E-L Financial Corporation Limited (ELF) 2014年年度報告「TSX」.pdf

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1、Annual ReportFinancial Corporation Limited2014The Year at a Glance(Thousands of dollars)20142013Net Premiums(1)$867,493$821,544Total Revenues(1)$2,391,237$1,644,896Shareholders Net Operating Income(1)(2)$127,112$140,591Shareholders Net Income$394,530$907,679Shareholders Comprehensive Income$428,032$

2、871,577Changes in E-L Financial Shareholders Equity:Beginning of the year$3,752,880$3,245,697Comprehensive income:Net income394,530907,679Other comprehensive income(loss)33,502(36,102)428,032871,577Dividends(17,560)(319,016)Reclassification of AOCI from discontinued operations(46,816)Other2,8761,438

3、End of the year$4,166,228$3,752,880Per Share Information:(3)Net Operating Income(1)(2)$28.41$31.84Net Income$96.51$227.18Comprehensive Income$105.04$217.99Net Equity Value(2)$970.65$872.45(1)Continuing operations(2)See Managements Discussion and Analysis for use of non-GAAP measures.(3)All earnings

4、per share figures are net of dividends paid on First Preference shares.ANNUAL MEETING OF SHAREHOLDERSThe Annual Meeting of Shareholders will be held at 11:30 a.m.on Tuesday May 12,2015,4th floormeeting room,165 University Avenue,Toronto.All shareholders are invited to attend.46th ANNUAL REPORTE-L Fi

5、nancial Corporation Limited 1Board of DirectorsJ.Christopher Barron,Corporate DirectorJames F.Billett,President,J.F.Billett Holdings Ltd.Michael J.Cooper,President and Chief Executive Officer,Dream Unlimited CorporationWilliam J.Corcoran,LL.B.,Vice-Chairman,Jarislowsky Fraser LimitedDuncan N.R.Jackm

6、an,Chairman,President and Chief Executive Officer,E-L Financial Corporation LimitedThe Honourable Henry N.R.Jackman,Honorary Chairman,The Empire Life Insurance CompanyR.B.Matthews,Chairman,Longview Asset Management Ltd.Clive P.Rowe,Partner,Oskie CapitalMark M.Taylor,Executive Vice-President and Chie

7、f Financial Officer,E-L Financial Corporation LimitedHonorary DirectorThe Right Honourable John N.TurnerOfficersChairman,President and Chief Executive OfficerDuncan N.R.JackmanExecutive Vice-PresidentMark M.TaylorVice-President,General Counsel and Corporate SecretaryRichard B.CartyTreasurerSusan C.C

8、lifford2 E-L Financial Corporation Limited REPORT ON E-L FINANCIAL CORPORATION LIMITEDThis document has been prepared for the purpose of providing Managements Discussion and Analysis(“MD&A”)of the financial condition and results of operations for the years ended December 31,2014 and2013 for E-L Fina

9、ncial Corporation Limited(“E-L Financial”or the“Company”).This MD&A should be readin conjunction with the December 31,2014 year end consolidated financial statements and the notes,whichform part of the E-L Financial Corporation Limited 2014 Annual Report dated March 5,2015.The consolidatedfinancial

10、statements have been prepared in accordance with International Financial Reporting Standards(“IFRS”)as set out in the Handbook of the Chartered Professional Accountants of Canada.Unless otherwisenoted,both the consolidated financial statements and this MD&A are expressed in Canadian dollars.On Novem

11、ber 1,2013,the Company completed the sale of its formerly wholly-owned subsidiary,TheDominion of Canada General Insurance Company(“The Dominion”)to The Travelers Companies,Inc.forgross proceeds of$1.08 billion.The financial performance and cash flows of The Dominion have beenpresented as a discontin

12、ued operation in the Companys consolidated statements of income,consolidatedstatements of comprehensive income and consolidated statements of cash flows for 2013.This MD&A contains certain forward-looking statements that are subject to risks and uncertainties that maycause the results or events ment

13、ioned in this discussion to differ materially from actual results or events.Noassurance can be given that results,performance or achievement expressed in,or implied by,any forward-looking statements within this discussion will occur,or if they do,that any benefits may be derived from them.Unless oth

14、erwise stated,all per share amounts are based on the average number of Common Shares andSeries A Convertible Preference Shares outstanding for the period,adjusted for the Companys proportionateinterest in its own common shares held indirectly through investments in associates(“Adjusted CommonShares”

15、).Additional information relating to the Company,including its Annual Information Form,may be found .Use of non-GAAP measuresThe MD&A contains reference to net operating income,net operating income per share and net equity valueper share.These terms do not have any standardized meaning according to

16、IFRS and therefore may notbe comparable to similar measures presented by other companies.The Company believes that these measures provide information useful to its shareholders in evaluating theCompanys financial results.Net operating income is net income excluding realized gain(loss)on availablefor

17、 sale investments(“AFS”)including impairment write downs,the Companys share of income(loss)fromassociates and the fair value change in fair value through profit or loss(“FVTPL”)investments in the E-LCorporate portfolio.Net operating income per share is net operating income less preferred dividends d

18、ividedby the average number of Adjusted Common Shares outstanding.Net equity value per share is describedand reconciled to shareholders equity on page 6.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 3The CompanyE-L Financial operates as an investment and insurance holding company.

19、The Empire Life InsuranceCompany(“Empire”or“Empire Life”)(80.5%owned)underwrites life and health insurance policies andprovides segregated funds,mutual funds and annuity products.Empire Life is consolidated into E-L Financialfor financial reporting purposes.The Dominion(100%owned prior to the sale o

20、n November 1,2013)hasbeen reported as discontinued operations.The Company also owns investments in stocks and fixed income securities directly,and indirectly,throughpooled funds,closed-end investment companies and other investment companies(“E-L Corporate”).Included within E-L Corporate are the Comp

21、anys significant investments in United Corporations Limited(United),Economic Investment Trust Limited(“Economic”)and Algoma Central Corporation(“Algoma”).Economic and United are both closed-end investment companies and Algoma is a shipping company.Economic and Algoma are reported as investments in a

22、ssociates and are accounted for using the equitymethod.United(51%owned)is consolidated into E-L Financial for financial reporting purposes.The Companys strategy is to accumulate shareholder value through long-term capital appreciation anddividend income from its investments.E-L Financial oversees it

23、s investments through representation on theboards of directors of the subsidiaries and the other companies in which the Company has significantshareholdings.Review of results attributable to shareholders of E-L FinancialThe following tables summarize the results of the Companys business segments(all

24、 figures are net of tax):December 31,2014(thousands of dollars)E-L CorporateEmpire LifeTotalNet operating income$51,109$76,003$127,112Realized gain on available for sale investmentsincluding impairment write downs13,5183,45516,973Share of income of associates20,66520,665E-L Corporates fair value cha

25、nge in fair valuethrough profit or loss investments229,780229,780Net income315,07279,458394,530Other comprehensive income(OCI)7,54825,95433,502Comprehensive income$322,620$105,412$428,032December 31,2013(thousands of dollars)E-L CorporateEmpire LifeTotalNet operating income$47,913$92,678$140,591Real

26、ized gain(loss)on available for saleinvestments including impairment write downs11,061(2,459)8,602Share of income of associates51,33751,337E-L Corporates fair value change in fair valuethrough profit or loss investments396,023396,023Net income from continuing operations506,33490,219596,553Net income

27、 from discontinued operations311,126Net income506,33490,219907,679OCI(OCL)from continuing operations32,834(5,235)27,599OCL from discontinued operations(63,701)Total OCI(OCL)32,834(5,235)(36,102)Comprehensive income$539,168$84,984$871,577MANAGEMENTS DISCUSSION&ANALYSIS4 E-L Financial Corporation Limi

28、tedNet operating income from continuing operations E-L Financial earned consolidated net operating income from continuing operations of$127.1 million or$28.41 per share compared with$140.6 million or$31.84 per share in 2013.The$13.5 million decrease innet operating income in 2014 versus 2013 is prin

29、cipally due to the unfavourable impact of long-term interestrate movements relating to Empire Lifes Individual Insurance product line in 2014 compared to the favourablemovements in 2013.The decline in operating income was partially offset by a$3.2 million increase in E-LCorporates operating income,r

30、esulting from increased dividend income from the deployment of$650 millioninto equities from the proceeds on the sale of The Dominion in 2013.Net incomeE-L Financial earned consolidated net income from continuing operations of$394.5 million in 2014 comparedwith$596.6 million in 2013.The$202.1 millio

31、n decline in net income is primarily attributed to a decline in E-L Corporates income from FVTPL investments which decreased from$396.0 million in 2013 to$229.8 millionin 2014,reflecting the more favourable impact of global stock market movements in the prior year.On November 1,2013,the Company comp

32、leted the sale of its formerly wholly-owned subsidiary,TheDominion,to The Travelers Companies,Inc.for gross proceeds of$1.08 billion,resulting in an after-tax gainof$266.4 million.This gain combined with The Dominions ten month earnings for 2013 of$44.7 millionresulted in$311.1 million earned from d

33、iscontinued operations.Net income from continuing and discontinued operations resulted in E-L Financial earning total consolidatednet income of$394.5 million or$96.51 per share compared with$907.7 million or$227.18 per share in 2013.Comprehensive incomeE-L Financial earned consolidated comprehensive

34、 income of$428.0 million or$105.04 per share comparedto$871.6 million or$217.99 per share in 2013.Consolidated other comprehensive income(“OCI”)was$33.5million compared with other comprehensive loss(OCL)of$36.1 million in 2013.The loss in 2013 is mainlydue to the reclassification of significant gain

35、s relating to The Dominions liquidation of its common shareportfolio.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 5Net equity value per shareUnder IFRS,investments in associates are accounted for using the equity method and are not carried at fairvalue.Therefore,to provide an ind

36、ication of the accumulated shareholder value,the following table adjustsshareholders equity to reflect investments in associates at fair value:(thousands of dollars)20142013E-L Financial shareholders equity$4,166,228$3,752,880Less:First preference shares(300,000)(300,000)3,866,2283,452,880Adjustment

37、s for E-L Corporate not carried at fair value:Investments in associatesCarrying value(301,228)(288,884)Fair value(1)342,121351,24140,89362,357Deferred income tax(5,418)(8,262)35,47554,095Net equity value$3,901,703$3,506,975Common Shares(2)outstanding at period end4,019,6674,019,667Net equity value p

38、er Common Share(2)$970.65$872.45(1)net of non-controlling interest(2)Common Shares includes Series A Convertible Preference Shares.Growth in net equity value The Companys objective is to build long-term shareholder value by compounding growth in net equity valueper Common Share over the long term.Si

39、nce inception,the Companys compounded annual growth rate innet equity value,including dividends,has been 12.4%.Set out below is a table that shows annual growth in each of the past 10 years and since inception.Annual growth in net equity value*200514.0%200625.3%200712.7%2008(17.8)%200923.7%20109.7%2

40、011(13.9)%201215.2%201328.0%201411.3%Compounded annual growth*2005-2014-10 years9.6%1969-2014-Since inception12.4%*This chart was drawn from the individual annual reports and has not been restated for any subsequent changes in accounting policies.MANAGEMENTS DISCUSSION&ANALYSIS6 E-L Financial Corpor

41、ation LimitedFourth quarter resultsNet operating income from continuing operationsFor the three months ended December31,2014,E-L Financial earned consolidated net operating incomefrom continuing operations of$31.2 million or$6.94 per share compared with$54.9 million or$12.98 pershare for the compara

42、ble period in 2013.The$23.7 million decrease in net operating income is due toworsened lapse and mortality experience relating to Empire Lifes Individual Insurance product line in 2014,as well as a$12.9 million recovery of refundable dividend taxes in 2013 resulting from the$301.5 millionspecial div

43、idend paid to common shareholders.Net incomeFor the three months ended December31,2014,E-L Financial had consolidated net income of$142.0 millionor$35.16 per share compared with$507.4 million or$128.23 per share in 2013.Net income for the fourthquarter of 2013 included non-recurring income of$266.4

44、million from the sale of The Dominion.This combinedwith a decrease in income from FVTPL investments from$185.4 million in 2013 to$94.7 million in 2014resulted in a decline of$365.4 million in net income for the fourth quarter of 2014 compared with 2013.Comprehensive incomeFor the three months ended

45、December31,2014,E-L Financial had a consolidated comprehensive incomeof$162.3 million or$40.35 per share compared with$534.6 million or$135.14 per share for the comparableperiod in 2013.OCI was$20.4 million compared with$27.1 million in 2013.The$6.7 million decrease inOCI is mainly due to The Domini

46、on reporting$11.7 million in 2013.This was partially offset by an increasein OCI in 2014 resulting from the remeasurement of defined benefit plans.The following table summarizes the quarterly results:(millions of dollars,except pershare amounts)20142013Q4Q3Q2Q1Q4Q3Q2Q1Revenue-Continuing OperationsNe

47、t premium income$216$208$214$229$215$203$197$207Associates(1)14107(5)2514173FVTPL(2)35510217730827311(161)172AFS(3)68104343Investment and other136128140124132110116101Total$727$456$548$660$648$338$173$486Net income(loss)(4)Continuing operations$142$71$77$105$265$92$107$132Discontinued operations243(

48、29)8414Total$142$71$77$105$508$63$191$146Earnings per share(4)Continuing operations-basic$35.16$17.00$18.66$25.69$66.41$22.61$26.23$32.70-diluted$32.40$16.12$17.61$24.75$56.27$19.68$22.70$28.09Total-basic$35.16$17.00$18.66$25.69$128.23$15.13$47.62$36.20-diluted$32.40$16.12$17.61$24.75$107.88$13.45$4

49、0.54$31.01(1)Share of income(loss)of associates,including impairment write downs(2)Realized and unrealized gains on FVTPL investments(3)Realized gain on AFS,including impairment write downs(4)Attributable to shareholdersMANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 7Quarterly tren

50、d analysisThe consolidated revenue and consolidated net income of the Company are expected to fluctuate on aquarterly basis given its various segments.In particular,equity market movements,changes in interest rates,underwriting results,policy liability discount rates and policy reserve adjustments a

51、re likely to causefluctuations.Revenue-Continuing operationsFor the past eight quarters,Empire Life has had steady net premium income.The quarterly fluctuationsfound in the investments in associates,FVTPL and AFS categories have been significant and can be attributedto the volatility in equity marke

52、ts and movement in bond prices.Investment and other income continues toincrease in 2014 due to higher fee and dividend income.Shareholders net incomeDuring the first quarter of 2013,net income decreased due to poor underwriting results at The Dominioncombined with the unfavourable impact of long-ter

53、m interest rate movements on Empire Lifes IndividualInsurance product line.The Dominions poor underwriting results continued throughout the second and thirdquarters of 2013.However,in the second quarter of 2013,The Dominion liquidated its common share portfoliowhich resulted in a realized gain on AF

54、S investments.In the fourth quarter of 2013,a gain of$266.4 millionwas recognized on the sale of The Dominion.Quarterly net income throughout 2014 was significantly impacted by the significant fluctuations in the globalequity markets combined with the unfavourable impact of long-term interest rate m

55、ovements relating to theIndividual Insurance product line.FVTPL and AFS gains,as well as E-L Corporates share of income from associates were significantlyimpacted by the global stock markets volatility throughout the year.Most significant markets rose in 2014providing investors with strong returns.C

56、anadas main stock market rose in 2014,but was much weakerthan the S&P 500 due to the steep drop in world oil prices and other commodities.Despite the overall strengthin 2014,global equity markets were significantly below the 2013 performance levels.MANAGEMENTS DISCUSSION&ANALYSIS8 E-L Financial Corp

57、oration LimitedSelected annual information(millions of dollars)201420132012Revenue-Continuing operationsE-L Corporate$465$739$404Empire Life1,9269061,260$2,391$1,645$1,664Shareholder net incomeE-L Corporate$316$507$369Empire Life799064Continuing operations395597433Discontinued operations-The Dominio

58、n31147Total$395$908$480Earnings per shareContinuing operations-basic$96.51$147.95$106.37-diluted$90.06$126.82$91.14Total-basic$96.51$227.18$118.41-diluted$90.06$192.97$101.10AssetsE-L Corporate$4,184$3,805$2,336Empire Life13,72712,08010,916Discontinued operations-The Dominion3,403Total assets$17,911

59、$15,885$16,655Cash dividends per shareFirst Preference shares,Series 1$1.3250$1.3250$1.3250First Preference shares,Series 2$1.1875$1.1875$1.1875First Preference shares,Series 3$1.3750$1.3750$1.0868Common shares$0.50$75.50$0.50Revenue-Continuing operations Revenues over the period have been significa

60、ntly impacted by fluctuations in the global stock markets.E-L Corporate has experienced significant fluctuations in the fair value change in FVTPL and shareof income of associates revenue streams.In 2012 the fair value change in FVTPL was$145 millionincreasing to$598 million in 2013.Commencing in 20

61、13,income from United was reported on aconsolidated basis as opposed to income from associates in 2012.The increase in 2013 reflected$295 million from Uniteds investments and the favourable impact of stock market movements duringthe year.In 2014 the fair value change in FVTPL was$330 million reflect

62、ing the continued strengthin the global equity markets.Income from associates has shown similar movement with a gain of$84 million in 2012 decreasing to$59 million in 2013 and$26 million in 2014.Revenue in 2012includes a$142 million gain from the consolidation of United.Empire Life has experienced s

63、teady insurance premium income over the past three years.Themovements in revenue over the three years were due primarily to changes in FVTPL investments,resulting from an increase in bond prices in 2014 and 2012 compared to decreases in bond pricesin 2013.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial

64、 Corporation Limited 9Net income In general,the net income for the Company is significantly impacted by the movements in the global stockmarkets.Over the three year period global stock markets have experienced significant volatility.E-L Corporates net income is directly related to its revenue,which

65、fluctuated significantly aspreviously discussed.In 2012 net income was impacted by a$142.2 million one-time gain relatingto the consolidation of United.Empire Lifes net income was$79 million in 2014 compared to$90 million in 2013 and$64 millionin 2012.The lower net income in both 2014 and 2012 was d

66、ue primarily to the favourable impact oflong-term interest rate movements relating to the Individual Insurance product line in 2013.Net income on discontinued operations for 2013 reflects 10 months of operations combined with a$266.4 gain on the sale of The Dominion.AssetsTotal assets increased in 2

67、013 compared to 2012 due to favourable stock market movements and strongnet sales in segregated fund assets.On November 1,2013,the Company sold The Dominion for grossproceeds of$1.08 billion.The proceeds from the sale were used for a special dividend of$75.00 per shareto common shareholders,re-inves

68、tment of approximately$650 million into U.S.and international equities,with the remainder added to E-L Corporate cash reserves.During 2014 assets continued to increase dueto favourable stock market movements.Cash dividendsFor the three year period,the Company paid out a regular annual dividend of$0.

69、50 per share on each ofits common shares.In addition,on December 16,2013,the Company paid a special cash dividend of$75.00per common share related to the sale of The Dominion.Disclosure controls and proceduresThe Companys disclosure controls and procedures are designed to provide reasonable assuranc

70、e thatinformation required to be disclosed by the Company under Canadian securities laws is recorded,processed,summarized and reported within the specified time periods,and include controls and procedures that aredesigned to ensure that information is accumulated and communicated to management on a

71、timely basisto allow appropriate decisions regarding public disclosure.Under the supervision of management,anevaluation was carried out on the effectiveness of the Companys disclosure controls and procedures as ofDecember31,2014.Based on that evaluation,management concluded that the Companys disclos

72、urecontrols and procedures were effective as at December31,2014.Internal control over financial reportingManagement is responsible for establishing and maintaining adequate internal control over financial reportingto provide reasonable assurance regarding the reliability of financial reporting and t

73、he preparation ofconsolidated financial statements for external purposes in accordance with IFRS.Under the supervision ofmanagement,an evaluation of the Companys internal control over financial reporting was carried out as atDecember31,2014.Based on that evaluation,management concluded that the Comp

74、anys internal controlover financial reporting was effective as at December31,2014.No changes were made in the Companysinternal control over financial reporting during the year ended December31,2014,that have materiallyaffected,or are reasonably likely to materially affect,the Companys internal contr

75、ol over financial reporting.Liquidity and capital resourcesLiquidity refers to the Companys ability to maintain cash flow adequate to fund operations,as well as toprovide resources for additional investments.The Companys liquidity management strategy is to ensurethat there will be sufficient cash to

76、 meet all financial commitments and obligations as they become due.MANAGEMENTS DISCUSSION&ANALYSIS10 E-L Financial Corporation LimitedThe Companys corporate obligations,primarily dividend payments on its outstanding Common and PreferredShares,are funded by cash flows arising from its equity and fixe

77、d income portfolio as well as dividends fromits subsidiaries.Excess cash flows are invested within E-L Corporate,as opportunities become available.Empire Life meets their cash requirements primarily through funds generated by insurance operations.Empire Life carries sufficient excess capital in the

78、event of reasonably possible adverse claims experienceor investment results.In 2013 Empire Life issued$300 million principal amount of unsecured subordinateddebentures with a maturity date of May 31,2023 and bear interest at a fixed annual rate of 2.870%for thefirst five years,payable semi-annually,

79、and a variable annual rate equal to the 3-month Bankers AcceptanceRate plus 1.05%for the last five years,payable quarterly.In 2014 Empire Life redeemed its$200 million6.73%subordinated debentures at par on May 20,2014.Refer to the 2014 audited consolidated financialstatements-Note 14 for further det

80、ails.At December 31,2014,Empire Lifes Minimum Continuing Capitaland Surplus Requirements measure was 197%.Critical accounting estimatesThe consolidated financial statements are prepared in accordance with generally accepted accountingprinciples in Canada which require estimates and assumptions in de

81、termining amounts reported in thefinancial statements.Note 2 to the consolidated financial statements describes the significant accountingpolicies.The Company considers the following items to be particularly susceptible to changes in estimatesand judgments:Insurance-related liabilitiesThe determinat

82、ion of policy liabilities requires best estimate assumptions that cover the remaining life of thepolicies for mortality,morbidity,investment returns,persistency,expenses,inflation and taxes and includeconsideration of related reinsurance effects.Due to the long-term risks and measurement uncertainti

83、esinherent in the life insurance business,a margin for adverse deviation from best estimates is included ineach assumption.These margins allow for possible deterioration in future experience and provide for greaterconfidence that policy liabilities are adequate to pay future benefits.The resulting p

84、rovisions for adversedeviations have the effect of increasing policy liabilities and decreasing the income that otherwise wouldhave been recognized at policy inception.A range of allowable margins is prescribed by the Canadian Instituteof Actuaries.Assumptions are reviewed and updated at least annua

85、lly and the impact of changes in thoseassumptions is reflected in earnings in the year of the change.Pension and other employee future benefitsPension and other employee future benefits expense is calculated by independent actuaries usingassumptions determined by management.The assumptions made affe

86、ct the pension and other employeefuture benefits expense included in net income.If actual experience differs from the assumptions used,theresulting experience gain or loss is recorded in OCI.Provision for impaired investmentsThe Company maintains a prudent policy in setting the provision for impaire

87、d investments.When there isno longer reasonable assurance of full collection of loan principal and loan interest related to a mortgage orpolicy contract loan,management establishes a specific provision for loan impairment and charges thecorresponding reduction in carrying value to income in the peri

88、od the impairment is identified.In determiningthe estimated realizable value of the investment,management considers a number of events and conditions.These include the value of the security underlying the loan,geographic location,industry classification ofthe borrower,an assessment of the financial

89、stability of the borrower,repayment history and an assessmentof the impact of current economic conditions.Changes in these circumstances may cause subsequentchanges in the estimated realizable amount of the investment and changes in the specific provision forimpairment.MANAGEMENTS DISCUSSION&ANALYSI

90、SE-L Financial Corporation Limited 11Available for sale securities are subject to a regular review for losses that are significant or prolonged.Objective evidence of impairment exists if there has been a significant or prolonged decline in the fair valueof the investment below its cost or if there i

91、s a significant adverse change in the technological,market,economic or legal environment in which the issuer operates or the issuer is experiencing financial difficulties.Investments in associates recognize an impairment loss if the investment in associates recoverable amountis determined to be lowe

92、r than the investments carrying amount at the reporting date.Recoverable amountis equal to the higher of the investments fair value less costs of disposal and value in use.Impairment lossesare recognized in the consolidated statements of income.Previously recognized impairment losses arereversed if

93、the investments recoverable amount subsequently increases and there is a significant indicationthat the circumstances that led to the initial recognition of the impairment loss have improved or recoveredcompletely.ConsolidationThere could be judgment involved in assessing control or significant infl

94、uence of certain of the Companysinterests in other entities.The Company has applied judgment to assess which party has power or influenceover the relevant activities of these entities.When assessing decision making power,the Company hasconsidered voting rights,contractual agreements,relative share h

95、oldings,and other facts and circumstances.The initial assessment of control or influence is reassessed when there are changes in facts andcircumstances.Fair value estimatesIn measuring the fair value of financial instruments,management exercises judgment in the selection of fairvalue inputs and in d

96、etermining their significance to the fair value estimate.Judgment is also required in theclassification of fair value measurements within the levels of the fair value hierarchy,in particularly thoseitems categorized within Level 3 of the hierarchy.Analysis of business segments The remainder of this

97、MD&A discusses the individual results of operations and financial condition of theCompanys business segments:E-L Corporate and Empire Life.MANAGEMENTS DISCUSSION&ANALYSIS12 E-L Financial Corporation LimitedE-L CORPORATEE-L Corporate owns investments in equities and fixed income securities directly a

98、nd indirectly through pooledfunds and other investment companies,as well as significant investments in United,Economic and Algoma.Economic and Algoma are reported as investments in associates and are discussed below.Investments inequities and fixed income securities held directly by E-L Financial an

99、d through United are combined to form“Investments corporate”.Investments-corporateInvestments-corporate includes investments in equities and short-term fixed-income investments.AtDecember31,2014,investments-corporate had aggregate investments of$3.8 billion,comprised primarilyof common shares,compar

100、ed to aggregate investments at December31,2013 of$3.4 billion.The fair valueof investments-corporate is summarized in the table below.(millions of dollars)20142013Short-term investments$211.5$126.4Preferred shares1.11.1Common sharesCanadian627.1637.8U.S.1,640.41,453.0Europe797.2727.3Other513.2435.8T

101、otal3,577.93,253.9Total invested assets$3,790.5$3,381.4The return on investments corporate for the year ended December31,2014 was approximately 13%(2013-35%).Fair value change in FVTPL investmentsFair value change in FVTPL investments includes both realized and unrealized gains(losses).The fair valu

102、e change in FVTPL investments for both the quarter and year relative to the prior year reflectsthe more favourable impact of global stock market movements in 2013.For the three months endedDecember31,2014,the fair value of FVTPL investments increased$94.7 million after tax compared to$185.4 million

103、after tax in 2013.For the year ended December31,2014,the fair value of FVTPL investmentsincreased$229.8 million after tax compared to$396.0 million after tax in 2013.Share of income of associatesThe details of E-L Corporates share of income of associates on an after tax basis are as follows:Fourth q

104、uarterYear(millions of dollars)2014201320142013Share of income$10.9$21.9$20.7$39.3Net impairment reversal12.010.921.920.751.3Share of OCI0.63.10.83.5$11.5$25.0$21.5$54.8E-L Corporates share of net income from associates for the three months ended December31,2014 was$10.9 million after tax compared t

105、o a$21.9 million after tax in 2013.The$11.0 million after tax decrease inincome from associates was primarily due to a decrease in Economics net income for the quarter resultingfrom stronger market performance during the fourth quarter of 2013.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation

106、 Limited 13On a year to date basis,E-L Corporate recorded net income from associates of$20.7 million after taxcompared to$51.3 million after tax in 2013.The$30.6 million after tax decrease in income from associatesis primarily due to stronger market performance in 2013 which resulted in a full rever

107、sal of previous impairmenton the Companys investment in Economic.(millions of dollars)20142013OwnershipCarryingvalueFair valueOwnershipCarryingvalueFair valueAlgoma34.7%$182.7$221.534.7%$168.8$224.1Economic24.0%118.5121.024.0%120.1127.1Total$301.2$342.5$288.9$351.2Additional information relating to

108、Algoma and Economic may be found on their respective profiles .Net operating incomeE-L Corporates net operating income for the quarter was$16.3 million after tax compared with$29.3 millionafter tax in 2013.The$13.0 million decrease in net operating income is mainly due to a$12.9 million recoveryof r

109、efundable dividend taxes in 2013 resulting from the$301.5 million payment of special dividends to commonshareholders.For the year ended December31,2014,E-L Corporate earned net operating income of$51.1 million aftertax compared to$47.9 million after tax for the comparative year.The$3.2 million after

110、 tax increase is dueto an increase in foreign dividend income in 2014 partially offset by the increase in the recovery of refundabletaxes in 2013.Comprehensive incomeFourth quarterYear(millions of dollars)2014201320142013Comprehensive incomeNet income$126.7$240.9$315.1$506.3OCIUnrealized fair value

111、increase on AFS investments8.915.920.340.6Realized gain on AFS investments reclassified to net income(4.7)(4.2)(13.5)(11.0)Share of OCI of associates0.63.10.83.5Other(0.1)(0.2)(0.1)(0.2)4.714.67.532.9Total$131.4$255.5$322.6$539.2For the three months ended December31,2014,E-L Corporate earned OCI of$

112、4.7 million compared to$14.6 million in 2013.For the year ended December31,2014,E-L Corporate earned OCI of$7.5 millioncompared to$32.9 million in 2013.The decrease in OCI for both the quarter and year versus the prior periodis mainly due to a lower unrealized fair value increase on AFS investments

113、in 2014 compared to the priorperiod.Risk managementThe objective of the Companys risk management process is to ensure that the operations of the Companyencompassing risk are consistent with the Companys objectives and risk tolerance,while maintaining anappropriate risk/reward balance.Market risk is

114、the most significant risk impacting E-L Corporate as itsinvesting activities are influenced by market price and interest rate risk.In addition to the discussion of risksMANAGEMENTS DISCUSSION&ANALYSIS14 E-L Financial Corporation Limitedincluded in this MD&A,a comprehensive discussion of the material

115、 risks that impact the Company is includedin the Annual Information Form which is available at .Disclosures regarding E-L Corporatesfinancial instruments,including financial risk management,are included in Notes 4,6 and 24 to theconsolidated financial statements.Liquidity and capital resourcesE-L Co

116、rporates liquidity,capital resources and cash flow is managed from a non-consolidated perspective.Composition of cash flows:E-L Financial*UnitedEmpire LifeThe DominionTotal(millions of dollars)2014201320142013201420132014201320142013Cash flows from:Operating activities$29$26$5$(2)$152$222$30$186$276

117、Financing activitiesCash dividends(18)(319)(9)(9)(7)(5)(34)(333)Subordinated debt(200)298(200)298Interest(15)(18)(15)(18)Investing activities(77)3281823119(509)(114)60(272)Net change in cash andcash equivalents$(66)$35$14$12$49$(12)$(84)$(3)$(49)*non-consolidatedCash flows on a non-consolidated basi

118、s for 2014 consisted of net investment income of$29 million(2013-$26 million)and cash dividends received from its subsidiaries of$37 million(2013-$28 million).In addition,the sale of The Dominion in 2013 provided$1.08 billion in net cash flows.These cash flows,net of dividendpayments made on the Com

119、panys Common and Preference Shares of$18 million(2013-$319 million),provided$48 million(2013$806 million)for investment opportunities.After the sale of The Dominion,$650million was invested into U.S.and international equities with the balance being added to E-L Corporate cashreserves.E-L Corporate m

120、aintains sufficient liquidity through holding short-term investments,cash equivalents andhigh quality marketable investments that may easily be sold,if necessary,to fund new investmentopportunities and to meet any operating cash flow requirements.Composition of E-L Financial(non-consolidated)liquidi

121、ty:(millions of dollars)20142013Cash and cash equivalents$60.7$88.3Short-term investments211.5126.4Total$272.2$214.7OutlookThe Companys future earning prospects are dependent on the successful management of its E-L Corporateportfolio and on the continued profitability of its insurance company subsid

122、iary.The performance of the E-LCorporate portfolio is impacted by global securities markets and the selection of equity and fixed incomeinvestments.The Company continues to maintain its strategy of accumulating shareholder value throughlong-term capital appreciation and dividend income.More informat

123、ion on the outlook for Empire Life isprovided in the outlook section of Empire Lifes report in the MD&A.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 15REPORT ON EMPIRE LIFEEmpire Life provides a broad range of life insurance and wealth management products,employee benefitplans an

124、d financial services to meet the needs of individuals,professionals and businesses through a networkof Independent Financial Advisors(“IFA”),Managing General Agents(“MGA”),National Account firms,MutualFund Dealers and Employee Benefits brokers and representatives.Empire Life reported full year share

125、holders net income of$98.7 million for 2014,compared to$113.3 millionfor 2013.Empire Lifes net income attributable to the owners of E-L Financial,after adjustment for non-controlling interests,is shown in the following table:Fourth quarterYear(millions of dollars)2014201320142013Net income,contribut

126、ion to E-L FinancialShareholders net income$18.2$29.9$98.7$113.3Non-controlling interests portion of net income3.56.119.223.1Net income,contribution to E-L Financial$14.7$23.8$79.5$90.2For the year shareholders net income was lower relative to 2013 primarily due to lower Individual Insuranceproduct

127、line net income.This product lines lower result was primarily due to the unfavourable impact of long-term interest rate movements experienced in 2014,compared to favourable movements in 2013.This waspartly offset by a strong improvement in Wealth Management product line net income.This product lines

128、improved result was primarily due to the growth in segregated fund management fees and growth insegregated fund guarantee fees related to guaranteed minimum withdrawal benefit(GMWB)products.This improvement in fee income was primarily due to the positive impact of favourable stock market conditions,

129、strong segregated fund product sales in 2014 and GMWB price increases.Empire Life has three major product lines(Wealth Management,Employee Benefits and Individual Insurance)and maintains distinct accounts for Capital and Surplus.A discussion of each product lines 2014 net incomecompared to 2013 is s

130、hown in the Product Line Results sections later in this report.This report contains references to annualized premium sales.This term does not have any standardizedmeaning according to GAAP and therefore may not be comparable to similar measures presented by othercompanies.Annualized premium sales is

131、 used as a method of measuring sales volume.It is equal to thepremium expected to be received in the first twelve months for all new Individual Insurance and EmployeeBenefit policies sold during the period.Empire Life believes that this measure provides information usefulto its shareholders and poli

132、cyholders in evaluating Empire Lifes underlying financial results.The summary of Empire Lifes operations on page 99 of this Annual Report provides an overview of resultsfor the five-year period from 2010 to 2014.The analysis and discussion which follows is focused on the fullyear 2014 and comparativ

133、e 2013 line of business net income after tax.MANAGEMENTS DISCUSSION&ANALYSIS16 E-L Financial Corporation LimitedThe following table provides a summary of Empire Life results by major product line(figures in ManagementsDiscussion and Analysis may differ due to rounding):For the twelve monthsended Dec

134、ember 31WealthManagementEmployeeBenefitsIndividualInsuranceCapital&SurplusTotal(millions of dollars)2014201320142013201420132014201320142013RevenueNet premium income$186$159$319$307$362$356$867$822Fee and other income17814098112188151Investment income4954441511404242246240Realized gain on FVTPLinves

135、tments9765387445Realized gain(loss)onavailable for saleinvestments includingimpairment write downs113(3)13(2)Fair value change inFVTPL investments20(36)4(7)514(306)538(349)4423253363121,09322955411,926907ExpensesBenefits and expenses3883023172941,04913216211,770749Income and other taxes1241091731104

136、49484003063273031,06616326251,819797Net income after tax$42$19$9$9$27$66$29$16$107$110Policyholders portion9(3)Shareholders net income98113Non-controlling interestsportion of net income1923Net income attributable toowners of E-L Financial$79$90Assets undermanagementGeneral fund assets$1,063$1,105Seg

137、regated fund assets$6,926$5,932$22$22Mutual fund assets$109$38Annualized premiumsales$42$52$59$55MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 17Total RevenueFourth quarterYear(millions of dollars)2014201320142013RevenueNet premium income$215$215$867$822Investment income6364246240

138、Fair value change in FVTPL investments including realized amounts2125612(304)Realized gain(loss)on available for sale investments including impairment write downs1(2)13(2)Fee and other income5040188150Total$541$322$1,926$906For the year,total revenue at Empire Life increased by 113%to$1.93 billion c

139、ompared to$906 million in2013.Revenue volatility was primarily driven by the impact of market interest rate movements on Fair valuechange in FVTPL investments.Major revenue items are discussed below.Net premium income for the year increased in 2014 relative to 2013.The increase related primarily to

140、theWealth Management product line.Fair value change in FVTPL investments including realized amounts often causes large revenue volatility.These assets experienced a net gain in 2014 compared to a net loss in 2013.In 2014 the large gain wasprimarily from an increase in bond prices(due to a decrease i

141、n market interest rates).In 2013 the loss wasprimarily from a decrease in bond prices(due to an increase in market interest rates).The impact of this onnet income is largely reduced due to a corresponding change in insurance contract liabilities(discussed inthe Total Benefits and Expenses section be

142、low).Realized gain(loss)on available for sale investments including impairment write downs was a gain in 2014versus losses in 2013.The increased revenue was due to gains from the sale of AFS equities and bonds in2014,compared to losses primarily from the sale of AFS bonds in 2013.These gains and los

143、ses impact netincome and are considered in the net income investment experience comments for each of the impactedproduct lines(see Product Line Results sections later in this report).The assets sold primarily backed capitaland surplus.Fee and other income increased in 2014 relative to 2013 primarily

144、 due to growth in segregated fundmanagement fees and growth in segregated fund guarantee fees related to GMWB products.The growthin these fees was primarily due to favourable stock market conditions,strong segregated fund product salesin 2014 and GMWB price increases.The favourable stock market cond

145、itions had a positive impact on averageassets under management and management fees earned,as stock markets were higher on average during2014 than they were during 2013.MANAGEMENTS DISCUSSION&ANALYSIS18 E-L Financial Corporation LimitedTotal Benefits and ExpensesFourth quarterYear(millions of dollars

146、)2014201320142013Benefits and ExpensesNet benefits and claims$168$145$645$560Net change in insurance contract liabilities23243745(160)Change in investment contracts provision121Policy dividends762422Operating expenses4036147139Net commissions5147193168Interest expense261419Total$501$283$1,770$749Tot

147、al benefits and expenses at Empire Life for the year increased by 136%to$1.77 billion compared to$749million in 2013.Expense volatility was primarily driven by the impact of market interest rate movements onNet change in insurance contract liabilities.Major benefit and expense items are discussed be

148、low.Net benefits and claims variability is dependent on the claims incurred.Generally,claims rise year over yeardue to growth of the insurance blocks,which was the case for the quarter and year to date for all lines ofbusiness except Individual Insurance,which declined slightly year to date.Variabil

149、ity in claims amounts doesnot,in isolation,impact net income as insurance contract liabilities are released when claims occur.Theinsurance contract liabilities released can be larger or smaller than the claims incurred depending on whetherclaims experience has been favourable or unfavourable.Claims

150、experience is the combination of claimsincurred compared to claims expected in product pricing and in insurance contract liabilities.Year over yearclaims experience is discussed in each of the impacted product lines(see Product Line Results sectionslater in this report).Net change in insurance contr

151、act liabilities varies with many factors including new business sold,claimsincurred,surrender and lapse experience,assumptions about the future,and changes in the market valueof assets matching insurance contract liabilities.The main reason for the large change from 2013 for thisitem was the change

152、in insurance contract liabilities resulting from the fair value change in matching assets(described above in the Total Revenue section).Variability in the net change in insurance contract liabilitiesamounts does not,in isolation,impact net income as it must be looked at in concert with other lines o

153、f thestatement of income.Net commissions increased year over year due to the increase in Wealth Management product sales.Interest expense decreased in 2014 relative to 2013 due to the redemption of$200 million 6.73%subordinateddebentures on May 20,2014.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Co

154、rporation Limited 19Product Line Results-Wealth ManagementAs at December 31(millions of dollars)20142013Assets under managementGeneral fund annuities$1,063$1,105Segregated funds6,9265,932Mutual funds10938Fourth quarterYear(millions of dollars)2014201320142013Selected financial informationFixed inter

155、est annuity premiums$45$44$186$159Segregated fund gross sales4043021,3121,009Segregated fund net sales184107479231Segregated fund fee income4637175139Mutual fund gross sales23106822Mutual fund net sales19106220Mutual fund fee income1Net income(loss)after tax fixed income annuity portion$4$(4)$8$Net

156、income after tax segregated fund portion973722Net loss after tax mutual fund portion(1)(1)(3)(3)Net income after tax$12$2$42$19Assets in Empire Life general fund annuities decreased by 4%,while segregated fund assets increased by17%during the last 12 months.The increase over the last 12 months for s

157、egregated funds was attributableto positive investment returns,due to the stock market increase since December 31,2013,and strong netsales(gross sales net of withdrawals)described below.Premium income for the Wealth Management product line is comprised solely of new deposits on fixedinterest annuiti

158、es and excludes deposits on the segregated fund and mutual fund products.For the year,fixed interest annuity premiums were up 17%compared to 2013.The increase was primarily due to increasedsales of fixed interest deferred annuities.For the year,segregated fund gross sales were up$303 million,a 30%in

159、crease from 2013.$205 million ofthis increase was from 75%maturity guarantee products,which increased 49%.GMWB and 100%maturityguarantee product sales also increased,growing by$69 million and$29 million respectively.Segregated fund net sales for the year were up 108%compared to 2013 due to the above

160、 mentioned grosssales result.For the year,segregated fund fee income increased by 26%in 2014 relative to 2013.The increase was dueto growth in segregated fund management fees and growth in segregated fund guarantee fees related toGMWB products.The growth in these fees was primarily due to favourable

161、 stock market conditions,strongsegregated fund product sales in 2014 and GMWB price increases.The favourable stock market conditionshad a positive impact on average assets under management and management fees earned,as stock marketswere higher on average during 2014 than they were during 2013.Empire

162、 Life launched its new mutual fund business during the first quarter in 2012.Therefore,Empire Lifesmutual fund business is still in its early stages of development and represents a small portion of the WealthMANAGEMENTS DISCUSSION&ANALYSIS20 E-L Financial Corporation LimitedManagement product line.F

163、or the year,mutual fund gross sales were up 209%in 2014 compared to 2013.Mutual fund gross sales continued to steadily improve during 2014 as sales for the fourth quarter came inat$23 million compared to$19 million,$13 million,$14 million and$10 million for the previous four quartersrespectively.In

164、January 2014 a new mutual fund was added,the Empire Life Emblem Diversified IncomePortfolio.With a target asset mix of 80%fixed income and 20%equities,it is designed for conservativeinvestors seeking predictable and diversified income.This new fund is aimed at providing income solutionsfor the growi

165、ng number of Canadians in retirement.During the fourth quarter and for the year earnings from this product line increased relative to 2013.Thefollowing table provides a breakdown of the components of this year over year change in net income.(millions of dollars)Fourth quarterYearWealth Management ne

166、t income analysisNet income after tax 2014$12$42Net income after tax 2013219Increase in net income after tax$10$23Components of increase2013 loss from update of policy liability assumptions$2$22014 loss from update of policy liability assumptions(2)(2)Increase in inforce profit margins317Improved an

167、nuitant mortality experience34Improved investment experience55Higher new business strain(1)(3)Total$10$23In both 2013 and 2014,the update of policy liability assumptions was unfavourable by$2 million.In bothyears the updates for general fund annuities related primarily to annuitant mortality assumpt

168、ions.Higher net income on inforce business in 2014 was primarily due to growth in segregated fund managementfees and growth in segregated fund guarantee fees related to GMWB products.The growth in these feeswas primarily due to favourable stock market conditions,strong segregated fund product sales

169、in 2014 andGMWB price increases.The favourable stock market conditions had a positive impact on average assetsunder management and management fees earned,as stock markets were higher on average during 2014than they were during 2013.Improved annuitant mortality experience relates to the fixed interes

170、t immediate annuity business.Improved investment experience resulted from market interest rate movements and the availability of assetsat attractive yields for matching fixed interest annuity contract liabilities.Lower net income from higher new business strain caused a year over year decrease in ne

171、t income.Highernew business strain primarily resulted from higher segregated fund sales.In the fourth quarter,Empire Life made significant changes to its segregated funds product line.Empire Lifehas closed its existing segregated funds products to new policies effective October 31,2014.In addition,o

172、nNovember 3,2014 Empire Life launched a new suite of investment products including a new segregatedfunds family called Empire Life Guaranteed Investment Funds,as well as a stand-alone Guaranteed InterestContract(GIC)and new version of its GMWB product.Fees charged to the customer on the new productl

173、ine are higher than the existing product line.The new product lines pricing and features are Empire Lifesresponse to the economic,regulatory and competitive landscape in the life insurance industry.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 21Product Line Results-Employee Benef

174、itsFourth quarterYear(millions of dollars)2014201320142013Selected financial informationAnnualized premium sales$9$12$42$52Premium income8078319307Net income after tax$2$1$9$9For the year,sales in this product line decreased by 19%in 2014 relative to 2013.However,the 2014 levelof sales while below l

175、ast year were relatively strong due to relatively stable economic conditions.This productlines premium income increased by 4%relative to 2013 due to continuing growth of the inforce block.During the fourth quarter and for the year earnings from this product line increased relative to 2013.Thefollowi

176、ng table provides a breakdown of the components of this year over year change in net income.(millions of dollars)Fourth quarterYearEmployee benefits net income analysisNet income after tax 2014$2$9Net income after tax 201319Increase in net income after tax$1$Components of increase2014 gain from upda

177、te of policy liability assumptions$3$3Increase in inforce profit margins2Worsened claims experience(2)(5)Total$1$In 2014,the favourable update of policy liability assumptions was primarily due to updated waiver of premiummethods and assumptions for group life products.Higher net income on inforce bu

178、siness in 2014 was due to growth of the inforce block of business.In 2014 worsened claims experience relates to unfavourable health claims and long-term disability results.Product Line Results-Individual InsuranceFourth quarterYear(millions of dollars)2014201320142013Selected financial informationAn

179、nualized premium sales$14$18$59$55Premium income9193362356Net income(loss)after taxNet(loss)income after tax shareholders portion$(1)$25$25$72Net income(loss)after tax policyholders portion8(4)2(6)Net income after tax$7$21$27$66For the year,annualized premium sales in this product line increased by

180、7%compared to 2013,and premiumincome increased by 2%compared to 2013.This product lines full year sales result is attributable primarilyMANAGEMENTS DISCUSSION&ANALYSIS22 E-L Financial Corporation Limitedto increased sales of term life products.Empire Life has been shifting its product mix toward sho

181、rter termproducts such as term life,while increasing prices on long-term products,due to the low long-term interestrate environment.During the fourth quarter and for the year,earnings from this product line decreased relative to 2013.Thefollowing table provides a breakdown of the components of this

182、year over year change in net income.(millions of dollars)Fourth quarterYearIndividual Insurance net income analysisNet income after tax 2014$7$27Net income after tax 20132166Decrease in net income after tax$(14)$(39)Components of income decrease2013 gain from update of policy liability assumptions$(

183、2)$(2)2014 gain from update of policy liability assumptions55Worsened investment experience(43)Quebec premium tax increase(5)(5)Worsened mortality,surrender and other experience(12)(2)Lower new business strain2Favourable legal settlement6Total$(14)$(39)In 2013,the update of policy liability assumpti

184、ons was favourable by$2 million.In 2014,the update of policy liability assumptions was favourable by$5 million.The following table providesa breakdown of the components of this amount:Components of income increase from update of policy liability assumptionsYearNet re-investment assumptions(primarily

185、 related to changes in methods)$70Mortality27Lapse(primarily related to changes in methods)(87)Other(5)Total 2014 gain from update of policy liability assumptions$5In May 2014,final revisions to the Canadian actuarial standards of practice with respect to economicreinvestment assumptions used in the

186、 valuation of insurance contract liabilities were released.The changesrelate to assumed future interest rates,credit spreads and the use of non-fixed income assets to matchinsurance contract liabilities.This revised standard,which took effect on October 15,2014 was used tocalculate the above mention

187、ed$70 million after tax reserve release resulting from investment returnassumption updates.Management estimates that the impact of implementing this revised standard at thebeginning of 2014 would have been a reserve release of approximately$60 million after tax.Accordinglymanagement estimates that a

188、 reserve release of approximately$10 million after tax($70 million minus$60million)relates to all other investment return assumption updates and changes in methods for 2014.Empire Life uses an ultimate reinvestment rate(“URR”)assumption of 4.0%(3.0%for 2013).Empire Lifeuses a best estimate return as

189、sumption for equities used to match long-term liabilities of 7.5%(7.7%for2013).This equity return assumption is then reduced by margins to determine the net return used in thevaluation.Additional information regarding investment return assumptions can be found in note 25 to theconsolidated financial

190、 statements.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 23The refinements of lapse rate assumptions for 2014 was primarily related to emerging lapse rate experiencefor certain cost of insurance structures offered within universal life products and for critical illness productsas

191、 well as regular updates for other individual life products.For the year,investment experience weakened significantly year over year primarily due to the unfavourableimpact from long-term interest rate movements in 2014,compared to favourable movements in 2013.Theseinterest rates decreased significa

192、ntly in 2014 compared to significant increases in 2013(as shown in thefollowing table).Fourth quarterYear2014201320142013Interest rate movement30 year Canada federal government bond yieldEnd of period2.36%3.24%2.36%3.24%Beginning of period2.67%3.07%3.24%2.37%Change during period(0.31)%0.17%(0.88)%0.

193、87%While the impact of bond asset market value changes on net income is largely reduced due to a correspondingchange in insurance contract liabilities,net income is impacted as it is not possible to perfectly match futureliability cash flows with future asset cash flows.During the fourth quarter,the

194、 province of Quebec increased premium tax rates on both inforce policies andnew policies sold.Some inforce policies allow for an adjustment to prices or charges to cover the cost of theadditional tax.However,some inforce policies are fully guaranteed and cannot be adjusted,resulting in astrengthenin

195、g of reserves of$5 million after tax.Higher net income from lower new business strain caused a year over year improvement in net income.Lower new business strain resulted from higher prices on long-term products and a product mix shift towardlower strain products such as term life.During the second

196、quarter a favourable settlement on a lawsuit resulted in a$5.5 million gain after tax forEmpire Life.Results-Capital and SurplusFourth quarterYear(millions of dollars)2014201320142013Net income after taxNet income after tax shareholders portion$6$2$22$14Net income after tax policyholders portion1172

197、Net income after tax$7$3$29$16In addition to the three major lines of business,Empire Life maintains distinct accounts for the investmentincome attributable to Shareholders Capital and Surplus and to Policyholders Surplus.During the fourthquarter and for the year Capital and Surplus earnings increas

198、ed relative to 2013.The following table providesa breakdown of the components of this year over year change in net income.MANAGEMENTS DISCUSSION&ANALYSIS24 E-L Financial Corporation Limited(millions of dollars)Fourth quarterYearCapital and surplus net income analysisNet income after tax 2014$7$29Net

199、 income after tax 2013316Increase in net income after tax$4$13Components of increaseIncreased net income from sale of investments$3$11Lower interest expense34Lower investment and other income(2)(2)Total$4$13Increased net income from sale of investments was due to gains from the sale of AFS equities

200、and bondsin 2014,compared to losses primarily from the sale of AFS bonds in 2013.Lower interest expense was due to the redemption of$200 million 6.73%subordinated debentures on May20,2014.Lower investment and other income was primarily due to a decrease in investment management service feeincome fro

201、m a former related company.Cash FlowYear(millions of dollars)20142013Cash flow provided from(used for)Operating activities$152$222Investing activities119(509)Financing activities(249)256Net change in cash and cash equivalents$22$(31)The decrease in cash provided from operating activities in 2014 rel

202、ative to 2013 was primarily due to increasedcash outflows related to annuity business in 2014 and higher cash outflows related to income taxes in 2014.The decrease in cash used for investing activities during 2014 relative to 2013 was primarily driven byfinancing activities.In 2013 cash used for inv

203、esting activities included the investment of proceeds from theMay 31,2013 issuance of$300 million of subordinated debentures(described below).In addition,2013 cashused for investing activities included the completion of asset mix changes that began late in 2012.A sale ofequity assets backing Capital

204、 and Surplus was completed in 2012,and proceeds were partially re-investedin fixed income assets backing Capital and Surplus in 2012.The remainder of the re-investment into fixedincome assets occurred in the first quarter of 2013.In 2014 cash provided from investing activities includedthe sale of in

205、vestments to fund Empire Lifes May 20,2014 redemption of$200 million of subordinateddebentures(described below).The decrease in cash provided from financing activities during 2014 relative to 2013 was primarily driven bydebt issuance and redemption activities.In 2013 Empire Life issued$300 million o

206、f subordinated debentureson May 31,2013.The Debentures will mature on May 31,2023 and bear interest at a fixed annual rate of2.870%for the first five years,payable semi-annually,and a variable annual rate equal to the 3-monthBankers Acceptance Rate plus 1.05%for the last five years,payable quarterly

207、.In 2014 Empire Life redeemedits$200 million 6.73%subordinated debentures at par on May 20,2014.In addition Empire Life paid$34MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 25million of dividends to common shareholders during 2014 compared to$24 million during 2013.Empire Lifesdiv

208、idends to E-L Financial are fully eliminated in the consolidated financial statements of E-L Financial.Capital ResourcesDec.312014Sept.302014June 302014Mar.312014Dec.312013MCCSR Ratio197%231%231%250%267%Empire Life continues to maintain a strong balance sheet and capital position.The A(Excellent)rat

209、ing givento Empire Life by A.M.Best Company provides third party confirmation of this strength.Empire Lifes risk-based regulatory capital ratio,as measured by Minimum Continuing Capital and Surplus Requirements(MCCSR),of 197%as at December 31,2014 continued to be above requirements,and above minimum

210、internal targets.The MCCSR ratio decreased by 34 points from the previous quarter and by 70 points on a full year basis.The change was primarily due to increases in required regulatory capital,as shown in the table below.(millions of dollars)Dec.312014Sept.302014June 302014Mar.312014Dec.312013Availa

211、ble regulatory capitalTier 1$872$856$839$808$831Tier 2452436430529533Total$1,324$1,292$1,269$1,337$1,364Required regulatory capital$671$560$549$535$511The increase in Tier 1 available regulatory capital from the previous quarter and on a full year basis wasprimarily due to net income.For the quarter

212、,this was partly offset by an increase in negative reserves whichdecrease Tier 1(but increase Tier 2 as described below).On a full year basis,the Tier 1 increase was partlyoffset by the payment of a common share dividend of$34 million during the first quarter(the dividenddecreased Empire Lifes MCCSR

213、 ratio by 10 points).Tier 2 available regulatory capital increased from the previous quarter primarily due to an increase in negativereserves which increase Tier 2(but decrease Tier 1 as described above).The decrease in Tier 2 availableregulatory capital on a full year basis was primarily due to Emp

214、ire Lifes redemption of$200 million 6.73%subordinated debentures at par on May 20,2014(the redemption decreased Empire Lifes MCCSR ratio by19 points).Regulatory capital requirements increased significantly from the previous quarter and on a full year basis.$102 million of the increase for both perio

215、ds was due to a comprehensive review and update of the methodsand assumptions used in Empires stochastic model for determining required regulatory capital and policyliabilities for Empires segregated fund product guarantees.In addition,for the quarter and the year requiredregulatory capital increase

216、d from the impact of higher investment exposures which were caused by increasedinvestment in bonds and stocks.For the year required regulatory capital also increased from the impact oflower interest rates which increased required regulatory capital related to lapse risk.MANAGEMENTS DISCUSSION&ANALYS

217、IS26 E-L Financial Corporation LimitedComprehensive IncomeFourth quarterYear(millions of dollars)2014201320142013Comprehensive IncomeNet income,contribution to E-L Financial$14.6$23.8$79.5$90.2Other comprehensive income(loss)Unrealized fair value increase(decrease)on AFS investments10.61.238.3(18.9)

218、Realized gain(loss)on AFS investments reclassification to net income(0.7)1.6(9.0)1.99.92.829.3(17.0)Amortization of loss on derivative investments designated ascash flow hedges reclassified to net income0.20.20.6Items that will not be reclassified to net income:Remeasurements of defined benefit plan

219、s10.7(0.1)3.212.920.62.932.7(3.5)Less:Participating Policyholders(1.4)(1.9)(0.5)(3.1)Non-controlling interests(3.7)(0.2)(6.3)1.3Other comprehensive income(loss),contribution to E-L Financial15.50.825.9(5.3)Comprehensive income,contribution to E-L Financial$30.1$24.6$105.4$84.9For the year 2014,Empir

220、e Life earned other comprehensive income of$32.7 million primarily due tounrealized fair value increases relating to AFS bonds and stocks.For the year 2013,Empire Life incurredan other comprehensive loss of$3.5 million primarily due to unrealized investment losses relating to AFSbonds.For the year 2

221、014,Empire Life experienced a$3.2 million gain after tax on the remeasurement of post-employment defined benefit(“DB”)plans.This gain was primarily due to the impact of higher stock marketson DB plan assets,partly offset by a loss on DB plan liabilities.The loss on DB plan liabilities resulted froml

222、ower market interest rates partly offset by gains related to updated plan membership experience data andmortality assumption updates.For the year 2013,Empire Life experienced a$12.9 million gain after tax on its DB plans.The gain for theyear was primarily due to the impact of higher equity markets o

223、n DB plan assets.DB plan liabilities alsoexperienced a net gain due to higher interest rates partly offset by losses due primarily to updated mortality.Unrealized fair value increases and decreases on AFS bonds in other comprehensive income do not impactMCCSR.Remeasurement of DB plans do not immedia

224、tely impact MCCSR as each quarters remeasurementgain or loss is amortized over 12 quarters for MCCSR purposes.Industry Dynamics and Managements Strategy Empire Lifes operations are organized by product line with each line of business having responsibility forproduct development,marketing,distributio

225、n and customer service within their particular markets.Thisstructure recognizes that there are distinct marketplace dynamics in each of the three major product lines.Management believes this structure enables each line of business to develop strategies to achieve theenterprise-wide objectives of bus

226、iness growth and expense management while recognizing the uniquebusiness environment in which each operates.The lines of business are supported by corporate units thatprovide product pricing,administrative and technology services to the lines of business,manage investedassets,and oversee enterprise

227、risk management policies.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 27Based on general fund and segregated fund assets,Empire Life is among the ten largest life insurancecompanies in Canada.Empire Life has less than six per cent market share in all three of its product lines.To

228、 be priced competitively in the marketplace while simultaneously providing acceptable long-term financialcontribution to shareholders,Empire Life,as a mid-sized company,must find a way to continue to be costcompetitive with the larger companies that have some natural economy of scale advantages.In o

229、rder toimprove its unit expenses,managements enterprise-wide strategic focus has been on achieving profitablegrowth in its selected markets and on expense management.Empire Life has focused exclusively on theCanadian marketplace and within it,on particular market segments where management feels ther

230、e areopportunities to build solid,long-term relationships with independent distribution partners by offeringcompetitive products and more personal service.By focusing on particular market segments and by beingseen by these independent advisors as a viable alternative to broadly focused competitors,m

231、anagementbelieves these solid relationships will enable profitable growth.The Wealth Management product line at Empire Life is comprised of segregated fund products,guaranteedinterest products and mutual funds.These products compete against products offered by a variety of financialinstitutions.A ke

232、y element of any competitive strategy in this market is providing a competitive rate of returnto clients.The value oriented equity investment strategy used by Empire Life has focused on developinglong-term performance in the fund marketplace.Management is expecting to grow market share throughthis l

233、ong-term performance along with broadened distribution reach and the addition of new funds and fundproducts such as the new segregated funds family called Empire Life Guaranteed Investment Funds launchedin the fourth quarter of 2014.Empire Life achieved strong growth in assets under management from

234、itssegregated fund business in 2014.However,Empire Life has taken several steps to limit GMWB riskexposure.The above mentioned fourth quarter product launch by Empire included a new version of its GMWBproduct.The new version commands a higher price and reduces the amount of risk Empire Life is takin

235、gon,while still offering a competitive guaranteed income solution to customers.Empire Life will continue tomonitor the competitive landscape for this product.Within the broader employee benefits marketplace in Canada,Empire Life continues to focus on the smallgroup market comprised of employers with

236、 fewer than 200 employees.This niche strategy coupled with anongoing focus on balancing growth and profit has enabled Empire Life to be cost competitive within thismarket segment and is expected to enable this product line to grow its market share while generatingacceptable returns.Individual Insura

237、nce products are very long-term in nature and consequently can be subject to new businessstrain.New business strain occurs when the provision for adverse deviation included in the actuarial policyliabilities exceeds the profit margin in the product pricing.Unless a company opts for increased levels

238、ofreinsurance,current price levels in the Canadian marketplace create new business strain that has a negativeimpact on short-term earnings.Low long-term interest rates continue to have an unfavourable impact on thisproduct line.In the past few years industry prices for longer term life insurance pro

239、ducts have increased.Empire Life has also increased prices for these products and has focused its growth efforts on shorter termproducts,such as 10 year term life.Mortality trends continue to be favourable for life insurance products.Rather than give up the future earnings that would emerge if the t

240、rend in mortality improvement witnessedin recent decades continues,Empire Life continues to utilize lower than average levels of reinsurance withthe resultant negative impact on short-term earnings.Because of the reasonable long-term returns of thisproduct line,management continues to focus on stead

241、y growth,technology development and processimprovement in order to continue to have a cost structure that allows us to compete while generating anacceptable long-term financial contribution.Empire Life has been reviewing its Individual Insurance productsto improve profitability,reduce interest rate

242、risk,reduce required regulatory capital,develop web basedproducts and processes,and improve the customer and advisor experience.MANAGEMENTS DISCUSSION&ANALYSIS28 E-L Financial Corporation LimitedRisk ManagementEmpire Lifes MCCSR ratio,among other things,is sensitive to stock market volatility,due pr

243、imarily to liabilityand capital requirements related to segregated fund guarantees.As of December 31,2014 Empire Life had$6.9 billion of segregated fund assets and liabilities.Of this amount,approximately$6.7 billion haveguarantees.The following table provides a percentage breakdown by type of guara

244、ntee:Dec.312014Dec.312013Percentage of segregated fund liabilities with:75%maturity guarantee and a 100%death benefit guarantee53.2%57.4%100%maturity and death benefit guarantees(with a minimum of 15 years betweendeposit and maturity date)5.4%5.2%100%maturity and death benefit guarantees(guaranteed

245、minimum withdrawalbenefit(GMWB)41.4%37.4%All Empire Life segregated fund guarantees are policy based(not deposit-based),thereby lowering EmpireLifes stock market sensitivity relative to products with deposit-based guarantees.For segregated fundguarantee insurance contract liabilities the level of se

246、nsitivity is highly dependent on the level of the stockmarket at the time of performing the estimate.If period end stock markets are high relative to market levelsat the time that segregated fund policies were issued,the sensitivity is reduced.If period end stock marketsare low relative to market le

247、vels at the time that segregated fund policies were issued,the sensitivity isincreased.Based on stock market levels at December 31 for 2014 and 2013,the sensitivity of shareholdersnet income(attributable to the owners of E-L Financial)to changes in segregated fund guarantee insurancecontract liabili

248、ties resulting from stock market increases and decreases is as follows:(millions of dollars)10%increase10%decrease20%increase20%decreaseSensitivity to segregated fund guarantees:2014 Net income attributable to E-L Financial$nil$nil$nil$nil2013 Net income attributable to E-L Financial$nil$nil$nil$nil

249、Based on stock market levels on the dates indicated below the sensitivity of Empire Lifes MCCSR ratio tostock market increases and decreases for all Empire Life stock market exposures,including segregatedfund guarantees,is as follows:10%increase10%decrease20%increase20%decreaseSensitivity to stock m

250、arkets:December 31,2014 MCCSR Ratio8.8%-11.2%14.9%-24.4%December 31,2013 MCCSR Ratio-1.2%1.2%-2.3%2.5%The 2014 amounts in the above tables include the effect of Empires equity risk hedging program(describedbelow).Sensitivity to equities is larger in 2014 than 2013 primarily due to the comprehensive

251、review andupdate of the methods and assumptions used in Empires stochastic model for determining requiredregulatory capital and policy liabilities for Empires segregated fund product guarantees.Prior to the fourth quarter of 2014,Empire Life has not hedged its segregated fund guarantee risk(exceptfo

252、r the reinsurance agreement described below).Empire has equity market risk related to its segregatedfund products and from equity assets backing life insurance liabilities.During the fourth quarter of 2014,Empire initiated a semi-static hedging program.The objective of the hedging program is to part

253、ially protectEmpire from possible future MCCSR ratio declines that might result from adverse stock market price changes.The hedging program presently employs put options and short positions on key equity indices.Empire intendsto protect 10%to 20%of overall income and MCCSR equity risk exposure by ex

254、panding the hedging programduring 2015 and subsequent years.MANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporation Limited 29There is income statement volatility from this hedging program.Based on current equity market levels,Empirehas required capital for MCCSR purposes related to segregated fund

255、 guarantees,but does not have policyliabilities related to these guarantees on its balance sheet.Therefore a by-product of hedging MCCSRexposure is income statement volatility,as the gains or losses from hedging instruments are not offset bychanges in policy liabilities related to segregated fund gu

256、arantees on the income statement.During the fourthquarter of 2014 Empire Life experienced a small loss of$0.4 million after tax on its hedging program.During2015 and subsequent years,Empire Life expects to expand its hedging program and expects an increasein income statement volatility as a result.E

257、mpire Life also has a reinsurance agreement to cede a portion of Empire Lifes segregated fund deathbenefit exposure.All Empire Life segregated fund policyholders with death benefit guarantees of at least$2million are included in this agreement.Empire Life does not reinsure any other insurers segrega

258、ted fundproducts.The amount at risk related to segregated fund maturity guarantees and segregated fund death benefitguarantees and the resulting actuarial liabilities and MCCSR required capital for Empire Life segregatedfunds is as follows:Segregated FundsGuarantee Fund ValueDeath Benefit Fund Value

259、GMWBTop-upAmount atRiskActuarialMCCSR(millions of dollars)Fund ValueAmount atRiskFund ValueAmount atRiskLiabilitiesRequiredCapitalDecember 31,2014$49$2$360$10$380$nil$102December 31,2013$29$3$264$18$328$nil$nilThe first four columns of the above table show all segregated fund policies where the futu

260、re maturityguarantee,or future death benefit guarantee,is greater than the fund value.The amount at risk representsthe excess of the future maturity guarantee or future death benefit guarantee amount over the fund valuefor these policies.The fifth column of the above table shows GMWB top-up exposure

261、.The GMWB top-upamount at risk represents the amount that could be paid by Empire Life to GMWB policyholders if the netreturn on each GMWB policyholders assets is zero for the remainder of each GMWB policyholders life,based on life expectancy.For these three categories of risk,the amount at risk is

262、not currently payable.Payment is contingent on future outcomes including fund performance,deaths,deposits,withdrawals andmaturity dates.The level of actuarial liabilities and required regulatory capital is calculated based on theprobability that Empire Life will ultimately have to make payment to th

263、e segregated fund policyholders forany fund value deficiency that may exist upon future maturity of the segregated fund policies,or upon futuredeath of the segregated fund policyholders,or upon the occurrence of future top-up payments to GMWBpolicyholders.The amounts at risk in December 2014 decreas

264、ed from the December 2013 levels for maturityguarantee,and death benefit guarantee exposure due primarily to the increase in many global stock markets.The amount at risk in December 2014 increased from the December 2013 levels for GMWB top-up exposure,due primarily to strong GMWB sales in 2014.The M

265、CCSR required capital increased due to thecomprehensive review and update of the methods and assumptions used in Empires stochastic model fordetermining required regulatory capital and policy liabilities for Empires segregated fund product guarantees.In addition,Empire Lifes MCCSR ratio is sensitive

266、 to changes in market interest rates.The impact of animmediate 1%decrease in interest rates,and a 1%decrease in assumed initial reinvestment rate(IRR)for nonparticipating insurance business and segregated fund guarantees,is shown in the table below.Thisassumes no change in the ultimate reinvestment

267、rate(URR).The first column below excludes the impact ofmarket value changes in available for sale(AFS)bonds.The AFS bonds provide a natural economic offsetto the interest rate risk arising from our product liabilities.The second column below shows the impact if theAFS bonds were sold to realize the

268、gains from a 1%decrease in interest rates.MANAGEMENTS DISCUSSION&ANALYSIS30 E-L Financial Corporation LimitedBefore the sale of AFSassetsAfter the sale of AFS assets1%decrease1%decreaseSensitivity to market interest rates:December 31,2014 MCCSR Ratio-32%-25%December 31,2013 MCCSR Ratio-35%-23%In add

269、ition to the discussion of risks included in this MD&A,a comprehensive discussion of the material risksthat impact Empire Life is included in the Annual Information Form.Additional disclosures of Empire Lifessensitivity to risks are included in notes 24 and 25 to the consolidated financial statement

270、s.OutlookIn 2014 Canadas economy remained stable,but experienced relatively weak growth.2014 headlines inCanada were filled with economic concerns about commodity prices,over-valued housing markets and highconsumer debt levels.Global concerns in 2014 about European sovereign debt eased in 2014,and t

271、he USeconomy improved significantly,improving consumer confidence.As a result,global credit and stock marketshave improved significantly from the economic turmoil of 2008 and early 2009.Canadian long-term interestrates decreased significantly in 2014 after increasing significantly in 2013,and have n

272、ow been lower thantypical levels for 4 years.Global stock markets remained volatile,but most significant markets rose in 2014.This was particularly the case in the U.S.,where stock markets provided investors with strong returns in2014.Canadas main stock market rose in 2014,but was much weaker than t

273、he US markets due to thesteep drop in world oil prices and other commodities.Stock market conditions mainly impact inforce profitmargin results and new business growth for the segregated fund and mutual fund portions of Empire LifesWealth Management product line.Looking forward,consumers continue to

274、 be somewhat cautious aboutstock market exposure and Empire Life is well positioned with segregated fund,mutual fund and fixed interestannuity product offerings to satisfy demand for lower risk investments.While Canada fared well during the financial crisis compared to many other countries,Canadas e

275、conomyis growing slowly and there continues to be uncertainty resulting in mixed economic indicators.Growth ratesin western Canada are expected to slow down due to the large drop in world oil prices.Lower gas pricesand a weaker Canadian dollar are expected to improve growth in Ontario and Quebec.How

276、ever,the autosector in Ontario is very uncertain given GMs unclear future intentions regarding manufacturing in Ontario.As a result businesses across Canada remain cautious and this could cause pressure in the near term ongrowth prospects for the Employee Benefits product line.A key issue for the In

277、dividual Insurance product line since 2011 has been the low long-term interest rateenvironment that followed the financial crisis.This has impacted the entire industry resulting in price increasesfor individual insurance products by Empire Life and many of our competitors.While market long-term inte

278、restrates recovered somewhat in 2013 they decreased significantly during 2014.Empire Life has also decreasedits emphasis on long-term products in favour of shorter term products,such as 10 year term life.Long-terminterest rates,product mix and product pricing are expected to continue to be issues fo

279、r Empire Lifes IndividualInsurance product line in 2015.Regulatory change related to segregated fund guarantees continues to evolve.OSFI continues to reviewthe overall approach for determining capital requirements for segregated fund risks.Longer term accounting standard changes are expected by 2018

280、 or later regarding International FinancialReporting Standards(IFRS)for Insurance Contracts.In a parallel process,capital adequacy standardsare also becoming more aligned with international frameworks.Both of these changes aim at consistentmeasurement.For Insurance Contracts accounting the goal is g

281、lobal consistency under IFRS as opposedto the differing approaches in each country that exist today.For capital adequacy standards the goal isconsistent treatment of risk within insurance companies from a capital adequacy perspective regardless ofMANAGEMENTS DISCUSSION&ANALYSISE-L Financial Corporat

282、ion Limited 31the type of business.These two items could have a material impact on Empire Lifes future net income andcapital ratios,however,much remains unknown.In 2011 OSFI implemented substantial regulatory changes for Canadian banks related to Basel III capitalstandards.These new banking regulati

283、ons provide a transition plan for banks to move towards more restrictivecapital requirements,including tighter restrictions on bank issued financial instruments.New financialinstruments issued by banks must comply with these new regulations in order to be included in the bankscapital ratios.We are n

284、ot aware of any plans by OSFI to make similar changes for life insurance companies.OSFIs Corporate Governance Guideline(compliance required January 31,2014)includes requirementsrelated to board responsibilities,the independence of oversight functions,enhancing risk reporting andcommissioning third p

285、arty reviews of board and oversight function effectiveness.OSFIs RegulatoryCompliance Management Guideline(compliance required by May 1,2015)establishes requirements formanaging regulatory compliance risk inherent in an insurers business activities.OSFIs Own Risk SolvencyAssessment Guideline(effecti

286、ve January 1,2014)requires insurers to complete a self-assessment processthat aims to link an insurers risk profile to its capital needs.The Canadian Securities Administrators(CSA)is increasing disclosure requirements for mutual fundcompanies,including point of sale requirements(effective mid-2014)a

287、nd customer relationship modelinitiatives(staggered implementation with full effectiveness mid-2016).Mutual fund fees continue to be anarea of interest for Canadian securities regulators.The CSA has commissioned independent third partyresearch that will assess the impact of commissions and embedded(

288、trailer)fees on mutual fund flows.Thisresearch will support CSA policy decisions concerning Canadas current mutual fund fee structure.Wecontinue to watch these developments as they may also impact the insurance industry at some future date.Regulatory change is also occurring for MGAs.Life insurance

289、companies,including Empire Life,commonlycontract with MGAs as a key component of the distribution chain for insurance and wealth managementproducts.In 2013 the Canadian Life and Health Insurance Association(CLHIA)has developed a newInsurer-MGA Relationship guideline(effective January 1,2015).The Gui

290、deline describes desired outcomesand related practices in five general areas,stating that insurers should:perform due diligence prior to enteringinto a contract with an MGA,clearly set out roles and responsibilities in the contract,commit to a culture oftreating customers fairly,monitor the performa

291、nce of the MGA and retain ultimate responsibility.Duncan N.R.JackmanChairman,President and Chief Executive OfficerMarch 5,2015MANAGEMENTS DISCUSSION&ANALYSIS32 E-L Financial Corporation LimitedMANAGEMENT REPORTThe accompanying consolidated financial statements of E-L Financial Corporation Limited an

292、d its subsidiariesand all information in the Annual Report are the responsibility of management and have been approved bythe Board of Directors.The consolidated financial statements necessarily include amounts that are basedon judgments,which are applied consistently and are considered appropriate i

293、n the circumstances.The consolidated financial statements have been prepared by management in accordance with Canadiangenerally accepted accounting principles.Financial and operating data elsewhere in the Annual Report areconsistent with the information contained in the consolidated financial statem

294、ents.The Company and its subsidiaries maintain systems of internal control over financial reporting which aredesigned to provide reasonable assurance that assets are safeguarded,expenditures are made inaccordance with authorizations of management and directors,transactions are properly recorded and

295、thatfinancial records are reliable for preparing the consolidated financial statements in accordance with Canadiangenerally accepted accounting principles.Under the supervision of management,an evaluation of theeffectiveness of the Companys internal control over financial reporting was carried out a

296、s at December 31,2014.Based on that evaluation,management concluded that the Companys internal control over financialreporting was effective as at December 31,2014.The Board of Directors carries out its responsibility for the consolidated financial statements in this AnnualReport principally through

297、 its Audit Committee and the Audit Committees of its subsidiaries.These AuditCommittees meet periodically with management and with the internal and external auditors to discuss thescope and results of audit examinations with respect to internal controls and financial reporting of theCompany and its

298、subsidiaries.The Audit Committee of the insurance subsidiary also meets periodically withthe Appointed Actuary.The Appointed Actuary is appointed by the Board of Directors of the insurance subsidiary to conduct anannual valuation of policy liabilities,in accordance with accepted actuarial practices,

299、and to report on whetherthe valuations are appropriate and whether their results are fairly presented in the subsidiarys financialstatements.The Appointed Actuary uses the work of the external auditors in verifying data used for valuationpurposes.PricewaterhouseCoopers LLP has been appointed externa

300、l auditors.It is their responsibility to report tothe shareholders regarding the fairness of presentation of the Companys consolidated financial positionand results of operations as shown in the annual consolidated financial statements.In carrying out theiraudit,the external auditors also consider t

301、he work of the actuaries and their report on policy liabilities.Theexternal auditors have full and free access to,and meet periodically with,the Audit Committees to discusstheir audits.The Auditors Report outlines the scope of their examination and their opinion.Duncan N.R.JackmanMark M.TaylorChairm

302、an,PresidentExecutive Vice-President and Chief Executive Officer and Chief Financial OfficerMarch 5,2015E-L Financial Corporation Limited 33Independent Auditors ReportTo the Shareholders ofE-L Financial Corporation LimitedWe have audited the accompanying consolidated financial statements of E-L Fina

303、ncial CorporationLimited and its subsidiaries,which comprise the consolidated Statements of Financial Position as atDecember 31,2014 and December 31,2013 and the consolidated Statements of Income,ComprehensiveIncome,Changes in Equity and Cash Flows for the years then ended,and the related notes,whic

304、hcomprise a summary of significant accounting policies and other explanatory information.Managements responsibility for the consolidated financial statementsManagement is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with International

305、Financial Reporting Standards,and for such internal controlas management determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement,whether due to fraud or error.Auditors responsibilityOur responsibility is to express an opinion on

306、these consolidated financial statements based on our audits.We conducted our audits in accordance with Canadian generally accepted auditing standards.Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consoli

307、dated financial statements are free from materialmisstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe consolidated financial statements.The procedures selected depend on the auditors judgment,including the assessment of the risks of ma

308、terial misstatement of the consolidated financial statements,whether due to fraud or error.In making those risk assessments,the auditor considers internal controlrelevant to the entitys preparation and fair presentation of the consolidated financial statements in orderto design audit procedures that

309、 are appropriate in the circumstances,but not for the purpose of expressingan opinion on the effectiveness of the entitys internal control.An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement,as well as eval

310、uating the overall presentation of the consolidated financial statements.We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide abasis for our audit opinion.OpinionIn our opinion,the consolidated financial statements present fairly,in all material

311、respects,the financialposition of E-L Financial Corporation Limited and its subsidiaries as at December 31,2014 andDecember 31,2013 and their financial performance and their cash flows for the years then ended inaccordance with International Financial Reporting Standards.Chartered Professional Accou

312、ntants,Licensed Public AccountantsToronto,OntarioMarch 5,201534 E-L Financial Corporation LimitedE-L Financial Corporation Limited and subsidiary companiesCONSOLIDATED STATEMENTS OF FINANCIAL POSITION(in thousands of Canadian dollars)December 31,2014December 31,2013AssetsCash and cash equivalents(No

313、te 8)$316,811$319,749Investments-corporate(Note 4)3,790,5033,381,417Investments-insurance operations(Note 5)6,426,9215,803,051Investments in associates(Note 6)301,228288,884Accrued investment income28,12726,598Premiums receivable25,21320,849Income taxes receivable1,6591,841Deferred tax assets(Note 2

314、0)2,400Other assets(Note 11)39,94752,105Property and equipment(Note 9)27,53129,773Intangible assets(Note 10)4,8324,317Segregated fund assets(Note 12)6,948,4755,954,508Total assets$17,911,247$15,885,492LiabilitiesAccounts payable$41,135$46,547Policyholders funds on deposit31,33230,937Reinsurance liab

315、ilities(Note 16)490,575284,627Insurance contract liabilities(Note 16)4,741,2334,214,272Investment contract liabilities11,62612,687Provision for profits to policyholders24,91323,893Income and other taxes payable7,80435,543Deferred tax liabilities(Note 20)189,204154,885Other liabilities(Note 13)71,205

316、66,371Subordinated debt(Note 14)298,763498,343Segregated fund liabilities(Note 12)6,948,4755,954,508Total liabilities$12,856,265$11,322,613EquityCapital stock(Note 17)$372,388$372,388Retained earnings3,721,9103,342,064Accumulated other comprehensive income(AOCI)71,93038,428Total E-L Financial shareh

317、olders equity4,166,2283,752,880Non-controlling interests in subsidiaries(NCI)828,714759,177Participating policyholders interests(PAR)60,04050,822Total equity$5,054,982$4,562,879Total liabilities and equity$17,911,247$15,885,492Approved by the BoardDuncan N.R.Jackman,DirectorJames F.Billett,DirectorT

318、he accompanying notes are an integral part of these consolidated financial statements.CONSOLIDATED FINANCIAL STATEMENTSE-L Financial Corporation Limited 35E-L Financial Corporation Limited and subsidiary companiesCONSOLIDATED STATEMENTS OF INCOME(in thousands of Canadian dollars)20142013RevenueGross

319、 premiums$971,552$918,521Premiums ceded to reinsurers(104,059)(96,977)Net premiums867,493821,544Investment and other income(Note 7)527,750459,277Share of income of associates(Note 6)25,51959,178Fair value change in fair value through profit or loss investments942,271294,558Realized gain on available

320、 for sale investments including impairment writedowns(Notes 4 and 5)28,20410,3392,391,2371,644,896ExpensesGross claims and benefits1,288,341437,904Claims and benefits ceded to reinsurers125,067(16,653)Net claims and benefits1,413,408421,251Change in investment contracts provision2,282945Commissions1

321、93,141168,257Operating(Note 19)172,049157,594Interest expense14,18018,977Premium taxes14,25914,0111,809,319781,035Income before income taxes581,918863,861Income tax expense(Note 20)91,066114,515Net income from continuing operations490,852749,346Net income from discontinued operations(Note 29)311,126

322、Net income490,8521,060,472Less:Participating policyholders income(loss)8,670(3,243)Non-controlling interests in net income87,652156,03696,322152,793E-L Financial shareholders net income$394,530$907,679Basic earnings per share attributable to E-L Financial common shareholders(Note 21)Earnings per sha

323、re from continuing operations$96.51$147.95Earnings per share from discontinued operations79.23Basic earnings per share from net income$96.51$227.18Diluted earnings per share attributable to E-L Financial commonshareholders(Note 21)Earnings per share from continuing operations$90.06$126.82Earnings pe

324、r share from discontinued operations66.15Diluted earnings per share from net income$90.06$192.97The accompanying notes are an integral part of these consolidated financial statements.CONSOLIDATED FINANCIAL STATEMENTS36 E-L Financial Corporation LimitedE-L Financial Corporation Limited and subsidiary

325、 companiesCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(in thousands of Canadian dollars,except per share amounts)20142013Net income$490,852$1,060,472Other comprehensive income(OCI)(loss)(OCL),net of taxes(Note 22)Items that may be reclassified subsequently to net income:Net unrealized fair value

326、increase on available for sale investments(AFS)36,22612,474Net gain on amortization of derivatives designated as cash flow hedgesreclassified to net income233574Share of OCI of associates2,7633,82039,22216,868Items that will not be reclassified to net income:Net remeasurement of defined benefit plan

327、s3,18212,779Share of employee future benefits of associates(1,963)(299)1,21912,480OCI from continuing operations,net of taxes40,44129,348OCI from discontinued operations,net of taxes(Note 29)(63,701)Total OCI(OCL)40,441(34,353)Comprehensive income531,2931,026,119Less:Participating policyholders comp

328、rehensive income(loss)9,218(156)Non-controlling interests in comprehensive income94,043154,698103,261154,542E-L Financial shareholders comprehensive income$428,032$871,577Comprehensive income is attributable to shareholders relating to:Continuing operations$428,032$624,152Discontinued operations247,

329、425Comprehensive income$428,032$871,577The accompanying notes are an integral part of these consolidated financial statements.CONSOLIDATED FINANCIAL STATEMENTSE-L Financial Corporation Limited 37E-L Financial Corporation Limited and subsidiary companiesCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(in

330、 thousands of Canadian dollars)E-L Financial shareholders equityCapitalstockRetainedearnings Total AOCITotalNCIPARTotal equityAt January 1,2014$372,388$3,342,064$38,428$3,752,880$759,177$50,822$4,562,879Net income for the year394,530394,53087,6528,670490,852OCI33,50233,5026,39154840,441Comprehensive

331、 income394,53033,502428,03294,0439,218531,293Dividends paid duringthe year(Note 17)(17,560)(17,560)(16,248)(33,808)Acquisition of subsidiary shares2,8762,876(8,258)(5,382)(14,684)(14,684)(24,506)(39,190)At December 31,2014$372,388$3,721,910$71,930$4,166,228$828,714$60,040$5,054,982E-L Financial shar

332、eholders equityCapitalstockRetainedearnings Total AOCITotalNCIPARTotal equityAt January 1,2013$372,388$2,764,971$108,338$3,245,697$628,743$50,978$3,925,418Net income(loss)for theyear907,679907,679156,036(3,243)1,060,472(OCL)OCI(36,102)(36,102)(1,338)3,087(34,353)Comprehensive income(loss)907,679(36,

333、102)871,577154,698(156)1,026,119Dividends paid during theyear(Note 17)(319,016)(319,016)(13,555)(332,571)Acquisition of subsidiaryshares1,4381,438(10,709)(9,271)Discontinued operations(Note 29)(13,008)(33,808)(46,816)(46,816)(330,586)(33,808)(364,394)(24,264)(388,658)At December 31,2013$372,388$3,342,064$38,428$3,752,880$759,177$50,822$4,562,879The accompanying notes are an integral part of these