The numbers are in, and they are not pretty. Still, there are signs that things are improving. For the first quarter of 2009, earnings for the 48 public financial services companies in this survey were down by an average of 76% vs the same period a year earlier. On the positive side, earnings totalled $1.4 billion. That’s a dramatic improvement over the fourth quarter of 2008, in which losses totalled $420 million.

Numbers for the 48 companies exclude results for three firms that are in the table, as their results are consolidated with others in the survey: Great-West Lifeco Inc.and IGM Financial Inc. , both owned by Power Financial Corp. ; and DundeeWealth Inc., owned by Dundee Corp.

Only eight companies among the 48 had higher earnings. These included six deposit-taking institutions, the TMX Group Inc. and Desjardins Group. And even among these, First Capital Mortgage Investment Trust’s increase was less than 2%.

Earnings at National Bank of Canada and Desjardins were up only because earnings for the same period last year were particularly low; neither has returned to previous levels of net income.

TMX’s increase reflects the merger with Montreal Exchange Inc. as well as a year-old payment related to the cancellation of a derivatives-trading joint venture. Excluding these items, TMX would have had a 10.4% drop in earnings.

Two other companies, Can-ac-cord Capital Inc. and Xceed Mortgage Corp., reported a small profit vs a loss the year before. And Power Financial reported a $252-million profit vs a loss a year earlier.

Twenty companies saw their net income decline, and 18 were in a loss position, including Royal Bank of Canada, which posted a $1-billion impairment charge.

Manulife Financial Corp. had the biggest loss in the survey, at $1.1 billion, due to $1.9 billion in charges related to continued declines in global equities markets, unrealized losses on alternative asset classes, and credit-related impairments and downgrades. Sun Life Financial Inc. also had a loss for similar reasons, but it was much smaller at $168 million.

One surprise was the loss for Fairfax Financial Holdings Ltd., which was one of the few companies to do very well in 2008 as a result of credit swaps. In this quarter, Fairfax had net losses on investments of US$153 million due to “other than temporary” impairment of common stocks and bonds. Fairfax had a small underwriting profit, with its 98.7% combined ratio (losses and operating expenses as a percentage of net earned premiums). ING Canada Inc. was the only other property and casualty insurer with an underwriting profit.

The 13 mutual fund and investment-management companies, which include DundeeWealth and IGM, reported an average decline in assets under management of 24.4% from a year earlier. But most also said that AUM was up from the fourth quarter of 2008.

Only Bank of Montreal had a common share issue, of $1 billion, during the quarter. However, there were several preferred share and subordinated debt offerings. None of these resulted in dilution of shareholders’ equity.

In a trend that was reassuring to many investors, most of the companies in the survey maintained their dividends, including all the big banks and life insurers. One company, Home Capital Group Inc., raised its dividend to 14¢ per quarter from 13¢.

Fairfax has privatized North-bridge Financial Corp. by buying all the shares it didn’t already own, so Northbridge is no longer in the survey. Elsewhere, things were quiet on the acquisition front. However, a number of companies are expecting opportunities in this area to emerge and are ready to jump in.

Here’s a look at the sectors in more detail:

> Banks. In general, banks with declines or losses were hit by impairment and other charges resulting from weak equities markets. However, most of the big banks saw higher earnings in the Canadian banking sector; a plus in this area has been declining competition from foreign banks, which are now exiting the Canadian marketplace. Some Canadian banks reported improved results in capital markets, albeit from lows of a year earlier. U.S. banking operations among this group generally struggled and wealth management was also down, reflecting lower AUM.

Provisions for loan losses continued to climb, to $3.1 billion from $2.7 billion in the previous quarter — and were almost triple the level a year earlier. In addition, returns on equity were generally down.

@page_break@Among the small banks with earnings increases, Equitable Group Inc. pointed to growth in its new mortgage business; it also noted that it had securitized and sold Canada Mortgage & Housing Corp.-insured mortgages at wider spreads and volumes than the historical norm.

Firm Capital Mortgage also referred to sustained growth in its mortgages operations and an increase in the proportion of multi-unit mortgages, which have significantly higher placement fees.

Cash Store Financial Services Inc. opened 45 new branches, bringing the total to 423, and also reported an 11.5% increase in same-branch sales.

> Life Insurers. Weak equities markets hit the life insurers hard. That’s because these companies have to strengthen reserves in order to offset declines in equities in their segregated funds. With AUM down by an average of 22.3% in this sector, the four companies had a combined $2.9 billion deterioration in net income, resulting in a loss of $845 million as a group vs a profit of $2.1 billion a year earlier.

Great-West’s U.S. wealth-management arm, Putnam In-vestments, was still in net redemptions — to the tune of US$2.8 billion. But similar operations at Manulife and Sun Life both had small net sales.

Great-West’s 48.7% drop in earnings was partly due to a non-recurring item a year earlier that pushed up net income. (Unusual or non-recurring items are excluded in this survey unless they relate to the core business; in this case, it did.) Without this item, Great-West’s earnings would have been down by only 30.3%.

The firm’s sharp 72.6% drop in revenue in the quarter was due to another one-time event: last year, there was a $12.5-billion increase in premium income when the company assumed a large block of British annuities from Britain-based Standard Life Assurance Ltd.

> Property And Casualty Insurers. All the companies had substantial declines in investment income and/or losses on investments. But Co-operators General Insurance Co., EGI Financial Holdings Inc. and Kingsway Financial Services Inc. also had underwriting losses.

Kingsway’s combined ratio is a very high 120.7%. The company’s U.S. subsidiary, Lincoln General Insurance Co., continues to struggle, but the Canadian operations also had a high combined ratio of 119.3%. That’s partly because of a one-time writeoff of recoveries for deductibles on certain policies.

Kingsway has a new president and is exiting unprofitable business lines, reducing organizational complexity and costs. It also has submitted plans to put all but the strongest of Lincoln’s programs into the discontinued business operations of the Pennsylvania Insurance Department.

> Mutual Fund And Investment-Management Companies. None of these firms had earnings increases and five, including DundeeWealth, were in a loss position. Only DundeeWealth had a single-digit decline in AUM (8.5%); the other firms were in the double digits.

But despite DundeeWealth’s relatively good performance on the asset-gathering side, it posted a loss. It says it is committed to reducing costs and is starting to see savings associated from measures initiated a year ago.

Among the big mutual fund firms, CI Financial Corp. and DundeeWealth had positive net sales in the quarter, while AGF Man-agement Ltd. and IGM were in net redemptions. IGM had the smallest decline in earnings in this group, although it was still a substantial 36.8%. (IGM’s results were mixed, with subsidiaries Investors Group Inc. up and Mackenzie Fi-nan-cial Corp. down.)

It should be noted that CI’s 57.8% drop was exaggerated by its conversion to a corporation from an income trust. Before taxes, its earnings were down by 43.1%.

Most companies in this category say they are focused on reducing costs, as they wait for the end of the recession and strengthening equities markets.

> Distributors And Suppliers. Two of the four brokerages were in a loss position, while Canaccord managed a small profit. Cost reduction is an important focus for these companies. Canaccord, for example, expects to reduce costs by about $20 million annually by March 31, 2010, and by another $15 million a year later. Thomas Weisel Partners Group Inc. has cut its workforce by 34% since January 2008. Expenses at both GMP Cap-i-tal Trust and Oppenheimer Holdings Inc. are down by about 20%.

> Holding Companies. The large profit increase for Desjardins is the result of very low earnings a year ago. Dundee not only had a loss at DundeeWealth but also in its natural resources investments. Power Financial’s stronger results reflect subsidiaries Great-West’s and Power Financial’s results. IE