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Summary of Consolidated Operating Results
Net income available to common shareholders
for the year ended December 31, 2002 was $491.1 million, compared
to $387.7 million in 2001. Earnings per share were $1.85 compared
with $1.56 in 2001, an increase of 18.5%.
Net income for the prior year ended December
31, 2001 excludes both a restructuring charge of $95.6 million
($56.0 million after tax) taken in the second quarter and
goodwill amortization related to the acquisition of Mackenzie
Financial Corporation (Mackenzie). It includes goodwill amortization
related to Investors Group Inc.’s (Company) investment
in Great-West Lifeco Inc. common shares which, if excluded
to reflect accounting standards now in effect, would have
resulted in an increase in earnings per share in 2002 of 17.0%
compared with 2001.
A change in accounting estimate effective
April 1, 2001 related to amortization of sales commissions
reduced expenses and increased earnings for the year ended
December 31, 2002 by $19.8 million after tax or 7.5 cents
per share. Excluding this change, earnings per share would
have been $1.78, an increase of 14.0%. The Company changed
the period of amortization for these expenditures to reflect
a more accurate estimate of their useful life. This estimate
is also consistent with that used by Mackenzie and the industry
generally.
Shareholders’ equity was $2.95 billion
as at December 31, 2002, up from $2.68 billion at December
31, 2001. Return on average common equity, excluding goodwill
amortization and restructuring costs, was 19.2%, compared
with 19.6% in 2001. The quarterly dividend per common share
was increased to 22.5 cents in 2002.
The Company’s reportable segments,
which reflect the current organizational structure, are Investors
Group, Mackenzie, and Corporate and Other. Management measures
and evaluates the performance of these segments based on earnings
before interest and taxes as shown in Table
1.
The Company acquired Mackenzie effective
April 20, 2001. Results reflect the inclusion of Mackenzie
from the date of acquisition. On October 5, 2001, the operations
of Maxxum Fund Management Inc. and Maxxum Financial Services
Co. (together Maxxum) were integrated with Mackenzie. Maxxum
results subsequent to the integration are reported in the
Mackenzie segment.
Discussion of segment operating results
for Investors Group and Mackenzie is contained later in this
report. Earnings before interest and taxes for Corporate and
Other, the segment which represents net investment income
earned on unallocated investments, totalled $8.5 million in
2002 compared to $42.5 million in 2001. Decreases in net investment
income were due to financing activities related to the acquisition
of Mackenzie.
Expenses reflected
in Table
1 that are not allocated to segments include:
- Restructuring costs of $95.6 million,
which were charged to earnings in the second quarter of
2001 and related to the acquisition of Mackenzie. The restructuring
provision is discussed more fully in the Investors Group
– Mackenzie Transition section later in this report.
- Interest expense of $79.5 million in
2002 and $73.2 million in 2001, which represents the cost
of financing the Mackenzie acquisition.
- Income taxes with effective rates of
38.3% in 2002 compared with 42.3% in 2001. The decline in
the effective rate was due to reductions in statutory tax
rates as well as other tax benefits.
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