,939,208 (19,695) 2,939,208 2,919,513 MORTGAGES ENTITIES MORTGAGES ENTITIES NET SECURITIZED SECURITIZATION $ 6,829,865 $ 6,907,742 $ 6,913,636 $ 6,996,953 $ (83,771) $ (89,211) $ 3,770,313 $ 3,790,156 $ 6,689,826 $ $ 6,882,802 (19,843) $ 6,729,364 $ 6,935,970 $ (39,538) $ (53,168) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED NOTES TO THE INTERIM | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 7 5 D
d 2019 d n i . SECURITIZATIONS M 31, 2020 G I _ 3 0 G N E NOTE 5 MARCH IGM FINANCIAL INC. FIRST DECEMBER 31, Fair value Issue costs are amortized over the li on securitized mortgages that are not due to be settled until after the reporting period. obligation on an effective interest rate basis. Carrying value ABCP sponsored CMB Program NHA MBS and Bank Total costs, includes principal payments The carrying value of Obligations to securitization entities, which is recorded net of issue $ 2,938,910 3,890,955 2,974,904 $ 3,938,732 (35,994) $ (47,777) Carrying value ABCP sponsored CMB Program NHA MBS and Bank Total Fair value The Company securitizes residential mortgages through the Canada Mortgage and Housing Corporation (CMHC) sponsored National (CMHC) sponsored and Housing Corporation the Canada Mortgage mortgages through securitizes residential The Company and through Canadian and Canada Mortgage Bond (CMB) Program Securities (NHA MBS) Program Housing Act Mortgage-Backed for derecognition These transactions do not meet the requirements commercial paper (ABCP) programs. bank-sponsored asset-backed retained these mortgag credit risk. Accordingly, the Company has prepayment risk and certain elements of as the Company retains risk is further limited to the extent these mortgages are insured. for failure to make payments when due. Credit on its balance sheets and has recorded offsetting liabilities for the net proceeds received as Obligations to securitization en net proceeds received as Obligations to and has recorded offsetting liabilities for the on its balance sheets cost. are recorded at amortized As part of the CMB on the obligations to securitization entities. on the mortgages and pays interest The Company earns interest and receives investment the Company pays coupons on CMBs enters into a swap transaction whereby transactions, the Company to the obligation t principal. A component of this swap, related and the reinvestment of repaid mortgage returns on the NHA MBS to manage exposure to principal, and the hedging swap used receive investment returns on repaid mortgage pay CMB coupons and with a negative fair value of $4.3 million investment returns, are recorded as derivatives changes in variable rate 31 at March (December 31, 2019 – negative $5.8 million). measures to support Canadians through the COVID-19 crisis where mortgage payments The Government of Canada has introduced over the life of the mortgage. Under the NHA MBS and CMB Program, the Company can be deferred for up to six months and repaid to security holders regardless of whether amounts are received from mortgagors. All has an obligation to make timely payments and CMB Program are insured by CMHC or another approved insurer under the program. mortgages securitized under the NHA MBS Cre has provided cash reserves for credit enhancement which are recorded at cost. As part of the ABCP transactions, the Company net interest income as the ABCP Trusts have no recourse to the Company’s othe risk is limited to these cash reserves and future _ 1 T A U Q _ 60 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D57 PPFC_2020_QUAT1_ENG03_IGM.indd D58 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U GWat aaeet 13771 – 1525 125,295 $ 125,295 1,024,481 21,800 $ 1,002,681 – 1,168,580 $ 1,347,781 $ Total Other Mackenzie IG WealthManagement Total Other Mackenzie IG WealthManagement 1,906,020 $ 213,734 $ are summarizedinthefollowingtable: 692,780 and definitelifeintangiblesconsistingofsoftwareothermanagementcontractsareallocatedbycashgeneratingunit(CGU) $ The carryingvaluesofgoodwill,indefinitelifeintangibleassetsconsistinginvestmentfundmanagementcontractsandtrade 999,506 – (16,411) 1,651,305 $ $ changes incircumstancesindicatethatthecarryingamountsmaynotberecoverable. 216,952 – 32,650 – separately identifiablecashinflows(cashgeneratingunits).Finitelifeintangibleassetsaretestedforimpairmentwhenever (3,361) 21,524 (16,411) 7,369 disposal anditsvalueinuse.Forthepurposesofassessingimpairment,assetsaregroupedatlowestlevelsforwhichther 216,952 28,642 asset’s carryingamountexceedsitsrecoverableamount.Theisthehigherofanfairvaluelesscost $ frequently ifaneventorcircumstanceindicatestheassetmaybeimpaired.Animpairmentlossisrecognizedamountoft 143 – 683,475 The Companyteststhefairvalueofgoodwillandindefinitelifeintangibleassetsforimpairmentatleastonceayearmore $ 967,830 $ 1,936 – adjustment wasapproximately$8.1millionandisincludedintheproportionateshareofearnings. 19,445 significant marketdeclinesandvolatilitydrivenbytheCOVID-19pandemic.TheCompany’safter-taxproportionateshareofthis In March2020,Lifecorecordedanadjustmentwhichrelatedtounfavourablebasischangesandmarketimpactsdue Personal CapitalCorporationasitexercisessignificantinfluence. The CompanyusestheequitymethodtoaccountforitsinvestmentsinGreat-WestLifecoInc.,ChinaAssetManagementCo.,Ltd.a Balance, endofperiod Othercomprehensiveincome(loss)andotheradjustments Earnings Proportionate shareof: (losses) Dividends Transfer fromcorporateinvestments(FVTOCI) Balance, beginningofperiod Balance, endofperiod Othercomprehensiveincome(loss)andotheradjustments Earnings (losses) Proportionate shareof: Dividends Balance, beginningofperiod AS ATDECEMBER MARCH AS AT MARCH 31,2020 MARCH AT AS MARCH NOTE 7 NOTE 6 A T 1 _ E C N 31, 2019 G 31, 2020 0 58 3 GOODWILL ANDINTANGIBLE ASSETS INVESTMENTINASSOCIATES _ I G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i 31,2019 n d d
D 5 8 IGM FINANCIALINC.FIRST QUARTER REPORT 2020 | NOTESTOTHEINTERIM ,6,6 $10576 2431 $1,230,127 204,391 $ 80,351 $1,025,736 57,296 $ 2,660,267 23,055 143,906 $1,233,288 207,552 $ $1,025,736 $ 2,660,267 –$ 127,003 $ 127,003 $ 1,347,781 $ 20,045 $ $ 207,924 (3,116) $703,430 $ 907,017 1,818,371 8,856 14,305 $ $ 194,537 $662,694 $ 896,651 1,753,882 ,6,8 10261 21,011 1,023,692 1,168,580 1,002,681 ODIL NEIIELF FNT IE TOTAL FINITELIFE INDEFINITE LIFE GOODWILL 4,0 305 5,3 82,593 59,538 23,055 143,906 1,5) (366 (30,040) – (13,686) (16,354) 245 4,6 653 74,484 16,503 45,566 12,415 IEOCIAA C AIA TOTAL LIFECO CHINA CAPITAL AMC PERSONAL CONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS INTANGIBLE ASSETS events or e are
s of names, he and
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sts t the or hich 31, 2019 e ed 59 nt to the fair rowth, C MARCH titutions and 138,598 3,908 (266,093) (1,783) 6,000,000 $ 150,000 240,885,317 $ 1,611,263 240,757,822 $ 1,613,388 STATED STATED SHARES VALUE
STATED 31, 2020 MARCH
SHARES VALUE – $ – $ – – – 238,308,284 $ 1,598,381 238,294,090 $ 1,597,860 14,194 521 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED (continued) NOTES TO THE INTERIM | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 9 5 D
d d n i . SHARE CAPITAL GOODWILL AND INTANGIBLE ASSETS AND INTANGIBLE GOODWILL M G I _ 3 0 G N E NOTE 8 NOTE 7 NORMAL COURSE ISSUER BID NORMAL COURSE ISSUER AUTHORIZED ISSUED AND OUTSTANDING IGM FINANCIAL INC. FIRST
Perpetual preferred shares – classified as equity: First preferred shares, Series B Purchased for cancellation for Purchased Balance, end of period Based on March 31, 2020 financial information the Company determined there was no impairment in the value of those assets. The in the value of those there was no impairment determined information the Company 31, 2020 financial Based on March could materially impac and resulting depressed financial markets of COVID-19 related economic disruptions duration and severity different assumptions w impairment tests may be based on of the Company. As a result, subsequent results and financial position in an adjustme assets. Any such impairment would result of goodwill or indefinite life intangible could result in an impairment Common shares: Balance, beginning of period Issued under Stock Option Plan carrying amount of the asset and a corresponding non-cash charge to the Company’s earnings. asset and a corresponding non-cash charge carrying amount of the amounts with th assets are impaired by assessing the carrying goodwill and indefinite life intangible The Company tests whether of fair value less co CGUs is based on the best available evidence The recoverable amount of the Company’s recoverable amounts. financial ins multiples of comparable publicly traded is initially assessed with reference to valuation of disposal. Fair value conventionally us may include price-to-earnings or other transactions. These valuation multiples precedent business acquisition management, revenues, (multiples of value to assets under managers or other financial service providers measures for investment other measures of profitability). This assessment may give regard to a variety of relevant considerations, including expected g to a variety of relevant considerations, including This assessment may give regard other measures of profitability). other factors. The valuation multiples used in assessing fair value represent Level 2 risk and capital market conditions, among estimates used in determining the recoverable amounts of CGUs can result in significa no impairment. Changes in assumptions and adjustments to the valuation of the CGUs value inputs. w CGUs was compared with the carrying amount and it was determined there The fair value less costs of disposal of the Company’s The Company commenced a normal course issuer bid on March 26, 2019 which was effective until March 25, 2020. Pursuant to this The Company commenced a normal course issuer bid on March 26, 2019 which was bid, the Company was authorized to purchase up to 4.0 million or 1.7% of its common shares outstanding as at March 14, 2019. shares purchased at a cost of $9.2 million).There were no common shares purchased in the first quarter of 2020 (2019 – 266,093 The premium stated value was charged to Retained earnings. paid to purchase the shares in excess of the Unlimited number of: issuable in series First preferred shares, in series Second preferred shares, issuable Class 1 non-voting shares no par value Common shares, _ 1 T A U Q _ 62 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D59 PPFC_2020_QUAT1_ENG03_IGM.indd D60 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U rnfroto VOI (148 – (21,468) – (71,717) $ 68,687 (21,468) $ (4,451) 28,628 (45,798) – $ $ (169,032) 22,667 46,020 $ $ 57,234 (7,138) $ (149,052) (19,980) $ Amounts arerecordednetoftax. Balance, endofperiod Transfer outofFVTOCI Other comprehensiveincome(loss) Balance, beginningofperiod Balance, endofperiod Other comprehensiveincome(loss) Balance, beginningofperiod after thegrantdate. of theexpectedoptionlife.Optionsvestoveraperiodupto7.5yearsfromgrantdateandareexercisablenolatertha Expected volatilityhasbeenestimatedbasedonthehistoricofCompany’ssharepriceoversevenyearswhichis Exercise price pricing model.Theclosingsharepriceatthegrantdatewas$36.41.Otherassumptionsusedinthesevaluationmodelsinclude: during thethreemonthsendedMarch31,2020hasbeenestimatedat$1.31peroption(2019–$1.82)usingBlack-Scholesopti In thefirstquarterof2020,Companygranted1,537,165optionstoemployees(2019–1,485,310).Thefairvalueg – Exercisable – Outstanding Common shareoptions 2019. December 31, to theConsolidatedFinancialStatementsin2019IGMInc.AnnualReportandhavenotchangedsignificantlysince Company’s Management’sDiscussionandAnalysiscontainedintheFirstQuarter2020ReporttoShareholdersNote18 The capitalmanagementpolicies,proceduresandactivitiesoftheCompanyarediscussedinCapitalResourcessection
Expected dividendyield Expected volatility Expected optionlife Risk-free interestrate MARCH MARCH 31, STOCK OPTIONPLAN NOTE 11 NOTE 10 NOTE 9 A T 1 _ E C N 31, 2019 G 0 60 3 CAPITAL MANAGEMENT 2020 _ I ACCUMULATED OTHER SHARE-BASED PAYMENTS G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 6 0 IGM FINANCIALINC.FIRST COMPREHENSIVE INCOME (LOSS) QUARTER REPORT 2020 | NOTESTOTHEINTERIM 1921 $ 841 4,3 $ (11,788) $ 49,032 $ 48,431 $ $ (109,251) $(127,702) (8,118) $ 46,363 $ $ (165,947) EMPLOYEE OTHER IN ASSOCIATES EEISIVSMNS N TE TOTAL AND BENEFITS INVESTMENTS OTHER 666 208 5,5 115,914 57,150 2,068 56,696 INVESTMENT
CONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS THREEMONTHSENDEDMARCH31
6.18% 17.00% 7 years 11,672,984 6,390,368 MARCH 31 $ 38.65 1.32% 2020 2020 5,470,178 7 years 10,529,360 $34.29
DECEMBER 31 6.56% 18.00% 2.07% n 10years reflective ranted
on 2019 2019
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t rates orical 61 of credit C ) our strong Company (continued) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED NOTES TO THE INTERIM | COMPREHENSIVE INCOME (LOSS) (LOSS) INCOME COMPREHENSIVE 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 1 6 D
d RELATED IMPACTS d RISK MANAGEMENT ACCUMULATED OTHER OTHER ACCUMULATED n i . M -19 G I _ 3 0 G N E NOTE 12 NOTE 11 COVID CREDIT RISK LIQUIDITY AND FUNDING IGM FINANCIAL INC. FIRST 2019, and is considered adequate by management to absorb all credit-related losses in the mortgage portfolios based on: i) hist 2019, and is considered adequate by management including the economic impact of COVID-19 and Canada’s COVID-19 Economic credit performance experience, ii) recent trends iii) current portfolio credit metrics and other relevant characteristics, iv Response Plan to support Canadians and businesses, The Company’s allowance for expected credit losses was $0.8 millionThe Company’s allowance for expected credit to $0.7 million at March 31, 2020, compared at December 31, and v) stress testing of losses under adverse real estate market conditions. financial planning relationship with our clients, of credit risk related to mortgage portfolios have not changed materially since The Company’s exposure to and management December 31, 2019. The risk management policies and procedures of the Company are discussed in the Financial Instruments Risk section of the Compa are discussed in the Financial Instruments policies and procedures of the Company The risk management measures to support Canadians through the COVID-19 crisis where mortgage payments The Government of Canada has introduced over the life of the mortgage. can be deferred for up to six months and repaid princi the NHA MBS program, it is obligated to make timely payment of interest and As the Company securitizes mortgages through Primarily due to COVID-19, discount rates increased by 1.1% during the first quarter of 2020. The gain on the increased discoun gain on the increased quarter of 2020. The by 1.1% during the first rates increased to COVID-19, discount Primarily due benefit plans. $56.7 million, net of tax, on its employee gain in Other comprehensive income of recorded a net actuarial Note 21 to the Consolida 2020 Report to Shareholders and in and Analysis contained in the First Quarter Management’s Discussion December 31, and have not changed significantly since in the 2019 IGM Financial Inc. Annual Report Financial Statements 2019. financial risks due to COVID-19 in the following areas: The Company has identified impacts to its between the receipt of cash from clients deferring mortgage payments and the payments, which will create a timing difference amounts. All mortgages in the NHA MBS program are insured against default. payment to the NHA MBS program of those from operations, available cash balances and liquidity available through its lines The Company believes its ongoing cash flows needs. are sufficient to address the Company’s liquidity was partially offset by the decrease in assets caused by market reductions. As a result, during the first quarter of 2020, the reductions. As a result, during the first quarter the decrease in assets caused by market was partially offset by _ 1 T A U Q _ 64 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D61 PPFC_2020_QUAT1_ENG03_IGM.indd D62 F C
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0 IGM FINANCIAL INC. 2 0 _ Q U indicative brokerquotes. methodologies, orsimilartechniquesusingprimarilyobservablemarketinputs.Thefairvalueoflong-termdebtisdetermined u fair valueofderivativefinancialinstrumentsanddepositscertificatesaredeterminedusingvaluationmodels,discounted term debt.Thefairvalueoffixedincomesecuritiesisdeterminedusingquotedmarketpricesorindependentdealerpricequote Level 2assetsandliabilitiesincludefixedincomesecurities,loans,derivativefinancialinstruments,depositscertifica liabilities ininstanceswheretherearequotedpricesavailablefromactivemarkets. Level 1financialinstrumentsincludeexchange-tradedequityinvestmentsandopen-endinvestmentfundunitsother Fair valueisdeterminedusingthefollowingmethodsandassumptions: determining themostappropriateinputsandweightingascribedtoeachinputaswellinselectionofvaluationmetho market transactions,anyrelevantobservableinputs,andinternalmodel-basedestimates.Managementexercisesjudgmenti reasonably availableinformationincludingindicativebrokerquotations,anypricingforsimilarinstruments,recent observable marketinputs(Level2)ormayutilizepredominantlynon-observable3).Managementconsidersal where tradedmarketsarenotconsideredsufficientlyactive,fairvalueismeasuredusingvaluationmodelswhichmayutilizepr a significantdeclineinthevolumeandlevelofobservedtradingactivityorthroughlargeerraticbid/offerspreads.Inth Markets areconsideredinactivewhentransactionsnotoccurringwithsufficientregularity.Inactivemarketsmaybecharact Level 3– Level 2– Level 1– measurement initsentirety. market, utilizingahierarchyofthreedifferentvaluationtechniques,basedonthelowestlevelinputthatissignificanttot Fair valueisdeterminedbasedonthepricethatwouldbereceivedforanassetorpaidtotransferaliabilityinmostadv distinguish fairvaluemeasurementsbythesignificanceofinputsusedforvaluation. All financialinstrumentsmeasuredatfairvalueandthoseforwhichisdisclosedareclassifiedintooneofthreel future fairvalues.Thecalculationsaresubjectiveinnature,involveuncertaintiesandmattersofsignificantjudgment. Fair valuesaremanagement’sestimatesandcalculatedusingmarketconditionsataspecificpointintimemaynotrefle NOTE 13 A T with similarcharacteristicsandmaturities,ordiscountedcashflowanalysis. Derivative financialinstrumentsarevaluedbasedonquotedmarketprices,whereavailable,prevailingratesforinstrum Long-term debtisvaluedusingquotedpricesforeachdebentureavailableinthemarket. deposits withsimilartermsandcreditrisks. Deposits andcertificatesarevaluedbydiscountingthecontractualcashflowsusingmarketinterestratescurrentlyofferedfo securities issuedbythesesecuritizationentitieshavingsimilartermsandcharacteristics. Obligations tosecuritizationentitiesarevaluedbydiscountingtheexpectedfuturecashflowsatprevailingmarketyieldsfor Loans classifiedasLevel3arevaluedbydiscountingtheexpectedfuturecashflowsatprevailingmarketyields. Loans classifiedasLevel2arevaluedusingmarketinterestratesforloanswithsimilarcreditriskandmaturity. valuation techniques. to discountratesandthetimingamountoffuturecashflows.Whereverpossible,observablemarketinputsareusedin available. Whenaquotedmarketpriceisnotreadilyavailable,valuationtechniquesareusedthatrequireassumptionsrelated Other investmentsandotherfinancialassetsliabilitiesarevaluedusingquotedpricesfromactivemarkets,when 1 _ E C N G 0 62 3 Unobservable inputsthataresupportedbylittleornomarketactivity.Valuationtechniquesprimarilymodel-based. corroborated byobservablemarketdata;and or similarassetsliabilitiesinmarketsthatarenotactive;inputsotherthanquotedpricesobservable Observable inputsotherthanLevel1quotedpricesforsimilarassetsorliabilitiesinactivemarkets;ident Unadjusted quotedpricesinactivemarketsforidenticalassetsorliabilities; _ I FAIR VALUE OFFINANCIALINSTRUMENTS G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 6 2 IGM FINANCIALINC.FIRST QUARTER REPORT 2020 | NOTESTOTHEINTERIM CONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS ose instances ose instances tes andlong- arm’s length arm’s length he fairvalue evels that edominantly edominantly antageous erized by erized by cash flow dologies.
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es, 63 amortized C r levels in the other financial other financial f principal if the carrying VALUE FAIR (continued) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED 62,004 61,661 32,157 – 343 – 62,004 29,750 2,407 32,157 65,581 – 41,670 23,911 65,581 $ 303,586 $ $ – $ 303,586 303,586 $ – $ 876,407 6,729,364 2,100,000 – 876,717 – 2,274,390 – 6,935,970 6,935,970 – – 876,717 2,274,390 – 31,762 – 31,762 – 31,762 CARRYING VALUE 1 LEVEL LEVEL 2 LEVEL 3 TOTAL 6,945,731 7,139,624 6,882,802 – 256,822 NOTES TO THE INTERIM | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 3 6 D
d 2019 d FAIR VALUE OF FINANCIAL INSTRUMENTS INSTRUMENTS OF FINANCIAL VALUE FAIR n i . M 31, 2020 G I _ 3 0 G N E NOTE 13 IGM FINANCIAL INC. FIRST DECEMBER 31, MARCH There were no significant transfers between Level 1 and Level 2 in the first quarter of 2020 and 2019. There were no significant transfers between Level 1 and Level 2 in the first quarter of Financial assets recorded at fair value FVTOCI investments Other – 301,196 $ $ – $ 301,196 301,196 $ – $ Financial assets recorded at fair value investments Other FVTOCI –
Level 3 assets and liabilities include investments with little or no trading activity valued using broker-dealer quotes, loans, valued using broker-dealer little or no trading activity investments with and liabilities include Level 3 assets consist o instruments. Derivative financial instruments securitization entities and derivative financial assets, obligations to whereby the Company a swap entered into under the CMB Program swaps which represent the component of reinvestment account principal. Fair va returns on the reinvestment of repaid mortgage Mortgage Bonds and receives investment pays coupons on Canada is determined by discounting the projected cashflows of the swaps. The notional amount, which is an input used to determine the The notional amount, which is an input the projected cashflows of the swaps. is determined by discounting on historical prepaym prepayment rate of 15% which is based is determined using an average unobservable fair value of the swap, amount of the swap. rate increases (decreases) the notional (decrease) in the assumed mortgage prepayment patterns. An increase including thei of financial assets and financial liabilities, the carrying amounts and fair values The following table presents fair value hierarchy. The table distinguishes between those financial instruments recorded at fair value and those recorded at instruments recorded at fair value and table distinguishes between those financial fair value hierarchy. The and other receivabl include cash and cash equivalents, accounts approximation of fair value. These items amount is a reasonable and accrued liabilities and certain other financial liabilities. certain other financial assets, accounts payable cost. The table also excludes fair value information for financial assets and financial liabilities not measured at fair value assets and financial liabilities not measured fair value information for financial cost. The table also excludes debt to securitization entities Obligations Long-term FVTPL instruments – financial Derivative cost Financial assets recorded at amortized cost Amortized Loans – instruments financial 15,204 Financial liabilities recorded at fair value entities certificates Derivative securitization and Financial liabilities recorded at amortized cost – to Deposits 10,762 debt Obligations 4,442 6,913,636 Long-term 17,193 15,204 7,198,043 56,166 – 55,603 7,273,763 – 6,907,743 – 366,020 11,845 6,996,953 584,331 6,996,953 5,348 – – 17,193 563 – 584,662 56,166 2,100,000 – 584,662 2,453,564 – 2,453,564 – Deposits and certificates Financial liabilities recorded at amortized cost and Deposits Loans FVTPL instruments – financial Derivative Financial assets recorded at amortized cost cost Loans Amortized – instruments Financial liabilities recorded at fair value financial Derivative – FVTPL – _ 1 T A U Q _ 66 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D63 PPFC_2020_QUAT1_ENG03_IGM.indd D64 F C
_ PART C 2
0 IGM FINANCIAL INC. 2 0 _ Q U Number ofcommonshares Netearningsavailabletocommonshareholders egtdaeaenme fcmo hrsottnig Excludes2,025thousandsharesforthethreemonthsendedMarch31,2020(2019–3,013thousand)relatedtooutstandingsto (1) Diluted Basic (150,141) Add:Potentialexerciseofoutstanding stockoptions $ Weightedaveragenumberofcommon sharesoutstanding – $ Perpetual 17,891 preferred Net share $ earnings dividends Earnings (8,251) $ – $ 372,396 ReclassificationofinvestmentinPersonal CapitalfromOtherinvestments(FVTOCI)toInvestmentinassociates(equitymeth (2) $ IncludedinNetinvestmentincometheConsolidatedStatementsofEarnings. (1) –FVTOCI Other investments instruments,net Derivative financial – FVTPL – FVTOCI Other investments JANUARY BALANCE The followingtableprovidesasummaryofchangesinLevel3assetsandliabilitiesmeasuredatfairvalueonrecurringbasis INCLUDED 1 (LOSSES) GAINS NET IN OTHER GAINS INCLUDED EARNINGS COMPREHENSIVE PURCHASES (LOSSES) IN ntuet,nt ,9 (,4) (7) 0 – (5,526) – 304 (973) – (9,148) 619 4,899 – – – – instruments,net Derivative financial 67 552 – FVTPL Earnings percommonshare Average numberofcommonsharesoutstanding–Dilutedbasis MARCH MARCH NOTE 14 NOTE 13 A T 1 _ E C N 31, 2019 G 31, 2020 0 64 3 _ I EARNINGSPERCOMMON SHARE FAIR VALUE OFFINANCIALINSTRUMENTS G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n d d
D 6 4 IGM FINANCIALINC.FIRST
(in thousands)
(in dollars) 0,9 –$230$ –$ –$ 303,586 –$ –$ –$ 2,390 $ $ 301,196 $ 96 (178 5 14 – (21,504) (164) 956 – (906) (21,718) 6 20 343 – – – – (220) 563 QUARTER REPORT (1)
(1) INCOME ISSUANCES SETTLEMENTS 2020 (continued) | NOTESTOTHEINTERIM AND TRANSFERS IN BALANCE
CONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS od). ck optionsthatwereanti-dilutive. THREEMONTHSENDEDMARCH31 $ 160,876 $ 0.68 $ 0.68 $ 160,876 238,316 238,302 (U) MARCH31 (OUT) 2020 14 – $ 167,503 $ 2,213 $ 0.70 0.70 $ $ 169,716 $ 240,941 – 240,941 2019 (2) $ 231,895 . 22020-05-11 1:01PM 0 2 0 - 67 0 5 - 1 1
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65 C nomic t on the CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED NOTES TO THE INTERIM | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 5 6 D
d d SEGMENTED INFORMATION SEGMENTED COVID-19 n i . M G I _ 3 0 G N E NOTE 16 NOTE 15 IGM FINANCIAL INC. FIRST significant volatility and weakness in global equity markets and material disruption to businesses globally resulting in an eco material disruption to businesses globally weakness in global equity markets and significant volatility and designed to stabilize monetary and fiscal interventions and central banks have reacted with significant slowdown. Governments economic conditions. moving substantially a result of these events, which has included its business continuity plan as a The Company has implemented of its investment funds. It also earns fee revenues from the provision of brokerage distribution, management and administration The Company’s reportable segments are: • IG Wealth Management Investments • Mackenzie Other and • Corporate financial reporting and performance measurement. These segments reflect the Company’s internal in the conduct of its core business activities which are primarily related to the IG Wealth Management earns fee-based revenues Governments worldwide have enacted emergency measures to combat the spread of a novel strain of coronavirus (COVID-19). of coronavirus (COVID-19). spread of a novel strain to combat the emergency measures worldwide have enacted Governments distancing, have ca self-imposed quarantine periods and social include the implementation of travel bans, These measures, which infrastructure. the Company’s information technology to work from home and further supporting employees and consultants and central bank at this time, as is the efficacy of the government of the COVID-19 pandemic is unknown The duration and impact and the impac length and severity of these developments it is not possible to reliably estimate the interventions. As a result, subsidiaries in future periods. of the Corporation and its operating financial results and condition banking products. In addition, IG Wealth Management earns intermediary revenues services and the distribution of insurance and activities and from the assets funded by deposit and certificate products. primarily from mortgage banking and servicing from services it provides as fund manager to its investment funds and as investm Mackenzie Investments earns fee-based revenues advisor to sub-advisory and institutional accounts. Planning Counsel, equity income from its investment in Lifeco, China AMC and Personal Corporate and Other includes Investment e unallocated investments, other income, and also includes consolidation elimination Capital (Note 6), net investment income on _ 1 T A U Q _ 68 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D65 PPFC_2020_QUAT1_ENG03_IGM.indd D66 F C
_ PART C 2
0 IGM FINANCIAL INC. 2 0 _ Q U annsbfr noetxs Total assets Goodwill Identifiable assets Net earningsavailabletocommonshareholders Income Earnings beforeincometaxes taxes Cmiso Interestexpenseincludesinterestonlong-termdebtandleases. (1) Interest expense Earnings beforeundernoted Non-commission Commission Expenses Proportionateshareofassociates’earnings Netinvestmentincomeandother Distribution fees Administration Managementandadvisoryfees fees Revenues 2020 THREE MONTHSENDEDMARCH 31 NOTE 16 A T 1 _ E C N G 0 66 3 _ I SEGMENTED INFORMATION G POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 M . i n (1) d d
D 6 6 IGM FINANCIALINC.FIRST QUARTER REPORT (continued) 2020 | NOTESTOTHEINTERIM AAEETIVSMNS N TE TOTAL AND MANAGEMENT INVESTMENTS OTHER ,5,0 $23948 ,7,5 $15,552,526 $3,372,350 $2,329,468 2,660,267 $ 9,850,708 143,906 $ 12,892,259 $3,228,444 1,168,580 1,347,781 $1,160,888 $ 8,502,927 7,2 3,0 2,8 236,217 27,081 35,709$ $ 173,427 $ 88,570 48,394 – 1,481 8,713 38,695 (2,756) – 72,774 $562,079 17,967 24,874 $ 3,529 $176,007 4,235 $ 368,105 9,486 101,883 20,045 20,045 GWAT MCEZE CORPORATE MACKENZIE IG WEALTH 1,6 6,9 709 545,846 67,089 163,897 275,862 314,860 22,024 88,474 269,984 45,065 165,364 75,423 149,496 782,063 94,170 199,606 488,287 CONDENSEDCONSOLIDATEDFINANCIALSTATEMENTS $ 160,876 208,910 48,034 27,307 22020-05-11 1:01PM 0 2 0 - 69 0 5 - 1 1
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IGM FINANCIAL INC. 1 1 - 5 0 - 0 2 0 22020-05-11 1:01 PM 67 C IG WEALTH MACKENZIE CORPORATE MANAGEMENT INVESTMENTS AND OTHER MANAGEMENT INVESTMENTS AND TOTAL 483,252 197,168 108,660 789,080 108,660 197,168 483,252 549,104 161,238 67,956 319,910 1,347,781 1,168,580 143,906 2,660,267 1,168,580 143,906 1,347,781 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED (continued) NOTES TO THE INTERIM | 2020 2020 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER QUARTER REPORT 7 25,216 6 (1) D
d d SEGMENTED INFORMATION INFORMATION SEGMENTED n i . M G I _ 3 0 G N E NOTE 16 IGM FINANCIAL INC. FIRST THREE MONTHS ENDED MARCH 31 31 THREE MONTHS ENDED MARCH (1) Interest expense includes interest on long-term debt and interest on leases. 2019 fees advisory fees and Revenues Management Administration fees Distribution Net investment income and other earnings Proportionate share of associates’ Expenses Commission Non-commission undernoted 358,153 $ $ 168,278 $ before 18,793 $ 545,224 Earnings 101,699 Interest expense 4,478 23,272 73,949 – 10,038 41,112 1,439 46,723 89,274 4,179 – 163,342 $ $ 35,930 $ 40,704 6,016 239,976 32,650 162,926 156,984 88,790 72,448 22,722 274,438 20,233 45,234 274,666 32,650 Total assets Total 15,970,222 3,204,531 $ 2,352,221 $ 10,413,470 $ $ Perpetual preferred share dividends 2,213 dividends share taxes earnings preferred Earnings before income taxes Income Net 45,044 Perpetual 169,716 Net earnings available to common shareholders assets Identifiable Goodwill 13,309,955 3,060,625 1,183,641 9,065,689 $ 167,503 214,760 _ 1 T A U Q _ 70 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG03_IGM.indd D67 Page intentionally left blank.
C 68 POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020
PPFC_2020_QUAT1_ENG03_IGM.inddFC_2020_QUAT1_ENG03_IGM.indd D68D68 22020-05-11020-05-11 1:011:01 PMPM M A
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PARGESA HOLDING SA 4 1 - 5 0 - 0 2 0 22020-05-14 9:16 AM 1 D nancial results results nancial of Pargesa Holding SA as issued by Pargesa Holding SA. Pargesa by as issued Holding SA of Pargesa POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER PART D PARGESA HOLDING SA HOLDING PARGESA The attached document discloses information relating to the fi to relating attached document discloses information The 1 E
d d n i . R A P _ 4 0 G N E _ 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG04_PAR.indd E1 PPFC_2020_QUAT1_ENG04_PAR.indd E2 F C
_ PART D 2
0 PARGESA HOLDING SA 2 0 _ Q U number of large European companies. Switzerland and its shares are listed on the Swiss Exchange (SIX: PARG). The Pargesa group holds interests in a limited group’s parent company, representing 75.4% of the voting rights in the company. Pargesa has its head office in Geneva, [e] ӧѴӨ following: in the investments and which islisted on the Euronext Exchange (EBR: GBLB). an interest in Groupe Bruxelles Lambert (GBL), aholdingPargesa holds company whose head office is in Brussels, Belgium, value Estimated [d] investment Comprising funds, valued at shareholdings fair value. in alternative [c] (and of economic interest), taking into of account voting the rights suspended voting rights related to GBLtreasury 51.9% sha [b] shows the operating companies of the portfolio The andSienna chart Capital. The percentages repr [a] 31, 2020 at theMarch group’s structure below reflects chart organization The Pargesa the (Pargesa), SA Holding Pargesa in interest 55.5% a held 2020, 31, March at that, company Netherlands-based N.V., a Power Financial Corporation and Parjointco the Frère Group of Charleroi, Belgium, each hold a 50.0% interest in SA Holding Pargesa PRIVATELY HELD PUBLICLY LISTED A T Operating companies (listed investments and private assets) at March 31, 2020 at fair value fair at 2020 31, March Operating companies (listedinvestments andprivate assets) at this report. this 1 In accordance with thevaluation principles described in thede _ E D N process outsourcing customer business and experience of provider – Webhelp aggregates concrete and cement, – LHN) HOLN andLafargeHolcim EPA: (SIX: wines and spirits – RI) Pernod Ricard (EPA: and design sportswear of distribution – ADS) (XETR: adidas testing, certification inspection and – SGSN) (SIX: SGS solutions mineral-based for specialty – NK) (EPA: Imerys industry G 0 2 4 Imerys _ POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 P A R 54.1% . i n [1] d in millions of euros at March 31, 2020. 2020. 31, March at euros of millions in d
E 2 SGS 18.9% adidas 6.8% Pernod Ricard 7.5% finitionasset of net valuein theglossary further in this repo Lafarge Holcim 7.6% P €14,187 a GBL r g
50.0% e tMrh3,22,GLsportfoliomainly was comprised of 31,2020, GBL’s At March
s Umicore a [e] [1] , [b] expressed in millions of euros. of millions in expressed 18.0% aqe operation regional leisureof parks – Parques hygiene products disposable – ONTEX) Ontex (EBR: supplier of equipment and project – G1A) GEA (XETR: technology materials and recycling of – UMI) Umicore (EBR: primarily in the food and beverage sectors beverageand food the in primarily management range awide for of processing industries precious metals esent the total interest percentage as defined in the glossary further in in further glossary the in defined as percentage interest total the esent GEA [a] 8.5% : Ontex 20.0% res. Webhelp rt. 63.7% Capital Sienna Sienna €1,721 €1,721 Parques [c] [d] 23.0% 22020-05-14 9:16AM 0 2 0 - 0 5 - 1 4
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arch 2020 and the end of of end the 2020 and arch
% t the end of December 2019 – 2019 December of t the end ѶѴӗ Ѵӝѳ ѶѼѴ ѴѴѹ ѵѳѴѼ ѹӗѻѴѷ ѴѳӗѼѷѹ December lue. lue. managed by Sagard SAS. SAS. Sagard by managed
%
ѶѴӗ ѼѴ ѴӝѺ ѴѺѻ ѵѳѴѼ ѹӗѹѳѺ ѴѳӗѴѺѼ March
e a for total amount€771 of million. capital The gain
%
funds, which keep a minority stake in the new ownership ownership new the in stake a minority keep which funds, ѹ general meeting, approved the introduction of a double- a of introduction the approved meeting, general January 24, 2020, were executed at an average spot price price spot average an at executed were 2020, 24, January ѶѴӗ ѴӝѶ ѴѳѺ ѵѳѵѳ to Sagardto4, new the fund ѻӗѶѳѳ ѸӗѷѶѷ March
POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER [2] 3 E
[c] d d d r n i
. a R [b] g A a P _ voting right. On April 28, 2020, GBL’s shareholders, at its extraordinary extraordinary its at shareholders, GBL’s 2020, 28, April On in animal health, benefiting from a sustained organic growth and an ambitious build-up strategy. Sienna Capital has has Capital Sienna strategy. build-up ambitious an and growth organic a sustained from benefiting health, animal in 4 Sagard and 3 Sagard the through group the in reinvested structure of Ceva. of Ceva. structure with IFRS 9. At the closing of this transaction, GBL’s ownership in Total was reduced to 0.01%. GBL continued to receive receive to continued GBL 0.01%. to reduced was Total in ownership GBL’s transaction, this of closing the At 9. IFRS with repurchase of treasury shares. This authorization is valid until April 2021. As a result of purchases made under this this under made purchases of a result As 2021. April until valid is authorization This shares. treasury of repurchase against 2020 31, March at 51.9% at stands GBL in interest economic of percentage Pargesa’s 2020, in GBL by program 51.7% December at 2019. 31, shareholder since 2010. With €1.2 billion of sales in 2019, Ceva has become in a few years one of the worldwide leaders leaders worldwide the of one years few a in become has Ceva 2019, in of sales billion €1.2 With 2010. since shareholder generatedby these salesamounts to €411 million, impacting not GBL’s consolidated result net 2020, in accordance in On September 19, 2019,GBL’s board of directors approved a second envelope€250 of million allocated to the Von Finck family at a price of SF2,425 per share. Following this investment, GBL increased its stake in the capital of SGS SGS of capital the in stake its increased GBL investment, this Following share. per SF2,425 of price a at family Finck Von million. €3,033 at valued was SGS in investment total GBL’s 2020, 31, March On 18.9%. to 2019 of end the at 16.7% from In March and April 2019, GBL entered into forward sales related to 15.9 million Total shares (representing In Marchand April2019, GBL entered into forwardsales related to million 15.9 Total shares (representing In March 2020, Sienna Capital committed €150 million million €150 committed Capital Sienna 2020, March In S On February 4, 2020, GBL purchased €374 million of SGS shares by participating in a private placement by the the by placement private a in participating by shares SGS of million €374 purchased GBL 2020, 4, February On 0.6% of the capital). Those forward sales, with a maturity of maturity a with sales, forward Those capital). of the 0.6% shar per of €48.37 price forward average an and of €50.52 dividends on divested the sharesuntil maturity the date. Inperiod, same the 2 fund finalized Sagard the disposal the Ceva SantéAnimale of (“Ceva”), whichofa was it 4 0
see “Net asset value” section for details. details. for value” section “Net asset see December 2019 for net asset value, market capitalization and net debt. debt. net and market capitalization value, asset net for 2019 December G Sienna Capital: Listed investments: investments: Listed Pargesa Holding SA SA Holding Pargesa Sienna Capital’s activity for the period ended March 31, 2020 developed as follows: follows: as developed 2020 31, March ended period the for activity Capital’s Sienna At March of 2020, the end asset the net value Sienna of million Capital at was €1,721 million, compared with €1,785 ended the quarter with uncalled commitments of €508 million (€466 million December at 2019). 31, and assets alternative Capital’s Sienna in million €132 invested GBL 2020, 31, March year-to-date For 2019). 31, December N report. this of at the end found the glossary in are defined indicators performance The alternative millions of Swiss francs, except as otherwise noted] noted] otherwise as except francs, Swiss of millions E
ѵӨ _ SF72.9 million from private equity and other investment funds; this business unit underwent negative fair value adjustments. adjustments. value fair negative underwent unit business this funds; investment other and equity private from SF72.9 million for same the 2019. periodin The first2020of quarter results were primarily affected by negative the contribution of [ Loan to value [a] M of the end between and result, net consolidated the for 2019 March of the end and 2020 March of the end between Variation million SF91 to compared 2020, of months three first the for million SF6 was share) (group result net consolidated Pargesa’s Highlights Key Financial Data [in [unaudited] share) (group Consolidated net result Net asset value Market capitalization Net debt [b] a million SF532 to compared 2020, March of at the end SF344 million was debt net Pargesa’s debt; net GBL’s 50% of Including [c] va portfolio Pargesa’s (ii) to relative debt net direct Pargesa’s (i) of the basis on calculated is value ratio to The loan 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG04_PAR.indd E3 PPFC_2020_QUAT1_ENG04_PAR.indd E4 F C
_ PART D 2
0 PARGESA HOLDING SA 2 0 _ Q U reimbursements by the French tax authorities of withholding taxes which had been applied to Total and Engie dividends increase is due to the acquisition of SGS shares in February 2020, the higher dividend per share paid by SGS to GBL and versus SF100.1 million in 2019. This line item mainly comprises the net dividend recorded on SGS of SF115.0 million. The The dividends and interest from equity investments rose by was, however, partially offset by the decrease in Imerys’ operating income (-SF13 million) operating profit for the quarter (SF26 million), following the acquisition of this group by GBL at the end of 2019. The increas SF84.0 million in the corresponding quarter ofthe prior year. This change mainly results from the inclusion of Webhelp’s The IFRS operating profit rose by15.7% and amounted to SF97 average€/SF exchange rate Average number thousands] shares of [in shareholders toPargesa [SF] earnings per share attributable Basic A non-controlling interests to Attributable C from associates and jointIncome ventures Taxes and financial expensesincome Other Dividends and interest from equity investments O Other income and expenses expensesOperating Operating income [unau [in The simplified consolidated income statement in accordance with IFRS accounting standards is as follows: Accordance in IFRS with of Results Presentation Piolin II/Parques from January 1 to March 31, 2020, of SF16.4 million and the reduction in the contribution from the private the from private 1toMarch January SF16.4 contribution from inthe of and reduction the Piolin 31, 2020, million II/Parques The negative change in the income from associates and joint ventures mainly represents the negative contribution of funds. during 2019 primarily reflects, in 2020, the negative change in the fair value of private equity and other non-consolidated The decline of other financial income and expenses to a loss of -SF130.1 million for 2020, compared with +SF43.3 million quarter. the from second in come will starting dividends of the other The contribution rate. received between 2016 and 2017. These different elements more than compensated the decrease in the €/SF exchange date of the group’s results, therefore no group shar forto results the publicatio prior reported 2019 Q1 its not Parques had 31, 2019, March ended the For quarter activity. equity A o t p T millions of Swiss francs, except as otherwise noted] t n 1 r e Pargesa Holding SA i _ s r b E o dited] a u D N t l i i t G d n a 0 a g b 4 4 t
_ l e p POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 e P d r
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, 0 Ӷ Ӷ Ӷ Ӷ 22020-05-14 9:16 AM ѶѴ ѼѼ ѳӝѹ ӯѻӝѺ ӯѵӝѸ ѹ ѵѶӝѹ Ѹѳӝѷ ѴѴӝѳ ѻѸӝѹ Ѵѹӝѹ ѼѶӝѸ ѼѴӝѳ , қӾҚқ қӾқҚ қӾҚҡ ѵѳѴѼ 5 ѴӝѴѶѵ ѻѷ March D
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, Ӷ ѶѴ ѷӝѳ ѳӝѹ Ѻӝѵ ѳӝѴ ѹӝѴ ӯѻӝѴ ӯѸӝѴ ӯѹӝѸ ӯѷӝѺ Ѵѷӝѻ ѸѼӝѹ ѴѺӝѵ Ѵѳӝѻ ҚӾқҝ ҚӾҚҡ ѵѳѵѳ ӯѺѵӝѼ ѴӝѳѹѺ ѻѷӗѺѳѵ March th 1.132 in the same period in 2019, a decrease of 5.8%. 5.8%. of a period in decrease 2019, in th the 1.132 same in 2020 and in 2019 (please refer to the section “Highlights” “Highlights” section the to refer (please 2019 in and 2020 in
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o o o
u n d R i i i i t t t g [a] l A o b m i P u u u n c o r o i - - _ s t t b b b c 4 i i i n n n a r r r 0 n r i o t t t o o
G Pargesa Holding SA SA Holding Pargesa e t n n n C Imerys income II/Parques Piolin operating net of share Webhelp income share operating net of N income share net operating of SGS Total dividends Other Other C N p p e o o o o o E _ Operatingincome the for three first months2020 of was SF10.8 million, compared million SF93.5 to the for first three months Average number of shares [in thousands] [in of shares thousands] number Average rate exchange €/SF average report. this further in section dividends)" (net Shareholdings the "Non-Consolidated in comment [a] See the (loss). income net non-operating shareholdings' consolidated of share Pargesa's [b] March 31, year-to-date the For euros. in denominated are results whose group, GBL the from primarily comes income net The income Operating C [SF] per share C Net financial income expenses and taxes and expenses General O [SF] per share (loss) income Non-operating consolidated shareholdings from N [SF] per share C Results Financial Pargesa’s of Presentation Economic The presentationeconomicthe of result follows that it makes possible analyze composition the to group the of results noted] otherwise as except francs, Swiss of millions [in [unaudited] 2020, the average €/SF exchange rate was 1.067, compared wi compared 1.067, was rate exchange €/SF average the 2020, of 2019. The variation of -SF82.7 million was primarily driven by the increase of dividends (+SF11.3 million), reduced by the the by reduced million), (+SF11.3 dividends of increase by the driven primarily was million -SF82.7 of variation The of 2019. differently. follows: as analyzed be can 2020 31, March at result economic The for more details), Pargesa’s share of GBL’s earnings (excluding the portion attributable to non-controlling shareholders) stood SF12.9 million decrease in the contribution from the consolidated shareholdings and the SF83.9 million decrease in the the in decrease million SF83.9 the and shareholdings consolidated the from contribution the in decrease million SF12.9 contribution from privateequity other and investment funds. Furthermore, following the acquisition of treasury shares by GBL GBL by shares of treasury acquisition the following Furthermore, at 51.9% at March 31, 2020, compared with 51.0% at March 31, 2019. 2019. 31, March at 51.0% with compared 2020, 31, March at 51.9% at 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG04_PAR.indd E5 PPFC_2020_QUAT1_ENG04_PAR.indd E6 F C
_ PART D 2
0 PARGESA HOLDING SA 2 0 _ Q U compared with SF23.6 2019. of quarter first the in million SF23.6 with compared Pargesa’s share ofImerys’ net incomefromcurrent operations, in SF51.0 million in the first quarter of of 2019. quarter the first in million SF51.0 with compared of 2020, quarter the first million in was SF62.3 shareholdings non-consolidated from contribution The onward. quarter second the from recorded are from shareholdings other as dividends SGS, from year comes financial medical applications and packaging. was partially offset by the positive effect of pricing and cost-saving measures and resilient sales in the consumer markets, and (ii) to the negative impact ofthe deconsolidation of the automotive and iron and steel sectors and in the Asian and European markets, causing the group’s sales volumes to decrease withholding taxes which had been applied to Engie and Total dividends received between 2016 and 2017. 2020 of SGS shares and also from the increase of the dividend per share paid by SGS to GBL (SF80 compared with SF78 in The contribution from SGS came in at SF59.6 million in 2020, compared with SF50.4 million for the corresponding period the quarter of the first in recorded income to operating the contribution only Usually, by GBL. recorded dividends net of Including of 2020. quarter the first in million €49 to 2019 of -SF8.8 funds of million of consolidated the contribution particular in includes of 2020 quarter the first for contribution The negative change of SF83.9 million. was -SF72.9 from activities these contribution net of in quarter a the first million 2019, with +SF11.0 compared million, the of quarter In2020, first the fees. and management net of general expenses reported is and Capital, Sienna subsidiary its through GBL by held funds the from primarily comes funds investment other and equity private from contribution The Funds Investment Other and Equity from Private Contribution The contributions from SGS, Total, LafargeHolcim, Pernod Rica Non-Consolidated Shareholdings cont of Webhelp’s share Pargesa’s of 2020, quarter first the In Webhelp in 2019). period for the corresponding recognized was investment of this the result of share group (no million -€8.1 was For the three-month31, period ended2020, Pargesa’s March share Parques Imerys’ (fully consolidated) net income from Imerys Shareholdings Consolidated in 2019. The change of the contribution year-over-year results from the impact on the dividend ofthe acquisition in February The item Other mainly includes reimbursements ofSF7.2 mi the reflects the impact million of forward sales of of the shares first negative quarterof SF5.1 contribution of 2020 Total’s 2019, up 2.6%). of 2019). first quarter in yet contributed not had in 2020 (-SF2.9 million in the first quarter of 2019), as well as the change in fair value during the period of funds that are this companythis carried out by GBLin 2019, maturing Januaryin 2020. the significant deterioration, at the end of the quarter, in market conditions. conditions. in quarter, market of the the end at deterioration, significant the consolidated for -SF61.6 million (+SF14.2 million in the first quarter of 2019). This variation must be put into perspective wi A T 1 Pargesa Holding SA _ E D N G 0 6 4 _ POWER FINANCIALCORPORATION — FIRST QUARTER REPORT 2020 P A R . i n d d
E 6
(full consolidation or equity accounting) equity or consolidation (full current operations (group share) decreasedmillion infrom €75 the first quarter (net dividends) (net This lower performance is due(i) to weaker demand in the ribution to the operating income wasSF4.0 million, (Webhelp rd, adidas, Umicore, GEA, and Ontex represent Pargesa’s share the effect ofthe decline of the average €/SF exchange rate, North Americantalc subsidiaries Swiss francs, was SF14.8million in the first quarter of 2020 llion (Pargesa’s share) bythe French tax authorities of of Piolin II/Parques’of Piolin contribution to the operating income
. The impact of this decline not th , 22020-05-14 9:16AM 0 2 0 - 0 5 - 1 4
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PARGESA HOLDING SA 4 1 - 5 0 -
0 2 0 22020-05-14 9:16 AM 7 D ll asll its share in those recorded by GBL represented 20, compared with SF16.6 millioncompared20, thewith in SF16.6 first 2019. quarter of with -SF1.7 million in the first quarter of 2019; 2019; of quarter first the in million -SF1.7 with (group share) amounted to SF13.2 million in the first quarter of 2020 (compared (compared 2020 of quarter first the in million SF13.2 to amounted share) (group ques’ and Webhelp’s non-operating income. income. non-operating Webhelp’s and ques’
POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER 7 E
d d n i . R A P _ 4 0 G terms of Pargesa’s share. share. Pargesa’s of terms Pargesa’s share of realized and unrealized results recorded by GBL from trading activities (including dividends) and from from and dividends) (including activities trading from GBL by recorded results unrealized and realized of share Pargesa’s 2019; in million +SF9.1 with compared 2020, in million +SF0.1 of portfolio its managing in used derivatives in million in bonds exchangeable the +SF22.5 in embedded to implicitly instruments amounted derivative the of 2020 market to of marking the of impact The quarter first the in that 2019, September in GBL by issued shares LafargeHolcim Pargesa Holding SA SA Holding Pargesa we as by Pargesa recorded expenses and income Interest -SF2.6 million in the first quarter of 2020, compared 2020, of quarter first the in million -SF2.6 N E
_ Pargesa’s share of Imerys’, Piolin II/Par Piolin Imerys’, of share Pargesa’s has not been recorded in the income statement, but directly in shareholders’ equity. equity. shareholders’ in directly but statement, income the in recorded been has not Details of Imerys’ results can be found on its website. website. its on be found can results Imerys’ of Details It should noted be IFRS that, pursuant 9, the capitalof the forward 0.6%of to on 2020 gainGBL Total’sin sale realized by level) Pargesa’s at disposal on gain exchange foreign a (including share Pargesa’s in million SF321 to amounting capital, share The main items comprised in this line item were: were: item line this in comprised items main The of GBL. expenses, amounted to SF17.2 million in the first quarter of 20 of quarter first the in million SF17.2 to amounted expenses,
Net Asset Value Value Asset Net The table below provides detailed a viewof Pargesa’s asset net value flow-through (on a 2020.31, The net basis)Marchat in participation Pargesa’s (excluding Pargesa of liabilities and assets the hand, one on taking, by calculated is value asset GBL) and, on theother hand, Pargesa’s share in the valueof the portfolio, the net cashor net debt position and theother assets liabilities and TheGBL.of assetvalue net calculated is closing based on market values exchange and rates for the investment other and equity (private funds the for rates exchange closing and value fair the on and shareholdings, listed Parques. and Webhelp in investments unlisted the for and Capital Sienna of funds) Non-Operating Income (Loss) (Loss) Income Non-Operating Non-operating income (loss) fromconsolidated shareholdings of loss a to amounted companies operating in shareholdings consolidated from (loss) income Non-operating million the in same period 2019) in and includes million in first the 2020 quarter of (non-operatingloss SF2.5 of SF4.7 IncomeNet After taking these variousitems into account, economic net income (group share)for first the quarter 2020 of was 2019. 31, March at million SF91.0 to compared million, SF6.1 result this in included income net Imerys’ with SF21.1 million in the first quarter of 2019). General ExpensesTaxes and those of share its as well as taxes and expenses general own Pargesa’s represents item line taxes and expenses general The Expenses and FinancialIncome Net and income financial as other well as expenses, and income interest includes which expenses, and income financial Net 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG04_PAR.indd E7 PPFC_2020_QUAT1_ENG04_PAR.indd E8 F C
_ PART D 2
0 PARGESA HOLDING SA 2 0 _ Q U May 8 to June 8, 2020. Information on this subject can be viewed on Pargesa’s website. shares for each Pargesa bearer share. The offer, which is subject to certain restrictions, will beopen to acceptance from publicly held Pargesa bearer shares. Under the public exchange The board of directors of Pargesa unanimously recommended to Public offer of exchange for Pargesa bearer shares in public hands Subsequent Event The net asset value is published on a weekly basis on Pargesa’s website. This item also includes Pargesa’s in share themarket valueof GBL’s trading portfolio. [b] As defined in theglossary found furtherin this report. [a] exchange€/SF rate Share price Pargesa per share value asset Net N T O L otherwise noted] [in N per share atPargesa’s March net asset value per31, share 2020, wasa SF98.0 decrease of 24.2% compared with the net Pargesa’s share price stood at SF64.2 on March 31, 2020, compared on April 30, 2020. share per SF104.2 per share).asset value It stood per share at at the end of 2019 (SF129.2 The net asset value at March 31, 2020 is broken down as follows: down as follows: broken is 2020 31, at March asset value net The financial environment marked bythe uncertainty caused by the consequences of the Covid-19 pandemic. and an of economic context the in 2020, of beginning the since down 14.7% at SF68.7, closed price share the 30, 2020, April A i o e s e t T millions of Swiss francs, except as as except francs, Swiss of millions t Net cash (debt) Net cash treasury assetsGBL PargesaOther Parques Webhelp CapitalSienna Other Total Ontex GEA Imerys Umicore LafargeHolcim Pernod Ricard adidas SGS h t t t 1
a Pargesa Holding SA e
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[a] [a]
interest interest ѵѶӝ ѹѶӝѺ ѵѳ ѸѷӝѴ Ѵѻӝѳ Ѵѻӝ Total Total ѳӝѳ ѻӝѸ Ѻӝѹ Ѻ ѹӝѻ . . % Ѹ ѳ ѳ Ѽ
[a]
through of of interest interest Flow ѴѴӝѸ ѶѴӝѼ Ѵѳӝѳ ѵѺӝѴ ѳӝѳ ѷӝѶ Ѽӝѳ Ѷӝѻ Ѷӝѻ Ѷӝѷ Ѽӝ % Ѹ -
[a] [a] offer, minority shareholders of Pargesa will receive 0.93 GBL Čyѵӗѵѷѵӝѳ Share price Share price & currency & currency ԦѴѵѼӝѸ ԦѵѳѸӝѼ with SF80.5 at the end of a2019, decrease of 20.3%. At accept the public exchange offer of Parjointco for all all for Parjointco of offer exchange public the accept ČyѶѸӝѷ ԦѶѸӝѷ ԦѴѸӝѼ ԦѴѻӝѺ ԦѵѵӝѼ ԦѶѴӝѼ
through ѴӝѳѸѼ ѻӗѶѳѳ ѻӗѷѵѸ ѴӗѶѹѶ ѴӗѷѼѷ ѴӗѹѳѸ value ӯѶѷѷ Flow ҠҞӾҜ ңҢӾҚ ѵѴѼ Ѵѵѷ ѷѸѼ ѼѴѴ ѴѶѼ ѴѸѵ ѸѵѴ ѺѷѺ ѻѵѸ Ѻѷ [a ѹ Ѹ - ]
)
March March
Weighting ѶѴӗѵѳѵѳ of total of as a % as a % Ѵѳѳ ѴѳѴ ѴѴ Ѵѳ Ѵѹ Ѵѻ ѴѼ ӯѷ Ѷ Ѵ ѹ Ѵ ѵ ѵ ѹ Ѽ Ӷ Ӷ
)
December December ѶѴӗѵѳѴѼ ѴѳӗѼѷѹ ѴѴӗѵѴѵ through ѴӝѳѻѸ қҜңӾҜ ѴӗѳѷѶ ѴӗѵѸѶ ѴӗѺѵѴ ѵӗѴѷѷ ѴӗѹѺѼ ӯѸѶѵ Flow ҢҚӾҟ value value ѵѹѹ Ѵѵѻ ѷѺѳ ѼѹѼ ѷѶѶ ѴѹѺ ѵѷѹ ѻѺѻ Ѵѻ ѹѶ -
)
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PARGESA HOLDING SA 4 1 - 5 0 - 0 2 0 22020-05-14 9:16 AM 9 D low. The definition of APMs are defined in the glossary be glossary in the defined are
n the non-operating income ofthe income GBL). non-operating The non-operating income generated by the holding companies (Pargesa and its in and share (Pargesa holding companies the by generated income The non-operating operating income (as described above) of the investments consolidated in the group group the in consolidated investments of the above) described (as income operating using accounting equity presented(Imerys, or Webhelpfinancial 2019) since statements shareholdings; from non-consolidated the (Piolin net dividends received II/Parques) the and funds (as together equityprivate other investment grouped from and The net contribution Capital); ofGBL titleby under the Sienna using accounting equity presented(Imerys, or Webhelpfinancial 2019) since statements (Piolin II/Parques); and The contribution from the investment portfolio, comprised of Pargesa’s share in share the of Pargesa’s portfolio, comprised from investment the The contribution and general financial the of expenses incomeTheimpact gross and financial gross net companies; holding of the and expenses taxes disposalsinvestment from impairment of and GBL,The gains or results losses the trading fundsincluded thatinvestment are equity other private and provisions within made the of this category model business of the the nature considering income operating thewithin of investments. group the in consolidated investments the of income non-operating the in share group The o i t i
n The operating income includes the following items: items: the following includes income operating The The income includes: non-operating i f e
Comprises the parent company Pargesa and its subsidiaries (including GBL), whose main activity is is activity main whose GBL), (including subsidiaries its and Pargesa company parent the Comprises companies. operating the consolidated as well as non-consolidated and investments to manage Pargesa by directly held debt) gross less cash (gross debt net (i) on based calculated is ratio This applied portfolio to are relative the (ii) methods valuation The to portfolio of Pargesa. the value asset value. identicalused for net the to those in its result, price stock and change an withis, the value alongThe in Pargesa’s net asset evolution group. of the performance the assessing for criterion important fair of gross cashbyvalue to obtained adding reference the isThe a conventional net asset value debt. gross deducting and portfolio investment the and is liabilitiesThehand, on assets of based, Pargesa, the on one calculation asset value net the D In addition accounting with in IFRS the prepared to accordance financial statements the to provide consistent of its results presentation economic publishesan standards, Pargesa of thedisclosureofits the term over of each and, long contribution investments the separately, share). (group to the results consolidated contribution holding companies’ of breakdown the provideispresentation toof an analytical economic purposeThe the one on discloses, presentation This origin. by their of Pargesa (group share) results consolidated on the and, (Pargesa share) investments of the components various of the thehand, contribution its of and (Pargesa share fromholding companies of contribution theotherhand, the activities the GBL’s holding activities). results. of the The elements and non-operating the operating between distinguishes This analysis net consolidated to the corresponds income the non-operating and income of operating sum the with the exclusion of its investment in GBL and, on the other hand, on Pargesa’s flow-through flow-through Pargesa’s on hand, other the on and, GBL in investment its of exclusion the with andinterest liabilitiesof other net cash assets and of debt, net in the the investments, or value the exchange foreign prices and closing market on the based isGBL. net asset value The calculated forunlisted rates foreign closing exchange fairrates for and usinginvestments the value and listed (Siennafunds Capital). investment funds equity other private investments, and and profit attributable to Pargesa shareholders (group share) as presented in financial consolidated (groupprofit as presented the shareholders to share) attributable Pargesa statements. POWER FINANCIAL CORPORATION — FIRST QUARTER REPORT 2020 2020 REPORT QUARTER FINANCIAL CORPORATION — FIRST POWER
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n r d l 0 t o e a t o e G Pargesa Holding SA SA Holding Pargesa c l o N N H L E A E _ shouldallow readers financial of statementsunderstandto their composition to and relateIFRS them to financial statements. Glossary Inorder to supplement mandatory the financial measuresIFRS the of accounting standards, Pargesa uses financial which (APMs), Measures Performance Alternative called indicators 1 T A U Q _ 0 2 0 2 _ C F PPFC_2020_QUAT1_ENG04_PAR.indd E9 PPFC_2020_QUAT1_ENG04_PAR.indd E10 F C
_ PART D 2
0 PARGESA HOLDING SA 2 0 _ Q U
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their number.their directly by Pargesa by or, directly through indirectly in investmentsother GBL, consolidated whether or not; Total interest percentage has the meaning the of percentage of the capital of investment held under review; by Pargesadirectly calculated the on totalbased number sharesof atthe end issued the of period Direct interest thepercentage meaning has the of percentage the capital investmentof of held the related and capital voting rights: Pargesa’s external communication different contains percentages the describing share of holding portfolio companies. holding companies of the group used for direct or indirect investment into the investment accounting equity acommercialmethod, that Excluded have this from activity. measure arethe The companiesoperating arethe the controlled companies group by or the using presented available resources structurethe to strategy. financial and implementown its financial cashThe and debt indicators are the presented Holdingfor segment Pargesa toreflect group’s atthe valued book equivalents). or is valuemarket (for certaincash cash cash includes and the Gross Holding equivalents segment. (trading assets, the cash of etc.) It exchangeable bonds bonds, and debt),bank valuedattheir nominal value. repayment the of Holding liabilities segment includes and allthe debt Gross financial (convertible The net cash follows: valuation to summarized above,The principles the applied portfolio, areexplained as fully more D considering Pargesa’sconsidering direct ratio interest percentageThis multiplying in is GBL. by calculated the investments the in holds Pargesa percentage the represents flow-through interestPercentage of end the the of underperiod review; consolidated intermediate, entities calculated and the on is based rights voting that total existed at Percentage of voting rights meaning has the the of percentage anddirectly held indirectly via shareholdings. a of distribution company. Itreflects the group’s “financial” or “monetary” rights subsidiaries in its and materializ Economic interest percentage entitlement the of profit fraction is lossthe that quota) generally (or SF20, the registeredSF20, the shares with valuea nominal SF2are of one-tenth of atafactor included of Furthermore, the netassetvalue share expressed is per per bearer withshare anominal value of percentage that Pargesa (50%). in GBL held each of componentinterest the of above, netassetvalue, described the interest direct by Pargesa’s direct account interest Thispercentage calculated in valueGBL. is theby multiplying the investments,of treasury shares that debt netcash/net Pargesa while and taking holds into the netassetvalue onIn addition, or aflow-through basis flow-through value represents value the interest held by GBL in each in Pargesa interest interest bythe by percentageheld GBL direct that investment in holds GBL (50%). (50%). GBL
e f i debt. where netcash applicable,Capital’s or, from which Sienna deducted is external Capital’s net its investments, marked to market, as determined by fund managers, to which is added Sienna Regarding the Sienna theof portfolio by held valuation GBL, Capital, the corresponds to sum of Investments unlisted companiesin and (Webhelp Piolin II/Parques) arevalued at value;fair conversion/exercise price; value shares of the underlying any commitments themade group by capped attheis companies listed Investments treasury and in shares arevalued closing atthe However,price. n i t i o n
es with the dividend distribution and, ifapplicable, of the liquidation surplus/(deficit)
o r ,
where applicable, composed is netdebt the of gross gross and the cash debt.
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A M Corporate Information
POWER FINANCIAL CORPORATION
751 Victoria Square Montréal, Québec, Canada H2Y 2J3 514-286-7430 1-800-890-7440
161 Bay Street, Suite 5000 Toronto, Ontario, Canada M5J 2S1 416-607-2250 www.powerfinancial.com
This document is also available on the Corporation’s website Transfer Agent and Registrar and on SEDAR at www.sedar.com. Computershare Investor Services Inc.
Offices in: Stock Listings Montréal, Québec; Toronto, Ontario Power Financial Corporation’s First Preferred Shares are listed www.investorcentre.com on the Toronto Stock Exchange: Series A: PWF.PR.A Series O: PWF.PR.O Shareholder Services Series D: PWF.PR.E Series P: PWF.PR.P Series E: PWF.PR.F Series Q: PWF.PR.Q Shareholders with questions relating to the payment of dividends, Series F: PWF.PR.G Series R: PWF.PR.R change of address, share certificates, direct registration and estate Series H: PWF.PR.H Series S: PWF.PR.S transfers should contact the Transfer Agent:
Series I: PWF.PR.I Series T: PWF.PR.T Computershare Investor Services Inc. Series K: PWF.PR.K Series V: PWF.PR.Z Shareholder Services Series L: PWF.PR.L 100 University Avenue, 8th Floor Toronto, Ontario, Canada M5J 2Y1 Telephone: 1-800-564-6253 (toll-free in Canada and the U.S.) or 514-982-7555 www.computershare.com
FIRST QUARTER REPORT 2020 POWER FINANCIAL CORPORATION PRINTED IN CANADA IN PRINTED