Análisis de los segmentos de crédito

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company’s management is responsible for establishing and maintaining

adequate internal control over financial reporting for the Company. All internal control systems have inherent limitations and may become inadequate because of changes in conditions. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management, under the supervision of the President and Chief Executive Officer and the Executive Vice-President and Chief Financial Officer, has evaluated the effectiveness of its internal control over financial reporting based on the Internal Control – Integrated Framework(COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission.

As at December 31, 2008, management assessed the effectiveness of the Company’s internal control over financial reporting and concluded that such internal control over financial reporting is effective and that there are no material weaknesses in the Company’s internal control over financial reporting that have been identified by management.

There have been no changes in the Company’s internal control over financial reporting during the year ended December 31, 2008, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Reinsurance Transactions

During 2008, a subsidiary of London Reinsurance Group, Inc., (LRG), an affiliated company, reinsured certain annuity guaranteed risks to the Company. In 2008, for the Summaries of Consolidated Operations, this transaction resulted in an increase in premium income of $33 million. The transaction was at market terms and conditions.

During 2008, a subsidiary of LRG novated a health business reinsurance agreement to the Company. The company then ceded this health business to another subsidiary of LRG. In 2008, for the Summaries of Consolidated Operations, this transaction resulted in a decrease in premium income of $1,120 million, policyholder

benefits of $1,093 million and an increase in actuarial liabilities of $14 million. The transaction was at market terms and conditions. During 2008, the Company entered into an agreement with LRG to retrocede certain health business. In 2008, for the Summaries of Consolidated Operations, this transaction resulted in a decrease in premium income of $795 million, policyholder benefits of $821 million and a decrease in actuarial liabilities of $35 million. The transaction was at market terms and conditions.

During 2007, a subsidiary of LRG reinsured certain aggregate stop loss coverage to the Company. This transaction was at market terms and conditions and resulted in an increase in premium income of $8 million ($29 million in 2007) on the Summaries of Consolidated Operations. This transaction was recaptured on March 31, 2008.

During 2006, the Company entered into agreements with LRG to cede certain term life business and group term disability business of the Company. The transactions were at market terms and conditions, and resulted in a decrease in premium income of $18 million ($18 million in 2007) and an increase in policyholder benefits of $4 million ($8 million in 2007).

Effective June 1, 2007, Canada Life recaptured all of the U.S. life and annuity business that had been ceded to GWL&A in 2003. For 2007, this recapture transaction resulted in an increase in acquired premiums with a corresponding change in actuarial liabilities on the Summaries of Consolidated Operations of $2,055 million (US$1,868 million). For the Consolidated Balance Sheets, the transaction resulted in an increase in invested assets of $1,578 million (US$1,594 million), an increase in other assets of $25 million (US$25 million), an increase in policyholder liabilities of $1,946 million (US$1,966 million) and a decrease in funds held under reinsurance contracts of $343 million (US$347 million). Effective April 1, 2007 CLICC, a wholly-owned subsidiary of Canada Life, and Great-West Life, the Company’s parent, entered into an Indemnity Reinsurance Agreement pursuant to which CLICC assumed liabilities by coinsurance including certain blocks of non-participating group life and health insurance policies, non-participating individual life reinsurance, non-participating group payout annuities and non-participating individual payout annuities. The initial transaction resulted in an increase in premium income of $3,535 million with a corresponding increase in the change in actuarial liabilities on the Summaries of Consolidated Operations. For the Consolidated Balance Sheets, the transaction resulted in an increase in invested assets of $3,775 million, an increase in actuarial liabilities of $3,535 million and an increase in policyholder funds of $240 million.

During 2007, the Company entered into certain reinsurance agreements with its parent, Great-West Life and London Life Insurance Company (London Life), a subsidiary of Great-West Life, covering unit-linked pension policies issued in Ireland and Germany. The transactions resulted in an increase of $34 million in 2007 with a corresponding increase in invested assets.

During 2006, the Company entered into an agreement with LRG to cede certain investment fund guaranteed products of the Company. The transaction was at market terms and conditions, and resulted in a decrease of premium income of $23 million ($19 million in 2007).

During 2005, Great-West Life & Annuity Insurance Company of South Carolina (GWSC), a subsidiary of GWL&A assumed on a coinsurance basis with funds withheld, certain of Canada Life’s U.S. term life reinsurance business. During 2007, an additional

amount of U.S term life reinsurance business was retroceded by Canada Life to GWSC. In 2008, for the Summaries of Consolidated Operations, this transaction resulted in a decrease of premium income of $156 million ($176 million in 2007), investment income of $15 million ($11 million in 2007), policyholder benefits of $98 million ($78 million in 2007), change in actuarial liabilities of $33 million ($50 million in 2007), commissions of $34 million ($31 million in 2007) and income taxes of $2 million ($10 million in 2007). The transaction was at market terms and conditions.

Other Related Party Transactions

In the normal course of business, the Company provided insurance benefits to other companies within the Power Corporation group of companies. In all cases, transactions were at market terms and conditions.

During the year, GWL&A provided certain administrative services to the Company’s U.S. operations. The expense to the Company for these services was $2 million ($2 million in 2007).

During the year, the Company received from IGM Financial Inc. and its subsidiaries (IGM), a member of the Power Financial Corporation group of companies, certain administrative services. As well, certain administrative services were provided to and received from Great-West Life and London Life, the net of which was a charge to the Company of $6 million ($8 million in 2007). The Company paid $2 million ($2 million in 2007) for property management and leasing services from GWL Realty Advisors Inc., a wholly owned subsidiary of Great-West Life. All services were provided on terms and conditions at least as favourable as market terms and conditions.

At December 31, 2008, the Company had a temporary outstanding balance of $52 million ($46 million in 2007) payable to Great-West Life and $35 million ($35 million in 2007) payable to London Life. These amounts are included in other liabilities.

During 2008, the Company purchased residential mortgages of $55 million ($73 million in 2007) from London Life, $0 million ($7 million in 2007) from Great-West Life, and $1 million ($1 million in 2007) from segregated funds maintained by Great-West Life. During 2008, the Company sold residential mortgages of $3 million ($4 million in 2007) to London Life. The Company purchased commercial mortgages of $2 million ($0 million in 2007) from London Life and $0 million ($626 million in 2007) from Great West Life. The Company sold commercial mortgages of $52 million ($0 million in 2007) to London Life. The Company purchased bonds from Great-West Life of $47 million ($71 million in 2007) and from London Life of $6 million ($0 million in 2007). The Company sold bonds to Great-West Life of $45 million ($0 million in 2007) and to London Life of $26 million ($24 million in 2007). All transactions were at market terms and conditions.

The Company has interest bearing notes receivable from Great- West Life, which have an outstanding balance of $400 million ($400 million in 2007). The notes mature on December 31, 2013 and bear interest at 5.4%. Interest income of $22 million is included in the Summaries of Consolidated Operations ($22 million in 2007). The Company has US$10 million (US$10 million in 2007) principal amount surplus note receivable with LRG. The note matures on December 15, 2025 and bears interest of 5.98%.

During 2008, the Company received loan proceeds of US$150 million from LRG. The loan is repayable on demand and bears interest of a rate equal to LIBOR plus 1.25%.

On December 11, 2008 the Company issued a $200 million principal amount note receivable to Great-West Life, with an interest rate of 7.08%.

At December 31, 2008, $109 million ($109 million in 2007) in temporary investments in trust securities issued by a trust administered by Canada Life was held by Great-West Life and London Life.

At December 31, 2008 the Company held $16 million ($13 million in 2007) of debentures issued by IGM.

During 2007 an indirect subsidiary issued common shares with a stated value of $19 million and a $56 million non-interest bearing promissory note to Great-West Life. During 2008, an additional $5 million of common shares and $15 million of non-interest bearing promissory notes were issued to Great-West Life. Great-West Life’s share of the subsidiary is included in non-controlling interests in

the Summaries of Consolidated Operations and the Consolidated Balance Sheets.

During 2007, London Life repaid the $250 million promissory note that was issued by the Company on December 21, 2006 that bore interest at the Canadian 90-day Bankers’ Acceptance rate plus 35 basis points. As part of the repayment, London Life transferred invested assets with a fair value of $101 million, with deferred unrealized gains included in accumulated other comprehensive income of $17 million after-tax, to the Company. The transfer of deferred unrealized gains was recorded as an increase to accumulated other comprehensive income and a decrease to shareholder surplus.

On September 29, 2006 Canada Life issued a $400 million principal amount non-interest bearing subordinated note which matures on September 29, 2026 to London Life.

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CLFC conducts business in multiple currencies. The four primary currencies are the Canadian dollar, the United States dollar, the British pound, and the euro. Throughout this document, foreign

currency assets and liabilities are translated into Canadian dollars at the market rate at the end of the financial period. All income and expense items are translated at an average rate for the period. The rates employed are:

Translation of foreign currency

Period ended Dec. 31 2008 Sept. 30 2008 June 30 2008 Mar. 31 2008 Dec. 31 2007 Sept. 30 2007 June 30 2007 Mar. 31 2007

United States dollar

Balance Sheet $ 1.22 $ 1.06 $ 1.02 $ 1.03 $ 0.99 $ 1.00 $ 1.06 $ 1.15

Income and Expenses $ 1.21 $ 1.04 $ 1.01 $ 1.00 $ 0.98 $ 1.05 $ 1.10 $ 1.17

British pound

Balance Sheet $ 1.79 $ 1.89 $ 2.03 $ 2.04 $ 1.96 $ 2.03 $ 2.13 $ 2.27

Income and Expenses $ 1.90 $ 1.97 $ 1.99 $ 1.99 $ 2.01 $ 2.11 $ 2.18 $ 2.29

Euro

Balance Sheet $ 1.70 $ 1.49 $ 1.60 $ 1.62 $ 1.44 $ 1.42 $ 1.44 $ 1.54

Income and Expenses $ 1.60 $ 1.56 $ 1.58 $ 1.50 $ 1.42 $ 1.44 $ 1.48 $ 1.54