Q4 2021 Power Corporation of Canada Earnings Call
Yeah.
Good day and thank you for spending by welcome to the Power Corporation fourth quarter and year end 'twenty 'twenty. One results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question you will need to.
Star one on your telephone if you require any further assistance. Please press star zero now it is my pleasure to hand, the conference over to your first speaker today, Mr or President and Chief Executive Officer of Power Corporation. Thank you. Please go ahead.
You, operator, and welcome everyone to our.
Q4 and year end 2021.
<unk> call.
I'm ready I'm pleased that you're here with us this morning.
And I will get right into the presentation on pages, two and page three you have that normal disclaimers regarding forward looking and non.
Harass him and non-GAAP financial measures.
On page four you got smiling faces of myself and Greg Trepp, Jack who is our Chief Financial Officer is here with me this morning, and together, we'll be going through our.
As a result.
If I may.
Move you to page six.
And in the presentation you just have some highlights there are some of the recent either earnings releases earnings calls or capital markets presentations that are power and its group companies have been involved in over the last month or so and yeah.
Welcome all of you to go directly to great West life.
G B L. A for any information you have with respect to their results.
What they would be pleased to engage with you.
So without that with that I will turn to page seven.
Which is really the summary of some of the highlights that I'd like to talk about today I think.
2021 in the fourth quarter, both evidenced the strong earnings growth and momentum that we've been talking about for quite a period of time, saying, we have believed that our underlying businesses have strong organic growth.
And as well as those pets being helped with the acquisition. So we'll talk a little bit about that during the presentation.
Another highlight of the last quarter was on the first of January .
Group announced the consolidation of our interest in China AMC under I G. M. So that continues as a further step to simplify our corporate structure, which continues to be a theme of our activities as is returning capital to shareholders.
In addition to the dividend increase that was.
It was announced in November and which was about dividend of course was also declared yesterday at the same heightened level of 49 and half cents also a re launched a new and CIB in February and we will talk a bit about that as we go through the presentation and another theme.
I'd like to pick up on is the continued growth of the alternative asset management platforms with significant fundraising throughout 2021, including in the fourth quarter and then the acquisition by cigar they've ever West from Great West life co wishes added more AUM and scale to our to our asset management activities with.
That all turn to page eight and pass the microphone over to Greg.
Thank you, Jeff well just two quick.
So on the earnings per share for the year.
And for the quarter, we don't usually do every year, but.
Given that it was a record we thought we should at least acknowledge that and you can see that.
The adjusted earnings for 2021 were $4 77 up.
Currently from 2000 Twenty's three.
$3.07.
With that I'm, just gonna go straight over to the Q4 results and give you a little color on the detail we're reporting.
Adjusted earnings per share of a dollar up seven cents from Q4 of 29.
93 cents.
You would have all participated in many of you and seeing the results that were reported by our publicly traded companies and you can see that they contributed.
A dollar in four cents versus 89 cents in Q4 of last year.
Our alternative asset investment platforms, which basically is.
Cigar and power.
Power sustainable energy that includes not only the management companies, but it also includes our seed capital or proprietary capital devoted to seed capital to those platforms and you can see relatively routine quarter.
Contributing.
Nickel, which was the same as last quarter or last year or so.
Nickel as well and.
So you may see of course as already reported its results and GM has shared that with you we're showing it as contributing to reality.
Our reality.
It was $17 million versus $12 million and last year.
And that is a significant increase and they continue to do well and we'll have more to talk about later on.
Another slide in the deck the.
Standalone businesses.
No realization.
In the quarter of significance.
GP strategies and.
Also.
I would say that the.
The 2020 number included a gain on eastern.
Sure.
There is in that 70% that you see there.
Finally, the corporate line you can see that it's 13 cents negative versus the 10 sets in Q4.
That is due to a tax benefit that we recorded in Q4 of 'twenty.
Yes.
With that I'd take you to the next page, which is the NAV and again, some very quick highlights youll see that the net was $52 60 at the end of December and a lot of change over.
Q3, but up 27% from the $41 in 2007.
December of 'twenty.
You'd be wondering what the.
Cranium and Russian War has done to the markets in terms of the NAV.
You'll see that on March 17th we have at it.
$50 on 11 cents. So it has come.
Come down slightly during this period.
A volatility.
And the only other comments I'd make on the NAV slide or that.
Of course, we announced the see May see deal and we marked it at that particular transaction price.
Here you see it rounded to $1 2 billion it was actually 1.15.
And.
Leo which is in the Standalone businesses.
Down a bit.
A $200 million from.
Prior year period.
And the other thing I would say is cash is $1 $6 billion at the end of the year and we will have comments on that later on I will pass that back to Jeff. Thanks, Greg and we're calling it adjusted net asset value from this quarter forward based upon accounting guidance is my understanding but adding the word adjusted actually does.
Change anything it's the same definition that has always been its just we call it adjusted net asset value.
Kind of a lag.
I Wanna be CA.
Right.
You're aware of that okay. So let me turn to the next few pages in.
The next three pages I'm on page 10 is just a restatement of our strategy I'm not going to go through these pages.
Most of you on the line I, probably heard me and Greg go through them. Many many times, but I am conscious that we are conscious of the fact, we may have some new listeners.
Calls and people often go to our last quarterly results. When they are looking for a desk to describe as soon as people get introduced to power Corp.
Continually reemphasize the playbook that we're following and you can see it again on page 11 in terms of how we talk about the different levers that we are pursuing to create value.
And then on page 12.
We talk about the strategies that are major public companies are pursuing themselves, which is part of our overall value creation strategy. So thank you for indulging us as we go through those three pages and continue to have them in our presentations.
I'll go to page 13, and I talked at the outset about.
The year in the quarter evidenced in the strong earnings growth and momentum, which we have been talking about for some time. It was both organic and M&A driven a very very strong results in 2021, great West life had record net earnings.
We could say they had record base earnings, but since they've only been covering base earnings are calculating them for a few years. It wasn't a very meaningful statement, but had the bandwidth we expect it would've been a record but on a net basis. It was a record earnings Q4.
I had a little bit of weakness from Q3.
Yeah, a few things I think great West life went through that empower was down a little bit from Q4 from Q3 excuse me sequentially some of that was.
A little bit of one timers in there was a little bit of a higher expenses in the fourth quarter. There is nothing in that quarter that changes our view as to the progress progress it empowers, making or the earnings trajectory that we see for the business going forward.
So we thought it was a solid quarter.
And overall, a terrific year for great West Lifeco same thing with IGN in their case it was virtually all organic growth.
We have been Telegraphing for some time that we thought the very strong momentum that Ah I G. M had been experiencing in the marketplace would result in an earnings growth as the top line was growing it had been driven and continues to be driven by Mackenzie, but well really.
Illustrated in our in 2000 22021, excuse me and as we went through into even the first part of this year with their sales. So there's good momentum at at IGT wealth. So we're really pleased about this part of our story, which was which we think at the end of the year, we look back out and say terrific growth in AR.
The underlying earnings.
Page 14, just a few comments on the transaction to move the 13.
9% stake that power owned into high G. M. It does a number of things for US first of all it is very consistent with our overall strategy of simplifying the group.
The second thing. It does is we think that having the entire stake of China AMC in IGF will result in much better value recognition I think about the size of the overall 27, 8% block and the earnings and the earnings growth.
Within <unk>, it's a meaningful part of AGM and we will continue to grow we assume over time. So that's something that we think will get recognized kind of got lost within power Corp. As a as an investment of $1 billion or so within our overall stream of asset. So we think it'll get better value recognition with an AGM and it belongs there quite frankly.
From a from a partnership in industrial AR.
A logic point of view.
We were really pleased to buy more shares of great West life co.
Very keen on what great West life goes up too. So we were pleased to facilitate.
The financing of the transaction for AGM by taking in effect.
For the money that we received in buying shares of great West Lifeco and then finally it provides cash.
Two power Corp to continue with our return of cash to capital to shareholders.
And so.
After the purchase of the great West life stock and paying a little bit of tax in China that we anticipate and still provides a good chunk of cash that'll help fund our buybacks. So theres four good reasons, why we love the transaction.
And the business of CMA C continues to progress very well.
Ill spend the next couple of pages, starting with page 15, just talking about G. B L and looking at what she'd be always done over the year.
Very strong.
Growth in their <unk>, 13% per share over the year.
The theme at G. B L is very strong our rotation of the businesses that they own and you can see how the travel.
Traveled from the start of the year to the end of the year and really a greater emphasis on private companies.
From over the 12 month period, they went from having 17% of their assets in private companies to 25% of their asset sensitive it's a rotation that's continuing.
Web helps the canyons you can see some examples of where.
They are putting their capital CNA investment managers are not only are they getting into private assets, but theyre also starting to get into the asset management business themselves with third party asset management, So real change happening at G. B L.
You see some of that on page 16.
Laid out in terms of some of the actual disposals of public companies like whole simmer Umicore and then more money into private some more money into Sienna and I would encourage you to look at the March 11th results.
Presentation, it's referred to on that early page Uh huh.
Oh on their webpage. It does a very good job of describing the strategy that <unk> is pursuing and the AR and the amount of energy going into building out that business.
Okay and then the other theme on page 17 is the alternative asset management businesses that we are building it.
Power Corp.
Stop at the end of the year here and say down in the lower right. We ended the fourth quarter of the year of 2020 with $8 5 billion under management or committed so funded and unfunded AUM and we ended the December 31st of this year with $19 1 billion that was as a result of.
Fund raising a result of the ever West transaction and a result of capital appreciation on the position. So all three we're driving it on the funding side on the lower right.
Of the slide you'll see that the funded went from five six to 14. So obviously the difference being funded unfunded, we got investors, who have committed to put money out but the money actually has to get invested in these funds. So that's the portion that's been invested and you see the growth there and you see in the dark power portion of that it.
It really has stayed constant and the growth has come from from third parties, including.
In our in this case, some some Canada life involvement.
Overwhelming majority of the external funding is coming from parties either then.
Power and Canada life, but in the ever worst case of course, a lot of Everquest money was Canada life or was great West Life Company I should say in Canada life money.
So they're there they are investors in that let me flip to the lower left side of the page and you see some of the profitability from the asset management company. So cigar.
Just from a management fee alone perspective had 100 million of ours and in management fees in 2021, basically getting close to breakeven here on a fee only basis. They had a very good year for carry a lot of that was the carried interest a lot of that was driven by their fintech investments that that is quite an unusual quite a very high number.
It's not to say it won't be done again, but we would not expect that to be an annual event on that that level of profit.
This business as you know CCAR is getting a lot of scale and and getting very close to the point, where it's going to be contributing.
Earnings to the company power sustainable is got is not as far along in terms of its development and to remind everyone. The the cigar business had some businesses that were already in the third party funding business the Fintech strategy cigar.
In Europe had been funding from third parties for couple of decades, or 15 years at least the strategies and power sustainable had really when we switched strategies two years ago were really 100% power Corp strategy. So that group is is out and have to build up their third party their distribution building up there there are there active.
And they're making good progress in terms of third party funding, but are are not but she'll have a ways to go in terms of getting the scale on their on their management fees. So I'm, just a little thing yet into our into the profitability I'd just draw your attention to the last bullet point on page 17, the fee bearing capital, we just break it out here.
As at the year end is 11 four versus the 14 that youll see at the bottom of page.
The bottom right and of course, the differences you get paid on committed capital and not on the capital appreciation when you're running these businesses. So we just.
Break that out to help you reconcile if youre looking at trying to type piece of assets.
Okay, I'll switch over to page 18.
In page 18 is just a little more detail as to how the strategies play out.
Between cigar empower sustainable and you do see at the top of the page the breakout between the growth in the AUM that came from fund raising $4 2 billion very significant and then but we did have the acquisition of ever west in the fourth quarter and you see now under cigar in the bottom right that are not real estate.
Investing capability at the U S real estate platform is a significant part of their own.
I'll move to 19.
On page 19, we just talk again about what are we doing here building out alternative asset management businesses will firstly, we had a lot of these capabilities that had been built at power Corp, We're now adding to them, but even prior to us shifting strategies.
We had these teams that had very good track record. So we were building from a position of strength, we've been able to attract very good teams that are.
Power and within these platforms, but also there are synergies with what great West life, and AGM and G. B L are doing and we're helping each other here.
<unk> got some of the points there great West life is looking to advance its strategy to put alternatives on its own balance sheet is looking for those assets to help with its a its own products and its own solutions for its clients and its in the financial services business, so being around a very active fintech.
Ecosystem is very very useful for them to understand what's happening in their businesses.
And then on the case of AGM very much the same strategy their purchase along with great West life of North leaf is evidence of that but there also.
Investing in some of the strategies that are at a power and then she'd be all I've already talked about their shift into our private assets and their own shift into our investment management and so this is really a group effort and there's a lot of benefits that are going back and forth between the public companies some powerpoint.
Shifting gears on page 22, our efforts to monetize assets and this is not just to create cash to return to shareholders. But is also part of the simplification of the group.
See it top four transactions. They are four four transactions, we highlight over the year.
That resulted in net proceeds coming into power I think we've talked about each of them.
And so.
That create cash and then the.
In January 50 announcement of China, AMC as I mentioned in my comments that also when you take it when you. After the fact that we purchase great West life shares payable, but tax in China Theres, another $500 million that is freed up for.
Capital that we're able to return to shareholders I've said it in all of our comments that while we plan to buy shares back we will always prioritize if one of our operating businesses is doing some sort of transaction and needs our support for for capital, we would prioritize that but we we always try and do those deals with.
Without putting much capital into them, if we can't and but.
But that would be the priority if they if they had a transaction that required an equity infusion, but in but in the absence of that our intention is to return capital to shareholders.
Page 21.
The four standalone businesses that we identified when we launched the strategy at GP strategies at the bottom has now been disposed of.
On the other three.
We're going to continue.
Continue to support the buildup in AR.
Of those businesses with the management teams and in some cases with other shareholders and we will be looking to monetize.
Monetize that and at the appropriate time that makes sense for power. It makes sense for our for our partners in those businesses. So that still is very much on.
In the playbook and part of the strategy, but we're not putting any kind of timeline to our.
Pinning ourselves into a corner that we have to do something by such and such a date, that's not the right way to maximize value for power Corp for our shareholders.
Greg I'll turn it back to you to talk about and make some comments on our capital and the whole share buyback topic, great. Thank you, Jeff So I'm on page 22 and start.
Start with capital transactions, you will have all seen that in October we took a vantage of some attractive rates on perpetual press.
And as some of US are want to say this is a security that is traded by appointment and.
And the windows to actually.
Take advantage of those opportunities don't present, all the time. So we were pleased to do that that's going to yield about a $3 million reduction in our annual financing expense.
You'll recall that back at the time of the next we said that we would potentially entertain entertain.
Redeeming.
Some press to reduce our financing expenses as well I think at this point in time, we see greater opportunity for shareholder value creation to our to buyback our own common equity and so we have re initiated our program.
Normal course issuer program and you can see that we bought $153 million worth of shares.
Through 'twenty one.
And a 22 year to date, we've done about $112 million.
I'd, just say that we.
We I had mentioned earlier on that we have cash on the balance sheet of about $1 $6 billion.
There is a a dividend that is payable usually in the first two weeks of the coming quarters. So we usually keep a little less.
When we think about.
That number so about $1 $3 billion is what we think is the cash on hand.
And as you can see in the bullet point, there that we keep two times, our fixed charges, which is roughly about $800 million. So that's about.
$500 million of.
Cash that we have available to us.
Repurchase stocks and of that 500 as I said, we've done about $112 million. So we've got about $400 million.
That we are looking to utilize to repurchase stock in the coming months.
Of course, then when a CMA sea closes in the second quarter, we should have an additional $500 million to work.
And we'll revisit it at that time and it does certainly talk to you about it.
That takes me to page 23, we've achieved our goal we were almost there in Q3, but we've gotten there.
We have achieved our targeted expense reduction of 50.
$50 million. So you can see our run rate and targeted run rate or a $38 million a quarter.
I would just say that in addition to this our wells as we were rationalizing some of the businesses and in particular, our real estate business Oh, we have.
Sold or have commitments to sell five properties of the six that we actually hold them and.
That's going to yield another $60 million in terms of additional cash that we can use.
And I think that's the end of the story on expenses, Jeff I'll turn it back to you. Okay. Thanks, and just before I wind up our comments I'll just stop on page 24, and make a comment on the discount to NAV.
We were obviously pleased after having.
Historically been around 15% and actually at certain times, even lower than that.
We had been traveled for a period of time, where our discount was closer to 35% over the last three years of work starting with the sale of the U S life insurance business by Great West and the three way buyback and then the reorganization and then the new strategy and all the things we've been doing we've been driving that discount down.
We think that aside from the.
Expenses that we have at the Holdco, which gets you to if you if you discount those gets you to somewhere around 3% NAV discount.
The rest of it is all open season for us to work on through our simplification and proving that we can how we add value at the power Corp level. So the discounts continued to come down it has widened out in the last couple of months here as we've gone through some I would say shakier markets and we just view that as an opportunity at this point.
But we continue to be very focused on driving this as an additional discount down as an additional lever of value creation.
Page 25, just speaks to what our group is doing on the ESG front.
Every every company and every public company is focused on this every every company should be focused on this we think we're very well positioned.
To continue to make progress on it it just highlight at the top of the page there that.
In 2021 power I was one of only three companies in Canada to receive it.
Leadership rating on the carbon disclosure project.
But you've got there for great West <unk> all of our companies are very active on their on their ESG strategies.
On their net zero commitments.
And so and on their launching of funds and launching our products for their clients as well so they could get their own corporate activities and they've got their own balance sheets and then they've got the money that we are managing on behalf of clients and they're all under intense focus from.
Where we're what we're doing on the ESG front.
And I'll conclude with just the.
Standard page on we're still very optimistic that a lots of opportunity across these three levers of value creation.
Obviously, you have done a lot we've put a lot of capital to work in the past 18 months and no question from.
In terms of the size of the capital and in particular, you look at great West life they've got.
Got a period of time, where theyre going to need to rebuild their balance sheet and I've also got three integrations are going on with the prudent Prudential retirement transaction has not closed yet is targeted to close right at the start of Q2.
And and so they'll have three integrations going on so that is obviously.
Our focus of great West life, but it is not stopping us from looking at what comes next and laying the seeds from where we take the M&A strategy going forward across the group, including at our Great West life. So very excited about what we still have to do and with that I will conclude my remarks, and we can turn to the period of the meeting where we take your quest.
And so operator.
You too.
Went up the.
The floor to questions.
Thank you Sir is there a reminder to all participants to ask a question you will need to press star one on your telephone again that is star one on your telephone keypad. However, if your question has been answered or you wish to withdraw from the queue just press the pound key standby, while we compile the Q&A roster.
Your first question is from Geoff Kwan with RBC capital markets. Please go ahead.
Hi, good morning.
My first question was when you think about the potential acquisitions that create lasting IGN could make over say the next few years.
There was a need for them to raise equity.
Do you see the plan to maintain your ownership stake in them or would you be willing to dilute down your ownership stake recently asking is I'm just trying to understand how you think about power's balance sheet in terms of potential uses of cash both from the cash that you've got right now, but also as you monetize some of these noncore assets.
Whether or not that ultimately see greater focus on share buybacks, given where the discontent is today.
So.
Thank you, Jeff and good morning.
Theres not a specific black and white answer to the question. So let me answer it based on the principles we would follow.
As I mentioned in the call if.
One of our operating businesses needed to raise capital and equity capital to do an attractive transaction.
We would prioritize that over buybacks any day.
That would be our first priority.
The second piece of your question, though is we don't have a bright line as to dilution or non dilution, we're not in favor of diluting ourselves in general, but if you look at the history of the acquisitions, London Life, Canada Life. For example, while the group put up capital to support the transactions they were big deals in the call.
Text of what life co locate with life Coe was doing and there was some dilution in other words, we power financial in that case and at that point at that time.
Participated.
But we participated lessen the public there was a little bit of dilution that occurred it wasn't part of a Grand Master plan, let's get ourselves diluted by a point or two it was just simply we had an incredibly attractive transaction.
It needed a lot of capital to get done it needed the public markets and we kicked in as I recall for $500 million.
I might have those numbers wrong, but that order of magnitude. So we would support transactions. We typically don't like to issue equity. If we if we don't have to do in our deals that's not the playbook, we like to follow up but if it's a very attractive transaction when do we need equity to get it done we will certainly do so we will support those and whether we dilute or we don't dilute at the Mart.
<unk> I think it just depends on how much cash how much with our financial position at the time, how big the deal is it'll be very situational specific.
That answers the question.
No it does.
And then my next question please.
<unk>.
Hi.
And power sustainable separately in your financial reporting I'm. Just wondering is there any merit to merging those two entities together, whether or not it's give me, giving greater scale and synergies or other reasons as you.
Look to build up your third party asset management business.
These are businesses that have capital on them, but they actually are people businesses and they they.
They they run and they succeed based on the.
The people and the teams that are in place just like any other asset management business.
And in these cases these businesses actually.
It came up within power with different groups operating them. They have different histories, they've got different people involved in it and as we look at that we think that trying to combine those would actually do more damage than trying to leave them, where they are so that's the first reason and it's the reason as you go across our group and many other group.
In asset management, whether it is public.
Public Securities are trading a private securities you have different investment management.
Company's existing across big financial groups, just because of the cultural aspect that everybody came to work at a certain place. They they bought into what was being done and if you try and combine it with someone else you.
You can really destroy you can think you're saving costs and getting scale, but you actually lose a whole bunch of your key people and Youre just drawing value. So we are happy to pursue it at this time and they are pursuing slightly different.
Strategies in the market as well in terms of their positioning.
So that's the answer to your question no plans at this point Jeff.
We think that would do more damage and help at this point.
Okay and just my last question was on GBS. They have theyre seeing investment managers business. Just wondering if that's something you could see the sorts of collaboration by partnering to distribute some of their strategies and vice versa or even if it.
A business that at some point down the road.
Might be interesting too.
Wired to scale up again, your third party asset management business.
Good question. So very good question, so G B L.
In general and Sienna specifically they have been cooperating with power Corp, they've been cooperating with cigar Europe . They are there is a lot of communication as you can imagine across the groups in terms of.
Both getting product for their clients as well as deal flow and I will just go back to the history of cigar Europe .
Empower which is going back to private equity business in France was really came out of the G. B L investments was one of the key motivators for G. B L was focused on doing larger transactions in the European market and Theyre getting all these opportunities that were below their radar screen and that was part of the thinking and star.
The the cigar Europe private equity business that we can get a deal flow here, we've got we own the second largest holding company in Europe , they're all over.
The deal flow in Europe .
That's the whole starting of cigar Europe was was in fact cooperation with the with <unk> and that continues as we get into as we get into private alternatives and to an even greater extent, Greg did you want to add to that.
I think youll see just that.
Sienna has invested in some of the cigar vehicles.
That collaboration also extends our right up to.
The governance structure of those organizations where.
The senior officers of.
Each of the groups will sit on each other's boards you know pull three is very active.
It should be L and also.
Colon haulers the CIO.
As you know.
The cigar board so theres a lot of cross fertilization, if you will.
Great. Thank you.
Thanks, Jeff.
Okay.
Your next question is from Graham Ryding with TD Securities. Please go ahead.
Right.
Hi, good morning.
Good morning.
Could you maybe just.
Elaborate or provide some color just on the fundraising outlook for 2022, maybe what are some of the sort of <unk>.
Strategies or what does the pipeline look for look like across your different.
Vertical is one alternative platform.
So your question is with respect to the alternatives right not across all asset management business.
Yeah.
Platform.
Yeah.
So continued fund or that the plans are continued robust fundraisings in the existing strategy as well as the launching of new strategies.
And I could I could talk a bit about that and the question Mark is the current environment Graham of a kind of market instability.
And then geopolitical instability of what's going on in Russia, and Ukraine, It's kind of got a obviously a question mark over everything is how does this play out and how much risk is in the market.
And.
I think so that that's their part of the backdrop, even before the Geo political issues has been with inflation coming.
To a higher point in a much greater concern to the market in the last you know going.
Going back to let's call it until the start of the fall.
You've had a sell off in the tech sector. So public valuations of tech companies overall has been.
Well off as you're aware that NASDAQ is down I think 14% year to date alone. So that so in terms of the tech side of it.
What does that do to fundraising on the Fintech side, we've just raised a bunch of capital by the way in potash.
Hum.
As you no doubt have seen and so maybe that's a good thing because we get into an investment cycle, where valuations pull off a bit.
But for future fund raising.
Those question marks out there Graham I mean, I think we were the the businesses had a great year in fundraising as you saw and I went through on the slide and they had ambitious plans for 2022.
And we're just all aware of the environment is a little bit more challenging right now than it was three or four months ago and so we don't know how that's going to play out, but it's not a positive development. So we could get through.
It could go through a harder period here in the quarters ahead.
And I think breakout.
Add that to the.
They are investors and they are cognizant of the environment and understand the challenges obviously in.
And there's going to be dislocation for sure which brings sometimes opportunity but.
They're also in spaces, where.
There's a lot of money that has to go in if you will the green.
Movements in terms of infrastructure and things like that so.
There's lots of work that has to be done there is capital that has to be put to work not.
Not only in the parts of the world that we.
Our operating in but in particular our own country.
Great to answer your question Graham.
Yeah that was helpful.
And then.
I'm, just wondering about sort of the outlook for rising rates here.
Sort of at the power Corp level, you look look across your public publicly traded operating companies and also a year.
Our alternative investment management platform, but maybe at a high level.
Businesses are you thinking about rising rates might be a headwind and where it might be a benefit.
Yeah. So that's a big that's a big it's a great question and it's a big question.
In general and are in the insurance part of our insurance business, which is a funny way of saying it but as you know not everything that great West Lifeco does is pure insurance and the insurance business higher rates has.
Typically been a very good thing and lower rates has put a squeeze on profitability.
You know great West Lifeco runs a very matched book. So we don't have an existing book that benefits from rates going up because we're match, but in terms of the profitability of new products that are being written when rates are higher there is more room for for margin and spread and profitability has typically been higher so rates in and of themselves.
<unk> is a good thing.
Inflation is in and of itself a bad thing because all of these businesses have operating costs and and so when you've got operating costs that are going out going up either because.
Labor is costing more.
People costs are going up or there's shortages of supply and you've got costs going up in terms of other systems and whatnot that can put a that can put a squeeze on profitability and hurt margins.
That would be to off the top comments and then what does the impact of inflation have.
And rising rates, what does that do.
To the equity markets, what does it do to corporate profitability overall, how does that get translated if yields are higher.
In bond markets, and we've got inflation pressures across the corporate spectrum, what does that do to equity valuations in the whole mood around capital markets. That's a bigger macro question that is less related to our business specifically, but of course, we aren't a lot of fees.
On the market levels, and we and our businesses grow better when there's a lot of investor confidence in money flowing into investment funds. So those bigger macro questions would have an impact on our businesses, but it's too early to tell at this point I don't have a crystal ball, where it. So that everybody is just kind of thinking about I'm trying to I'm trying to get a handle on so that would be my answer to the question.
Graham.
Yeah.
Yep.
That was helpful. And then my last one last one if I could just I know you did a financing for cohort.
Subsequent to year end is there anything material there from I think you are involved in selling selling piece and that financing done anything material on youre not there or is that too small.
Please.
Yes, yes, it was very small I'm trying to remember the number I thought it was like a <unk>.
<unk> to $30 million.
Great.
Earnings will look like.
That's it for me.
Another example of.
The strength of our Fintech franchise there.
And again, the kind of investments they've been making so thanks for highlighting it.
Yeah.
Graham.
Okay, I think Graham's gone.
Operator.
Yes. Your next question is from Nick Priebe with CIBC capital markets. Please go ahead.
Okay. Good morning.
Maybe continuing on the conversation around your Fintech platform.
I wanted to start with a pair of questions on both simple.
I just wanted to confirm that the fair value of that investment has not been updated in your NAV since the investment round in may of last year.
And how well funded is that business for 2022, and they're going to need to come to market again here.
So do you want answer that go ahead Greg.
The fair value has not changed and.
I would I wouldn't answer it necessarily for well simple about their plans with respect to their capital, but I would say that I'm not aware of anything on the horizon.
The cost will be coming back to the market but.
Jeff I don't know.
I don't have a clear visibility into that at this point as well they raised a fair bit of capital. Although we did a secondary as you know we ourselves in AGM sold $500 million. There was I think $250 million of cash that went into treasury or thereabouts.
And with that.
They have continued to expand their their marketing in there.
Their outreach into new parts of the of the market with the introduction of new products.
And as a consequence, they're spending they're getting more aggressive in the market and the investor base that came in to support them expect someone wants them to do that so.
I think they are well funded but they're also out there building businesses and they are as a consequence using up that cash I don't have clear visibility.
I'm not even sure. Therefore does at this point is too, but I don't have clear visibility specifically as to whether they need at what point, they're going to want to raise more capital.
Okay.
And then just a point of clarification and this one might be for Greg.
Interpreting the asset management earnings contribution presented on slide 17.
Which I believe excludes mark to market gains on proprietary capital.
Does the earnings contribution of 41 billion.
Include fees and carried interest earned on proprietary capital as well.
The.
Sorry, I'm, just going to the slides first of all.
And I lost it okay, yeah. So the quick.
Is does the carry I think include gains on the proprietary capital.
As well and I think the answer is yes, yes. It does yes, yes, so that your page 17, so in the.
40 $41 million of.
Uh huh.
Asset management contribution from cigar empower sustainable.
It does include <unk>.
Carry on.
Proprietary and Nick the way to think about it as we think about the business in two buckets, we have an asset management business that we own.
A majority of the G. P. All of the GP the general partner in the case of power sustainable and a majority of the G. P management and now Canada life with the upper West transaction on as part of that GP and we think of that as we earn fees and we are in carry and the carry of course the split between the.
The professionals in the business get some of the carry than the G. P get some of the carrier so.
The source of the carry is the all the capital, including the third party capital and the power capital. We then have a second part of the business that we think of as we're a limited partner and Thats. Our seed capital. So we have roughly 2 billion or what have you across the strategies invested in our in the seed capital and in that in that context, we're getting.
Current kinds of returns depending on the strategy and in effect there were paying mccarry when theres a big gain they limited partner investors of course provide carried to the to the GP when there's a realization. So that's conceptually how we think about it and what's on page 17 is looking at it as an asset manager that GP only.
Understood. Okay. Yeah, I was just trying to get a better understanding of what the GP earnings might look like.
Excluding fees.
Fees earned on proprietary capital, maybe we can take that one offline but.
Yeah, Okay. So.
Yeah.
Thank you I'm sorry go ahead.
Yes.
Good idea okay.
Thank you.
Okay, Nick Thank you.
Your next question is from Tom Mackinnon with BMO capital. Please go ahead.
Yes, good morning, and thanks for taking my question here It has to do with Cipla.
Simplified the structure here with respect to China, AMC and are just continuing that simplification question with respect to well simple here owned in pieces.
Both IGN and power Corp level.
So the question is where do you think it's best to put wells simple too.
Optimize well simple and.
To get the best value recognition throughout the power group.
Hi, Tom Good question.
So.
The simplification I'm going to I'm going to I'll go specifically to your question there and then I'll then I'll go more general.
Just the history of while simple is that we started with a fintech strategy at power financial at the time and the initial rounds were done there and as well as simple starting to really.
We started to realize that this could be a very significant distribution in company in Canada and.
And our wealth distribution business.
<unk> is a big part of that and the management at AGM had been part of sourcing the deal. Originally so the subsequent rounds I think we did five or six rounds in total when we invested 300 over three years or so subsequent rounds came from my GM. So they could get a direct stake in it.
And that's how it ended up being in two places I know that's not your question, but it was done for we didn't try to complicate things, we didnt, we didnt set up too complicated, but we ended up with in two places.
I think we will wait and see with respect to well simple.
We've kept our Optionality open.
Answered the questions that you and others have had as to where do we go with it in the future.
We own after having put in 300 million and taken 500 back between ourselves and AGM, we own between 43 and 48% of the equity of wealth simple depending on how the options of management play out over the next few years, they've got condition based options. So we're still very very large and significant shareholder and how do we.
How do we.
What do we do with respect to well simple in the future do we continue to grow and be a major shareholder or do we let others are funded.
We were not making those decisions today and so.
We'll make them in the future as this as the business unfolds, we don't need to and so why not keep we will keep our options open we're delighted with what's happened so far but we're going to keep our options open I don't think in the short term, we would have as a high focus trying to concentrated in one place or the other I think we'll wait on that one to see how it plays out and then ultimately decide where.
Our position resides.
So that's not kind of if I look at things that we'd be working on in the next 12 months or so that's not going to be high on the focus unless for some event. It while simple that would bring it into focus but I don't anticipate that at this point.
I want to go more broadly on your simplification point.
Because I think just to say.
It's got two dimensions in my mind one is.
Where we have complications we get rid of the complications and that would be examples of that would be power port and power financial to holding companies GPL part, Jason two holding companies CMA Sea in two places.
In some ways you know they own the ownership of great West life, with which through the the transaction for a C. M. A C. AGM took a step in terms of their own simplification in the groups by by using that to help finance that acquisition and get more more great West life up.
At power Corp, so that structural simplification and the second piece of simplification is what we actually are and power Corp.
Has historically through our diversification strategy one to many different businesses at power Corp itself and none of them in particular being that material or meaningful therefore, when investors look at that they don't know how to value them. They don't really know, which part of the business is meaningful and therefore it becomes.
Complicated to even understand who we are so that part of the strategy is also a simplification and that is raising capital in a smart way from the Standalone businesses and ultimately disposing of those businesses.
And getting power Corp, simplified into being a profitable asset manager with some seed capital that's supporting it and Thats simplification of what we are at power Corp, which is not necessarily structural but in terms of what our portfolio is so I'm sorry, I went beyond your question to make a more general comment.
About simplification into two ways.
Yes, that's good.
Just when you did the bit of the history here on wealth simple I think you'd mentioned that.
I think it was started off as a fintech strategy powertrain and then as it started to grow you seemed like you started kicking me there's distribution opportunities at IGN with well simple is that ever materialized.
I didn't mean it from a context of necessarily synergies, although there are synergies already that Mackenzie is getting.
It's got some is providing some products into well simple I think if you go to the AGM.
Material and talk.
Talk to IGN management, they have been talking about some of the flows that they've got and providing some products on that shelf.
And it's in the form of Etfs.
There is that synergy, but I didn't really mean it that way what I meant is when you think about IGN. We are in the wealth management business in Canada, <unk> through <unk>, well, the traditional business where in that business through IPC, which is kind of a window onto the onto the <unk>.
A different part of the of the distribution chain and to the extent that well simple.
<unk> is becoming.
Financial services brand and stopped for a large part of the Canadian population.
It becomes a distribution brand in the Canadian market, and where does that best belong.
Under the scenario, where we owned it for a long time and it becomes I think it will become a very successful business management is doing a great job.
Where would we own that.
Think over time, it's part of your first question. If if if it were if that ends up being something as real as it looks like it could be and we own it for a long time.
<unk> wouldn't keep it in two places over time, we'd look to we'd look to put it in one place.
And our thinking and the subsequent rounds with IGN, which is a more logical place for that power Corp.
So that's.
Just kind of sharing how we thought about it I hope that helps.
Oh, Yeah. That's helpful. So it sounds like it.
In terms of anything with well simple doesn't sound like it's something that necessarily in the near term but.
As power evolves.
We'll see where our well simple takes us does that is that a good way of summarizing it isn't the only asterix I would put on your comment as well.
We will simply never sitting around doing nothing for a while.
Very active management team, they've got active shareholders and so I sit here, you're saying well I don't see anything.
In the near term in terms of our agenda.
Could be here next quarter talking about something because they are Michael catch him on the team and the border are always are always looking at doing things. So I just wanted to put that little asterix on your comments.
I think Tom prisoners power evolves as more how exactly that's it.
Yeah.
Yeah. Thanks, Tim.
Great.
Once again as a reminder to ask a question you May press Star one on your telephone Keypad, you May press Star one now.
Do we have other operators.
Go ahead go ahead, operator, sorry.
Thank you Sir your last question is from Jamie <unk> with National Bank. Your line is open.
Yeah. Thanks, good morning.
Alright.
First step first question.
On the impairment and the project under construction in power sustainable energy could you give us a little bit more color as to what drove that.
That impairment.
Typically.
Yes that was.
Covid is.
<unk> hit many industrials.
Through the supply chain so.
That in particular wind turbines have to be manufactured and we don't have any capacity to manufacture that type of equipment in Canada.
So it's usually the Germans or the Chinese who are manufacturing that type of equipment. So there had been construction delays that.
<unk> been basically due to.
The turbines and the and also the repricing of turbines.
Other thing as you all probably know that the carbon tax.
Rebate on.
Or credits I should say.
In that industry have been undergoing.
A change I think the federal government to put out a $170 per ton.
Sort of a high watermark and.
I think the industry has probably settled on something that is quite a bit south of that.
Probably $1 10, $1 20, most of the big.
Purchasers of those credits.
It's not a big group of companies in Canada. So.
The pricing on that is not because I would say it's not a.
Fluid market is one that.
Is dominated by just a few people and so there's a lot of volatility and so we took a bit of a mark on that for that reason as well too. So that was just in general some of the reasons for the for the Mark at this time.
Okay fair enough.
Does that did that Mark also factor in any of the recent developments in Iraq.
In Russia, Ukraine.
Constructions that maybe that might create as well on that.
On supply chain.
In this market or even in the other markets as well that could cause an apartment.
No that was it was not a forward looking mark it was for events that have have happened and that we've got a really have line of sight on it and I don't think you do.
Theres anything direct.
With respect to those events are in.
In Europe that would affect the manufacturing of our other that generally inflation.
And I think.
If I can I'll digress on your question there James.
One of the things that we didn't say in the call was that.
We do not have a lot of exposure to either Russia or to the Ukraine in our portfolio it's de Minimis.
We have gone through an exercise of looking at all of the portfolios in the group and so I'm just not.
Sure that with you as well.
Okay I appreciate it.
Hugh you decided this quarter to pull out.
At this time.
<unk>, our private wealth platform seem to be generating some losses.
What was the.
Bob process and purpose to point out that that platform and disclosures.
Well might say just general transparency, it's as you know it's not a large operation its grayhawk. So that's.
That's the firm you're talking about based at Calgary.
High net worth for that.
It is.
We've got a wonderful product I'm a client by the way. So I wanted to I wanted to make sure that those guys are doing a good job. So I made sure they got disclosure.
Greg MD&A.
That is not.
[laughter].
Humor.
So.
But also it is different right we have alternative asset management businesses that are running money.
For clients and there is a distribution business at cigar purchased which is a window into the high net worth market family office market and that market purchases a lot of alternative asset management.
Businesses. So it is a.
It's got a link in our synergy it's a distribution outlet for product and a window into our market, but it's not an alternative asset management business in and of itself. So and it's at a stage, where it's you know.
It has not gotten a lot of scale to it right now so I think pulling it out separate its profitability from the core asset management business that was the answer that Greg and attended to give you as opposed to saying he was a client.
Yeah, Yeah, Okay I appreciate that I appreciate that Greg.
It does it does it.
Any read throughs for the future or.
Any other plans they get pulled out should I be thinking about this in a larger scale down the road or.
Is it really just to clean up the asset management side of the disclosure. It was I think it was for good disclosure and I won't comment on what we might do in the future how big it might be come or not I think that would be speculative at this point definitional purposes, only just to make sure that was clear.
Okay last one for me then that just around third party capital raising initiatives six funds in.
In process today Portage three I think is done.
But what I'm curious to learn is blue sky.
Uh huh.
You know what.
What would a good year in terms of third party capital raising look like or App or stay garner power sustainable on this alternative asset side.
So we did $4 2 billion last year like what would a good year look like in 2022.
Yeah, so well.
Without being evasive so.
$4 2 billion was a good year.
And the platforms are now bigger and they have more products are launching so over time, we would hope to have the fundraising total continue to grow off that four point too.
But where I want to hesitate on what you because you put 2022 and your question.
In any given year, it's hard to predict what the number is going to be and fundraising is always specific to what the environment is and that's why I made some comments that the environment has gotten more risk in it right now people are being more cautious.
Technology in and of itself as a sector is not getting beaten up a little bit. So I just I had a note of caution I would think we'd hope that before would grow every year as the platform grows.
But I don't want to get into what 2022 will look like and we have a lot of risk around in the environment right. Now so I think the most complete way I can answer the question.
Alright fair enough.
On the books, so far if I can ask that.
You mean committed.
Everything that's committed in law on the books.
Pardon.
What's been locked in so far in terms of fund raising in 2022 Theres supports ops III.
0.2 that you saw when we have committed on that page I think it was 17 I can't remember in the deck here. We had we had funded and then we have committed and funded so that difference between the 19 and the 14 is what has been committed by investors that has not yet been put to work and there was nothing else committed that there's people out there.
Going about doing additional fundraisings, but that's all that's committed that for anything to add to that Greg.
Nothing to add to it.
Okay. Thanks, very much thank you.
And there are no additional questions at this time I will now hand, the conference back over to Mr. <unk> for final comments.
Great I have no final comments other than to thank everybody for their participation and wish everybody a good day. Thanks very much bye bye now.
Ladies and gentlemen. This concludes today's conference call. Thank you for joining you may now disconnect Stacey.
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Okay.
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Okay.
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