first quarter report - power corporation du canada · 2020-02-13 · page intentionally left blank....

First Q

uarter R

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First Quarter Report F O R T H E P E R I O D E N D E D M A R C H 3 1 , 2 0 1 5

1

TO THE SHAREHOLDERS

Power Corporation of Canada’s operating earnings attributable to participating shareholders (a non-IFRS inancial measure) for the quarter ended March , were $ million or $ . per share, compared with $ million or $ . per share in .

Other items, not included in operating earnings, were a contribution of $ million mainly comprised of the Corporation’s share of the gain realized by Groupe Bruxelles Lambert (GBL) on the sale of part of its interest in Total SA (Total). In the corresponding period of , other items represented a contribution of $ million.

Net earnings attributable to participating shareholders were $ million or $ . per share, compared with $ million or $ . per share in .

R E S U L T S O F P O W E R F I N A N C I A L C O R P O R A T I O N

Power Financial reported operating earnings attributable to common shareholders for the quarter ended March , of $ million or $ . per share, compared with $ million or $ . per share in .

Other items, not included in operating earnings, were a contribution of $ million mainly comprised of Power Financial’s share of the gain realized by GBL on the sale of part of its interest in Total. In the corresponding period of , other items represented a contribution of $ million.

Net earnings attributable to common shareholders were $ million or $ . per share, compared with $ million or $ . per share in .

At March , , Power Corporation held a . % economic interest in Power Financial. Power Financial’s contribution to Power Corporation’s operating earnings was $ million for the quarter ended March , , compared with $ million in .

On behalf of the Board of Directors,

Paul Desmarais, Jr., . ., . . André Desmarais, . ., . .Chairman and Co-Chief Executive Of icer Deputy Chairman, President and

Co-Chief Executive Of icer

May ,

P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5 1

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Signed, Signed,

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2 P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5

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GR

EA

T-WE

ST LIFECO

INC

.IG

M FIN

AN

CIA

L INC

.PA

RG

ESA

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LDIN

G SA

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Power Corporation of Canada

P A R T A

Power Financial Corporation

P A R T B

Great-West Lifeco Inc.

P A R T C

IGM Financial Inc.

P A R T D

Pargesa Holding SA

P A R T E


T A B L E O F C O N T E N T S

This document contains management’s discussion and analysis of the

fi nancial condition and fi nancial performance of Power Corporation of Canada

(the Corporation) for the three months ended March 31, 2015 and the unaudited

interim condensed consolidated fi nancial statements of the Corporation as at

and for the three months ended March 31, 2015. This document has been fi led

with the securities regulatory authorities in each of the provinces and territories

of Canada and mailed to shareholders of the Corporation in accordance with

applicable securities laws.

P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5 3

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The trademarks contained in this report are owned by Power Corporation of Canada or by a Member of the Power Corporation Group of CompaniesTM. Trademarks that are not owned by Power Corporation are used with permission.

4 P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5

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P A R T A

Management’s Discussion and Analysis

P A G E A 2

Financial Statements and Notes

P A G E A 2 8

P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5 A 1

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POWER CORPORATION OF CANADAMANAGEMENT’S DISCUSSION AND ANALYSIS

A 2 P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5


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ORGANIZATION OF THE INTERIM MD&A

OVERVIEW



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POWER FINANCIAL

Lifeco

IGM Financial

POWER CORPORATION

Power Financial

Pargesa

Lifeco



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DAIGM Financial

Pargesa and GBL

Recent Developments at Power Financial



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SAGARD INVESTMENT FUNDS

Sagard Europe

Sagard Capital

Sagard China



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OTHER SUBSIDIARIES

Square Victoria Communications Group

La Presse LaPresse+La Presse+

La Presse

Power Energy

Subsidiaries held by Sagard Investment Funds

OTHER INVESTMENTS



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BASIS OF PRESENTATION

Interim Financial Reporting

Degree of Control Basis of Accounting Earnings and OtherComprehensive Income

Impairment Testing Impairment Reversal

> > > >

>

> > > >

> >

>

>

>

>

>

>



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NON-IFRS FINANCIAL MEASURES AND PRESENTATION

operating earnings other items



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RESULTS OF POWER CORPORATION OF CANADA

EARNINGS SUMMARY – CONDENSED SUPPLEMENTARY NON-CONSOLIDATED STATEMENTS OF EARNINGS

March31,2015

Operating earnings

371(18)353

41(32)(13)349

Other items (non-operating) [2]5

5Net earnings (attributable to participating shareholders) 354

Earnings per share (attributable to participating shareholders)0.760.010.77

NET EARNINGS

OPERATING EARNINGS

A 1 0 P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5


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CONTRIBUTION TO OPERATING EARNINGS

Power Financial

March 31,2015

47311919611(13)(33)565

371

Other subsidiaries

P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5 A 1 1


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CORPORATE OPERATIONS OF POWER CORPORATION

Income from investments

March 31,2015

(2)(3)34

11141

Operating and other expenses



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OTHER ITEMSMarch31,

2015

61(2)5

5

Power Financial

Power Financial

Other subsidiaries



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FINANCIAL POSITION

CONSOLIDATED BALANCE SHEETS

March31,2015

Assets5,258

161,494

2,524

33914,2425,18711,0935,9689,394

187,433402,932

Liabilities

155,3626,6957,63412,938

187,433370,062

Equity972

11,74320,15532,870402,932



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NON-CONSOLIDATED BALANCE SHEETS

March31,2015

Assets598

2,31910,124

35913,400

Liabilities400285685

Equity972

11,74312,71513,400



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Investments

March 31, 2015

160 22 182272 241 513182 157 339

282 28 310180 162 342356 277 633

1,432 887 2,319

Investments in Power Financial and Other subsidiaries



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SHAREHOLDERS’ EQUITY

Non-Participating Shares

Participating Shareholders’ Equity

Outstanding Number of Participating Shares



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CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

2015

1,225(409)(83)

94

827

4,431

5,258

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS



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2015

Operating activities367(195)

(35)32169

Financing activities(13)(134)40(1)

(108)Investing activities

61(63)(30)(2)(34)27571

Cash and cash equivalents, at March 31 598



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CAPITAL MANAGEMENT

March31,2015

Debentures and debt instruments400250

5,3701,325332(43)

7,634Non-participating shares

9722,5802,514150

6,216Equity

11,74314,91126,65440,504



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RATINGS

RISK MANAGEMENT



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FINANCIAL INSTRUMENTS RISK

•

•

•



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OFF-BALANCE SHEET ARRANGEMENTS

GUARANTEES

LETTERS OF CREDIT

CONTINGENT LIABILITIES

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

TRANSACTIONS WITH RELATED PARTIES



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FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

March31, 2015

43 1 (5)63 4 4

23,635 583 (1,310)2,591 71 13

29 (2)26,361 659 (1,300)



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SUMMARY OF CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

CHANGES IN ACCOUNTING POLICIES

FUTURE ACCOUNTING CHANGES

IFRS 4 – INSURANCE CONTRACTSInsurance Contracts

IFRS 9 – FINANCIAL INSTRUMENTSFinancial Instruments Financial

Instruments: Recognition and Measurement



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IFRS 15 – REVENUE FROM CONTRACTSWITH CUSTOMERSRevenue from Contracts with Customers

INTERNAL CONTROL OVER FINANCIAL REPORTING



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SUMMARY OF QUARTERLY RESULTS

2015Q1

13,632

3490.76

50.01

3540.770.76

2015Q1

55

5



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POWER CORPORATION OF CANADA

March312015

,

Assets5,258

110,51828,2019,6374,9438,195

161,49414,2425,1872,8631,410659

7,1041,9205,9689,394

187,433Total assets 402,932

Liabilities154,494

8686,6957,6341,9599,0321,947

187,433Total liabilities 370,062

Equity

972670

9,6131,46012,71520,155

Total equity 32,870Total liabilities and equity 402,932



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2015

Revenues

7,806(874)6,932

1,6122,9584,5701,914216

13,632

Expenses

5,640(483)5,157381

4,3519,889737

1,697115

12,4381,194

251,219277

Net earnings 942

Attributable to57513354942

Earnings per participating share

0.770.76



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2015

Net earnings 942

Other comprehensive income (loss)Items that may be reclassified subsequently to net earnings

270(35)(112)12135

(135)511

(83)

862

20882

57Total – items that may be reclassified 991

Items that will not be reclassified subsequently to net earnings(247)53(4)

Total – items that will not be reclassified (198)

Other comprehensive income 793

Total comprehensive income 1,735


1,735



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2015

Operating activities1,219(152)

2,851272(92)11

(2,958)74

1,225Financing activities

(299)(13)(134)(446)40125(88)–

(11)(62)33

(409)Investment activities

10,1515816499

(63)(10,104)

(616)(461)

–(229)(83)94827

4,431Cash and cash equivalents, end of period 5,258

Net cash from operating activities includes1,415

99



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NOTE 1 CORPORATE INFORMATION

NOTE 2 BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




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USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS


IFRS 9 – Financial InstrumentsFinancial Instruments Financial

Instruments: Recognition and Measurements

IFRS 15 – Revenue from Contracts with CustomersRevenue from Contracts with Customers,



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NOTE 3 INVESTMENTS

NOTE 4 SEGREGATED FUNDS AND OTHER STRUCTURED ENTITIES



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SEGREGATED FUNDS GUARANTEE EXPOSURE



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INVESTMENTS ON ACCOUNT OF SEGREGATED FUND POLICYHOLDERS

INSURANCE AND INVESTMENT CONTRACTS ON ACCOUNT OF SEGREGATED FUND POLICYHOLDERS

INVESTMENT INCOME ON ACCOUNT OF SEGREGATED FUND POLICYHOLDERS



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OTHER STRUCTURED ENTITIES

NOTE 5 INSURANCE AND INVESTMENT CONTRACT LIABILITIES

INSURANCE AND INVESTMENT CONTRACT LIABILITIES



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NOTE 6 STATED CAPITAL

AUTHORIZED

ISSUED AND OUTSTANDING

Non Participating Shares

Participating Shares

Total Participating Shares



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NOTE 7 SHARE BASED COMPENSATION

STOCK OPTION PLAN

Compensation expense



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NOTE 8 CAPITAL MANAGEMENT

LIFECO



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Insurance Companies Act

IGM FINANCIAL



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NOTE 9 RISK MANAGEMENT



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POWER CORPORATION AND POWER FINANCIAL

Liquidity risk

Credit risk



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Market riska) Currency risk

b) Interest rate risk

c) Equity price risk



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LIFECO

Liquidity risk

Credit risk





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IGM FINANCIAL

Liquidity risk

Credit risk



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NOTE 10 PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS



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NOTE 11 INCOME TAXES

INCOME TAX EXPENSE

EFFECTIVE INCOME TAX RATE

DEFERRED TAX ASSETS



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NOTE 12 OTHER COMPREHENSIVE INCOME

NOTE 13 EARNINGS PER SHARE

Earnings

Number of participating shares (millions)

Net earnings per participating share



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NOTE 14 FAIR VALUE OF FINANCIAL INSTRUMENTS



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Financial assets recorded at fair value

Financial liabilities recorded at fair value





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Typeof asset Valuation approachSignificantunobservable input Input value

Inter relationshipbetweenkeyunobservable inputs andfair valuemeasurement



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NOTE 15 LEGAL PROVISIONS AND CONTINGENT LIABILITIES

NOTE 16 SUBSEQUENT EVENT

NOTE 17 SEGMENTED INFORMATION



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INFORMATION ON CONTRIBUTION TO NET EARNINGS

Revenues

Expenses

Contribution to net earnings

Attributable to



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Revenues

Expenses


Attributable to

INFORMATION ON TOTAL ASSETS



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TION

The attached documents concerning Power Financial Corporation are documents prepared and publicly disclosed by such subsidiary. Certain statements in the attached documents, other than statements of historical fact, are forward-looking statements based on certain assumptions and refl ect the current expectations of the subsidiary as set forth therein. Forward-looking statements are provided for the purposes of assisting the reader in understanding the subsidiary’s fi nancial performance, fi nancial position and cash fl ows as at and for the periods ended on certain dates and to present information about the subsidiary’s management’s current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes.

By its nature, forward-looking information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved.

For further information provided by the subsidiary as to the material factors that could cause actual results to diff er materially from the content of forward-looking statements, the material factors and assumptions that were applied in making the forward-looking statements, and the subsidiary’s policy for updating the content of forward-looking statements, please see the attached documents, including the section entitled Forward-Looking Statements. The reader is cautioned to consider these factors and assumptions carefully and not to put undue reliance on forward-looking statements.

Power Financial Corporation

P A R T B


P A G E B 2


P A G E B 2 6

P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5 B 1

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POWER FINANCIAL CORPORATIONMANAGEMENT’S DISCUSSION AND ANALYSIS

B 2 P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5


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ORGANIZATION OF THE INTERIM MD&A

OVERVIEW



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POWER FINANCIAL

Lifeco IGM Financial Pargesa

LIFECO



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IGM FINANCIAL

PARGESA AND GBL

RECENT DEVELOPMENTS



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Degree of Control Basis of Accounting Earnings and OtherComprehensive Income

Impairment Testing Impairment Reversal

> > > >

>

> > > >

> >

>

>

>

>

>

>



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NON-IFRS FINANCIAL MEASURES AND PRESENTATION

operating earnings

other items



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RESULTS OF POWER FINANCIAL CORPORATION

EARNINGS SUMMARY – CONDENSED SUPPLEMENTARY NON-CONSOLIDATED STATEMENTS OF EARNINGS

March31,2015

Operating earnings

47311919611(13)(33)565

Other items (non-operating) [1]

88

Net earnings (attributable to common shareholders) 573

Earnings per share (attributable to common shareholders)0.790.010.80

NET EARNINGS

OPERATING EARNINGS



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CONTRIBUTION TO OPERATING EARNINGS LIFECO, IGM AND PARGESA

Lifeco

March31,2015

Canada77122109(9)

299

United States1202(1)

121

Europe21677(7)

286

Lifeco Corporate (6)

700



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IGM Financial

March31,2015

1915732280(80)200

2015

B 1 0 P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5


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Pargesa

March 31,2015

23

(7)

37

53154

19

P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5 B 1 1


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CORPORATE OPERATIONS OF POWER FINANCIAL

OTHER ITEMS

March31,2015

92(3)8

Pargesa

IGM Financial

Pargesa



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FINANCIAL POSITION

CONSOLIDATED BALANCE SHEETS

March31,2015

Assets4,677

158,967

2,524

23514,2425,18710,4695,7109,156

187,433398,600

Liabilities155,3626,6956,90212,201

187,433368,593

Equity2,58015,18112,24630,007398,600



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NON-CONSOLIDATED BALANCE SHEETS

March31,2015

Assets84334

14,9592,524139

18,499

Liabilities250488738

Equity2,58015,18117,76118,499



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Investment in Subsidiaries and Parjointco

SHAREHOLDERS’ EQUITY

Common Shareholders’ Equity

Outstanding Number of Common Shares



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CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

2015

1,198(519)(82)

91688

3,9894,677

NON-CONSOLIDATED STATEMENTS OF CASH FLOWS



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2015

Operating activities606(318)

6294

Financing activities(33)(249)

49(233)

Investing activities(4)(4)57786

Cash and cash equivalents, at March 31 843



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CAPITAL MANAGEMENT

March31,2015

Debentures and debt instruments250

5,3701,325(43)

6,902Preferred shares

2,5802,514150

5,244Equity

15,1819,58224,76336,909



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RATINGS

RISK MANAGEMENT



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•

•

•



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OFF-BALANCE SHEET ARRANGEMENTS

GUARANTEES

LETTERS OF CREDIT

CONTINGENT LIABILITIES

COMMITMENTS AND CONTRACTUAL OBLIGATIONS




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DERIVATIVE FINANCIAL INSTRUMENTS

March31, 2015

63 4 423,635 583 (1,310)2,591 71 1326,289 658 (1,293)



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SUMMARY OF CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS



IFRS 4 – INSURANCE CONTRACTSInsurance Contract

IFRS 9 – FINANCIAL INSTRUMENTSFinancial Instruments Financial

Instruments: Recognition and Measurement



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IFRS 15 – REVENUE FROM CONTRACTSWITH CUSTOMERSRevenue from Contracts with Customers,

INTERNAL CONTROL OVER FINANCIAL REPORTING



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2015Q1

13,369

5650.79

80.01

5730.800.80

2015Q1

9

2

(3)8



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POWER FINANCIAL CORPORATION

March312015

,

Assets4,677

110,33828,2017,2904,9438,195

158,96714,2425,1872,7591,004658

6,9171,8905,7109,156

187,433Total assets 398,600

Liabilities154,494

8686,6956,9021,9518,3881,862

187,433Total liabilities 368,593

Equity

2,580804

13,469908

17,76112,246

Total equity 30,007Total liabilities and equity 398,600



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2015

Revenues

7,806(874)6,932

1,5652,9584,5231,91413,369

Expenses

5,640(483)5,157381

4,3519,889737

1,430104

12,1601,209

271,236280

Net earnings 956


Earnings per common share

0.800.80



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2015

Net earnings 956

Other comprehensive income (loss)Items that may be reclassified subsequently to net earnings

136(29)(74)1245

(135)511

(83)

739

20759

57Total – items that may be reclassified 778

Items that will not be reclassified subsequently to net earnings(243)53(4)

Total – items that will not be reclassified (194)

Other comprehensive income 584

Total comprehensive income 1,540


1,540



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2015

Operating activities1,236(151)

2,851272(92)11

(2,958)29

1,198Financing activities

(181)(33)(249)(463)49–

69(88)(54)(62)30

(519)Investment activities

9,9975815889

(10,072)(616)(370)(199)(82)91688

3,989Cash and cash equivalents, end of period 4,677

Net cash from operating activities includes1,414

94



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NOTE 1 CORPORATE INFORMATION





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USE OF SIGNIFICANT JUDGMENTS, ESTIMATES AND ASSUMPTIONS


IFRS 9 – Financial InstrumentsFinancial Instruments Financial

Instruments: Recognition and Measurements

IFRS 15 – Revenue from Contracts with CustomersRevenue from Contracts with Customers,



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NOTE 3 INVESTMENTS




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SEGREGATED FUNDS GUARANTEE EXPOSURE



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INSURANCE AND INVESTMENT CONTRACTS ON ACCOUNT OF SEGREGATED FUND POLICYHOLDERS

INVESTMENT INCOME ON ACCOUNT OF SEGREGATED FUND POLICYHOLDERS



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OTHER STRUCTURED ENTITIES

NOTE 5 INSURANCE AND INVESTMENT CONTRACT LIABILITIES

INSURANCE AND INVESTMENT CONTRACT LIABILITIES



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NOTE 6 STATED CAPITAL

AUTHORIZED

ISSUED AND OUTSTANDING

First Preferred Shares (perpetual)

Common Shares

Common Shares



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NOTE 7 SHARE BASED COMPENSATION

STOCK OPTION PLAN

Compensation expense



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LIFECO



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Insurance Companies Act

IGM FINANCIAL



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POWER FINANCIALLiquidity risk



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N


Credit risk





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LIFECO

Liquidity risk

Credit risk




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N





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IGM FINANCIAL

Liquidity risk



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N


Credit risk






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NOTE 10 PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS



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NOTE 11 INCOME TAXES

INCOME TAX EXPENSE

EFFECTIVE INCOME TAX RATE

DEFERRED TAX ASSETS



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NOTE 12 OTHER COMPREHENSIVE INCOME

NOTE 13 EARNINGS PER SHARE

Earnings

Number of common shares (millions)

Net earnings per common share



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Typeof asset Valuation approachSignificantunobservable input Input value

Inter relationshipbetweenkeyunobservable inputs andfair valuemeasurement



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NOTE 15 LEGAL PROVISIONS AND CONTINGENT LIABILITIES




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Revenues

Expenses


Attributable to



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Revenues

Expenses


Attributable to

INFORMATION ON TOTAL ASSETS



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Please note that the bottom of each page in Part C contains two diff erent page numbers. A page number with the prefi x “C” refers to the number of such page in this document and the page number without any prefi x refers to the number of such page in the original document issued by Great-West Lifeco Inc.

The attached documents concerning Great-West Lifeco Inc. are documents prepared and publicly disclosed by such subsidiary. Certain statements in the attached documents, other than statements of historical fact, are forward-looking statements based on certain assumptions and refl ect the current expectations of the subsidiary as set forth therein. Forward-looking statements are provided for the purposes of assisting the reader in understanding the subsidiary’s fi nancial performance, fi nancial position and cash fl ows as at and for the periods ended on certain dates and to present information about the subsidiary’s management’s current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes.


For further information provided by the subsidiary as to the material factors that could cause actual results to differ materially from the content of forward-looking statements, the material factors and assumptions that were applied in making the forward-looking statements, and the subsidiary’s policy for updating the content of forward-looking statements, please see the attached documents, including the section entitled Cautionary Note Regarding Forward-Looking Information. The reader is cautioned to consider these factors and assumptions carefully and not to put undue reliance on forward-looking statements.

Great-West Lifeco Inc.

P A R T C


P A G E C 2


P A G E C 3 6

P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5 C 1

PCC_QUAT1_ENG03_GWL_2015-08-05_v1.indd C1PCC_QUAT1_ENG03_GWL_2015-08-05_v1.indd C1 15-05-12 8:53 AM15-05-12 8:53 AM

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Management's Discussion and Analysis

5

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE PERIOD ENDED MARCH 31, 2015

DATED: MAY 7, 2015

This Management’s Discussion and Analysis (MD&A) presents management’s view of the financial condition, results of operations and cash flows of Great-West Lifeco Inc. (Lifeco or the Company) for the three months ended March 31, 2015 and includes a comparison to the corresponding periods in 2014, to the three months ended December 31, 2014, and to the Company’s financial condition as at December 31, 2014. This MD&A provides an overall discussion, followed by analysis of the performance of Lifeco's three major reportable segments: Canada, United States (U.S.) and Europe.

BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIESThe consolidated financial statements of Lifeco, which are the basis for data presented in this report, have been prepared in accordance with International Financial Reporting Standards (IFRS) unless otherwise noted and are presented in millions of Canadian dollars unless otherwise indicated. This MD&A should be read in conjunction with the Company's condensed consolidated financial statements for the period ended March 31, 2015. Please also refer to the 2014 Annual MD&A and consolidated financial statements in the Company's 2014 Annual Report.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATIONThis MD&A contains some forward-looking statements about the Company, including its business operations, strategy and expected financial performance and condition. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates” and similar expressions or negative versions thereof. In addition, any statement that may be made concerning future financial performance (including revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions by the Company, including statements made with respect to the expected benefits of acquisitions and divestitures, are also forward-looking statements. Forward-looking statements are based on expectations and projections about future events that were current at the time of the statements and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company, economic factors and the financial services industry generally, including the insurance and mutual fund industries. They are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements. Material factors and assumptions that were applied in formulating the forward-looking information contained herein include the assumption that the business and economic conditions affecting the Company’s operations will continue substantially in their current state, including, without limitation, with respect to market prices for products provided, sales levels, premium income, fee income, expense levels, mortality experience, morbidity experience, policy lapse rates, reinsurance, taxes, inflation, general economic, political and market factors in North America and internationally, interest and foreign exchange rates, investment values, global equity and capital markets, business competition, continuity and availability of personnel and third party service providers, the Company's ability to complete strategic transactions and integrate acquisitions and that there will be no unplanned material changes to the Company’s facilities, customer and employee relations or credit arrangements. Many of these assumptions are based on factors and events that are not within the control of the Company and there is no assurance that they will prove to be correct. Other important factors and assumptions that could cause actual results to differ materially from those contained in forward-looking statements include technological change, breaches or failure of information systems and security (including cyber attacks), payments required under investment products, changes in local and international laws and regulations, changes in accounting policies and the effect of applying future accounting policy changes, unexpected judicial or regulatory proceedings and catastrophic events. The reader is cautioned that the foregoing list of assumptions and factors is not exhaustive, and there may be other factors listed in other filings with securities regulators, including factors set out in the Company's 2014 Annual MD&A under "Risk Management and Control Practices" and "Summary of Critical Accounting Estimates", which, along with other filings, is available for review at www.sedar.com. The reader is also cautioned to consider these and other factors carefully and not to place undue reliance on forward-looking statements. Other than as specifically required by applicable law, the Company does not intend to update any forward-looking statements whether as a result of new information, future events or otherwise.

CAUTIONARY NOTE REGARDING NON-IFRS FINANCIAL MEASURESThis MD&A contains some non-IFRS financial measures. Terms by which non-IFRS financial measures are identified include, but are not limited to, “operating earnings”, “constant currency basis”, “premiums and deposits”, “sales”, "assets under management", "assets under administration" and other similar expressions. Non-IFRS financial measures are used to provide management and investors with additional measures of performance to help assess results where no comparable IFRS measure exists. However, non-IFRS financial measures do not have standard meanings prescribed by IFRS and are not directly comparable to similar measures used by other companies. Please refer to the appropriate reconciliations of these non-IFRS financial measures to measures prescribed by IFRS.

C 2 P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5


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6

CONSOLIDATED OPERATING RESULTS

Selected consolidated financial information (in Canadian $ millions, except for per share amounts)

As at or for the three months endedMarch 31

2015Dec. 31

2014March 31 2014(2)(4)

Premiums and deposits:Amounts reported in the financial statementsNet premium income (Life insurance, guaranteed annuities and insured

health products) $ 6,932 $ 5,501 $ 5,267Policyholder deposits (segregated funds):

Individual products 2,981 3,185 2,946Group products 2,035 1,955 3,364

Premiums and deposits reported in the financial statements 11,948 10,641 11,577Self-funded premium equivalents (Administrative services only contracts)(1) 662 654 658Proprietary mutual funds & institutional deposits(1)(2) 12,938 12,729 12,295

Total premiums and deposits(1) 25,548 24,024 24,530

Fee and other income 1,258 1,161 1,059Paid or credited to policyholders(3) 9,889 8,125 7,489

EarningsNet earnings - common shareholders $ 700 $ 657 $ 587

Per common shareBasic earnings 0.702 0.658 0.587Dividends paid 0.3260 0.3075 0.3075Book value(4) 17.68 16.80 15.88

Return on common shareholders' equity(4)(5)

Operating earnings(6) 16.0% 15.7% 14.7%Net earnings 16.0% 15.7% 16.2%

Total assets per financial statements(4) $ 381,331 $ 356,709 $ 342,830Proprietary mutual funds and institutional net assets(7) 238,650 216,271 199,921

Total assets under management(4)(7) 619,981 572,980 542,751Other assets under administration(8) 556,893 490,353 263,113

Total assets under administration(4) $ 1,176,874 $ 1,063,333 $ 805,864Total equity(4) $ 22,888 $ 21,897 $ 20,787

(1) In addition to premiums and deposits reported in the financial statements, the Company includes premium equivalents on self-funded group insurance administrative services only (ASO) contracts and deposits on proprietary mutual funds and institutional accounts to calculate total premiums and deposits (a non-IFRS financial measure). This measure provides useful information as it is an indicator of top line growth.

(2) Comparative figures for premiums and deposits (a non-IFRS financial measure) have been restated to improve consistency across the Company's business units.(3) Paid or credited to policyholders includes the impact of changes in fair values of assets supporting insurance and investment contract liabilities.(4) Comparative figures have been adjusted as described in note 2 to the Company's condensed consolidated financial statements for the period ended March 31,

2015.(5) Return on shareholders' equity is detailed within the "Capital Allocation Methodology" section(6) Operating earnings (a non-IFRS financial measure) excludes the impact of certain litigation provisions described in note 32 to the Company's December 31, 2014

annual consolidated financial statements.(7) Total assets under management (a non-IFRS financial measure) provides an indicator of the size and volume of the overall business of the Company. Services

provided in respect of assets under management include the selection of investments, the provision of investment advice and discretionary portfolio management on behalf of clients. This includes internally and externally managed funds where the Company has oversight over the investment policies.

(8) Other assets under administration (a non-IFRS financial measure) include assets where the Company only provides administration services for which the Company earns fee and other income. These assets are beneficially owned by clients and the Company does not direct the investing activities. Services provided relating to assets under administration include recordkeeping, safekeeping, collecting investment income, settling of transactions or other administrative services. Administrative services are an important aspect of the overall business of the Company and should be considered when comparing volumes, size and trends.



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7

NET EARNINGSConsolidated net earnings of Lifeco include the net earnings of The Great-West Life Assurance Company (Great-West Life) and its operating subsidiaries, London Life Insurance Company (London Life), The Canada Life Assurance Company (Canada Life) and Irish Life Group Limited (Irish Life); Great-West Life & Annuity Insurance Company (Great-West Financial) and Putnam Investments, LLC (Putnam), together with Lifeco’s Corporate operating results.

Lifeco's net earnings attributable to common shareholders for the three month period ended March 31, 2015 were $700 million compared to $587 million a year ago and $657 million in the previous quarter. On a per share basis, this represents $0.702 per common share ($0.700 diluted) for the first quarter of 2015 compared to $0.587 per common share ($0.587 diluted) a year ago and $0.658 per common share ($0.657 diluted) in the previous quarter.

Net earnings - common shareholdersFor the three months ended

March 312015

Dec. 312014

March 312014

CanadaIndividual Insurance $ 77 $ 120 $ 69Wealth Management 122 69 105Group Insurance 109 96 109Canada Corporate (9) 15 11

299 300 294United States

Financial Services 120 93 94Asset Management 2 (1) (53)U.S. Corporate (1) (3) —

121 89 41Europe

Insurance & Annuities 216 218 200Reinsurance 77 71 63Europe Corporate (7) (15) (4)

286 274 259

Lifeco Corporate (6) (6) (7)Net earnings - common shareholders $ 700 $ 657 $ 587

The information in the table above is a summary of results for net earnings of the Company. Additional commentary regarding net earnings is included in the "Segmented Operating Results" section.



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8

MARKET IMPACTS

Interest Rate EnvironmentInterest rates in countries where the Company operates declined during the quarter, but did not impact the range of interest rate scenarios tested through the valuation process. The net change in interest rates had no material impact on net earnings or the Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio relative to the Company’s expectations.

In order to mitigate the Company's exposure to interest rate fluctuations, the Company follows disciplined processes for managing the matching of assets and liabilities. As a result, the impact of changes in fair values of bonds backing insurance and investment contract liabilities recorded through profit or loss are mostly offset by a corresponding change in the insurance and investment contract liabilities.

Refer to note 5 to the Company's condensed consolidated financial statements for the period ended March 31, 2015 for a further description of the Company's sensitivity to interest rate fluctuations.

Equity MarketsEquity markets' performance in the first quarter of 2015 was positive in all geographies where the Company operates. This positively impacted asset-based fee income and continued to have a favourable impact on costs related to guarantees of death, maturity or income benefits within certain wealth management products offered by the Company.

The major equity indices finished the first quarter up 2% in Canada (as measured by S&P TSX), up 18% in broader Europe (as measured by Eurostoxx 50), up 3% in the U.K. (as measured by FTSE 100) and flat in the U.S. (as measured by S&P 500) compared to December 31, 2014. Comparing the first quarter of 2015 to the first quarter of 2014, the average equity market levels were up by 6% in Canada, by 11% in broader Europe, by 2% in the U.K. and by 12% in the U.S.

Foreign CurrencyThroughout this document, a number of terms are used to highlight the impact of foreign exchange on results, such as: “constant currency basis”, “impact of currency movement” and “effect of currency translation fluctuations”. These measures have been calculated using the average or period end rates, as appropriate, in effect at the date of the comparative period. This non-IFRS measure provides useful information as it facilitates the comparability of results between periods.

During the first quarter of 2015, the average currency translation rate of the U.S. dollar and British pound increased, while the average currency translation rates of the euro declined compared to the first quarter of 2014. The overall impact of currency movement on the Company’s net earnings for the three month period ended March 31, 2015 was an increase of $15 million compared to translation rates a year ago.

From December 31, 2014 to March 31, 2015, the market rates at the end of the reporting period used to translate U.S. dollar and the British pound assets and liabilities to the Canadian dollar increased, while the end of period market rates for euro assets and liabilities decreased. The movements in end of period market rates resulted in unrealized foreign exchange gains from the translation of foreign operations, including related hedging activities, of $753 million recorded in other comprehensive income during the quarter.

Translation rates for the reporting period and comparative periods are detailed in the "Translation of Foreign Currency" section.

ACTUARIAL ASSUMPTION CHANGESDuring the first quarter of 2015, the Company updated a number of assumptions resulting in a positive net earnings impact of $82 million, compared to a positive net earnings impact of $39 million for the same quarter last year and $176 million for the previous quarter. For the first quarter of 2015, refinements to annuitant longevity assumptions and updated asset cash flow assumptions in Europe as well as modeling refinements in Canada were partially offset by an increase in premium tax assumptions in Canada.



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9

PREMIUMS AND DEPOSITS AND SALESTotal premiums and deposits (a non-IFRS financial measure) include premiums on risk-based insurance and annuity products (as defined under IFRS), premium equivalents on self-funded group insurance administrative services only (ASO) contracts, deposits on individual and group segregated fund products as well as deposits on proprietary mutual funds and institutional accounts. This measure provides an indicator of top line growth.

Sales (a non-IFRS financial measure) for risk-based insurance and annuity products include 100% of single premium and annualized premiums expected in the first twelve months of the plan. Group insurance and ASO sales reflect annualized premiums and premium equivalents for new policies and new benefits covered or expansion of coverage on existing policies. For individual wealth management products, sales include deposits on segregated fund products, proprietary mutual funds and institutional accounts as well as deposits on non-proprietary mutual funds. For group wealth management products, sales include assets transferred from a previous plan provider and the expected annual contributions from the new plan. This measure provides an indicator of new business growth.

Total premiums and depositsFor the three months ended

March 312015

Dec. 312014

March 31 2014(1)

CanadaIndividual Insurance $ 1,154 $ 1,202 $ 1,077Wealth Management 2,811 2,741 4,051Group Insurance 1,948 1,931 1,900

5,913 5,874 7,028United States

Financial Services(1) 2,730 2,268 2,441Asset Management 10,232 10,542 9,972

12,962 12,810 12,413Europe

Insurance & Annuities 5,160 3,875 4,112Reinsurance 1,513 1,465 977

6,673 5,340 5,089Total $ 25,548 $ 24,024 $ 24,530

SalesFor the three months ended

March 312015

Dec. 312014

March 312014

Canada $ 3,183 $ 3,311 $ 3,202United States 19,436 15,105 13,159Europe - Insurance & Annuities 4,456 3,155 3,506

Total $ 27,075 $ 21,571 $ 19,867

(1) Comparative figures for total premiums and deposits (a non-IFRS financial measure) have been restated to improve consistency across the Company's business units.

The information in the table above is a summary of results for the Company's total premiums and deposits and sales. Additional commentary regarding premiums and deposits and sales is included in the "Segmented Operating Results" section.



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10

NET INVESTMENT INCOME

Net investment incomeFor the three months ended

March 312015

Dec. 312014

March 312014

Investment income earned (net of investment properties expenses) $ 1,475 $ 1,511 $ 1,490Allowances for credit losses on loans and receivables 1 (8) (1)Net realized gains 87 43 22Regular investment income 1,563 1,546 1,511Investment expenses (27) (30) (22)Regular net investment income 1,536 1,516 1,489Changes in fair value through profit or loss 2,953 2,545 2,122Net investment income $ 4,489 $ 4,061 $ 3,611

Net investment income in the first quarter of 2015, which includes changes in fair value through profit or loss, increased by $878 million compared to the same quarter last year. The change in fair values in the first quarter of 2015 was an increase of $2,953 million compared to an increase of $2,122 million for the first quarter of 2014, primarily due to a larger decline in bond yields.

Regular net investment income in the first quarter of 2015, which excludes changes in fair value through profit or loss, increased by $47 million compared to the first quarter of 2014. The increase was primarily due to higher net realized gains and the impact of currency movement as the U.S. dollar and British pound strengthened against the Canadian dollar, partially offset by lower interest from fixed-income investments. Net realized gains include gains on available-for-sale securities of $74 million in the first quarter of 2015 compared to $11 million for the same quarter last year.

Net investment income in the first quarter of 2015 increased by $428 million compared to the previous quarter, primarily due to net increases in fair values of $2,953 million in the first quarter of 2015 compared to net increases of $2,545 million in the previous quarter. The change in fair values was primarily due to equity markets rising in the first quarter of 2015 compared to declining in the previous quarter as well as a larger decline in Canadian bond yields compared to the previous quarter.

Credit Markets In the first quarter of 2015, the Company experienced net recoveries on impaired investments, including dispositions, which positively impacted common shareholders’ net earnings by $3 million ($5 million net recovery in the first quarter of 2014).

In the first quarter of 2015, changes in credit ratings in the Company's bond portfolio resulted in a net increase in provisions for future credit losses in insurance contract liabilities, which negatively impacted common shareholders' net earnings by $6 million ($3 million net charge in the first quarter of 2014).



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FEE AND OTHER INCOMEIn addition to providing traditional risk-based insurance products, the Company also provides certain products on a fee-for-service basis. The most significant of these products are segregated funds and mutual funds, for which the Company earns investment management fees on assets managed and other fees, as well as ASO contracts, under which the Company provides group benefit plan administration on a cost-plus basis.

Fee and other incomeFor the three months ended

March 312015

Dec. 312014

March 312014

CanadaSegregated funds, mutual funds and other $ 319 $ 309 $ 306ASO contracts 39 40 38

358 349 344United States

Segregated funds, mutual funds and other 573 522 419

EuropeSegregated funds, mutual funds and other 327 290 296

Total fee and other income $ 1,258 $ 1,161 $ 1,059

The information in the table above is a summary of gross fee and other income for the Company. Additional commentary regarding fee and other income is included in the "Segmented Operating Results" section.

PAID OR CREDITED TO POLICYHOLDERS

Paid or credited to policyholdersFor the three months ended

March 312015

Dec. 312014

March 312014

Canada $ 3,765 $ 3,327 $ 3,365United States 1,121 1,229 1,298Europe 5,003 3,569 2,826Total $ 9,889 $ 8,125 $ 7,489

Amounts paid or credited to policyholders include life and health claims, policy surrenders, annuity and maturity payments, segregated funds guarantee payments, policyholder dividend and experience refund payments and changes in insurance and investment contract liabilities. The change in contract liabilities includes the impact of changes in fair value of certain invested assets supporting those liabilities as well as changes in the provision for future credit losses. The amounts do not include benefit payments for ASO contracts or segregated funds and mutual funds.

For the three months ended March 31, 2015, consolidated amounts paid or credited to policyholders were $9.9 billion, including $5.5 billion of policyholder benefit payments and a $4.4 billion increase in contract liabilities. The increase of $2.4 billion from the same period in 2014 consisted of a $1.6 billion increase in the change in contract liabilities and an $824 million increase in benefit payments. The increase in contract liabilities was primarily due to the acquisition of Equitable Life's annuity business and fair value adjustments to insurance contract liabilities as a result of changes in interest rates in Canada, the U.S. and Europe. The increase in benefit payments was primarily due to new and restructured reinsurance treaties, normal business growth and currency movement.



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Compared to the previous quarter, consolidated amounts paid or credited to policyholders increased by $1.8 billion. The increase consisted of a $1.4 billion increase in the change in contract liabilities, primarily due to the acquisition of Equitable Life's annuity business and higher fair value adjustments to insurance contract liabilities as a result of changes in interest rates in Canada, the U.S. and Europe. The increase also consisted of a $347 million increase in benefit payments primarily due to normal business growth and currency movement.

INCOME TAXESThe Company's effective income tax rate is generally lower than the statutory income tax rate of 26.5% due to benefits related to non-taxable investment income and lower income tax in foreign jurisdictions.

The Company had an effective income tax rate of 23% for the first quarter of 2015 compared to 21% for the same quarter last year. The increase in the Company's effective income tax rate was primarily due to a lower percentage of the Company's income consisting of non-taxable investment income and income subject to lower rates of income tax in foreign jurisdictions as well as an increase in reserves for uncertain tax positions.

The first quarter 2015 effective income tax rate of 23% was higher than the fourth quarter 2014 rate of 19%. The increase in the effective income tax rate compared to the previous quarter was primarily due to an increase in reserves for uncertain tax positions.



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CONSOLIDATED FINANCIAL POSITION

ASSETS

Assets under administrationMarch 31, 2015

Canada United States Europe TotalAssets

Invested assets $ 67,002 $ 39,997 $ 48,212 $ 155,211Goodwill and intangible assets 5,121 2,263 2,279 9,663Other assets 3,651 4,263 21,110 29,024Segregated funds net assets 71,598 34,693 81,142 187,433

Total assets 147,372 81,216 152,743 381,331Proprietary mutual funds and institutional net assets 5,019 211,294 22,337 238,650Total assets under management 152,391 292,510 175,080 619,981Other assets under administration 15,164 494,200 47,529 556,893Total assets under administration $ 167,555 $ 786,710 $ 222,609 $ 1,176,874

December 31, 2014Canada United States Europe Total

AssetsInvested assets $ 64,718 $ 36,198 $ 45,440 $ 146,356Goodwill and intangible assets 5,123 2,061 2,296 9,480Other assets 3,277 3,613 19,017 25,907Segregated funds net assets 68,372 31,030 75,564 174,966

Total assets 141,490 72,902 142,317 356,709Proprietary mutual funds and institutional net assets 4,718 190,817 20,736 216,271Total assets under management 146,208 263,719 163,053 572,980Other assets under administration 14,793 433,754 41,806 490,353Total assets under administration $ 161,001 $ 697,473 $ 204,859 $ 1,063,333

Total assets under administration at March 31, 2015 increased by $113.5 billion to approximately $1.2 trillion compared to December 31, 2014, primarily as a result of the positive impact of currency movement as well as increased market values and new business growth.

INVESTED ASSETSThe Company manages its general fund assets to support the cash flow, liquidity and profitability requirements of the Company's insurance and investment products. The Company follows prudent and conservative investment policies, so that assets are not unduly exposed to concentration, credit or market risks. The Company implements strategies within the overall framework of the Company’s policies, reviewing and adjusting them on an ongoing basis in light of liability cash flows and capital market conditions. The majority of investments of the general fund are in medium-term and long-term fixed-income investments, primarily bonds and mortgages, reflecting the characteristics of the Company’s liabilities.

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Bond portfolio – It is the Company's policy to acquire only investment grade bonds subject to prudent and well-defined investment policies. The total bond portfolio, including short-term investments, was $109.9 billion or 71% of invested assets at March 31, 2015 and $103.2 billion or 71% at December 31, 2014. The overall quality of the bond portfolio remained high, with 99% of the portfolio rated investment grade and 82% rated A or higher. The Company's bond exposure to the Oil & Gas industry, including funds held by ceding insurers, was less than 3% of invested assets at March 31, 2015 and December 31, 2014.

Bond portfolio qualityMarch 31, 2015 December 31, 2014

AAA $ 35,132 32% $ 34,332 34%AA 20,630 19 18,954 18A 33,792 31 31,133 30BBB 18,874 17 17,370 17BB or lower 1,467 1 1,379 1

Total $ 109,895 100% $ 103,168 100%

Mortgage portfolio – It is the Company’s practice to acquire only high quality commercial mortgages meeting strict underwriting standards and diversification criteria. The Company has a well-defined risk-rating system, which it uses in its underwriting and credit monitoring processes for commercial loans. Residential loans are originated by the Company’s mortgage specialists in accordance with well-established underwriting standards and are well diversified across each geographic region, including specific diversification requirements for non-insured mortgages.

Mortgage portfolioMarch 31, 2015 December 31, 2014

Mortgage loans by type Insured Non-insured Total TotalSingle family residential $ 809 $ 1,116 $ 1,925 9% $ 1,916 9%Multi-family residential 2,902 2,730 5,632 27 5,322 26Commercial 236 13,391 13,627 64 13,308 65

Total $ 3,947 $ 17,237 $ 21,184 100% $ 20,546 100%

The total mortgage portfolio was $21.2 billion or 14% of invested assets at March 31, 2015, compared to $20.5 billion or 14% of invested assets at December 31, 2014. Total insured loans were $3.9 billion or 19% of the mortgage portfolio.

Single family residential mortgages

Region March 31, 2015 December 31, 2014Ontario $ 941 49% $ 933 49%Quebec 398 21 401 21Alberta 134 7 134 7British Columbia 111 6 111 6Newfoundland 101 5 102 5Saskatchewan 81 4 78 4Nova Scotia 62 3 62 3Manitoba 54 3 51 3New Brunswick 40 2 41 2Other 3 — 3 —

Total $ 1,925 100% $ 1,916 100%

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During the three months ended March 31, 2015, single family mortgage originations, including renewals, were $129 million, of which 31% were insured. Insured mortgages include mortgages where insurance is provided by a third party and protects the Company in the event that the borrower is unable to fulfill their obligations related to the mortgage. Loans that are insured are subject to the requirements of the mortgage default insurance provider. For new originations of non-insured residential mortgages, the Company’s investment policies limit the amortization period to a maximum of 25 years and the loan-to-value to a maximum of 80% of the purchase price or current appraised value of the property. The weighted average remaining amortization period for the single family residential mortgage portfolio is 22 years as at March 31, 2015.

Provision for future credit lossesAs a component of insurance contract liabilities, the total actuarial provision for future credit losses is determined consistent with Canadian Actuarial Standards of Practice and includes provisions for adverse deviation.

At March 31, 2015, the total actuarial provision for future credit losses in insurance contract liabilities was $3,283 million compared to $3,133 million at December 31, 2014, an increase of $150 million primarily due to the impact of currency movement and normal business activity.

The aggregate of impairment provisions of $25 million ($22 million at December 31, 2014) and actuarial provisions for future credit losses in insurance contract liabilities of $3,283 million ($3,133 million at December 31, 2014) represents 2.3% of bond and mortgage assets, including funds held by ceding insurers, at March 31, 2015 (2.4% at December 31, 2014).

LIABILITIES

Total liabilitiesMarch 31 Dec. 31

2015 2014Insurance and investment contract liabilities $ 155,362 $ 146,055Other general fund liabilities 15,648 13,791Investment and insurance contracts on account of segregated fund policyholders 187,433 174,966Total $ 358,443 $ 334,812

Total liabilities increased by $23.6 billion to $358.4 billion at March 31, 2015 from December 31, 2014.

Investment and insurance contracts on account of segregated fund policyholders increased by $12.5 billion, primarily due to the combined impact of market value gains and investment income of $9.6 billion, the impact of currency movement of $2.3 billion and net deposits of $0.3 billion. Insurance and investment contract liabilities increased by $9.3 billion. The increase was primarily due to the strengthening of the U.S. dollar and British pound against the Canadian dollar, declining interest rates reflected in the fair value adjustments and the impact of the acquisition of Equitable Life's annuity business.

Investment Guarantees Associated with Wealth Management Products The Company offers retail segregated fund products, unitized with profits (UWP) products and variable annuity products that provide for certain guarantees that are tied to the market values of the investment funds.

The guaranteed minimum withdrawal benefit (GMWB) products offered by the Company provide levels of death and maturity guarantees. At March 31, 2015, the market value of GMWB product in-force in Canada, the U.S., Ireland and Germany was $3,320 million ($3,016 million at December 31, 2014). The Company has a hedging program in place to manage certain risks associated with options embedded in its GMWB products.



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Segregated funds guarantee exposureMarch 31, 2015

Investment deficiency by benefit typeIncome Maturity Death Total(1)

Canada $ — $ 30 $ 91 $ 91United States 1 — 45 46Europe

Insurance & Annuities 3 58 67 67Reinsurance(2) 415 — 21 436

418 58 88 503Total $ 419 $ 88 $ 224 $ 640

(1) A policy can only receive a payout from one of the three trigger events (income election, maturity or death). Total deficiency measures the point-in-time exposure assuming the most costly trigger event for each policy occurred on March 31, 2015.

(2) Reinsurance exposure is to markets in Canada and the United States.

The investment deficiency measures the point-in-time exposure to a trigger event (i.e., income election, maturity or death) assuming it occurred on March 31, 2015. The actual cost to the Company will depend on the trigger event having occurred and the market values at that time. The actual claims before tax associated with these guarantees were $3 million in-quarter ($2 million for the first quarter of 2014), with the majority arising in the Reinsurance business unit in the Europe segment.

SHARE CAPITAL AND SURPLUSShare capital outstanding at March 31, 2015 was $9,668 million, which comprises $7,154 million of common shares, $2,264 million of non-cumulative First Preferred Shares and $250 million of non-cumulative five-year rate reset First Preferred Shares.

The Company commenced a normal course issuer bid on December 9, 2014, terminating December 8, 2015, to purchase and cancel up to 8,000,000 of its common shares at market prices in order to mitigate the dilutive effect of stock options under the Company's Stock Option Plan. During the three months ended March 31, 2015, the Company repurchased and subsequently cancelled 765,450 common shares (2014 - 425,878) at an average cost per share of $34.23 (2014 - $31.30) under its normal course issuer bid program.

NON-CONTROLLING INTERESTSThe Company's non-controlling interests include participating account surplus in subsidiaries and non-controlling interests in subsidiaries.



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LIQUIDITY AND CAPITAL MANAGEMENT AND ADEQUACY

LIQUIDITYThe Company’s liquidity requirements are largely self-funded, with short-term obligations being met by internal funds and maintaining adequate levels of liquid investments. The Company holds cash, cash equivalents and short-term bonds at the Lifeco holding company level and with the Lifeco consolidated subsidiary companies. At March 31, 2015, the Company and its operating subsidiaries held cash, cash equivalents and short-term bonds of $9.7 billion ($7.3 billion at December 31, 2014) and other available government bonds of $32.0 billion ($32.8 billion at December 31, 2014). Included in the cash, cash equivalents and short-term bonds at March 31, 2015 is approximately $0.9 billion ($0.7 billion at December 31, 2014) at the Lifeco holding company level. In addition, the Company maintains sufficient committed lines of credit with Canadian chartered banks for unanticipated liquidity needs, if required.

The Company does not have a formal common shareholder dividend policy. Dividends on outstanding common shares of the Company are declared and paid at the sole discretion of the Board of Directors of the Company. The decision to declare a dividend on the common shares of the Company takes into account a variety of factors including the level of earnings, adequacy of capital and availability of cash resources.

As a holding company, the Company’s ability to pay dividends is dependent upon the Company receiving dividends from its operating subsidiaries. The Company’s operating subsidiaries are subject to regulation in a number of jurisdictions, each of which maintains its own regime for determining the amount of capital that must be held in connection with the different businesses carried on by the operating subsidiaries. The requirements imposed by the regulators in any jurisdiction may change from time to time, and thereby impact the ability of the operating subsidiaries to pay dividends to the Company. For entities based in Europe, the local solvency capital regime will be changing to the Solvency II basis, effective January 1, 2016. Uncertainty around the rules and regulatory interpretation could increase the near-term risk of additional local capital requirements. The Company continues to assess the impact of this change and will take appropriate steps to respond to the new regulatory environment.

CASH FLOWS

Cash flowsFor the three months ended

March 312015 2014

Cash flows relating to the following activities:Operations $ 1,092 $ 1,273Financing (380) (410)Investment (104) (561)

608 302Effects of changes in exchange rates on cash and cash equivalents 91 103Increase (decrease) in cash and cash equivalents in the period 699 405Cash and cash equivalents, beginning of period 2,498 2,791Cash and cash equivalents, end of period $ 3,197 $ 3,196

The principal source of funds for the Company on a consolidated basis is cash provided by operating activities, including premium income, net investment income and fee income. In general, these funds are used primarily to pay policy benefits, policyholder dividends and claims, as well as operating expenses and commissions. Cash flows generated by operations are mainly invested to support future liability cash requirements. Cash flow related financing activities include the issuance and repayment of capital instruments, and associated dividends and interest payments.



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In the first quarter of 2015, cash and cash equivalents increased by $699 million from December 31, 2014. Cash flows provided by operations during the first quarter of 2015 were $1,092 million, a decrease of $181 million compared to the first quarter of 2014. Cash flows used in financing were $380 million, primarily used for payment of dividends to the preferred and common shareholders of $357 million and a decrease to a line of credit of a subsidiary of $43 million, partially offset by the issuance of common shares for $57 million. During the quarter, the Company increased the dividend to common shareholders from $0.3075 per common share to $0.3260 per common share. For the three months ended March 31, 2015, cash flows were used by the Company to acquire an additional $104 million of investment assets.

COMMITMENTS/CONTRACTUAL OBLIGATIONSCommitments/contractual obligations have not changed materially from December 31, 2014.

CAPITAL MANAGEMENT AND ADEQUACYAt the holding company level, the Company monitors the amount of consolidated capital available and the amounts deployed in its various operating subsidiaries. The amount of capital deployed in any particular company or country is dependent upon local regulatory requirements, as well as the Company’s internal assessment of capital requirements in the context of its operational risks and requirements and strategic plans.

The Company’s practice is to maintain the capitalization of its regulated operating subsidiaries at a level that will exceed the relevant minimum regulatory capital requirements in the jurisdictions in which they operate. Other foreign operations and foreign subsidiaries are required to comply with local capital or solvency requirements in their respective jurisdictions. The capitalization decisions of the Company and its operating subsidiaries also give consideration to the impact such actions may have on the opinions expressed by various credit rating agencies that provide financial strength and other ratings to the Company.

In Canada, the Office of the Superintendent of Financial Institutions (OSFI) has established a capital adequacy measurement for life insurance companies incorporated under the Insurance Companies Act (Canada) and their subsidiaries, known as the MCCSR ratio. The internal target range of the MCCSR ratio for Lifeco's major Canadian operating subsidiaries is 175% to 215% (on a consolidated basis).

Great-West Life’s MCCSR ratio at March 31, 2015 was 222% (224% at December 31, 2014). London Life’s MCCSR ratio at March 31, 2015 was 237% (247% at December 31, 2014). Canada Life's MCCSR ratio at March 31, 2015 was 236% (237% at December 31, 2014). The MCCSR ratio does not take into account any impact from $0.9 billion of liquidity at the Lifeco holding company level at March 31, 2015 ($0.7 billion at December 31, 2014).

In calculating the MCCSR position, available regulatory capital is reduced by goodwill and intangible assets, subject to a prescribed inclusion for a portion of intangible assets. The OSFI MCCSR Guideline also prescribes that quarterly re-measurements to defined benefit plans, impacting available capital for the Company’s federally regulated subsidiaries, are amortized over twelve quarters.

Due to the evolving nature of IFRS and proposed future changes to IFRS for the measurement of insurance contract liabilities, there will likely be further regulatory capital and accounting changes, some of which may be significant.

The Company is both a user and a provider of reinsurance, including both traditional reinsurance, which is undertaken primarily to mitigate against assumed insurance risks, and financial reinsurance, under which the amount of insurance risk passed to the reinsurer or its reinsureds may be more limited.



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The Company has established policies and procedures designed to identify, measure and report all material risks. Management is responsible for establishing capital management procedures for implementing and monitoring the capital plan. The capital plan is designed to ensure that the Company maintains adequate capital, taking into account the Company's strategy, risk profile and business plans. The Board of Directors reviews and approves the annual capital plan as well as all capital transactions undertaken by management pursuant to the plan.

OSFI Regulatory Capital Initiatives OSFI has commenced work on a number of initiatives that will have or may have application to the calculation and reporting of the MCCSR of the Company or certain of its subsidiaries.

These initiatives are discussed in the 2013 OSFI Life Insurance Regulatory Framework. Within the Framework, there are three broad categories specific to regulatory capital amounts: the review of methodology used to determine capital requirements in connection with segregated fund guarantees; the review of the qualifying criteria and capital components of Available Capital; and the new regime for calculating capital requirements relating to credit, market, insurance and operational risk. In tandem with these reviews, OSFI will consider the extent of diversification benefits and hedging credits to reflect in its new framework.

The Company is presently reviewing the OSFI proposals that have been released to the industry to date, and is in ongoing dialogue with OSFI, the Canadian Institute of Actuaries, the Canadian Life and Health Insurance Association and other industry participants. The Company is also actively participating in OSFI Quantitative Impact Studies relating to its Life Insurance Regulatory Framework initiatives. At this point, the Company cannot determine what the final outcome of these initiatives will be.

CAPITAL ALLOCATION METHODOLOGY The Company has a capital allocation methodology, which allocates financing costs in proportion to allocated capital. For the Canadian and European segments (essentially Great-West Life), this allocation method tracks the regulatory capital requirements, while for U.S. Financial Services and U.S. Asset Management (Putnam), it tracks the financial statement carrying value of the business units. Total leverage capital is consistently allocated across all business units in proportion to total capital resulting in a debt-to-equity ratio in each business unit mirroring the consolidated Company.

The capital allocation methodology allows the Company to calculate comparable Return on Equity (ROE) for each business unit. These ROEs are therefore based on the capital the business unit has been allocated and the financing charges associated with that capital.

Return on Equity(1)

Mar. 31 Dec. 31 Mar. 312015 2014 2014(3)(4)

Canada 22.2 % 22.1 % 23.0 %U.S. Financial Services(2) 16.0 % 16.3 % 17.8 %U.S. Asset Management (Putnam) (0.7)% (3.6)% (5.3)%Europe 18.0 % 17.7 % 14.9 %Lifeco Corporate(3) (5.1)% (5.3)% (19.6)%

Total Lifeco Operating Earnings Basis(3) 16.0 % 15.7 % 14.7 %Total Lifeco Net Earnings Basis 16.0 % 15.7 % 16.2 %

(1) Return on Equity is the calculation of net earnings divided by the average common shareholders' equity over the trailing four quarters.(2) Includes U.S. Corporate.(3) Operating earnings (a non-IFRS financial measure) excludes the impact of certain litigation provisions described in note 32 to the Company's

December 31, 2014 annual consolidated financial statements, which is reflected in the results of Lifeco Corporate.(4) Comparative figures have been adjusted as described in note 2 to the Company's condensed consolidated financial statements for the period

ended March 31, 2015.



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RATINGS Great-West Lifeco maintains ratings from five independent ratings' companies. In the first quarter of 2015, the credit ratings for Lifeco and its major operating subsidiaries were unchanged (set out in table below). The Company continues to receive strong ratings relative to its North American peer group resulting from its conservative risk profile, stable net earnings and consistent dividend track record.

Lifeco's operating companies are assigned a "fleet" rating from each rating agency. This fleet rating is predominantly supported by the Company’s leading position in the Canadian insurance market and competitive positions in the U.S. and Europe. Great-West Life, London Life and Canada Life have common management, governance and strategy, as well as an integrated business platform. Each operating company benefits from the strong implicit financial support and collective ownership by Lifeco. There were no changes to the Company's fleet credit ratings in the first quarter of 2015.

Rating agency Measurement LifecoGreat-West

LifeLondon

LifeCanada

LifeGreat-WestFinancial

A.M. Best Company Financial Strength A+ A+ A+ A+DBRS Limited Claim Paying Ability IC-1 IC-1 IC-1 NR

Senior Debt AA (low)Subordinated Debt AA (low)

Fitch Ratings Insurer Financial Strength AA AA AA AASenior Debt A

Moody's Investors Service Insurance Financial Strength Aa3 Aa3 Aa3 Aa3Standard & Poor's RatingsServices

Insurer Financial Strength AA AA AA AASenior Debt A+Subordinated Debt AA-

Irish Life Assurance Plc (ILA) is rated A by Standard & Poor’s Ratings Services and AA- by Fitch Ratings. The ILA €200 million perpetual capital notes assumed on the acquisition of Irish Life are rated BBB+ by Standard & Poor's Ratings Services and A- by Fitch Ratings.



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RISK MANAGEMENT AND CONTROL PRACTICES

DERIVATIVE FINANCIAL INSTRUMENTSThere were no major changes to the Company's policies and procedures with respect to the use of derivative financial instruments in the first quarter of 2015. The Company’s derivative transactions are generally governed by International Swaps and Derivatives Association, Inc. (ISDA) Master Agreements, which provide for legally enforceable set-off and close-out netting of exposure to specific counterparties in the event of early termination of a transaction, which includes but is not limited to, events of default and bankruptcy. In the event of an early termination, the Company is permitted to set off receivables from a counterparty against payables to the same counterparty, in the same legal entity, arising out of all included transactions. The Company’s ISDA Master Agreements may include Credit Support Annex provisions, which require both the pledging and accepting of collateral in connection with its derivative transactions. At March 31, 2015, total financial collateral, including initial margin and overcollateralization, received on derivative assets was $105 million ($52 million at December 31, 2014) and pledged on derivative liabilities was $340 million ($299 million at December 31, 2014).

During the three month period ended March 31, 2015, the outstanding notional amount of derivative contracts increased by $8.1 billion to $23.6 billion, primarily due to an increase of $7.9 billion in forward settling to-be-announced security transactions.

The Company’s exposure to derivative counterparty credit risk, which reflects the current fair value of those instruments in a gain position, decreased to $583 million at March 31, 2015 from $652 million at December 31, 2014. Market value decreased on cross currency swaps, that pay U.S. dollars and receive Canadian dollars, due to the strengthening of the U.S. dollar, as well certain interest rate swaps that were in an unrealized gain position of $202 million at December 31, 2015 were unwound. These decreases were partially offset by market value increases on interest rate swaps that receive fixed rates and pay floating rates which were impacted by declining interest rates.

ACCOUNTING POLICIES

INTERNATIONAL FINANCIAL REPORTING STANDARDSDue to the evolving nature of IFRS, there are a number of IFRS changes impacting the Company in 2015, as well as standards that could impact the Company in future reporting periods. The Company actively monitors future IFRS changes proposed by the International Accounting Standards Board (IASB) to assess if the changes to the standards may have an impact on the Company's results or operations.

The Company adopted the narrow scope amendments to IFRS for Annual Improvements 2010 - 2012 Cycle, Annual Improvements 2011 - 2013 Cycle and IAS 19 Employee Benefits effective January 1, 2015. The adoption of these narrow scope amendments did not have a significant impact on the Company’s financial statements.

In regards to future accounting policy changes that could impact the Company, there have been no significant changes from the disclosure included in the Company's 2014 Annual MD&A.



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SEGMENTED OPERATING RESULTS

The consolidated operating results of Lifeco, including the comparative figures, are presented on an IFRS basis after capital allocation. Consolidated operating results for Lifeco comprise the net earnings of Great-West Life and its operating subsidiaries, London Life and Canada Life; Great-West Financial and Putnam, together with Lifeco's corporate results.

For reporting purposes, the consolidated operating results are grouped into four reportable segments – Canada, United States, Europe and Lifeco Corporate – reflecting geographic lines as well as the management and corporate structure of the companies.

CANADAThe Canada segment of Lifeco includes the operating results of the Canadian businesses operated by Great-West Life, London Life and Canada Life. There are three primary business units included in this segment. Through its Individual Insurance business unit, the Company provides life, disability and critical illness insurance products to individual clients. Through its Wealth Management business unit, the Company provides accumulation products and annuity products for both group and individual clients in Canada. Through its Group Insurance business unit, the Company provides life, health, critical illness, disability and creditor insurance products to group clients in Canada.

Selected consolidated financial information - CanadaFor the three months ended

March 312015

Dec. 312014

March 312014

Premiums and deposits $ 5,913 $ 5,874 $ 7,028Sales 3,183 3,311 3,202Fee and other income 358 349 344Net earnings - common shareholders 299 300 294

Total assets $ 147,372 $ 141,490 $ 135,197Proprietary mutual funds and institutional net assets 5,019 4,718 4,382Total assets under management 152,391 146,208 139,579Other assets under administration 15,164 14,793 13,812Total assets under administration $ 167,555 $ 161,001 $ 153,391

2015 DEVELOPMENTS• Premiums and deposits for the first quarter of 2015 were $5,913 million, a decrease of $1,115 million compared to

the same quarter in 2014. For the first quarter of 2014, premiums and deposits included $1,066 million relating to the conversion of certain pension plan assets into a segregated fund product, which did not recur in 2015. Excluding the impact of this conversion, premiums and deposits were comparable to the same quarter in 2014.

• Sales for the first quarter of 2015 of $3,183 million were comparable to $3,202 million for the same quarter in 2014.

• Fee and other income was $358 million for the first quarter of 2015, an increase of $14 million compared to the same quarter in 2014, primarily due to growth in assets under management driven by market gains and positive net cash flows.

• Net earnings in the first quarter of 2015 of $299 million were comparable to $294 million for the same quarter in 2014 as strong investment experience was mostly offset by lower contributions from insurance contract liability basis changes and higher expenses.

• The Canada segment continued to focus on organic growth, including increased investment in digital technology and services.



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BUSINESS UNITS - CANADA

INDIVIDUAL INSURANCE

OPERATING RESULTS

For the three months endedMarch 31

2015Dec. 31

2014March 31

2014Premiums and deposits $ 1,154 $ 1,202 $ 1,077Sales 113 117 122Net earnings 77 120 69

Premiums and depositsIndividual Insurance premiums in the first quarter of 2015 increased by $77 million to $1,154 million compared to the same quarter last year. Individual Life premiums for the quarter increased by $78 million to $1,072 million compared to the same quarter last year, primarily due to an increase in participating life premiums. Living Benefits premiums of $82 million were comparable to the same quarter last year.

Individual Insurance premiums in the first quarter of 2015 decreased by $48 million compared to the previous quarter, primarily due to lower participating life premiums.

SalesIndividual Insurance sales in the first quarter of 2015 decreased by $9 million to $113 million compared to the same quarter last year. Participating life insurance sales remain strong, up $2 million or 2%. Universal Life and Term Life insurance product sales decreased by $10 million or 30%, impacted by application processing delays as a result of new business process system issues. While first quarter Individual Life sales are down year-over-year, the results continued to improve during the quarter as the Company continues to work on returning to normal service levels during 2015.

Individual Insurance sales in the first quarter of 2015 decreased by $4 million compared to the previous quarter, primarily due to a 4% decrease in participating life insurance sales.

Net earningsNet earnings for the first quarter of 2015 increased by $8 million to $77 million compared to the same quarter last year. The increase was primarily due to higher contributions from investment experience and favourable morbidity experience, partially offset by higher new business strain and lower contributions from insurance contract liability basis changes.

Net earnings for the first quarter of 2015 decreased by $43 million compared to the previous quarter. The decrease was primarily due to lower contributions from insurance contract liability basis changes, partially offset by higher contributions from investment experience and favourable morbidity experience.

In the first quarter of 2015, the net earnings attributable to the participating account increased by $11 million to $33 million compared to the same quarter last year. The increase was primarily due to higher contributions from investment experience on par surplus assets.

The net earnings attributable to the participating account in the first quarter of 2015 increased by $9 million from the previous quarter. The increase was primarily due to higher contributions from investment experience on par surplus assets and lower new business strain, partially offset by lower contributions from insurance contract liability basis changes.



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WEALTH MANAGEMENT

OPERATING RESULTS


2015Dec. 31

2014March 31

2014Premiums and deposits $ 2,811 $ 2,741 $ 4,051Sales 2,944 3,073 2,933Fee and other income 308 297 294Net earnings 122 69 105

Premiums and depositsExcluding the impact of the conversion of certain pension plan assets into a segregated fund products of $1,066 million in the first quarter of 2014, premiums and deposits in the first quarter of 2015 were $2,811 million, a decrease of $174 million. Lower premiums related to group capital accumulation plan (GCAP) products and single premium group annuities (SPGAs) in the first quarter of 2015 were partially offset by an increase in premiums and deposits into retail investment funds.

Premiums and deposits in the first quarter of 2015 increased by $70 million compared to the previous quarter. The increase was primarily driven by higher premiums relating to retail investment funds driven by registered retirement savings plans (RRSP) seasonality impacts, partially offset by lower premiums into SPGAs.

SalesSales in the first quarter of 2015 increased by $11 million to $2,944 million compared to the same quarter last year. The increase was primarily due to higher sales of retail investment funds, moderated by lower sales of GCAP products and SPGAs.

Sales in the first quarter of 2015 decreased by $129 million compared to the previous quarter. The decrease was driven by lower sales of GCAP products and SPGAs, partially offset by higher sales of retail investment funds.

Net cash inflows for the first quarter of 2015 were $250 million compared to $1,312 million in the same quarter last year and $264 million in the previous quarter. First quarter 2014 net cash inflows included $1,066 million related to the conversion of certain pension plan assets into a segregated fund product. Excluding this conversion, net cash inflows were comparable to the same quarter in 2014.

Fee and other incomeFee and other income in the first quarter of 2015 increased by $14 million to $308 million compared to the same quarter last year. The increase was due to growth in assets under management driven by market gains and positive net cash flows, partially offset by lower fee margins.

Fee and other income in the first quarter of 2015 increased by $11 million compared to the previous quarter, primarily due to a fee income provision established in the previous quarter.

Net earningsNet earnings for the first quarter of 2015 increased by $17 million to $122 million compared to the same quarter last year. The increase was primarily driven by higher fee income, higher contributions from investment experience and more favourable mortality experience, partially offset by lower contributions from insurance contract liability basis changes and increased operating expenses.

Net earnings for the first quarter of 2015 increased by $53 million compared to the previous quarter for the same reasons discussed for the in-quarter results.



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GROUP INSURANCE

OPERATING RESULTS


2015Dec. 31

2014March 31

2014Premiums and deposits $ 1,948 $ 1,931 $ 1,900Sales 126 121 147Fee and other income 39 40 38Net earnings 109 96 109

Premiums and depositsPremiums and deposits in the first quarter of 2015 increased by $48 million to $1,948 million compared to the same quarter last year, primarily due to an increase in mid-size and large case market premiums and deposits.

Premiums and deposits in the first quarter of 2015 increased by $17 million compared to the previous quarter, for the same reasons discussed for the in-quarter results.

SalesSales in the first quarter of 2015 decreased by $21 million to $126 million compared to the same quarter last year, primarily due to lower creditor sales in the large case market. Sales of creditor/direct marketing products can be highly variable from quarter to quarter.

Sales in the first quarter of 2015 increased by $5 million compared to the previous quarter, primarily due to higher sales in the large case market.

Fee and other incomeFee and other income of $39 million for the first quarter of 2015 was both comparable to the same quarter last year and the previous quarter.

Net earningsNet earnings for the first quarter of 2015 of $109 million were comparable to the same quarter last year. Higher contributions from investment experience and favourable morbidity experience were offset by lower contributions from insurance contract liability basis changes.

Net earnings for the first quarter of 2015 increased by $13 million compared to the previous quarter, primarily due to higher contributions from investment experience and favourable morbidity experience, partially offset by lower contributions from insurance contract liability basis changes and increased operating expenses.



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CANADA CORPORATECanada Corporate consists of items not associated directly with or allocated to the Canadian business units.

In the first quarter of 2015, Canada Corporate had a net loss of $9 million compared to net earnings of $11 million for the same quarter last year. The decrease was primarily due to increased allocated financing charges, lower income on surplus assets and an increase in reserves for uncertain tax positions.

In the first quarter of 2015, Canada Corporate had a net loss of $9 million compared to net earnings of $15 million in the previous quarter. The decrease was primarily due to an increase in reserves for uncertain tax positions and increased allocated financing charges, partially offset by lower net expenses and higher income on surplus assets.

UNITED STATESThe United States operating results for Lifeco include the results of Great-West Financial, Putnam and the results of the insurance businesses in the United States branches of Great-West Life and Canada Life, together with an allocation of a portion of Lifeco's corporate results.

Through its Financial Services business unit, and specifically the Empower Retirement brand, the Company provides an array of financial security products, including employer-sponsored defined contribution plans, administrative and recordkeeping services, individual retirement accounts, fund management as well as investment and advisory services. The Company also provides life insurance and annuity products and executive benefits products.

Through its Asset Management business unit, the Company provides investment management, certain administrative functions, distributions and related services through a broad range of investment products.

TRANSLATION OF FOREIGN CURRENCYForeign currency assets and liabilities are translated into Canadian dollars at the market rate at the end of the financial period. All income and expense items are translated at an average rate for the period.

Currency translation impact is a non-IFRS financial measure that highlights the impact of changes in currency translation rates on IFRS results. This measure provides useful information as it facilitates comparability of results between periods. Refer to the Cautionary Note regarding non-IFRS Financial Measures at the beginning of this document.



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Selected consolidated financial information - United StatesFor the three months ended

March 312015

Dec. 312014

March 31 2014(1)(2)

Premiums and deposits(1) $ 12,962 $ 12,810 $ 12,413Sales 19,436 15,105 13,159Fee and other income 573 522 419Net earnings - common shareholders 121 89 41Net earnings - common shareholders (US$) 98 77 37

Total assets(2) $ 81,216 $ 72,902 $ 68,332Proprietary mutual funds and institutional net assets 211,294 190,817 177,063Total assets under management 292,510 263,719 245,395Other assets under administration 494,200 433,754 207,348Total assets under administration $ 786,710 $ 697,473 $ 452,743

(1) Comparative figures for premiums and deposits (a non-IFRS financial measure) have been restated to improve consistency across the Company's business units.

(2) Comparative figures have been restated for a prior period adjustment described in note 2 to the Company's condensed consolidated financial statements for the period ended March 31, 2015.

2015 DEVELOPMENTS• Under the Empower Retirement brand, effective January 1, 2015, the retirement services businesses of Great-

West Financial, the acquired J.P. Morgan Retirement Plan Services (RPS) and Putnam Investments have merged, creating the second largest recordkeeping provider in the U.S. with over 7.3 million participant accounts. Empower Retirement also includes the individual retirement account (IRA) business that was previously reported with Great-West Financial's Individual Markets results. Empower Retirement brings together best in class capabilities that leverage the attributes and specializations of each of the predecessor businesses.

• Within the business unit sections, 2015 figures are aligned with the new business structure, while 2014 comparative figures reflect the previous structure. For the full year in 2014, Putnam's retirement service business recorded a net loss of approximately US$20 million. As noted above, in 2015 this business is integrated within the Empower Retirement operations.

• Net earnings for the three months ended March 31, 2015 were US$98 million, an increase of US$61 million over the same quarter last year.

BUSINESS UNITS – UNITED STATES

FINANCIAL SERVICES

2015 DEVELOPMENTS• Sales for the first quarter of 2015 were US$7.4 billion, an increase of US$4.5 billion compared to the same quarter

last year, primarily due to an increased number of large plan sales in Empower Retirement.

• Fee and other income for the three months ended March 31, 2015 was US$238 million, an increase of US$69 million from the same period last year, primarily due to the addition of RPS fee income of US$49 million which was acquired on August 29, 2014.

• Net earnings for the three months ended March 31, 2015 were US$97 million, an increase of US$12 million over the same period last year.

• Empower Retirement is investing in significant strategic and business development initiatives as part of the integration plan. Enhancements are being made, which will improve the client-facing experience as well as streamline the back-office processing over the next several years.



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• Great-West Financial received three Lipper Fund Awards for its Great-West Aggressive Profile II fund including top performing fund in the Mixed-Asset Target Allocation Aggressive Growth Funds category for three-year, five-year and ten-year periods, ended November 30, 2014. Great-West MFS International Value Fund also received a Lipper Fund Award; it was named the best performing fund in the International Multi-Cap Core Fund category for the five-year period ended November 30, 2014.

• In March 2015, Great-West Financial was one of the top ten companies for variable annuity sales of Fifth Third Bank, a bank distribution partner.

OPERATING RESULTS


2015Dec. 31

2014March 31

2014(1)

Premiums and deposits(1) $ 2,730 $ 2,268 $ 2,441Sales 9,204 4,563 3,187Fee and other income 295 245 185Net earnings 120 93 94

Premiums and deposits (US$)(1) $ 2,202 $ 1,990 $ 2,219Sales (US$) 7,423 4,003 2,897Fee and other income (US$) 238 215 169Net earnings (US$) 97 80 85

(1) Comparative figures for premiums and deposits (a non-IFRS financial measure) have been restated to improve consistency across the Company's business units.

Premiums and depositsPremiums and deposits for the first quarter of 2015 decreased by US$17 million to US$2,202 million compared to the first quarter of 2014, due to an increase of US$111 million in Empower Retirement being offset by a decrease of US$128 million in Individual Markets. The increase in Empower Retirement was primarily due to an increase in large plan sales, partially offset by lower contributions from participants of existing plans. The decrease in Individual Markets reflects IRA premiums and deposits being included with Empower Retirement results in 2015. In the first quarter of 2014, IRA premiums and deposits were US$59 million.

Premiums and deposits in the first quarter of 2015 increased by US$212 million compared to the previous quarter. Empower Retirement premiums increased by US$388 million, primarily due to an increase in large plan sales, partly offset by lower contributions from participants of existing plans. Individual Markets premiums decreased US$176 million, reflecting IRA premiums and deposits being included with Empower Retirement results in 2015. In the fourth quarter of 2014, IRA premiums and deposits were US$116 million.

SalesSales in the first quarter of 2015 increased by US$4,526 million to US$7,423 million compared to the same period in 2014, due to an increase of US$4,710 million in Empower Retirement, partially offset by a decrease of US$184 million in Individual Markets. Empower Retirement sales include an increase in large plan sales of US$3,379 million, an increase in IRA sales of US$624 million as well as an increase in transferred assets from participants of existing plans and plan mergers. The decrease in Individual Markets sales was primarily due to IRA sales being included with Empower Retirement results in 2015. In the first quarter of 2014, IRA sales were US$133 million.



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Sales in the first quarter of 2015 increased by US$3,420 million compared to the previous quarter, due to an increase of US$3,930 million in Empower Retirement, partially offset by a decrease of US$510 million in Individual Markets. Empower Retirement sales include an increase in large plan sales of US$2,720 million, an increase in IRA sales of US$624 million as well as an increase in transferred assets from participants of existing plans and plan mergers. The decrease in Individual Markets sales was primarily due to IRA sales being included with Empower Retirement results in 2015. In the fourth quarter of 2014, IRA sales were US$413 million.

Fee and other incomeFee and other income for the first quarter of 2015 increased by US$69 million to US$238 million compared to the same quarter last year. The increase was primarily due to higher fees resulting from the RPS acquisition of US$49 million, increased average asset levels driven by higher average equity market levels and positive cash flows as well as the impact of the transfer of the defined contribution business from Putnam to Empower Retirement on January 1, 2015. In the first quarter of 2014, Putnam fee income included US$7 million related to the transferred defined contribution business.

Fee and other income for the first quarter of 2015 increased by US$23 million to US$238 million compared to the previous quarter, primarily due to increased average asset levels driven by higher average equity market levels and positive cash flows as well as additional fee income relating to the transfer of Putnam's defined contribution business discussed for the in-quarter results.

Net earningsNet earnings for the first quarter of 2015 increased by US$12 million to US$97 million compared to the same quarter last year. Higher contributions from investment experience were partially offset by increased strategic and business development expenses related to Empower Retirement of US$6 million and the impact of the transfer of the defined contribution business from Putnam to Empower Retirement. Putnam net earnings in the first quarter of 2014 included a net loss of US$5 million related to the transferred defined contribution business.

Net earnings for the first quarter of 2015 increased by US$17 million compared to the previous quarter. The increase in net earnings was primarily due to higher contributions from investment experience, partially offset by a net loss relating to Empower Retirement's defined contribution business discussed for the in-quarter results.

ASSET MANAGEMENT

2015 DEVELOPMENTS• Putnam’s ending assets under management (AUM) at March 31, 2015 of US$159 billion increased by US$6 billion

compared to the same quarter last year.

• Sales for the three months ended March 31, 2015 were US$8.3 billion, a decrease of US$0.8 billion compared to the same quarter last year.

• Fee income was US$224 million for the first quarter of 2015, an increase of US$12 million compared to the same quarter last year.

• On January 1, 2015, Putnam transferred its defined contribution full service retirement business to Great-West Financial's Empower Retirement operation.

• Five of Putnam's mutual funds received 2015 Lipper Fund Awards to honour their consistent, strong risk-adjusted performance relative to peers for periods of three years or more.

• Putnam has been named Money Management Institute’s Advisory Solutions Manager Distribution Team of the Year for its effective distribution strategy and execution, successfully linking marketing and sales, and achieving significant and relative growth in net sales.



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• For the fourth consecutive year, Putnam has been named the sole recipient of the "Total Client Experience" award from DALBAR. This award reflects multi-dimensional analysis by DALBAR of customer service that is based on rigorous, systematic and yearlong testing.

• Putnam continues to sustain strong risk-adjusted investment performance relative to its peers. As of March 31, 2015, approximately 88% and 77% respectively, of Putnam’s fund assets performed at levels above the Lipper median on a three-year and five-year basis. Additionally, approximately 54% of Putnam’s fund assets performed at levels in the Lipper Top Quartile on a three-year basis.

OPERATING RESULTS


2015Dec. 31

2014March 31

2014Sales $ 10,232 $ 10,542 $ 9,972Fee income

Investment management fees 213 197 175Performance fees 3 13 3Service fees 42 47 43Underwriting & distribution fees 20 20 13

Fee income 278 277 234

Core net earnings (loss)(1) 15 14 (14)Less: Financing and other expenses (after-tax)(1) (13) (15) (39)

Reported net earnings (loss) 2 (1) (53)

Sales (US$) $ 8,252 $ 9,248 $ 9,065Fee income (US$)

Investment management fees (US$) 172 173 158Performance fees (US$) 3 12 3Service fees (US$) 34 41 39Underwriting & distribution fees (US$) 15 17 12

Fee income (US$) 224 243 212

Core net earnings (loss) (US$)(1) 12 12 (13)Less: Financing and other expenses (after-tax) (US$)(1) (10) (13) (35)

Reported net earnings (loss) (US$) 2 (1) (48)

Pre-tax operating margin (US$)(2) 9.2% 13.4% (5.1)%

(1) Core net earnings (loss) (a non-IFRS financial measure) is a measure of the Asset Management business unit's performance. Core net earnings (loss) includes the impact of dealer commissions and software amortization, and excludes the impact of corporate financing charges and allocations and fair value adjustments related to stock-based compensation.

(2) Pre-tax operating margin (a non-IFRS financial measure) is a measure of the Asset Management business unit's pre-tax core net earnings (loss) divided by the sum of fee income and net investment income.



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SalesSales in the first quarter of 2015 decreased by US$0.8 billion to US$8.3 billion compared to the same quarter last year, due to a decrease in mutual fund sales of US$0.8 billion. Institutional sales were comparable to the same quarter last year.

Sales in the first quarter of 2015 decreased by US$1.0 billion compared to the previous quarter, due to a decrease in mutual fund sales of US$0.6 billion and a decrease in institutional sales of US$0.4 billion.

Fee incomeFee income is derived primarily from investment management fees, performance fees, transfer agency and other service fees, as well as underwriting and distribution fees. Generally, fees are earned based on AUM and may depend on financial markets, the relative performance of Putnam’s investment products, the number of retail accounts and sales.

Fee income for the first quarter of 2015 increased by US$12 million to US$224 million compared to the same quarter last year. Fee income for the first quarter of 2014 included US$7 million related to the defined contribution business, which was transferred to Empower Retirement on January 1, 2015. Excluding the impact of the defined contribution business, fee income increased by US$19 million, primarily due to increased investment management fees driven by growth in assets under management.

Fee income for the first quarter of 2015 decreased by US$19 million compared to the previous quarter. Fee income for the fourth quarter of 2014 included US$8 million related to the defined contribution business transferred to Empower Retirement. Excluding the impact of the defined contribution business, fee income decreased by US$11 million, primarily due to lower performance fees due to the seasonality in which these fees are earned.

Net earningsCore net earnings (a non-IFRS financial measure) for the first quarter of 2015 were US$12 million compared to a core net loss of US$13 million in the same quarter last year. Core net earnings for the first quarter of 2014 included a loss of US$5 million attributable to the defined contribution business transferred to Empower Retirement, while the current year quarter includes US$5 million of expense recoveries not expected to recur. Excluding the impact of these items, core net earnings increased US$15 million, primarily due to higher fee income and net investment income, partially offset by higher operating expenses. Reported net earnings, including financing and other expenses, for the first quarter of 2015 were US$2 million compared to a net loss of US$48 million for the same quarter last year. Financing and other expenses for the first quarter of 2015 decreased by US$25 million to US$10 million compared to the same quarter last year. First quarter 2014 financing and other expenses included the impact of share-based liability compensation expense of US$21 million and proxy expenses for the Putnam Funds of US$4 million, which did not recur in 2015.

Core net earnings for the first quarter of 2015 were comparable to the previous quarter. Core net earnings for the fourth quarter of 2014 included a loss of US$4 million attributable to the defined contribution business transferred to Empower Retirement as well as an expense recovery related to the settlement of a legal matter of US$12 million and higher tax expenses of US$7 million related to a change U.S. state tax rates. Excluding the impact of these items and the 2015 expense recoveries noted above, core net earnings for the first quarter of 2015 decreased US$4 million, primarily due to lower fee income and higher operating expenses, partially offset by higher investment income. Reported net earnings, including financing and other expenses, for the first quarter of 2015 were US$2 million compared to a net loss of US$1 million in the previous quarter. Financing and other expenses for the first quarter of 2015 decreased by US$3 million to US$10 million compared to the previous quarter, primarily due to expenses incurred in the fourth quarter of 2014 related to the impending transfer of the defined contribution business to Empower Retirement.



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ASSETS UNDER MANAGEMENT

Assets under management ($US)For the three months ended

March 312015

Dec. 312014

March 312014

Beginning assets $ 157,572 $ 157,047 $ 149,556

Sales - Mutual funds 5,608 6,244 6,376Redemptions - Mutual funds (5,166) (5,573) (3,929)Net asset flows - Mutual funds 442 671 2,447

Sales - Putnam Institutional 2,644 3,004 2,689Redemptions - Putnam Institutional (3,063) (4,913) (4,046)Net asset flows - Putnam Institutional (419) (1,909) (1,357)

Net asset flows - Total 23 (1,238) 1,090

Impact of market/performance 1,613 1,763 2,786

Ending assets $ 159,208 $ 157,572 $ 153,432

Average assets under managementMutual funds 87,269 85,462 78,406Institutional assets 71,127 71,769 72,034Total average assets under management $ 158,396 $ 157,231 $ 150,440

Average AUM for the three months ended March 31, 2015 was US$158.4 billion. Average AUM increased by US$8.0 billion compared to the same quarter last year, primarily due to the impact of positive market and investment performance as well as net asset inflows over the twelve month period. Net asset inflows for the first quarter of 2015 were nominal compared to net inflows of US$1.1 billion in the same quarter last year as in-quarter mutual fund net asset inflows of US$0.4 billion were offset by institutional outflows of US$0.4 billion.

Average AUM increased by US$1.2 billion compared to the previous quarter, primarily due to the impact of positive market and investment performance.

UNITED STATES CORPORATEUnited States Corporate consists of items not associated directly with or allocated to the United States business units, including the impact of certain non-continuing items related to the U.S. segment.

In the first quarter of 2015, United States Corporate had a net loss of US$1 million compared to nil for the same period in 2014, due to RPS acquisition related restructuring costs in 2015.

The net loss for the three months ended March 31, 2015 was US$1 million compared to US$2 million in the previous quarter, due to lower RPS acquisition related restructuring costs in the first quarter of 2015.



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EUROPEThe Europe segment comprises two distinct business units: Insurance & Annuities, where the Company offers protection and wealth management products including payout annuity products through subsidiaries of Canada Life in the U.K., the Isle of Man and Germany, as well as through Irish Life in Ireland; and Reinsurance, which operates primarily in the U.S., Barbados and Ireland. Reinsurance products are provided through Canada Life, London Life and their subsidiaries.

TRANSLATION OF FOREIGN CURRENCYForeign currency assets and liabilities are translated into Canadian dollars at the market rate at the end of the financial period. All income and expense items are translated at an average rate for the period.

Currency translation impact is a non-IFRS financial measure that highlights the impact of changes in currency translation rates on IFRS results. This measure provides useful information as it facilitates comparability of results between periods. Refer to the Cautionary Note regarding non-IFRS Financial Measures at the beginning of this document.

Selected consolidated financial information - Europe


2015Dec. 31

2014March 31

2014Premiums and deposits $ 6,673 $ 5,340 $ 5,089Fee and other income 327 290 296Net earnings - common shareholders 286 274 259

Total assets $ 152,743 $ 142,317 $ 139,301Proprietary mutual funds and institutional net assets 22,337 20,736 18,476Total assets under management 175,080 163,053 157,777Other assets under administration 47,529 41,806 41,953Total assets under administration $ 222,609 $ 204,859 $ 199,730

2015 DEVELOPMENTS• On March 3, 2015, the Company announced that it reached an agreement with The Equitable Life Assurance Society

(Equitable Life) in the U.K. to acquire, through its wholly owned subsidiary, Canada Life Limited, the assets and liabilities associated with Equitable Life’s annuity business. The transaction involves the initial reinsurance and ultimate transfer, subject to court process, of approximately 31,000 policies, with liabilities and supporting assets of approximately $1.6 billion. The initial reinsurance arrangement was effective January 1, 2015.

• Premiums and deposits for the first quarter of 2015 were $6.7 billion compared to $5.1 billion for the same quarter last year, including $1.6 billion related to the acquisition of Equitable Life's annuity business.

• Fee and other income for the first quarter of 2015 was $327 million compared to $296 million for the same quarter last year, primarily due to higher assets under management, driven by market gains and new mandates.

• Net earnings for the first quarter of 2015 were $286 million, an increase of $27 million from the same quarter last year, primarily due to favourable investment experience and higher contributions from insurance contract liability basis changes.



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• The 2014 U.K. Budget introduced greater flexibility for those individuals with defined contribution pensions to access their savings in retirement. These changes became effective in April 2015 and have reduced, and will continue to impact, the sales of annuities in the U.K. In the first quarter of 2015, excluding Equitable Life's sales, U.K. retail payout annuities sales were 18% of the sales levels in the first quarter of 2014. In April 2015, the Company launched new products in the U.K. to enable clients to take advantage of these flexibilities and the Company anticipates this market will develop over time.

The Company’s earnings contribution from the U.K. annuity market comes from new sales, existing in-force business and includes yield enhancement on the in-force business assets. The earnings contribution from the in-force business is more significant than the earnings contribution from new sales.

• On February 10, 2015, the Company announced that it reached an agreement to acquire, through its subsidiary The Canada Life Group (UK) Limited, Legal & General International (Ireland) Limited (LGII), a Dublin-based subsidiary of the Legal & General Group Plc. LGII provides investment and tax planning solutions, primarily focused on the U.K. high net worth market and has over 4,000 U.K. offshore bond policies with assets under administration of £2.5 billion (as at October 30, 2014). The transaction is expected to close in the second quarter of 2015 and is subject to customary regulatory approvals, including approvals from the European Commission under the EU Merger Regulation as well as certain other closing conditions.

• In Ireland, Irish Life was awarded the Life Sector overall winner in the annual Irish Brokers Association industry awards. In addition, Irish Life won the Gold Award at the Irish Media Awards for its “We Know Irish life; We are Irish Life” campaign.

• In Europe, the Company continues to develop and implement the new Solvency II regulations in advance of the effective date of January 1, 2016. The implementation of Solvency II regulations will remain the focus of all of the Company's regulated European businesses during 2015. The Company is making good progress and has established a single European holding company for its EU based entities, which is intended to be the European group for Solvency II purposes.

BUSINESS UNITS – EUROPE

INSURANCE & ANNUITIES

OPERATING RESULTS


2015Dec. 31

2014March 31

2014Premiums and deposits $ 5,160 $ 3,875 $ 4,112Sales 4,456 3,155 3,506Fee and other income 322 284 286Net earnings 216 218 200

Premiums and depositsPremiums and deposits for the first quarter of 2015 increased by $1.0 billion to $5.2 billion compared to the same quarter in 2014. The increase was primarily due to the impact of the acquisition of Equitable Life's annuity business. The increase was partially offset by lower retail U.K. payout annuity sales following the changes announced in the 2014 U.K. Budget as well as the impact of currency movement, driven by the weakening of the euro during the quarter compared to the first quarter of 2014.

Premiums and deposits for the first quarter of 2015 increased by $1.3 billion compared to the previous quarter. The increase was primarily due to the impact of the acquisition of Equitable Life's annuity business and the impact of currency movement, driven by the strengthening of the British pound during the quarter. This increase was partially offset by lower pension sales in Ireland and Germany reflecting normal seasonal fluctuations.



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SalesSales for the first quarter of 2015 increased by $1.0 billion to $4.5 billion compared to the same quarter in 2014. The increase was primarily due to the impact of the acquisition of Equitable Life's annuity business. This increase was partly offset by lower U.K. payout annuity sales following the changes announced in the 2014 U.K. Budget, lower fund management sales in Ireland and the impact of currency movement, as a result of the weakening of the euro during the quarter compared to the first quarter of 2014.

Sales for the first quarter of 2015 increased by $1.3 billion from the previous quarter, primarily due to the acquisition of Equitable Life's annuity business and the positive impact of currency movement, driven by the strengthening of the British pound during the quarter. These increases were partly offset by lower fund management and pension sales in Ireland and Germany reflecting normal seasonal fluctuations.

Fee and other incomeFee and other income for the first quarter of 2015 increased by $36 million to $322 million compared to the same quarter in 2014. The increase was primarily due to higher fees in Ireland resulting from growth in assets under management, driven by market gains, partially offset by the impact of currency movement, as a result of the weakening of the euro during the quarter compared to the first quarter of 2014.

Fee and other income for the first quarter of 2015 increased by $38 million compared to the previous quarter. The increase was primarily due to higher fees in Ireland resulting from growth in assets under management, driven by market gains. Net earnings Net earnings for the first quarter of 2015 increased by $16 million to $216 million compared to the same quarter in 2014, primarily due to higher contributions from insurance contract liability basis changes, higher asset management fees in Ireland and improved morbidity experience in the U.K. and Ireland. Basis changes reflect refinements to annuitant longevity assumptions and updated asset cash flow assumptions. These items were mostly offset by the impact of lower U.K. payout annuity new business volumes, lower contributions from investment experience, less favourable mortality experience and higher income taxes. Insurance and Annuities net earnings include $80 million of net earnings in Ireland, up $28 million from the first quarter of 2014 for the reasons discussed above as well as an increase in benefits from integration synergies.

Net earnings for the first quarter of 2015 decreased by $2 million compared to the previous quarter, due to lower contributions from insurance contract liability basis changes, lower contributions from investment experience, less favourable mortality experience and higher income taxes. These impacts were offset by higher asset management fees in Ireland and improved morbidity experience in the U.K. and Ireland. The fourth quarter of 2014 included basis changes reflecting refinements to the annuitant mortality assumptions and the impact of changes to actuarial standards related to economic reinvestment assumptions.



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REINSURANCE

OPERATING RESULTS


2015Dec. 31

2014March 31

2014Premiums and deposits $ 1,513 $ 1,465 $ 977Fee and other income 5 6 10Net earnings 77 71 63

Premiums and depositsReinsurance premiums can vary significantly from period to period depending on the terms of underlying treaties. For certain life reinsurance transactions, premiums will vary based on the form of the transaction. Treaties where insurance contract liabilities are assumed on a proportionate basis will typically have significantly higher premiums than treaties where claims are not incurred by the reinsurer until a threshold is exceeded.

Premiums and deposits for the first quarter of 2015 increased by $536 million to $1,513 million compared to the same quarter last year, primarily due to higher new business volumes and the positive impact of currency movement.

Premiums and deposits for the first quarter of 2015 increased by $48 million compared to the previous quarter, primarily due to the positive impact of currency movement, partially offset by lower new business volumes.

Fee and other incomeFee and other income for the first quarter of 2015 was $5 million, down from $10 million in the same quarter last year. Certain life treaties were restructured in the fourth quarter of 2014 and result in lower fee income on an ongoing basis.

Fee and other income for the first quarter of 2015 was comparable to the previous quarter.

Net earningsNet earnings for the first quarter of 2015 increased by $14 million to $77 million compared to the same quarter in 2014. The increase was primarily due to the positive impact of insurance contract liability basis changes, higher contributions from investment experience and the positive impact of currency movement, partially offset by higher new business strain relating to traditional life reinsurance.

Net earnings for the first quarter of 2015 increased by $6 million compared to the previous quarter. The increase was primarily due to lower new business strain relating to traditional life reinsurance, higher contributions from investment experience and the positive impact of currency movement, partially offset by lower contributions from insurance contract liability basis changes and higher income taxes.

EUROPE CORPORATEThe Europe Corporate account includes financing charges, the impact of certain non-continuing items as well as the results for the legacy international businesses.

In the first quarter of 2015, Europe Corporate had a net loss of $7 million compared to a net loss of $4 million for the same period in 2014. First quarter 2015 results include restructuring charges of $6 million relating to the acquisition of Irish Life, compared to Irish Life restructuring costs of $5 million for the same quarter last year.

The net loss for the three months ended March 31, 2015 decreased from $15 million in the previous quarter to $7 million in the current quarter. The fourth quarter of 2014 included basis changes related to the legacy international businesses, which did not recur in 2015.



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LIFECO CORPORATE OPERATING RESULTSThe Lifeco Corporate segment includes operating results for activities of Lifeco that are not associated with the major business units of the Company.

For the three months ended March 31, 2015, Lifeco Corporate had a net loss of $6 million compared to a net loss of $7 million in the first quarter of 2014. The net loss for Lifeco Corporate was lower, primarily due to higher investment income.

The net loss for the three months ended March 31, 2015 was comparable to the previous quarter, as lower preferred share dividends payments in Lifeco Corporate were mostly offset by lower investment income. In 2015, preferred share dividends related to preferred shares issued in the second quarter of 2014 were allocated to the Canada segment.

OTHER INFORMATION

QUARTERLY FINANCIAL INFORMATION

Quarterly financial information(in $ millions, except per share amounts)

2015 2014 2013Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2

Total revenue(1) $12,679 $10,723 $ 8,451 $10,070 $ 9,937 $ 8,056 $ 7,206 $ 3,628

Common shareholdersNet earnings

Total 700 657 687 615 587 717 523 521Basic - per share 0.702 0.658 0.687 0.616 0.587 0.717 0.527 0.548Diluted - per share 0.700 0.657 0.686 0.615 0.587 0.716 0.522 0.547

Operating earnings(2)

Total 700 657 687 615 587 491 523 521Basic - per share 0.702 0.658 0.687 0.616 0.587 0.491 0.527 0.548Diluted - per share 0.700 0.657 0.686 0.615 0.587 0.490 0.522 0.547

(1) The Company reclassified comparative figures for presentation adjustments in 2013.(2) Operating earnings (a non-IFRS financial measure) excludes the impact of certain litigation provisions. Refer to the "Cautionary Note

Regarding Non-IFRS Financial Measures" section of this document.

Lifeco's consolidated net earnings attributable to common shareholders were $700 million for the first quarter of 2015 compared to $587 million reported a year ago. On a per share basis, this represents $0.702 per common share ($0.700 diluted) for the first quarter of 2015 compared to $0.587 per common share ($0.587 diluted) a year ago.

Total revenue for the first quarter of 2015 was $12,679 million and comprises premium income of $6,932 million, regular net investment income of $1,536 million, a positive change in fair value through profit or loss on investment assets of $2,953 million and fee and other income of $1,258 million.

DISCLOSURE CONTROLS AND PROCEDURESThe Company’s disclosure controls and procedures are designed to provide reasonable assurance that information relating to the Company which is required to be disclosed in reports filed under provincial and territorial securities legislation is: (a) recorded, processed, summarized and reported within the time periods specified in the provincial and territorial securities legislation, and (b) accumulated and communicated to the Company's senior management, including the President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.



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INTERNAL CONTROL OVER FINANCIAL REPORTINGThe Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. The Company’s management is responsible for establishing and maintaining effective internal control over financial reporting. All internal control systems have inherent limitations and may become ineffective because of changes in conditions. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

There have been no changes in the Company's internal control over financial reporting during the three month period ending March 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

TRANSLATION OF FOREIGN CURRENCYThrough its operating subsidiaries, Lifeco conducts business in multiple currencies. The four primary currencies are the Canadian dollar, the U.S. dollar, the British pound and the euro. Throughout this document, foreign currency assets and liabilities are translated into Canadian dollars at the market rate at the end of the reporting period. All income and expense items are translated at an average rate for the period. The rates employed are:

Translation of foreign currencyPeriod ended Mar. 31

2015Dec. 31

2014Sept. 30

2014June 30

2014Mar. 31

2014United States dollarBalance sheet $ 1.27 $ 1.16 $ 1.12 $ 1.07 $ 1.11Income and expenses $ 1.24 $ 1.14 $ 1.09 $ 1.09 $ 1.10

British poundBalance sheet $ 1.88 $ 1.81 $ 1.82 $ 1.83 $ 1.84Income and expenses $ 1.88 $ 1.80 $ 1.82 $ 1.84 $ 1.83

EuroBalance sheet $ 1.36 $ 1.40 $ 1.42 $ 1.46 $ 1.52Income and expenses $ 1.40 $ 1.42 $ 1.44 $ 1.50 $ 1.51

Additional information relating to Lifeco, including Lifeco's most recent consolidated financial statements, CEO/CFO certification and Annual Information Form are available at www.sedar.com.



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CONSOLIDATED STATEMENTS OF EARNINGS (unaudited)(in Canadian $ millions except per share amounts)

For the three months endedMarch 31 December 31 March 31

2015 2014 2014

IncomePremium income

Gross premiums written $ 7,806 $ 6,402 $ 6,111Ceded premiums (874) (901) (844)

Total net premiums 6,932 5,501 5,267Net investment income (note 4)

Regular net investment income 1,536 1,516 1,489Changes in fair value through profit or loss 2,953 2,545 2,122

Total net investment income 4,489 4,061 3,611Fee and other income 1,258 1,161 1,059

12,679 10,723 9,937Benefits and expenses

Policyholder benefitsInsurance and investment contracts

Gross 5,640 5,335 4,801Ceded (483) (513) (475)

Total net policyholder benefits 5,157 4,822 4,326Policyholder dividends and experience refunds 381 369 388Changes in insurance and investment contract liabilities 4,351 2,934 2,775Total paid or credited to policyholders 9,889 8,125 7,489

Commissions 515 514 505Operating and administrative expenses 1,078 1,005 933Premium taxes 84 86 85Financing charges (note 9) 77 77 76Amortization of finite life intangible assets 36 34 33Restructuring and acquisition expenses 7 7 5

Earnings before income taxes 993 875 811Income taxes (note 14) 224 164 173Net earnings before non-controlling interests 769 711 638Attributable to non-controlling interests 37 23 22Net earnings 732 688 616Preferred share dividends 32 31 29Net earnings - common shareholders $ 700 $ 657 $ 587

Earnings per common share (note 11)Basic $ 0.702 $ 0.658 $ 0.587Diluted $ 0.700 $ 0.657 $ 0.587



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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)(in Canadian $ millions)

For the three months endedMarch 31 December 31 March 31

2015 2014 2014(note 2)

Net earnings $ 732 $ 688 $ 616Other comprehensive income (loss)Items that may be reclassified subsequently to Consolidated

Statements of EarningsUnrealized foreign exchange gains on translation of foreignoperations 733 174 520

Unrealized foreign exchange gains (losses) on euro debt designatedas hedge of the net investment in foreign operations 20 10 (25)

Unrealized gains on available-for-sale assets 130 122 95Income tax expense (28) (23) (21)

Realized gains on available-for-sale assets (73) (18) (11)Income tax expense 12 2 3

Unrealized losses on cash flow hedges (135) (51) (59)Income tax benefit 51 19 22

Realized losses on cash flow hedges 1 1 —Income tax benefit — (1 ) —

Non-controlling interests (42) (31) (28)Income tax benefit 11 8 7

Total items that may be reclassified 680 212 503Items that will not be reclassified to Consolidated Statements of

EarningsRe-measurements on defined benefit pension and other post-employment benefit plans (note 13) (223) (156) (120)

Income tax benefit 48 43 29Non-controlling interests 7 5 9

Income tax expense (1 ) (1 ) (2)Total items that will not be reclassified (169) (109) (84)

Total other comprehensive income 511 103 419Comprehensive income $ 1,243 $ 791 $ 1,035



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CONSOLIDATED BALANCE SHEETS (unaudited)(in Canadian $ millions)

March 31 December 312015 2014

AssetsCash and cash equivalents $ 3,197 $ 2,498Bonds (note 4) 109,895 103,168Mortgage loans (note 4) 21,184 20,546Stocks (note 4) 7,797 7,820Investment properties (note 4) 4,943 4,613Loans to policyholders 8,195 7,711

155,211 146,356Funds held by ceding insurers 14,242 12,154Goodwill 5,859 5,855Intangible assets 3,804 3,625Derivative financial instruments 583 652Owner occupied properties 631 619Fixed assets 235 228Reinsurance assets (note 8) 5,187 5,151Premiums in course of collection, accounts and interest receivable 3,862 3,056Other assets 2,430 2,368Current income taxes 44 48Deferred tax assets 1,810 1,631Investments on account of segregated fund policyholders (note 7) 187,433 174,966Total assets $ 381,331 $ 356,709

LiabilitiesInsurance contract liabilities (note 8) $ 154,494 $ 145,198Investment contract liabilities (note 8) 868 857Debentures and other debt instruments 5,370 5,355Funds held under reinsurance contracts 332 313Derivative financial instruments 1,893 1,195Accounts payable 2,031 1,480Other liabilities 3,653 3,099Current income taxes 673 737Deferred tax liabilities 1,534 1,450Capital trust debentures 162 162Investment and insurance contracts on account of segregated fund policyholders (note 7) 187,433 174,966Total liabilities 358,443 334,812

EquityNon-controlling interests Participating account surplus in subsidiaries 2,541 2,480 Non-controlling interests in subsidiaries 200 163Shareholders' equity Share capital (note 10) Preferred shares 2,514 2,514 Common shares 7,154 7,102 Accumulated surplus 9,491 9,134 Accumulated other comprehensive income 889 378 Contributed surplus 99 126Total equity 22,888 21,897Total liabilities and equity $ 381,331 $ 356,709



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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)(in Canadian $ millions)

March 31, 2015

Sharecapital

Contributedsurplus

Accumulatedsurplus

Accumulatedother

comprehensiveincome

Non-controllinginterests

Totalequity

Balance, beginning of year $ 9,616 $ 126 $ 9,134 $ 378 $ 2,643 $ 21,897Net earnings — — 732 — 37 769Other comprehensive income — — — 511 25 536

9,616 126 9,866 889 2,705 23,202Dividends to shareholders

Preferred shareholders (note 11) — — (32) — — (32)Common shareholders — — (325) — — (325)

Shares exercised and issued under share-basedpayment plans (note 10) 57 (43) — — 39 53

Share-based payment plans expense — 16 — — — 16Shares purchased and cancelled under Normal

Course Issuer Bid (note 10) (26) — — — — (26)Excess of redemption proceeds over stated capital

per Normal Course Issuer Bid (note 10) 21 — (21) — — —Dilution gain on non-controlling interests — — 3 — (3) —Balance, end of period $ 9,668 $ 99 $ 9,491 $ 889 $ 2,741 $ 22,888

March 31, 2014 (note 2)

Sharecapital

Contributedsurplus

Accumulatedsurplus

Accumulatedother

comprehensiveincome

Non-controllinginterests

Totalequity

Balance, beginning of year $ 9,426 $ 57 $ 7,899 $ 86 $ 2,362 $ 19,830Net earnings — — 616 — 22 638Other comprehensive income — — — 419 14 433

9,426 57 8,515 505 2,398 20,901Dividends to shareholders

Preferred shareholders (note 11) — — (29) — — (29)Common shareholders — — (307) — — (307)

Shares exercised and issued under stock optionplan (note 10) 6 (1) — — — 5

Share-based payment plans expense — 1 — — — 1Modification to share-based payment plans — 26 — — 217 243Equity settlement of Putnam share-based plans — — — — (14) (14)Shares purchased and cancelled under Normal

Course Issuer Bid (note 10) (13) — — — — (13)Excess of redemption proceeds over stated capital

per Normal Course Issuer Bid (note 10) 10 — (10) — — —Dilution loss on non-controlling interests — — (9) — 9 —Balance, end of period $ 9,429 $ 83 $ 8,160 $ 505 $ 2,610 $ 20,787



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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(in Canadian $ millions)

For the three monthsended March 31

2015 2014Operations Earnings before income taxes $ 993 $ 811 Income taxes paid, net of refunds received (88) (286) Adjustments: Change in insurance and investment contract liabilities 2,851 3,035 Change in funds held by ceding insurers 272 139 Change in funds held under reinsurance contracts (92) (17) Change in deferred acquisition costs 10 9 Change in reinsurance assets 11 (185) Changes in fair value through profit or loss (2,953) (2,122) Other 88 (111)

1,092 1,273Financing Activities Issue of common shares (note 10) 57 6 Purchased and cancelled common shares (note 10) (26) (13) Decrease in line of credit of subsidiary (43) (66) Decrease in debentures and other debt instruments (11) (1) Dividends paid on common shares (325) (307) Dividends paid on preferred shares (32) (29)

(380) (410)Investment Activities Bond sales and maturities 9,837 9,067 Mortgage loan repayments 581 390 Stock sales 566 1,309 Investment property sales 4 58 Change in loans to policyholders 9 8 Investment in bonds (9,937) (10,079) Investment in mortgage loans (624) (867) Investment in stocks (360) (392) Investment in investment properties (180) (55)

(104) (561)

Effect of changes in exchange rates on cash and cash equivalents 91 103

Increase in cash and cash equivalents 699 405

Cash and cash equivalents, beginning of period 2,498 2,791

Cash and cash equivalents, end of period $ 3,197 $ 3,196

Supplementary cash flow information Interest income received $ 1,288 $ 1,322 Interest paid $ 40 $ 40 Dividend income received $ 60 $ 78



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CONDENSED NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (unaudited)

(in Canadian $ millions except per share amounts)

1. Corporate Information

Great-West Lifeco Inc. (Lifeco or the Company) is a publicly listed company (Toronto Stock Exchange: GWO), incorporated and domiciled in Canada. The registered address of the Company is 100 Osborne Street North, Winnipeg, Manitoba, Canada, R3C 1V3. Lifeco is a member of the Power Financial Corporation (Power Financial) group of companies and its direct parent is Power Financial.

Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses, primarily in Canada, the United States and Europe through its major operating subsidiaries The Great-West Life Assurance Company (Great-West Life), London Life Insurance Company (London Life), The Canada Life Assurance Company (Canada Life), Great-West Life & Annuity Insurance Company (Great-West Financial) and Putnam Investments, LLC (Putnam).

The condensed consolidated interim unaudited financial statements (financial statements) of the Company as at and for the three months ended March 31, 2015 were approved by the Board of Directors on May 7, 2015.

2. Basis of Presentation and Summary of Accounting Policies

These financial statements should be read in conjunction with the Company's December 31, 2014 consolidated annual audited financial statements and notes thereto. Certain March 31, 2014 comparative figures in these financial statements have been restated for the prior period adjustment disclosed in note 35 to the Company's December 31, 2014 consolidated annual financial statements. For the three months ended March 31, 2014 this adjustment resulted in a decrease to other comprehensive income of $8 as a result of unrealized foreign exchange losses on translation of foreign operations. This adjustment had no impact on the net earnings or earnings per share for the periods presented within these financial statements.

The financial statements of Lifeco at March 31, 2015 have been prepared in compliance with the requirements of International Accounting Standard (IAS) 34, Interim Financial Reporting (IAS 34) as issued by the International Accounting Standards Board (IASB) using the same accounting policies and methods of computation followed in the consolidated financial statements for the year ended December 31, 2014 except as described below.

The Company adopted the narrow scope amendments to International Financial Reporting Standards (IFRS) for Annual Improvements 2010 - 2012 Cycle, Annual Improvements 2011 - 2013 Cycle and IAS 19 Employee Benefits effective January 1, 2015. The adoption of these narrow scope amendments did not have a significant impact on the Company’s financial statements.

There have been no significant changes to the future accounting policies that could impact the Company, as disclosed in the December 31, 2014 consolidated annual audited financial statements.

Use of Significant Judgments, Estimates and AssumptionsIn preparation of these financial statements, management is required to make significant judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, net earnings and related disclosures. Although some uncertainty is inherent in these judgments and estimates, management believes that the amounts recorded are reasonable. Key sources of estimation uncertainty and areas where significant judgments have been made are further described in the relevant accounting policies as described in the Company's December 31, 2014 consolidated annual audited financial statements and notes thereto.



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2. Basis of Presentation and Summary of Accounting Policies (cont'd)

45

The results of the Company reflect management's judgments regarding the impact of prevailing global credit, equity and foreign exchange market conditions. The provision for future credit losses within the Company's insurance and investment contract liabilities relies upon investment credit ratings. The Company's practice is to use third party independent credit ratings where available.

3. Acquisition of J.P. Morgan Retirement Plan Services

On August 29, 2014, the Company, through its wholly owned subsidiary Great-West Financial, completed the acquisition of all of the voting equity interests in the J.P. Morgan Retirement Plan Services (RPS) large-market recordkeeping business. The Company disclosed the allocation of the purchase price to the amounts of assets acquired, goodwill and liabilities assumed in note 3 to the December 31, 2014 consolidated annual audited financial statements. During the three months ended March 31, 2015 the Company finalized the purchase price allocation with no adjustments from those balances reported as at December 31, 2014.



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4. Portfolio Investments

(a) Carrying values and estimated fair values of portfolio investments are as follows:

March 31, 2015 December 31, 2014Carrying

valueFair

valueCarrying

valueFair

valueBonds

Designated fair value through profit or loss (1) $ 80,868 $ 80,868 $ 77,833 $ 77,833Classified fair value through profit or loss (1) 1,934 1,934 2,167 2,167Available-for-sale 13,077 13,077 9,990 9,990Loans and receivables 14,016 15,975 13,178 14,659

109,895 111,854 103,168 104,649Mortgage loans

Residential 7,557 8,071 7,238 7,653Non-residential 13,627 14,997 13,308 14,514

21,184 23,068 20,546 22,167Stocks

Designated fair value through profit or loss (1) 6,591 6,591 6,617 6,617Available-for-sale 54 54 50 50Available-for-sale, at cost (2) 562 N/A 560 N/AEquity method 590 650 593 664

7,797 7,295 7,820 7,331Investment properties 4,943 4,943 4,613 4,613Total $ 143,819 $ 147,160 $ 136,147 $ 138,760

(1) A financial asset is designated as fair value through profit or loss on initial recognition if it eliminates or significantly reduces an accounting mismatch. Changes in the fair value of financial assets designated as fair value through profit or loss are generally offset by changes in insurance contract liabilities, since the measurement of insurance contract liabilities is determined with reference to the assets supporting the liabilities.

A financial asset is classified as fair value through profit or loss on initial recognition if it is part of a portfolio that is actively traded for the purpose of earning investment income.

(2) Fair value cannot be reliably measured, therefore the investments are held at cost and excluded from the total fair value amount presented.

(b) Included in portfolio investments are the following:

Carrying amount of impaired investments


Impaired amounts by classificationFair value through profit or loss $ 365 $ 355Available-for-sale 14 14Loans and receivables 24 15

Total $ 403 $ 384

The above carrying values for loans and receivables are net of allowances of $18 at March 31, 2015 and $18 at December 31, 2014.



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(c) Net investment income comprises the following:

For the three monthsBonds

Mortgageloans Stocks

Investmentproperties Other Totalended March 31, 2015

Regular net investment income:Investment income earned $ 1,017 $ 243 $ 62 $ 88 $ 90 $ 1,500Net realized gains

Available-for-sale 73 — 1 — — 74Other classifications 5 8 — — — 13

Net allowances for credit losseson loans and receivables — 1 — — — 1

Other income and expenses — — — (25) (27) (52)1,095 252 63 63 63 1,536

Changes in fair value on fair valuethrough profit or loss assets:

Net realized/unrealized gainsClassified fair value throughprofit or loss 45 — — — — 45

Designated fair valuethrough profit or loss 2,577 — 162 55 114 2,908

2,622 — 162 55 114 2,953Total $ 3,717 $ 252 $ 225 $ 118 $ 177 $ 4,489

For the three monthsBonds

Mortgageloans Stocks

Investmentproperties Other Totalended March 31, 2014

Regular net investment income:Investment income earned $ 994 $ 234 $ 71 $ 77 $ 130 $ 1,506Net realized gains (losses)

Available-for-sale 12 — (1) — — 11Other classifications 9 2 — — — 11

Net allowances for credit losseson loans and receivables — (1) — — — (1)

Other income and expenses — — — (16) (22) (38)1,015 235 70 61 108 1,489

Changes in fair value on fair valuethrough profit or loss assets:

Net realized/unrealized gainsClassified fair value throughprofit or loss 32 — — — — 32

Designated fair valuethrough profit or loss 1,712 — 210 90 78 2,090

1,744 — 210 90 78 2,122Total $ 2,759 $ 235 $ 280 $ 151 $ 186 $ 3,611

Investment income earned comprises income from investments that are classified as available-for-sale, loans and receivables and classified or designated as fair value through profit or loss. Investment income from bonds and mortgages includes interest income and premium and discount amortization. Income from stocks includes dividends and equity income from the investment in IGM Financial Inc. and Allianz Ireland. Investment properties income includes rental income earned on investment properties, ground rent income earned on leased and sub-leased land, fee recoveries, lease cancellation income, and interest and other investment income earned on investment properties.



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5. Financial Instruments Risk Management

The Company has policies relating to the identification, measurement, monitoring, mitigating and controlling of risks associated with financial instruments. The key risks related to financial instruments are credit risk, liquidity risk and financial market risk (currency, interest rate and equity). The Risk Committee of the Board of Directors is responsible for the oversight of the Company's key risks. The Company's approach to risk management has not substantially changed from that described in Lifeco's 2014 Annual Report. Certain risks have been outlined below. For a complete discussion of the Company's risk governance structure and risk management approach, see the "Financial Instruments Risk Management" note in the Company's December 31, 2014 consolidated audited financial statements and the "Risk Management and Control Practices" section in the Company's December 31, 2014 Management's Discussion and Analysis.

The Company has also established policies and procedures designed to identify, measure and report all material risks. Management is responsible for establishing capital management procedures for implementing and monitoring the capital plan. The Board of Directors reviews and approves all capital transactions undertaken by management.

(a) Credit Risk

Credit risk is the risk of financial loss resulting from the failure of debtors to make payments when due.

Concentration of Credit RiskConcentrations of credit risk arise from exposures to a single debtor, a group of related debtors or groups of debtors that have similar credit risk characteristics in that they operate in the same geographic region or in similar industries. No significant changes have occurred from the year ended December 31, 2014.

(b) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet all cash outflow obligations as they come due. The following policies and procedures are in place to manage this risk:

• The Company closely manages operating liquidity through cash flow matching of assets and liabilities and forecasting earned and required yields, to ensure consistency between policyholder requirements and the yield of assets.

• Management monitors the use of lines of credit on a regular basis, and assesses the ongoing availability of these and alternative forms of operating credit.

• Management closely monitors the solvency and capital positions of its principal subsidiaries opposite liquidity requirements at the holding company. Additional liquidity is available through established lines of credit or via capital market transactions. The Company maintains committed lines of credit with Canadian chartered banks.

(c) Financial Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market factors which include three types: currency risk, interest rate (including related inflation) risk and equity risk.

Caution Related to Risk SensitivitiesThese financial statements include estimates of sensitivities and risk exposure measures for certain risks, such as the sensitivity due to specific changes in interest-rate levels projected and market prices as at the valuation date. Actual results can differ significantly from these estimates for a variety of reasons including:

• Assessment of the circumstances that led to the scenario may lead to changes in (re)investment approaches and interest rate scenarios considered,

• Changes in actuarial, investment return and future investment activity assumptions,• Actual experience differing from the assumptions,• Changes in business mix, effective income tax rates and other market factors,• Interactions among these factors and assumptions when more than one changes, and



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5. Financial Instruments Risk Management (cont'd)

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• The general limitations of the Company's internal models.

For these reasons, the sensitivities should only be viewed as directional estimates of the underlying sensitivities for the respective factors based on the assumptions outlined above. Given the nature of these calculations, the Company cannot provide assurance that the actual impact on net earnings attributed to shareholders will be as indicated.

(i) Currency Risk

Currency risk relates to the Company operating and holding financial instruments in different currencies. For the assets backing insurance and investment contract liabilities that are not matched by currency, changes in foreign exchange rates can expose the Company to the risk of foreign exchange losses not offset by liability decreases. The Company has net investments in foreign operations. In addition, the Company’s debt obligations are mainly denominated in Canadian dollars. In accordance with IFRS, foreign currency translation gains and losses from net investments in foreign operations, net of related hedging activities and tax effects, are recorded in accumulated other comprehensive income. Strengthening or weakening of the Canadian dollar spot rate compared to the U.S. dollar, British pound and euro spot rates impacts the Company’s total equity. Correspondingly, the Company’s book value per share and capital ratios monitored by rating agencies are also impacted.

• A 10% weakening of the Canadian dollar against foreign currencies would be expected to increase non-participating insurance and investment contract liabilities and their supporting assets by approximately the same amount resulting in an immaterial change to net earnings. A 10% strengthening of the Canadian dollar against foreign currencies would be expected to decrease non-participating insurance and investment contract liabilities and their supporting assets by approximately the same amount resulting in an immaterial change in net earnings.

(ii) Interest Rate Risk

Interest rate risk exists if asset and liability cash flows are not closely matched and interest rates change causing a difference in value between the asset and liability.

Projected cash flows from the current assets and liabilities are used in the Canadian Asset Liability Method to determine insurance contract liabilities. Valuation assumptions have been made regarding rates of returns on supporting assets, fixed income, equity and inflation. The valuation assumptions use best estimates of future reinvestment rates and inflation assumptions with an assumed correlation together with margins for adverse deviation set in accordance with professional standards. These margins are necessary to provide for possibilities of misestimation and/or future deterioration in the best estimate assumptions and provide reasonable assurance that insurance contract liabilities cover a range of possible outcomes. Margins are reviewed periodically for continued appropriateness.

Testing under a number of interest rate scenarios (including increasing, decreasing and fluctuating rates) is done to assess reinvestment risk. The total provision for interest rates is sufficient to cover a broader or more severe set of risks than the minimum arising from the current Canadian Institute of Actuaries prescribed scenarios.

The range of interest rates covered by these provisions is set in consideration of long-term historical results and is monitored quarterly with a full review annually. An immediate 1% parallel shift in the yield curve would not have a material impact on the Company’s view of the range of interest rates to be covered by the provisions. If sustained however, the parallel shift could impact the Company’s range of scenarios covered.



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5. Financial Instruments Risk Management (cont'd)

50

The total provision for interest rates also considers the impact of the Canadian Institute of Actuaries prescribed scenarios:

• The effect of an immediate 1% parallel increase in the yield curve on the prescribed scenarios would not change the total provision for interest rates.

• The effect of an immediate 1% parallel decrease in the yield curve on the prescribed scenarios would not change the total provision for interest rates.

Another way of measuring the interest rate risk associated with this assumption is to determine the effect on the insurance and investment contract liabilities impacting the shareholders earnings of the Company of a 1% change in the Company's view of the range of interest rates to be covered by these provisions:

• The effect of an immediate 1% increase in the low and high end of the range of interest rates recognized in the provisions would be to decrease these insurance and investment contract liabilities by approximately $93 causing an increase in net earnings of approximately $55.

• The effect of an immediate 1% decrease in the low and high end of the range of interest rates recognized in the provisions would be to increase these insurance and investment contract liabilities by approximately $634 causing a decrease in net earnings of approximately $431.

(iii) Equity Risk

Equity risk is the uncertainty associated with the valuation of assets and liabilities arising from changes in equity markets and other pricing risk. To mitigate pricing risk, the Company has investment policy guidelines in place that provide for prudent investment in equity markets within clearly defined limits. The risks associated with segregated fund guarantees have been mitigated through a hedging program for lifetime Guaranteed Minimum Withdrawal Benefit guarantees using equity futures, currency forwards, and interest rate derivatives. For policies with segregated fund guarantees, the Company generally determines insurance contract liabilities at a conditional tail expectation of 75 (CTE75) level.

Some insurance and investment contract liabilities are supported by investment properties, common stocks and private equities, for example segregated fund products and products with long-tail cash flows. Generally these liabilities will fluctuate in line with equity values. There will be additional impacts on these liabilities as equity values fluctuate. A 10% increase in equity values would be expected to additionally decrease non-participating insurance and investment contract liabilities by approximately $39 causing an increase in net earnings of approximately $32. A 10% decrease in equity values would be expected to additionally increase non-participating insurance and investment contract liabilities by approximately $151 causing a decrease in net earnings of approximately $130.

The best estimate return assumptions for equities are primarily based on long-term historical averages. Changes in the current market could result in changes to these assumptions and will impact both asset and liability cash flows. A 1% increase in the best estimate assumption would be expected to decrease non-participating insurance contract liabilities by approximately $483 causing an increase in net earnings of approximately $380. A 1% decrease in the best estimate assumption would be expected to increase non-participating insurance contract liabilities by approximately $512 causing a decrease in net earnings of approximately $398.



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6. Fair Value Measurement

The Company’s assets and liabilities recorded at fair value have been categorized based upon the following fair value hierarchy:

Level 1: Fair value measurements utilize observable, quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Assets and liabilities utilizing Level 1 inputs include actively exchange traded equity securities, exchange-traded futures, and mutual and segregated funds which have available prices in an active market with no redemption restrictions.

Level 2: Fair value measurements utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. The fair values for some Level 2 securities were obtained from a pricing service. The pricing service inputs include, but are not limited to, benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, offers and reference data. Level 2 assets and liabilities include those priced using a matrix which is based on credit quality and average life, government and agency securities, restricted stock, some private bonds and equities, most investment-grade and high-yield corporate bonds, most asset-backed securities, most over-the-counter derivatives, and mortgage loans. Investment contracts that are measured at fair value through profit or loss are mostly included in the Level 2 category.

Level 3: Fair value measurements utilize one or more significant inputs that are not based on observable market inputs and include situations where there is little, if any, market activity for the asset or liability. The values of the majority of Level 3 securities were obtained from single broker quotes, internal pricing models, or external appraisers. Assets and liabilities utilizing Level 3 inputs generally include certain bonds, certain asset-backed securities, some private equities, investments in mutual and segregated funds where there are redemption restrictions, certain over-the-counter derivatives, and investment properties.



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The following presents the Company’s assets and liabilities measured at fair value on a recurring basis by hierarchy level:

March 31, 2015Assets measured at fair value Level 1 Level 2 Level 3 Total

Cash $ 3,197 $ — $ — $ 3,197Financial assets at fair value through profit or loss

Bonds — 82,713 89 82,802Stocks 6,533 7 51 6,591

Total financial assets at fair value through profit or loss 6,533 82,720 140 89,393Available-for-sale financial assets

Bonds — 13,076 1 13,077Stocks 53 — 1 54

Total available-for-sale financial assets 53 13,076 2 13,131

Investment properties — — 4,943 4,943Derivatives (1) 1 582 — 583Other assets:

Trading account assets in Putnam 292 161 — 453Other trading assets 84 — — 84Other (2) 114 — — 114

Total assets measured at fair value $ 10,274 $ 96,539 $ 5,085 $ 111,898

Liabilities measured at fair valueDerivatives (3) $ 1 $ 1,892 $ — $ 1,893Investment contract liabilities — 839 29 868Other liabilities - other 114 — — 114Total liabilities measured at fair value $ 115 $ 2,731 $ 29 $ 2,875

(1) Excludes collateral received of $99. (2) Includes cash collateral under securities lending agreements. (3) Excludes collateral pledged of $312.

There were no transfers of the Company's assets and liabilities between Level 1 and Level 2 in the period.



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December 31, 2014Assets measured at fair value Level 1 Level 2 Level 3 Total

Cash $ 2,498 $ — $ — $ 2,498Financial assets at fair value through profit or loss

Bonds — 79,914 86 80,000Stocks 6,594 6 17 6,617

Total financial assets at fair value through profit or loss 6,594 79,920 103 86,617

Available-for-sale financial assetsBonds — 9,989 1 9,990Stocks 49 — 1 50

Total available-for-sale financial assets 49 9,989 2 10,040

Investment properties — — 4,613 4,613Derivatives (1) 1 651 — 652Other assets:

Trading account assets in Putnam 184 143 — 327Other trading assets 78 — — 78Other (2) 16 — — 16

Total assets measured at fair value $ 9,420 $ 90,703 $ 4,718 $ 104,841

Liabilities measured at fair valueDerivatives (3) $ 4 $ 1,191 $ — $ 1,195Investment contract liabilities — 829 28 857Other liabilities - other 16 — — 16

Total liabilities measured at fair value $ 20 $ 2,020 $ 28 $ 2,068

(1) Excludes collateral received of $52. (2) Includes cash collateral under securities lending agreements. (3) Excludes collateral pledged of $273.

There were no transfers of the Company's assets and liabilities between Level 1 and Level 2 in the period.



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The following presents additional information about assets and liabilities measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

March 31, 2015

Fair valuethroughprofit or

loss bonds

Available-for-sale bonds

Fair value through profit or

lossstocks (3)

Available-for-sale stocks

Investmentproperties

Other assets-trading

account (4)

TotalLevel 3 assets

Investmentcontractliabilities

Balance, beginning ofyear $ 86 $ 1 $ 17 $ 1 $ 4,613 $ — $ 4,718 $ 28

Total gainsIncluded in netearnings 3 — 5 — 55 — 63 —

Included in other comprehensive income (1) — — — — 99 — 99 —

Purchases — — 31 — 180 — 211 —Sales — — — — (4) — (4) —Other — — — — — — — 1Transfers into Level 3 (2) — — — — — — — —Transfers out of Level 3 (2) — — (2) — — — (2) —

Balance, end of period $ 89 $ 1 $ 51 $ 1 $ 4,943 $ — $ 5,085 $ 29

Total gains for theperiod included innet investmentincome $ 3 $ — $ 5 $ — $ 55 $ — $ 63 $ —

Change in unrealized gains for the period

included in net earnings for assets held at March 31, 2015 $ 3 $ — $ 5 $ — $ 54 $ — $ 62 $ —

(1) Other comprehensive income for investment properties represents the unrealized gains on foreign exchange. (2) Transfers into Level 3 are due primarily to decreased observability of inputs in valuation methodologies.

Transfers out of Level 3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of market prices with multiple pricing vendors or the lifting of redemption restrictions on investments in mutual and segregated funds.

(3) Includes investments in mutual and segregated funds where there are redemption restrictions. The fair value is based on observable, quoted prices.

(4) Includes illiquid equities where prices are not quoted; however, the Company does not believe changing the inputs to reasonably alternate assumptions would change the values significantly.



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December 31, 2014

Fair valuethrough

profit or lossbonds

Available-for-sale bonds

Fair value through profit or

lossstocks (3)

Available-for-sale stocks


Other assets - trading

account (4)

TotalLevel 3 assets

Investmentcontractliabilities

Balance, beginning ofyear $ 333 $ 24 $ 24 $ 1 $ 4,288 $ 21 $ 4,691 $ 30

Total gains (losses)Included in netearnings 6 — (1) — 262 1 268 —

Included in other comprehensive income (1) — 1 — — 56 — 57 —

Purchases 33 — 8 — 127 — 168 —Sales — — (13) — (98) (22) (133) —Repayments (1) — — — — — (1) —Transferred to owner

occupied properties — — — — (13) — (13) —Other — — — — (9) — (9) (2)Transfers into Level 3 (2) — — — — — — — —Transfers out of Level 3 (2) (285) (24) (1) — — — (310) —

Balance, end of year $ 86 $ 1 $ 17 $ 1 $ 4,613 $ — $ 4,718 $ 28

Total gains (losses) forthe year included innet investment income $ 6 $ — $ (1) $ — $ 262 $ 1 $ 268 $ —

Change in unrealized gains (losses) for

the year included in net earnings for

assets held at December 31, 2014 $ 6 $ — $ (3) $ — $ 229 $ 1 $ 233 $ —

(1) Other comprehensive income for investment properties represents the unrealized gains on foreign exchange. (2) Transfers into Level 3 are due primarily to decreased observability of inputs in valuation methodologies.

Transfers out of Level 3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of market prices with multiple pricing vendors or the lifting of redemption restrictions on investments in mutual and segregated funds.

(3) Includes investments in mutual and segregated funds where there are redemption restrictions. The fair value is based on observable, quoted prices.

(4) Includes illiquid equities where prices are not quoted; however, the Company does not believe changing the inputs to reasonably alternate assumptions would change the values significantly.



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The following sets out information about significant unobservable inputs used at period-end in measuring assets and liabilities categorized as Level 3 in the fair value hierarchy.

Type of asset Valuation approachSignificantunobservable input Input value

Inter-relationship betweenkey unobservable inputs andfair value measurement


Investment property valuations are generally determined using property valuation models based on expected capitalization rates and models that discount expected future net cash flows. The determination of the fair value of investment property requires the use of estimates such as future cash flows (such as future leasing assumptions, rental rates, capital and operating expenditures) and discount, reversionary and overall capitalization rates applicable to the asset based on current market rates.

Discount rate Range of 3.5% - 10.3% A decrease in the discount rate would result in an increase in fair value. An increase in the discount rate would result in a decrease in fair value.

Reversionary rate Range of 5.3% - 8.3% A decrease in the reversionary rate would result in an increase in fair value. An increase in the reversionary rate would result in a decrease in fair value.

Vacancy rate Weighted average of 2.6% A decrease in the expected vacancy rate would generally result in an increase in fair value. An increase in the expected vacancy rate would generally result in a decrease in fair value.

7. Segregated Funds and Other Structured Entities

The Company offers segregated fund products in Canada, the U.S. and Europe that are referred to as segregated funds, separate accounts and unit-linked funds in the respective region. These funds are contracts issued by insurers to segregated fund policyholders where the benefit is directly linked to the performance of the investments, the risks or rewards of the fair value movements and net investment income is realized by the segregated fund policyholders. The segregated fund policyholders are required to select the segregated funds that hold a range of underlying investments. While the Company has legal title to the investments, there is a contractual obligation to pass along the investments results to the segregated fund policyholder and the Company segregates these investments from those of the Company.

In Canada and the U.S., the segregated fund and separate account assets are legally separated from the general assets of the Company under the terms of the policyholder agreement and cannot be used to settle obligations of the Company. In Europe, the assets of the funds are functionally and constructively segregated from those of the Company. As a result of the legal and constructive arrangements of these funds, the assets and liabilities of these funds are presented as line items within the Consolidated Balance Sheets as investments on account of segregated fund policyholders and with an equal liability as investment and insurance contracts on account of segregated fund policyholders.

In circumstances where the segregated funds are invested in structured entities and are deemed to control the entity, the Company has presented the non-controlling ownership interest within the segregated funds for the risk of policyholders as equal and offsetting amounts in the assets and liabilities. The amounts presented within are $1,223 at March 31, 2015 ($1,012 at December 31, 2014).

Within the Consolidated Statements of Earnings, all segregated fund policyholders’ income, including fair value changes and net investment income, is credited to the segregated fund policyholders and reflected in the assets and liabilities on account of segregated fund policyholders within the Consolidated Balance Sheets. As these amounts do not directly impact the revenues and expenses of the Company, these amounts are not included separately in the Consolidated Statements of Earnings.



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Segregated Funds Guarantee ExposureThe Company offers retail segregated fund products, unitized with profits products and variable annuity products that provide for certain guarantees that are tied to the market values of the investment funds. While these products are similar to mutual funds, there is a key difference from mutual funds as the segregated funds have certain guarantee features that protect the segregated fund policyholder from market declines in the underlying investments. These guarantees are the Company’s primary exposure on these funds. The Company accounts for these guarantees within insurance and investment contract liabilities within the financial statements. In addition to the Company’s exposure on the guarantees, the fees earned by the Company on these products are impacted by the market value of these funds.

In Canada, the Company offers retail segregated fund products through Great-West Life, London Life and Canada Life. These products provide guaranteed minimum death benefits and guaranteed minimum accumulation on maturity benefits.

In the U.S., the Company offers variable annuities with guaranteed minimum death benefits through Great-West Financial. Most are a return of premium on death with the guarantee expiring at age 70.

In Europe, the Company offers unitized with profits products, which are similar to segregated fund products, but with pooling of policyholders' funds and minimum credited interest rates.

The Company also offers a guaranteed minimum withdrawal benefits product in Canada, the U.S. and Europe. The guaranteed minimum withdrawal benefits products offered by the Company offer levels of death and maturity guarantees. At March 31, 2015, the market value of guaranteed minimum withdrawal benefits product in-force in Canada, the U.S., Ireland and Germany was $3,320 ($3,016 at December 31, 2014).

The Company’s exposure to these guarantees is set out as follows:

March 31, 2015Investment deficiency by benefit type

Income Maturity Death Total (1)

Canada $ — $ 30 $ 91 $ 91United States 1 — 45 46Europe 418 58 88 503Total $ 419 $ 88 $ 224 $ 640

(1) A policy can only receive a payout from one of the three trigger events (income election, maturity or death). Total deficiency measures the point-in-time exposure assuming the most costly trigger event for each policy occurred on March 31, 2015.

The investment deficiency measures the point-in-time exposure to a trigger event (i.e. income election, maturity, or death) assuming it occurred on March 31, 2015. The actual cost to the Company will depend on the trigger event having occurred and the market values at that time. The actual claims before tax associated with these guarantees was $3 for the first quarter of 2015, with the majority arising in the Europe segment.

For further details on the Company's risk and guarantee exposure and the management of these risks, refer to the Risk Management and Control Practice section of the Company's December 31, 2014 Management's Discussion and Analysis.



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The following presents further details of the investments, determined in accordance with the relevant statutory reporting requirements of each region of the Company's operations, on account of segregated fund policyholders:

(a) Investments on account of segregated fund policyholders


Cash and cash equivalents $ 10,940 $ 11,052Bonds 41,365 37,912Mortgage loans 2,565 2,508Stocks and units in unit trusts 74,249 68,911Mutual funds 50,603 46,707Investment properties 9,588 9,533

189,310 176,623Accrued income 392 364Other liabilities (3,492) (3,033)Non-controlling mutual funds interest 1,223 1,012Total $ 187,433 $ 174,966

(b) Investment and insurance contracts on account of segregated fund policyholders


2015 2014

Balance, beginning of year $ 174,966 $ 160,779Additions (deductions):

Policyholder deposits 5,016 6,310Net investment income 231 265Net realized capital gains on investments 1,593 1,160Net unrealized capital gains on investments 7,810 2,462Unrealized gains due to changes in foreign exchange rates 2,331 3,981Policyholder withdrawals (4,742) (4,928)Segregated Fund investment in General Fund (7) (377)General Fund investment in Segregated Fund (1) —Net transfer from General Fund 25 13Non-controlling mutual funds interest 211 27Other — (2)

Total 12,467 8,911Balance, end of period $ 187,433 $ 169,690



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(c) Investment income on account of segregated fund policyholders


2015 2014

Net investment income $ 231 $ 265Net realized capital gains on investments 1,593 1,160Net unrealized capital gains on investments 7,810 2,462Unrealized gains due to changes in foreign exchange rates 2,331 3,981Total 11,965 7,868Change in investment and insurance contracts liability on account of

segregated fund policyholders 11,965 7,868Net $ — $ —

(d) Investments on account of segregated fund policyholders by fair value hierarchy level (note 6)

March 31, 2015Level 1 Level 2 Level 3 Total

Investments on account of segregated fund policyholders (1) $ 122,857 $ 56,993 $ 10,575 $ 190,425

(1) Excludes other liabilities, net of other assets, of $2,992.

December 31, 2014Level 1 Level 2 Level 3 Total

Investments on account of segregated fund policyholders (1) $ 112,189 $ 54,942 $ 10,390 $ 177,521

(1) Excludes other liabilities, net of other assets, of $2,555.

During the first three months of 2015 certain foreign stock holdings valued at $2,230 have been transferred from Level 2 to Level 1 ($2,234 were transferred from Level 1 to Level 2 at December 31, 2014) based on the Company's ability to utilize observable, quoted prices in active markets.

Level 2 assets include those assets where fair value is not available from normal market pricing sources and where the Company does not have visibility through to the underlying assets.



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The following presents additional information about the Company's investments on account of segregated fund policyholders for which the Company has utilized Level 3 inputs to determine fair value:


Balance, beginning of year $ 10,390 $ 9,298Total gains included in segregated fund investment income 210 782Purchases 136 919Sales (161) (603)Transfers into Level 3 — 4Transfers out of Level 3 — (10)Balance, end of period $ 10,575 $ 10,390

Transfers into Level 3 are due primarily to decreased observability of inputs in valuation methodologies. Transfers out of Level 3 are due primarily to increased observability of inputs in valuation methodologies as evidenced by corroboration of market prices with multiple pricing vendors.

Other Structured EntitiesIn addition to the segregated funds, the Company has interests in a number of structured unconsolidated entities including mutual funds, open-ended investment companies, and unit trusts. These entities are created as investment strategies for its unit-holders based on the directive of each individual fund.

Some of these funds are managed by related parties of the Company and the Company receives management fees related to these services. Management fees can be variable due to performance of factors - such as markets or industries - in which the fund invests. Fee income derived in connection with the management of investment funds generally increases or decreases in direct relationship with changes of assets under management which is affected by prevailing market conditions, and the inflow and outflow of client assets.

Factors that could cause assets under management and fees to decrease include declines in equity markets, changes in fixed income markets, changes in interest rates and defaults, redemptions and other withdrawals, political and other economic risks, changing investment trends and relative investment performance. The risk is that fees may vary but expenses and recovery of initial expenses are relatively fixed, and market conditions may cause a shift in asset mix potentially resulting in a change in revenue.



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8. Insurance and Investment Contract Liabilities

March 31, 2015Grossliability

Reinsuranceassets Net

Insurance contract liabilities $ 154,494 $ 5,187 $ 149,307Investment contract liabilities 868 — 868Total $ 155,362 $ 5,187 $ 150,175

December 31, 2014Grossliability

Reinsuranceassets Net

Insurance contract liabilities $ 145,198 $ 5,151 $ 140,047Investment contract liabilities 857 — 857Total $ 146,055 $ 5,151 $ 140,904

9. Financing Charges

Financing charges consist of the following:


2015 2014

Operating charges:Interest on operating lines and short-term debt instruments $ 1 $ 1

Financial charges:Interest on long-term debentures and other debt instruments 66 66Interest on capital trust debentures 3 3Other 7 6

76 75Total $ 77 $ 76



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10. Share Capital

Common Shares

For the three months ended March 312015 2014

Carrying CarryingNumber Value Number Value

Common sharesBalance, beginning of year 996,699,371 $ 7,102 999,402,079 $ 7,112Purchased and cancelled under Normal

Course Issuer Bid (765,450) (26) (425,878) (13)Excess of redemption proceeds over stated

capital per Normal Course Issuer Bid — 21 — 10Exercised and issued under stock option

plan 1,670,744 57 182,362 6Balance, end of period 997,604,665 $ 7,154 999,158,563 $ 7,115

Normal Course Issuer BidOn December 5, 2014, the Company announced a normal course issuer bid commencing December 9, 2014 and terminating December 8, 2015 to purchase for cancellation up to but not more than 8,000,000 of its common shares at market prices.

During the three months ended March 31, 2015, the Company repurchased and subsequently cancelled 765,450 common shares at a cost of $26 (425,878 during the three months ended March 31, 2014 under the previous normal course issuer bid at a cost of $13). The Company’s share capital was reduced by the average carrying value of the shares repurchased for cancellation. The excess paid over the average carrying value was $21 and was recognized as a reduction to equity ($10 during the three months ended March 31, 2014 under the previous normal course issuer bid).



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11. Earnings per Common Share


2015 2014EarningsNet earnings $ 732 $ 616Preferred share dividends (32) (29)Net earnings - common shareholders $ 700 $ 587

Number of common sharesAverage number of common shares outstanding 996,852,230 999,215,630Add: Potential exercise of outstanding stock options 2,279,239 1,258,267Average number of common shares outstanding - diluted basis 999,131,469 1,000,473,897

Basic earnings per common share $ 0.702 $ 0.587

Diluted earnings per common share $ 0.700 $ 0.587

Dividends per common share $ 0.3260 $ 0.3075



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12. Capital Management

(a) Policies and Objectives

Managing capital is the continual process of establishing and maintaining the quantity and quality of capital appropriate for the Company and ensuring capital is deployed in a manner consistent with the expectations of the Company’s stakeholders. For these purposes, the Board considers the key stakeholders to be the Company’s shareholders, policyholders and holders of subordinated liabilities in addition to the relevant regulators in the various jurisdictions where the Company and its subsidiaries operate.

The Company manages its capital on both a consolidated basis as well as at the individual operating subsidiary level. The primary objectives of the Company’s capital management strategy are:

• to maintain the capitalization of its regulated operating subsidiaries at a level that will exceed the relevant minimum regulatory capital requirements in the jurisdictions in which they operate;

• to maintain strong credit and financial strength ratings of the Company ensuring stable access to capital markets; and

• to provide an efficient capital structure to maximize shareholders value in the context of the Company’s operational risks and strategic plans.

The capital planning process is the responsibility of the Company’s Chief Financial Officer. The capital plan is reviewed by the Executive Committee of the Board of Directors and approved by the Company’s Board of Directors on an annual basis. The Board of Directors reviews and approves all capital transactions undertaken by management.

The target level of capitalization for the Company and its subsidiaries is assessed by considering various factors such as the probability of falling below the minimum regulatory capital requirements in the relevant operating jurisdiction, the views expressed by various credit rating agencies that provide financial strength and other ratings to the Company, and the desire to hold sufficient capital to be able to honour all policyholder and other obligations of the Company with a high degree of confidence.

(b) Regulatory Capital

In Canada, the Office of the Superintendent of Financial Institutions Canada has established a capital adequacy measurement for life insurance companies incorporated under the Insurance Companies Act (Canada) and their subsidiaries, known as the Minimum Continuing Capital and Surplus Requirements. For this purpose, various additions or deductions from capital are mandated by the guidelines issued by the Office of the Superintendent of Financial Institutions Canada. The following provides a summary of the Minimum Continuing Capital and Surplus Requirements information and ratios for Great-West Life:


Adjusted Net Tier 1 Capital $ 11,516 $ 11,132Net Tier 2 Capital 2,635 2,530Total Capital Available $ 14,151 $ 13,662Total Capital Required $ 6,376 $ 6,092

Tier 1 Ratio 181% 183%Total Ratio 222% 224%

Other foreign operations and foreign subsidiaries of the Company are required to comply with local capital or solvency requirements in their respective jurisdictions. At December 31, 2014 the Company maintained capital levels above the minimum local regulatory requirements in each of its other foreign operations.



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13. Pension Plans and Other Post-Employment Benefits

The total pension plans and other post-employment benefits expense included in operating expenses and other comprehensive income are as follows:


2015 2014Pension plans

Service costs $ 50 $ 39Net interest cost 6 1

56 40Other post-employment benefits

Service costs 1 —Net interest cost 4 5

5 5Pension plans and other post-employment benefits expense - Consolidated

Statements of Earnings 61 45

Pension plans - re-measurementsActuarial loss recognized 537 225Return on assets greater than assumed (420) (119)Administrative expenses less than assumed — (1)Change in the asset ceiling 85 (7)Pension plans re-measurement loss 202 98

Other post-employment benefits - re-measurementsActuarial loss recognized 17 18

Pension plans and other post-employment benefits expense - other comprehensiveloss 219 116

Total pension plans and other post-employment benefits expense $ 280 $ 161

During the three months ended March 31, 2015, the Company incurred $4 of actuarial losses for pension plan re-measurements not included in the table above ($4 of actuarial losses for the three months ended March 31, 2014). This includes the Company's share of pension plan re-measurements for an investment in an associate accounted for under the equity method.

The following shows the weighted average pension plans and other post-employment benefits discount rate used to re-measure the defined benefit obligation at the following dates:

Weighted averagediscount rate

March 31, 2015 (March 31, 2014) 3.1% (4.3%)

December 31, 2014 (December 31, 2013) 3.5% (4.7%)



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14. Income Taxes

(a) Income Tax Expense

Income tax expense consists of the following:


2015 2014

Current income taxes $ 149 $ 106Deferred income taxes 75 67Total income tax expense $ 224 $ 173

(b) Effective Income Tax Rate

The overall effective income tax rate for Lifeco for the three months ended March 31, 2015 was 23% compared to 19% for the full year 2014 and 21% for the three months ended March 31, 2014. The effective income tax rates are generally lower than the Company's statutory income tax rate of 26.5% due to benefits related to non-taxable investment income and lower income tax in foreign jurisdictions.

The effective income tax rate for the three months ended March 31, 2015 is higher than the three months ended March 31, 2014 and the full year 2014 effective income tax rates primarily due to a lower percentage of the Company's income consisting of non-taxable investment income and income subject to lower rates of income tax in foreign jurisdictions as well as an increase in reserves for uncertain tax positions.

(c) Deferred Tax Assets

A deferred income tax asset is recognized for deductible temporary differences and unused losses and carryforwards only to the extent that realization of the related income tax benefit through future taxable profits is probable.

Recognition is based on the fact that it is probable that the entity will have taxable profits and/or tax planning opportunities will be available to allow the deferred income tax asset to be utilized. Changes in circumstances in future periods may adversely impact the assessment of the recoverability. The uncertainty of the recoverability is taken into account in establishing the deferred income tax assets. The Company's annual financial planning process provides a significant basis for the measurement of deferred income tax assets.

The deferred income tax asset includes balances which are dependent on future taxable profits while the relevant entities have incurred losses in either the current year or the preceding year. The aggregate deferred income tax asset for the most significant entities where this applies is $1,311 at March 31, 2015 ($1,216 at December 31, 2014).

15. Legal Provisions and Contingent Liabilities (changes since December 31, 2014 Consolidated Financial Statements)

Subsequent EventOn April 15, 2015 the United States Court of Appeals for the Second Circuit issued its decision in the second civil litigation matter involving a subsidiary of the Company, Putnam Advisory Company, LLC. The decision overturned the dismissal of the action and remanded the matter for further proceedings.



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16. Segmented Information Consolidated Net Earnings

For the three months ended March 31, 2015

CanadaUnitedStates Europe

LifecoCorporate Total

IncomeTotal net premiums $ 2,667 $ 729 $ 3,536 $ — $ 6,932Net investment income

Regular net investment income 629 395 513 (1) 1,536Changes in fair value through profit or loss 1,376 232 1,345 — 2,953

Total net investment income 2,005 627 1,858 (1) 4,489Fee and other income 358 573 327 — 1,258

5,030 1,929 5,721 (1) 12,679

Benefits and expensesPaid or credited to policyholders 3,765 1,121 5,003 — 9,889Other (1) 763 586 324 4 1,677Financing charges 29 36 12 — 77Amortization of finite life intangible assets 14 17 5 — 36Restructuring and acquisition expenses — 1 6 — 7

Earnings (loss) before income taxes 459 168 371 (5) 993Income taxes 123 44 58 (1) 224Net earnings (loss) before non-controllinginterests 336 124 313 (4) 769

Non-controlling interests 33 2 2 — 37Net earnings (loss) 303 122 311 (4) 732Preferred share dividends 26 — 6 — 32Net earnings (loss) before capitalallocation 277 122 305 (4) 700

Impact of capital allocation 22 (1) (19) (2) —Net earnings (loss) - commonshareholders $ 299 $ 121 $ 286 $ (6) $ 700

(1) Includes commissions, operating and administrative expenses and premium taxes.



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16. Segmented Information (cont'd)

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For the three months ended March 31, 2014

CanadaUnitedStates Europe

LifecoCorporate Total

IncomeTotal net premiums $ 2,613 $ 812 $ 1,842 $ — $ 5,267Net investment income

Regular net investment income 638 357 498 (4) 1,489Changes in fair value through profit or loss 947 323 852 — 2,122

Total net investment income 1,585 680 1,350 (4) 3,611Fee and other income 344 419 296 — 1,059

4,542 1,911 3,488 (4) 9,937

Benefits and expensesPaid or credited to policyholders 3,365 1,298 2,826 — 7,489Other (1) 715 494 310 4 1,523Financing charges 29 35 12 — 76Amortization of finite life intangible assets 13 15 5 — 33Restructuring and acquisition expenses — — 5 — 5

Earnings (loss) before income taxes 420 69 330 (8) 811

Income taxes 105 23 47 (2) 173

Net earnings (loss) before non-controlling interests 315 46 283 (6) 638

Non-controlling interests 22 1 (1) — 22

Net earnings (loss) 293 45 284 (6) 616

Preferred share dividends 23 — 6 — 29

Net earnings (loss) before capital allocation 270 45 278 (6) 587

Impact of capital allocation 24 (4) (19) (1) —

Net earnings (loss) - common shareholders $ 294 $ 41 $ 259 $ (7) $ 587(1) Includes commissions, operating and administrative expenses and premium taxes.



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Please note that the bottom of each page in Part D contains two diff erent page numbers. A page number with the prefi x “D” refers to the number of such page in this document and the page number without any prefi x refers to the number of such page in the original document issued by IGM Financial Inc.

The attached documents concerning IGM Financial Inc. are documents prepared and publicly disclosed by such subsidiary. Certain statements in the attached documents, other than statements of historical fact, are forward-looking statements based on certain assumptions and refl ect the current expectations of the subsidiary as set forth therein. Forward-looking statements are provided for the purposes of assisting the reader in understanding the subsidiary’s fi nancial performance, fi nancial position and cash fl ows as at and for the periods ended on certain dates and to present information about the subsidiary’s management’s current expectations and plans relating to the future and the reader is cautioned that such statements may not be appropriate for other purposes.


For further information provided by the subsidiary as to the material factors that could cause actual results to diff er materially from the content of forward-looking statements, the material factors and assumptions that were applied in making the forward-looking statements, and the subsidiary’s policy for updating the content of forward-looking statements, please see the attached documents, including the section entitled Forward-Looking Statements. The reader is cautioned to consider these factors and assumptions carefully and not to put undue reliance on forward-looking statements.


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The Management’s Discussion and Analysis (MD&A) presents management’s view of the results of operations and financial condition of IGM Financial Inc. (IGM Financial or the Company) as at and for the three months ended March 31, 2015 and should be read in conjunction with the unaudited Interim Condensed Consolidated Financial Statements (Interim Financial Statements) as well as the 2014 IGM Financial Inc. Annual Report filed on www.sedar.com. Commentary in the MD&A as at and for the three months ended March 31, 2015 is as of May 8, 2015.

Certain statements in this MD&A, other than statements of historical fact, are forward-looking statements based on certain assumptions and reflect IGM Financial’s current expectations. Forward-looking statements are provided to assist the reader in understanding the Company’s financial position and results of operations as at and for the periods ended on certain dates and to present information about management’s current expectations and plans relating to the future. Readers are cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of the Company, as well as the outlook for North American and international economies, for the current fiscal year and subsequent periods. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects”, “anticipates”, “plans”, “believes”, “estimates”, “seeks”, “intends”, “targets”, “projects”, “forecasts” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may”, “will”, “should”, “would” and “could”. This information is based upon certain material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking statements,

including the perception of historical trends, current conditions and expected future developments, as well as other factors that are believed to be appropriate in the circumstances. While the Company considers these assumptions to be reasonable based on information currently available to management, they may prove to be incorrect. By its nature, this information is subject to inherent risks and uncertainties that may be general or specific and which give rise to the possibility that expectations, forecasts, predictions, projections or conclusions will not prove to be accurate, that assumptions may not be correct and that objectives, strategic goals and priorities will not be achieved. A variety of material factors, many of which are beyond the Company’s and its subsidiaries’ control, affect the operations, performance and results of the Company, and its subsidiaries, and their businesses, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. These factors include, but are not limited to: the impact or unanticipated impact of general economic, political and market factors in North America and internationally, interest and foreign exchange rates, global equity and capital markets, management of market liquidity and funding risks, changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates), the effect of applying future accounting changes, operational and reputational risks, business

competition, technological change, changes in government regulations and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, the Company’s ability to complete strategic transactions, integrate acquisitions and implement other growth strategies, and the Company’s and its subsidiaries’ success in anticipating and managing the foregoing factors. The reader is cautioned that the foregoing list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. The reader is also cautioned to consider these and other factors, uncertainties and potential events carefully and not place undue reliance on forward-looking statements. Other than as specifically required by applicable Canadian law, the Company undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise. Additional information about the risks and uncertainties of the Company’s business and material factors or assumptions on which information contained in forward-looking statements is based is provided in its disclosure materials, including this Management’s Discussion and Analysis and its most recent Annual Information Form, filed with the securities regulatory authorities in Canada, available at www.sedar.com.

FORWARD-LOOKING STATEMENTS

Basis of Presentation and Summary of Accounting PoliciesThe Interim Financial Statements of IGM Financial, which are the basis of the information presented in the Company’s MD&A, have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (IFRS) and are presented in Canadian dollars (Note 2 of the Interim Financial Statements).

Net earnings available to common shareholders, which is an additional measure in accordance with IFRS, may be subdivided into two components consisting of:• Operating earnings available to common shareholders; and• Other items, which include the after-tax impact of any item that management considers to be of a non-recurring nature or that could make the period-over-period comparison of results from operations less meaningful. “Operating earnings available to common shareholders”, “operating diluted earnings per share” (EPS) and “operating return on average common equity” (ROE) are non-IFRS financial measures which are used to provide management and investors with additional measures to assess earnings performance. These non-IFRS financial

measures do not have standard meanings prescribed by IFRS and may not be directly comparable to similar measures used by other companies. “Earnings before interest and taxes” (EBIT), “earnings before interest, taxes, depreciation and amortization” (EBITDA) and “adjusted earnings before interest, taxes, depreciation and amortization” (Adjusted EBITDA) are also non-IFRS financial measures. EBIT, EBITDA and Adjusted EBITDA are alternative measures of performance utilized by management, investors and investment analysts to evaluate and analyze the Company’s results. EBITDA is a common measure used in the asset management industry to assess profitability before the impact of different financing methods, income taxes, depreciation of capital assets and amortization of intangible assets. Other items of a non-recurring nature, or that could make the

period-over-period comparison of results from operations less meaningful, are further excluded to arrive at Adjusted EBITDA. These non-IFRS financial measures do not have standard meanings prescribed by IFRS and may not be directly comparable to similar measures used by other companies. “Earnings before income taxes” and “net earnings available to common shareholders” are additional IFRS measures which are used to provide management and investors with additional measures to assess earnings performance. These measures are considered additional IFRS measures as they are in addition to the minimum line items required by IFRS and are relevant to an understanding of the entity’s financial performance. Refer to the appropriate reconciliations of non-IFRS financial measures to reported results in accordance with IFRS in Tables 1, 2 and 3.

NON-IFRS FINANCIAL MEASURES AND ADDITIONAL IFRS MEASURES

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IGM Financial Inc.Summary of Consolidated Operating Results

IGM Financial Inc. (TSX:IGM) is one of Canada’s premier financial services companies. The Company’s principal businesses are Investors Group Inc. and Mackenzie Financial Corporation, each operating distinctly primarily within the advice segment of the financial services market. Total assets under management were $148.4 billion at March 31, 2015, the highest quarter end level in the history of the Company, and compared with $137.3 billion at March 31, 2014 and $141.9 billion at December 31, 2014. Average total assets under management for the first quarter of 2015 were $146.5 billion compared to $134.2 billion in the first quarter of 2014. Mutual fund assets under management were $131.5 billion at March 31, 2015, the highest quarter end level in the history of the Company, and compared with $122.5 billion at March 31, 2014 and

$126.0 billion at December 31, 2014. Average mutual fund assets under management for the first quarter of 2015 were $129.9 billion compared to $119.7 billion in the first quarter of 2014. Net earnings available to common shareholders for the three months ended March 31, 2015 were $200.3 million or 80 cents per share compared with net earnings available to common shareholders of $194.4 million or 77 cents per share for the comparative period in 2014. Shareholders’ equity was $4.8 billion as at March 31, 2015, unchanged from December 31, 2014. Return on average common equity for the three months ended March 31, 2015 was 17.1% compared with 16.9% for the comparative period in 2014. The quarterly dividend per common share declared in the first quarter of 2015 was 56.25 cents, unchanged from the fourth quarter of 2014.

TABLE 1: RECONCILIATION OF NON-IFRS FINANCIAL MEASURES

2015 2014 2014 Three months ended march 31 december 31 march 31 ($ millions) earnings eps(1) earnings eps(1) earnings eps(1)

Operating earnings available to common shareholders – Non-IFRS measure $ 200.3 $ 0.80 $ 208.1 $ 0.83 $ 194.4 $ 0.77 Client distributions and other costs, net of tax – – (59.2) (0.24) – –

Net earnings available to common shareholders – IFRS $ 200.3 $ 0.80 $ 148.9 $ 0.59 $ 194.4 $ 0.77

Adjusted EBITDA – Non-IFRS measure $ 348.9 $ 357.0 $ 345.0 Client distributions and other costs – (81.0) –

EBITDA – Non-IFRS measure 348.9 276.0 345.0 Commission amortization (58.7) (57.4) (60.7) Amortization of capital assets and intangible assets and other (9.8) (10.3) (8.4) Interest expense on long-term debt (22.8) (23.3) (22.8)

Earnings before income taxes 257.6 185.0 253.1 Income taxes (55.1) (33.9) (56.5) Perpetual preferred share dividends (2.2) (2.2) (2.2)

Net earnings available to common shareholders – IFRS $ 200.3 $ 148.9 $ 194.4

(1) Diluted earnings per share

6 i gm f inanc ial inc . f irst quarter report 2015 / management ’s d i scuss ion and analys i s



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REPORTABLE SEGMENTS

IGM Financial’s reportable segments, which reflect the current organizational structure and internal financial reporting, are:• Investors Group• Mackenzie Investments (Mackenzie Investments

or Mackenzie)• Corporate and Other. Management measures and evaluates the performance of these segments based on EBIT as shown in Tables 2 and 3. Segment operations are discussed in each of their respective Review of Segment Operating Results sections of the MD&A. Certain items reflected in Tables 2 and 3 are not allocated to segments:• Interest expense – represents interest expense on long-

term debt. • 2014 Client distributions and other costs – In the

third quarter of 2012, Investors Group introduced

investment solutions for clients with household investments in Investors Group funds in excess of $500,000. At December 31, 2014, a before-tax charge of $81.0 million ($59.2 million after-tax) was recorded related to these lower fee investment solutions. This amount primarily reflects distributions to clients who did not transfer to these lower priced solutions when eligible. Investors Group will make these distributions in the last half of 2015.

• Income taxes – changes in the effective tax rates are shown in Table 4.

Tax planning may result in the Company recording lower levels of income taxes. Management monitors the status of its income tax filings and regularly assesses the overall adequacy of its provision for income taxes and, as a result, income taxes recorded in prior years may be adjusted in the current year. The effect of changes in management’s best estimates reported in operating earnings is reflected in Other items, which also includes, but is

TABLE 2: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q1 2015 VS. Q1 2014

investors group mackenzie corporate & other totalThree months ended 2015 2014 2015 2014 2015 2014 2015 2014 ($ millions) mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31

Revenues Fee income $ 435.5 $ 415.2 $ 206.7 $ 201.0 $ 63.7 $ 57.2 $ 705.9 $ 673.4 Net investment income and other 21.5 13.2 4.2 1.3 29.3 26.9 55.0 41.4

457.0 428.4 210.9 202.3 93.0 84.1 760.9 714.8

Expenses Commission 145.0 130.5 77.8 73.8 44.1 38.9 266.9 243.2 Non-Commission 121.3 109.9 76.2 70.8 16.1 15.0 213.6 195.7

266.3 240.4 154.0 144.6 60.2 53.9 480.5 438.9

Earnings before interest and taxes $ 190.7 $ 188.0 $ 56.9 $ 57.7 $ 32.8 $ 30.2 280.4 275.9

Interest expense (22.8) (22.8)

Earnings before income taxes 257.6 253.1Income taxes 55.1 56.5

Net earnings 202.5 196.6Perpetual preferred share dividends 2.2 2.2

Net earnings available to common shareholders $ 200.3 $ 194.4

Operating earnings available to common shareholders(1) $ 200.3 $ 194.4

(1) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A for an explanation of the Company’s use of non-IFRS financial measures.




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TABLE 3: CONSOLIDATED OPERATING RESULTS BY SEGMENT – Q1 2015 VS. Q4 2014

investors group mackenzie corporate & other totalThree months ended 2015 2014 2015 2014 2015 2014 2015 2014 ($ millions) mar. 31 dec. 31 mar. 31 dec. 31 mar. 31 dec. 31 mar. 31 dec. 31

Revenues Fee income $ 435.5 $ 433.6 $ 206.7 $ 204.4 $ 63.7 $ 57.8 $ 705.9 $ 695.8 Net investment income and other 21.5 15.8 4.2 (0.4) 29.3 30.8 55.0 46.2

457.0 449.4 210.9 204.0 93.0 88.6 760.9 742.0

Expenses Commission 145.0 140.2 77.8 74.7 44.1 39.0 266.9 253.9 Non-Commission 121.3 112.3 76.2 76.3 16.1 10.2 213.6 198.8

266.3 252.5 154.0 151.0 60.2 49.2 480.5 452.7

Earnings before interest and taxes $ 190.7 $ 196.9 $ 56.9 $ 53.0 $ 32.8 $ 39.4 280.4 289.3

Interest expense (22.8) (23.3)Client distributions and other costs – (81.0)

Earnings before income taxes 257.6 185.0Income taxes 55.1 33.9

Net earnings 202.5 151.1Perpetual preferred share dividends 2.2 2.2

Net earnings available to common shareholders $ 200.3 $ 148.9

Operating earnings available to common shareholders(1) $ 200.3 $ 208.1

(1) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in this MD&A for an explanation of the Company’s use of non-IFRS financial measures.

TABLE 4: EFFECTIVE INCOME TAX RATE

2015 2014 2014 Three months ended mar. 31 dec. 31 mar. 31

Income taxes at Canadian federal and provincial statutory rates 26.61 % 26.50 % 26.60 % Effect of: Proportionate share of affiliate’s earnings (2.70) (4.08) (2.06) Loss consolidation(1) (2.29) (2.76) (1.82) Other items (0.25) (1.30) (0.41)

Effective income tax rate – net earnings 21.37 % 18.36 % 22.31 %

(1) See the Transactions with Related Parties section of this MD&A for additional information.




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not limited to, the effect of lower effective income tax rates on foreign operations.

• Perpetual preferred share dividends – represents the dividends declared on the Company’s 5.90% non-cumulative first preferred shares.

SUMMARY OF CHANGES IN TOTAL ASSETS UNDER MANAGEMENT

Total assets under management were $148.4 billion at March 31, 2015 compared to $137.3 billion at March 31, 2014. Changes in total assets under management are detailed in Table 5. Changes in assets under management for Investors Group and Mackenzie are discussed further in each

of their respective Review of the Business sections in the MD&A.


The Summary of Quarterly Results in Table 6 includes the eight most recent quarters and the reconciliation of non-IFRS financial measures to net earnings in accordance with IFRS. Average daily mutual fund assets under management, as shown in Table 6, have increased in each of the eight most recent quarters with the exception of a decrease of 1.3% in the fourth quarter of 2014, consistent with the movement in domestic and foreign markets.

TABLE 5: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – Q1 2015 VS. Q1 2014

investment planning investors group mackenzie counsel consolidated(1)

Three months ended 2015 2014 2015 2014 2015 2014 2015 2014 ($ millions) mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31 mar. 31

Mutual funds Gross sales – money market $ 260.9 $ 209.6 $ 102.3 $ 115.3 $ 18.6 $ 16.6 $ 381.8 $ 341.5 Gross sales – long term 2,104.4 2,019.4 1,871.2 2,258.5 177.2 140.4 4,145.2 4,415.1

Total mutual fund gross sales $ 2,365.3 $ 2,229.0 $ 1,973.5 $ 2,373.8 $ 195.8 $ 157.0 $ 4,527.0 $ 4,756.6

Net sales – money market $ 91.4 $ 47.4 $ 15.2 $ 27.2 $ 13.6 $ 11.7 $ 120.2 $ 86.3 Net sales – long term 496.5 362.9 (120.8) 326.5 46.3 28.2 416.9 715.9

Total mutual fund net sales $ 587.9 $ 410.3 $ (105.6) $ 353.7 $ 59.9 $ 39.9 $ 537.1 $ 802.2

Sub-advisory, institutional and other accounts Gross sales $ – $ – $ 1,715.5 $ 1,492.4 $ – $ – $ 984.7 $ 961.0 Net sales – – 674.4 428.0 – – 432.2 299.5

Combined Gross sales $ 2,365.3 $ 2,229.0 $ 3,689.0 $ 3,866.2 $ 195.8 $ 157.0 $ 5,511.7 $ 5,717.6 Net sales 587.9 410.3 568.8 781.7 59.9 39.9 969.3 1,101.7

Change in total assets under management Net sales $ 587.9 $ 410.3 $ 568.8 $ 781.7 $ 59.9 $ 39.9 $ 969.3 $ 1,101.7 Market and income 2,450.6 2,211.8 3,159.2 2,270.1 216.3 141.3 5,499.3 4,436.8

Net change in assets 3,038.5 2,622.1 3,728.0 3,051.8 276.2 181.2 6,468.6 5,538.5 Beginning assets 73,458.6 68,254.7 70,876.1 65,315.2 3,850.3 3,406.0 141,919.3 131,776.5

Ending assets $ 76,497.1 $ 70,876.8 $ 74,604.1 $ 68,367.0 $ 4,126.5 $ 3,587.2 $ 148,387.9 $ 137,315.0

(1) Total Gross Sales and Net Sales excluded $738 million and $247 million, respectively, in accounts sub-advised by Mackenzie on behalf of Investors Group and Investment Planning Counsel ($534 million and $130 million in 2014). Total assets under management excluded $6.8 billion of assets sub-advised by Mackenzie on behalf of Investors Group and Investment Planning Counsel ($5.5 billion at March 31, 2014).




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TABLE 6: SUMMARY OF QUARTERLY RESULTS

2015 2014 2014 2014 2014 2013 2013 2013 q1 q4 q3 q2 q1 q4 q3 q2

Consolidated statements of earnings ($ millions)Revenues Management fees $ 509.1 $ 507.4 $ 517.0 $ 503.9 $ 485.8 $ 475.6 $ 462.2 $ 451.9 Administration fees 102.3 100.7 102.0 99.3 95.2 93.7 90.4 87.9 Distribution fees 94.5 87.7 85.0 86.1 92.4 85.6 76.2 79.8 Net investment income and other 55.0 46.2 46.2 32.5 41.4 36.7 38.7 47.4 760.9 742.0 750.2 721.8 714.8 691.6 667.5 667.0Expenses Commission 266.9 253.9 249.8 245.7 243.2 229.3 219.8 219.0 Non-commission 213.6 198.8 190.8 194.5 195.7 179.9 173.0 182.7 Interest 22.8 23.3 23.2 22.9 22.8 23.3 23.2 22.9 503.3 476.0 463.8 463.1 461.7 432.5 416.0 424.6Earnings before undernoted 257.6 266.0 286.4 258.7 253.1 259.1 251.5 242.4Client distributions and other costs – (81.0) – – – – – –Restructuring and other charges – – – (18.3) – (14.6) – –Proportionate share of affiliate’s provision – – – – – 9.0 – –Earnings before income taxes 257.6 185.0 286.4 240.4 253.1 253.5 251.5 242.4Income taxes 55.1 33.9 64.5 47.9 56.5 54.2 55.9 49.3Net earnings 202.5 151.1 221.9 192.5 196.6 199.3 195.6 193.1Perpetual preferred share dividends 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2Net earnings available to common shareholders $ 200.3 $ 148.9 $ 219.7 $ 190.3 $ 194.4 $ 197.1 $ 193.4 $ 190.9

Reconciliation of Non-IFRS financial measures(1) ($ millions)Operating earnings available to common shareholders – non-IFRS measure $ 200.3 $ 208.1 $ 219.7 $ 203.9 $ 194.4 $ 198.7 $ 193.4 $ 190.9Other items: Client distributions and other costs, net of tax – (59.2) – – – – – – Restructuring and other charges, net of tax – – – (13.6) – (10.6) – – Proportionate share of affiliate’s provision – – – – – 9.0 – –Net earnings available to common shareholders – IFRS $ 200.3 $ 148.9 $ 219.7 $ 190.3 $ 194.4 $ 197.1 $ 193.4 $ 190.9

Earnings per share (¢)Operating earnings available to common shareholders(1)

– Basic 80 83 87 81 77 79 77 76 – Diluted 80 83 87 81 77 79 77 76Net earnings available to common shareholders – Basic 80 59 87 75 77 78 77 76 – Diluted 80 59 87 75 77 78 77 76Average daily mutual fund assets ($ billions) $ 129.9 $ 124.6 $ 126.2 $ 123.6 $ 119.7 $ 114.6 $ 110.2 $ 108.4Total mutual fund assets under management ($ billions) $ 131.5 $ 126.0 $ 125.2 $ 125.2 $ 122.5 $ 117.6 $ 111.2 $ 107.6Total assets under management ($ billions) $ 148.4 $ 141.9 $ 140.6 $ 141.4 $ 137.3 $ 131.8 $ 126.0 $ 124.8

(1) Refer to Non-IFRS Financial Measures and Additional IFRS Measures in addition to the Summary of Consolidated Operating Results section included in this MD&A for an explanation of Other items used to calculate the Company’s Non-IFRS financial measures.




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Investors GroupReview of the Business

INVESTORS GROUP STRATEGY

Investors Group strives to ensure that the interests of shareholders, clients, Consultants and employees are closely aligned. Investors Group’s business strategy is focused on:• Growing our distribution network by expanding the

number of region offices, attracting new Consultants to our industry and supporting existing Consultants in their growth and development.

• Emphasizing the delivery of financial advice, products and services through our exclusive network of Consultants.

• Providing an effective level of administrative support to our Consultants and clients, including active communication during all economic cycles.

• Extending the diversity and range of products offered by Investors Group as we continue to build and maintain enduring client relationships.

• Maximizing returns on business investment by focusing resources on initiatives that have direct benefits to clients and Consultants and result in increased efficiency and improved control over expenditures.

CONSULTANT NETWORK

Investors Group distinguishes itself from its competition by offering comprehensive planning to its clients within the context of long-term relationships. At the centre of these relationships is a national distribution network of Consultants based in 110 region offices across Canada. At March 31, 2015, Investors Group had a Consultant network of 5,156, up from 4,731 at March 31, 2014. This represents the highest level in the history of the company. The individuals in the Consultant network with more than four years of Investors Group experience was at an all time quarter end high of 2,819 at March 31, 2015 compared to 2,795 a year earlier. At March 31, 2015, 1,539 individuals in our Consultant network held the Certified Financial Planner (CFP) designation, or its Quebec equivalent, the Financial Planner (F.Pl.) designation. The CFP and F.Pl. designations are nationally accepted financial planning qualifications that require an individual to demonstrate financial planning competence through

education, standardized examinations, continuing education requirements, and accountability to ethical standards.

ADMINISTRATIVE SUPPORT AND COMMUNICATION FOR CONSULTANTS AND CLIENTS

Administrative support for Consultants and clients includes timely and accurate client account record-keeping and reporting, effective problem resolution support, and continuous improvements to servicing systems. This administrative support is provided from both Investors Group’s Quebec General Office located in Montreal for Consultants and clients residing in Quebec and from Investors Group’s head office in Winnipeg, Manitoba for Consultants and clients in the rest of Canada. The Quebec General Office has approximately 190 employees and operating units for most functions supporting over 1,000 Consultants throughout Quebec and the 19 Quebec region offices. Mutual fund assets under management in Quebec were approximately $13 billion as at March 31, 2015. Regular communication with our clients includes quarterly reporting of their Investors Group mutual fund holdings and the change in asset values of these holdings during the quarter. Individual clients experience different returns as a result of their net cash flow and fund holdings in each quarter as illustrated on the accompanying chart. This chart reflects in-quarter client account median rates of return for the current year. The chart also illustrates upper and lower ranges of rates of return around the median for 90% of Investors Group clients.

Client Account Rate of Return (ROR) Experience

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90% ofclients rate of returnrange

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For the three months ended March 31, 2015, the client account median rate of return was approximately 3.0% and 89% of clients experienced positive returns.

New Client Rate of Return ReportingIn March 2013, the Canadian Securities Administrators adopted a new set of rules as Phase 2 of the Client Relationship Model, often referred to as CRM2. One of the most significant aspects of these rules will require all dealers to provide their clients with account level rates of return for various historical periods. This is an industry-wide regulatory amendment focused on ensuring that clients are well informed regarding the performance of their investments. Investors Group fully supports this initiative and we believe investment account level rates of return reporting will provide a meaningful benefit to our clients and demonstrate the value provided through advice over the history of our client relationships. Investors Group has established multiple-period account rate of return reporting capabilities that will be added to most Investors Group’s client statements for the June 30, 2015 client statement period and will continue reporting on this basis each quarter thereafter. Required data has been gathered for several years so that clients will have one year, three year and five year calculations appearing immediately upon Investors Group’s introduction of this new feature. This new client feature will be introduced a full two years earlier than the regulatory requirements and will show at least a five year history immediately upon this introduction for our long-term clients. The regulations would have required us to provide this information by

June 30, 2017 and only on a one year basis initially with longer time frames emerging over time.

Client Experience SurveyConsultants maintain a high degree of contact with our clients, continuing to reinforce the importance of long-term planning and a diversified investment portfolio. Ongoing surveys of our clients indicate a strong appreciation of the value of advice and service provided by our Consultants through varying economic cycles. In 2014, Investors Group introduced an ongoing program of surveys to measure client experience for new and existing clients: • All new Investors Group clients receive a survey at

their three month anniversary date. • All existing clients are surveyed annually. The results of the surveys from inception to March 31, 2015 are detailed in Table 7.


The level of mutual fund assets under management is influenced by three factors: sales, redemptions and net asset values of our funds. Changes in assets under management for the periods under review are reflected in Table 8. Assets under management reached $76.5 billion at March 31, 2015, the highest quarter end level in the history of Investors Group.

Fund PerformanceAt March 31, 2015, 38.5% of Investors Group mutual funds had a rating of three stars or better from the Morningstar† fund ranking service and 11.9% had a rating of four or five stars. This compared to the

TABLE 7: CLIENT EXPERIENCE SURVEY – INVESTORS GROUP

Surveys completed from inception to March 31, 2015

New client households surveyed 90 days after account opening Satisfied with service 96 % Offered a financial plan 91 Satisfied with discussion about goals and concerns 97 Willing to refer 94

Client households with 12+ months tenure Satisfied with service 93 % Have a financial plan 85 Satisfied with level of contact 93 Willing to refer 88




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Morningstar† universe of 65.2% for three stars or better and 28.5% for four and five star funds at March 31, 2015. Morningstar Ratings† are an objective, quantitative measure of a fund’s three, five and ten year risk-adjusted performance relative to comparable funds.

Additions to Mutual Fund Product OfferingInvestors Group continues to enhance the performance, scope and diversity of our investment offering with the introduction of new funds that are well-suited to the long-term diverse needs of Canadian investors. Investors Group introduced two new investment options which became available for sale in January 2015:• Investors U.S. Dividend Registered Fund which

aims to provide long-term capital appreciation and income by investing primarily in a combination of U.S. dividend-paying equity securities and/or other types of income producing investments. Due to an exemption from U.S. withholding tax, no U.S. withholding tax will be charged on interest and dividends received by the Investors U.S. Dividend Registered Fund. This will result in a positive effect on performance.

• Allegro Income Balanced Portfolio Class which aims to provide fixed-income diversification and long-term capital appreciation by investing primarily in underlying funds that provide equity and/or fixed income exposure.

Pricing for Households with Investment Assets in Excess of $500,000During 2012 and 2013, Investors Group introduced investment solutions with differentiated pricing for

households with investments in Investors Group funds in excess of $500,000. • Series J was introduced in the third quarter of

2012 and had assets of $17.4 billion at March 31, 2015, an increase of 87% from $9.3 billion at March 31, 2014.

• Series U was introduced in the third quarter of 2013 and provides a pricing structure which separates the advisory fee, which is charged directly to a client’s account, from the fees charged to the underlying investment funds. At March 31, 2015, Series U assets under management had increased to $2.2 billion, compared to $764 million at March 31, 2014, an increase of 186%.

At March 31, 2015, a significant majority of clients eligible for Series J or U had transferred to these solutions. In order to encourage and accelerate this movement, Investors Group announced that it will provide distributions to clients during their period of eligibility, up to April 30, 2015. These distributions will be made in the last half of 2015.

Change in Mutual Fund Assets Under Management – Q1 2015 vs. Q1 2014Investors Group’s mutual fund assets under management were $76.5 billion at March 31, 2015, the highest quarter end level in the history of Investors Group, representing an increase of 7.9% from $70.9 billion at March 31, 2014. Average daily mutual fund assets were $75.5 billion in the first quarter of 2015, up 8.9% from $69.3 billion in the first quarter of 2014.

TABLE 8: CHANGE IN MUTUAL FUND ASSETS UNDER MANAGEMENT – INVESTORS GROUP

% change

Three months ended 2015 2014 2014 2014 2014 ($ millions) mar. 31 dec. 31 mar. 31 dec. 31 mar. 31

Sales $ 2,365.3 $ 1,840.4 $ 2,229.0 28.5 % 6.1 %Redemptions 1,777.4 1,646.0 1,818.7 8.0 (2.3)

Net sales (redemptions) 587.9 194.4 410.3 202.4 43.3Market and income 2,450.6 578.4 2,211.8 323.7 10.8

Net change in assets 3,038.5 772.8 2,622.1 293.2 15.9Beginning assets 73,458.6 72,685.8 68,254.7 1.1 7.6

Ending assets $ 76,497.1 $ 73,458.6 $ 70,876.8 4.1 % 7.9 %

Average daily assets $ 75,456.4 $ 72,533.7 $ 69,292.6 4.0 % 8.9 %


D 1 0 P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5


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For the quarter ended March 31, 2015, sales of Investors Group mutual funds through its Consultant network were $2.4 billion, the highest quarter end level in the company’s history, and an increase of 6.1% from the comparative period in 2014. Mutual fund redemptions totalled $1.8 billion, a decrease of 2.3% from 2014. Net sales of Investors Group mutual funds for the first quarter of 2015 were $588 million compared with net sales of $410 million in 2014, an improvement of $178 million. During the first quarter, market and income resulted in an increase of $2.5 billion in mutual fund assets compared to an increase of $2.2 billion in the first quarter of 2014. Sales of long-term funds were $2.1 billion for the first quarter of 2015, an increase of 4.2% from the previous year. Net sales of long-term funds for the first quarter of 2015 were $497 million compared to net sales of $363 million in 2014. Investors Group’s annualized quarterly redemption rate for long-term funds of 8.8% in the first quarter of 2015 was lower than the rate of 9.9% in the first quarter of 2014. Investors Group’s twelve month trailing redemption rate for long-term funds was 8.5% at March 31, 2015 which remains well below the corresponding average redemption rate for all other members of the Investment Funds Institute of Canada (IFIC) of approximately 15.3% at March 31, 2015. Over the last several years, a growing component of the redemptions included in Investors Group’s long-term redemption rate has related to the Cornerstone funds and transfers to Investors Group Series of Guaranteed Investment Funds (GIFs). The Cornerstone funds are income portfolio funds which invest between 30% and 50% of their assets in Investors Premium Money Market Fund. These funds are used by our clients as a substitute for money market funds which have higher redemption activity and, together with the transfers to GIFs, account for 0.3% of our long-term redemption rate at March 31, 2015. Excluding such items, the twelve month trailing redemption rate for long-term funds would have been 8.2%.

Change in Mutual Fund Assets Under Management – Q1 2015 vs. Q4 2014Investors Group’s mutual fund assets under management were $76.5 billion at March 31, 2015, an increase of 4.1% from $73.5 billion at December 31, 2014. Average daily mutual fund assets were $75.5 billion in the first

quarter of 2015 compared to $72.5 billion in the fourth quarter of 2014, an increase of 4.0%. For the quarter ended March 31, 2015, sales of Investors Group mutual funds through its Consultant network were $2.4 billion, an increase of 28.5% from the fourth quarter of 2014. Mutual fund redemptions, which totalled $1.8 billion for the first quarter, increased 8.0% from the previous quarter and the annualized quarterly redemption rate of 8.8% in the first quarter was higher than the rate of 8.1% in the fourth quarter of 2014. Net sales of Investors Group mutual funds for the current quarter were $588 million compared with net sales of $194 million in the previous quarter. Sales of long-term funds were $2.1 billion for the current quarter, compared to $1.5 billion in the previous quarter, an increase of 36.2%. Net sales of long-term funds for the current quarter were $497 million compared to net sales of $80 million in the previous quarter.

OTHER PRODUCTS AND SERVICES

Segregated FundsInvestors Group has offered segregated funds since 2001 and introduced the Investors Group Series of Guaranteed Investment Funds (GIFs) in November 2009. GIFs are segregated fund policies issued by The Great-West Life Assurance Company and include 14 fund-of-fund segregated portfolios and six individual segregated funds. These segregated funds provide for long-term investment growth potential combined with risk management, full and partial maturity and death benefit guarantee features, potential creditor protection and estate planning efficiencies. Select GIF policies allow for a Lifetime Income Benefit (LIB) option to provide guaranteed retirement income for life. The investment components of these segregated funds are managed by Investors Group. At March 31, 2015, total segregated fund assets were $1.7 billion compared to $1.5 billion at March 31, 2014.

InsuranceInvestors Group distributes insurance products through I.G. Insurance Services Inc. For the quarter ended March 31, 2015, sales of insurance products as measured by new annualized premiums were $17 million, an increase of 1.0% from $16 million in 2014.


P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5 D 1 1


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Securities OperationsInvestors Group provides securities services to clients through Investors Group Securities Inc., an investment dealer registered in all Canadian provinces and territories.

Mortgage Operations Investors Group is a national mortgage lender that offers residential mortgages to Investors Group clients as part of a comprehensive financial plan. Investors Group Mortgage Planning Specialists are located throughout each province in Canada, and work with our clients and their Consultants as permitted by the regulations to develop mortgage strategies that meet the individual needs and goals of each client. Through its mortgage banking operations, mortgages originated by Investors Group Mortgage Planning Specialists are sold to the Investors Mortgage and Short Term Income Fund, Investors Canadian Corporate Bond Fund, securitization programs, and institutional investors. Certain subsidiaries of Investors Group are Canada Mortgage and Housing Corporation (CMHC)-approved issuers of National Housing Act Mortgage-Backed Securities (NHA MBS) and are approved sellers of NHA MBS into the Canada Mortgage Bond Program (CMB Program). Securitization programs that these subsidiaries participate in also include certain bank-sponsored asset-backed commercial paper (ABCP) programs. Residential mortgages are also held by Investors Group’s intermediary operations.

Mortgage fundings for the quarter ended March 31, 2015, were $389 million, compared to $324 million in 2014, an increase of 20.3%. At March 31, 2015, mortgages serviced by Investors Group related to its mortgage banking operations totalled $10.0 billion, compared to $8.6 billion at March 31, 2014, an increase of 16.4%.

Solutions Banking† Investors Group’s Solutions Banking† continues to experience high rates of utilization by Consultants and clients. The offering consists of a wide range of products and services provided by the National Bank of Canada under a long-term distribution agreement and includes: investment loans, lines of credit, personal loans, creditor insurance, deposit accounts and credit cards. Clients have access to a network of banking machines, as well as a private labeled client website and client service centre. The Solutions Banking† offering supports Investors Group’s approach to delivering total financial solutions for our clients through a broad financial planning platform.

Additional Products and Services Investors Group also provides its clients with guaranteed investment certificates offered by Investors Group Trust Co. Ltd., as well as a number of other financial institutions.




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Review of Segment Operating Results

Investors Group’s earnings before interest and taxes are presented in Table 9.

Q1 2015 VS. Q1 2014

Fee IncomeFee income is generated from the management, administration and distribution of Investors Group mutual funds. The distribution of insurance and Solutions Banking† products and the provision of securities services provide additional fee income. Investors Group earns management fees for investment management services provided to its mutual funds, which depend largely on the level and composition of mutual fund assets under management. Management fees were $316.2 million in the first quarter of 2015, an increase of $15.5 million or 5.2% from $300.7 million in 2014. The net increase in management fees in the three months ended March 31, 2015 was due to the increase in average daily mutual fund assets of 8.9% as shown in Table 8. The average management fee rate in the first quarter of 2015 was 169.9 basis points of daily mutual fund assets compared to 176.0 basis points in 2014. This decline in basis points resulted primarily from transfers of eligible clients into lower fee investment solutions. Investors Group’s efforts to encourage and

accelerate transfers of eligible clients into lower fee investment solutions resulted in the weighted average management fee rate declining by approximately 4 basis points starting in the first quarter of 2015. Management fee income and average management fee rates also reflected the effect of Investors Group having waived a portion of the investment management fees on its money market funds. These waivers totalled $0.7 million in the first quarter of 2015 compared to $0.8 million in the prior year. Investors Group receives administration fees for providing administrative services to its mutual funds and trusteeship services to its unit trust mutual funds, which also depend largely on the level and composition of mutual fund assets under management. Administration fees totalled $73.0 million in the current quarter compared to $66.0 million a year ago, an increase of 10.6%. The increase resulted primarily from the change in average mutual fund assets under management. Distribution fees are earned from:• Redemption fees on mutual funds sold with a

deferred sales charge. • Portfolio fund distribution fees.• Distribution of insurance products through

I.G. Insurance Services Inc.• Securities trading services provided through

Investors Group Securities Inc.

TABLE 9: OPERATING RESULTS – INVESTORS GROUP

% change


Revenues Management fees $ 316.2 $ 317.4 $ 300.7 (0.4) % 5.2 % Administration fees 73.0 71.3 66.0 2.4 10.6 Distribution fees 46.3 44.9 48.5 3.1 (4.5)

435.5 433.6 415.2 0.4 4.9 Net investment income and other 21.5 15.8 13.2 36.1 62.9

457.0 449.4 428.4 1.7 6.7

Expenses Commission 76.7 76.8 69.8 (0.1) 9.9 Asset retention bonus and premium 68.3 63.4 60.7 7.7 12.5 Non-commission 121.3 112.3 109.9 8.0 10.4

266.3 252.5 240.4 5.5 10.8

Earnings before interest and taxes $ 190.7 $ 196.9 $ 188.0 (3.1) % 1.4 %




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• Banking services provided through Solutions Banking†. Distribution fee income of $46.3 million for the first quarter of 2015 decreased by $2.2 million from $48.5 million in 2014, due primarily to decreases in distribution fee income from insurance products and redemption fees. Redemption fee income varies depending on the level of deferred sales charge attributable to fee-based redemptions.

Net Investment Income and OtherNet investment income and other includes income related to mortgage banking operations and net interest income related to intermediary operations. Net investment income and other was $21.5 million in the first quarter of 2015, an increase of $8.3 million from $13.2 million in 2014. Net investment income related to Investors Group’s mortgage banking operations totalled $21.1 million for the first quarter of 2015 compared to $12.8 million in 2014, an increase of $8.3 million. A summary of mortgage banking operations for the quarter under review is presented in Table 10. The changes in mortgage banking income were due to:• Net interest income on securitized loans – which

increased by $0.9 million for the quarter ended March 31, 2015 to $11.7 million compared to 2014. The increase resulted from higher average securitized loans offset in part by lower interest income margins.

• Gains realized on the sale of residential mortgages – which increased by $4.2 million for the quarter ended March 31, 2015 to $7.1 million compared to 2014. The increase in gains in the three month period resulted from a higher level of sale activity as well as an increase in the proportion of sales made to institutional investors compared to mutual funds.

• Fair value adjustments – which increased by $3.6 million for the three month period ended March 31, 2015 to $4.0 million compared to 2014. The increase was primarily due to favourable fair value adjustments on certain securitization related financial instruments.

ExpensesInvestors Group incurs commission expense in connection with the distribution of its mutual funds and other financial services and products. Commissions are paid on the sale of these products and fluctuate

with the level of sales. The expense for deferred selling commissions consists of the amortization of the asset over its useful life and the reduction of the unamortized deferred selling commission asset associated with redemptions. Commissions paid on the sale of mutual funds are deferred and amortized over a maximum period of seven years. Commission expense was $76.7 million for the first quarter of 2015, an increase of $6.9 million from $69.8 million in 2014. The increase was primarily related to a new program that provides Consultants with higher income potential in their first two years with Investors Group. Asset retention bonus and premium expense is comprised of the following:• Asset retention bonus, which is based on the

value of assets under management, increased by $6.4 million for the quarter ended March 31, 2015 to $57.1 million compared to 2014. The increase was primarily due to the increase in assets under management.

• Asset retention premium, which is a deferred component of compensation designed to promote Consultant retention, is based on assets under management at each year end. Asset retention premium expense increased by $1.2 million in the first quarter to $11.2 million compared to 2014. The increase was related to the increase in assets under management.

Non-commission expenses incurred by Investors Group primarily relate to the support of the Consultant network, the administration, marketing and management of its mutual funds and other products, as well as sub-advisory fees related to mutual funds under management. Non-commission expenses were $121.3 million for the first quarter of 2015 compared to $109.9 million in 2014, an increase of $11.4 million or 10.4%. Pension expense increased in the quarter primarily as a result of interest rate declines which had the effect of increasing current service costs on the related pension obligation. Excluding the impact of the increased pension expense of $2.4 million in the quarter, the increase in non-commission expenses was 8.2%. These increases included additional expenses related to Consultant network expansion and other business development efforts.




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Q1 2015 VS. Q4 2014

Fee IncomeManagement fee income decreased by $1.2 million or 0.4% to $316.2 million in the first quarter of 2015 compared with the fourth quarter of 2014. The net decrease in management fees in the first quarter was primarily due to:

• The decrease in the average management fee rate in the first quarter of 2015 to 169.9 basis points of daily mutual fund assets from 173.6 basis points in the prior quarter. The 4 basis point decline resulted from Investors Group’s efforts to encourage and accelerate the transfer of eligible clients into lower fee investment solutions.

TABLE 10: MORTGAGE BANKING OPERATIONS – INVESTORS GROUP

% change

2015 2014 2014 2014 2014 ($ millions) mar. 31 dec. 31 mar. 31 dec. 31 mar. 31

As atMortgages serviced $ 9,997 $ 9,894 $ 8,587 1.0 % 16.4 %Mortgage warehouse(1) $ 375 $ 357 $ 200 5.0 % 87.5 %

Three months endedAverage mortgages serviced CMB/MBS Programs $ 4,570 $ 4,411 $ 3,799 3.6 % 20.3 % Bank-sponsored ABCP programs 1,956 1,966 1,666 (0.5) 17.4

Securitizations 6,526 6,377 5,465 2.3 19.4 Other 3,404 3,416 3,059 (0.4) 11.3

$ 9,930 $ 9,793 $ 8,524 1.4 % 16.5 %

Mortgage fundings(2) $ 389 $ 511 $ 324 (23.9) % 20.3 %

Mortgage sales to:(3)

Securitizations $ 378 $ 754 $ 453 (49.9) % (16.6) % Other(4) 332 310 215 7.1 54.4

$ 710 $ 1,064 $ 668 (33.3) % 6.3 %

Total mortgage banking income Net interest income on securitized loans Interest income $ 47.1 $ 47.7 $ 41.6 (1.3) % 13.2 % Interest expense 35.4 34.8 30.8 1.7 14.9

Net interest income 11.7 12.9 10.8 (9.3) 8.3 Gains on sales(5) 7.1 5.8 2.9 22.4 144.8 Fair value adjustments 4.0 (1.5) 0.4 n/m n/m Other(6) (1.7) (2.0) (1.3) 15.0 (30.8)

$ 21.1 $ 15.2 $ 12.8 38.8 % 64.8 %

(1) Warehouse activities include mortgage fundings, mortgage renewals and mortgage refinances.(2) Excludes renewals and refinances.(3) Represents principal amounts sold.(4)(5) Represents sales to institutional investors through private placements, to Investors Mortgage and Short Term Income Fund, and to Investors Canadian Corporate Bond

Fund as well as gains realized on those sales.(6) Represents mortgage issuance and insurance costs, interest earned on warehoused mortgages, and servicing and other.




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• A decrease of $7.0 million due to two less calendar days in the first quarter compared to the fourth quarter of 2014.

The decrease was offset in part by the impact of the increase in average daily mutual fund assets of 4.0% for the quarter as shown in Table 8. Money market fund waivers totalled $0.7 million in the first quarter of 2015 compared with $0.8 million in the fourth quarter of 2014. Administration fees increased to $73.0 million in the first quarter of 2015 from $71.3 million in the fourth quarter of 2014. The net increase resulted from the increase in average daily mutual fund assets compared with the fourth quarter of 2014. Distribution fee income of $46.3 million in the first quarter of 2015 increased by $1.4 million from $44.9 million in the fourth quarter primarily due to an increase in redemption fees offset in part by distribution fee income from a seasonal decrease in insurance product sales.

Net Investment Income and OtherNet investment income and other was $21.5 million in the first quarter of 2015 compared to $15.8 million in the previous quarter, an increase of $5.7 million primarily related to Investors Group’s mortgage banking operations. Net investment income related to Investors Group’s mortgage banking operations totalled $21.1 million in the first quarter of 2015, an increase of $5.9 million from $15.2 million in the previous quarter as shown in Table 10. The changes in mortgage banking income were due to:• Net interest income on securitized loans – which

decreased by $1.2 million in the first quarter of 2015 to $11.7 million, compared to $12.9 million in the previous quarter primarily due to lower margins.

• Gains realized on the sale of residential mortgages – which increased by $1.3 million in the first quarter of 2015 to $7.1 million, compared to $5.8 million in the previous quarter. The increase in gains resulted from higher margins on these sales.

• Fair value adjustments – which increased by $5.5 million in the first quarter of 2015 to $4.0 million, compared to ($1.5) million in the previous quarter. The increase was primarily due to favourable fair value adjustments on certain securitization related financial instruments.

ExpensesCommission expense in the current quarter was $76.7 million compared with $76.8 million in the previous quarter. The asset retention bonus and premium expense increased by $4.9 million to $68.3 million in the first quarter of 2015 due to increases in average assets under management, the reset of the asset retention premium which is based on assets under management at the year end, as well as increases in asset retention bonus rates. Non-commission expenses were $121.3 million in the current quarter, an increase of $9.0 million or 8.0% from $112.3 million in the fourth quarter of 2014. Pension expense increased in the quarter primarily as a result of interest rate declines which had the effect of increasing current service costs on the related pension obligation. Excluding the impact of the increased pension expense of $2.4 million in the quarter, the increase in non-commission expenses was 5.9%. These increases included additional expenses related to Consultant network expansion and other business development efforts.




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MACKENZIE STRATEGY

Mackenzie strives to ensure that the interests of shareholders, dealers, advisors, clients and employees are closely aligned. In the fourth quarter of 2013, Mackenzie affirmed its vision and established a number of strategic priorities to drive future business success. Our vision: We are committed to the financial success of investors, through their eyes.• Getting the basics right; every time, everywhere• Delivering competitive and consistent risk-adjusted

performance• Transforming distribution to drive sales and market

share• Delivering high quality products to investors and

advisors and actively anticipating their future needs• Reinvigorating the brand and leading the industry

on key investor and advisor issues• Building a winning culture Mackenzie seeks to maximize returns on business investment by focusing resources on initiatives that have direct benefits to investment management, distribution and client experience. Founded in 1967, Mackenzie continues to build an investment advisory business through proprietary investment research and portfolio management while utilizing strategic partners in a selected sub-advisory capacity. Our sales model focuses on multiple distribution channels: Retail, Strategic Alliances and Institutional. Mackenzie distributes its retail investment products through third party financial advisors. Mackenzie’s sales teams work with many of the more than 30,000 independent financial advisors and their firms across Canada. In addition to its retail distribution team, Mackenzie also has specialty teams focused on strategic alliances and the institutional marketplace. Within the strategic alliance channel Mackenzie offers certain series of its mutual funds and provides sub-advisory services to third party and related party investment programs offered by banks, insurance companies and other investment companies. Strategic alliances with related parties include providing advisory services to Investors Group, Investment Planning Counsel and Great-West Lifeco Inc. (Lifeco) subsidiaries, and also include a private label mutual fund arrangement with Lifeco subsidiary Quadrus. Within the strategic alliance channel, Mackenzie’s primary distribution

relationship is with the head office of the respective bank, insurance company or investment company. In the institutional channel Mackenzie provides investment management services to pension plans, foundations and other institutions. Mackenzie attracts new institutional business through its relationships with pension and management consultants. Gross sales and redemption activity in strategic alliance and institutional accounts can be more pronounced than in the retail channel given the relative size and the nature of the distribution relationships of these accounts. These accounts are also subject to ongoing reviews and rebalance activities which may result in a significant change in the level of assets under management. Mackenzie is positioned to continue to build and enhance its distribution relationships given its team of experienced investment professionals, broad product shelf, competitively priced products and its focus on client experience and investment excellence.

LIVE IT™ InitiativeDuring the fourth quarter of 2014, Mackenzie announced LIVE IT, a new framework for investment conversations based on the six concerns that matter most to investors. The message of LIVE IT reflects Canadians’ aspirations to live a fulfilling life today, and through a strong investment plan, into the future. The LIVE IT framework was built after extensive conversations and research with investors and advisors to identify what issues were most on their minds. LIVE IT puts a spotlight on those areas through an acronym that takes the first letter from each major financial challenge facing investors today, and in the future: Longevity, Income, Volatility, Estate, Inflation and Taxes.


The changes in mutual fund assets under management are summarized in Table 11 and the changes in total assets under management are summarized in Table 12. At March 31, 2015, Mackenzie’s mutual fund and total assets under management reached $50.9 billion and $74.6 billion, respectively, the highest quarter end levels in the history of Mackenzie. The change in Mackenzie’s assets under management is determined by the increase or decrease in the market value of the securities held in the

Mackenzie InvestmentsReview of the Business




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TABLE 11: CHANGE IN MUTUAL FUND ASSETS UNDER MANAGEMENT – MACKENZIE

% change


Sales $ 1,973.5 $ 1,555.5 $ 2,373.8 26.9 % (16.9) %Redemptions 2,079.1 2,027.0 2,020.1 2.6 2.9

Net sales (redemptions)(1) (105.6) (471.5) 353.7 77.6 n/mMarket and income 2,267.5 479.4 1,681.1 n/m 34.9

Net change in assets 2,161.9 7.9 2,034.8 n/m 6.2Beginning assets 48,781.9 48,774.0 46,024.4 – 6.0

Ending assets $ 50,943.8 $ 48,781.9 $ 48,059.2 4.4 % 6.0 %

Daily average mutual fund assets $ 50,492.4 $ 48,311.3 $ 46,950.3 4.5 % 7.5 %

(1) In the fourth quarter of 2014, a third party investment program which includes Mackenzie mutual funds made fund allocation changes which resulted in gross sales of $62 million, redemptions of $284 million and net redemptions of $222 million.

TABLE 12: CHANGE IN TOTAL ASSETS UNDER MANAGEMENT – MACKENZIE

% change


Sales $ 3,689.0 $ 3,320.8 $ 3,866.2 11.1 % (4.6) %Redemptions 3,120.2 3,172.5 3,084.5 (1.6) 1.2

Net sales (redemptions)(1) 568.8 148.3 781.7 283.5 (27.2)Market and income 3,159.2 774.0 2,270.1 308.2 39.2

Net change in assets 3,728.0 922.3 3,051.8 304.2 22.2Beginning assets 70,876.1 69,953.8 65,315.2 1.3 8.5

Ending assets $ 74,604.1 $ 70,876.1 $ 68,367.0 5.3 % 9.1 %

Consists of: Mutual funds $ 50,943.8 $ 48,781.9 $ 48,059.2 4.4 % 6.0 % Sub-advisory, institutional and other accounts 23,660.3 22,094.2 20,307.8 7.1 16.5

$ 74,604.1 $ 70,876.1 $ 68,367.0 5.3 % 9.1 %

Monthly average total assets(2) $ 73,591.6 $ 69,834.2 $ 66,748.9 5.4 % 10.3 %

(1) In the fourth quarter of 2014, a third party investment program which includes Mackenzie mutual funds made fund allocation changes which resulted in gross sales of $62 million, redemptions of $284 million and net redemptions of $222 million. In addition, there were tactical rebalances by an institutional client that resulted in gross sales of $448 million, redemptions of $94 million and net sales of $354 million into separately managed account investment mandates advised on by Mackenzie.

(2) Based on daily average mutual fund assets and month-end average sub-advisory, institutional and other assets.




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portfolios of investments and by the level of sales as compared to the level of redemptions.

Fund PerformanceLong-term investment performance is a key measure of Mackenzie’s ongoing success. At March 31, 2015, 30.3% of Mackenzie mutual funds were rated in the top two performance quartiles for the one year time frame, 25.6% for the three year time frame and 42.9% for the five year time frame. Mackenzie also monitors its fund performance relative to the ratings it receives on its mutual funds from the Morningstar† fund ranking service. At March 31, 2015, 62.0% of Mackenzie mutual funds measured by Morningstar† had a rating of three stars or better and 18.5% had a rating of four or five stars. This compared to the Morningstar† universe of 65.2% for three stars or better and 28.5% for four and five star funds at March 31, 2015. These ratings exclude the Quadrus Group of Funds†.

Changes to Mutual Fund Product OfferingMackenzie’s diversified suite of investment products is designed to meet the needs and goals of investors. Mackenzie continues to evolve its product shelf by providing enhanced investment solutions for financial advisors to offer their investment clients. During the third quarter of 2014, Mackenzie completed a comprehensive retail pricing review and announced, on October 8, 2014, changes designed to simplify and enhance its approach to the retail pricing of its mutual funds. Mackenzie is focused on delivering clear, consistent and competitive pricing on its retail mutual fund product line-up. As part of these pricing changes, which became effective on September 29, 2014, Mackenzie aligned management fees within the income and balanced asset class categories resulting in management fee reductions to 13 mutual funds. The decreases range from 0.15% to 0.25% per annum of the asset value of the fund. Mackenzie also lowered fixed rate annual administration fees on Series A, C, SC and T of many funds to align the rates applied within each asset class. In addition, administration fees have been lowered on Mackenzie’s entire Series F offering. Series F is available to retail investors who are enrolled in a dealer-sponsored fee-for-service or wrap program.

Change in Assets under Management – Q1 2015 vs. Q1 2014 Mackenzie’s mutual fund assets under management were $50.9 billion at March 31, 2015, an increase

of 6.0% from $48.1 billion at March 31, 2014. Mackenzie’s sub-advisory, institutional and other accounts at March 31, 2015 were $23.7 billion, an increase of 16.5% from $20.3 billion last year. Mackenzie’s total assets under management at March 31, 2015 were $74.6 billion, an increase of 9.1% from $68.4 billion at March 31, 2014. At March 31, 2015, Mackenzie’s mutual fund and total assets under management were the highest quarter end levels in the history of the company. In the three months ended March 31, 2015, Mackenzie’s mutual fund gross sales were $2.0 billion, a decrease of 16.9% from $2.4 billion in the comparative period last year. Mutual fund redemptions in the current period were $2.1 billion, an increase of 2.9% from last year. Mutual fund net redemptions for the three months ended March 31, 2015 were $106 million, as compared to net sales of $354 million last year. During the current quarter, market and income resulted in assets increasing by $2.3 billion as compared to an increase of $1.7 billion last year. In the three months ended March 31, 2015, Mackenzie’s gross sales for total assets under management were $3.7 billion, a decrease of 4.6% from $3.9 billion in the comparative period last year. Redemptions in the current period were $3.1 billion, an increase of 1.2% from last year. Net sales for the three months ended March 31, 2015 were $569 million, as compared to net sales of $782 million last year. During the current quarter, market and income resulted in assets increasing by $3.2 billion as compared to an increase of $2.3 billion last year. Redemptions of long-term mutual funds in the three month period ended March 31, 2015, were $2.0 billion as compared to $1.9 billion last year. Mackenzie’s annualized quarterly redemption rate for long-term mutual funds of 16.2% in the first quarter of 2015 was lower than the 16.9% in the first quarter of 2014. Mackenzie’s twelve-month trailing redemption rate for long-term mutual funds was 14.4% at March 31, 2015, as compared to 16.0% last year. The corresponding average twelve-month trailing redemption rate for long-term mutual funds for all other members of IFIC was approximately 14.8% at March 31, 2015. Mackenzie’s twelve-month trailing redemption rate is comprised of the weighted average redemption rate for front-end load assets, deferred sales charge and low load assets with redemption fees, and deferred sales charge assets




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without redemption fees (matured assets). Generally, redemption rates for front-end load assets and matured assets are higher than the redemption rates for deferred sales charge and low load assets with redemption fees.

Change in Assets under Management – Q1 2015 vs. Q4 2014Mackenzie’s mutual fund assets under management were $50.9 billion at March 31, 2015, an increase of 4.4% from $48.8 billion at December 31, 2014. Mackenzie’s sub-advisory, institutional and other accounts increased $1.6 billion from $22.1 billion to $23.7 billion at March 31, 2015. Mackenzie’s total assets under management at March 31, 2015, were $74.6 billion, an increase of 5.3% from $70.9 billion at December 31, 2014, as summarized in Table 12. For the quarter ended March 31, 2015, Mackenzie mutual fund gross sales were $2.0 billion, an increase of 26.9% from the fourth quarter of 2014. Mutual fund redemptions, which totalled $2.1 billion for the first quarter, increased 2.6% from the previous quarter. Net redemptions of Mackenzie mutual funds for the current quarter were $106 million compared with net redemptions of $471 million in the previous quarter.

During the fourth quarter of 2014, a third party investment program, which includes Mackenzie mutual funds, made fund allocation changes resulting in gross sales of $62 million, redemptions of $284 million and net redemptions of $222 million. Excluding this transaction, gross sales increased 32.1% in the quarter ended March 31, 2015 compared to the fourth quarter of 2014 and net redemptions were $106 million in the current quarter compared to net redemptions of $249 million in the prior quarter. Redemptions of long-term mutual fund assets in the current quarter were $2.0 billion, compared to $1.9 billion in the fourth quarter of 2014. Mackenzie’s annualized quarterly redemption rate for long-term mutual funds for the quarter ended March 31, 2015 was 16.2%, compared to 16.1% for the fourth quarter of 2014. Net redemptions of long-term funds for the current quarter were $121 million compared to net redemptions of $496 million in the previous quarter. Excluding rebalance transactions during the fourth quarter of 2014, Mackenzie’s annualized quarterly redemption rate for long-term funds was 13.7%.




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Review of Segment Operating Results

Mackenzie’s earnings before interest and taxes are presented in Table 13.

Q1 2015 VS. Q1 2014

RevenuesThe largest component of Mackenzie’s revenues is management fees. The amount of management fees depends on the level and composition of assets under management. Management fee rates vary depending on the investment objective and the account type of the underlying assets under management. Equity-based mandates have higher management fee rates than fixed income mandates and retail mutual fund accounts have higher management fee rates than sub-advised and institutional accounts. The majority of Mackenzie’s mutual fund assets are purchased on a retail basis. Within Mackenzie’s retail mutual fund offering, certain series are offered for fee-based programs of participating dealers whereby dealer compensation is charged directly by the dealer to a client (primarily Series F). As Mackenzie does not pay the dealer compensation, these series have lower management fees. At March 31, 2015, these series had $3.1 billion in assets, an increase of 35.5% from the prior year.

Management fees were $178.0 million for the three months ended March 31, 2015, an increase of $6.3 million or 3.7% from $171.7 million last year, primarily due to increases in average assets under management of 10.3%. Mackenzie’s average management fee rate was 98.1 basis points for the three month period ended March 31, 2015 compared to 104.3 basis points in 2014. The decline in the average management fee rate was due to a change in the composition of assets under management and the pricing changes made to retail mutual funds which became effective on September 29, 2014. The impact of these pricing changes was a decline in management fees of $2.0 million in the current quarter. Mackenzie earns administration fees primarily from providing services to its mutual funds. Administration fees were $25.5 million for the three months ended March 31, 2015, as compared to $26.1 million in 2014. The impact of the pricing changes, which became effective on September 29, 2014, was a decline in administration fees of $1.2 million in the current quarter. Effective August 1, 2007, Mackenzie assumed responsibility for the operating expenses of the Mackenzie funds, other than GST/HST and certain specified fund costs, in return for a fixed rate

TABLE 13: OPERATING RESULTS – MACKENZIE

% change


Revenues Management fees $ 178.0 $ 175.4 $ 171.7 1.5 % 3.7 % Administration fees 25.5 26.2 26.1 (2.7) (2.3) Distribution fees 3.2 2.8 3.2 14.3 –

206.7 204.4 201.0 1.1 2.8 Net investment income and other 4.2 (0.4) 1.3 n/m 223.1

210.9 204.0 202.3 3.4 4.3

Expenses Commission 15.7 15.4 16.9 1.9 (7.1) Trailing commission 62.1 59.3 56.9 4.7 9.1 Non-commission 76.2 76.3 70.8 (0.1) 7.6

154.0 151.0 144.6 2.0 6.5

Earnings before interest and taxes $ 56.9 $ 53.0 $ 57.7 7.4 % (1.4) %




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administration fee established for each fund. The funds that existed as at August 1, 2007 may be required to pay a monthly operating expense adjustment to Mackenzie if the combined average monthly net assets for all Mackenzie funds and series that were subject to the administration fee proposal that was approved by investors on August 7, 2007 fall to a level that is 95% of the amount of their total net assets on August 1, 2007. Due to the level of mutual fund assets, Mackenzie continued to receive an operating expense adjustment in the current period. The operating expense adjustment in the three months ended March 31, 2015 was $1.0 million compared to $1.9 million in 2014. As part of the retail pricing changes announced during the fourth quarter of 2014, effective April 1, 2015, this operating expense adjustment was discontinued. Mackenzie earns distribution fee income on redemptions of mutual fund assets sold on a deferred sales charge purchase option and on a low load purchase option. Redemption fees charged for deferred sales charge assets range from 5.5% in the first year and decrease to zero after seven years. Redemption fees for low load assets range from 2.0% to 3.0% in the first year and decrease to zero after two or three years, depending on the purchase option. Distribution fee income in the three months ended March 31, 2015 was $3.2 million, unchanged from 2014. Net investment income and other includes investment returns related to Mackenzie’s investments in proprietary funds. These investments are generally made in the process of launching a fund and are sold as third party investors subscribe. Net investment income and other was $4.2 million for the three months ended March 31, 2015, an increase of $2.9 million from $1.3 million last year.

ExpensesMackenzie’s expenses were $154.0 million for the three months ended March 31, 2015, an increase of $9.4 million or 6.5% from $144.6 million in 2014. Mackenzie pays selling commissions to the dealers that sell its mutual funds on a deferred sales charge and low load purchase option. The expense for deferred selling commissions consists of the amortization of the asset over its useful life and the reduction of the unamortized deferred selling commission asset associated with redemptions. Mackenzie amortizes selling commissions over a maximum period of three years from the date of original purchase of the applicable

low load assets and over a maximum period of seven years from the date of original purchase of the applicable deferred sales charge assets. Commission expense was $15.7 million in the three months ended March 31, 2015, as compared to $16.9 million last year. This decline is consistent with the lower amount of deferred sales commissions paid in recent years combined with lower write-offs of the unamortized balance of deferred sales commissions associated with redemptions. Trailing commissions paid to dealers are paid on certain classes of retail mutual funds and are calculated as a percentage of mutual fund assets under management. These fees vary depending on the fund type and the purchase option upon which the fund was sold: front-end, deferred sales charge or low load. Trailing commissions were $62.1 million in the three months ended March 31, 2015, an increase of $5.2 million or 9.1% from $56.9 million last year. The change in trailing commissions resulted both from the period over period increase in average mutual fund assets as well as a change in the composition of mutual fund assets towards series of mutual funds that pay higher trailer rates. During the period, this included both the impact of having a higher weighting of equity funds as well as having a higher weighting of no load series of funds, both of which are subject to higher trailer rates. Trailing commissions as a percentage of average mutual fund assets under management were 49.2 basis points in the three months ended March 31, 2015 as compared to 48.4 basis points in 2014. Non-commission expenses are incurred by Mackenzie in the administration, marketing and management of its assets under management. Non-commission expenses were $76.2 million in the three months ended March 31, 2015, an increase of $5.4 million or 7.6% from $70.8 million in 2014. Mackenzie continues to attract, retain and develop employees and invest strategically in systems and technology to enhance its future operating capabilities while at the same time investing in revenue generating initiatives to further grow its business.

Q1 2015 VS. Q4 2014

RevenuesMackenzie’s revenues were $210.9 million for the current quarter, an increase of $6.9 million or 3.4% from $204.0 million in the fourth quarter of 2014.




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Management fees were $178.0 million for the current quarter, an increase of $2.6 million or 1.5% from $175.4 million in the fourth quarter of 2014. Factors contributing to the net increase in management fees are as follows:• Average total assets under management were

$73.6 billion in the current quarter compared to $69.8 billion in the quarter ended December 31, 2014, an increase of 5.4%.

• Mackenzie’s average management fee rate was 98.1 basis points in the current quarter as compared to 99.7 basis points in the fourth quarter of 2014 due to a change in the composition of assets under management.

• There were two less calendar days in the first quarter of 2015 than in the fourth quarter of 2014, which had an impact of $3.9 million.

Administration fees were $25.5 million in the current quarter, a decrease of $0.7 million or 2.7% from $26.2 million in the prior quarter. Included in administration fees for the current quarter was the fund operating expense adjustment of $1.0 million as compared to $1.7 million in the fourth quarter of 2014. Net investment income and other includes investment returns related to Mackenzie’s investments in proprietary funds. These investments are generally

made in the process of launching a fund and are sold as third party investors subscribe. Net investment income and other was $4.2 million for the three months ended March 31, 2015 compared to a loss of $0.4 million in the fourth quarter of 2014.

ExpensesMackenzie’s expenses were $154.0 million for the current quarter, an increase of $3.0 million or 2.0% from $151.0 million in the fourth quarter of 2014. Commission expense, related to the amortization of selling commissions, was $15.7 million in the quarter ended March 31, 2015, an increase of 1.9% from the fourth quarter of 2014. Trailing commissions were $62.1 million in the current quarter, an increase of $2.8 million or 4.7% from $59.3 million in the fourth quarter of 2014. The change in trailing commissions reflects the 4.5% period over period increase in average mutual fund assets under management. The effective trailing commission rate for the first quarter was 49.2 basis points as compared to 49.1 basis points in the fourth quarter of 2014. Non-commission expenses were $76.2 million in the current quarter compared to $76.3 million in the fourth quarter of 2014.




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Corporate and OtherReview of Segment Operating Results

Q1 2015 VS. Q1 2014

Net investment income and other increased to $29.3 million in the first quarter of 2015 compared to $26.9 million in 2014. The increase in the three month period was largely due to an increase in the Company’s proportionate share of Lifeco’s earnings as discussed in the Consolidated Financial Position section of this MD&A. Earnings before interest and taxes related to Investment Planning Counsel were $0.3 million higher in the first quarter of 2015 compared to the same period in 2014.

Q1 2015 VS. Q4 2014

Net investment income and other totalled $29.3 million in the first quarter of 2015 compared to $30.8 million in the fourth quarter of 2014. The decrease was primarily due to a decrease in the Company’s proportionate share of Lifeco’s earnings as discussed in the Consolidated Financial Position section of this MD&A. Earnings before interest and taxes related to Investment Planning Counsel were $5.5 million lower in the first quarter of 2015 compared with the previous quarter.

The Corporate and Other segment includes net investment income not allocated to the Investors Group or Mackenzie segments, the Company’s proportionate share of earnings of its affiliate, Great-West Lifeco Inc. (Lifeco), operating results for Investment Planning

Counsel Inc., other income, as well as consolidation elimination entries. Corporate and other earnings before interest and taxes are presented in Table 14.

TABLE 14: OPERATING RESULTS – CORPORATE AND OTHER

% change


Revenues Fee income $ 63.7 $ 57.8 $ 57.2 10.2 % 11.4 % Net investment income and other 29.3 30.8 26.9 (4.9) 8.9

93.0 88.6 84.1 5.0 10.6

Expenses Commission 44.1 39.0 38.9 13.1 13.4 Non-commission 16.1 10.2 15.0 57.8 7.3

60.2 49.2 53.9 22.4 11.7

Earnings before interest and taxes $ 32.8 $ 39.4 $ 30.2 (16.8) % 8.6 %




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IGM Financial’s total assets were $14.4 billion at March 31, 2015 unchanged from December 31, 2014.

SECURITIES

The composition of the Company’s securities holdings is detailed in Table 15.

Available for Sale (AFS) Securities Securities classified as available for sale include investments in proprietary investment funds. Unrealized gains and losses on available for sale securities are recorded in Other comprehensive income until they are realized or until management determines that there is objective evidence of impairment, at which time they are recorded in the Consolidated Statements of Earnings and any subsequent losses are also recorded in net earnings.

Fair Value Through Profit or Loss SecuritiesSecurities classified as fair value through profit or loss include equity securities and proprietary investment funds. Unrealized gains and losses are recorded in Net investment income and other in the Consolidated Statements of Earnings. Certain proprietary investment funds are consolidated where the Company has made the assessment that it controls the investment fund as discussed in Note 2 of the Consolidated Financial Statements included in the 2014 IGM Financial Inc. Annual Report (Annual Financial Statements). The underlying securities of these funds are classified as held

for trading and recognized at fair value through profit or loss.

LOANS

The composition of the Company’s loans is detailed in Table 16. Loans consisted of residential mortgages and represented 48.7% of total assets at March 31, 2015, unchanged from December 31, 2014. Loans are comprised of:• Sold to securitization programs – these loans are

sold to securitization trusts sponsored by third parties that in turn issue securities to investors. An offsetting liability, Obligations to securitization entities, has been recorded and totalled $6.7 billion at March 31, 2015, compared to $6.8 billion at December 31, 2014.

• Intermediary operations – these loans are held by the Company to earn interest in the Company’s deposit operations.

• Mortgage banking operations – these loans are held temporarily by the Company pending sale or securitization.

Residential mortgages originated by Investors Group are funded primarily through sales to third parties on a fully serviced basis, including Canada Mortgage and Housing Corporation (CMHC) or Canadian bank sponsored securitization programs. Investors Group services $12.3 billion of residential mortgages, including $2.3 billion originated by subsidiaries of Lifeco.

IGM Financial Inc.Consolidated Financial Position

TABLE 15: SECURITIES

march 31, 2015 december 31, 2014 ($ millions) cost fair value cost fair value

Available for sale Proprietary investment funds $ 4.4 $ 4.7 $ 9.6 $ 10.2

Fair value through profit or loss Equity securities 10.3 11.1 11.0 10.2 Proprietary investment funds 60.5 66.8 66.4 69.1

70.8 77.9 77.4 79.3

$ 75.2 $ 82.6 $ 87.0 $ 89.5




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at amortized cost, and (ii) interest income and interest expense, utilizing the effective interest rate method, are recorded over the term of the mortgages. In the first quarter of 2015, the Company securitized loans through its mortgage banking operations with cash proceeds of $374.2 million compared to $445.0 million in 2014. The fair value of the Company’s retained interest was $108.0 million at March 31, 2015 compared to $136.2 million at December 31, 2014. The retained interest includes cash reserve accounts of $34.6 million, which are reflected on the balance sheet, and rights to future excess spread of $124.1 million, which are not reflected on the balance sheet. The retained interest also includes the component of a swap entered into under the CMB Program whereby the Company pays coupons on Canada Mortgage Bonds and receives investment returns on the reinvestment of repaid mortgage principal. This component of the swap is recorded on the balance sheet and had a negative fair value of $50.7 million at March 31, 2015. Additional information related to the Company’s securitization activities, including the Company’s hedges of related reinvestment and interest rate risk, can be found in the Financial Instruments Risk section of this MD&A and in Note 4 of the Interim Financial Statements.

SECURITIZATION ARRANGEMENTS

Through the Company’s mortgage banking operations, residential mortgages originated by Investors Group mortgage planning specialists are sold to securitization trusts sponsored by third parties that in turn issue securities to investors. The Company securitizes residential mortgages through the CMHC sponsored National Housing Act Mortgage-Backed Securities (NHA MBS) and the CMB Program and through Canadian bank-sponsored asset-backed commercial paper (ABCP) programs. The Company retains servicing responsibilities and certain elements of credit risk and prepayment risk associated with the transferred assets. The Company’s credit risk on its securitized mortgages is mitigated through the use of insurance. Derecognition of financial assets in accordance with IFRS is based on the transfer of risks and rewards of ownership. As the Company has retained prepayment risk and certain elements of credit risk associated with the Company’s securitization transactions through the CMB and ABCP programs, they are accounted for as secured borrowings. The Company records the transactions under these programs as follows: (i) the mortgages and related obligations are carried

TABLE 16: LOANS

2015 2014 ($ millions) march 31 december 31

Loans and receivables Sold to securitization programs $ 6,582.8 $ 6,624.0 Intermediary operations 28.4 29.5

6,611.2 6,653.5 Less: Collective allowance 0.7 0.8

6,610.5 6,652.7Held for trading Mortgage banking operations 406.6 366.2

$ 7,017.1 $ 7,018.9




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INVESTMENT IN AFFILIATE

Investment in affiliate represents the Company’s 4% equity interest in Great-West Lifeco Inc. (Lifeco). IGM Financial and Lifeco are controlled by Power Financial Corporation. The equity method is used to account for IGM Financial’s investment in Lifeco, as it exercises

significant influence. The Company’s proportionate share of Lifeco’s earnings is recorded in Net investment income and other in the Corporate and other reportable segment. Changes in the carrying value for the three months ended March 31, 2015 compared with 2014 are shown in Table 17.

TABLE 17: INVESTMENT IN AFFILIATE

Three months ended 2015 2014 ($ millions) mar. 31 mar. 31

Carrying value, beginning of period $ 794.4 $ 717.8 Proportionate share of earnings 25.9 19.4 Dividends received (12.9) (12.2) Proportionate share of other comprehensive income (loss) and other adjustments (4.5) 20.2

Carrying value, end of period $ 802.9 $ 745.2

Fair value, end of period $ 1,451.6 $ 1,210.4




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LIQUIDITY

Cash and cash equivalents totalled $1.12 billion at March 31, 2015 compared with $1.22 billion at December 31, 2014. Cash and cash equivalents related to the Company’s deposit operations were $4.7 million at March 31, 2015 compared with $4.5 million at December 31, 2014 and $3.5 million at March 31, 2014, as shown in Table 18. Working capital totalled $1,277.1 million at March 31, 2015 compared with $1,196.4 million at December 31, 2014 and $1,151.4 million at March 31, 2014. Working capital excludes the Company’s deposit operations. Working capital is utilized to: • Finance ongoing operations, including the funding

of selling commissions.• Temporarily finance mortgages in its mortgage

banking operations.• Pay interest and dividends related to long-term debt

and preferred shares. • Maintain liquidity requirements for regulated entities.• Pay quarterly dividends on its outstanding

common shares.• Finance common share repurchases related to the

Company’s normal course issuer bid. IGM Financial continues to generate significant cash flows from its operations. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) totalled $348.9 million in the first quarter

of 2015 compared to $345.0 million in the first quarter of 2014 and $357.0 million in the fourth quarter of 2014. Adjusted EBITDA for each period under review excludes the impact of amortization of deferred selling commissions which totalled $58.7 million in the first quarter of 2015 compared to $60.7 million in the first quarter of 2014 and $57.4 million in the fourth quarter of 2014. As well as being an important alternative measure of performance, EBITDA is a common measure utilized by investment analysts and credit rating agencies in reviewing asset management companies. Refer to the Financial Instruments Risk section of this MD&A for information related to other sources of liquidity and to the Company’s exposure to and management of liquidity and funding risk.

Cash Flows Table 19 – Cash Flows is a summary of the Consolidated Statements of Cash Flows which forms part of the Interim Financial Statements for the quarter ended March 31, 2015. Cash and cash equivalents decreased by $93.1 million in 2015 compared to an increase of $45.8 million in 2014. Operating activities, before payment of commissions, generated $216.5 million during the quarter ended March 31, 2015, as compared to $183.4 million in 2014. Cash commissions paid were $84.8 million in 2015 compared to $82.2 million in 2014. Cash flows from operating activities, net of commissions paid, were

Consolidated Liquidity and Capital Resources

TABLE 18: DEPOSIT OPERATIONS – FINANCIAL POSITION

2015 2014 2014 ($ millions) mar. 31 dec. 31 mar. 31

Assets Cash and cash equivalents $ 4.7 $ 4.5 $ 3.5 Accounts and other receivables 234.3 204.4 168.2 Loans 24.4 25.0 30.7

Total assets $ 263.4 $ 233.9 $ 202.4

Liabilities and shareholders’ equity Deposit liabilities $ 252.5 $ 223.3 $ 189.8 Other liabilities 0.6 0.7 0.8 Shareholders’ equity 10.3 9.9 11.8

Total liabilities and shareholders’ equity $ 263.4 $ 233.9 $ 202.4




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$131.7 million in 2015 as compared to $101.2 million in 2014. Financing activities during the three months ended March 31, 2015 compared to 2014 related to:• A net increase of $29.2 million in deposits and

certificates in 2015 compared to a net increase of $3.3 million in 2014.

• A net decrease of $61.7 million in 2015 arising from obligations to securitization entities compared to a net increase of $155.5 million in 2014.

• Proceeds received on the issuance of common shares of $12.2 million in 2015 compared with $14.7 million in 2014.

• The purchase of 1,385,000 common shares in 2015 under IGM Financial’s normal course issuer bid at a cost of $62.1 million compared with the purchase of 310,000 common shares at a cost of $16.8 million in 2014.

• The payment of perpetual preferred share dividends which totalled $2.2 million in 2015, unchanged from 2014.

• The payment of regular common share dividends which totalled $141.4 million in 2015 compared to $135.6 million in 2014.

Investing activities during the three months ended March 31, 2015 compared to 2014 primarily related to:• The purchases of securities totalling $10.0 million

and sales of securities with proceeds of $21.8 million in 2015 compared to $6.9 million and $10.7 million, respectively, in 2014.

• A net decrease in loans of $7.9 million in 2015 compared to a net increase of $68.4 million in 2014 primarily related to residential mortgages in the Company’s mortgage banking operations.

CAPITAL RESOURCES

The Company’s capital management objective is to maximize shareholder returns while ensuring that the Company is capitalized in a manner which appropriately supports regulatory requirements, working capital needs and business expansion. The Company’s capital management practices are focused on preserving the quality of its financial position by maintaining a solid capital base and a strong balance sheet. Capital of the Company consists of long-term debt, perpetual preferred shares and common shareholders’ equity which totalled $6.2 billion at March 31, 2015, unchanged from December 31, 2014. The Company regularly assesses its capital management practices in response to changing economic conditions. The Company’s capital is primarily utilized in its ongoing business operations to support working capital requirements, long-term investments made by the Company, business expansion and other strategic objectives. Subsidiaries subject to regulatory capital requirements include investment dealers, mutual fund dealers, exempt market dealers, portfolio managers, investment fund managers and a trust company. These subsidiaries are required to maintain minimum levels

TABLE 19: CASH FLOWS

Three months ended 2015 2014 ($ millions) mar. 31 mar. 31 % change

Operating activities Before payment of commissions $ 216.5 $ 183.4 18.0 % Commissions paid (84.8) (82.2) (3.2)

Net of commissions paid 131.7 101.2 30.1Financing activities (226.0) 18.9 n/mInvesting activities 1.2 (74.3) n/m

(Decrease) increase in cash and cash equivalents (93.1) 45.8 n/mCash and cash equivalents, beginning of period 1,216.0 1,082.4 12.3

Cash and cash equivalents, end of period $ 1,122.9 $ 1,128.2 (0.5) %




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of capital based on either working capital, liquidity or shareholders’ equity. The Company’s subsidiaries have complied with all regulatory capital requirements. The total outstanding long-term debt was $1,325.0 million at March 31, 2015, unchanged from December 31, 2014. Long-term debt is comprised of debentures which are senior unsecured debt obligations of the Company subject to standard covenants, including negative pledges, but which do not include any specified financial or operational covenants. Perpetual preferred shares of $150 million at March 31, 2015 remain unchanged from December 31, 2014. The Company purchased 1,385,000 common shares during the three months ended March 31, 2015 at a cost of $62.1 million under its normal course issuer bid (refer to Note 5 to the Interim Financial Statements). The Company commenced a normal course issuer bid on March 20, 2015 to purchase up to 5% of its common shares in order to mitigate the dilutive effect of stock options issued under the Company’s stock option plan and for other capital management purposes. Other activities in 2015 included the declaration of perpetual preferred share dividends of $2.2 million or $0.36875 per share and common share dividends of $140.9 million or $0.5625 per share. Changes in common share capital are reflected in the Consolidated Statements of Changes in Shareholders’ Equity. In connection with its normal course issuer bid, the Company has established an automatic securities purchase plan for its common shares. The automatic securities purchase plan provides standard instructions regarding how IGM Financial’s common shares are to be purchased under its normal course issuer bid during certain pre-determined trading blackout periods. Outside of these pre-determined trading blackout periods, purchases under the Company’s normal course issuer bid will be completed based upon management’s discretion. The current rating by Standard & Poor’s (S&P) of the Company’s senior debt and liabilities is “A” with a stable outlook. Dominion Bond Rating Service’s (DBRS) current rating on the Company’s senior unsecured debentures is “A (High)” with a stable rating trend. Credit ratings are intended to provide investors with an independent measure of the credit quality of the securities of a company and are indicators of the likelihood of payment and the capacity of a company

to meet its obligations in accordance with the terms of each obligation. Descriptions of the rating categories for each of the agencies set forth below have been obtained from the respective rating agencies’ websites. These ratings are not a recommendation to buy, sell or hold the securities of the Company and do not address market price or other factors that might determine suitability of a specific security for a particular investor. The ratings also may not reflect the potential impact of all risks on the value of securities and are subject to revision or withdrawal at any time by the rating organization. The A rating assigned to IGM Financial’s senior unsecured debentures by S&P is the sixth highest of the 22 ratings used for long-term debt. This rating indicates S&P’s view that the Company’s capacity to meet its financial commitment on the obligation is strong, but the obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rated categories. According to S&P, the “Stable” rating outlook means that S&P considers that the rating is unlikely to change over the intermediate term. The A (High) rating assigned to IGM Financial’s senior unsecured debentures by DBRS is the fifth highest of the 26 ratings used 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 may be vulnerable to future events, but qualifying negative factors are considered manageable. According to DBRS, the “Stable” rating trend helps give investors an understanding of DBRS’s opinion regarding the outlook for the rating.


Table 20 presents the carrying amounts and fair values of financial assets and financial liabilities. The table excludes fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. These items include cash and cash equivalents, accounts and other receivables, certain other financial assets, accounts payable and accrued liabilities, and certain other financial liabilities.




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Fair value is determined using the following methods and assumptions:• Securities and other financial assets and liabilities

are valued using quoted prices from active markets, when available. When a quoted market price is not readily available, valuation techniques are used that require assumptions related to discount rates and the timing and amount of future cash flows. Wherever possible, observable market inputs are used in the valuation techniques.

• Loans classified as held for trading are valued using market interest rates for loans with similar credit risk and maturity.

• Loans classified as loans and receivables are valued by discounting the expected future cash flows at prevailing market yields.

• Obligations to securitization entities are valued by discounting the expected future cash flows at prevailing market yields for securities issued by these securitization entities having similar terms and characteristics.

• Deposits and certificates are valued by discounting the contractual cash flows using market interest rates currently offered for deposits with similar terms and credit risks.

• Long-term debt is valued using quoted prices for each debenture available in the market.

• Derivative financial instruments are valued based on quoted market prices, where available, prevailing market rates for instruments with similar characteristics and maturities, or discounted cash flow analysis.

See Note 10 of the Interim Financial Statements which provides additional discussion on the determination of fair value of financial instruments. Although there were changes to both the carrying values and fair values of financial instruments, these changes did not have a material impact on the financial condition of the Company for the three months ended March 31, 2015.

TABLE 20: FINANCIAL INSTRUMENTS

march 31, 2015 december 31, 2014 ($ millions) carrying value fair value carrying value fair value

Financial assets recorded at fair value Securities – Available for sale $ 4.7 $ 4.7 $ 10.2 $ 10.2 – Held for trading 77.9 77.9 79.3 79.3 Loans – Held for trading 406.6 406.6 366.2 366.2 Derivative financial instruments 70.9 70.9 39.4 39.4 Other financial assets 9.3 9.3 – –Financial assets recorded at amortized cost Loans – Loans and receivables 6,610.5 6,853.6 6,652.7 6,849.3Financial liabilities recorded at fair value Derivative financial instruments 58.1 58.1 29.8 29.8 Other financial liabilities 6.1 6.1 6.6 6.6Financial liabilities recorded at amortized cost Deposits and certificates 252.5 254.2 223.3 225.3 Obligations to securitization entities 6,695.0 6,847.2 6,754.0 6,858.9 Long-term debt 1,325.0 1,730.0 1,325.0 1,682.0




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The Company is exposed to a variety of risks that are inherent in its business activities. The Company’s ability to manage these risks is key to its ongoing success and includes emphasizing a strong risk management culture and effective risk management approach. The Company’s risk management approach coordinates risk management across the organization and its business units and seeks to ensure prudent and measured risk-taking in order to achieve an appropriate balance between risk and return. The Company’s risk governance structure emphasizes a comprehensive and consistent framework throughout the Company and its subsidiaries, with clearly identified ownership of risk management in each business unit and oversight by an executive Risk Management Committee accountable to the Executive Committee of the Board. Additional oversight is provided by a Risk Management Department, corporate and sales compliance groups, and the Company’s Internal Audit Department. The Board of Directors provides oversight and carries out its risk management mandate primarily through the following committees:• The Executive Committee is responsible for

the oversight of enterprise risk management by: i) ensuring that appropriate procedures are in place to identify and manage risks and establish risk tolerances, ii) ensuring that appropriate policies, procedures and controls are implemented to manage risks, and iii) reviewing the risk management process on a regular basis to ensure that it is functioning effectively.

• The Investment Committee oversees management of the Company’s financial risks, being market risk, credit risk, and liquidity and funding risk by: i) ensuring that appropriate procedures are in place to identify and manage financial risks in accordance with tolerances, ii) monitoring the implementation and maintenance of appropriate policies, procedures and controls to manage financial risks, and iii) reviewing the financial risk management process on a regular basis to ensure that it is functioning effectively.

• The Audit Committee has specific risk oversight responsibilities as it oversees financial disclosure, internal controls and the control environment as well as the Company’s compliance activities.

• Other committees having specific risk oversight responsibilities include: i) the Compensation

Committee which oversees compensation policies and practices, ii) the Governance and Nominating Committee which oversees corporate governance practices, and iii) the Related Party and Conduct Review Committee which oversees conflicts of interest and recommends to the Board a code of business conduct and ethics.

The executive Risk Management Committee is comprised of the Co-Presidents and Chief Executive Officers, the Chief Financial Officer, and the General Counsel and Chief Compliance Officer. The committee is responsible for providing oversight of the Company’s risk management process by: i) establishing and maintaining the risk framework and policy, ii) defining the Company’s risk appetite, iii) ensuring the Company’s risk profile and processes are aligned with corporate strategy and risk appetite, and iv) establishing “tone at the top” and reinforcing a strong culture of risk management. The Chief Executive Officers of the respective operating companies, being Investors Group, Mackenzie and Investment Planning Counsel, have overall responsibility for overseeing risk management of their respective companies. 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. Responsibilities of business unit and support function leaders include: i) establishing and maintaining procedures for the identification, assessment, documentation and escalation of risks, ii) implementing control activities to mitigate risks, iii) identifying opportunities for risk reduction or transfer, and iv) aligning business and operational strategies with the risk culture and risk appetite of the organization as established by the Risk Management Committee. The Risk Management Department provides oversight, analysis and reporting on the level of risks relative to the established risk appetite to the Risk Management Committee. Other responsibilities include: i) developing and maintaining the enterprise risk management program and framework, ii) managing the enterprise risk management process, and iii) providing guidance and training to business unit and support function leaders. A Technical Review Committee of senior business leaders supports the Risk Management Department by performing critical reviews of risk assessments developed by business units

Risk Management




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and support functions. Other oversight accountabilities reside with the Company’s: a) corporate and sales compliance groups – which are responsible for ensuring compliance with policies, laws and regulations, and b) financial risk management function – which is independent from the Treasury Department and is responsible for assessing financial risk management processes and exposures and monitoring compliance with the Investment Policy and other relevant policies. The Internal Audit Department provides independent assurance to senior management and the Board of Directors on the effectiveness of risk management policies, processes and practices.


The Company actively manages risks that arise as a result of holding financial instruments which include liquidity and funding risk, credit risk and market risk.

Liquidity and Funding RiskLiquidity and funding risk is the risk of the inability to generate or obtain sufficient cash in a timely and cost-effective manner to meet contractual or anticipated commitments as they come due or arise. The Company’s liquidity management practices include:• Controls over liquidity management processes.• Stress testing of various operating scenarios.• Oversight of liquidity management by Committees

of the Board of Directors. As part of ongoing liquidity management during 2015 and 2014, the Company:• Continued to expand our funding channels by

issuing National Housing Act Mortgage Backed Securities to multiple purchasers.

• Continued to assess additional funding sources for the Company’s mortgage banking operations.

A key liquidity requirement for the Company is the funding of commissions paid on the sale of mutual funds. Commissions on the sale of mutual funds continue to be paid from operating cash flows. The Company also maintains sufficient liquidity to fund and temporarily hold mortgages. Through its mortgage banking operations, residential mortgages are sold or securitized to:• Investors Mortgage and Short Term Income Fund

and Investors Canadian Corporate Bond Fund;• Third parties, including CMHC or Canadian bank

sponsored securitization trusts; or• Institutional investors through private placements.

Certain subsidiaries of the Company are approved issuers of NHA MBS and are approved sellers into the CMB Program. This issuer and seller status provides the Company with additional funding sources for residential mortgages. The Company’s continued ability to fund residential mortgages through Canadian bank-sponsored securitization trusts and NHA MBS is dependent on securitization market conditions that are subject to change. A condition of the NHA MBS and CMB Program is that securitized loans be insured by an insurer that is approved by CMHC. The availability of mortgage insurance is dependent upon market conditions that are subject to change. The Company’s contractual obligations are reflected in Table 21. In addition to IGM Financial’s current balance of cash and cash equivalents, liquidity is available through the Company’s lines of credit. The Company’s lines of credit with various Schedule I Canadian chartered banks totalled $525 million as at March 31, 2015, unchanged from December 31, 2014. The lines of credit as at March 31, 2015 consisted of committed lines of $350 million (2014 – $350 million) and uncommitted lines of $175 million (2014 – $175 million). The Company has accessed its uncommitted lines of credit in the past; however, any advances made by a bank under the uncommitted lines of credit are at the bank’s sole discretion. As at March 31, 2015 and December 31, 2014, the Company was not utilizing its committed lines of credit or its uncommitted lines of credit. The last actuarial valuation for funding purposes related to the Company’s registered defined benefit pension plan was based on a measurement date of December 31, 2013. Based on the actuarial valuation, the registered pension plan had a solvency deficit of $23.4 million which is required to be funded over five years. The annual contributions are $19.7 million and include annual current service costs of $13.4 million. The Company has made contributions of $3.2 million in 2015 (2014 – $12.5 million). Pension contribution decisions are subject to change, as contributions are affected by many factors including market performance, regulatory requirements, changes in assumptions and management’s ability to change funding policy. The next required actuarial valuation will be based on a measurement date of December 31, 2016. Management believes cash flows from operations, available cash balances and other sources of liquidity described above are sufficient to meet the Company’s




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liquidity needs. The Company continues to have the ability to meet its operational cash flow requirements, its contractual obligations, and its declared dividends. The current practice of the Company is to declare and pay dividends to common shareholders on a quarterly basis at the discretion of the Board of Directors. The declaration of dividends by the Board of Directors is dependent on a variety of factors, including earnings which are significantly influenced by the impact that debt and equity market performance has on the Company’s fee income and commission and certain other expenses. The Company’s liquidity position and its management of liquidity and funding risk have not changed materially since December 31, 2014.

Credit Risk Credit risk is the potential for financial loss to the Company if a counterparty to a transaction fails to meet its obligations. The Company’s cash and cash equivalents, securities holdings, mortgage portfolios, and derivatives are subject to credit risk. The Company monitors its credit risk management practices on an ongoing basis to evaluate their effectiveness. At March 31, 2015, cash and cash equivalents of $1,122.9 million (December 31, 2014 – $1,216.0 million) consisted of cash balances of $56.9 million (December 31, 2014 – $106.8 million) on deposit with Canadian chartered banks and cash equivalents of $1,066.0 million (December 31, 2014 – $1,109.2 million). Cash equivalents are comprised of Government of Canada treasury bills totalling

$12.5 million (December 31, 2014 – $190.8 million), provincial government and government guaranteed commercial paper of $702.1 million (December 31, 2014 – $665.8 million) and bankers’ acceptances issued by Canadian chartered banks of $351.4 million (December 31, 2014 – $252.6 million). The Company regularly reviews the credit ratings of its counterparties. The maximum exposure to credit risk on these financial instruments is their carrying value. The Company manages credit risk related to cash and cash equivalents by adhering to its Investment Policy that outlines credit risk parameters and concentration limits. The Company regularly reviews the credit quality of the mortgage portfolios related to the Company’s mortgage banking operations and its intermediary operations, as well as the adequacy of the collective allowance. As at March 31, 2015, mortgages totalled $7.0 billion (December 31, 2014 – $7.0 billion) and consisted of residential mortgages:• Sold to securitization programs which are classified

as loans and receivables and totalled $6.6 billion, unchanged from December 31, 2014. An offsetting liability, Obligations to securitization entities, has been recorded and totalled $6.7 billion at March 31, 2015, compared to $6.8 billion at December 31, 2014.

• Related to the Company’s mortgage banking operations which are classified as held for trading and totalled $406.6 million compared to $366.2 million at December 31, 2014. These loans are held by the Company pending sale or securitization.

TABLE 21: CONTRACTUAL OBLIGATIONS

As at March 31, 2015 less than 1 – 5 after ($ millions) demand 1 year years 5 years total

Derivative financial instruments $ – $ 14.0 $ 44.1 $ – $ 58.1Deposits and certificates 234.0 6.3 8.8 3.4 252.5Obligations to securitization entities – 1,275.7 5,406.9 12.4 6,695.0Long-term debt – – 525.0 800.0 1,325.0Operating leases(1) – 55.1 147.1 47.7 249.9Pension funding(2) – 16.5 19.7 – 36.2

Total contractual obligations $ 234.0 $ 1,367.6 $ 6,151.6 $ 863.5 $ 8,616.7

(1) Includes office space and equipment used in the normal course of business. Lease payments are charged to earnings in the period of use.

(2) The next required actuarial valuation will be completed based on a measurement date of December 31, 2016. Pension funding requirements beyond 2016 are subject to significant variability and will be determined based on future actuarial valuations. Pension contribution decisions are subject to change, as contributions are affected by many factors including market performance, regulatory requirements, changes in assumptions and management’s ability to change funding policy.




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• Related to the Company’s intermediary operations which are classified as loans and receivables and totalled $28.4 million at March 31, 2015, compared to $29.5 million at December 31, 2014.

As at March 31, 2015, the mortgage portfolios related to the Company’s intermediary operations were geographically diverse, 100% residential (December 31, 2014 – 100%) and 93.9% insured (December 31, 2014 – 92.6%). As at March 31, 2015, impaired mortgages were nil, unchanged from December 31, 2014. Uninsured non-performing mortgages over 90 days were nil, unchanged from December 31, 2014. The characteristics of the mortgage portfolio have not changed significantly during 2015. The NHA MBS and CMB Program require that all securitized mortgages be insured against default by an approved insurer. The ABCP programs do not require mortgages to be insured; however, at March 31, 2015, 51.6% of these mortgages were insured compared to 51.0% at December 31, 2014. At March 31, 2015, 82.8% of the securitized portfolio and the residential mortgages classified as held for trading were insured compared to 83.6% at December 31, 2014. As at March 31, 2015, impaired mortgages on these portfolios were $2.4 million, compared to $2.1 million at December 31, 2014. Uninsured non-performing mortgages over 90 days on these portfolios were $0.2 million at March 31, 2015, compared to $0.3 million at December 31, 2014. The Company retains certain elements of credit risk on securitized loans. At March 31, 2015, 85.6% of securitized loans were insured against credit losses compared to 85.1% at December 31, 2014. The Company’s credit risk on its securitization activities is limited to its retained interest. The fair value of the Company’s retained interests in securitized mortgages was $108.0 million at March 31, 2015 compared to $136.2 million at December 31, 2014. Retained interests include:• Cash reserve accounts and rights to future net interest

income – which were $34.6 million (December 31, 2014 – $35.1 million) and $124.1 million (December 31, 2014 – $127.4 million), respectively, at March 31, 2015. Cash reserve accounts are reflected on the balance sheet, whereas rights to future net interest income are not reflected on the balance sheet and will be recorded over the life of the mortgages.

The portion of this amount pertaining to Canadian bank-sponsored securitization trusts of

$63.9 million (December 31, 2014 – $65.1 million) is subordinated to the interests of the trust and represents the maximum exposure to credit risk for any failure of the borrowers to pay when due. Credit risk on these mortgages is mitigated by any insurance on these mortgages, as previously discussed, and the Company’s credit risk on insured loans is to the insurer.

Rights to future net interest income under the NHA MBS and CMB Program totalled $94.8 million (December 31, 2014 – $97.4 million). Under the NHA MBS and CMB Program, the Company has an obligation to make timely payments to security holders regardless of whether amounts are received from mortgagors. All mortgages securitized under the NHA MBS and CMB Program are insured by CMHC or another approved insurer under the program. Outstanding mortgages securitized under these programs are $4.6 billion, unchanged from December 31, 2014.

• Fair value of principal reinvestment account swaps – which had a negative fair value of $50.7 million at March 31, 2015 (December 31, 2014 – negative $26.3 million) and is reflected on the Company’s balance sheet. These swaps represent the component of a swap entered into under the CMB Program whereby the Company pays coupons on Canada Mortgage Bonds and receives investment returns on the reinvestment of repaid mortgage principal. The notional amount of these swaps was $499.5 million at March 31, 2015 (December 31, 2014 – $436.9 million).

The Company also retains certain elements of credit risk on mortgage loans sold to the Investors Mortgage and Short Term Income Fund and to the Investors Canadian Corporate Bond Fund through an agreement to repurchase mortgages in certain circumstances benefiting the funds. These loans are not recorded on the Company’s balance sheet as the Company has transferred substantially all of the risks and rewards of ownership associated with these loans. The Company’s collective allowance for credit losses was $0.7 million at March 31, 2015, compared to $0.8 million at December 31, 2014, and is considered adequate by management to absorb all credit-related losses in the mortgage portfolios based upon the following considerations:• The Company’s lending policy, underwriting

standards and loan servicing capabilities.




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• The Company’s practice of originating its mortgages exclusively through its own network of Investors Group consultants and mortgage planning specialists as part of a client’s comprehensive financial plan.

• The quality of the Company’s mortgage portfolio based on: i) historical credit performance experience and recent trends, ii) current portfolio credit metrics and other relevant characteristics, and iii) regular stress testing of losses under adverse real estate market conditions.

• The existence of client-insured mortgage default insurance and mortgage portfolio default insurance held by the Company.

The Company’s exposure to and management of credit risk related to cash and cash equivalents, fixed income securities and mortgage portfolios have not changed materially since December 31, 2014. The Company utilizes over-the-counter derivatives to hedge interest rate risk and reinvestment risk associated with its mortgage banking and securitization activities, as well as market risk related to certain stock-based compensation arrangements. To the extent that the fair value of the derivatives are in a gain position, the Company is exposed to credit risk that its counterparties fail to fulfill their obligations under these arrangements. The Company participates in the CMB Program by entering into back-to-back swaps whereby Canadian Schedule I chartered banks designated by the Company intermediate between the Company and the Canada Housing Trust. The Company receives coupons on NHA MBS and eligible principal reinvestments and pays coupons on the Canada Mortgage Bonds. The Company also enters into offsetting interest rate swaps with the same bank counterparties to hedge interest rate and reinvestment risk associated with the CMB Program. The negative fair value of these swaps totalled $11.1 million at March 31, 2015 (December 31, 2014 – negative $9.0 million) and the outstanding notional amount was $6.6 billion (December 31, 2014 – $6.7 billion). Certain of these swaps relate to securitized mortgages that have been recorded on the Company’s balance sheet with an associated obligation. Accordingly, these swaps, with an outstanding notional amount of $4.1 billion (December 31, 2014 – $4.2 billion) and having a negative fair value of $23.4 million (December 31, 2014 – negative $17.9 million), are not reflected on the balance sheet. Principal reinvestment account swaps and hedges of reinvestment and interest

rate risk, with an outstanding notional amount of $2.5 billion (December 31, 2014 – $2.4 billion) and having a fair value of $12.3 million (December 31, 2014 – $8.9 million), are reflected on the balance sheet. The exposure to credit risk, which is limited to the fair value of swaps in a gain position, totalled $69.2 million at March 31, 2015 compared to $40.6 million at December 31, 2014. The Company utilizes interest rate swaps to hedge interest rate risk associated with mortgages securitized through Canadian bank-sponsored ABCP programs. The negative fair value of these interest rate swaps totalled $0.2 million (December 31, 2014 – negative $0.3 million) on an outstanding notional amount of $14.0 million at March 31, 2015 (December 31, 2014 – $24.0 million). The exposure to credit risk, which is limited to the fair value of swaps in a gain position, was nil at March 31, 2015, unchanged from December 31, 2014. The Company enters into other derivative contracts which consist primarily of interest rate swaps utilized to hedge interest rate risk related to mortgages held pending sale, or committed to, by the Company as well as total return swaps and forward agreements on IGM Financial common shares utilized to hedge deferred compensation arrangements. The fair value of interest rate swaps, total return swaps and forward agreements was $0.7 million on an outstanding notional amount of $107.9 million at March 31, 2015 compared to a fair value of $1.1 million on an outstanding notional amount of $156.0 million at December 31, 2014. The exposure to credit risk, which is limited to the fair value of those instruments which are in a gain position, was $2.2 million at March 31, 2015, compared to $2.7 million at December 31, 2014. The aggregate credit risk exposure related to derivatives that are in a gain position of $71.3 million (December 31, 2014 – $43.3 million) does not give effect to any netting agreements or collateral arrangements. The exposure to credit risk, considering netting agreements and collateral arrangements and including rights to future net interest income, was $3.3 million at March 31, 2015 (December 31, 2014 – $2.5 million). Counterparties are all Canadian Schedule I chartered banks and, as a result, management has determined that the Company’s overall credit risk related to derivatives was not significant at March 31, 2015. Management of credit risk related to derivatives has not changed materially since December 31, 2014.




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Additional information related to the Company’s securitization activities and utilization of derivative contracts can be found in Note 4 of the Interim Financial Statements and Notes 2, 6 and 21 to the Annual Financial Statements.

Market Risk Market risk is the potential for loss to the Company from changes in the values of its financial instruments due to changes in foreign exchange rates, interest rates or equity prices. The Company’s financial instruments are generally denominated in Canadian dollars, and do not have significant exposure to changes in foreign exchange rates.

Interest Rate RiskThe Company is exposed to interest rate risk on its loan portfolio and on certain of the derivative financial instruments used in the Company’s mortgage banking and intermediary operations. The objective of the Company’s asset and liability management is to control interest rate risk related to its intermediary operations by actively managing its interest rate exposure. As at March 31, 2015, the total gap between deposit assets and liabilities was within the Company’s trust subsidiary’s stated guidelines. The Company utilizes interest rate swaps with Canadian Schedule I chartered bank counterparties in order to reduce the impact of fluctuating interest rates on its mortgage banking operations, as follows:

• The Company has funded fixed rate mortgages with floating rate ABCP as part of certain securitization transactions with bank-sponsored securitization trusts. The Company enters into interest rate swaps with Canadian Schedule I chartered banks to hedge the risk that ABCP rates rise. However, the Company remains exposed to the basis risk that ABCP rates are greater than the bankers’ acceptances rates that it receives on its hedges.

• The Company has in certain instances funded floating rate mortgages with fixed rate Canada Mortgage Bonds as part of the securitization transactions under the CMB Program. The Company enters into interest rate swaps with Canadian Schedule I chartered banks to hedge the risk that the interest rates earned on floating rate mortgages decline. As previously discussed, as part of the CMB Program, the Company is also entitled to investment returns on reinvestment of principal repayments of securitized mortgages and is obligated to pay Canada Mortgage Bond coupons that are generally fixed rate. The Company hedges the risk that reinvestment returns decline by entering into interest rate swaps with Canadian Schedule I chartered bank counterparties.

• The Company is exposed to the impact that changes in interest rates may have on the value of mortgages held, or committed to, by the Company. The Company enters into interest rate swaps to hedge the interest rate risk related to mortgages held by the Company.

TABLE 22: ASSETS UNDER MANAGEMENT – ASSET AND CURRENCY MIX

consolidated As at March 31, 2015 mutual funds total

Cash 0.9 % 1.1 %Short-term fixed income and mortgages 7.7 7.6 Other fixed income 23.2 29.0 Domestic equity 31.3 28.6 Foreign equity 33.8 31.0 Real Property 3.1 2.7

100.0 % 100.0 %

CAD 65.0 67.9 USD 23.1 21.2 Other 11.9 10.9

100.0 % 100.0 %




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As at March 31, 2015, the impact to annual net earnings of a 100 basis point increase in interest rates would have been a decrease of approximately $2.4 million (2014 – $1.5 million). The Company’s exposure to and management of interest rate risk have not changed materially since December 31, 2014.

Equity Price RiskThe Company is exposed to equity price risk on its proprietary investment funds which are classified as available for sale securities and on its equity securities and proprietary investment funds which are classified as fair value through profit or loss, as shown in Table 15. Unrealized gains and losses on available for sale securities are recorded in Other comprehensive income until they are realized or until management determines there is objective evidence of impairment in value, at which time they are recorded in the Consolidated Statements of Earnings. The Company sponsors a number of deferred compensation arrangements where payments to participants are linked to the performance of the common shares of IGM Financial Inc. The Company hedges this risk through the use of forward agreements and total return swaps.

RISKS RELATED TO ASSETS UNDER MANAGEMENT

At March 31, 2015, IGM Financial’s total assets under management were $148.4 billion compared to $141.9 billion at December 31, 2014. The Company is subject to the risk of asset volatility from changes in the Canadian and global financial and equity markets. Changes in these markets have caused in the past, and will cause in the future, changes in the Company’s assets under management, revenues and earnings. Global economic conditions, exacerbated by financial crises, changes in the equity marketplace,

currency exchange rates, interest rates, inflation rates, the yield curve, defaults by derivative counterparties and other factors including political and government instability that are difficult to predict, affect the mix, market values and levels of assets under management. The Company’s assets under management may be subject to unanticipated redemptions as a result of such events. Changing market conditions may also cause a shift in asset mix between equity and fixed income assets due to market and income as well as net cash flows, potentially resulting in a decline in the Company’s revenue and earnings depending upon the nature of the assets under management and the level of management fees earned. Interest rates at unprecedented low levels have significantly decreased the yields of the Company’s money market and managed yield mutual funds. Since 2009, Investors Group and Mackenzie have waived a portion of investment management fees or absorbed some expenses to ensure that these funds maintained positive yields. The Company continuously reviews its practices in this regard in response to changing market conditions. Redemption rates for long-term funds are summarized in Table 23 and are discussed in the Investors Group and Mackenzie Segment Operating Results sections of this MD&A. IGM Financial provides Consultants, independent financial advisors, and strategic alliance and institutional clients with a high level of service and support and a broad range of investment products based on asset classes, countries or regions, and investment management styles which, in turn, should result in maintaining strong client relationships and lower rates of redemptions. The Company’s subsidiaries also continually review product pricing to ensure competitiveness in the marketplace in relation to the nature and quality of services provided.

TABLE 23: TWELVE MONTH TRAILING REDEMPTION RATE FOR LONG-TERM FUNDS

2015 2014 mar. 31 mar. 31

IGM Financial Inc. Investors Group 8.5 % 9.3 % Mackenzie 14.4 % 16.0 % Counsel 12.6 % 12.7 %




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The mutual fund industry and financial advisors continue to take steps to educate Canadian investors on the merits of financial planning, diversification and long-term investing. In periods of volatility Consultants and independent financial advisors play a key role in assisting investors to maintain perspective and focus on their long-term objectives.

OTHER RISK FACTORS

Distribution RiskInvestors Group Consultant network – Investors Group derives all of its mutual fund sales through its Consultant network. Investors Group Consultants have regular direct contact with clients which can lead to a strong and personal client relationship based on the client’s confidence in that individual Consultant. The market for financial advisors is extremely competitive. The loss of a significant number of key Consultants could lead to the loss of client accounts which could have an adverse effect on Investors Group’s results of operations and business prospects. Investors Group is focused on growing its distribution network of Consultants and on responding to the complex financial needs of its clients by delivering a diverse range of products and services in the context of personalized financial advice, as discussed in the Investors Group Review of the Business section of this MD&A. Mackenzie – Mackenzie derives the majority of its mutual fund sales through third party financial advisors. Financial advisors generally offer their clients investment products in addition to, and in competition with Mackenzie. Mackenzie also derives sales of its investment products and services from its strategic alliance and institutional clients. Due to the nature of the distribution relationship in these relationships and the relative size of these accounts, gross sale and redemption activity can be more pronounced in these accounts than in a retail relationship. Mackenzie’s ability to market its investment products is highly dependent on continued access to these distribution networks. The inability to have such access could have a material adverse effect on Mackenzie’s operating results and business prospects. Mackenzie is well positioned to manage this risk and to continue to build and enhance its distribution relationships. Mackenzie’s diverse portfolio of financial products and its long-term investment performance record, marketing, educational and service support has made Mackenzie one of

Canada’s leading investment management companies. These factors are discussed further in the Mackenzie Review of the Business section of this MD&A.

The Regulatory EnvironmentIGM Financial is subject to complex and changing legal, taxation and regulatory requirements, including the requirements of agencies of the federal, provincial and territorial governments in Canada which regulate the Company and its activities. The Company and its subsidiaries are also subject to the requirements of self-regulatory organizations to which they belong. These and other regulatory bodies regularly adopt new laws, rules, regulations and policies that apply to the Company and its subsidiaries. These requirements include those that apply to IGM Financial as a publicly traded company and those that apply to the Company’s subsidiaries based on the nature of their activities. They include regulations related to securities markets, the provision of financial products and services, including fund management, distribution, insurance and mortgages, and other activities carried on by the Company in the markets in which it operates. Regulatory standards affecting the Company and the financial services industry are increasing. The Company and its subsidiaries are subject to regulatory reviews as part of the normal ongoing process of oversight by the various regulators. Failure to comply with laws, rules or regulations could lead to regulatory sanctions and civil liability, and may have an adverse reputational or financial effect on the Company. The Company manages regulatory risk through its efforts to promote a strong culture of compliance. It monitors regulatory developments and their impact on the Company. It also continues to develop and maintain compliance policies, processes and oversight, including specific communications on compliance and legal matters, training, testing, monitoring and reporting. The Audit Committee of the Company receives regular reporting on compliance initiatives and issues. Particular regulatory initiatives may have the effect of making the products of the Company’s subsidiaries appear to be less competitive than the products of other financial service providers, to third party distribution channels and to clients. Regulatory differences that may impact the competitiveness of the Company’s products include regulatory costs, tax treatment, disclosure requirements, transaction processes or other differences that may be as a result of differing regulation




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or application of regulation. Regulatory developments may also impact product structures, pricing, dealer and advisor compensation. While the Company and its subsidiaries actively monitor such initiatives, and where feasible comment upon or discuss them with regulators, the ability of the Company and its subsidiaries to mitigate the imposition of differential regulatory treatment of financial products or services is limited. In March 2013, the Canadian Securities Administrators (CSA) adopted a new set of rules as Phase 2 of the Client Relationship Model that will require dealers, among other things, to provide their clients with enhanced information on the performance of their investments and the costs associated with them, including the compensation paid to the dealer (the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association of Canada have published rules that are to the same effect). These new requirements are effective for annual periods commencing no later than July 15, 2016 and comprise the following:• Performance and Rate of Return Reporting – Dealers

must provide clients with annual multiple-period performance information, including percentage rate of return results, on each of a client’s accounts. The rule mandates use of a dollar-weighted methodology which takes into consideration all cashflows into and out of the account and all underlying funds and investments. This prescribed calculation methodology is one that the Company supports. This approach ensures that client cashflows to, from, and within their accounts are properly reflected in the rate of return calculations. This provides a helpful view of the results of clients’ many decisions to save, invest, transfer between different investments and withdraw funds.

• Cost and Compensation Disclosure – Dealers must also provide clients with an annual report on all charges associated with their accounts, including direct and indirect compensation that the dealer receives related to a client’s account. These new requirements will provide important information to our clients and will build on already existing disclosure including information already provided through Fund Facts and the Management Report of Fund Performance (MRFP) related to distribution and fund management costs.

The CSA have been reviewing and conducting research related to Canada’s mutual fund fee structures.

As part of this effort, the CSA awarded a contract to a professor from York University to further this research. The CSA requested mutual fund asset managers to provide extensive, historical mutual fund data from 2003 onwards, including sales, redemptions, performance, and fund fee related information on a fund by fund basis, with a response deadline of January 16, 2015. The Company provided the requested information by the deadline and it supports the CSA’s efforts to further its understanding of the importance mutual funds have in the investment needs of Canadians. The Company will continue to monitor developments and engage with the industry and regulators on any relevant findings or proposals that result from this research. In 2013, the Government of Canada, as part of its Economic Action Plan, indicated an intention to establish a common securities regulator for Canada’s capital markets working cooperatively with the provinces and territories. In September 2014, the Government of Canada published two proposed pieces of legislation to implement the cooperative capital markets regulatory system, namely the Provincial Capital Markets Act and the Capital Markets Stability Act. Comments on the proposed legislation closed in December 2014 and supporting regulations are expected to be issued for comment by the Government of Canada in the latter half of 2015. The Company is continuing to monitor this initiative and the potential effect it will have on its activities and those of its subsidiaries, particularly in the area of the regulation of mutual funds.

ContingenciesThe Company is subject to legal actions arising in the normal course of its business. Although it is difficult to predict the outcome of any such legal actions, based on current knowledge and consultation with legal counsel, management does not expect the outcome of any of these matters, individually or in aggregate, to have a material adverse effect on the Company’s consolidated financial position.

Acquisition RiskThe Company undertakes thorough due diligence prior to completing an acquisition, but there is no assurance that the Company will achieve the expected strategic objectives or cost and revenue synergies subsequent to an acquisition. Subsequent changes in the economic environment and other unanticipated factors may affect the Company’s ability to achieve expected earnings growth or expense reductions. The success




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44

THE FINANCIAL SERVICES ENVIRONMENT

Canadians held $3.4 trillion in discretionary financial assets with financial institutions at December 31, 2013 based on the most recent report from Investor Economics. The nature of holdings was diverse, ranging from demand deposits held for short-term cash management purposes to longer-term investments held for retirement purposes. Over 63% ($2.2 trillion) of these financial assets are held within the context of a relationship with a financial advisor, and this is the primary channel serving the longer-term savings needs of Canadians. Of the $1.2 trillion held outside of a financial advisory relationship, approximately 67% consisted of bank deposits. Financial advisors represent the primary distribution channel for the Company’s products and services, and the core emphasis of the Company’s business model is to support these financial advisors as they work with clients to plan for and achieve their financial goals. Multiple sources of emerging research show significantly better financial outcomes for Canadians who use financial advisors compared to those who do not. The Company actively promotes the value of financial advice and the importance of a relationship with an advisor to develop and remain focused on long-term financial plans and goals. Approximately 39% of Canadian discretionary financial assets or $1.3 trillion resided in investment funds at December 31, 2013, making it the largest financial asset class held by Canadians. Other asset types include deposit products and direct securities such as stocks and bonds. Approximately 75% of investment funds are comprised of mutual fund products, with other product categories including segregated funds, hedge funds, pooled funds, closed end funds and

exchange traded funds. With $132 billion in mutual fund assets under management, the Company is among the country’s largest investment fund managers. Management believes that investment funds are likely to remain the preferred savings vehicle of Canadians. Investment funds provide investors with the benefits of diversification, professional management, flexibility and convenience, and are available in a broad range of mandates and structures to meet most investor requirements and preferences. Competition and technology have fostered a trend towards financial service providers offering a comprehensive range of proprietary products and services. Traditional distinctions between bank branches, full service brokerages, financial planning firms and insurance agent sales forces have become obscured as many of these financial service providers strive to offer comprehensive financial advice implemented through access to a broad product shelf. Accordingly, the Canadian financial services industry is characterized by a number of large, diversified, vertically-integrated participants, similar to IGM Financial, who offer both financial planning and investment management services. Canadian banks distribute financial products and services through their traditional bank branches, as well as through their full service and discount brokerage subsidiaries. Bank branches continue to place increased emphasis on both financial planning and mutual funds. In addition, each of the “big six” banks has one or more mutual fund management subsidiaries. Collectively, mutual fund assets of the “big six” bank-owned mutual fund managers and affiliated firms represented 47% of total industry long-term mutual fund assets at March 31, 2015.

Outlook

of an acquisition is dependent on retaining assets under management, clients, and key employees of an acquired company.

Model RiskThe Company uses a variety of models to assist in: the valuation of financial instruments, operational scenario testing, management of cash flows, capital management,

and assessment of potential acquisitions. These models incorporate internal assumptions, observable market inputs and available market prices. Effective controls exist over the development, implementation and application of these models. However, changes in the internal assumptions or other factors affecting the models could have an adverse effect on the Company’s consolidated financial position.




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As a result of consolidation activity in the last several years, the Canadian mutual fund management industry is characterized by large, often vertically-integrated, firms. The industry continues to be very concentrated, with the ten largest firms and their subsidiaries representing 72% of industry long-term mutual fund assets and total mutual fund assets under management at March 31, 2015. Management anticipates continuing consolidation in this segment of the industry as smaller participants are acquired by larger organizations. Management believes that the financial services industry will continue to be influenced by the following trends:• Shifting demographics as the number of Canadians

in their prime savings and retirement years continue to increase.

• Changes in investor attitudes based on economic conditions.

• Continued importance of the role of the financial advisor.

• Public policy related to retirement savings.• Changes in the regulatory environment.• An evolving competitive landscape.• Advancing and changing technology.

THE COMPETITIVE LANDSCAPE

IGM Financial and its subsidiaries operate in a highly competitive environment. Investors Group and Investment Planning Counsel compete directly with other retail financial service providers, including other financial planning firms, as well as full service brokerages, banks and insurance companies. Investors Group, Mackenzie and Investment Planning Counsel compete directly with other investment managers for assets under management, and their products compete with stocks, bonds and other asset classes for a share of the investment assets of Canadians. Competition from other financial service providers, alternative product types or delivery channels, and changes in regulations or public preferences could impact the characteristics of product and service offerings of the Company, including pricing, product structures, dealer and advisor compensation and disclosure. The Company monitors developments on an ongoing basis, and engages in policy discussions and develops product and service responses as appropriate. IGM Financial continues to focus on its commitment to provide quality investment advice

and financial products, service innovations, effective management of the Company and long-term value for its clients and shareholders. Management believes that the Company is well-positioned to meet competitive challenges and capitalize on future opportunities. The Company enjoys several competitive strengths, including: • Broad and diversified distribution with an emphasis

on those channels emphasizing comprehensive financial planning through a relationship with a financial advisor.

• Broad product capabilities, leading brands and quality sub-advisory relationships.

• Enduring client relationships and the long-standing heritages and cultures of its subsidiaries.

• Benefits of being part of the Power Financial group of companies.

Broad and Diversified DistributionIGM Financial’s distribution strength is a competitive advantage. In addition to owning two of Canada’s largest financial planning organizations, Investors Group and Investment Planning Counsel, IGM Financial has, through Mackenzie, access to distribution through over 30,000 independent financial advisors. Mackenzie also, in its growing strategic alliance business, partners with Canadian and U.S. manufacturing and distribution complexes to provide investment management to a number of retail investment fund mandates.

Broad Product CapabilitiesIGM Financial’s subsidiaries continue to develop and launch innovative products and strategic investment planning tools to assist advisors in building optimized portfolios for clients.

Enduring RelationshipsIGM Financial enjoys significant advantages as a result of the enduring relationships that advisors enjoy with clients. In addition, the Company’s subsidiaries have strong heritages and cultures which are challenging for competitors to replicate.

Benefits of Being Part of the Power Financial Group of CompaniesAs part of the Power Financial group of companies, IGM Financial benefits through expense savings from shared service arrangements, as well as through access to distribution, products and capital.




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SUMMARY OF CRITICAL ACCOUNTING ESTIMATES

There were no changes to the Company’s assumptions related to critical accounting estimates from those reported at December 31, 2014.


There were no changes to the Company’s accounting policies from those reported at December 31, 2014.


The Company continuously monitors the potential changes proposed by the International Accounting Standards Board (IASB) and analyzes the effect that changes in the standards may have on the Company’s operations.

IFRS 9 Financial InstrumentsThe IASB issued IFRS 9 which replaces IAS 39, the current standard for accounting for financial instruments. The standard was completed in three separate phases:• Classification and measurement: This phase requires

that financial assets be classified at either amortized cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

• Impairment methodology: This phase replaces the current incurred loss model for impairment of financial assets with an expected loss model.

• Hedge accounting: This phase replaces the current rule-based hedge accounting requirements in IAS 39 with guidance that more closely aligns the accounting with an entity’s risk management activities.

This standard is effective for annual periods beginning on or after January 1, 2018 and the impact of the standard is currently being assessed.

IFRS 15 Revenue from Contracts with CustomersThe IASB issued IFRS 15 which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The model requires an entity to recognize revenue as the goods or services are transferred to the customer in an amount that reflects the expected consideration. Subsequent to quarter end, the IASB has tentatively approved to defer the current effective date of January 1, 2017 to annual periods beginning on or after January 1, 2018.

Other The IASB is currently undertaking several projects which will result in changes to existing IFRS standards that may affect the Company:

IFRS Standard Expected date of issuance

Leases Q3/Q4 2015 – Final StandardMacro Hedge Accounting Q2 2015 – Redeliberations

Source: IFRS website at www.ifrs.org

Critical Accounting Estimates and Policies

During the first quarter of 2015, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Internal Control Over Financial Reporting




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The Company entered into tax loss consolidation transactions with its parent company, Power Financial Corporation, after obtaining advance tax rulings:• On January 7, 2014, the Company acquired

$1.67 billion of 4.51% preferred shares of a wholly-owned subsidiary of Power Financial Corporation. As sole consideration for the preferred shares, the Company issued $1.67 billion of 4.50% secured demand debentures to Power Financial Corporation. The Company has legally enforceable rights to settle these financial instruments on a net basis and the Company intends to exercise these rights.

• On January 6, 2015, the Company acquired $0.33 billion of 4.51% preferred shares of a wholly-owned subsidiary of Power Financial Corporation. As sole consideration for the preferred shares, the Company issued $0.33 billion of 4.50% secured demand debentures to Power Financial Corporation. The Company has legally enforceable rights to settle these financial instruments on a net basis and the Company intends to exercise these rights.

The preferred shares and debentures and related dividend income and interest expense are offset in the Consolidated Financial Statements of the Company.

Tax savings arise due to the tax deductibility of the interest expense. For further information on transactions involving related parties, see Notes 8 and 25 to the Company’s Annual Financial Statements.

OUTSTANDING SHARE DATA

Outstanding common shares of IGM Financial as at March 31, 2015 totalled 250,411,395. Outstanding stock options as at March 31, 2015 totalled 7,826,084, of which 3,495,954 were exercisable. As at May 5, 2015, outstanding common shares totalled 249,359,726 and outstanding stock options totalled 7,644,978 of which 3,495,423 were exercisable. Perpetual preferred shares of $150 million were outstanding as at March 31, 2015, unchanged at May 5, 2015.

SEDAR

Additional information relating to IGM Financial, including the Company’s most recent financial statements and Annual Information Form, is available at www.sedar.com.

Other Information




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48 i gm f inanc ial inc . f irst quarter report 2015 / inter im condensed consol idated f inanc ial statements

Consolidated Statements of Earnings

(unaudited) three months ended march 31(in thousands of Canadian dollars, except shares and per share amounts) 2015 2014

Revenues Management fees $ 509,111 $ 485,766 Administration fees 102,236 95,223 Distribution fees 94,533 92,411 Net investment income and other 29,081 22,002 Proportionate share of affiliate’s earnings 25,902 19,444

760,863 714,846

Expenses Commission 266,867 243,169 Non-commission 213,622 195,777 Interest 22,750 22,749

503,239 461,695

Earnings before income taxes 257,624 253,151Income taxes 55,065 56,490

Net earnings 202,559 196,661Perpetual preferred share dividends 2,213 2,213

Net earnings available to common shareholders $ 200,346 $ 194,448

Average number of common shares (in thousands) (Note 11)

– Basic 251,211 252,368 – Diluted 251,421 253,413

Earnings per share (in dollars) (Note 11)

– Basic $ 0.80 $ 0.77 – Diluted $ 0.80 $ 0.77

(See accompanying notes to interim condensed consolidated financial statements.)

Interim Condensed Consolidated Financial Statements



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i gm f inanc ial inc . f irst quarter report 2015 / inter im condensed consol idated f inanc ial statements 49

Consolidated Statements of Comprehensive Income

(unaudited) three months ended march 31(in thousands of Canadian dollars) 2015 2014

Net earnings $ 202,559 $ 196,661

Other comprehensive income (loss), net of tax Items that will not be reclassified to Net earnings Employee benefits Net actuarial gains (losses), net of tax of $4,788 and $5,552 (12,950) (15,016)

Investment in affiliate – employee benefits and other Other comprehensive income (loss), net of tax of nil (5,736) 5,756

Items that may be reclassified subsequently to Net earnings Available for sale securities Net unrealized gains (losses), net of tax of $(1,185) and $(44) 3,208 122 Reclassification of realized (gains) losses to net earnings, net of tax of $233 and $40 (637) (111)

2,571 11 Investment in affiliate and other Other comprehensive income (loss), net of tax of $(51) and $404 9,599 15,041

(6,516) 5,792

Comprehensive income $ 196,043 $ 202,453




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Consolidated Balance Sheets

(unaudited) MARCH 31 december 31(in thousands of Canadian dollars) 2015 2014

Assets Cash and cash equivalents $ 1,122,939 $ 1,215,980 Securities 82,588 89,545 Accounts and other receivables 473,137 470,708 Income taxes recoverable 30,081 22,710 Loans (Note 3) 7,017,081 7,018,893 Derivative financial instruments 70,889 39,449 Other assets 53,334 45,757 Investment in affiliate 802,860 794,381 Capital assets 122,071 121,854 Deferred selling commissions 736,506 710,447 Deferred income taxes 73,659 69,405 Intangible assets 1,169,233 1,161,513 Goodwill 2,659,856 2,656,539

$ 14,414,234 $ 14,417,181

Liabilities Accounts payable and accrued liabilities $ 340,109 $ 374,369 Income taxes payable 14,530 30,916 Derivative financial instruments 58,083 29,788 Deposits and certificates 252,499 223,328 Other liabilities 564,647 528,289 Obligations to securitization entities (Note 4) 6,695,025 6,754,048 Deferred income taxes 327,446 310,564 Long-term debt 1,325,000 1,325,000

9,577,339 9,576,302

Shareholders’ Equity Share capital Perpetual preferred shares 150,000 150,000 Common shares 1,661,017 1,655,581 Contributed surplus 32,268 33,504 Retained earnings 3,110,844 3,112,512 Accumulated other comprehensive income (loss) (117,234) (110,718)

4,836,895 4,840,879

$ 14,414,234 $ 14,417,181

These interim condensed consolidated financial statements were approved and authorized for issuance by the Board of Directors on May 8, 2015.




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i gm f inanc ial inc . f irst quarter report 2015 / inter im condensed consol idated f inanc ial statements 51

Consolidated Statements of Changes in Shareholders’ Equity

three months ended march 31

share capital

accumulated perpetual other preferred common comprehensive total (unaudited) shares shares contributed retained income (loss) shareholders’ (in thousands of Canadian dollars) (Note 5) (Note 5) surplus earnings (Note 8) equity

2015Balance, beginning of period $ 150,000 $ 1,655,581 $ 33,504 $ 3,112,512 $ (110,718) $ 4,840,879

Net earnings – – – 202,559 – 202,559Other comprehensive income (loss), net of tax – – – – (6,516) (6,516)

Total comprehensive income (loss) – – – 202,559 (6,516) 196,043

Common shares Issued under stock option plan – 14,608 – – – 14,608 Purchased for cancellation – (9,172) – – – (9,172)Stock options Current period expense – – 1,134 – – 1,134 Exercised – – (2,370) – – (2,370)Perpetual preferred share dividends – – – (2,213) – (2,213)Common share dividends – – – (140,941) – (140,941)Common share cancellation excess and other (Note 5) – – – (61,073) – (61,073)

Balance, end of period $ 150,000 $ 1,661,017 $ 32,268 $ 3,110,844 $ (117,234) $ 4,836,895

2014Balance, beginning of period $ 150,000 $ 1,630,844 $ 32,627 $ 2,977,083 $ (82,959) $ 4,707,595

Net earnings – – – 196,661 – 196,661Other comprehensive income (loss), net of tax – – – – 5,792 5,792

Total comprehensive income (loss) – – – 196,661 5,792 202,453

Common shares Issued under stock option plan – 17,117 – – – 17,117 Purchased for cancellation – (2,014) – – – (2,014)Stock options Current period expense – – 1,342 – – 1,342 Exercised – – (2,419) – – (2,419)Perpetual preferred share dividends – – – (2,213) – (2,213)Common share dividends – – – (135,657) – (135,657)Common share cancellation excess and other (Note 5) – – – (16,297) – (16,297)

Balance, end of period $ 150,000 $ 1,645,947 $ 31,550 $ 3,019,577 $ (77,167) $ 4,769,907




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Consolidated Statements of Cash Flows

(unaudited) three months ended march 31(in thousands of Canadian dollars) 2015 2014

Operating activities Earnings before income taxes $ 257,624 $ 253,151 Income taxes paid (62,203) (65,252) Adjustments to determine net cash from operating activities Deferred selling commission amortization 58,703 60,684 Amortization of capital and intangible assets 9,409 8,105 Changes in operating assets and liabilities and other (47,047) (73,240)

216,486 183,448 Deferred selling commissions paid (84,762) (82,243)

131,724 101,205

Financing activities Net increase in deposits and certificates 29,171 3,346 Net (decrease) increase in obligations to securitization entities (61,671) 155,451 Issue of common shares 12,238 14,698 Common shares purchased for cancellation (62,086) (16,763) Perpetual preferred share dividends paid (2,213) (2,213) Common share dividends paid (141,449) (135,612)

(226,010) 18,907

Investing activities Purchase of securities (9,964) (6,937) Proceeds from the sale of securities 21,774 10,696 Net decrease (increase) in loans 7,882 (68,390) Net additions to capital assets (4,514) (638) Net cash used in acquisitions and additions to intangible assets (13,933) (9,127)

1,245 (74,396)

(Decrease) increase in cash and cash equivalents (93,041) 45,716Cash and cash equivalents, beginning of period 1,215,980 1,082,437

Cash and cash equivalents, end of period $ 1,122,939 $ 1,128,153

Cash $ 56,935 $ 55,867Cash equivalents 1,066,004 1,072,286

$ 1,122,939 $ 1,128,153

Supplemental disclosure of cash flow information related to operating activities Interest and dividends received $ 63,751 $ 55,893 Interest paid $ 44,977 $ 40,287




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igm financial inc. first quarter report 2015 / notes to the interim condensed consolidated financial statements 53

Notes to the Interim Condensed Consolidated Financial Statementsmarch 31, 2015 (unaudited) (In thousands of Canadian dollars, except shares and per share amounts)

1 . CORPORATE INFORMATION

IGM Financial Inc. (the Company) is a publicly listed company (TSX: IGM), incorporated and domiciled in Canada. The registered address of the Company is 447 Portage Avenue, Winnipeg, Manitoba, Canada. The Company is controlled by Power Financial Corporation. IGM Financial Inc. is a financial services company which serves the financial needs of Canadians through its principal subsidiaries, each operating distinctly within the advice segment of the financial services market. The Company’s wholly-owned principal subsidiaries are Investors Group Inc. and Mackenzie Financial Corporation.

2 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The unaudited Interim Condensed Consolidated Financial Statements of the Company (Interim Financial Statements) have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, using the accounting policies as set out in Note 2 to the Consolidated Financial Statements for the year ended December 31, 2014. The Interim Financial Statements should be read in conjunction with the Consolidated Financial Statements in the 2014 IGM Financial Inc. Annual Report.

Future accounting changesThe Company continuously monitors the potential changes proposed by the International Accounting Standards Board (IASB) and analyzes the effect that changes in the standards may have on the Company’s operations.

IFRS 9 Financial InstrumentsThe IASB issued IFRS 9 which replaces IAS 39, the current standard for accounting for financial instruments. The standard was completed in three separate phases:• Classification and measurement: This phase requires that financial assets be classified at either amortized cost or

fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

• Impairment methodology: This phase replaces the current incurred loss model for impairment of financial assets with an expected loss model.

• Hedge accounting: This phase replaces the current rule-based hedge accounting requirements in IAS 39 with guidance that more closely aligns the accounting with an entity’s risk management activities.

This standard is effective for annual periods beginning on or after January 1, 2018 and the impact of the standard is currently being assessed.

IFRS 15 Revenue from Contracts with CustomersThe IASB issued IFRS 15 which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The model requires an entity to recognize revenue as the goods or services are transferred to the customer in an amount that reflects the expected consideration. Subsequent to quarter end, the IASB has tentatively approved to defer the current effective date of January 1, 2017 to annual periods beginning on or after January 1, 2018.



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54 igm financial inc. first quarter report 2015 / notes to the interim condensed consolidated financial statements

3 . LOANS

CONTRACTUAL MATURITY

MARCH 31 december 31 1 YEAR 1 – 5 OVER 2015 2014 OR LESS YEARS 5 YEARS TOTAL total

Loans and receivables Residential mortgages $ 1,310,393 $ 5,298,276 $ 2,511 $ 6,611,180 $ 6,653,428

Less: Collective allowance 673 762

6,610,507 6,652,666Held for trading 406,574 366,227

$ 7,017,081 $ 7,018,893

The change in the collective allowance for credit losses is as follows: Balance, beginning of period $ 762 $ 728Losses (recoveries) 42 (236)Provision for credit losses (131) 270

Balance, end of period $ 673 $ 762

Total impaired loans as at March 31, 2015 were $2,393 (December 31, 2014 – $2,056). Total interest income on loans classified as loans and receivables was $47.4 million (2014 – $42.0 million). Total interest expense on obligations to securitization entities, related to securitized loans, was $35.4 million (2014 – $30.8 million). Gains realized on the sale of residential mortgages totalled $7.1 million (2014 – $2.9 million). Fair value adjustments related to mortgage banking operations totalled $4.0 million (2014 – $0.4 million). These amounts were included in Net investment income and other. Net investment income and other also includes other mortgage banking related items including interest income on mortgages held for trading, portfolio insurance, issue costs, and other items.

4 . SECURITIZATIONS

The Company securitizes residential mortgages through the Canada Mortgage and Housing Corporation (CMHC) sponsored National Housing Act Mortgage-Backed Securities (NHA MBS) Program and Canada Mortgage Bond (CMB) Program and through Canadian bank-sponsored asset-backed commercial paper (ABCP) programs. These transactions do not meet the requirements for derecognition as the Company retains prepayment risk and certain elements of credit risk. Accordingly, the Company has retained these mortgages on its balance sheets and has recorded an offsetting liability for the net proceeds received as Obligations to securitization entities which is carried at amortized cost. The Company earns interest on the mortgages and pays interest on the obligations to securitization entities. As part of the CMB transactions, the Company enters into a swap transaction whereby the Company pays coupons on CMBs and receives investment returns on the NHA MBS and the reinvestment of repaid mortgage principal. A component of this swap, related to the obligation to pay CMB coupons and receive investment returns on repaid mortgage principal, is recorded as a derivative and had a negative fair value of $50.7 million at March 31, 2015 (December 31, 2014 – negative $26.3 million). Under the NHA MBS and CMB Program, the Company has an obligation to make timely payments to security holders regardless of whether amounts are received from mortgagors. All mortgages securitized under the NHA MBS and CMB Program are insured by CMHC or another approved insurer under the program. As part of the ABCP transactions, the Company has provided cash reserves for credit enhancement which are carried at cost. Credit risk is limited to these cash reserves and future net interest income as the ABCP Trusts have no recourse to the Company’s other assets for failure to make payments when due. Credit risk is further limited to the extent these mortgages are insured.



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obligations to securitized securitization MARCH 31, 2015 mortgages entities net

Carrying value NHA MBS and CMB Program $ 4,624,931 $ 4,685,386 $ (60,455) Bank sponsored ABCP 1,957,812 2,009,639 (51,827)

Total $ 6,582,743 $ 6,695,025 $ (112,282)

Fair value $ 6,824,883 $ 6,847,195 $ (22,312)

december 31, 2014

Carrying value NHA MBS and CMB Program $ 4,611,253 $ 4,691,792 $ (80,539) Bank sponsored ABCP 2,012,702 2,062,256 (49,554)

Total $ 6,623,955 $ 6,754,048 $ (130,093)

Fair value $ 6,819,531 $ 6,858,924 $ (39,393)

The carrying value of Obligations to securitization entities, which is recorded net of issue costs, includes principal payments received on securitized mortgages that are not due to be settled until after the reporting period. Issue costs are amortized over the life of the obligation on an effective interest rate basis.

5 . SHARE CAPITAL

AuthorizedUnlimited number of: First preferred shares, issuable in series Second preferred shares, issuable in series Class 1 non-voting shares Common shares, no par value

Issued and outstanding MARCH 31, 2015 march 31, 2014

stated stated shares value shares value

Perpetual preferred shares – classified as equity: First preferred shares, Series B 6,000,000 $ 150,000 6,000,000 $ 150,000

Common shares: Balance, beginning of period 251,469,346 $ 1,655,581 252,309,767 $ 1,630,844 Issued under Stock Option Plan (Note 7) 327,049 14,608 361,124 17,117 Purchased for cancellation (1,385,000) (9,172) (310,000) (2,014)

Balance, end of period 250,411,395 $ 1,661,017 252,360,891 $ 1,645,947

4 . SECURITIZATIONS (continued)



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Normal course issuer bidIn the first quarter of 2015, 1,385,000 shares (2014 – 310,000 shares) were purchased at a cost of $62.1 million (2014 – $16.8 million). The premium paid to purchase the shares in excess of the stated value was charged to Retained earnings. The Company commenced a normal course issuer bid on March 20, 2015 which is effective until March 19, 2016. Pursuant to this bid, the Company may purchase up to 12.5 million or 5% of its common shares outstanding as at March 13, 2015. On April 14, 2014, the Company commenced a normal course issuer bid, effective until March 19, 2015, which authorized it to purchase up to 12.6 million or 5% of its common shares outstanding as at March 31, 2014. In connection with its normal course issuer bid, the Company has established an automatic securities purchase plan for its common shares. The automatic securities purchase plan provides standard instructions regarding how the Company’s common shares are to be purchased under its normal course issuer bid during certain pre-determined trading blackout periods. Outside of these pre-determined trading blackout periods, purchases under the Company’s normal course issuer bid will be completed based upon management’s discretion.

6 . CAPITAL MANAGEMENT

The capital management policies, procedures and activities of the Company are discussed in the Capital Resources section of the Company’s Management’s Discussion and Analysis contained in the First Quarter 2015 Report to Shareholders and in Note 17 to the Consolidated Financial Statements in the 2014 IGM Financial Inc. Annual Report and have not changed significantly since December 31, 2014.

7 . SHARE-BASED PAYMENTS

Stock option plan MARCH 31 december 31 2015 2014

Common share options – Outstanding 7,826,084 6,940,248 – Exercisable 3,495,954 3,124,226

In the first quarter of 2015, the Company granted 1,293,075 options to employees (2014 – 1,024,685). The fair value of options granted during the three months ended March 31, 2015 has been estimated at $3.49 per option (2014 – $6.59) using the Black-Scholes option pricing model. The closing share price at the grant date was $44.09. The assumptions used in the valuation model include: three months ended march 31 2015 2014

Exercise price $ 43.97 $ 53.81Risk-free interest rate 1.04% 1.90%Expected option life 6 years 6 yearsExpected volatility 20.00% 21.00%Expected dividend yield 5.12% 4.00%

Expected volatility has been estimated based on the historic volatility of the Company’s share price over six years which is reflective of the expected option life. Options vest over a period of up to 7.5 years from the grant date and are exercisable no later than 10 years after the grant date. A portion of the outstanding options can only be exercised once certain performance targets are met.

5 . SHARE CAPITAL (continued)



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8 . ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

available investment employee for sale in affiliate MARCH 31, 2015 benefits securities and other total

Balance, beginning of period $ (123,510) $ 194 $ 12,598 $ (110,718)Other comprehensive income (loss) (12,950) 2,571 3,863 (6,516)

Balance, end of period $ (136,460) $ 2,765 $ 16,461 $ (117,234)

march 31, 2014

Balance, beginning of period $ (68,593) $ 420 $ (14,786) $ (82,959)Other comprehensive income (loss) (15,016) 11 20,797 5,792

Balance, end of period $ (83,609) $ 431 $ 6,011 $ (77,167)

Amounts are recorded net of tax.

9 . RISK MANAGEMENT

The risk management policies and procedures of the Company are discussed in the Financial Instruments Risk section of the Company’s Management’s Discussion and Analysis contained in the First Quarter 2015 Report to Shareholders and in Note 20 to the Consolidated Financial Statements in the 2014 IGM Financial Inc. Annual Report and have not changed significantly since December 31, 2014.

10 . FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair values are management’s estimates and are generally calculated using market conditions at a specific point in time and may not reflect future fair values. The calculations are subjective in nature, involve uncertainties and are matters of significant judgment. All financial instruments measured at fair value and those for which fair value is disclosed are classified into one of three levels that distinguish fair value measurements by the significance of the inputs used for valuation. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in the most advantageous market, utilizing a hierarchy of three different valuation techniques, based on the lowest level input that is significant to the fair value measurement in its entirety. Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 – Observable inputs other than Level 1 quoted prices for similar assets or liabilities in active markets; quoted

prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable or corroborated by observable market data; and

Level 3 – Unobservable inputs that are supported by little or no market activity. Valuation techniques are primarily model-based.

Markets are considered inactive when transactions are not occurring with sufficient regularity. Inactive markets may be characterized by a significant decline in the volume and level of observed trading activity or through large or erratic bid/offer spreads. In those instances where traded markets are not considered sufficiently active, fair value is measured using valuation models which may utilize predominantly observable market inputs (Level 2) or may utilize predominantly non-observable market inputs (Level 3). Management considers all reasonably available information including indicative broker quotations, any available pricing for similar instruments, recent arms length market transactions, any relevant observable market inputs, and internal model-based estimates. Management exercises judgment in determining the most appropriate inputs and the weighting ascribed to each input as well as in the selection of valuation methodologies.



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Fair value is determined using the following methods and assumptions:

Securities and other financial assets and financial liabilities are valued using quoted prices from active markets, when available. When a quoted market price is not readily available, valuation techniques are used that require assumptions related to discount rates and the timing and amount of future cash flows. Wherever possible, observable market inputs are used in the valuation techniques.

Loans classified as Level 2 are valued using market interest rates for loans with similar credit risk and maturity.

Loans classified as Level 3 are valued by discounting the expected future cash flows at prevailing market yields.

Obligations to securitization entities are valued by discounting the expected future cash flows at prevailing market yields for securities issued by these securitization entities having similar terms and characteristics.

Deposits and certificates are valued by discounting the contractual cash flows using market interest rates currently offered for deposits with similar terms and credit risks.

Long-term debt is valued using quoted prices for each debenture available in the market.

Derivative financial instruments are valued based on quoted market prices, where available, prevailing market rates for instruments with similar characteristics and maturities, or discounted cash flow analysis.

Level 1 financial instruments include exchange-traded equity securities and open-end investment fund units and other financial liabilities in instances where there are quoted prices available from active markets. Level 2 assets and liabilities include fixed income securities, loans, derivative financial instruments, deposits and certificates and long-term debt. The fair value of fixed income securities is determined using quoted market prices or independent dealer price quotes. The fair value of derivative financial instruments and deposits and certificates are determined using valuation models, discounted cash flow methodologies, or similar techniques using primarily observable market inputs. The fair value of long-term debt is determined using indicative broker quotes. Level 3 assets and liabilities include securities with little or no trading activity valued using broker-dealer quotes, loans, other financial assets, obligations to securitization entities and derivative financial instruments. Derivative financial instruments consist of principal reinvestment account swaps which represent the component of a swap entered into under the CMB Program whereby the Company pays coupons on Canada Mortgage Bonds and receives investment returns on the reinvestment of repaid mortgage principal. Fair value is determined by discounting the projected cashflows of the swaps. The notional amount, which is an input used to determine the fair value of the swap, is determined using an average unobservable prepayment rate of 15% which is based on historical prepayment patterns. An increase (decrease) in the assumed mortgage prepayment rate increases (decreases) the notional amount of the swap. The following table presents the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. The table distinguishes between those financial instruments recorded at fair value and those recorded at amortized cost. The table also excludes fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value. These items include cash and cash equivalents, accounts and other receivables, certain other financial assets, accounts payable and accrued liabilities, and certain other financial liabilities.

10 . FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)



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fair value

carrying value level 1 level 2 level 3 total

MARCH 31, 2015 Financial assets recorded at fair value Securities – Available for sale $ 4,675 $ 4,675 $ – $ – $ 4,675 – Held for trading 77,913 74,940 1,351 1,622 77,913 Loans – Held for trading 406,574 – 406,574 – 406,574 Derivative financial instruments 70,889 – 70,593 296 70,889 Other financial assets 9,273 – – 9,273 9,273Financial assets recorded at amortized cost Loans – Loans and receivables 6,610,507 – 28,723 6,824,883 6,853,606Financial liabilities recorded at fair value Derivative financial instruments 58,083 – 7,048 51,035 58,083 Other financial liabilities 6,108 6,108 – – 6,108Financial liabilities recorded at amortized cost Deposits and certificates 252,499 – 254,198 – 254,198 Obligations to securitization entities 6,695,025 – – 6,847,195 6,847,195 Long-term debt 1,325,000 – 1,729,693 – 1,729,693

december 31, 2014Financial assets recorded at fair value Securities – Available for sale $ 10,220 $ 10,220 $ – $ – $ 10,220 – Held for trading 79,325 76,953 769 1,603 79,325 Loans – Held for trading 366,227 – 366,227 – 366,227 Derivative financial instruments 39,449 – 39,449 – 39,449Financial assets recorded at amortized cost Loans – Loans and receivables 6,652,666 – 29,749 6,819,531 6,849,280Financial liabilities recorded at fair value Derivative financial instruments 29,788 – 3,461 26,327 29,788 Other financial liabilities 6,585 6,585 – – 6,585Financial liabilities recorded at amortized cost Deposits and certificates 223,328 – 225,266 – 225,266 Obligations to securitization entities 6,754,048 – – 6,858,924 6,858,924 Long-term debt 1,325,000 – 1,681,954 – 1,681,954

There were no significant transfers between Level 1 and Level 2 in 2015 and 2014.




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The following table provides a summary of changes in Level 3 assets and liabilities measured at fair value on a recurring basis. gains/(losses)

gains/ included in

(losses) other purchases balance included in comprehensive and transfers balance january 1 net earnings(1) income(2) issuances settlements in/out march 31

MARCH 31, 2015 Assets Securities – Held for trading $ 1,603 $ 19 $ – $ – $ – $ – $ 1,622 Other financial assets(3) – – 3,562 – – 5,711 9,273Liabilities Derivative financial instruments, net 26,327 (27,506) – (793) 2,301 – 50,739

march 31, 2014Assets Securities – Held for trading $ 1,446 $ – $ – $ 51 $ – $ – $ 1,497Liabilities Derivative financial instruments, net 16,163 (12,642) – (626) 4,583 – 23,596

(1) Included in Net investment income in the Consolidated Statements of Earnings.(2) Included in Available for sale securities – Net unrealized gains (losses) in the Consolidated Statements of Comprehensive Income.(3) Other financial assets previously recorded at cost were re-measured at fair value using recent market transactions.

11 . EARNINGS PER COMMON SHARE

three months ended march 31 2015 2014

Earnings Net earnings $ 202,559 $ 196,661 Perpetual preferred share dividends 2,213 2,213

Net earnings available to common shareholders $ 200,346 $ 194,448

Number of common shares (in thousands) Average number of common shares outstanding 251,211 252,368 Add: Potential exercise of outstanding stock options 210 1,045

Average number of common shares outstanding – diluted basis 251,421 253,413

Earnings per common share (in dollars) Basic $ 0.80 $ 0.77 Diluted $ 0.80 $ 0.77




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12 . RELATED PARTY TRANSACTIONS

The Company entered into tax loss consolidation transactions with its parent company, Power Financial Corporation, after obtaining advance tax rulings:• On January 7, 2014, the Company acquired $1.67 billion of 4.51% preferred shares of a wholly-owned subsidiary of

Power Financial Corporation. As sole consideration for the preferred shares, the Company issued $1.67 billion of 4.50% secured demand debentures to Power Financial Corporation. The Company has legally enforceable rights to settle these financial instruments on a net basis and the Company intends to exercise these rights.

• On January 6, 2015, the Company acquired $0.33 billion of 4.51% preferred shares of a wholly-owned subsidiary of Power Financial Corporation. As sole consideration for the preferred shares, the Company issued $0.33 billion of 4.50% secured demand debentures to Power Financial Corporation. The Company has legally enforceable rights to settle these financial instruments on a net basis and the Company intends to exercise these rights.

The preferred shares and debentures and related dividend income and interest expense are offset in the Consolidated Financial Statements of the Company. Tax savings arise due to the tax deductibility of the interest expense.

13 . SEGMENTED INFORMATION

The Company’s reportable segments are:• Investors Group• Mackenzie• Corporate and Other These segments reflect the current organizational structure and internal financial reporting. Management measures and evaluates the performance of these segments based on earnings before interest and taxes. Investors Group earns fee-based revenues in the conduct of its core business activities which are primarily related to the distribution, management and administration of its investment funds. It also earns fee revenues from the provision of brokerage services and the distribution of insurance and banking products. In addition, Investors Group earns intermediary revenues primarily from mortgage banking and servicing activities and from the assets funded by deposit and certificate products. Mackenzie earns fee-based revenues from services it provides as fund manager to its investment funds and as investment advisor to sub-advisory and institutional accounts. Corporate and Other includes Investment Planning Counsel, equity income from its investment in Lifeco, net investment income on unallocated investments, other income, and also includes consolidation elimination entries.



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2015

investors corporate Three months ended March 31 group mackenzie and other total

Revenues Management fees $ 316,181 $ 177,962 $ 14,968 $ 509,111 Administration fees 73,029 25,540 3,667 102,236 Distribution fees 46,270 3,246 45,017 94,533 Net investment income and other 21,518 4,218 29,247 54,983

456,998 210,966 92,899 760,863

Expenses Commission 144,979 77,858 44,030 266,867 Non-commission 121,331 76,186 16,105 213,622

266,310 154,044 60,135 480,489

Earnings before undernoted $ 190,688 $ 56,922 $ 32,764 280,374

Interest expense 22,750

Earnings before income taxes 257,624 Income taxes 55,065

Net earnings 202,559 Perpetual preferred share dividends 2,213

Net earnings available to common shareholders $ 200,346

Identifiable assets $ 8,272,283 $ 1,342,012 $ 2,140,083 $ 11,754,378 Goodwill 1,347,781 1,168,580 143,495 2,659,856

Total assets $ 9,620,064 $ 2,510,592 $ 2,283,578 $ 14,414,234

13 . SEGMENTED INFORMATION (continued)



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2014

investors corporate Three months ended March 31 group mackenzie and other total

Revenues Management fees $ 300,682 $ 171,720 $ 13,364 $ 485,766 Administration fees 66,009 26,045 3,169 95,223 Distribution fees 48,495 3,214 40,702 92,411 Net investment income and other 13,243 1,359 26,844 41,446

428,429 202,338 84,079 714,846

Expenses Commission 130,457 73,780 38,932 243,169 Non-commission 109,943 70,800 15,034 195,777

240,400 144,580 53,966 438,946

Earnings before undernoted $ 188,029 $ 57,758 $ 30,113 275,900

Interest expense 22,749

Earnings before income taxes 253,151Income taxes 56,490

Net earnings 196,661Perpetual preferred share dividends 2,213

Net earnings available to common shareholders $ 194,448

Identifiable assets $ 7,048,431 $ 1,343,281 $ 2,030,019 $ 10,421,731Goodwill 1,347,781 1,168,580 140,178 2,656,539

Total assets $ 8,396,212 $ 2,511,861 $ 2,170,197 $ 13,078,270

13 . SEGMENTED INFORMATION (continued)



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P A R T E

The attached document discloses information relating to the fi nancial results of Pargesa Holding SA as issued by Pargesa Holding SA.

P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5 E 1

PCC_QUAT1_ENG05_PAR_2015-12-05_v1.indd E1PCC_QUAT1_ENG05_PAR_2015-12-05_v1.indd E1 15-05-13 11:51 AM15-05-13 11:51 AM

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HIGHLIGHTS

E 2 P O W E R C O R P O R AT I O N O F C A N A DA — F I R S T Q UA RT E R R E P O RT 2 0 1 5


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ECONOMIC PRESENTATION OF PARGESA’S FINANCIAL RESULTS

FIRST QUARTER2015

Operating contribution of the main shareholdingsConsolidated

23.3

Equity method(7.2)

Non consolidated:

37.3

Operating contribution of the main shareholdings 53.4per share [SF] 0.63 0.58

2.16.2(8.0)

Economic operating income 53.7per share [SF] 0.63 (0.59)

(6.9)39.9

Net income 86.7per share [SF] 1.02 0.56

84,659

1.070



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CONSOLIDATED AND EQUITY ACCOUNTED HOLDINGS

Imerys

Lafarge

NON CONSOLIDATED HOLDINGS

PRIVATE EQUITY ACTIVITIES AND OTHER INVESTMENT FUNDS



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NET FINANCIAL INCOME AND EXPENSES

GENERAL EXPENSES AND TAXES

NON OPERATING INCOME



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PRESENTATION OF RESULTS IN ACCORDANCE WITH IFRS

FIRST QUARTER2015

1,138.7(1,041.1)

83.7Operating profit 181.3

71.8(5.7)(32.3)(5.7)

Consolidated net profit 209.4122.7

Attributable to Pargesa shareholders 86.7

84,659

Basic earnings per share attributable to Pargesa shareholders [SF] 1.02 0.56

1.070



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ADJUSTED NET ASSET VALUE

Pargesa’s flow through adjusted net asset value

Total portfolio

Adjusted net asset value

per Pargesa share 68.4 SF 99.3



Power Corporation of Canada has been designated

“A Caring Company” by Imagine, a national program to

promote corporate and public giving, volunteering and

support in the community.

To learn more about the organizations we support, visit

www.powercorporationcommunity.com.

CORPORATE INFORMATION

This document is also available on the Corporation’s website

and on SEDAR at www.sedar.com.

STOCK LISTINGS

Shares of Power Corporation of Canada are listed on the

Toronto Stock Exchange:

Subordinate Voting Shares: POW

Participating Preferred Shares: POW.PR.E

First Preferred Shares 1986 Series: POW.PR.F

First Preferred Shares, Series A: POW.PR.A

First Preferred Shares, Series B: POW.PR.B

First Preferred Shares, Series C: POW.PR.C

First Preferred Shares, Series D: POW.PR.D

First Preferred Shares, Series G: POW.PR.G

TRANSFER AGENT AND REGISTRAR

Computershare Investor Services Inc.

Offices in:

Montréal, Québec; Toronto, Ontario;

Vancouver, British Columbia

www.computershare.com

SHAREHOLDER SERVICES

Shareholders with questions relating to the payment of dividends,

change of address and share certificates should contact the

Transfer Agent:

Computershare Investor Services Inc.

Shareholder Services

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


751 Victoria Square

Montréal, Québec, Canada H2Y 2J3

514-286-7400

161 Bay Street, Suite 5000

Toronto, Ontario, Canada M5J 2S1

www.powercorporation.com

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