Q2 2022 Power Corporation of Canada Earnings Call

I.

Good day ladies and gentlemen. Welcome to the Power Corp Q2 2022 earnings call. At this time, all lines are in a live-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for a question.

If anyone has any difficulties hearing the conference, please press star zero for the operator's assistant at any time.

I would like to remind everyone that this call is being recorded on August 8, 2022.

I would now like to turn the call over to Jeffrey or President and Chief Executive Officer please go ahead sir.

Thank you operator and welcome everyone to our Q2 results call and happy Monday morning to all of you.

I'll kick off the call here on the pages 2 and 3. We have our disclaimers on forward looking information and on non-IFRS measures.

page four with me today is Greg Trezjak, who is EVP and Chief Financial Officer of PowerCorp and between the two of us will go through the presentation and answer your questions. Welcome back.

H6, just a reminder of various sources of information that you can look through that have been recently released by either Power or R3, Principal Operating Public Sub's, and you can reference that material at your leisure. H6, just a reminder of various sources of information that you can refer to.

And I'll start my remarks focusing on page seven.

So I think two key highlights from our perspective for the quarter, really solid earnings and what was a pretty challenging environment, obviously we have a lot of our earnings across different parts of the group are tied to market levels. Markets were shaky, flows were negative and certain parts of the industry and in certain, both in Canada and other countries.

So challenging environment, but on the two main earnings drivers for power corporation being our interests and greatness life in IGM, really solid results. Greatness life, really the diversification of its business, the strength of those businesses performed well and offset a lot of the market weakness, which was most pronounced in our results and their results in the US businesses. And then IGM continuing to roll along with its business strategy.

and showing good results in the challenging environment. The second point for my perspective, and this was really it.

a quarter really focused on execution. So in previous quarters we've come along and said, hey, we did two deals or three transactions. We've done a lot of transactions over the last couple of years. The group is heavily focused on execution, not to say we're not focused on what could, you know, other deals and other transactions in the future. We're always focused on it, but everybody's got their head down, focused very hard on executing the strategy that we've already articulated.

The US with progress made it in power. Again, IGM continuing to move forward, GBL, executing on its strategy and the face of difficult markets continuing the fundraising at the platforms. And then we continue to return capital to shareholders. So those are some of the themes, solid earnings results and execution.

KJ.

I could have picked a whole bunch of slides and examples. You all live it. But on the left-hand side, really challenging markets. And the S&P, I think it was down up to June 30th. I think it was 21%. It looks like it's about 20% in that. I got 21% from Jan 1 to June 30th in my head. And also the Barclays Ag, so the bond market, fixed income market, down 10%. So it's been a long time since we've seen those two.

act in that way. And so investors really got whacked in the face on both the fixed income side and the equity side. And on the right hand side, just one example, these are Canadian mutual fund sales, so we are certainly in a lot more markets than just that. But it's a very concrete example. You're looking at the second quarter mutual fund flows for the last 10 years in Canada. And this is the worst.

Quarter Q2 on record. I think if you go back in history There's this is the worst quarter that the industry has suffered certainly from a gross $20 outflow point of view so challenging environments on the market side of the business.

Greg, I'm going to turn it to you to walk us through page 9 and the next few ensuing pages. Greg?

Great, thank you, Jeff. I'm going to go straight to page 10, where we have a little more color on the results for the quarter. And so...

As you noted, challenging environment, but delivered solid results from the operating companies. I'm gonna go basically down the page on the right hand column and just give you a few points on some of the significant items here. So, you know, first starting with Great West Life as you alluded to Jeff, but you know, diversified.

business mix that delivered in this environment, you know, great-west life insurance businesses across all geographies were strong and offsetting some of the market-induced weakness in the wealth and asset management businesses. IGM was basically right on Q221.

with the exception of the mortgage business was a little softer and and seed capital marks that management referenced in their call last week otherwise the earnings would have been right on last quarter.

JBL, we've tried to enhance some of the disclosure and give you a bit more insight into that business. Their management focuses on cash earnings and dividends in addition to NAV, but principally they're focused as a key performance indicator where their NAV is travelling of course.

And they had...

a negative $44 million contribution to us in the quarter. And that reflects some impairments that they took on their tech buck in the quarter.

Down the page, alternative investment platforms as well. We've enhanced the disclosure. I think hopefully you'll see those changes. We do cite one of the big reasons for the change in contribution quarter to quarter and primarily being the China public equities portfolio. Where this year we

realized losses on the portfolio, whereas last year at the top of the market they were harvesting some gains.

So those are reflected in the results. But I would, in the appendix of this particular presentation on page 33, there's a significant amount of detail on the asset alternative asset investment platforms of both cigar and power sustainable. But I would invite you to take a look at over the course of the next couple of days.

In the corporate operations and others, two points to make operating expenses. Our run rate is about $35 million, which is in line with our post-cenergy targets as we completed our $50 million synergy targets. So it's running the right in line with where we expected it to be.

The $76 million number is lower than you might expect and it includes a $17 million net gain, which is associated with certain options that were designated as cash settled in the quarter. So you would have probably been expecting something a little higher, so just point that out. And with that, I just flip over to the next page, which is page 11, net out.

it here. And with that, I think I turn it back to you, Jeff.

Okay, thank you, Greg. So I'm going to move forward to page 12 and let's just pick up a few highlights within the company's not go exhaustively. But a key message at Great West Life is that the empower management of its three acquisitions over the last couple of years are on track. MassMutual is the furthest along in terms of its integration and they are tracking very well. Management reaffirmed their

that they're going to expect to hit their synergy target on the expense side and revenue retention is actually tracking ahead of their own models. There are six of the eight waves that have already been completed and they're on track to complete all eight by the end of the year. So, Mass Mutual is moving along well. Prudential closed during the quarter, so that's great. And that's significantly to the position of Empower in the DC market. And then the Personal Capital.

work continues and the tools of personal capital are starting to be rolled out both within the core DC program. So 8.5 million of the participants have now starting to get personal capital tools, including messaging tools. So we're enhancing the experience of participants as well as those tools being incorporated into the retail wealth management strategy of Empower.

on the retail business where effectively people roll out of their DC plan on retirement or when they change jobs. And of course, Power's got a strategy to try and capture an increasing share of that. So really good progress and feel very good about all of the original goals that we have announced at the time we announced those transactions.

Page 13.

You know, I GM overall, I talked about the results. I think really focusing on the strength of the IG wealth management businesses, the core point I'd like to highlight. We have talked about it. I for a number of years how there's been a lot of investment into that business, things have changed. It's been a multi year journey. And we felt we had good momentum building. And then this difficult first.

part of this year and through the second quarter and into July , the flows at IG Wealth continue to be really, really strong, which is just great news. And on this page, you just highlight a bit of that on the left hand side is the slide that IGM used in their presentation. But, you know, new flows from new clients continue to grow and they are attracting clients to the platform at an increasing rate. And it's coming across different wealth bands, including.

Mass affluent and higher net worth clients contributing and the redemption rate on the right hand side continues to be very solid as you've got Advisors basically very pleased with the platform and new advisors joining the platform I think IGM in their call highlighted some of the Marks that they're getting on the different surveys of advisors and on how well the IGL platform is being rated by advisors

So lots of good stuff happening. We're really pleased with the progress being made at IGM and with IG wealth in particular. Greg mentioned GBL. A lot of the earnings was really related to marks on their private investments in the tech sector. But they're continuing to execute on the strategy and made a couple of big acquisitions in the healthcare space during the quarter continuing to make a rotation.

and returning a capital to shareholders, their dividends actually up this year. And that they've announced for May 2023. So they are...

You know, the cashierings we're getting from the GBL continuing to increase outstanding the noise around some of the private marks.

Okay, I'm going to flip Pierre over to page 15 and just talk.

about what we've actually done.

to try and lighten the capital intensity of our model and create cash. At the time that we announced the reorganization and subsequently we put a lot of focus on the standalone businesses and as being a source of capital that we could liquidate and a lot of questions were on it. And that's the way we were thinking at the time. But you know, as we've reflected on our activities, we've actually been looking to realize how the

and monetize assets wherever we can as we move to a more capitalite model. And the standalone businesses actually have been less of a source of capital than we would have anticipated for reasons like I'm happy to discuss. But it doesn't mean we didn't have other tools in the toolkit. And so what you got on page 15. And so what you got on page 15.

is an example of a series of transactions, the most notable being having an opportunity to sell our interest in the Cigar3 Fund, some money we took off the table at Wealthsimple, of course, but you go through here and you see about a billion dollars from the start of 2021 through to 2022. And those are pre-tax numbers. And then another, the cash we're going to get pending the sale of CMAC to IGM.

being another source of capital that is still in cash that has not closed at this point. So we've been taking a lot of steps here to monetize assets. This is not a reconciliation. We actually do invest in the platforms and in the seed capital. And so, you know, this is kind of more, but this is more an example of the action steps management has taken to create cash. And then on page 16.

Just kind of adding it up, going back to the same 2021, we've returned $2.4 billion capital of shareholders. Obviously the dividends are the biggest part of that $1.9 billion. And that was also impacted by the dividend increase we announced last November . But also the buyback program we bought back. But also the buyback program we bought back.

you know, about 2% of the participating shares, 2.4% of the public float, $511 million in the bulk of that of course is in 2022 because we were not active really in 2021 as all of you I think are aware. And at the bottom of the page is just a statement of our current cash position. So that's a little different perspective on what we've been up to. Page 17 speaking of the standalone businesses.

They're continuing to make good progress. Leon, you've got some talking points there. Even though the capital markets are less keen on the electric vehicle space, Leon continues to make good progress in building out their business. Lumen Pulse been affected by supply chain issues quite a lot over the last year and a half, but their business remains very healthy.

So we've said all along right from the time we announced the reorganization we're going to support the growth of these businesses, we're going to do what's right for the businesses, we do not have a gun to our head to have a deadline by which time we need to realize value, we're going to do what's right for Power Corp, we're going to do what's in our shareholders, we're going to do what's right for the partners, our other shareholders in those businesses and the management teams with which we partnered prior to us changing our strategy in late 2019 and we continue to support these businesses and ultimately

will realize a good value for Power Corp when the time is right.

realize a good value for powercorp when the time is right and most opportune.

Okay, so I'm gonna carry on then to page 18. Greg mentioned there's a continue to enhance our disclosure. It's a work in prime rest, but we're just trying to continue to get greater clarity on that.

these businesses and you've got some disclosure on the PNLs here, including fee-related earnings for the businesses, which is down in the lower left hand corner in the third line. So that's basically the fees not including carry or performance fees, basically the management fees, left the expenses. There's a little bit in the cigar line where we have a $4 million of pre-tax profit there. The $4 million of pre-tax profit there.

There's some one times in there that's probably thinking that business more is running at a break even at this point. As Greg mentioned, you've got some negative carry going on during this quarter.

And we are also trying to put emphasis on the lower right hand corner. You get the AUM and then you get the AUM, which is funded and unfunded. And you also see the power corp portion of that. But of course the fees are not on the AUM. The fees are on the fee bearing capital. Sometimes the, so there's some funds that have been committed that have not been put to work yet. There's also on some of the private equity funds you get paid on the initial amounts, not the carrying value.

an Agra, a sustainable Agra food private equity fund in Canada. Sagar is up to 400 million on their Canadian private equity fund and Portage has launched a LEAP stage Fintech fund which is just in the initial capitalizing stages to good progress there.

Continuing on with the businesses on page 20, the original capital that Power Put in the China strategy back in 2005 is now the seed capital in our sustainable, our sustainable capital, China strategy. And this is just to say, notwithstanding a weakness in the Chinese markets and some losses that we took on realizing positions during the quarter that Greg alluded to, the capital we've had in the strategy has been.

very good one for PowerClark over many, many years. And it's not just because the market has done well, the team has outperformed the market both in their security selection and in the rest of the allocation decisions.

And I'll move to page 21.

Just a comment on our FinTech strategies, and attention around all we're taking it on. And attention around all we're taking it on.

The group's taken a break down on its well simple position. Just reiterating, we're just delighted with our FinTech strategy. As we've said many times, the strategy started back six, seven years ago, and it was primarily to get our group on top of what was happening with technological change, make sure we knew where it was coming from, we had visibility, and we were on top of it, and our operating management teams were on top of it, and that's been a huge success.

It's a subjective point, but from the point of view of senior leadership of the group, it's worked well. We made two significant investments, Wealthsimple and Personal Capital, where we put more significant amounts of money in, and we're delighted with the outcomes of both of those businesses. And then Portage was really our main window into what was happening in about five different verticals around the financial services space that we cared about around the world, and that has not only done well.

for its shareholders and for the other LPs, but it's also succeeded in getting our group and other LPs, by the way, really up to speed and on top of where technology is impacting the management services. So very pleased with what we've been creating in our fintech strategies.

And then just to comment on the...

On China AMC, it has continued to build its business in a difficult market and grew its assets over the first six months of the year and has been really driving its profit forward, its assets forward, really good progress to try to aim see the businesses doing well.

And then on page 23, comment on the.

on the discount. We have continued to say that as we execute our strategy and communicate what we're doing and simplify our model and get the market to understand the value drivers that we should be able to narrow that discount and we continue to make a good progress. There's always go on a straight line depending on and you get bumps in the market from time to time, but that continues to drop and we continue to believe that it's going to be additional.

initiatives that are touched pretty well every part of our businesses. So just a note on that.

And then I'll wrap up on page 25.

To say we haven't changed our strategy, we've been there, we've got a playbook, we're following it, the theme right now is execution, execution, we've got lots of opportunities to continue to drive forward. But this is the playbook that we're following and pleased with the progress that we have been making. So with that, I will stop the formal part of the presentation and you can turn it to questions. So I would ask the operator to...

Open up the lines for questions from people who have questions.

Operator. Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Should you have a question, please press star followed by the one on your telephone keypad.

You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received.

Should you wish to decline from the polling process, please press star followed by the two.

If you're using a speaker phone, please lift the hands up before pressing any keys. One moment please for your first question.

Your first question comes from Jeff Kwan of RBC Capital Markets. Please go ahead. river appearances

warning

My first question was on the China AMC deal. If I recall when the deal was announced at the start of the year, the expected closing was sometime in the first half of this year, I Jim mentioned last week that it may be more late than this quarter, maybe even slipping into Q4. So just wondering what's changed that's causing the delay for the deal from being completed? And what is the likelihood that the deal?

may not even get approved. Yeah, so good question, Jeff. You're great, right? We had anticipated that we would be closing earlier and they caught the delay as changes. And they caught the delay as changes.

different waves of changes in regulations in China that have caused refilings.

basically information that was provided on the basis of the rules that existed at the time that we announced on Gen 5 then changed a couple of times and assisted nature. There's a lot of change that goes on in their regulations, so we've had to provide new information and refile. Nothing to my understanding and I'll ask Greg to confirm that was at all specific to this transaction or two.

us or to China AMC or to, you know, IGM or power, nothing specific related because of us. It was just the rules changed and all of a sudden what we filed originally was no longer what adequate and we had to file different information and that's taking time and I think there's still some filings that are pending. Craig, do you want to add any color to that? Did I answer the question accurately or did I miss something?

Yeah, I know, I thought you've got it. There was a change during the Chinese New Year that I don't think anybody expected. So that came out after everybody returned from Chinese New Year and there was a new regulation or a new set of regulations. And then later in June , there was an addendum to it. And so it is part of...

the regulatory regimes.

It changes to modernize its regulation with respect to asset managers in the country. As you know, there's been a lot of change in China with respect to opening up its financial services market. And this is just part and parcel of that. So I don't see anything that is preventing us from moving forward on the transaction.

Okay, are you able to elaborate like what was the regulatory changes? You also mentioned there's an addendum.

Right now, let me take that to extent you want to.

Yeah, they're quite elaborate. They're filing requirements with respect to the type of filing, the amount of information, the financial statements that have to be filed. It's quite a laundry list, Jeff.

Okay, it was very technical in nature.

So I gather. The second question, the other question I had was just.

How do you think about in terms of the co-investments that you have in your strategies as LP investors? Do you kind of think of it in terms of whatever strategies that we do have wind up launching the alternatives platform? You know, this is kind of the you know Ballpart percentage commitment we want to make or or is there perhaps like an aggregate? Dollar amount you want to commit to this part of your business

That's a great question and one that we spend a lot of time talking about amongst ourselves and with the platforms. So the answer is, and I'm not trying to be evasive, is it depends. So when you launch a new product and it's the first time a strategy has gone out, the sponsor of being Power Corp is expected by the third party investors to show a real commitment. So think of Portage 3, the first fund...

We needed to be a big investor to get it off the ground. By the time we got to the third fund, you know, the LP community, the investor community didn't really need power to put a lot of money in order to launch a third fund, the fund track records book for itself. So, and the initial fund requires more capital commitment. The, that can be different, whether it's an equity fund or whether it's a debt fund and what's the track record of the investment team. Then when we come at it, our overall goal.

would be to minimize our capital commitment because, you know, I don't know how much, notwithstanding all of our efforts to articulate that we're going to get good returns and have got good returns on our LP commitments, I don't know how much the market fully values that relative to...

investing in things that produce earnings. And so we are committed to, we think we're gonna get good returns on the capital and we're building a business out to get to profitability, but we're trying to minimize our capital commitment while we do so. And so,

That's kind of the discussion that happens every time there's a fund launch. And the more there are new products that they introduce, the more we are asked to put some capital in. We're trying to run it so that we are not over time here going to be putting more capital in. We're trying to run it on a pretty balanced way. But it goes through some waves at times. Some years you're putting in, and other years you're taking more out.

So that, Jeff, I don't know if that's giving you a sense of it. I think bottom line is that we're supporting the businesses to grow and we're putting capital in to support the platforms while we're at the same time trying to minimize our capital position and change our mix, if you will, at Power Corp too.

have more, really at the margin, more earnings driven and less NAV driven businesses as we go through time here.

Okay, no, that's perfect. Thank you.

Thank you.

Thank you.

The next question comes from Graham Writing of TD Securities. Please go ahead.

Graham writing of TD Securities, please go ahead. I'm Graham.

Hello?

Hi, Graham. Sorry, was I open? Oh, go ahead. Thank you. Sorry, was I mute there? Apologies. Morning, just with the China MC, assuming the deal does go through with IGM 575 million cash proceeds pre-tax, what would your plans be here for that? What would that be?

be sort of further supportive here, share by Vax, or how should we think about that?

Yeah, good question. I think we have the number disclosed somewhere.

Greg, I have the number in my head. I just don't want to get ahead of our disclosure. The after tax number, have we disclosed what we think that is in terms of proceeds? I thought we had.

Yeah, I think it's about 60 million is the tax 515

I knew the number I just didn't want didn't want to get out of our disclosure inadvertently here. Yes. So 515 is the after-tax proceeds that Graham is what we've estimated and we the answer is we'll look at it at the time. What we are always doing is trading off buying shares back which financially is attractive for a number of reasons and that is our go-to playbook.

But we're all also looking at different opportunities from time to time and our subs are looking at different opportunities from time to time. So we're trading off, the go-to playbook is managed to our minimum cash level and buy shares back. But we always prioritize buying business either supporting our principal subs in something that they might wanna do or some opportunity came up at the power level at this financial services, like those.

feeling like you're sitting on some excess capital or in addition are you know are you of the view that your shares are undervalued or is it because they're trading at a discount to nav you just think that's a worthwhile.

on some excess capital or in addition are you know are you of the view that your shares are undervalued or is it because they're trading at a discount to that you just think that's a worthwhile uh way to deploy capital.

Yeah, I would say that we're just following what we said we're going to do. And why that makes sense is the second part of your question in terms of buying back. It wasn't so much that, oh, my goodness, the market's down, we should buy some shares. As you remember, through 2021, and going all the way back to COVID, we had stopped aggressively doing buyback liquid, a minimum program in type two, to manage dilution on options. And we were being super cautious through the COVID period.

until ultimately our major source of cash, which is dividends from Great West Life, when Osvie basically in the fall said, okay, the restrictions on dividend increases are pulled off financial institutions, nothing special turned on that, but that was the event for us to say, okay, we can... that was the event for us to say, okay, we can...

we can get back into the market buying shares. So the fact that we bought in the first part of 2022 happens to coincide with a weak market, but it was more related in our perspective from the fact that we hadn't been buying shares back. And we'd been selling a bunch of assets as I showed on page 17 or whatever the page was that I went through the divestitures.

we can get back into the market buying shares. So the fact that we bought in the first part of 2022 happens to coincide with a weak market but it was more related in our perspective from the fact that we hadn't been buying shares back and we've been selling a bunch of assets as I showed on page 17 or whatever the page was that I went through the divestitures. You know what happens?

If you think about it, when we sell an asset that is...

Particularly an asset that's either non-core US non-financial services and typically if it's a power, a lot of them are NAV based.

We sell an asset at NAV.

And then we turn around, we buy our shares back. And we buy our shares back, we're buying about a discount to NAV. So that's a good thing, we're arming that. But the other thing that's happening is we're kind of at the margin. Every time we do that, increasing the percentage of our company, it comes from earnings. Because if you see the value that PowerCorp has about 75% of it, I'm just being simple, but great less life in IGM, but 10% of our value.

It's really earnings and dividend growth based.

and not to oversimplify, but the rest of 25% is for the most part, NAV based. So you sell an asset at NAV at a dollar, you buy stock back at 80 cents, and then when you're buying the stock back at 80 cents, you're actually...

buying 75% of that value that you're spending is increasing earnings relative to what you sold. So I'm just doing a little financial math with you there as we buy the shares back.

We're actually arbing the discount but also changing very slowly but over time more meaningfully the mix of earnings versus NAV. So we think it's...

The absence of...

One of our subs doing some transaction where they ask us to finance it, that's a good use to recap right now.

Okay.

That's fair. And then just my last one, if I could, uh, this late stage FinTech fund, some see a little different than your previous ones, um, Portage that were more venture focused. So what are you seeing in the market that makes you think there's an opportunity here for more late stage?

a role-age focus fund.

A whole bunch of capital having a role in the syntax in the last three, four years with a lot of companies.

that are not yet to the point where their cash flow positive, having markdowns on their values, we've experienced some of that ourselves, and going to be needing capital to get themselves to the stage where they're profitable, but not necessarily a lot of venture money ready to jump in now because the momentum has been lost on the trade and on the investment. So to us, that smells an opportunity to use our network and our expertise.

to fund later stage companies that are, when I say late stage, they're still venture, but they're later stage venture. That is the opportunity that the Fortage team is seeking to take advantage of.

Okay, understood any size that you're targeting here or too early to a number on that. I should know that.

I'm...

I am, I'm not gonna, we can get back to you on that. That would probably be in the public domain. Greg, you have a particular...

I don't.

I forget.

I don't know that it's in the public domain yet. It's like what? True target will be Jeff. I think that...

That's still on the CUM grant. I'm going to let you know when it's available.

That's fine. That's it for me. Thank you.

Thank you. Okay, thank you.

Thank you.

The next question comes from Nick Prebe of CIBC Capital Markets. Please go ahead.

Okay, thanks. Maybe the bolt on to one of the earlier questions. You had a page in the presentation dedicated to highlighting some of the progress that you've made in making the platform increasingly capital light over time.

when you look across the various businesses, is there any other low hanging fruit you see to advance that a little further? You know, whether it's the sale of, you know, secondary sale of LP interests or a sale of standalone business. Yeah, I'm just trying to understand what the roadmap might look like on that front over the next year or so.

It's a good question and I'd love to be able to give a good answer, Nick, but I'm not sure I can. And I'll just give by way of example when we.

launch the strategy and said, you know, we're going to be looking to move capital light. We're going to move these to a fee business based on 30-party capital.

We're going to try and raise some...

capital from our standalone businesses.

You know, well, look at the way the world actually worked out.

we got into a COVID case and all of a sudden Lumen Pulse, which we thought was going to be part of that, their business got impacted. EV took off at electric vehicles and all of a sudden, Leon, which we really didn't want to focus on in terms of being a major source of cash, became a very, very meaningful value creator. But in order to realize that, you got to support it to a stage where it's got its business a little bit more developed. So a bigger opportunity, but it's going to take longer.

And so, you know, the standalone business as we did look at SLGP strategies, which is on page 15, but that's a small part of it. We really didn't have in our playbook that Cigar 3 would be an opportunity to raise capital, but there was such an interest by some secondary funds that that became an opportunity if they were out fundraising for Fund 4 that they got interest in Fund 3. Well, simple financing, we didn't have in our playbook, we'd be doing a secondary. So I guess I'm trying to give you an example.

But I can't tell you this is going to be sold or that's going to be sold. I just don't know at this point.

I'm sorry, that's not helpful. On the 20 AMC, I mentioned like, 20 AMC was really not.

predicated on trying to raise capital, but you kind of killed two birds with one stone, and that you say it does make sense in terms of power simplification strategy and not have trying to amc in two places.

That's, you know, we'd let's get it in one place where it belongs, where it gets better value recognition. And then you work out the economics of all that and lo and behold, you know, we're taking back only half of the proceeds in Great West Lifestock, which is in further interest as well as simplification. But we're taking half of the cash, which is,

And so you got another opportunity to raise cash right there at the power level. So we're just, we actively manage this. We're looking for opportunities. Maybe we'll go through a period where we don't realize anything. Maybe we'll go through a period where we realize a lot. I can't tell you. The market's being down and this environment is probably less conducive to selling assets right now than it had been over the period of 2021. That is an overall tone here of caution that we don't have.

The capital's not running around chasing transactions the way it was in 2021. So that's a bit of a notification there.

Yeah, don't be scared of it.

Yeah, China AMC is a good example of that. Um, on a fundraising front, are you able to give us an update on just what the third-party demand looks like for power sustainable strategies specifically, which I think, you know, historically have been a bit less.

advanced with respect to their reliance on LP capital or or let's call it third party assets. I just be interested in an update on how the outlook appears for scaling those strategies.

Good, great question. Yeah, and for sure, the strategies that existed within the power sustainable capital realm had really been built for power zone balance sheet, both the China strategy and then the energy infrastructure, which is an equity strategy. So if I start with China, great track record, they got off to the races really by raising third party capital, and then I'll start with China. So let's start with China. So let's start with China.

Putting money into China right now is not at the top of every investor's list, right? There's uncertainty around the market. We think that that will be successful over time, but that's not exactly the hottest area right now. And the energy we had a portfolio of assets.

that were and still are to some extent under development. So, greenfield, wind and solar projects, for example. And those were at such an early stage that they were not necessarily ones that you could raise, you could put into a fund. So, some of those assets remain on the power plant balance sheet. With the funds that we have raised, the energy infra fund, the billion dollars, as those assets come to fruition, they get transferred into the fund. So, we'll get some more cash.

as that goes forward. Your question was on fundraising however, and I do think that we're optimistic we can do more fundraising in the energy and for fund.

And there's some other product extensions that we think we can do in the energy area that we think can raise some capital. In addition, I mentioned the Canadian Sustainable Agri Fund that we did raise over 200 million on our first clothes here. And so there's good interest in that area. So I think...

Lots of progress and lots of opportunity.

to continue to build that business out, but it really started as a, and that was the most capital intensive part of the whole thing, and it was... that was the most capital intensive part of the whole thing, and it was...

and it is, it was never geared to be a third party. But that the person will capital team come to. The person will capital team come to.

from a bigger challenge than the cigar holding team that

was already to a large extent

in some third party funding businesses around cigar, excuse me, around Portage, the FinTech around cigar in Europe , and then the transaction they did with Ever West with the Great West life that was already in third party funding. So they're just at a further stage in their development.

I hope I can find through the question for you.

No, that's good color. That's all for me. Thanks for taking my questions.

That's all for me. Thanks for taking my questions. Thanks, Nick.

Thank you. The next question comes from Doug Young of Desjardins. Please go ahead.

Hi, good morning. First on the wealth simple, just so I got this right, because it's consolidated, Greg, you don't take the earnings hit from the valuation decline and you actually get an earnings pick up from the revaluation of the put option liability. Do I have that right? I apologize. It's Monday morning and I'm still kind of low gear, but and what if that's right, what was the positive impact?

from the reevaluation of the put option liability this quarter. Greg, you're going to take that? Yeah, sure. So yeah, because it is consolidated, we don't get to enjoy the mark up or mark down on the asset, if you will. And it's really the carry that was affected by the evaluation adjustment in the period.

And I think I'm remembering it right, but I think it was $34, $36 million, negative. And you see that in Cigar's asset management activities line. And if you go to that page in the back of the deck page 33, you'll see the color there. However, there is also an offset to that of $25 million where...

It is in the Portage Fund, which is, of course, taking the other side of that transaction because that's who the carry's paid to. The carry's paid to.

Okay, no that I'm going to say. So put, there's no put option anymore. It was extinguished at the funding round last year. As part of that funding round, we negotiated with management that the put was gone. But that part of our financials get exists that no longer tests.

Oh, okay. Okay, so then that answers my second question. Okay, then maybe Jeff on onto you, bigger picture. I mean, one of the levers, you're talking about three levers to surface value and you've been very consistent in that and you've seen some actions on this. But one of the levers you talk about is actions between the old go and the publicly traded operating companies and investments in a Chinese and sea, makes it ten of cents. You've talked a lot about that. What else can you do between power, and IGM, power, and great West life in terms of shifting things around?

to service value? Like is there stuff, like what's your vision there? Is there more to be done? Can you maybe kind of flush some of that out?

Yeah, it's.

It's a good question and it's not kind of a linear answer in terms of it's only this thing that we do or that thing that we do. I think when you, I would bring your question up a level to say we have a simplification strategy.

because PowerCorp has been far too complex for investors to understand. The simplification is on a whole series of dimensions. One of the dimensions is our structure. We've done a lot with respect to the PowerCorp Rear Organization, Power Financial, the Projects of GBL. Another is where we hold things. CMAC is in two places. IGM owns a big chunk of Great West by stock. Those are your techniques.

like, complicate life and investors go, rightly, think, why would you want that there? Now, some of those things were done for valid business reasons. It's not like they were done without thought. They were usually, at the time of those transactions, either constraints on where you could buy things or a need for capital or what have you. But straighten it. So, you know, cleaning that up over time in a way that makes sense when the opportunity is right is the second piece of the simplification strategy. And the third piece is to simplify what we do.

And now I have two different things that look like they're all in different industries, so the two will go, I'll get this.

is to try and simplify our business. And the main focus there is financial services. So the move over time to transform the Power Corp operations from diversification to financial services without blowing up the assets that we have or blowing up the management teams that came and worked for us and signed up because we're good long-term shareholders. So doing things in a methodical, smart way that honors our commitments to people but simplifying what we own.

so that its financial services, while we communicate, is all part of the strategy of getting greater value and having the market appreciate the value. You're also hearing a little theme playing into it that getting over time greater focus on earnings and increasing the earnings, I think will reward all power crooks shareholders well and balance it.

at the margin getting more inextricivity. Those are all the themes we're playing into it. Now, I got really big picture, but that is the way we think about it. And so whether there are other specific examples, the co-ownership structures, there's a lot we co-owned right now. We still got some great business like stock and the IGM balance sheet. There's a further opportunity, but when and how that gets recognized will be.

told in the future, I don't know the answer to it. But it's the bigger picture, I think, is where you got to go. We are on a simplification strategy.

Yeah, where it's going is, you know, and I think just, it makes a ton of sense. And you look around the portfolio between Great West, IGM and power, you know, you've got asset management at Great West with Putnam. You've got asset management, obviously, you know, at IGM, and you now have some asset management up at the power level. Like I guess where I'm going to make would make a ton of sense. And it's a lot more complicated than me being an armchair quarterback here, but does it make a ton of sense to have asset management in one particular cell? And so is that something that is?

always. So the examples of us having done so, as you know, in Canadian asset management, we took all the IG, Investors Group investment management and put it in McKenzie, and then Canada Life was managing its Canadian shelf of public equities and debt. And that looked like it was duplicative and I won't say an easy move, but one that was easier. So we then transferred that business and negotiated between the IGM and Greatless Life teams.

And that was an effort of consolidating our asset management. When you then get to the other obvious questions, which is a great West Scott investments like Putnam and we've got McKenzie, it gets more complicated. You've got different business models. And typically when you're doing a transfer, there's a big synergy to kind of make it work. They're not always obvious when you're going into different markets. There may be long-term benefits. And, you know, so that's a great way to make it work. And that's a great way to make it work.

So it's something that we have been asked a lot and we look at from time to time, but we don't do anything. So, but there are some impediments to us doing that at this point. So that's at the puttin' level. At the asset management level at power, you know, you go with where the opportunity is. And the fact is we had the teams at power and we've got people ask the investment managers in the alternative space who were working for us.

for the group. They weren't working for one of the subs. They weren't working for one of the public hospitals. They were working for power. And those teams have an ability to attract additional talent to them. And that's the key, as you know, in investment management. It's all about talent, the investment management talent, where you go to attract them. And so we've got the businesses at power and they're running and they're growing.

And you don't just turn around and say, well, why don't you all go work somewhere else? We're going to move you to another company. It doesn't work that way. You can destabilize them. So I guess I'm going to come back to a high level. We are trying to simplify, but we do have a number of public companies and we have businesses in those public companies that are people businesses, and you prioritize not doing anything that would, the first priority is to make sure the businesses succeed. And that trumps.

and I'm putting them all in one place, which on paper looks good, but if there's not real synergies in doing it, you don't do it. So long answer, maybe too long for you, but that's the way we think about it.

No, I appreciate the color. Thank you.

appreciate the color. Thank you. Thank you very much.

Thank you. The next question comes from Tom McKinnon of BMO Capital. Please go ahead.

Yeah, thanks for taking my question and good morning, Jeff and Greg. Just taking this power simplification theme a little further and it may have been asked in prior quarters, but well simple here, owned in two places. You took some money off the table, which in hindsight is good, given the markdown. How does this, he's got another kind of...

retail wealth management strategy that kind of plays a bit into Fintech space being the or robo space as well in personal capital. And you know that seems to have been probably closer to break even more successful, leverages into Great West and we can see how that happens. Just you know with respect to well simple, you've got a lot of windows into this Fintech space through other means now.

How does it leverage into the company in terms of, it has just provide Intel or in what's the longer term plan for it, with respect to joint ownership and where it fits overall and the whole power group. So, a lot to join there, sorry, but in thinking you can get this great, thanks.

Yeah, hi Tom. Thanks for your questions. It's a good one. I'll start by saying addressing the personal capital and well simple, you know financial services are really a regional market here. When I say here, they are a regional market. It's not because somebody has a franchise in one country that you then just poured it to the other side of the border. The regs are different, the competitive reality is different. It is the financial services at the

Individual level is a regional market and wealth, simple and personal capitals have extremely different business models. They are both emerging in the Fintech space, but they are, they are not the same business model at all, either in their technology, their approach to market or the clients that they focus on. So that's not, that's not a marriage made in heaven, I guess is what I'm saying. And they have an even great less life is purchased personal capital where the synergies are very very significant over time we think.

Well Simple, if I flip there, that is a good example. I think it was on the next question about complication, about how we end up with things in different places. It's not that we try to complicate life, but when Well Simple came along, you know, it was the opportunity came through and it was the team and Pertaj and Paul Free and Adam and the whole team there that were close to it.

And so the initial providers of the capital at that time was power. We saw the opportunity and we funded the first few rounds. And we said the world simple.

you know, you've got a good thing. We want to support your business, we'll provide the capital, assuming you make your business plan goals. And the first few rounds happened out of power, because that's where we had the interest in IGM was less focused on at that time. As time went on, the whole, well, simple, it became obvious was a way for our group to get exposure.

to a direct consumer digital model going after the next generation in effect and creating a franchise there. So we said well, let's put some capital in there. We don't know where this thing is going to go, but we're not exposed there and we should be because how is financial services going to emerge over time and how big is digital going to be and what's the next generation going to be?

So we decided to invest in that area without necessarily having a clear idea where it was going to go. We didn't bet the farm in total between ourselves. In Great West, we invested $315 Canadian. And so it wasn't like we have no crystal ball here. It was to position ourselves in the sector and see where it goes. So that's where we're at right now and we have the investment in two places for those historical reasons.

to invest in that area without necessarily having a clear idea where it was going to go. We didn't bet the farm you know in total between ourselves in Great West we invested 315 Canadian and so it wasn't you know like we have no crystal ball here it was to position ourselves in the sector and see where it goes. So it is that that's that's where we're at right now and we have the investment in two places for those historical reasons.

Where does it go in the future? We said all along, and I think IGM and James and Sullivan will say the same thing, we are going to continue to support the growth of this business and we have full optionality. Don't know what we're going to do in the future. We have taken all of our initial 315 off the table and then a little bit more than that. We own between 43 and 48% of the company between ourselves and IGM.

based upon how management options get realized over time. So we've got all the optionality in the world and we'll just decide how we're gonna play it as the world unfolds. Haven't made any, like, those are future decisions. So I've given you.

I think they're hopefully the explanation of why Park, well-simple and personal capital, are different how we ended up with well-simple in two places and why we did it in the first place and going forward we're just gonna kind of, gonna continue to watch it develop and make our things easier. Tom, I'd like to go further, but we are then any further. That is where we are in our thinking. We could slowly and further back through everything in the whole way we done. you

So it sounds like, I mean you're playing with the house money here, do you continue to think you're going to have to put more money into it or if more money is needed to change it or grow it, does that just come from more third parties or would that come from power IGM?

Now we haven't crossed that bridge. They're pretty well financed right now from their previous rounds of financing.

And I think we'll make that decision in the future. And you know. And you know. And you know.

One way to look at it is it's simply a financial bet. We put money in and we took the money off the table and it's house money and that's true. So good, we feel great about that. But I don't know that Wellsimple could be part of the power group for the next 50 years. Like it could become a core part of the franchise or maybe we don't play it that way. What do I say about optionality? It's not just a venture capital bet. We're in financial services and we got in there because we wanted to see what was happening and had a leg in the digital emerging space, as I said. And then.

Um, it's a sizable investment for you, 7% of your gross asset value, but you talk about sort of simplification of the business and looking to own financial services, and then also greater focus on earnings, less focus on that. So how should we think about

GBL, it's on obvious fit with those sort of themes. And then we can serve revisit that.

Yeah, so my comments were, you know, directionally, yes, looking more on earnings, but not.

doing anything that destroys

value shorter medium or long term through taking actions that

You know, destroy what we got or hurt when we have. So.

QBL in its own right.

is making a switch into more private and asset management. We look at what you're building with Sienna. And therefore, there's some of that going on within business. business.

I've always said on GBL that's a part of power that doesn't, and this current configuration, fit the definition of financial services perfectly. I acknowledge that and leave it acknowledge that. But we also have a 40-year history of having built up a business that is the second largest folding company in Europe and has a flow of transactions, both at the GBL level, at the CNL level, but also.

was the genesis of cigar equity way back when when it was launched, the private equity funds because it was a deal flow in the private space that at the time and still to this day might have been too small or a scope for GBL. So, you know, we've got this machine over there and this presence in Europe that brings a lot of, a lot of information, a lot of knowledge, a lot of windows and has created value over time. So you don't just turn around and say, well, you're going to have a lot of information. So, you know, we're going to have a lot of information. So, you know, we're going to have a lot of information.

You know, that's no longer. That's not pure financial services or it's not pure earnings. Let's just let's just

Except that, that's not the way we think. We think about many, many other things that we can work on to simplify, create value along the strategies of articulated and GBL's carrying on its own strategy of rotation and the private assets and more towards financial services and we'll just see how that goes.

But there's no shorts or we have no current plans to be divesting if that's underlined your question.

No, I just wanted to get a sort of updated view on how it fits with the overall strategy, but that's helpful. Thank you.

I'm going to go back to Tom McKinney's question on well simple. Tom, I don't know if you're still on the line, but you know, I didn't say that not understanding them, the markdown that well simple has, it's gone on with well simple and that's obvious.

in terms of valuations of tech companies and then slow down and market activity and business activity in certain areas. But well simple, I've done an unbelievable job of management team in creating a brand and in going out, I think we've got I think a million seven clients if I'm not right, these are just close your will be elsewhere. But it's created a major client base, major brand, happy clients with good experiences.

in an area of the market that is going to be the next generation. And so they've done a great job. And so, you know, valuations go up, valuations go down. But I don't want to let this kind of corridor go through and talk about it right down with this thing. The friends have come and done a great job. And they're very, very well positioned going for in the future and well funded at this point. So, I'll have that comment if you're still listening.

Ter.

Thank you.

I just add that you're right it's the 1.7 million clients but 17 billion in AUM as well. So 1.7 million.

1.7. Boy for the day when the CEO .

Thinking up a decimal place on the CFL. Yes, I just my weeks off, Greg, my weeks off to a great start already. I'm thinking 10 years ahead. Thank you. That's right.

up a decimal place on the CFO . Greg, my week's off to a great start already. I'm thinking 10 years ahead. Operator, more questions?

Thank you. As a reminder, ladies and gentlemen, if you do have a question, please press star 1 at this time. The next question comes from Jeff Kwan, RBC Capital Markets. Please go ahead.

I just have one follow up question. We've seen other alternatives private equity managers that have looked to distribute their funds through proprietary wealth management arms. Is that something that power is looking to do? So for example, whether or not I do well to what not. Or is it maybe perhaps given, you've got a number of different strategies, a number of them are relatively new that maybe you'd wait for future iterations that have those funds before looking to distribute.

those through your retail wealth management channels. In terms of examples, and Greg, I might kick it to you in a second, but in terms of examples of others, I haven't kind of...

I'm trying to think of where there are, where you've got.

I'll look, we'll come back to you on that, but what I am going to say is that that

Definitely the teams that Cigar, Power Sustainable Capital, and Northleaf within IGM are in discussions with our retail platforms to look to see how they can be distributing product, they can be embedding product, particularly in multi-asset strategies. If you think about the mass affluent market, it may not be appropriate that an investor who's got whatever portfolio that they'd be making direct investments.

but if they've got an asset allocation program and there's some portion of that program that's got a portion of its assets invested in ALTS.

That can make sense. And the teams are working hard on that with North Leif and with our group at PowerCorp to get access to product because they want that kind of product across IGM. And I think you'll see it through Great West Life over time. So that's very much a focus. And I know other groups who have been in the liquid asset management business who are buying into and capable is a non-liquid are looking to...

feather those strategy through their distribution. And I'm sure some of it's prop, but I can't kind of articulate all the names there. Greg, do you want to add anything to what I said to an answer to Jeff's question? No, I don't think so, but just certainly North Leaf, that's where my mind went too, has already been exploring those type of opportunities. And...

I think you're quite right that not only our own distribution channels, but others where, you know, like our major manufacturers like Mackenzie and their relationship with distributors are looking to provide this type of product as well through their efforts.

Okay, great.

Okay, great. Thank you. Thank you.

Thank you.

Ladies and gentlemen, there are no further questions at this time. This concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you.

Thank you. Thanks everybody. Bye now.

Please hold for the next available operator. Welcome to the Conferencing Center. Please hold for the next available operator. Thank you for calling the Conferencing Center. What did you call your joining? Hi, it's Power Corporation of Canada. Your first and last name? Rachel Smith. And the company you're with? AYERA. One moment. The conference is now being recorded.