Q2 2021 Power Corporation of Canada Earnings Call
Thank you.
Yeah.
Ladies and gentlemen, thank you for standing by and welcome to the Power Corporation second quarter 2021 conference call. At this time, all participants lines are evening, and he said no and email.
After the speaker's presentation, there will be a question and answer session.
And I ask a question during the session you will need to press star 1 and your telephone.
Please be advised that today's conference is being recorded.
And you require any further assistance please press star zero.
Now I would like to hand over the conference to our speaker of today.
And so jaffe or precedent and chief Executive officer of power.
Power Corporation of Canada. Thank you Sir Please go ahead.
Thank you very much operator, and good morning, everyone. Thanks for being with us on a Monday morning, and the summertime.
We're very pleased to be presenting our results and speak about some of the activities of power Corp.
Over the last quarter or so.
I'll just draw your attention before we get going to the cautionary statements on pages 2 and 3.
And with that on page 4 and addition to myself and there's also Greg Trepp check with me our chief.
Chief Executive and Chief Financial Officer, Executive Vice President of Power Corp, and known to most of you I believe.
All of a switch over to page 6 on the presentation and you have there.
A number of the of documents and events of that.
Half of that form part of our communication to investors that have come out over the last.
Weeks from both power Corp, and great West I G M and G. B L and all of those documents are available online and to you. If you are if you. So desire if you havent already and looked at them.
So with that I'll start on page 7 and.
And just kind of resume.
Are they the quarter and and the last I guess 4 months or so really pleased with how the companies are performing both from an organic and inorganic point of view, we really had a lot of progress and it's become evident in the quarter.
Very strong earnings at each of the operating businesses and strong business momentum.
Theme that we have been communicating for at least a few years that we believed.
Believed that a lot of the investments that we had made at great West of I G. M. G. B L. We're going to translate into good business momentum and we've seen and the last quarter that was absolutely true across the board.
With the strong earnings and momentum at Great West led by empower both organically and Inorganically Archie M. Just kind of across the board across your business units really demonstrating great momentum G. B L. Benefiting from a lot of the portfolio of change since they've done and the last few years, so great organic growth.
But then also you.
You'll see with the obviously the Prudential acquisition was the highlight of since we last talked in terms of being and external transaction and we'll talk some more about that and this presentation and got a few pages, where we'll give our perspective on the Prudential acquisition.
But great West also was active and Ireland and in Canada, where they are.
And with a and acquisition and the group insurance sector with the acquisition of claims secure and a third party administrator.
In addition, when you come to the power Corp level, we continue to make progress and our strategies 1 of those will talk a little bit of Butters GP strategies, we announced the transaction and that's 1 of the 4 standalone businesses, where with that transaction and you'll not only surface value, but upon the closing of actually exit the position and and monetize that position and further and some of the <unk>.
<unk> and we've communicated to you and many times and.
And then the alternative asset management businesses that we're building at power have continued to make good progress on fund raising and you have a couple of examples here at the bottom of page 7 but there's more of that we'll talk about briefly when we get into the presentation.
Turning to page 8.
From a financial point of view of great quarter and.
Is up quite strongly and that continued subsequent to quarter and.
We had strong earnings of $1.47, with very very strong earnings and earnings per share.
It was a record adjusted earnings per share of $1.51, and well up from the previous year and then we.
We kept our dividend at day 44, 75% level as you know dividends from our public operating companies have been flat and in particular, they're great West life, which is a big part of it and still with and off street restriction on increasing dividends and so that we have maintained our dividend at the 44, 75% level.
With that I'm going to turn the microphone over to Greg trajectory of talk about the next couple of pages Greg.
Thanks, Jeff I'll give a little color on and net asset value and the earnings for the quarter and.
First on page 9 of net asset values as Jeff had mentioned.
1 of $51.60.
Up 12% from March.
And it's 31.
And.
And since then too.
August 6 or up another dollar 50, and 53 term.
Great West life, and IGN and JBL all 3 you can see the strong earnings and good momentum.
And being reflected and the share prices.
And you can see now that.
The net asset value for the 3 of the publicly traded companies our share, but $32.4 billion.
And just note that and cigar holdings, Thats, where our interest and well simple shows and Thats.
I was going to say about 800 million and it's actually 796.
And the other I'd highlight is China AMC, we talked about this the last call.
It's still on our books of book value.
2017.
And our purchase price.
And.
And I think I reflected last time that there was around 17.5 times earnings the entry multiple was.
And that has not been adjusted.
Or any.
Further market increases given their strong performance.
And Standalone businesses.
35, 7% interest and Leon and the Standalone businesses, and GP strategies has and there as well and there is a separate slide we will talk about little later on and the presentation.
Take us to page 10 and.
PCC earnings per share.
Record earnings record I should say record adjusted net earnings of $1.51.
And compared to 79 cents in Q2.
I'm here.
Go through a couple of highlights as well.
And certainly with great West life and.
Another strong quarter led by.
Increased contributions from empower reflecting the recent mass mutual acquisition.
IGN had record rings, and the quarter on a record assets under management and Q.
Q2.
Hi, net sales.
For Q2 as well.
And just note on CBL and the effect of consolidation and the effect of consolidation.
<unk>.
Any adjustments that we need to make for differences in accounting and of course <unk>.
Good deal.
Still or should uses it for us.
9 so gains and losses.
And on dispositions are.
And I recognize this fair value through OCI, so none of their dispositions and go through the earnings line, whereas we still use.
And if for us of 39, and we do reflect it so.
And most of that 14 cents of affect all of that 2014.
And.
Basically.
<unk>.
Of the gains of being recorded in our P&L from the dispositions that <unk> did on wholesome humor, Umicore and gea.
Down the page and alternative asset management platforms, certainly there is activity of power Pacific and the portfolio of there.
<unk>.
And also and.
And the cigar of Europe.
Sale of a couple of portfolio of investments there as well.
So of a contributing 18 and the quarter.
And as I mentioned and try and AMC had a strong.
Quarter up 33% their asset management and was also up compare comparatively and.
And their equity product sales were strong throughout the quarter.
And Standalone businesses.
We have 23 cents contribution.
A large component of that came from.
Leone.
Recognizing its merger with northern Genesis.
And also.
And a contribution from GP strategies of the quarter.
And with that I think I would turn it back to Jeffery or.
Okay, great. Thank you.
So I'll turn to page 11, and the next few pages I won't dwell on and you've seen them before but they are here.
To reiterate and our strategy is.
And we're pursuing it and a pretty disciplined way I would say, what we're focusing on financial services each of the public operating businesses have their own organic and inorganic strategies. We have a whole series of steps that we're taking at power corp to add to that value and at the bottom of the page across the group we are committed to continually enhancing.
Our communication to the marketplace and as well as the quality of that communication and the quality of the material. So that's what the strategy is page 12 simply expresses and a different way.
And so I won't spend any time on 12, but thats the same strategy.
<unk> laid out and a different fashion on page 13, just spending a moment here for our public operating businesses.
First bullet point, they have gone through years of investing in.
Their business is to make them more competitive and the management teams at each of the businesses are very focused on turning that into higher earnings and cash flow growth and in the case of JBL higher and EV growth.
And they are doing so as well with and external M&A strategy and then the third bullet point is really about looking at the portfolio of actively and saying are there businesses and they're they don't meet our objectives and what can we do about that all 3 of those are being pursued actively by the management teams and as I said, everybody is out trying to enhance the quality of their <unk>.
Communication to our different stakeholders page.
Page 14, I won't go through all of these bullet points, but you just see across.
West life really broad based progress and the quarter.
And across AGM.
Earnings per record net flows at both <unk> and Mackenzie.
Our record earnings of just firing on all cylinders right now and then it's G B L.
And Greg mentioned, a number of the dispositions and those dispositions are coming in.
Holdings and we've got a few examples there where a lot of the investments of JBL recently have been rotating into more private type investments and that is part of the active.
Rotation going on and GPL that is.
What they think will drive a lot of value for the company and they are also focused on share buybacks.
To try and work and narrow that discount to their net asset value.
Okay page 15 kind of few pages here of sharing with you our perspectives on the acquisition of credential that was announced by great West Lifeco.
We're really excited about this transaction, we think it is not only a great deal of strategically for great West and empower but it's also a very strong deal financially.
It will create assuming we achieve our synergies, which we believe we will 8% to 9% earnings per share accretion comes on the heels of the mass deal a year ago, which itself was a 10% earnings accretion.
And on Prudential, we financed it without any equity, but when we look at it and say well what.
Would it have looked at had we done a 70.30 equity debt financing consistent with great West life cost long term capital structure and even on that basis, It's an $8..1 times p/e multiple we think we did a very strong deal financially. We're really excited about it like the mass steel most of that EPS accretion.
The overwhelming majority comes from cost synergies, which are things that we've got a high degree of confidence on because we're just simply.
According the businesses onto empowers existing platform and we know the costs very well.
Confident on the cost side and most of those EPS numbers are based on costs.
Longer term medium term longer term and revenue synergies not really baked into the numbers and any material way or in fact of great opportunity as we look down the road.
I will turn to page 16, and Thats, just a visual as to in the defined contribution market itself.
The transaction is transformative and positioning and power.
And its size and scale and.
And it is becoming very much of a scale game and the defined contribution business and in power on top of the investments <unk> made and its platform over the last number of years to enhanced.
And create a very competitive client experience for both plan sponsors and that's to say the employers and participants.
We are also very focused on getting the scale to be able to continue to invest and drive your cost.
<unk> down to a lower point and industry competitors.
Page 17.
Stepping back for a moment here these transactions and empower has done have really transformed the business first thing they've done is that they have.
Set and power up to be an industry leader.
And with a business model that will thrive and the defined contribution space, but they've also transform great west life and transform great West life business mix and its earnings profile.
You just go back to the personal capital transaction, which I think was the last week of June of the second last week and see when I can't remember the exact date.
And then you go to Prudential, which was.
And a third over a period of 13 months of little under 13 months, Great West life has deployed $8 billion of U S. Roughly 10 billion Canadian on 3 transactions and those transactions will materially impact the business mix at great West where all of a sudden win there.
Fully baked in and synergize empower itself and the U S will be a very significant part of great West life business and its earnings and the earnings profile itself has been altered and that we think given the dynamics going on and the defined contribution business that we can grow strong earnings and a consolidating market.
For quite a few years to come so the business mix the earnings mix the growth profile of great West Lifeco has been transformed by 3 very large transactions and I'll, just reiterate and I think the economics, we've shown our based principally on costs and the real medium to long term opportunity is the retail.
<unk> management of.
Opportunity that is adjacent to the defined contribution business and the company has to execute on that no doubt and.
And so we're confident we can do that but that medium to longer term. When you look out beyond 2 years. After the deals that will make make these deals go from good to great.
If we can execute on it and we think we will so that's our perspective is happy to take questions very excited about.
Prudential transaction.
Page 18, and continued good fundraising buys cigars and buy power sustainable and you've got under the second bullet point of number of examples of additional fundraising and <unk>.
Included of spec that power.
Cash.
Completed just in July of $240 million of U S.
As well power specific.
Which is the team of investment managers that are based in Shanghai, where initially set up and 2005 when power was accorded a and <unk> license.
And was managing basically powers money and <unk>.
Have a great long term track record.
And doing fundraising because we're trying to fund all of our strategies, primarily through third party capital and they've been having some good success and attracting third party capital, including and institutional commitment, which is not funded yet from a U S based pension plan and the second quarter. So really excited about continued good progress on building out the.
Third party fund raising on our platforms.
Page 19.
It is an example of what we're trying to do on the disclosure front. These numbers are in the MD&A and I don't not intending to day to go through along.
Diatribe on how the financials work, we probably should do that and some subsequent sessions when it's not just a quarterly earnings call, but you see we are breaking out the management fees cigar holdings and the platform expenses and then they also get money of course from of carried interest when there are.
Gains. So those are carried interest line and is a lumpy 1 but a very meaningful part of the economics over time and the same thing for power sustainable.
And as I said these numbers are in the MD&A and so this is part of our ongoing effort to.
Jim.
Illustrate the economics, both as of GP and we also have.
A fair bit of work to do on illustrating how we make money on our seed capital as well that you're going to see continued enhanced disclosure on this front as we move forward.
Okay.
Page 20, as we talk a lot about alternative asset management.
And we're doing it at power Corp, and its also going across great West life and AGM of GPL and this page is just intended to give you a little bit of of logic as to how each of our operating businesses look at alternative asset management. So for example of great West Lifeco, where theyre invested in power sustainable energy infrastructure Fund there also.
Investments and per cash and then credit funds and there are of course of Investor and Northlake.
And they are trying to do 3 things they are trying to.
And that's their strategy and advance our capabilities for their own balance sheet needs and they're trying to access product.
For their customers and their clients and on the Fintech front and of course, there's also a whole additional.
Strategy being played out to remain at the forefront of Fintech developments, because it impacts their own core businesses at IGN.
Almost the same but there is 1 difference they don't have of balance sheet to invest so there and not trying to put their own capital to work for our balance sheet purpose, but with all of the ownership of 80% of the position, we have and northlake. It actually has put them into the private alternatives business and a meaningful way so they've expanded into a whole new market both in terms of the capabilities.
Within North Lake as well as all of the distribution channels that come with that.
And then at GBM is increasingly focused as I mentioned on private investments. They do have their own sienna investment managers, and they're expanding that business and a fair bit of cooperation between <unk> and cigar in Europe on opportunities that may not be exactly suited for 1 but would be suited for the other and they are in active dialogue and theirs.
Common of directors on the 2 companies so that that exchange of information goes on.
Okay page 21, I won't really add anything to what Greg mentioned, good progress at China AMC.
And we don't have their trunk quickly there we just got the market performance of the of.
And the indexes, but they've got great long term alpha creation and.
And so they continue to.
Grow up 2 will grow their business successfully and China, AMC I would say.
And institutional player its mutual fund player and it's an ETF player and they continue to build out their business successfully of really pleased with the progress being made okay. Standalone businesses just for a moment here.
We have got the 4 businesses that we considered the standalone businesses and we now have 73% of the.
And EV that we disclosed is public. So this is getting easier to measure.
You know about line electric we've already talked to for a bit about that GP strategies and as I mentioned as of transaction there assuming it closes we'll monetize that transaction.
<unk> pulse you may be aware of.
It did file too and initial respect us to do and IPL got into some choppy markets and the decision was made not to go and that direction. At this time and so you may say, it's a funny thing to mention on the call that talked about.
Attempt that didn't work, but we mentioned it and the context.
Active we said we were garner of surface value on these businesses and over time, we were going to realize value and.
Here, we are not that long after having announced the reorganization we have been active on all fronts here.
On making this piece of our balance sheet become clearer surface value and ultimately realize value from power Corp.
Okay over to page.
23.
And we've continued to make good progress on our target of achieving $50 million and expense reductions we're almost there.
And you've got across the top of the page of bullets as to how we've done it and ifs.
Secondly, what you've got on the bottom right. We had just about $200 million and operating expenses between power Corp power financial and.
2019, which was a $50 million per quarter run rate, we were at 40 and Q2 'twenty 1 our target of 38, we're getting very close.
And these are core Guinea representation of theirs.
And the company there can be from quarter to quarter. They can bounce around but we think on a run rate basis, we're getting very close to our targeted reductions. So we're pleased about that.
A word on 24 on our communication strategies.
Power Corp itself of course is continuing to work hard on the investment platform disclosure still some work to do there, but we will continue to make progress on that and we've been very active and meeting with investors and 2021 to date.
It actually is 100 investors and analysts when we met and different meetings.
Propylene and said.
And then at approximately and apparently it's exactly.
We haven't had exactly 100 meetings.
At Great West life, I think quite meaningful they hosted an investor day and in June and of course, the focus of it was on empower but they also started off by doing something they havent done and.
As far as I can remember ever.
Which is that they provided medium term EPS guidance of 8% to 10% base earnings growth absent any future acquisitions that was prior to the announcement of the Prudential of course.
And of targeted 14% to 15% base Roe.
And so this is just part of my <unk>.
Switching and our messaging that we are across the group trying to move forward and and get our Investor Communications.
Error, and clearer and clearer and that was a.
A big step for them and I'm really pleased that they did that at AGM in the meantime, they worked very hard as you know.
Show the segmentation of the business and the way that they think about it and trying to surface to the value of that when you look at the sum of the parts of our GM and <unk>.
You drill down on the different values, but theres still.
Lots of opportunity there to surface value.
And to that and I think they illustrate when you look at all of the other pieces of the company that the wealth management business and the asset management business effectively and it's being.
Valued at a very low value or maybe it's the other parts, but in any event. There is a lot of value that is not getting recognized in the share price and they are on of terror to get the market to focus on of some of the parts of first evaluation and I think that's getting 10 year and increasingly getting recognized by the analyst and Investor community.
Greg I'm going to turn it to you to just say of worried about our liquidity and cash on page 25.
Thanks, Jeff.
So start off with the important number how much cash do we have we've got it.
And 1 billion won.
In terms of our cash reserves and the balance sheet.
We're looking forward to.
Resuming our buyback program and when we look forward, we look at 3 things.
Certainly our cash balance and it's.
It's on the higher side of the 2 to 3 times fixed charges.
We've guided.
And folks on it and in the past.
The other thing is obviously the.
Pandemic and the.
Of the economy and certainly we're seeing that there is a move to opening up across the board and Canada. So that is looking good for the fall and.
And finally, we've talked about we're also be will be with its guidance.
With respect to dividends.
Dividends and buybacks.
And we are certainly looking forward to what osprey will have to say in the coming months as well.
Jeff I'll turn it right back to you.
Thanks, Greg.
Page 26.
Is <unk>.
Discount to NAV and.
And it's something we're focused heavily on.
And we've continued to make good progress through all of the strategies that we've executed on and narrowing that discount we still think there's there's progress to be made there and lots of opportunity ahead of.
We think about it this journey on narrowing it actually started back at the start of 2019, a lot of people talk about it from the reorganization, which we announced at the end of 2019, but.
We sold the U S life insurance business and great West life of Great West Life date, I should say.
And then we embarked on a 3 way of share buyback that was intended to return capital and take advantage of the NAV discounts and power can national and power Corp.
And those discussions led to the decision to do the reorganization and the fall.
And which was announced in December of 19, and then with a little bump and the road when Covid hit and we got into a big market Downdrafts on our stock GAAP down.
We've made steady progress as we've executed on.
The strategies at the operating businesses and the strategies at power Corp itself and our communication.
And continue to see good progress and that's 1 of the levers of.
Value creation that we remain highly focused on.
Page 27, and I won't and you've seen this slide before but this is this is on the right and.
The left hand side of the page and we think about the value creation and that translates into 4.
Diamond is 4 drivers of growth on the right hand side of the page higher earnings per share at our operating businesses principally the potential for the multiples of great West life and AGM to increase as a result of that both organic and and through M&A and then JBL potential too.
The increase of 10.
And then the third bullet point higher across power Corp. As a result of of what we're doing and our operating businesses and what we're doing at power Corp.
And and then focused on the last element, which is the discount through good communication and good visibility as to how we're creating value going forward. That's how we think about value creation just.
Just before I.
To conclude I would say on page 28.
Im sure as and your businesses there.
Theres not a not of management meeting our board meeting we go to across the groups that we're not talking about ESG I think our companies are very well positioned.
For ESG going forward, which is not to say that it's not.
And I continually moving target and that there isn't a lot of.
Work and but also opportunity ahead for our group because we have been very strong on.
Good governance principles.
And thinking about our community thinking about.
How we are good corporate citizens that's reflected in some of the measures that you see here and.
Including I, just pointed out I know IGN likes to say they were actually.
First among all of investment service companies worldwide and the global corporate Knights Global survey.
Recently, but across the group really this is a big focus and you'll hear more about it as we continue to move forward.
And page 29, just kind of summarizes how I started the presentation here really thrilled about.
The strong organic growth, that's being shown and our companies from a business momentum point of view and and earnings point.
Point of view and of course of strong stock market help there's no question, but it's way beyond that and our view.
Growth and the strength is much more fundamental and that and much more deeply rooted in that and then we're adding to it with continued high a high level of M&A as we said, we would and so just really pleased with the great progress, we're making lots of opportunity ahead.
But really fund the reported strong quarter like that.
<unk>.
With that I will operate or stop or our formal remarks of our address and we'd like to open it up to questions from those on the call.
Thank you Sir and as a reminder, we will now begin the question and answer session.
If you wish to ask a question simply press Star then the number 1 and your telephone keypad once again that of star 1 and your telephone keypad, we will pause for just a moment to compile between the last day.
Your first question is from the line of Nick.
And from CIBC capital markets. Your line is now open.
Yes.
And in your prepared remarks, you discussed the attempt to take Lumia pulse public.
Perhaps without asking you to divulge any specifics would you be able to give us a general update on the monetization pipeline that you see in front of you for the other standalone businesses.
Do you feel that youll be able to make some further progress on that front over the next 2.
Whole bunch of so just some color around those efforts would be helpful.
Nick it's hard to respond to that.
And in a definitive way I don't want to be evasive, but.
When you are sitting on businesses and your own shares.
You don't want to be out there, saying, we're going to get it done by such and such a date.
It would be like.
And of investment manager going out and telling their trader to tell the world you got it.
Off this position by a certain period of time and and what does that do.
And you'll end up with that traders right because they don't do that kind of thing so.
Yes, what I would say is that we've taken steps to surface of the value to create liquid markets. For example per liana, we attempted it lumen pulse.
And that puts you in a position where it can be easier to then take the next step which is to find attractive opportunities to monetize it.
I don't want to get into all I'm going to tell you is we're focused on it and when the opportunity is right. We will act, but I don't want to get into putting 9.
Any kind of up.
A false deadline on it so that will just end up hurting power Corp, and and the management teams that are building and several of our partners that are building. These businesses, who are great businesses. We've got great partners of doing a great job on on these companies building them out I just don't want to put anybody is back to the loss share. So I'm going to Dodge Your question, but just to tell you we're focused on.
And if they were very focused on it.
Yeah, No fair enough I can appreciate that okay, and then just a point of clarification.
I think when you were discussing the corporate cash balances if I caught it correctly I think you stated that youre holding $1.1 billion.
Which compares to the $1.3 billion reported on June 30th So is the inference, there that <unk> been deploying excess cash subsequent to quarter and.
No good good attention of detail Nick.
And we always adjust our cash from the balance sheet and <unk>.
Looking at how much we have available by.
There is the dividends that are payable very early in the ensuing quarters. So.
And early in July were paying dividends and.
So we make an adjustment for that amount.
We know what our cash.
Basically as of.
Going forward to be able to deploy.
Okay understood.
And then last 1 from me.
It appears there is pretty significant progress need and the quarter with respect to achieving targeted expense reductions and can you give us a just a little bit more insight on I guess what areas those savings came from.
Yes, we can actually Greg do you want to do you want to handle that I didn't handle it but why don't you want to sure.
Yes.
So Nick.
We are fond of when we've got a big big target, we want to take it piece by piece and.
<unk>.
And a chunk of it down and we made progress and virtually every 1 of the areas.
In terms of the targeted areas and so we did a lot of work on our.
Our travel and.
And our physical footprint and the quarter and continued and each and every 1 of the categories that is listed on that page. So.
And of course, we're we're nearing.
Q1 of 2022, which is the target date so.
And <unk> had there.
In order to the Wieland.
And making sure that we can get there.
But at that time.
Okay very good that's all I had thanks for taking my questions.
Thanks, Nick.
Your next question is from the line of Graham Ryding from TD Securities. Your line is now open.
Hi, good morning.
Hey, Grandma and.
My first question would just be on your capital and your commentary around.
You'd like to have a minimum balance I think of 2 to 3 times. Your fixed charges could you just spell of for us what that actually implies in terms of absolute numbers because I'm not sure.
I've got the right number for your fixed charges necessarily.
And Greg for you I think yes.
Yes for sure.
And so that'd be about 752.1100, 2 times 2 to 3 times the fixed charges.
Granted.
Which is basically our expenses and are.
Our interest.
Requirements owner of preferreds.
So expense as they get down to $1.50, and then you just take the preferred share dividends and the.
Little bit of interest expense and you multiply by 2.
And most of our buy 3 yes.
Okay.
Okay understood and then.
With your.
Asset management arm was there anything that you are targeting in terms of fundraising over the next year like I know you have a bunch of different verticals and.
Things Im sure.
Going to be unique for each 1 of them, but broadly speaking like as a percentage of AUM or in absolute terms do you guys have targets for what Youre trying to break and in terms of third party capital.
I think that's putting a fine point on it if I go to.
The cigar holdings of harvesting and what capital of different strategies and each and so.
There are more strategies and cigar holdings right now and you've got royalties credits.
Fintech for example, and private equity business in Europe.
And along and then Theyre always looking at what new strategies can be launched alongside those so each of those groups are out fundraising and you see I don't have the patient in front of me here, sorry, and just lost it on my screen.
Okay.
And I'll come back to you see at power standard Cigar holdings and good progress along.
Each of those strategies and I don't know that they had us back and their headlights, a year ago, but the opportunity to do a stock came up even in a weak stock market and it's quite something that we are able to call.
Pull that off and that's a tribute to the track record and they've got and the Fintech space and the Investor base that they have.
<unk>.
They don't I don't have a specific target in mind Theyre out fund raising and then sometimes it's tough going and sometimes they come back and say we've got we've just made great progress on this fund we know we know where they are active but.
And we haven't thought about it in terms of new capital I think.
The on the on the power sustainable capital line and they've got 2 principal strategies.
Their infrastructure and the of China.
And strategy and they are looking to what new products. They can launch to broaden that out and as they get into new products. That's a good example of where power and might have to put up more seed capital and then they would on an existing product. That's on its second or third fundraising, where we won't have to put up much capital on of new product.
And the sponsor has got to kind of.
And so their confidence and the strategy. So these things are all moving.
And we actually haven't got it got it down to being.
Over the next 12 months this is what we're expecting.
And I don't have that number Greg you made but I don't.
Think of it that way what we do.
And what they are very clear on is that we are on a march to increase the businesses, where they become principally third party funded.
And ultimately we power ends up being and much smaller piece of the of the.
The capital right.
Greg anything you'd add to my comments.
Yes, the only thing I would add Jeff is that.
The it depends on the maturity of the.
And the particular.
And asset classes, well certainly cigar of Europe for example, which we have been.
Active and for many many years.
And it's and the mature.
Set of funds, so we would expect that.
Because it's mature and the future we wouldn't be putting as much capital in and Youll see that I think with.
Each 1 of the particular asset classes, depending on the type of food.
The asset class some require a little more seed capital for us to get up and running and some are little less and the.
I guess, that's the color I'd add and that's something maybe we can look at 4 of future quarter to give a little little finer point on it a few of them.
No.
That's helpful.
And then my last question just seems a big increase in the GB.
And <unk> related quarter.
Quarter over quarter.
Were there any anything that you would highlight there did some of the heavy lifting and through the quarter was it broad based.
Mr. <unk> can answer that question.
Yes, I think we kind of slide in the back, but I don't know that it actually.
Breaks down the increase.
It was pretty much across the board some good movement actually and the private.
Holdings.
Web help was up significantly.
And of course, you would have seen that.
There was a.
Put rate associated.
With that and.
That was reflected as well and.
In the quarter, but.
That will.
Those are my comments grim.
Graham and certainly.
And if you look back on our previous presentation.
Be able to see it specifically.
Okay.
Great. That's good thank you.
Thank you Greg.
Your next question is from the line of <unk>.
And Mcgloin from National Bank. Your line is your.
Your line is now open.
Hi, good morning.
Morning.
I wanted to just a question to start with.
And the asset management business and the.
AUM seems to be building very nicely.
And the profitability seems to be improving slowly.
Do you have a sense of in terms of what level of AUR and is required or timing around when we should expect to see this business starts at startup and ramp up in terms of profit.
Youre talking about the businesses at power I assume.
Correct and when you say assets right, yes, so a few ways to think of it very good question I think that.
<unk> holdings as we've talked about is.
<unk> got a broader footprint with more strategies and it.
Is closer to a point of breaking even.
You need to think about the P&L and these businesses in 2 ways..1 of them is it's got the of fee revenue and they have ongoing expenses and then the second piece of it is there is a carried interest and those would be more prevalent let's say when there's private equity then when there is a strategy like infrastructure.
Where.
You wouldn't expect kind of sudden gains or periodic gains is a better way to put it. So the first thing we look at it just on a fee basis forget about the carry.
When do we get to the point, where the fees are going to cover the expenses.
And the run rate expenses and then when you actually look at the overall economics of being in the business you look at the carry as well, but that can be lumpy. So on a fee basis I would say that cigar holdings would be I would hope within a couple of years here is going to be whether its head above water and.
And contributing and I think just depending it all depends on fundraising of course, and then on the power sustainable capital side, there at a little bit earlier stage in terms of their products and their fund raising and they're probably a year or 2 beyond that but as we've communicated to the market, we kind of look out and say and and kind of 3 <unk>.
4 years, something like that we should be at a point, where we can say hey, we're making.
Not a lot of money right now, but we're making.
X million on this business and if you look out 2 years, it's actually going to start to be something thats really contributing and we have.
We have operating profit and this business not just it's not just kind of a holding company.
Not there yet, but we can see a path to get there, but it's a few years out.
The other piece of the business that we have to do some work on is too.
Explain.
We make money on the seed capital itself because there. It's a mixed bag. If you think about it we've got some seed capital and the private credit.
And as that cigar is running so there you've got of running yield on those.
And you can explain the profit is pretty easily.
Investments and some energy infrastructure, where you're making capital investments and from a P&L point of view you got a lot of amortization of lot of depreciation I should say and they really should be valued on a cash basis, not and earnings basis, and then private equity where you've got kind of a lumpy returns based upon when there is a.
Disposition. So we've got a mixed bag in the seed capital, but we think we actually have quite attractive returns. We can earn there and that's I think.
In addition to what they were making money as of GP as a manager we've got more work and the upcoming year to lay out to all of you. How we think about profit from the seed as well and then we roll it all up together into this is what the business is producing for power and sorry for the long answer.
That's what's from.
My perspective on when we get to profitability and how we communicated.
Yes. Thank you.
That's great detail and thought.
Second question was.
On the <unk>.
And the growth in China, and net and it seems youre, bringing capital and through the power of Pacific Channel and and also China AMC is obviously doing very well.
Is that the extent of the strategy for power Corp. In in China or are there other avenues that you could be out.
And looking to.
And in terms of.
Growing your AUM base and China.
Yes, I think.
On the China Amc's side, starting with that.
And you're starting to see some really good cooperation while its been its actually been corporation for a number of years, but you're starting to see some good results of <unk>.
Kenzie launching products into Canada, Mackenzie actually managing some.
Money from <unk>.
And so you've got some 2 way flows there.
Starting to happen.
Power Corp, and our alternative management strategies, what are the opportunities for distribution.
Cooperating with.
Neither CMA sea or with.
The group that own CMA Sea, which has citic.
I think those are all things that that we would like to explore.
And so youre right on point I think there's broader relationships there that we can explore that.
But what would be within the same kind of.
Yes.
<unk> term ecosystem of companies over there that we that we partner with.
And then China Pacific itself.
Really really great long term track record, we're trying to raise capital and been successful here and the states.
But we're also talking to our partners in China about how we can expand the distribution and there's some early success. There. So youre quite right. We're looking at how we can expand our distribution footprint using our partners there and hopefully we have some things we can talk about but.
I wouldn't say anything.
Few tangible at this point, but we are focused on that I don't know if that answers your question.
Yes. Thank you.
Okay. Thank you.
Your next question is from the lineup.
Makena and from BMO capital. Your line is now open.
Yes, thanks, very much and good.
Morning, Jeff and Greg.
A quick numbers question and then some follow ups.
Just with respect to.
Ownership and GP strategies.
And the ownership and the.
Back.
In terms of you know.
The fair values at June 30th.
Are those 93 for the GP strategies and U S 240 million for this back.
And are those values around the same values when we show you.
On page 9.
And.
And.
While you're looking up that I am wondering when you show that any of the on page 9 you talked about publically traded companies actually have owners significant ownership and 3 others.
Get smaller and why.
And as line when is this back and 1 of the and.
And you can strategy and stock now as well so I'm wondering why why you don't separate those out.
And when do you or any of the non page.
9.
And then and then I have a follow up thanks.
Okay. Thanks, Good morning, Tom.
I'll pass it over to Greg on your whats in that number I think it's yes for GP and know for this back because that's not our capital, but Greg why don't you take 1 of those questions and then I think for Oxy all offer you.
Yes.
And.
Unfortunately, I'm going to have to ask you too.
Most of your follow up question again.
But with respect to GP strategies you quoted the August.
Number.
June 30 numbers, a little lower I think my recollection of the 76 is and that is the amount for.
For June, but I'll have someone check that and.
Let us know if that's exactly right.
And as Jeff said, the spark is not and that.
<unk>.
Have a very.
De minimis amount of money.
<unk>.
Put into the stock.
It's not shown in and net asset value.
And part of that could affect US third party funded it off thats it.
Right.
And Tom Your second question or second through all of course, yes.
Yes.
Why don't you take a.
Your line ownership in line and out of that.
And that and show on page 9 and put it in the publicly traded and put it in the publicly traded companies line.
Because of the <unk> is 1 of the stand alone companies right. It's not 1 of our publicly traded companies it is mark to market.
On a on a regular basis, but.
That's the distinction and when we do the presentations Tom as the show basically what what are the strategic core assets.
And which are the operating companies that are publicly traded there and.
And then make the distinction between those and the Standalone. So that you can understand.
And how we look at it going forward.
Tom Let me say it another way.
If your question was about value disclosure, you'll get it on 22, okay.
And with your question noted about weather.
And GP and August 6 number.
So there is a timing difference so that was your question, but basically if they're public we've disclosed the numbers right there.
The real difference, though is that the.
<unk> Standalone businesses, we've been pretty clear are.
And while they are great businesses, and they're really businesses that we would intend to not have within the portfolio of if you look out several years.
And I kind of repeat and my question to my answer to Nicks as to when we would do that but they're really not financial services and we're going to build a business that's going to be of financial services around the alternative asset management businesses and theyre not part of that.
Having the 3 businesses at the top which is of the core great West life ITM and <unk> those are on strategy and so that's why they are separate it out exactly.
And that's why there's okay.
Thanks, and then just in terms of.
The increase and the fundraising of cigar.
Would you.
And that too I mean, we've had a stronger private equity market, you've got broad and mandates here.
And it's.
I mean do you expect this trend to continue here it is and it's pretty good market for private equity but.
What makes cigar and little bit more unique here in terms of the weighted to do some fund raising.
Versus sort of the broader private equity market.
Yes, good track record and a good.
A very good track next day right. So if you go to part cash part.
Cash and has had a great and I've had.
And 1 and 2 of them produce great returns.
And so there were able to continue to raise money and the stack was basically that as well and it's based on and the team.
And that's been put together and the fundraising machine and that goes around it same thing with credit partners that that's it.
Team that has got a produce very good returns so they've been very successful at raising.
Additional additional capital.
Track record at cigar Europe, It's a 20 year track record and maybe even longer and it goes back to about 2000, 2001, and I can't remember exactly the date.
So they've got they had good success there because they've got a good long term track record, it's about track record and focus on fundraising.
The the royalties team as is.
That's it's a simple of that you've got it on both fronts.
And good returns for their investors and they are very good at reaching out and and doing fundraising.
Okay. Thanks, so much of that.
Okay. Thanks, Tom.
Your next question is from the line of Doug Young from <unk>. Your line is now open.
Hi, good morning.
First question on the stand alone businesses.
And I guess 2 questions from the Standalone business and some of the GP strategies you sold that as you as you talked about how do you or could you quantify the gain that you're anticipating in Q4 from that transaction and the second question on Standalone and the ownership and Leon increased to 35, 7% and think of it was 31% per.
Before I would have expected it to go the other way, but there may be some nuances there that im not catching just hoping to get some color on that and then I've got a follow up.
I I'm going to hand, it over and it Greg.
So.
GP strategies, we did not sell it yet.
It will be still.
And Oh.
Well the transaction closes I think and the fourth quarter, So and we're just reflecting.
And quite frankly the.
And the reversal of the previous impairment actually on.
That particular property and.
So and.
And the gain off the top of my head I think it's something like Oh.
$33 million and.
And the quarter.
And.
And then your question about Leo and.
And it actually did not increase so I'm not sure what you're referencing it is $35.7 and that's what our interest is right now so.
And that was after obviously the merger with northern Genesis and there was of dilution.
And that point in time, so yes.
Yes, I'm not sure.
Jump in Greg that we maybe not get to the bottom of air on the call, but Lille priest back merger, we owned equity and we owned and option with some of the we won't we owned and option to buy more.
And the stack and the merger with northern Genesis in and.
And of itself was dilutive to our position and then the option that we had became subject of.
Negotiation as part of this back.
And and it was it was exercised.
So when all of that comes out you get to our equity position, but to follow through those steps like kind of do a reconciliation I don't have that in my head, but there were there were 3 moving pieces you need to be aware of.
The 31, okay, yes, so that we should go back and are.
Off the call and kind of piece of our way through but that's those are the moving pieces.
Yes.
Yeah.
Okay.
Sorry, sorry, Doug and I was just going to add that it probably was you're probably referencing of 31.
Before the options were exercised the option of excellence and such.
Correct.
So that's it.
Sorry, Doug and then I'll, let you.
No no worries I was going to say I blame it on my summary of brain, but yeah, we can follow up off line.
And then second just on the cash balances and again, maybe you can correct me if I'm wrong I would've expected the cash balances to increase a little bit more.
Now that does include the wealth of the Kashi proceeds you got from wealth simple.
And then there was and the non consolidated cash flow statement, there's investment activities, where there was an outflow of $271 million. So I'm just hoping you can maybe maybe quickly flushed show and if theres anything unusual and just the movements and of note that the cash side and.
And and then the second part of that is just I know you talked a bit about buybacks and the 3 criteria.
Jeff is it really like you have to wait for Isps restrictions to come off is that like.
And for Great West before you really are going to get more aggressive on the buybacks just hoping it is that the 1 criteria that has to kind of happen first before you get comfortable with that.
It's a great question.
And it's funny, you could be sitting in our and our.
And our meeting rooms and Doug.
I think on the dividend and the answer is yes and on the buybacks we're discussing that.
So that.
And it's a good question and maybe not on the buybacks. We haven't made any decisions here, but we're asking that very same question to ourselves.
Did you want to go on and the cash flow and Greg in terms of sure sure Doug So Doug.
The cash flow is theres, nothing unusual and the cash flows and it does reflect our proceeds.
From well simple.
I think of it.
187 was our total, but we did not receive all of that.
And this.
Particular quarter will be receiving some of that in future quarters.
And for tax planning.
Reasons and.
The outflows would just be normal funding activity to the platforms being the sustainable.
Power sustainable and also to cigar.
And that's what the hope flows would've represented.
Okay, So and just put a finer point so it looks like of seed investments out of your investment platforms and our normal cash flow is out of your investment platforms could be including seed and then on the buyback and a dividend increase yes, you've got to wait for a series of restrictions to come off and I kind of get that but buybacks. It's unclear, whether you had to or not and youre kind of bounce and that around do I have that yet.
Let me be yes.
I don't think our dividend as of flow through of pass through so without the subs.
Increasing without great west or the subs, increasing dividends, we're not going increase the dividends would be our current position and buyback is less clear about that I'd want to leave any 1 of the impression that we're going to get ahead of RSP I don't we have not made any decision and so I'm going just to be perfectly clear, but there's but the answer to your specific question, we don't have to wait.
And so that's something we can consider.
But we haven't made any decisions on and so I don't want and I don't want kind of on getting ahead of themselves thinking we're about to do that we just.
Not as hard and fast of rule its just its more of a judgment call.
That's all.
Got it thank you.
Thanks, Doug.
Your last question is from the line of Geoff Kwan from RBC capital markets. Your line is now open.
Good morning, just had 1 question recognizing great west of the potential.
Deal on intense but just wondering if you could talk about just generally speaking where do you see the opportunities for <unk>.
Acquisitions, and divestitures within great West and <unk> and IGN.
Hi, Jeff Good morning.
So.
It's a good question.
Great West Lifeco itself the empower team.
Obviously, they've announced 3 transactions so from a human point of view and a resource point of view. They are very very focused on getting those done and we're very confident that they are made.
Great progress on both mass and on personal capital.
And really nicely sequenced with the way the Peru deal will work in terms of how it falls in but they are but they are they are occupied clearly.
Across the rest of AGM and AGC.
Excuse me of Great West Lifeco, and AGM and their management teams. They don't have the same level of.
M&A integration activity going on and a little bit of Irish life with the deal that of an ounce. So lots of of human capacity across the group and then from a financial capacity point of view currently great West Lifeco has.
<unk> got its leverage ratio to the point, where it's not sitting theyre able to go out and do a leveraged transaction, if and attractive financing or attractive M&A opportunity came along but the philosophy. We follow is we're going to look at opportunities and all of our businesses and they tend to take a long term to come to fruition once you're on them and if we have.
And attractive deal, we'll figure out of way to finance and if it's attractive and so we're not we're not kind of stopping and on any business front of great West Lifeco.
Or at AGM to look for opportunities and recognizing the empower team itself is.
Occupied for the foreseeable future.
Commenting on.
Specific areas, where you might see something is always difficult to do we follow every business.
<unk> by saying, we've got and organic strategy to pursue.
And then we're going to be active and if an opportunity comes by we'll pursue it anything where the kind of deals where we would be focused on are ones, where we can do 2 things build out of strategic position of the company that we have so it's stronger and their market more relevant to clients more scale and and.
At the same time drive some synergies both cost and revenue.
So we've been active we continue to be active and the asset management space, because that's a space as you would know.
That is 1 where we could benefit from more scale.
But plan a is always just improve the business that we have right now.
If you go into great West Lifeco.
You've seen activity and Ireland.
And we're always looking across Europe.
European platforms are there ways, we can enhance our businesses.
And there I G M itself I think.
James Sullivan has been speaking about it recently and what can we do and the Canadian wealth management space, what again, what can we do and the asset management space.
And I don't know, it's hard to pin it down because we will lift from here.
We internally will be.
Rotating from where we are in this business, what what's and opportunity there all across the businesses.
We are actively looking at how we can enhance the position and the 1 where I think people always thought and our own verbiage, we said well and great West life, Canada, We're already a big player Theres not a lot of opportunities.
Great West life, and Canada itself through Canada life is looking maybe not a big dollar acquisitions, but and enhancing the capabilities they have and their platform. So the tpa acquisition that you saw was a way to position.
Great West life, and the group health benefits market by participating and part of the channel and it's growing so it wasn't a big dollar outlay, but it is a strategic value to it the same way of few years back they bought financial horizons.
On the distribution side with individual advisors of bought it 1 of the big Mga's. So.
Even for Canada life.
And even though they have a big part of the market Theres still things from an M&A point of view that enhance their capabilities.
And it's a bit of a rambling answer Jeff, but thats, what it is and it's across the board that were and that we're looking at all times.
Okay, great. Thank you.
Okay. Thank you.
There are no further questions presenters. Please continue.
Okay, well, thank you operator, and again I'll just finish the way we started thank you everyone for being part of the call.
Really excited about what.
And that's gone on since we last met and looking forward to continuing with our foot on the gas pedal here and to our reporting more good progress as we as we speak to you and the upcoming quarters and I wish you all a good a good day and a good week operator. Thank you very much of a fit for the conference call.
Thank you and with that this concludes today's conference call. Thank you for attending you may now disconnect.
Okay.
And then.
And.
[music] monetization and retention.
And again.
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And.
And then.
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