Financial Corporation Limited ANNUAL REPORT 2014 46th ANNUAL REPORT The Year at a Glance (Thousands of dollars) 2014 2013 Net Premiums (1) $ 867,493 $ 821,544 Total Revenues (1) $ 2,391,237 $ 1,644,896 Shareholders' Net Operating Income (1) (2) $ 127,112 $ 140,591 Shareholders' Net Income $ 394,530 $ 907,679 Shareholders' Comprehensive Income $ 428,032 $ 871,577 Changes in E-L Financial Shareholders' Equity: Beginning of the year $ 3,752,880 $ 3,245,697 Comprehensive income: Net income 394,530 907,679 Other comprehensive income (loss) 33,502 (36,102) 428,032 871,577 Dividends (17,560) (319,016) Reclassification of AOCI from discontinued operations — (46,816) Other 2,876 1,438 End of the year $ 4,166,228 $ 3,752,880 Per Share Information: (3) Net Operating Income (1) (2) $ 28.41 $ 31.84 Net Income $ 96.51 $ 227.18 Comprehensive Income $ 105.04 $ 217.99 Net Equity Value (2) $ 970.65 $ 872.45 (1) Continuing operations (2) See Management's Discussion and Analysis for use of non-GAAP measures. (3) All earnings per share figures are net of dividends paid on First Preference shares. ANNUAL MEETING OF SHAREHOLDERS The Annual Meeting of Shareholders will be held at 11:30 a.m. on Tuesday May 12, 2015, 4th floor meeting room, 165 University Avenue, Toronto. All shareholders are invited to attend. E-L Financial Corporation Limited 1 Board of Directors J. Christopher Barron, Corporate Director James F. Billett, President, J.F. Billett Holdings Ltd. Michael J. Cooper, President and Chief Executive Officer, Dream Unlimited Corporation William J. Corcoran, LL.B., Vice-Chairman, Jarislowsky Fraser Limited Duncan N.R. Jackman, Chairman, President and Chief Executive Officer, E-L Financial Corporation Limited The Honourable Henry N.R. Jackman, Honorary Chairman, The Empire Life Insurance Company R.B. Matthews, Chairman, Longview Asset Management Ltd. Clive P. Rowe, Partner, Oskie Capital Mark M. Taylor, Executive Vice-President and Chief Financial Officer, E-L Financial Corporation Limited Honorary Director The Right Honourable John N. Turner Officers Chairman, President and Chief Executive Officer Duncan N.R. Jackman Executive Vice-President Mark M. Taylor Vice-President, General Counsel and Corporate Secretary Richard B. Carty Treasurer Susan C. Clifford 2 E-L Financial Corporation Limited MANAGEMENT’S DISCUSSION & ANALYSIS REPORT ON E-L FINANCIAL CORPORATION LIMITED This document has been prepared for the purpose of providing Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations for the years ended December 31, 2014 and 2013 for E-L Financial Corporation Limited (“E-L Financial” or the “Company”). This MD&A should be read in conjunction with the December 31, 2014 year end consolidated financial statements and the notes, which form part of the E-L Financial Corporation Limited 2014 Annual Report dated March 5, 2015. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as set out in the Handbook of the Chartered Professional Accountants of Canada. Unless otherwise noted, both the consolidated financial statements and this MD&A are expressed in Canadian dollars. On November 1, 2013, the Company completed the sale of its formerly wholly-owned subsidiary, The Dominion of Canada General Insurance Company (“The Dominion”) to The Travelers Companies, Inc. for gross proceeds of $1.08 billion. The financial performance and cash flows of The Dominion have been presented as a discontinued operation in the Company’s consolidated statements of income, consolidated statements of comprehensive income and consolidated statements of cash flows for 2013. This MD&A contains certain forward-looking statements that are subject to risks and uncertainties that may cause the results or events mentioned in this discussion to differ materially from actual results or events. No assurance can be given that results, performance or achievement expressed in, or implied by, any forward- looking statements within this discussion will occur, or if they do, that any benefits may be derived from them. Unless otherwise stated, all per share amounts are based on the average number of Common Shares and Series A Convertible Preference Shares outstanding for the period, adjusted for the Company’s proportionate interest in its own common shares held indirectly through investments in associates (“Adjusted Common Shares”). Additional information relating to the Company, including its Annual Information Form, may be found at www.sedar.com. Use of non-GAAP measures The MD&A contains reference to net operating income, net operating income per share and net equity value per share. These terms do not have any standardized meaning according to IFRS and therefore may not be comparable to similar measures presented by other companies. The Company believes that these measures provide information useful to its shareholders in evaluating the Company’s financial results. Net operating income is net income excluding realized gain (loss) on available for sale investments (“AFS”) including impairment write downs, the Company’s share of income (loss) from associates and the fair value change in fair value through profit or loss (“FVTPL”) investments in the E-L Corporate portfolio. Net operating income per share is net operating income less preferred dividends divided by the average number of Adjusted Common Shares outstanding. Net equity value per share is described and reconciled to shareholders’ equity on page 6. E-L Financial Corporation Limited 3 MANAGEMENT’S DISCUSSION & ANALYSIS The Company E-L Financial operates as an investment and insurance holding company. The Empire Life Insurance Company (“Empire” or “Empire Life”) (80.5% owned) underwrites life and health insurance policies and provides segregated funds, mutual funds and annuity products. Empire Life is consolidated into E-L Financial for financial reporting purposes. The Dominion (100% owned prior to the sale on November 1, 2013) has been reported as discontinued operations. The Company also owns investments in stocks and fixed income securities directly, and indirectly, through pooled funds, closed-end investment companies and other investment companies (“E-L Corporate”). Included within E-L Corporate are the Company’s significant investments in United Corporations Limited ("United"), Economic Investment Trust Limited (“Economic”) and Algoma Central Corporation (“Algoma”). Economic and United are both closed-end investment companies and Algoma is a shipping company. Economic and Algoma are reported as investments in associates and are accounted for using the equity method. United (51% owned) is consolidated into E-L Financial for financial reporting purposes. The Company’s strategy is to accumulate shareholder value through long-term capital appreciation and dividend income from its investments. E-L Financial oversees its investments through representation on the boards of directors of the subsidiaries and the other companies in which the Company has significant shareholdings. Review of results attributable to shareholders of E-L Financial The following tables summarize the results of the Company’s business segments (all figures are net of tax): December 31, 2014 (thousands of dollars) E-L Corporate Empire Life Total Net operating income $ 51,109 $ 76,003 $ 127,112 Realized gain on available for sale investments including impairment write downs 13,518 3,455 16,973 Share of income of associates 20,665 — 20,665 E-L Corporate's fair value change in fair value through profit or loss investments 229,780 229,780 Net income 315,072 79,458 394,530 Other comprehensive income ("OCI") 7,548 25,954 33,502 Comprehensive income $ 322,620 $ 105,412 $ 428,032 December 31, 2013 (thousands of dollars) E-L Corporate Empire Life Total Net operating income $ 47,913 $ 92,678 $ 140,591 Realized gain (loss) on available for sale investments including impairment write downs 11,061 (2,459) 8,602 Share of income of associates 51,337 — 51,337 E-L Corporate's fair value change in fair value through profit or loss investments 396,023 396,023 Net income from continuing operations 506,334 90,219 596,553 Net income from discontinued operations — — 311,126 Net income 506,334 90,219 907,679 OCI (OCL) from continuing operations 32,834 (5,235) 27,599 OCL from discontinued operations — — (63,701) Total OCI (OCL) 32,834 (5,235) (36,102) Comprehensive income $ 539,168 $ 84,984 $ 871,577 4 E-L Financial Corporation Limited MANAGEMENT’S DISCUSSION & ANALYSIS Net operating income from continuing operations E-L Financial earned consolidated net operating income from continuing operations of $127.1 million or $28.41 per share compared with $140.6 million or $31.84 per share in 2013. The $13.5 million decrease in net operating income in 2014 versus 2013 is principally due to the unfavourable impact of long-term interest rate movements relating to Empire Life's Individual Insurance product line in 2014 compared to the favourable movements in 2013. The decline in operating income was partially offset by a $3.2 million increase in E-L Corporate's operating income, resulting from increased dividend income from the deployment of $650 million into equities from the proceeds on the sale of The Dominion in 2013. Net income E-L Financial earned consolidated net income from continuing operations of $394.5 million in 2014 compared with $596.6 million in 2013. The $202.1 million decline in net income is primarily attributed to a decline in E- L Corporate’s income from FVTPL investments which decreased from $396.0 million in 2013 to $229.8 million in 2014, reflecting the more favourable impact of global stock market movements in the prior year. On November 1, 2013, the Company completed the sale of its formerly wholly-owned subsidiary, The Dominion, to The Travelers Companies, Inc. for gross proceeds of $1.08 billion, resulting in an after-tax gain of $266.4 million. This gain combined with The Dominion’s ten month earnings for 2013 of $44.7 million resulted in $311.1 million earned from discontinued operations.