Q2 2020 Power Corporation of Canada Earnings Call

Ladies and gentlemen, thank used for standing by and welcome to the Power Corporation of Canada earnings call second quarter Twentytwenty Conference call. At this time, all participants on the listen only mode. After the speakers presentation. There will be a question answer session to ask a question. During this session you will need to press star one on your.

Please be advised that today's conference is being recorded if you're acquiring any further assistance. Please press star zero I would like to now hand, the conference over to your speaker today, Jeffrey or President and CEO. Please go ahead Sir.

Thank you operator, and good morning, everyone.

Thanks for joining us this morning welcome to our second.

Quarterly analyst and Investor call 'em, we had very strong quarter across the group for the financial results point of view and we also continued to push very hard and advancing a strategic agenda that we have been.

Talking about telling you about over the last few quarters.

To give you a sensor that through today's call well still leaving a lot of time for questions hopefully as we move into that part of the call.

Pages, two and three of the presentation or the standard disclaimers and cautions regarding forward looking information.

Page four and so.

Participants with me today digitally not with me physically with digitally as Greg trends, Jack we see a executive Vice President and Chief Financial Officer with Evercore.

And I'm going to then moving forward to page six would have just see either investor calls and investor presentations that were made by companies in our group and this call is not intended to a duplicate those calls and cover the information that they called covered it's really.

Not to complement them and then really give the power club lens on our group developments and so hopefully if you've got specific questions on life coal or Archie M print or three B.L.. We could you can follow up directly with those companies. Let me turn then just very quickly to page seven which has the power.

Uh Huh highlights.

I'm pleased to start off with.

With the recognition that are perceived and being included in the corporate nights.

Top 50, best corporate citizens and it's really to make the broader point you know we're in a kogut 19 environment a lot of scrutiny on the role of companies and what they're playing in our society and I think we're very well positioned because power corp, or our operating companies Great West Canada life investors group now as you well.

Oh Mackenzie across the group for decades have put a big emphasis on investing in the communities, giving back a bit in good corporate citizens. We didn't always tell that story very well in the last several years, we've already made an effort to tell the story and documented and corporate nicely just one of many many recognitions we received a music.

The more information and the indices and also on our website and see we have a dedicated corporate social responsibility pages I talking about what we do and how and how we'd been recognized and I think in a world at the U.S.G. investing I mean, not that that's why we have done it but in a world of U.S.G. investing becoming more and more part and that's going to us.

Keep us and very good put us in a very good position going forward.

You know three strategic.

That's a transaction going announcements that were made but theres a lot more going on the not trying to give me a sensor that and I'm going to talk about it during the presentation. So I won't spend any more time here on page seven but it will do is a pass the a microphone to.

Greg Touchy actionable that go through our financial results over the next few funds Greg.

Okay. Thank you, Jeff good morning, or hold to all those on the line I'm I'm on page eight a net earnings for the quarter were 90 99 cents adjusted net earnings 79 cents, which was up sharply sequentially from Oh, the 62 cents in.

Q1, and a compares very favorably to last years or 83 cents given it was a covert corridor and net or that the now that the ended the quarter was $32 a 96 cents a up 7% from Q1.

And after life care, why GM and personally as I had a reported last week or.

We have another 35 53 on August seven with that will go to a.

Page nine.

Just give you a little color on the the results and the contributions from all the component parts of Ah PCC.

You have heard already a great west life, and a a G.M. how to <unk>, a strong and good quarter this last quarter.

Up sharply from the Q1, a quarter that a you can see there on the page.

Pursues a.

He is reflecting some of the dividend pressure on that so portfolio.

Companies I would note that or economic interest as a us Nick or over what it was in Q1 might think we're up about 14, 1.4%.

In terms of our interest economic interest in Oh, partially to.

The corporate operations a there is basically the expenses power financial and you can see further down the page the corporate operations again, which are the expenses and PCC. Both of those are reflecting the work that we've been doing a to achieve our goal of.

$50 million and of course Uh huh.

Part, reflecting a cobot related reductions and expenses during.

The quarter as well, but trending down nicely.

Quarter over quarter.

Other investments, which includes a cigar holdings and power sustainable capital you can see that line a quiet quarter in terms of realizations.

But unrealized gains a were up in the quarter, a quite nicely $86 million so were 16%.

Most of that coming from our China Asia portfolio at power Pacific, which was up nicely in the quarter and you'll see further on the slide up almost 40% a year to date. So the market in China is performing very well.

And also our European.

Portfolio at cigar holdings was up in the quarter.

I'm trying to AMC, a again, we have a slight further on but a and you would have heard from I.E.G.M. last week that had another very good quarter up 28% in terms of profit.

And reflects a no China's emergence from Ur Cobot 19 a.

Which is happening rather quickly were I should say quicker than we are experiencing in North America.

And with that I would turn it back to Mr. or.

Okay, great. Thank you. So all move forward then to page 10 and the presentation.

And as Greg mentioned, Yeah. This is a very strong quarter, yes, its covert 90, but the companies have performed very well, we think we're well positioned from a balance sheet point of view from a business model point of view.

The nature of our business, we think positions us very well.

I think it really focus on the bottom part of the page you know we are continuing to push forward I think.

Our attitude very much is yes, we're being cautious with liquidity, but we're playing offense and the focus of.

Group at power within our operating businesses are very much focused on offense and and moving our business is forward you see that with our willingness to do transactions in this environment.

But also we continue to enhance our operating platforms.

Business models, our client offerings, that's been going on at a frenetic pace for the last several years, how we are across the group growing in our optimism about how we're building momentum across the different client franchise is around the world Cross great West platform across our Jim's platforms.

And then at the bottom of the page power level, we're very intensely focused on pursuing a strategy that we outlined.

And spoke to many investors and analysts as part of the reorganization admin change at the bottom of the page good progress on our investment platform cigar holdings and power sustainable capital, but it's broader than that it goes a great across all of the elements of what we're trying to do power.

Let me flip to page 11, a slide you will have seen before but this is really we find it very helpful to think about our activities and these buckets. We think as we are pursuing a value creation strategy. We've got three leveraged that we're pulling on the first one is all of the does.

Yes, that's going on internally across the <unk>, Canada likes the idea of wealth management Mackenzie empowers our asset management businesses.

Our UK candle business Irish like Germany.

Our group insurance or reinsurance and risk group at a great west huge amounts of backwards.

As I said that continues with strong.

Momentum being built across those platforms.

In addition to that does the M&A leaders that we have and it's really deploying capital or in the case, some as you've seen with us in the last couple of years. It Couldnt ball getting out of businesses that we don't think are going to serve us well overtime and then we've got the third level, which is things we do it the power Corp level and we are pulling aggressively.

On all three levers and as they go through some of the slides.

Coming up I'll try and put those in context for you and where they fit.

Page 12.

As a lever one.

Gannett Cleat and this just focuses on digital this doesn't state the entire strategies of the company's but continued strong investment in digital capabilities at Kennedy like for example on the individual side simple protect.

Launched last year to enable.

Advisors to do all of their new business origination for life on a on that basically a digital platform with very quick turnaround and that's been extended into other products.

And really thank goodness that was launched because kogut 19, forcing everybody into a digital way of operating.

We didn't watch it last year with that in mind, but very very pleased that we did as a result, and then second bullet point on the on the group side. Our group business platform is very very strong and we are in a position where most of the transactions are happening digitally and they're continuing to enhance that and then.

Then I Gmps, some again for two or just launch of a new advisor portal in the fourth quarter 2009, and when Cobot 19 comes all of a sudden you get very very strong adoption normally when you put new technologies and with advisors that take a long time to get adoption, but all of a sudden its batter it's very difficult.

To do business. So we've had very good take up and with conquests later in the year. We think we're gonna take our planning advantage, which RG. Walt has we think relative to other financial services companies, we're going to take that to all new level with the next generation as best International financial planning tools, so lots happening on the Levered, one organic side of the busy.

Yes.

Page 13, this is a bit of a look back over the last 18 months or so on the lever two and three M&A activity and things were doing at the holding company level I would say, it's been a frenetic pace.

You know we have been.

These are six things that we've announced publicly you know it's like an iceberg, you'll see some things above the water. There's a lot more under the water that's been going on but these are things that have come to fruition. The sale of great West life goes U.S. life business and now and just January 2019, some 18 months ago, which gave rise to great West life.

Doing the share buyback and that gave rise to the possibility of power financial and power being able to do a simultaneous buyback and in effect arbitrage the net asset value discount by selling shares at the net asset value and buying shares back at a discount in that popped, our navy, which we think created shareholder value.

The car for National car Corp. levels.

The big announcement in December of the collapse of the do a holding company structure and just as importantly, a more focused strategy.

As well as a cost initiatives and launching an anti be all those temporarily suspended due to.

The current environment and Kobin 19.

Then we follow it up in March with an effect the same type of simplifying transaction with parties and GBL.

And then and in this quarter that was approved as.

You will see you probably have seen we've announced.

Addition, a personal capital and then the GLC a great much like Mckenzie transaction, which I'll talk more data in the pages that follow so just like very very busy and we are keeping the pedal to the metal to continue to use lever to unlever three tools to enhance our value.

So on page 14, I'll say a couple of comments about the personal capital transaction, great West would have spoken about it.

I guess at a very high level, we have a great defined contribution group retirement business in the United States empowers the second largest business what really unlocks the economics.

Hey group retirement business is coupling it with a direct to consumer.

Retail capability.

The Best example of that fidelity.

And it really unlocks the economics.

We have been on a road you've got one option you can build it we were on the road building it it's a very slow process.

And it takes a long long time to get any kind of scale.

We have been on the look for ways to acquire those capabilities and a you again its direct to consumer that you need and so you would've seen just in the last nine months, you know Schwab purchase TD Ameritrade for 26 billion U.S.

Morgan Stanley purchased the trade for 13 billion U.S.

Like there's not a lot of direct to consumer companies out there and the ones that were mature and had profitability, we're very very big tickets.

Personal capital is kind of right in a sweet spot, California based company, we think the absolutely best technology Oh there.

A company, we knew because I G M had been investing in it over the last four years. So we knew the company new the management had gotten very comfortable with it and.

It was at a price that great West life could do.

You know its was we paid 825 million U.S. with an earn out could get it up to a billion.

It was a price that great west life quit afford and it's been called by some.

Extensive well at its stage of development you know it doesn't have earnings.

And so we were able.

But it it ended up being affordable from a size point of view and is on a very very high growth trajectory. This is a revenue synergy deal and at that size great West life.

Make the acquisition plug it into in power and still leave lots of capital to go and pursue added more if I can call them traditional acquisitions, where you get a cost synergies as opposed to revenue synergies.

So very excited about this transaction and a more more to come on that as we move forward.

Page 15.

Just last week announced that Mackenzie was going to buy GLC asset management business GLC from from Canada life.

And going the other way that Quadras fund contracts, which are actually the contracts are owned in the management of them.

By Mckenzie went the other way for.

Transaction that had in net proceeds of 145 billion. This is really a win win.

It's a pure win win from I. GM in Mckenzie his point of view Mackenzie becomes 172 billion dollar asset manager in Canada. That's a yet scale is critical and asset management they have scale.

And they extend their capabilities with new products new teams it gets them into the being very significant player in that group.

Business the group retirement business as a supplier there and they end up being the principal supplier to Canada like the primary supplier to candle life from Canada life point of view, they end up getting a much broader and better supplier you know GLC was a smaller more narrow platform and they end.

<unk> up here being supplied by Mckenzie, which has just got a much broader Shelton group and greater capabilities. They also you know of course have the freedom as they have to go out and get external third party advisories when the capabilities are stronger there. So this is really going to enhance their ability to serve their clients going forward and that's it that's to name in the game.

So very excited about this it works for both works for both transactions for both the company's excuse me.

Okay, we can move to.

Page 16, and we talked about this at the last meeting I think the main piece of news that have got approved since we since we last met.

It hasn't closed yet there's still some steps to go on there, but the shareholders approved that's very meaningful and on page 17.

You have the the what it does to our corporate structure.

Basically a period of about six seven months, we've gone from the left side of the page.

To the right side of the page and really taken some very meaningful steps to to simplify our simplify our corporate structure.

Okay moving forward that moving from.

The M&A side of the equation and the transactional side to what's happening at power corporate So I'll take you to page 18.

The investment platforms are really where we are building out in the future and were taking.

Major steps to try and.

Bring the light to what it is we're doing there what are those businesses, how are we creating value and that the slides that you're going to see 18, when that's going to follow or some of our initial attempts to.

To do that so on page 18, you see that we have at the first bullet point, we have 4.5 billion at AIU EM in the two platforms cigar holdings and power sustainable capital, but we do have total unfunded commitments of 6.4 billion in other words investors have committed to money that has not yet been.

Deployed you see on the left side of the page down at the bottom you see how that is broken out between the the dark Blue, which is the power Corp. A U M and the lighter Blue is third party a U M. And then the two bars at the top or the power for the 500 million there.

Unfunded commitment and then the 1.4 billion is third parties unfunded commitments and then you get it broken down by the different strategies on the same basis.

You can see cigar holdings currently is.

Funded to a very large extent by third parties across those strategies power sustainable capital, which had been a diversification strategy for power Corp has pivoted and it's very much in the quarter focusing on raising third party money that currently is all money that is in with that set power corrupts capital, but that you'll see that.

Changing as the strategy unfolds going forward. So just kind of initial attempt to layout for you.

Where the money is where the fundraising is what strategies are.

19 is then laying out for you how it works financially and this is a work in progress but.

You will see a top the page you have for cigar holdings, the whats called management activities.

On that a table and at the top breaking out the management fees and the carried interest cigar earnings earnings as an asset manager and their expenses and then the second bar investment activities is what power.

Earning on the seed capital at it has so conceptually.

Two businesses here, you've got an asset manager and that you've got powers capital as a seed capital investor at work and you're seeing or break we're going to be breaking that out for you. So you can differentiate the different parts of the business.

The power sustainable capital at the bottom is not yet there we will be coming forward very soon with a similar breakout as to what we have at the top of the page are you. We show you the economics of that business, but not yet broken out between the asset manager and the capital that we we have at work.

I'm going to move forward than to page 20.

I'm not sure I can add to what I GM and Greg said on the slide here, we talk at the top of the page about the strong position that China M. season.

Actually also leading institutional player which is not on the slide.

You know they've continued to press forward doing very well great momentum.

And increasing share or contribution to profitability.

And so we're really pleased with the momentum that's being built to China AMC and.

Very happy with how that is playing out.

Each 21.

Just to point out in a cobot 19 environment digital.

Offerings are doing very well and wealth simple has continued to build momentum.

Through this environment and it has also broaden the number of services and offerings that it has including a trading.

Business, they've got cash products that are being offered to their clients the tax products and so you know very very strong progress.

Lots of clients coming in growing assets under administration and growing our profitability, which it's all great to see.

Page 22, as our Standalone businesses, just talks about a few highlights and well we have said that in the future, we're not gonna be making investments in one off companies like this.

It doesn't mean that we're not really pleased about the quality of the businesses that we have and that we very much believe we've got strong businesses here that can provide good value to power Corp, and yes, we'd been explicit that our strategy is to realize value overtime.

We are going to play that in a way that we maximized value as well and you see on the page here some of the developments for lumen Paulson, GP and Leone, which has a very exciting electric bus and truck company, which is making good progress commercially in a very very hot sector a lot of demand there. So we.

Right now we have these on our books, it's a $660 million you can see at the bottom of the page. We think that this is another source of value creation that we can pull on and in the period ahead here.

Turning to 23, and Greg mentioned this up front, we continue to make progress on.

Hitting our target of reducing our expenses by $50 million and then I'll just say on the page I mentioned it earlier the other parts of our strategy not covered in a slide here as we I think I mentioned it earlier, the NC IB and the redemption or preferred shares we did announce cells in the fall and I think just to reiterate where we were in the first quarter, we temporarily put those on hold.

While we watch how the.

Environment unfolds here in in a Cogan 19 type environment, we'll wait to see how that goes but those are very much part of our plans going forward.

Okay, I'm going to turn to 24.

This is a theme you will have heard from US a lot and really pleased about some progress we've made in the last quarter here and that's enhancing the disclosure that we have across the group. So we can enhance the visibility of what we're doing and get the market's confidence in the future. The way we have confidence in the future so great West life.

Introduced base earnings in the first quarter I think it was well received.

You know, we've got new segment disclosure around the great Great West, Canada, the U.S., Europe, and our growing capital in risk solutions basis and in the second quarter. They also had increased.

Disclosure and detail on the sources of earnings. So this is a journey, but it's a journeys is picking up momentum I think of insurance sector in general and great West has probably been tagged with it being a bit of a black box I think theres a lack of.

Visibility that analysts would have on the future of earnings growth and I think we're doing are very very best to try and get great question, a position, where there's greater visibility and greater confidence so that the market shares the confidence that we have in the future growth.

Hi, GM financial also announced that they're going to come out with new disclosure in the third quarter, they're going to talk about in September to the marketplace and divide their.

Earnings into wealth management asset management, and then strategic investments and other and I GM is much more of a wealth manager than it is an asset manager and it's important to market understands the source of profitability not to this asset management, but simply to state the facts.

But it has much more of its earnings from a wealth management point of you're going to see that as I GM moves forward and explains where its versus the profitability.

And then continue group disclosure at the Powerpoint level. This is our second earnings call and I've already talked about some of the increased disclosure, we're making around or investment platform. So we're continuing on this journey.

Yeah, Mike a couple of comments on the market and then wrap it up.

Page 25.

The insurance sector globally and in Canada has been really come off since covert 19, the the general market. The overall broader market indices have basically recovered to.

To where they were at this started the year, but the insurance market is still down 2025, 28%.

You know it hasn't it has not followed the recovery so the market discounting something.

I think big or something very very negative happening in the life sector.

If you think about what the markets. This guy is put in the context of great West life cope with its market cap.

It's a market cap would be off.

You know in 567 billion dollar spending and where the stock prices. It's you know there are scenarios as you roll forward with cobot 19 that if it carries on for a long time and you don't get.

Funds being transferred by the authorities they stop with their fiscal support or monetary support could you get credit losses. There are scenarios out there that there's not playing out right now, but you could there are scenarios you can play that happen that way.

It is difficult and the modeling that we've done too.

Try and put that in the context of the amount of market cap that's been law they seem to be.

Lee.

On different planets in terms of the magnitude of the of the correction in the stock prices. So.

You can look at that Pessimistically, we look at that optimistically Theres a source of.

I have increased value coming toward.

Page 26 also goes devaluation, a little bit and holding companies by the way post Cobot 19, if you look around the world, they're getting there they're discounts have tended to GAAP out.

In this period.

We're trading right now at about 28% if you look at Fridays close to the net asset value. We historically had been up and the thirtys on a double discount basis. If you look through power and power financial but given what we've done collapse, the holding company structure that visibility, we're giving too and we'll continue to give to the assets that we havent power Corp.

And we think that this discount should go we would be hopeful that it could get to the level of the single discount of power financial and through it because we think we'll have better disclosure and people that will understand the value. So that's still a work in progress we actually made great progress right. After the announcement if you look at the Blue lines there.

Right. After the announcement in the deal got closed and then we when it when the Blue light Spike up that's basically the market collapsing uncoated 19, as what's what's happening there.

To finish up on page 27, with a kind of a snapshot about how we think about value creation and I'm going back to the three levers that I talked about earlier on.

And I want to tell you how I, we see them coming together so the opco organic levers basically you know this has been a long work in progress working we're working very hard to.

Invest in our leading franchises and and build momentum in the underlying businesses and I would say across the board. We are extremely confident that our businesses are getting stronger and stronger and are going to be able to demonstrate that growth and then giving enhanced disclosure to have the market share in our enthusiasm that's.

That is a lever number one.

Then augment that volume that value through acquisitions and associated synergies as I mentioned personal capital was a revenue synergy transaction and revenue synergies don't happen in the short term that tend to happen medium long term not our classic deal. Our classic deal is where we go out we do and end market merger and end up with cost synergies and work.

Very much focused on.

Getting some of those done as well.

So that is the second source of value and then create value what the power corp level through our investment platforms, realizing creating realizing value from standalone businesses.

Plant. They would then be to return capital to shareholders. We won't have the blinders on if there was a very attractive.

Use of capital at the Powerpoint level are supporting one of our companies will of course.

Make those decisions based on the choices, we have at the time, but plenty as to return the capital we free up to the shareholders and then enhancer communication.

All the way along so you understand it so on the box on the right here, here's the a little bit of the Formula. If we were driving higher earnings growth is the goal.

And through that.

Driving.

Also hire anybody.

And so what could happen with that in of itself creates value, but we also think there's a potential for multiple revision at the Opcos you look at great West life trading it.

And a half nine times earnings like discounting.

If you do any kind of required rate of return you basically discounting negative earnings going forward.

And you know hopefully if the market gains confidence that we actually have growing earnings there's a possibility as we prove that out.

Hope, it's more the possibility that you get a multiple revision on that.

And then at the same time, we carry up this strategy. We think we can narrow the discount so at the at the holding company. So you put together to higher earnings to hire and Navy multiple revision at a lower discount and you've got a formula where we get really excited about what the value creation is based on certain like why we're trading today. So that's really all I was going.

Lets say, we've got a summary on 28 I'm not going to carry you through it.

I think I've made all the points and I think what I should do operator is stop there and have you open it up for questions.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please stand by the compiled acuity roster.

Your first question comes from the line as Nick pre from CBC capital markets. Your line is now open.

Okay. Thanks, good morning.

Next or the question on liquidity at the power Corp level.

Look relatively unchanged quarter over quarter wondering just give us a bit of a sense of how comfortable you are getting around the deployment of that capital or perhaps what conditions you'd like to see to start drawing down on that liquidity going to execute on some of those initiatives that you've outlined earlier like the repurchase of the preferred shares and the resumption of buybacks.

Yes, it's hard to make that.

To answer that question into formalistic away.

So I mentioned that we are playing offense and playing offense includes taking advantage of the environment at the operating businesses to make acquisitions. So just taking that we're going out we're playing offense and if we can we're prepared to deploy capital in the face of uncertainty.

Of the Kogut 19, and what happens then well you know the authorities have done everything I think from a fiscal and monetary point of view.

They really responded in a very aggressive fashion and I expect that they will continue to do so you can run scenarios, where they don't where you know things don't happen. Then you end up with a with a financial environment. That's not as good six months out what are your route. So there's a degree of caution we have and yet we're playing offense taking it.

Vantage of it so in that context.

Keeping great greater liquidity at power for the time being.

<unk> is a smart thing to do.

While we encourage our you know the companies in our group too.

Pursue the opportunities that are in front of them and we keep our powder dry well that's happening in this environment. That's our current mode Nick.

I can't give you a formula as to when we might say okay. It's different now we can we can move to a different stance, we just kind of well know what when we get there I guess is the best way to answer I hope that answers. Your question I'm, just trying to share our thinking with you.

Okay got it now that's helpful.

And then could ask for a little more color on the evolution of power sustainable capital.

No that platform manages powers on proprietary capital I Wonder if you could just give us a bit of an update on the status of those funds.

You know with respect to fundraising efforts to track third party capital just what stage, there and how you see that progressing over the next year too.

So it or.

To start by that the strategies, our equity investments and sustainable energy.

Oh wind and solar on the on the energy on the energy side and then there's the China.

Fund management business based in Shanghai, and we started in 2005, when we were one or two Canadians that got.

You know a license to operate in the country have a great long term track record, there and and create value creation.

With that not only from the market, but the the outperformance that our team has realized.

The team has been busy because it was a much bigger pivot for power sustainable capital than it was for cigar holdings, which were already on a third party model. So they have been over the last six months in over the last three months reorienting themselves to being in the business to bring in third Party party capital. They have they have got al.

Active discussions going on with some institutional.

Parties that could come in and are interested in coming in there is nothing definitive to announce but I can say that had been extremely active at doing that they've set their organization up to become a third party manager, where you are interacting with outside investors.

They get and they're going to build the organization around to do that they're getting their financials in their business plan, which is basically done lined up.

That way and are actively fundraising, but nothing to announce at this point on the when the fundraising side just a lot a lot of activity and I think good progress.

Okay. Okay. That's helpful and then I wanted to ask one last one.

Just about one of the Standalone businesses.

I understand that and take remit underwent a restructuring in the quarter can you give just give us a bit of an update on what's happening in that business and and maybe remind us how much that investment is carried out from a net asset value perspective.

Greg threats, yet I'm going to turn.

That question over to you.

Sure folks around the any beyond the books and.

Finished next questioner thank you.

Yeah, Thanks for that Nick.

The Integra mid property has been disposed of than there is no longer on the books.

It was.

On the disposition I think we realized a recovery of some $27 million.

So it is no longer part of the portfolio and Uh Huh.

I was disposed of in the quarter.

Okay. Okay.

Alright thats it thanks for taking my questions. Thank you Nick.

Next question comes from the line of Graham writing from TD Securities. Your line is now open.

Hi, good morning.

Brian.

Maybe I can just start with the cost savings so.

You said, you're at 45% of your targeted 50 million.

What drove the initial savings are then let's explore expected to surface the remaining 55% and.

I'm going to let Greg and Latin.

Thank you want to address that question.

Sure.

So the initial 45%.

There's.

Three items on that slide that point to the majority of that quite frankly.

And you can see that certainly with the retirement of the two co Ceos and the changes and governance a that a.

Contributed it.

We still are a public company.

Let's see however.

There are some of the.

<unk> expenses associated with being a.

Fully traded public company.

In the equity sense of the term and those have been eliminated in the first.

Eight weeks or word I guess is little more than eight weeks that we've been out those.

And then a we've restructured some of the.

Services that we have in the the group, a including or or research in or advisory services and the those have contributed to a the 45% reduction a curve that we've attained so far when we look forward to over the next Oh.

Periods, we see opportunities obviously.

In some of our.

Other.

Expenses, the biggest categories being our.

Properties that we have and.

So we see a opportunities there and a they will emerge.

Over the next six quarters.

Some of them may take a little longer than.

We had hoped for given the the cobot environment right now but.

We feel confident that we're going to get to that $50 million over the next six quarters and.

We'll probably give you a little more transparency on how we see that emerging as we move forward over the next couple of quarters.

And Graham I might just add to Greg's comments, you know one of them as well was.

Look at our travel and in particular with with the going for three to one CEO and and just looking more generally our travel expenses of course, we completely blown through our savings, but it but do you really can't measure at right now because nobody's traveling so that's a weak but there was it was a travel piece and the actual repair.

Hi, Good would include much lower travel expenses and what we would expect on a run rate basis, but there is that theres travel as part of the as part of the run rate that we're looking at reducing as well so I'd just add that.

I can answer your question.

Yep.

That's helpful.

Maybe if I could jump to.

You've got liquidity I think of 1.4 billion.

Power coped level and then.

You're looking to redeem the $350 million preferred shares at some point so when I think about your and see I'd be you've got 23 million shares left how would you fund all of that if you wanted to be.

Active and purchasing all of that would you have to monetize some of your standalone businesses to to funded or how should I think about.

How should I think about your liquidity and funding that and she said.

Yeah.

No we havent.

As I answered to Nick we Havent landed at this point about where the right level of cash and liquidity is on an ongoing basis, we'll continue to review that but over time.

We would be looking too.

You know disposal of assets.

And freeing up those capital.

As we replace some of the some of the seed capital that we have.

Those would those would be sources.

Liquidity for us as well as ultimately determining where we should land on the cash, but we're deferring that.

Until as we see the environment environment, you know basically settle itself.

Greg I don't know if you wanted to add anything to Graham's question around funding of buybacks and sources is really where he is going.

I think you hit the nail and ahead.

On page 22, you know.

So as we as we realize value we will certainly take that value that we realized and and put it to work in a buying back shares if that's the most opportune thing to do with time.

It will balance out against.

Our preferred share repurchase that we also signal.

Earlier on when we announced the transaction. So that's the only thing I'd add to it.

Thank you.

It would that include.

Your efforts to raise third party capital.

So your sustainable investments.

Should we think let John as potential capital return or would you raise third party capital to just reinvested grow year sustainably.

It's going to depend on the opportunities in terms of the products.

So there's attention that exists there we are looking to free up capital by bringing in third party capital into the sustainable.

Energy portfolios, because we have assets and we'll see them.

So that becomes a source of funding the flip side is what opportunities are there to launch new products, we do want to grow these platforms obviously the.

Teams that are managing both cigar holdings and and power sustainable capital are looking to launch new products, if they get opportunities to do so on a profitable bases and grow their businesses and that's going to be a call on capital and we're just going up to manage all of those pensions. If you will but all I would call them opportunities as maybe a better way to put it and bill.

We don't have a perfect crystal ball.

How all that unfolds its hard to get precise and I'm not trying to be.

I'm not trying to be a base of and the question. It's just hard to be precise on saying how much liquidity comes free and that over what period of time. It depends on the point you just raised.

And then it also depends on.

Maximizing value on the standalone businesses versus versus realizing value and how that plays out over time, you don't want to put yourself in a straitjacket by committing to doing this and then you end up leaving money on the table.

Our missing opportunities, so sorry to be more precise but again just sharing you with you the way that we think about it.

Understood that's helpful. Thanks.

Your next question comes in that line of Jeff Kwan from RBC capital markets. Your line is now open.

Hi, good morning.

You've done a number of transactions that you flagged involving the various entities within the power complex and in generally.

General seemingly call it.

More active on transactions in the past 18 months, when thinking about simplifying to power structure and servicing value.

I will just kind of like what inning you are in.

And if there's any sort of additional context, you want it to cheer answer.

Okay. Good question, Jeff. Thank you I think in terms of the simplification from a structural point of view, we don't have any other plans to.

You know, we basically have three public companies.

Can we have a wholly owned businesses within power book, So structurally them. The biggest steps have been taken but simplification goes beyond structure simplification goes too.

What you do and how you had the market understands it and so we still have at power Corp, I would say.

A bunch of assets, if I can put it that way.

You know kind of new sway.

I would say when we talk to market participants they they don't understand the strategy that pulls it all together and look at it more as a diversification strategy and if you play out what we've said too.

Analysts and investors over the last couple of quarters since we announced reorganization, we see if you reach out to three years from now.

You are going to have a much simpler holding of assets at power Corp., where you'll be able to see some asset management businesses with some revenue in some costs and and can see how those are growing and contributing and then you're going to see seed capital.

According those businesses.

And that seed capital will have returned attached to it and you'll see how that's creating value and so I think it will be similar to understand in value, even though it may not even though I think big structural steps have been taken already.

Okay, because maybe asking in other ways is there are there assets fixed you have in any of the different entities that.

You think.

Me make sense.

In another part of the power family.

The one that gets talked about as an obvious and you haven't you've kind of stopped short of naming it but we do have China AMC and two spots.

And so I have spoken we have and Greg and we havent at investors in front of investors conferences over the years above the fact that when I see I may see first the opportunity came to acquire CMHC true.

Really the Demerist family, they're they're in a long history of focusing on China, starting with Paul Senior and Andrea Olivia is taking up the casuals there in terms of.

Working the opportunities in China, we'll see I may see ended up being.

This price that we were had an opportunity to get a 10% foothold in back in 2011, but at the time, we had no active discussions about whether it made sense in Idaho.

Power Corp, and power Corp was the only eligible buyer from.

The point of view of participating in it and being able to buy it. So there wasn't really any choice went to power Corp. When the second two blocks came.

We set the best way to do it because or synergies with our G M and maybe a more natural holding place we split it and now we have the holding 50 50. So that's something we we have talked about we talk about it from time to time Guy gems pretty keen on their CMHC sake as as a as they should be and as we are.

With ours.

That's the one that we would that we have discussions around but I don't want to get.

Ahead of ourselves, Jeff and saying a totally transparent we talk about that we have not made a decision at this point.

And so to say anything beyond that.

I think would be I don't I don't think it's appropriate.

Okay.

My other question was.

Again, maybe as a baseball analogy makes no sense like.

Looking at Great West.

At least from powers ownership perspective, and your investment there.

Relative to firing on all cylinders.

How would you kind of describe where the various business within great west or at in terms of you know once you feel are performing well and ones that you think are still work in progress.

Yes, good question.

You know everybody should canceled the next hour of their day.

Answered.

Ill try to do that quickly I'm I'm teasing, if I start with Canada. The group business in Canada for Canada life is firing on all cylinders.

And you know, it's kind of basically just sharpening this off I can call it that way, but there.

Great position good growth the Canada individual business.

He has got more challenges in terms of there where the product start right now, but I would say from a management team leadership team strategy.

They know exactly where they are going right now and they have got a very clear strategy, they're executing on it they're executing quickly.

You know that digital offering I talked about.

With what they've done with GLC in Canada life. It looks innocuous I think thats going to that's part of a much stronger wealth offering that that they are.

Coming out with <unk>.

I feel really good about the strategy that Canada life has got for its individual business.

So lots of work to do there, it's early stages, but but very clear.

Understanding where they're going to the states in power.

What can I say, it's on its own <unk>, a very strong growth trajectory and I think by plugging in a retail business.

As I said in personal capital, that's kind of really strengthen their offering both on the DC side, but also on the individual side love to be able to do.

Something that would grow there and from an acquisition point of view, but.

You've got to be <unk>, we're going to remain disciplined but.

Business is growing quickly Putnam has caught in a very still a very difficult environment for active.

Has continued to manage their costs down while improving their shell and the flows are really starting I mean, they obviously went through a hiccup in the first quarter.

But the flows are starting to come around you saw that in the numbers in the second quarter Penegor, which is also in our asset management portfolio in the states a client isn't has really gone through big outflows, but they've got it they've outperformed the bridge wires and the eight you ours at the world and many others strategies, we feel very good about that.

But there's an opportunity shell to unlock value as a way I would look at that flipping over the UK.

Really strong business.

I really taking advantage of the retirement advantaged acquisition. They made a couple of years couple of years ago and building out on the wealth side Irish life, Good momentum, Germany, very strong momentum and then on the reinsurance the reinsurance and risk group you see.

But I mean, they they're they're getting great returns on capital and that's a nice source of growth I feel really good rate across portfolio I feel they're not all they're not all contributing earnings wise the way. They are capable of at this point, but every business is moving forward and I can say more optimistic than I've been at anytime in the last four or five years about the sweet.

So those businesses and where they're at that would be my assessment Jeff.

Okay perfect. Thank you.

[noise] again, if she'd like to ask a question press Star one on your telephone. Your next question comes from line of Tom Mackinnon Fenby Ml capital. Your line is now open.

Yes, thanks very much good morning.

One quick one for Greg maybe a follow up for Jeff said, Greg I think you mentioned there are some cold good related reductions in expenses in the quarter.

Maybe just quantify what you think the dollar amount of those were and.

And what they might have been obviously probably related travel, but if you just give us an idea with it.

Reduction, which is all that.

Yes, Tom broad strokes I don't have a precise number but I'd say $2 million in that neighborhood would be.

Approximately what we would expect in terms of.

Those type of expenses.

And they did relate prime and are primarily to travel but to.

Travel on other related type of expenses.

So.

That would be it.

Okay. Thanks for that and then for Jeff.

Embarked on this restructuring you know sort of conveyed to the street that to.

You'd be looking to sell some sort of non financial assets.

Power.

Corporation level.

And obviously you know the environment is different but.

Probably the street didn't expect was.

Moves to sort of the optimize efficiencies within the power group.

That.

So what extent are there more opportunities to sort of optimize efficiencies within the group you've got three businesses that are.

Sort of in the wealth management, NDS and asset management type businesses, you've tried to optimize stuck within.

Those functionalities between.

With the GLC acquisitions, but do you see other opportunities here.

Three businesses sort of doing some of the same stuff in terms of.

Optimize efficiencies within those three groups.

Yeah, I think if you're if I got your question right.

In particular your truck is not really at the power Corp level, you're asking but within the operating businesses.

And the obvious overlap you're talking about as with the Nigerian which operates in Canada, and Canada life, which operates on Canada because outside of that.

You don't really have too much over at operate kittens, it's great West life, that's in the states and in Europe, and and whatnot. So.

I think that.

The what we've just announced in terms of the asset management.

Changes the biggest opportunity we saw but we have.

Much you are aware of how much cooperation has been built up over the years between.

Gee wealth management, Mackenzie, and <unk>, and Canada life from Great West life actors that we should probably.

Probably doing ourselves into service by not highlighting all of the.

Distribution opportunities that go on across it.

Across those two groups the.

Because it's a lot and so you continue to have you know asset management Putnam Penegor funds are distributed across.

Hi, Jim Mackenzie funds or.

Distributed.

The other way.

China asset management is not just working with Mackenzie to try in.

Create products for the group you've got a lot on that on on that side of it concerns products like I think I'd you well to see.

I think they're the largest single distributor outside of the Canada life's owned distribution of insurance products for Canada life Theres a lot on the product side the system side was probably bigger before.

Because it used to be that companies did all their own system. So we had.

Both groups working together for 20 years, but as everybody has moved to the cloud and moving more to it outsourcing model and the reality is that you know that that.

Business model has evolved and changed.

I didn't know, if that's where you're getting out with your questions.

That's that's the way I would answer it.

Yeah, I was just thinking just with respect to some of the asset management companies at the Holdco level is there any opportunities.

R&D opportunities you see there.

With leveraging those capabilities is down into the operating company. Yes. Good question. Good question I guess just fit.

Very much so the capabilities that we're creating a stick at a to Paris tangible capital in cigar holdings.

Our <unk> have are good fit for great West life balance sheet, which is trying to and it's very much looking to extend their position in alternatives. So right. There theres a good there's a there's a fit and they're actively working on those opportunities obviously, great west not going to be exclusively looking at power. It's a big rolled up there and then from a district.

Fusion point of view, there's opportunities for those products to find their way into.

Some of the alternative products that are that are being built for retail high network clients et cetera. So that is going on thank you I missed that what you were saying there that apps absolutely lots of efforts going on there.

More more more to say about that in future.

Okay, great. Thanks.

Thanks, Tom.

Operator, there no further questions at this time I will turn the call back over to Jeffrey or.

Okay. Thank you and I.

I am flies when you're having fun I see we're right up against a 930 again I just want to ER and.

On the know how busy a quarter it is and where we just got the pedal to the metal to keep driving it forward with more.

And hopefully we can be successful doing some other things that create value.

Thanks again on a Monday morning in August for being on the call and we look forward to talk to you again soon bye bye now.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

[music].