Q3 2021 Power Corporation of Canada Earnings Call

Yeah.

Looking at your attention.

Yeah.

Ladies and gentlemen, thank you for standing by and welcome to the Power Corporation third quarter 2021 conference call. At this time all participants lines are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

To ask a question. During this session you will need to press star one on your telephone.

Please be advised that today's conference is being recorded.

If you require any further assistance please press star zero.

I would now like to turn the conference over to your Speaker today, Mr. Geoffrey or President and Chief Executive Officer of Power Corporation of Canada.

Please go ahead.

Thank you very much operator, and welcome everyone to our quarterly results call on this remembrance day.

And I am here with Greg Trepp, Jack we're kind of in.

In the usual fashion walk through and give you comments on what's going on at the company and then open it up for questions I would draw your attention on pages, two and three to the cautionary statements regarding forward looking information and non I FRS measures.

And so why don't I jump all the way forward to page six.

Just draw your attention to the various.

Materials that have been released by power Corp, and by our principal operating subsidiaries.

With respect to their own earnings in different conference materials that they have participated in over the last quarter. So there's lots of other information to for you to look at to our supplement.

What we're going to talk about here today.

So with that I will jump to page seven on the presentation and just to give you our perspectives on the quarter I think first and foremost this was a quarter, where the earnings momentum and growth at our public operating companies, namely great West life and I G. M. We're really an evidence.

We have been I think saying for some time and our different communications with investors over the past several years that we believed that we had been building.

Through our operating businesses a basis on which we could deliver a lot stronger earnings growth than we had over the previous years and that's been building for some time over the past a year or so but it really came into evidenced in the in the third quarter with strong solid earnings at both great West Lifeco and.

G M. So really pleased to see that and I think that's that is actually the highlight of the quarter in my mind, having said that we have continued as well too.

Look to divest of assets at the power Corp level, which is part of our communicated strategy in the last quarter. We had two events that provided some liquidity we had an opportunity in our cigar through Europe, three which is our.

Our private equity business in Europe.

And we had an opportunity to.

Sell through a secondary transaction powers limited partnership position in that fund, which was also good for developing the investor base of cigar as there was interest in our position and so we liquidated it for $334 million and.

And and also our reported a gain I think of about $66 million pre tax on that particular transaction and then we one of our four standalone businesses GP strategies, we entered into a transaction that closed and so we've exited that position for a pre tax proceeds of $94 million. So a couple of events there.

To.

Create liquidity at power.

And with that and we're also pleased to be announcing here that we're resuming our purchases under the normal course share buyback program.

You would be aware that with the.

Start of COVID-19.

We took a conservative view in terms of cash and we suspended purchases under that program other than some small purchases to mitigate option dilution.

But aside from that effectively we pulled out of the markets, who will be re instituting our purchases under that program. We're pleased to announce that today.

Just while we're on the topic of buybacks GBM as well.

Their own interaction with shareholders they have their own a buyback program they've been taking various measures to enhance their shareholder returns and they've announced an additional share buyback program. You may be aware G. B L has a net asset value discount in NAV discount itself and its been working on that and is looking.

To reduce their own in a discount.

As well, it's been a terrific year for fundraising at our alternative asset investment platforms and that continued in the third quarter. So far this year, we've got $3 $4 billion raised from non power participants and I will talk more about that when we get into the presentation and then.

Western cigar announced a transaction, which will put cigar into the real estate business, a whole new strategy for them and enhance their there AUM materially, which we'll talk about it as we come to us as we come to that particular part of the presentation.

And and obviously in terms of a highlight I don't think there's any company or any business or any investor today, who doesn't have ESG at the top of their AR at the top of their minds Theres nothing kind of more topical going on in in finance are in the world right now and and we're we're not blind to that.

We think we're very well set up for all of the efforts in ESG across our group companies, but certainly just a ton of work for for corporations a ton of work for really society and a ton of work for power and great West in all of our companies to continue to meet the expectations and.

And the challenges that we all collectively face in this regard great West life did publicly announce this week its commitment to net zero greenhouse greenhouse gas emissions by 2050 and across the group as I am sure with many of you as many of you were with financial institutions across the group, there's just a whole plethora of products.

That are also being launched in this regard.

So with that I'm going to turn the microphone over to Greg Tretyakov who's going to walk through our financials in the next few slides.

Thank you, Jeff I'm on page eight.

Our newest but 50 to 81 at the end of the quarter was up 2% from June and at November was up an additional 2% and Oh also when we look at it from a year ago up 51% from a year ago net earnings.

<unk> of $1 nine compared to 75 up 45% and adjusted net earnings of 110.

Compared to 72 cents in Q3 up 53.

Per cent, and we announced a quarterly dividend of <unk> 44.

75 cents.

Go to page nine and just a couple of quick points here, you're all familiar with the NAV table.

Just stay in cigar.

Well simple as our interest and while simple is there.

And that hasn't changed from the previous quarter. We kept the same mark from their last round of financing and that's at a $768 million.

It's the 1.4 reflects the sale of cigar three that Jeff just mentioned in his opening remarks.

And that's a 330.

$4 million that basically moves down the geography of the NAV table to the cash at $1 $6 billion.

Ill remind you our China AMC has shown.

As shown at it's equity accounted.

Book value here and.

Also in the Standalone businesses, that's where <unk> is and there is a it's marked at $1 billion, which reflects its a $12.62 a share price at the end of the quarter.

With that I'd take you to the earnings on page 10 and quickly go through those.

Certainly given the headlines already just mentioned that.

Significant contributions from.

Great West life, and IGN, great West life.

At 86 up 28% from the prior year and you can see that the momentum at <unk>.

Westlife Ah is is continuing with another strong quarter and we have a couple of slides.

In the deck, so I won't go into any detail here and AGM up 25%.

At 25 cents or <unk>.

Twenty-five contribution in the quarter and that's a record earnings.

Driven by record AUM and operating leverage.

At J B L.

In the quarter Q3 is not a dividend paying quarter in Europe, and so you can see that.

And a negative <unk> contribution in the quarter the same as last year, both quarters had a.

Mark.

Mark with respect to a good event, which is the appreciation of web help which they which is an asset.

They hold a 60% interest in has had significant appreciation.

Throughout the last couple of years and they are the Mark comes from the liability associated with the non controlling interest and management puts that has to be marked.

The wonders of consolidation accounting, we don't get the markup.

The increase in value on the the holding but we have to recognize the minority rate.

And management puts a liability so.

Too much detail quite frankly for the for the.

But non accountants, but that's the.

The nature of that particular item.

Down the page to alternative asset.

Investment platforms.

That reflects the cigar three dispositions $66 million in there.

Contributing to the six six cents in the quarter, China asset management strong results once again in China.

And later on you will see a chart and you'll see our country. The contribution is up 62%.

Strong increase in our AUM.

And the performance of its a mutual funds.

The other comment I'd make is leone as reflected in the stand alone businesses and finally.

On our corporate operations, another a little tax noise in both the quarters.

In Q3, we had three cent benefit.

In the quarter.

In Q3, 'twenty, one we have a one cent negative effect.

Effect from tax in the quarter.

And with that Jeff I'll turn it back to you Okay. Thank you Greg.

So then the next few pages I will just spend it very very quickly on our strategy on page 11, I'm not going to read the page. If many of you have seen this a lot, but perhaps someone on the call have up not in are new to the call. But this is what we've articulated as our strategy going back with the announcement of the reorganization.

And as you go through the various points there I hope you will agree we have been executing on each of the points.

These aren't just words on a page we are we take it very seriously and we have been working on all of them, including at the bottom of the page or a communication strategy is not just an hour, but across our various public companies as well and so I'll then turn your forward to to page 12.

We're also pulling on all of these three levers.

The organic growth tools that are public companies have the M&A leavers that are public companies have and then the additional value that can be created at the power corp level through various tools that we have and those three levers translate into value creation for shareholders on the right hand side.

Through higher earnings growth for that those parts of our businesses that trade on earnings, which is namely great West life and I G M.

And there's potential revisions as we prove to the market that we have higher growth that we have multiple revisions.

If we and as we execute that that in what we do in those parts of our businesses that are NAV driven.

Increases are N. A V and then we still think there's lots of potential on the AR on the discount side at the power Corp level. So that's what that's how our strategies translate into value for shareholders and then on page 13, you know each of the public op coast have their own strategies as to how they they're pursuing organic and inorganic and as I.

And the point of this page two as well, they're all on their own missions to communicate so let me then.

Turning to page 14.

And I think you know this is really a quarter, where we saw.

The growth at <unk>.

Great West life co broadly based across various platforms.

A little bit of noise in the reinsurance or then the capital and risk solutions part of the business, but strong growth across all the operating platforms and then led by empower of course with its strong organic growth in the market and then the three acquisitions that they have done two of which have closed.

And then there's the the Peru acquisition, which has.

Ben.

<unk> signed and as not closed at this point, so really strong earnings growth and of course, great West life did communicate in June at their Investor day that they had a medium term growth objectives for their EPS base EPS of 8% to 10% prior to additional acquisitions in that announcement it was prior to the Prudential.

It's been a course, which came in July.

I G M is.

It was really firing on all cylinders I think is the way to describe it and it has got strong flows it's got strong growth in AUM.

It has got its businesses all of them are showing really strong top line growth I G. Wealth is Mckenzie is right across the board.

And we're seeing the operating leverage in that business work. So you know and obviously markets are helping but you've got markets that got strong flows and the operating leverage in the business is really becoming evident and we're going to we've got good strong earnings momentum and AGM. So that's really.

Great to see and I would say that's the.

That's the slide of the quarter, if you will for at least in my mind.

So moving on to page 15.

So far this year, we have sold assets.

For about $800 million pre tax.

And those come from those transactions you can see on the page there I think all of them have been talked about before and so that part of the strategy and I think when we launched the strategy. We we talked a lot about the standalone businesses being a source of cash.

But we also said that we were moving to lighten our capital commitment underpinning the investment platforms and in a number of the of what you see here.

Both on the first point and then in power sustainable, while we're getting and third party investors. We're also looking for opportunities when they're there to take some cash off the table.

And with a view to returning that to shareholders.

Which then leads to page 16, and I think I already mentioned this at the outset I.

I think I've made the point, so I don't know they don't repeat on the buyback point.

I will point out we do have an objective the last point under PCC share buybacks. We do have an objective to maintain cash and cash equivalents of about two times our fixed charges.

And and then beyond that that's available resources to to return to shareholders I do want to say every time I I mentioned buybacks and I've said this many times that if ever one of our group companies needed capital because they had an opportunity for whatever it was.

You know, obviously, we're going to prioritize supporting the growth of our underlying core businesses, but in the absence of that.

Then we would we would be looking to return the money to shareholders.

We've also worked on reducing our financing costs and we are you would've been aware we we.

We issued $200 million of a perhaps last month and also redeemed.

Virtually identical series in terms of its term in terms of its.

Terms excuse me.

And took a $3 million of after tax annual our financing cost out through that transaction.

And at the bottom of the page just to you know we are very mindful that the group's leverage ratios are temporarily elevated because of the great West life.

Very active acquisitions.

I think you're aware so I spent about $10 billion Canadian over just a little over 12 months.

Or has announced they're not all closed as I mentioned on Peru.

And so there you know there are leverage ratios right now are right up at a really worried that the top says that they can be and so there's a lot of cash flow coming from the businesses. They required. So we think that will get itself back into a more normal.

And our levels in the near term, but we're conscious of that.

And working on that as part of our part of the business going forward here.

Okay I'm going to flip then on page 17, just a couple of comments on the platforms continued strong third party fundraising which is a key theme.

$3 4 billion from from non tower parties.

Parties other than power are to date.

That includes the 334 of the secondary and the balances capital that goes is going into the strategies themselves and I won't read off all of them on the page, but you see them there.

Various key.

Key fund Raisings that have been announced year to date and then on the right hand side of the page you see the continual drop and powers capital.

As a percentage of the total.

AUM the top of the pages funded and unfunded AUM and at the bottom of the page the unfunded, which is really the new fundraisings going on you can see that of course, there's an even greater percentage of third party non power and are in the fund raising as we move forward on a lighter capital model for power Corp.

And then page 18 is just.

Just breaks it out you've seen this fly this breaks out the funded and unfunded of $12 5 billion.

And then it.

Take looks at the funded.

On the.

Right hand side are center right hand side of the slide breaks it out between cigar and power sustainable and then the dark Blue is a power Corp sound money and the light I don't know what that color is.

Guess, it's blue.

I'm looking around at breakthrough he doesn't know what color it is either.

The the light color there is as non power capital. So that's just to break out and you're seeing that the sub bullet at the top of the page about $900 million increase in funded and unfunded AUM and just compared.

Compared to the end of the second quarter. So that's good progress.

Page 19.

So guard has got itself is.

As launch itself now into the real estate real property business through the acquisition of ever West from Great West.

This is a transaction that's a win win for both great West and for our cigar for cigar at launches an entirely new strategy and will add U S $3 $8 billion to its assets under management and then as you look lower on the page great West life has made a commitment over the ensuing years to put in.

Other $2 billion of U S into the strategies as well as another 500 into a different cigar products.

So great West was building out its U S real estate business. It was doing so for its own balance sheet needs and was also looking to to.

Managed third party money.

Cigar has really built up a very large network of lp's are investors across its different strategies I think is well over 100 investors and Lps and its different strategies and has become quite a fundraising machine.

So that was something that cigar was bring to ever west in cigars also proved very.

Adept at hiring talent.

And and so all of that with all of that life co had on its plate.

And recognizing it had a desire for the assets great West thought better way to go was to have cigar.

Manage ever West and then you'll see here that our great West took a minority equity stake in cigar.

Very similar to the structure they did at north leaf.

And so they're there.

Very interested in getting if you will a lot of product flow and also.

Being aware, how those strategies are unfolding and getting a window in our seed into that so.

We think there's going to be good for cigar and power and we think it's going to get to the great Western really pleased to announce that.

Page 20 won't go on on this page just to say each of our.

Each of our companies when we're looking at alternative strategies, and I guess private equity private credit real estate et cetera. This is this is good for power, but each of our public companies has also.

Focused on increasing their participation either for their own balance sheet in the case of great west or for their clients in the case of a great West N. I G. M. N. G. B L is also building out its our private asset capabilities through Sienna. So this is a focus across the group.

Turning to page 21.

You have got a continued acceleration in the AR and the profit here of a T M. A C and China asset management of course, we own just under 28% between ourselves and our N I G M.

We're really privileged to have a position of.

Such such size and such a quality company.

We continue to believe that this is going to provide great growth and shareholder value for our group over time.

China is a go.

Going to and is prioritizing the development of their savings and retirement business.

It's one of the reasons why notwithstanding at times.

Strained relations over the last few years.

Financial services companies have just.

Across all of the major financial institutions across the world. Many of them are trying to establish positions in China and the reason is simple.

China is favoring the development of a savings business in our retirement business they need to do so if theyre going to move to a consumer led economy you need to have your population secure in their retirement and you need to have that broadly based and to do that you have to have a good savings business. So this is a priority.

In China, and China AMC is in a beautiful position to take advantage of that so we're really thrilled to have this asset.

<unk> Standalone businesses on page 22.

So we have taken action since the announcement of our new strategy to surface and then realize value in across the portfolio here.

The most obvious one was on the Lion electric and and through the fact that we did roughly a year ago and going public and aligned continues to.

Progressed.

Their business.

And so we're really thrilled we have we have really surfaced a lot of value. There I've mentioned previously that lumen pulse.

It continues to progress on their business, we did make an attempt to bring the company public ran into choppy waters here in the spring. So we decided not to push it at that time, but we continue to be very pleased with the progress that lumen pulse a peak in the fourth quarter of last year actually did.

Bring in or.

Or part of their business being eastern Diamond Sports was was in effect sold to Rawlings all part of a peak continuing to develop their business strategy to surface value and then as I mentioned earlier, we've actually sold GP strategies here. So that's been a liquefied. So we're very active on these various businesses.

We've got great businesses here, we continue to do what is smart for power, which is to maximize our value ultimately realize the value and work with our partners our managers and outside shareholders to do so.

Page 23, we continue to work on our operating expenses.

And we've made continued progress here. It was quick at the beginning it was we're chipping away as we get to a 100% goal on the right hand side. It looks like we've already achieved our goal, but the Q3 at 38 million there that's a little bit overstated, we got lower travel expenses because of Covid. So when we look at achieving the goal were trying to normalize.

For being in a post Covid world. So we don't think we're quite at gold yet, but we're getting very very close.

Page 24.

I think I've mentioned everything on this page I'll just skip over it I've already made the point we're on a we're all trying to communicate very aggressively page 25, I've I think I've addressed as well I just pointed out that power Corp does have.

For a number of years a separate website on various activities.

And the whole area of ESG and you can refer there to it and I think we'll all be talking more about this as we as we go forward.

Page 26th continued progress on our discount to my mind.

The voyage really started at the beginning of 2019, when great West life sold its U S life business and then we did the three way buyback a three level buyback between great West power financial in power Corp.

And we're really communicating we were going to be working on reducing the discount that culminated in the announcement of the reorganization in the fall of 19, and then with the exception of the blip. When we went into Covid, we've been steadily working through the various levers that we've been pulling on to reduce the discount and we still think there's opportunity to do that going forward.

So there you see it and then I will.

Up on the opportunities for further value creation.

Thank you.

If you go to the top of the page the Opco organic leavers.

And just talk about you know roughly three quarters of our value is in great West life, and our control positions, great West life and I T. M. They are principally earnings driven they're there they trade on our earnings as opposed to <unk>.

They're a little bit of an exception and great Western AGM excuse me on their strategic investments and they've been pointing out that they've got some assets there that don't get fully valued based on earnings, but theres still principally earnings driven and so we continue to prioritize driving earnings growth and you'll hear that from me you'll hear it from Paul Man, you'll hear it from James Sullivan.

Managements are highly focused on taking advantage of past investments to drive top line growth and then drive our bottom line growth and so earnings growth is going to be a big driver of our of how we create value at power in the meantime, we've got M&A as an additional tool and yes, great West life is in a position where it doesn't have.

A lot of excess capital sitting around but that doesn't mean, it's not very active in looking for opportunities and at some point here, we'll get those leverage ratios.

Ah back where they need to be and will be in a position to.

To continue to pursue transactions.

And then I G. M is also very active in looking at opportunities. So M&A will.

Continue to be a driver of value and then at power Corp. You know I really I really think we're just getting going here we have got.

Continue to have a lot of opportunities to.

To.

Create value for shareholders first of all in terms of the simplification of the group true realizing value on non financial services businesses on simplification of where our assets are on simplification of what's left at power communicating clearly.

How we're creating value through our.

Asset management businesses, and how we're creating value through the capital that we have underpinning those businesses.

Increased communication with our stakeholders and then continuing to as we do all of that drive the NAV discount down and when I when I think about the discount.

I do understand how for a number of years prior.

2013 to 18, it kind of.

Wished around 30% to 35% when you take into account both the power and the power financial discount when I when I talk about it.

Really the double discount, but you know in the past we've been as low as 5%.

And and when.

When I look at it going forward.

I get if people don't understand.

The value of the assets the power they are not going to put a lot of value on it but as we surface it realize it simplify it.

Then I think that story changes.

And I when I look at the discount either then the expenses. So if you look at our operating expenses 105 hundred $60 million a year pre tax you know if you do a present value on that what did you get to maybe two and a half 3% of our of our asset value.

You should have a discount for that I acknowledge that.

Sometimes people raise do.

Do we at taxes, if we were able to sell assets because we do.

That's a hypothetical question because I don't think we would do things that we've put ourselves in a position to realize.

A lot of taxes on a disposition those are the those are the kind of legitimate issues you could talk about a discount they don't get anywhere near 20%. They don't get you anywhere near there.

And on top of that power corrupts got it.

Better liquidity than our underlying operating businesses for those that want to buy and sell and get in and out.

So I think we've got a pretty compelling story as we continue to execute over the next few years here to drive that discount to a to a lower place. So with that we remain very excited about our what's going on here and the opportunities ahead as I see we're coming up on that we are on the half hour I should stop talking.

And open it up for questions that you may have so operator, thats it and I would ask you to open up the.

The call to questions.

At this time, if you'd like to ask a question. Please press Star then the number one on your telephone keypad again, that's star then the number one to ask a question.

Your first question comes from Graham Ryding with TD Securities.

Hi, good morning.

Hi, Greg.

Maybe I can start with the trends.

Actually that you did with the west.

So you I.

I guess, what I'm interested to know what's just whats your ownership stake.

Cigar in asset management or the overall asset management platform going forward because I know you also.

We sold a pool, but the management of cigar took on a 4.5% stake I think in.

In that business. So how should we think about your overall ownership of this alternative asset management platform going forward.

Yes, it's a good question and I don't think we've.

Our first priority, we disclose the number yet so we should come back on that but do that when we can when we can do it to all.

Shareholders at the same time, but I think we should do that and it's a fair question I think we own a very very large percentage of it was a small minority position that great West life coast taken and it was a small minority position that management has been taken.

So that's kind of a half answer to your question that I've I've gone as far as I can without that but I think it's a fair question that we should come back with a clearer number but do it for everybody and then the second thing I would say, though is going forward. If we do see opportunities to bring in outside or is even into the GP if.

They can add significant value to power's share of the G. P will be open to do that so in the case of ever West. This.

Our cigar into a brand new strategy, it's a very big asset class.

There's a lot of AUM that comes with it and they've got great West life looking to put more capital to work. So that's going to build out the business for cigar and great West life rightly said, well if we're going to.

We want to do that with you. We believe we like we like ever West we bought it we think we can grow ever west even more quickly under your hands.

But if we're going to do that and make the capital commitment we want a piece of the of the action at the GP and that was a fair fair thing for great West life to do all of these deals as you know if there's a transaction between great Western power.

And then the great West Life Independent Committee with a related Party Committee, which has got all independent directors on it gets involved in that so.

These are transact so that's the background to it.

So I've gone on a bit long here small.

We own the overwhelming majority right now they're small minority positions, we will work on getting disclosure.

So that we can be more specific about that but going forward.

Evidence that we're not adverse to bringing in other partners into it if theyre going to add a lot of value to our to our own stake Greg anything did you did you want to add anything that I forgot you captured at all okay.

Graham that's what I, all I can as far as I can go right now.

Okay, that's fine.

There any like cash proceeds involved with this transaction or was this purely.

Like an equity interest swap today.

Okay.

Yeah, I'm looking at Greg If there was cash was pretty small no there's no cash outflow okay.

And then.

I thought it was notable that you did in secondary sale for your.

Our cigar geared three invest.

Investment there that's something we should expect more other there are other parts of your <expletive> imagine.

Yeah within the funds that you see potential to reduce your.

Direct investment.

Sustainable capital.

The opportunity right.

Yeah. So.

Yes with power sustainable capital in.

In fact.

That did occur and the funding that was announced.

A year ago. When we did the 1 billion dollar fund of which $600 million was non power power rolled assets in and took a little bit of cash off the table. That's in that slide I cant remember the page now earlier in the deck. There were four cash items when I talked about the 800 million.

That was raised you'll see I think it was 150 or so that occurred when that was rolled in and there could be more opportunities because power still has a power sustainable still has a number of assets that have not that are still wholly owned by power that are in the development phase to wind and solar assets that are being developed and as they get developed there.

Does that have to roll them into that fund and other funds that we would have bringing third parties and take some money off the table. So that's an answer yes on power sustainable capital on the on the cigar side, we don't have immediate plans for that and this was quite opportunistic.

I'll, maybe digress a bit but just talk about what's going on you know lots of investors who are looking.

To get exposure to private asset classes.

<unk> are looking for secondary positions as well and the reason they like secondary positions as if you put your money stay in a brand new private equity fund as you May know it takes three or four years for that money to get deployed and the returns come for five years. Later, if you walk into a secondary position that's existed for three or four years you walk into an.

Investment, which is closer to the harvest period, and therefore, the returns come and meet a more immediate period. So you don't go through the J curve of a weighting in the desert for three or four years. So there's a lot of interest in secondaries as part of what is.

It's driven the secondary market in this case investors who were looking at some of the fund raising that cigar was doing elsewhere.

We're looking for a secondary reason raised the possibility that they wanted to purchase our interest and so the team is really opportunistic and saying well that's great because powers on our strategy to lower its capital. So it kind of came together.

And we were able to take some money off the table.

And expand the Investor base for cigar. So it was it was again it was a win win will there be more of those I don't want to promise those I'm not aware of any that are being worked on at this time, but we would certainly be open to them if those opportunities came.

Okay.

And that leads to.

Your cash balance moved up slightly higher quarter over quarter.

You did mention that you are going to be active on your in CIB, but what about the originally when we talked about all $350 million, perhaps Shirley.

Looking to the deal with that still.

On the cards.

Do you want to address the questions on the $350 million for chairs I could I'm going to.

Pass just to Greg sorry, Graham I could barely hear you on that so yeah, we're going to continue to look at the market in terms of opportunities.

As you know there is some interesting hybrids out there that.

My suite, the Bill and.

We've been looking at them and you know as.

As the markets evolve your.

You can expect that Oh, that's something that we're going to be active in thinking about and and there's opportunity obviously to to reduce.

The cost of financing.

Through some of these.

Instruments are.

Other than the perpetual prep are.

Issue that we did.

Just last month, so I might put it I might add a note to that Graham I think when we originally announced the strategy.

We had.

Notionally discussed it in the context of taking $350 million of cash and we had a goal of reducing our financing expenses by $15 million if you recall.

We're thinking about can we get there.

And not used $350 million of cash by lowering the expenses the cost of our financing in and not utilize the cash but you don't get the 15 golf some other way and.

And we're not declaring victory on that but that's what we're that's what we're thinking about and that's what we're looking for those kinds of opportunities to continue to reduce the costs, but maybe do it with either no cash or less cash as we do so so that's that's kind of behind Greg's comment.

Okay understood and then my last question if I could just.

Your comment on the discount to NAV.

And how you think it's appropriate to have some discounting there for you.

Your ongoing expenses, but.

What about the potential for some tax leakage of if you ever wanted to dispose of assets is there a reasonable discount that.

Think would account for.

For that.

When I'm looking at your sort of.

The holdco structure and discount to NAV.

I don't see why not I don't see much of one because I think it's a pretty hypothetical question and I think that.

So and I think that if we were ever to do divestitures, we would be looking for ways to you now.

Uh huh.

Get our cost base are properly aligned and not face big tax bills are unnecessarily.

In terms of so it's hypothetical that we would be doing big divestitures and its and its and we would be trying to be minimizing that so I don't I can't I can get really precise on a number when it comes to and my own had at least when it comes to discounting the operating expenses, it's a little more of a a brain teaser to try and figure out a tax question like that that's very hypothetical.

I don't think it gets you to 20% I I just.

You know you could create cases, but I don't know that it gets you anywhere near there. So that's not a very precise answer to your question because the questions pretty hypothetical.

And then Greg Youre looking at.

Got it.

I'd just add Graeme that.

0.2, perhaps history in that.

Whenever we do things.

Things of that nature, and but it's just that that is a REIT has a real hypothetical but.

We've managed our tax and our tax attributes to I think a pretty successfully over the years and so.

We would be minimizing that.

The tax bite on any.

Any transaction of that nature.

With advanced planning.

And do care.

Okay. That's okay. Thank you.

Okay. Thanks Graham.

Your next question comes from the line of Doug Young with Hey, Jordan.

Good morning.

Just on the staggered back to the staggered business I guess the first question is any way to quantify the net inflows and I think you've given obviously some fundraising and maybe the fundraising number is what the net flows would technically be but just curious.

Hi.

To get a to get more color on that and then can you also remind us what your hold staggered AD in the NAV, but not you what your investments are in staggered, but what the actual asset management entity is held that with them and add then the reason I ask because obviously, there's been lots of transactions in the Alt space over the last little while just trying to get some color on that.

Yeah. So on your first question and I'll give you a high level answer and I and I don't know, whether we've got a flow number but of course all of these funds or closed end funds. If you think about them in the context of sort of public funds. They're not open ended funds once people have committed.

They get their capital returns either through income, let's say on the let's say on the private credit funds.

But also a return of capital or are they get it through a return of capital when an asset has been disposed off but they don't actually have an opportunity to come in and say I want my money back right. So theres no outflows, there's return of income and capital.

So all of the gross AR fundraising.

Fund Raisings or net and fundraising so that's the way to think about it what we haven't tried to do is at least I haven't seen it is to look at the fund Raisings and then to look at what return of capital has been also provided to the Lps and then you've got to add in the AUM growth through growth in value.

I have I don't have that in my head I'm looking at Greg I don't think we've got maybe we have that I haven't seen it but I'm not.

But given my answer is that that satisfy your question gross gross inflows are equal to net inflows because these are closed end funds.

Yeah, I think others kind of baked in a little bit of the Richard I know, it's complicated kind of Beast, but I think some do you kind of factor in some of the return of capital when that thing could be and that's where I was kind of going but if you don't have the pets, that's fine it would be.

Yes, that's.

That's a good question, though Doug go ahead Doug.

I think that that's certainly something that will.

We'll look forward to disclosing in the ER and.

In the coming quarters, we certainly have Oh I thought.

Those numbers are available to us, but we.

We haven't disclosed them, yet, but I think that.

Your question is prompted.

Our job for the team here, who is looking for something to do for the next quarter always looking for feedback on our communications and IR. So that's good and we will work on that and I think the other thing that you asked was what.

What are what do we essentially carrying the management companies at and then I would say to use that right now that they are basically valued under book cost in the case of the cigar.

It's essentially.

The cash that they have on the balance sheet and I think its something like $80 million or something right now.

We haven't we haven't factored a value for the management companies into our announced at this point in time.

Okay. Good to know then.

You said and many times do you intend to resume the normal course share buybacks and I was just hoping you can elaborate is that just the wipe out deletion from the options or could you be more aggressive and I think I've asked this question in past calls so I am repeating myself, but yes.

Would you be more aggressive on buybacks here.

Seem to think you're discounting that should be a lot lower and then if you're not going to be overly aggressive on the buybacks why not because you seem like you've got quite a bit of liquidity.

Yeah. So.

Good question again and just to.

Be clear, but.

In terms of our intentions.

Doug.

We do have about 1.6 billion on the balance sheet and.

Jeff referenced that.

We'd like to carry to carry in cash and cash equivalents about two times our fixed charges.

You can calculate the fixed charges from our disclosure in the MD&A.

The two times fixed is probably between 700 and.

$800 million depending on the.

The quarter or so.

In that range, so you're you're looking at a.

Basically a difference of $800 million right.

Right now in terms of.

Where we're at now.

We like to carry a bit of a buffer.

And.

The buffer would be a fairly.

Fairly significant at this time.

So the range that you one might expect.

Is anywhere from 500 to 700 being available.

But.

We haven't been specific on exactly where we are we will travel over the next little while but that's the range that are.

We're thinking about yes, so that's a way of saying that we are.

We are going beyond option.

Not just doing option.

Mitigating option dilution.

We're going we will.

Opportunistically go into the market and put capital to work and buy shares back and reduces the share count that's exactly what we're planning to do and in that.

It has a lot of benefits, including we're trading at a discount is pretty pretty high still compared to our underlying value and we like the opportunity just basically on where the shares are growing and or at least where our businesses are growing so.

The answer to your question is yes.

And Greg just kind of played out how the math might work.

Perfect and then just on the cash balance that does not include the $94 million from GP I don't think or you can correct me, if I'm wrong and what else like in terms of cash inflows are coming in Q4, I don't there's nothing obvious to me, but I just wanted to see if I'm missing something.

G. P. GP is not closed and we don't have the cash in the quarter yet.

It's in in the door in Q4, but its not in Q3.

Okay perfect.

And then lastly, just on the Standalone investment earnings 58 million can you dig a little bit into what drove that.

And you said that the Standalone earnings $58 million what drove that.

The Standalone that's.

Leo and.

As you know in the quarter again.

The wonders of the consolidation accounting.

Certainly.

Leone announced earnings.

And they are announcing them today quite frankly, and so that's that calls on right now.

And.

That's our share I think our share is.

Just let me look at my note here.

$56 million of their income for the quarter and.

The income this quarter for Leo had a either a minute where they had a reevaluation of the Amazon warrants for.

I think well for our share being $56 million and that was due to obviously the decrease in the value of <unk> over the.

Period, so that that mark.

Became income.

So hopefully that explanation.

You followed it but it is.

The nature of our recognizing.

The decrease in the warrant value.

It was issued to Amazon.

So that's where I was going and it seems like there was there some unusual items in there, but that's basically what you're saying there was something unusual coming through.

As a result of the deal.

Yes, yes.

Okay perfect. Thank you very much.

<unk>.

Your next question comes from the line of Jami Cohen from.

From National Bank.

Yes, thanks, I kind of want to.

Follow on that theme and just looking at the alternative another investments platform I know that well I guess.

Couple of questions on that first the 2021 it's been a pretty.

Solid year from.

From that line item in terms of driving earnings.

A couple of of course onetime items, helping support that performance I'm just wondering if.

Is this a game.

And like enough scale or businesses, the underlying businesses and assets gained enough maturity that we.

We should come to expect that a bit more earnings contribution.

From this business on a consistent basis going forward or is it still kind of a.

Yeah, very modestly positive earning.

Earnings driver.

So maybe I can take a start and then Greg can.

Save me if I can.

Can you help clarify what I said I think from a.

We think of the business.

As a general partner being the asset manager and then as a provider of seed capital.

And I think you need to separate those two and as a provider as a as an asset manager.

When you look at cigar holdings.

It's got quite a lot of assets since quite a lot of third party assets, but quite a lot of assets under management right now and it's getting to the point where it is.

It can start to contribute but I don't want to say when but right now it's pretty close to breakeven from a cost and expense point of view given its scale and so as a GP. It will start to contribute if it continues to grow.

And of course, the income emerges you get fees and you have expenses and then they have carry and so how the profit emerges as a GP.

Be a little lumpy you get a realization on our private equity position and all of a sudden you got carry on it and some of that goes to the staff to the management and and then some of it goes to the G. P. So.

We look forward to that but we havent been profitable up to this point, but it's getting to the point, where it will be and then.

The L. P caps with regards to capital is a mix of strategies that are mature such as a more mature or I should say such as the private equity funds in Europe.

Cigar tree is.

It's been a cigar theyre doing cigar for now when the fundraising. So those are more mature funds, we get realizations for those periodically.

The.

The Portage tree Fintech funding has had realizations that have driven our profitability. The profit emergence on the credit fund is more kind of regular if I can call. It that theres an income stream, although there are recaps and refinancings that can drive so so.

We we are earning and will earn money on the L. P capital, but the profit emergence as a little Lumpier and I think we need and we've stated it in our in previous meetings Jamie.

Jamie that we owe it to our investor base to really lay that out and we're not quite there this quarter, but kind of talk about how that profit emerges on the L. P.

I flipped the cigar.

Excuse me power sustainable capital.

They are the AUM is not quite as developed in their little further wait before they reach breakeven as an asset manager or they need to do some more fund raising.

The as an L P and that business, you've got energy assets and you've got.

And in fact Chinese equities.

And so two divergent strategies, but they come from Power's history, which is why we have very strong teams in both areas.

The profit emergence on that is quite different as well.

But effectively you're you're earning eight 910, 11% returns on your on your LP capital as an energy and the and the interest funds and then on the on the Chinese equity side. Well then we can have a discussion about what what kind of returns we get and the Chinese are.

Markets, there's an L. P. It's been very very profitable for us obviously over the last 15 years, we've done really well on it.

So that's that's giving you some color, but not giving you some specific numbers and we're gonna before it Greg you can add to that I'd just add to it Jim.

On slide 18.

Jeff.

Through the various.

Funds that are proprietary capital or LP capital is held in.

And.

A lot of it comes down to vintage when Youre looking at the <unk>.

Private equity and.

We as you know we did the secondary with the cigar threes.

The cigar for is basically just.

Being launched.

And and funded so there are some assets in cigar for right now but.

As you know the.

The return of capital in the private equity businesses will be a three to four years out before we start to see some of the <unk>.

The earnings emerge if you will from that and they they emerge on realization right.

Private credit and of course, we will get that as we get.

Get our.

Dividend returns from private from the private credit fund.

Venture capital very much the same as the private equity.

<unk> royalties more like.

Private credit as well and.

In power Pacific the realizations, there come as the portfolio.

As a is managed for.

Either.

The market conditions as we saw earlier this year where.

The markets ran up significantly and.

The team in Shanghai, I realized a lot of gains in the it.

It was a Q2 that most of the gains were realized and so they'll emerge not on a regular basis, but on an intermittent basis.

So.

Yeah.

The good thing I'd say about.

Where we have the seed capital is it's in a lot of diverse.

Opportunities in.

At some point hopefully.

It'll be a little more consistent and more balanced balance out each other.

But it is a it is maturing and as Jeff said.

We promise that we'll give you more insight into that in a future quarter. So we will do that.

Great. Thank you very much.

Thank you.

Your next question comes from Tom Mackinnon.

With BMO.

Yeah, Good morning, Jeff and Greg a question just.

With respect to the buyback.

I mean, the company seems to leverage is high and it's certainly higher than our normal that great West why would you be buying back stock when your when the objective here is to reduce the overall leverage at the group and.

Just with respect to tax noise in the quarter, Greg I think you had mentioned something about its recent benefit and then a penny hurt and I'm not sure, which one applied to the third quarter of 2021. So if you could just clarify that please.

Thanks, Tom.

Let me start with the buyback and leverage question.

Greg can add to that too.

So the <unk> question or address the tax question.

So on the buyback side.

The leverage at the power group has consolidated of course, it's a consolidated leverage the great West life, and AGM and everything else, we consolidate and the.

Reason that the Leverages elevated is because great west life that did a lot of transactions.

And managed to do that without issuing equity, which we think is a good thing for shareholders.

At the power Corp level, we don't have.

That really we have a lot of cash.

We got preferred shares.

And we've already talked about our intent we want to keep that capital structure based in place, we're going to work on reducing the cost.

As we said in response to a question earlier.

But we're not looking to reduce so that's that's it we don't have to act like we got to think $250 million of debt basically across the group sales in its 33 year 30 year debt right. Thank you very much.

So we have.

So the cashes at power and we're going to return the return the ER.

Shares or buy back shares with it which does not affect our it really doesn't impact the amount of debt. We have of course, but we don't have an opportunity to reduce the debt at power Corp.

It answered.

And.

Okay great.

Do the tax thing and that is just a follow up sorry, yes sure sure. So.

The benefit <unk> benefit was for Q3, 'twenty and a one cent hurt us in the current in the current quarter. So that basically is the entire difference between the two quarters.

Okay, that's great and when when rating agencies look at.

Great Westwood they look at.

Yeah.

Power consolidated would that have a factor in terms of the.

On the leverage.

Four are in terms of their rating for great West and if so then why wouldn't the consolidated leverage at power and matter.

So let me take an attempt and then Greg you can you can jump in but.

Or do you want to if you want to start off I'm happy to jump on it. Okay. Go ahead, and then Youll correct me if I'm wrong.

Great West life does.

Rating agencies look at great West life as their own leverage.

The rating agencies look at power on a consolidated basis.

The rating of power in our group rating can impact their rating of great West life, but it's not through the mechanism. You described it's not that they take the power Corp that are in the I G. M consolidated debt somehow ascribe it to great West life. They look at great West on a standalone basis, but when they look at power and they look at our overall group.

If our rating where to go down several notches.

They have kind of rules within a group that you can have.

Our group rating being too many notches below the subsidiary as ratings, so they've got and so if power got.

A bunch of downgrades that could impact great West life rating I think is the simple way to put it but when they look at great West. They look stand alone. The end of your question, though is why don't you reduce your why wouldn't you reduced your debt at power Corp, and I'll come back to my answer to your previous question. We don't have that at power Corp. They only go one series is 30 years.

<unk> would be very very expensive to try and redeem that series.

And the preferred shares that we have outstanding we're not looking to reduce the base, we're looking to perhaps reduce the cost of it at this point is the way we're thinking.

Through transactions like we did this quarter Greg.

Greg anything you want to add to that or did I did I put my foot in it or don't get it right. You have just proven that you sat through a rating agency meetings. So.

That's a good a good thing and so it really really does start with the group rating, though and that's the news you start at the top and you look for the group rating.

And everybody's been measured on their own book right. So great West life is is Uh huh.

Its rating is calibrated based on its particular.

Position it is influenced by the group rating, but.

It is not it is done standalone and that's the same for AGM as well.

We could get into more of the subtleties.

In terms of what what's considered to be a strategic holding and what's not considered to be a strategic holding but I don't think we should go there on this call because that's that's probably the.

Jeff just gave you the 101 in the readings and how it works. So you know that's probably you know two or one or 301.

So we won't go there this morning, Okay and in your opinion the group rating wouldn't be jeopardized by buying back stock is that correct.

Correct right absolutely.

Thanks.

Thank you.

At this time I would like to turn the conference over to <unk>.

Geoffrey or for closing remarks.

Okay well.

I didn't I don't have any further questions or Greg. So we will wrap it up. Thank you if there's no further questions I'd just.

Again, thank everyone for participating and we look forward to talk to everybody soon and look forward to our lots of questions on this call about disclosure.

Around our platforms and we really those are good questions and we will take that input and look forward to coming back and answering those questions in the quarters ahead here. Thank you very much and operator thats it.

Bring the call to a close.

Thank you for participating you may disconnect at this time.

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