Q1 2023 Power Corporation of Canada Earnings Call
Good morning, ladies and gentlemen, and welcome to the Power Corporation Q1, 2023 earnings Conference call.
At this time all lines are in listen only mode.
Following the presentation, we will conduct a question and answer session instead.
Instructions will be provided at that time for you to queue up for a question.
Anyone has any difficulties hearing the conference. Please press star zero for operator assistance at any time.
I would like to remind everyone that this call is being recorded on Tuesday may 16 2023.
I would now turn the conference over to Mr. Jeffrey or President and Chief Executive Officer of Power Corporation.
Please go ahead Sir.
Thank you operator and welcome everyone. Thanks for joining us this morning for our first quarter.
<unk> call.
Would draw your attention on page two to the cautionary statement regarding forward looking statements and non <unk> disclosure measures.
So with me this morning is.
Greg <unk> Who's the Chief Financial Officer of Power Corporation.
Together will make the presentation and then be pleased to answer your questions.
I will just highlight page six as I normally do to call your attention to various public disclosure events and documents for our group of companies that you can reference that have come out over the last several.
Weeks.
And with that I.
I will turn to page seven.
First comment on the on our earnings and really we focus our earnings on great West Lifeco and IGN, which are the two.
Main sources they are the sources of our quicker.
Recurring earnings and it was a strong result, and what is pretty difficult market conditions, our great West life of course, the big highlight Ah is.
Is that they and their other competitors in the insurance industry.
Least earnings under Ifr at 17, so a very significant change I, Greg will spend just a quick few moments on on that today, although the great West life disclosure is much more extensive on the topic obviously.
But great West life had a strong earnings in the quarter and I G. M. A 207 of adjusted net earnings just down a snick from the same quarter in 2022 despite.
Significantly lower markets. We thought it was a very strong result, there net earnings of course were affected by the transaction that we did with the C. M. A C in that game they recognized with respect to that so we ourselves look at the adjusted net earnings number because they are the one which is more indicative of underlying earnings levels.
And then you know a lot of things happened in the quarter, we've been awfully busy and great West life announced the acquisition of IPC from from IGN will give our perspective on that in this call and then I G M announced the acquisition of a 20% plus interest in Rockefeller and make some comments about that at G. B L reported a good growth in its Ned.
Asset value.
And and really have quite an interesting transaction on web help which we will talk about not just in terms of the value that was created but I think it's quite illustrative of some of the earnings challenges that exist in looking at that part of our portfolio from an earnings point of view as opposed to from a high value.
Point of view.
And the platforms in a difficult environment raised just under $400 million during the quarter. So we'll touch on those points as we go through the presentation.
Page eight is just a reminder, it's a difficult environment. The bottom left hand, the S&P had its worst year on since the financial crisis. Its fourth worst on record and then that coincide with the Bloomberg Barclays Bond index, having its worst performance on record. So this was a difficult.
Year for investors and for companies that serve investors and earn a lot of their revenue from market levels and then that of course on the right hand side has resulted in investors not putting a lot of work.
Money at work excuse me end markets money or money is flowing into Cds and and other type products as you've seen and this is a Canadian example, but it's true across the various geographies where we operate.
Greg I'd ask you to pick it up on the earnings and the NAV over the next few slides okay. Thanks, Jeff.
So I'm on page nine and looking.
Looking at adjusted earnings of $514 million in the quarter, which is up 16% over last year 77 per share, which is a T. Five over last year.
The <unk> now.
Nice increases over the quarter, we have more on that in a subsequent slide so I won't spend any time there of course, we declared a quarterly dividend of 52.5 cents.
Thank you over to page 10.
I'm not going to give you an accounting class today I'm sure you've heard a lot about it for us a nine and 17 for all those who follow the insurance industry, but just a few points if we could.
So no.
With great West Lifeco, they adopted 17, and nine and that affects it but a third of their business.
A lot of work for that are reporting effort to AR in the quarter, obviously and.
One of the things that is apparent I think across the industry is that the.
Net earnings volatility given the de linking of.
Our assets and liability under the standards are.
Standard 17 in particular.
Expected to continue.
Continue to.
Net earnings volatility and so I'm sure you've seen that and you can witness it in the quarters.
Certainly and life goes results and others.
And great West life, I think one of the most important changes in terms of management's presentation has been the addition of the value drivers.
Workplace solutions wealth.
And asset management, and insurance and risk solutions I think.
Breaking down the information.
In this way and presenting the information this way will give us a lot more insights than you insights into the nature of the business and how it's performing in addition to there are geographic segmentation.
With respect to our power Corp.
We are I should start with J P. L. J P. L adopted <unk> nine back in 2018, when you had first adopt that standard.
At that time, PCC preferred to wait until a great west life buds, one of its major subs, obviously to to change its accounting and so we were under 39.
And we moved to nine and are in that.
Reconciliation if you will are.
Presented a fair amount of noise in our results over the last several years and we adopted <unk> accounting standard which is <unk>.
<unk> nine in this quarter, so going forward, that's one less moving parts that youll see in our numbers, which is a good thing.
And then on a power sustainable Oh, China.
We have this portfolio basically has held for capital appreciation and we look to obviously the changes in NAV over time for this particular portfolio and we have a.
Classified it as fair value through OCI, all the rest of our investments are basically a fair value through P&L and there was a slide in the appendix that.
It helps you navigate our selection of accounting standards through the quarter, sorry for the long winded explanation of the changes for accounting in the quarter, but Oh I promise not to do it in the future.
I'll come back with the operator, whether it was telling anybody on the line Greg.
I'm sorry, so the page page 11.
So adjust.
Adjusted net earnings.
You can see that our great West life and I G. M combined delivered $663 million versus say 600 in Q1 of last year up 11%. So good showing jeffs already spoken to the cause.
Strength those are both great West life and <unk> results in the quarter.
Looking at J P. L. You can see that Oh.
It was up over last year, there is a slide in there or should I should say a section in the M. D. N M. DNA page 39, which I think breaks out nicely their earnings you'll see the cash dividends were up in the quarter and that's one of the things that we keep an eye on when we're looking at their earnings.
<unk> and power sustainable.
And minus 88 are in terms of the contribution largely driven by the two items you can see in the left hand panel.
One is.
Yeah.
Snow cover and and during the year was more than normal and our operating results on our infrastructure energy infrastructure was down.
Down.
$30 million in the AR in the quarter.
The second one is the.
The $33 million on the reevaluation of the NCI liabilities.
You saw that in the last quarter and in the last couple of quarters actually and we expect to see that in the future as well we have a number of assets that we are.
Basically.
Bringing to a completion I think we got a boat.
Total Oh no capital on our energy projects are in the west about $350 million of projects that have yet to come on stream and go C.
T O D and Oh as they go through that process, there will be re evaluations throughout the coming quarters and so we will expect to see those NCI charges in the future a future quarters as well as those projects are.
Our.
Basically coming to a.
Completion and on stream and then transferred into the fund.
One of the things we will do in the quarter. This coming quarter is reached.
Reach out to you and give you a little more transparency on how we anticipate that number to a little unfair.
As we go through the coming quarters.
Other than that I think I don't have anything more on that page and I. Just go to the next page, which is the net asset values.
You can see that we're at.
46, <unk> 89, which was up 11, 9% over December that's driven on the back of.
Great West life, and IGN and.
And J D L and you can see that in the table that are 85% of the portfolio is basically in those operating companies that are publicly traded and Oh and then when you look at May 15th our net asset value were up another 4.4.
Our percent so with that Jeff I'll turn it back to you Okay. Thank you Greg.
Okay, I'm going to spend.
Spend a few pages on some of the transactions that we announced during the quarter and share our perspectives with them with you.
First is on page 13 in US, Canada life's acquisition or investment planning Council for Mindshare.
I think this is going to prove to be a very smart move for Canada life as we look back on it a few years from now.
It does a number of things for them it really positions them by giving them the tools and the scale to build a leading wealth management platform for their advisors and clients and with $85 billion now that they have between quadras between their second fund shelf, which as you know they're very much.
If I can invest my childhood insurance rap and then now with the scale that they have and the tools from I P. C.
They will and are capable of building one of the leading wealth management platforms for advisors are away from the non bank advisors.
In Canada. So this is this is I think a very very strategic transaction is going to help them grow their wealth management presence they've got a strong insurance offering and a strong group business. This kind of leaps problems going forward with the tools to build a very competitive wealth offering that we think will play out well for their growth going forward in Canada.
I want to draw an analogy to this and what we've done at Mackenzie over the last few years, we've talked in our strategy about simplifying our power Corp, and our structures and how we own assets, but they're not anything that's gone on is we have actually looked across our group, where we have where we can benefit from.
Greater scale and create stronger businesses and an example that would be analogous is at Mackenzie. If you go back over the last several years not only have we built mckenzie into a very strong competitor through all the investments and changes that have been made in the investment area in the distribution area, but we gave at scale.
I'll fight in the first instance, traveling transferring I G investment management and all of their assets over to Mackenzie and then we followed that up with Canada life. As you recall, a few years ago, selling GLC to Mackenzie and concentrated Mackenzie with a much bigger asset base to be a more formidable competitor in the asset management business.
In Canada with scale and we're doing the same thing here I view that as quite analogous is that you look at Oh Gee am already has a very strong presence in the Canadian wealth management business.
Canada life here is able to take what they have at IPC to it and build a much more competitive wealth manager.
Going forward for them. So just some comments on that it's a I'm not sure. It got no matter how much attention that.
It got from the market place I think this is a really important move for Canada life and for our group.
Move to page 14.
Really excited about this opportunity and what I G. M has done in buying a 20.5 interest and Rockefeller first of all this is an iconic brand I don't know if there is a better brand in wealth management and high net worth and ultra high net worth and the World I just can't imagine one and Rockefeller is a business that.
That's been built by Greg Fleming and his incredible leadership team starting five years ago and they took the family office business of Rockefeller and then they built the advisory business around it.
And we've known Greg and worked closely with Greg for eight or nine years. After he left president of Morgan Stanley I think it was eight or nine years ago. He has been a very close adviser to us.
And so we we got close to him and got to know his management team and have the opportunity to make a.
This investment.
I think they have a differentiated position in the U S wealth management market as I said, it's got a unique positioning with a.
Our family office at the core and then a very high end adviser business, they're creating one firm all of the teams that they recruit come into Rockefeller, they're all on the same platform day, one when they join it as one company one culture, one set of systems, a very high and curated product shelf and the and the final point is that while they are.
So having advisors joined the platform the advisors. The join are at a stage in their career, where they are very interested in growth. These are this is not providing a a ticket for our advisors to to retire. This as advisors that are in high growth mode of the compensation system motivate.
Some highly for growth. So Rockefeller has a lot of organic growth. In addition to the advisors are recruiting so that's.
We're as I said, we're very very excited about it it's a it's a risk smart way for AGM to get into the U S market with with people. We know in our model that we're comfortable with and I will then broaden this out and just kind of draw the lens back a bit on what I G. M is done so I look at I Jam right now I think you're well aware.
Of all the changes that have been done at I G wealth in Canada, starting with Jeff Carney and then Damian in their team.
We're aware of how we have strengthened Mackenzie. So AGM has now got two very very strong.
Engines, and wealth and asset management in Canada, and you couple that now with a very high growth engine in the U S market and by putting these C. M. A C stake, which we did in the first close in the first quarter I Jim's got this these two strong engines of growth in Canada, and then two vehicles.
For growth in the two biggest markets in the world, the United States, and China, and so where do you go back over the last five six years, we've transformed AGM here into a different company than what it was and very excited about this deal obviously.
Okay.
Well web help this is as close as I'm going to get to an accounting lesson is when you'll ever hear me on these on these talks but well help is really illustrative of some of the the the two parts of power Corp. In how we look at them from a value point of view, so and it's also a great deal for G B all in and.
Asian of of many of the great things that they're doing so as you know great West life Cohen I G. M. I think it's up to about 78% of our gross asset value now that we have purchased the additional great West life shares from I G M and that 78% is the source of our recurring earnings the rest of it is G. B L a platform.
Standalone businesses and we don't look at earnings as are the measure as to how those businesses are doing because their investment positions. Some of them are early stage and they go up and down in value over time, obviously, we are thinking that they are going up in value and they have but they go up and down with marks and then we have a number of businesses where we are.
Consolidate them and we have minority positions and as they go up in value are we actually recognize the increase in the value of the minority interests, but we don't recognize the increase in the value in our position and there's no better example of an App and web help so I'll turn to the slide <unk>.
How would you be all announced a transaction to emerge well help and create a value for themselves. A 1.5 billion euros that this was an investment they made in 2019 and its 1.8 times multiple on their invested capital.
Through the piece as the value of web help has been going up as I said Gee B all has not recognize those increases but if you go to the bottom of the page. They have recognized $1 3 billion euros of cumulative losses that.
Are associated with the increase in the value. So here, we have something where it's been an unbelievable investment grade I or ours, and and and the way. The accounting works is they've got one 3 billion in losses to show for it when the transaction closes at 1.3 billion won't reverse in the gain will be recognized on the transaction at whatever they are value.
They're taking shares or whatever the value of the shares are at that time. So you know great. So great deal validation of their value creation strategy and also a great illustration as to why we don't look to the earnings that come from G. B L or from the power Corp assets as our benchmarks for how Theyre doing we do that with great West life.
And I G M, but not that 22% of our portfolio.
Okay and it turns into comments then.
To the platforms really difficult page 16, really difficult fundraising environment, but there was still 300 in just under $400 million of our fundraising that was done in the first quarter that was through a our European fund that cigar completed and also cigar completed.
Our senior lending fund and their credit and their private credit business, which is a new product for them. In addition power sustainable capital announced during the quarter. The launching of two credit funds. So this is a new product for them, it's infrastructure credit and they announced a global entry.
Infrastructure credit find where the team in the U S and a U K a fund for the team in the U K. So no fundraising there yet, but they've announced the hiring of teams and the launch of two new products. So good progress.
And I will show you. If you go down to the bottom left on page 16 under the funded there you'll see powers capital.
It is now $2 4 billion of the $15 8 billion that has been raised as power itself. A candlelight has some has some money in their platforms as well the power Corp. 's 2.4, that's about the same as what it was two or three years ago, even though that funded number has grown I think about fourfold over the last three years.
And power Corp. 's investment has stayed the same so when we talked about growing these platforms and not using our balance sheet, but you know this is.
A perfect illustration of it.
And with that I'll turn it over to page 17, our when we look at the first thing we're looking at in building. The alternate investment platforms is the fee related earnings. So on the bottom left you've got the fee related earnings of our cigar and power sustainable capital.
You see good growth in revenue at cigar and still slight losses at fee related earnings.
And there is so that they have built up their platform. There's a there's a number of things happening there in terms of building up of staff. There is a little bit of a catch up fee in Q1, a few million dollars. So if you normalize for that the two is probably a little bit lower than that a couple a few million bucks lower than that and so they're just you know cigar.
<unk> continues to build out its capabilities grow our staff builds its platform and is operating just below breakeven is the way we think about it and then power Signable capital I've already mentioned about good growth new products new funding.
But at an earlier stage in its development in terms of the fees that are it is collecting them, but in an area, where we think theres pretty explosive growth in the years ahead.
Those are my comments on our platforms I'll turn to page 18.
We talk a lot about the standalone businesses and I want to make a comment here.
We launched the the strategy around the reorganization, we talked a lot about the platforms as being the Skus excuse me the standalone businesses as being a source of capital.
And the way our strategy has worked out the opportunities to raise capital and return it to shareholders have actually come from different parts of the portfolio. So you know from the beginning of 'twenty 'twenty. One we have raised $1 $8 billion of capital, but it hasnt come from the Standalone businesses, which we kind of indicated at that time it would have.
And it just goes to show that you need to be you need to be active in the management of these strategies and our goal hasn't changed but how we've executed it has changed given what happened in markets. So you know.
The 1.8 has come from a variety of sources I think we told you last year 'twenty 'twenty. One we took a we sold our secondary interest in cigar Europe . Three we took some money off the table with well simple we sold energy assets into the power sustainable Energy fund and put money back from that we sold GP strategies, we ended up.
Selling our stake in China asset management to AGM and took back great West life shares and cash and we've just announced the sale of Bellus health, which will be another approximately $100 million Canadian when that closes. So you know we've raised 1 billion eight over the last couple of years and ER and yet we still have.
You know the all in aluminum pulse and and peak in the portfolio, we have taken steps to surface value by taking me all public and Oh Blumenthal has just a a financing in the last couple of quarters.
But we are on path it nonetheless to raise capital and then and then return it to shareholders and with that I'll turn to 19 <unk>.
In the quarter, we returned.
We returned approximately $375 million to shareholders through our dividends and through our buybacks last year by the way, we returned about $1 $7 billion to shareholders. We had $1 3 billion in dividends and $415 million in buybacks and we've done all of this.
We now have our cash had kind of an unprecedented level got about a billion seven in cash if you deduct the dividend that we declared yesterday from that you get to a billion three five actually take off the dividend payable.
To keep two times fixed charges. So we got lots of firepower here.
With that I will turn to page 21 of the things. We are focused on is the net asset value discount and we have we were as you know before the reorganization for five years. They are trading around 35, we've done a good job through communication and transactions are reducing it. It has gapped up in the recent period I mean I.
We have a long discussion about why that is I just simply summarize it that this is an opportunity not happy about it gapping out, but it's an opportunity both for investors as well as for power Corp. As we are in terms of buybacks. We've had our heads down a lot in the last six months or so working on a number of things, including some of the transactions we announced.
And we're really looking forward to getting back out and talking to investors in a more active way than we have in the last period about what we're up to what we've done and then what are some of the opportunities going ahead, so with that operator, I think I'm gonna.
And I will ask you to open up the lines for questions that we may have from our participants.
Currently.
Now begin the question answer session.
The question queue, you May Press Star then one on your telephone keypad.
Sure a tone acknowledging your request.
We are using a speakerphone please pick up your handset before pressing any keys.
Draw. Your question. Please press Star then two.
We will pause for a moment as callers join the queue.
The first question comes from Geoff Kwan with RBC capital markets. Please go ahead.
Hi, good morning.
Good morning, My first my first question was Ah for your noncore assets such as peak in L. N. P. G could you talk about maybe what some of the metrics or things that are kind of looking for them.
To be in a position to eventually monetize it.
Thank you good question, Geoff So well, we have announced our strategy focused on financial services and long term those or not.
Core assets, if I can put it that way, they're not they're not on strategy. We were very clear on two things. One was that we you know we don't have a gun to our head we're going to realize value in a way that we think will maximize value for power Corp. And secondly, we are an investor who we are good partners with our people.
That we join with and we made commitments when our strategy was different to the management teams and two other shareholders and so we we honor our commitments and do things in a sensible way not in a hurry way. So now specifically, let me give you some examples with lumen pulse.
You know right after we.
Announced our new strategy we.
We had we had COVID-19 hit and all of a sudden we had this company that was really doing well and growing and making acquisitions and its whole business model just got totally turned upside down projects got stopped.
A lot of what they do.
Our off and on big projects, sometimes at the tail end of projects and they ended up their their whole business class weren't there. So not all of it was just not a good opportunity for us to realize capital.
As you know we filed for a and offering I think it was in 2020, but my memory, mainly my serve me wrong. There. They did a third party financing in the last couple of quarters.
She has great. That's the next step in at some point, we will think that the value is there and the business plan is that a good point, where we can bring in some other investors and start to monetize our position, but we're not going to do it in a way that we're leaving value on the table and the timing wasn't there Leo is a really interesting one Leon was only $50.
3 million and $54 million at the time, we announced the reorganization that we had invested in it and then electric vehicles took off.
The company, we took the company public as a step in realizing value and then all of a sudden the bloom was off the rose in terms of everything that was venture capital and everything that was E V and all of a sudden and this company needs capital to grow. So we have this great.
Company and all of a sudden you know.
The capital markets in the VC markets shut down and so do you try and push it out and just drop it when its got this great future, we actually put some more capital in the last year $25 million U S to support their offering. So you know you could say well what are you doing that's that's off strategy.
$5 million in the context of power Corp, and we're supporting the management team and other shareholders to make sure we get the company to a point of maturity, where its proper value can be recognized and ultimately realize by power Corp.
That's.
I don't know if that's answering your question I'm sharing with you how we look at these things we do things that are smart, we do things that are maximize our value and we do things that honor our commitments to the partners, we have and in the meantime, we realize value using other assets, where there were opportunities.
Great.
Okay. Thanks for that and just my other question just given the dislocation we've seen in quite a market. So just more broadly speaking wondering if you can talk about how you see that in terms of say for example opportunities or your existing operating businesses and then on your kind of alternatives platform, whether or not that.
Making opportunities opportunities acquisitions potentially strategy, but also to me is what are the companies that are within the portfolio.
And if that might create any sort of.
Headwinds in terms of if theres any sort of debt refinancings that need to happen within there.
Okay I'll start and then Greg if you jump in if you as always jump in if you want to add anything.
You know I think that if credit markets ended up getting dislocated.
We've just got some fresh powder in our credit funds and cigar and I think that will be a good thing.
They'll get some opportunities to earn some good investment.
Returns for their investors, whether there is whether in behind your question there'll be an opportunity to I don't know if that's it to acquire a credit capability I don't think that's on the radar screen it might come by who knows so I don't know whether that was where you were going.
In terms of our own financing structures.
If that if you were asking about our own companies in their maturity certainly between I G. M. A great West life G. B L. Power Corp. We don't have any worries about refinancing we've got very very well, but very strong credit ratings and we got very staggered.
Our debt maturities, which were always for decades make sure we manage and I couldn't speak to.
You know the individual companies within our different portfolios and the alts area. If that's where your questions going maybe you can clarify a little bit that one I wasn't sure where you were talking about in terms of difficulties with our own companies and credit markets do you want to just.
But they're not within within cigar their power sustainable.
Yeah, I'm not aware of any I have not heard anything that they're concerned about.
Our credit markets I think in the Fintech World I will say.
You know when you've got Silicon Valley Bank, they were a big fund or to a lot of the fintech companies so that sector in general.
Not just in our portfolios in general as got.
And all of a sudden a player who was probably the leading player in terms of banking those business. Those businesses is out of business. So I know that has created some shortage of capital across the Fintech space and I suspect that will be an opportunity, but everybody's for our for our funds in terms of making investments because we've got capital to work to play.
But that's a that's a general comment.
Yeah, that's exactly where my mind without question, Jeff and.
But certainly management as is working through.
Getting those startup.
Entities that need capital and you know, obviously raising capital where they can and looking for alternatives.
That's a work in progress but.
Nothing that I think is disrupting.
Their strategies in that marketplace.
Would be my take on it.
Okay, great. Thank you.
Alright, Thank you Jeff.
The next question comes from Jamie going with National Bank financial.
Please go ahead.
Yeah.
Yeah. Thanks.
First question just related to the to the Rockefeller transaction.
Or where are you guys.
And the family had a significant role in putting that together.
I'm curious if you could talk a little bit more about the history of that deal come together and then.
Are there are there other such opportunities available within the power complex through those relationships.
Okay, So I touched on it.
It really started with our relationship with Greg Fleming, Greg funding for those of you who don't know who's the president of Merrill Lynch and that was.
President of Morgan Stanley . He he ran initially ran investment banking at Merrill was president through.
Right through the financial crisis, and then Merrill got sold to Bofa. He went over to J P. Morgan ran their wealth management and asset management businesses 2000 and.
I want to say 15, it's somewhere around there he left and kind of did his own advisory thing for a while trying to figure out what he was going to do next we actually hired him as an adviser.
And he ended up being kind of for the three years.
Someone who we would talk to at least weekly about what the opportunities were in the states. He was also on the empower board. He is on the empower wording on the and on the Putnam Board and has been through 2015. So we have a close relationship with Greg Greg announced this to us in 2018, he's done a transaction to buy into and become <unk>.
Oh of Rockefeller and brings in the a team if I can put it that way our former colleagues from the top bulge bracket firms in the U S and and takes advantage of the dislocation going on particularly with the high end of the of the big Bulge bracket firms who.
Have become very large and in the very top kind of one or two per cent of advisers not always the happiest campers in that environment, they've taken advantage of that to build out what.
What is now Rockefeller, where I think they've got T D.
Got 90 teams that they built in that over the last five years of her team might be three Florida, you know 10 advisers coming over that have joined them. So we just we talked to Greg all the time Rockefeller you may have noticed has advised on our acquisition of personal capital mass mutual of Prudential. So we were talking to.
Closely and through that relationship.
Spoke to them, but well, what's what are your future plans for Rockefeller them. Because you know we're all we're looking to expand into the U S into wealth management.
And and that led to discussions which led to the transaction. So that's that's the history of it.
Jamie did you want add something Greg.
I'd, just say that in the interim.
Jumping back even.
And time that it's part of the DNA of the group, but quite frankly in that Paul on Andre.
Yeah.
Of course, their father had day, particularly.
Good expertise in developing ecosystems and I think if you look back through our history. You can see many examples of this type of relationship are turning into something that was unexpected. Thank you and thanks for reminding me of that and in this particular case, because I just told you with Greg Fleming, but the Rockefeller family.
And the demo family of a relationship going way back Andre Demaree personally has had a close relationship.
With David Rockefeller's Who's on the on the board and the shareholder of the company and his father.
And so there was all of that angle to it as well. So you know that there was there was the derma angle and then there was the management angle then it kind of all came together here. Thanks. Thanks Craig.
Okay. Thanks.
Yep.
That's why they were gonna do others I I don't know, whether we're gonna do others. I mean, we're like I just show you. The 20 deals we've done in the last six years and ask you Bob.
I don't know, but we do have our eyes open Jamie at all times.
Okay understood.
And then just a clarification question on the on the Dallas.
<unk> is that.
Is that $73 million that you expected to receive is that is that cash receipts and then yes. The other part of that is that already included in the $813 million of NAV that you've disclosed here.
Wanted to clarify that.
It's outside the 813 to start with.
And the 73 is coming in cash were not taking any shares back Oh, not particularly 73 with the U S and U S 200 sounds better doesn't like Brexit does.
Okay. Thanks, guys.
And we have that I think we have that marked on our books at zero in terms of book value right now.
Not that we love to earnings so that part of the portfolio I'm sorry go ahead operator.
The next question comes from Doug Young with Cabot.
Capital market.
Please go ahead.
Hi, Good morning, maybe starting just with the excess cash.
Last quarter, I think Jeff or Greg you said two times debt coverage was 700 million to 800 million I don't know if there's a nuance there but I'm.
Just wanted clarification on that and if I did the math.
Based on what you've laid out it looks like your excess cash is sitting at 550 million and as you've said you've got lots of liquidity here. So why why why the slowdown in buybacks.
You know we've as I said, we've had our head down quite a bit working on a bunch of on a bunch of things as you've seen.
And so it.
That's that's that's the answer I don't think Theres anything on the 800 and the like are I think that's a rounding because rounding.
No change in our run rate costs, we should go back I don't think 780 to be 780 than it was last time as well or 770 like thing. Okay. That's yeah, that's right yeah, but we don't manage it to that fine a point in terms of having two times coverage, we've gone below it sometimes and we've often run above it yes. So I think this.
Recent period, we've not only been not been out kind of talking to investors for the loss, but we've been less active on the buyback side. We are as I said, we've been busy on a bunch of things and looking forward to looking forward to getting back on both that's all I can tell you why.
Yeah.
Okay and then.
No no that's fine and then just going to the power sustainable.
I guess, the energy infrastructure loss due to seasonality and smell like kind of get that.
But what I guess I'm more curious about you've taken a 33 million revaluation of NCI on the.
The power sustainable energy infrastructure, and Jeff you kind of describe that and how you've done this in the past, but you don't get to realize our write up the value.
These entities you just take the hit upfront what is the unrealized gain on the power of sustainable energy infrastructure partnership that Hasnt been.
I've recognized.
I don't know the answer that I don't want you to do so.
I don't know that I have that right now, Doug, but maybe as we go through the call it will emerge.
But.
I did give you a number that.
We are bending in Prague.
Projects that we currently have on the balance sheet.
Basically wind projects, Oh, West Theres about four or five of them that are I.
I think the capital that we have in numbers about $350 million.
And we would expect to get a game or a revaluation again on news as they are they come to Oh commercially.
Viable projects and.
And so we'd probably get somewhere in the neighborhood of $40 million to $60 million of D.
Uh huh coming through at that time of course, which of which we will have to take a NCI a liability on so 60% of that because we're a 40% of that particular fund and the other partners or 60 them and so.
We're talking about another $30 million on that project those set of projects alone and of course, we're developing projects.
In addition to those that will be bend. It and then we will have the revaluations and so that's what I alluded to I think that over the quarter, what we'll do as well will reach out to Uh huh.
To the street here in <unk>.
Try and lay that out so that you can you can understand and anticipate what might be evolving over the next several quarters. Yeah. We got it we have to get greater clarity on this as we get lots of questions on it. So your question is a quick one Doug.
Yes.
I kind of follow where youre doing with the <unk> had a bunch of these over the years. If there is unrealized gains that aren't properly being reflected now that I'd be curious and if it's not just this theres a number of them might be curious what that conservatism is in I think other people wouldn't be as well, but we can kind of.
I'll leave that for now, but I guess, maybe I'll kind of give a last high level question.
Our view is always.
The cleanup of the power structure would mean running the small holdco and concentrating most of the insurance business that great west in the wealth and asset management at IGN.
You've talked about this before but you're building an investment platform up in power.
Great West there seems to be a blending of the two and so maybe Jeff what's the end goal here like what am I missing what's the end goal here what does that clean power Corp structure look like when you're all said and done.
Yeah, so lots of things happening.
That's a big question and a lot of different forces at work not just simplifying that's what I made the comment earlier when I look at Mackenzie acquiring IAG investment management, which he may say, it's all inside of I G. That's that's to give Mackenzie more scale to compete when I look at G. L C.
Two years ago was it but a great west life sold kind of lifestyle GLC as asset manager and Mackenzie that is concentrating scale at Mackenzie same thing happening here at IPC IPC is a $33 billion, a wealth manager and Ah Theres. Another 50 over at Canada life, and putting it together plus all of the.
Capabilities that.
They have.
In terms of you know creates more competitive.
Our platform because we're not we're not just cleaning up and simplifying Paris platform. We spent a lot of time.
Strategically working with the management teams of Great West life, and I G M to position those businesses for greater growth and you're seeing some of these deals are not about simplifying power Corp. There about there about getting our main operating businesses in a more competitive position.
Your question with respect to power Corp.
The goal is to.
Ultimately the goal is to have.
The Standalone Nonfinancial service businesses.
Within the portfolio, but as we said not in a rush and I'm not going to do anything stupid to get there and then.
Secondly, create the scale and the investment platforms to create.
Streams of income without putting more capital into it.
And simplifying what's there so that we don't have a stream of businesses that people don't understand what we are partway down that path, but what we have is an accounting.
Kind of I won't say I should not be critical of a gallon and we havent, we have accounting numbers that make it really hard for people to understand so we are simplifying the business, but we still have.
We haven't done a good enough job of explaining the value creation and it gets lost in the accounting So I don't know.
I said a lot there.
In a nutshell I said a lot of the moves are not just about simplification are both building the strength of the businesses and the second part is we are trying to simplify power. So that at the end of the day you can say they've got this asset management business and they've got this much seed capital and the seed capital is producing this kind of a return and I can value it and therefore I can get my hands around it that is the end goal sorry for the long answer.
Sure.
No no I appreciate the color. Thank you.
Okay. Thanks, Doug Doug, Let's note that Doug page 56 of the MD&A.
You can you can look at look at that to get more color on.
The position of power are sustainable in the power energy assets and just on the energy assets alone I think the unrealized value would be somewhere.
Around 400 million for in total.
And we would have 40% of that so you know roughly 150 $160 million.
Thank you.
And next question comes from Graham Ryding with TD Securities. Please go ahead.
I just had one question just with the the Canada life platform now with the wealth platform with IPC is part of it can you just sort of describe your vision for this platform relative to what you haven't well how are they similar in how are they perhaps unique and different.
Yeah. So a great question. Thanks, Graham So first of all in terms of vision.
IPC not only brings scale to the Canada life platform, but they also have a far greater Iraq capabilities, they've got discretionary platform. So as you know a lot of advisors moved to a discretionary model, whether it's discretion is given to the house our discretion as with the adviser. So you add all of those capabilities and and.
It brings with a management team that's very that's very capable as well that are excited about this so you know overtime.
Those capabilities will merge into.
One a far greater suite of capabilities for advisers, so they can pick which way they want to grow and how they want to pursue their careers are they want to serve their clients and kind of like more of an ability to accommodate all of that and get the economies of scale over time from having a bigger platform to do it. So that's what it does for Canada life.
The models are different you know the history of IAG wealth. So I G. Wealth has has been prime but its model is changing too. So I'd have to say I G well had been primarily.
In advisors train them.
And then have primarily a proprietary shelf and was primarily mutual funds now that's been turned upside down in the last five six years.
You've got the recruiting model that used to bring in many many advisors with or without I would say not.
A certain our success rate in terms of turning them into successful advisors, they've just pared that back four five years ago to they're trying to hire like fifth of what they were doing.
They are yes, they got mutual funds, but there are into wrap programs in and unbundled programs and so the the product shelf has changed dramatically and they are now recruiting from the outside.
And while it is still mostly IAG wrapped product.
You know there are lots of different sub advisors and I G itself no longer has E investment management. So so that's I G wealth model has been revitalized and therefore, much more competitive and going after larger clients by the way and getting getting new advisors and so but it still has a history of coming from kind of the.
IAG product side of it and so it's you know it's got a different feel in a different culture to it.
Over time do they do they become the same 10 years out I don't know I'm not sure.
But so that's the best I can do it in terms of compare and contrast, I didn't always do well at those things and and college you know when you have that you just gave me that compare and contrast question. They have different histories are a little different.
But they work I G. I G wealth is set up for success with N. I G M and I think Canada life's got itself enough capabilities here to build a great wealth management firm going forward.
And is there a larger insurance component with.
With the Canada life business relative to <unk>.
Yeah, so within I G Walther within within our Canada life.
Yes, Canada life business that is acquiring IPC is there a bigger insurance component to sort of the wealth management.
Yeah, Yeah. Yeah. Good question. Good question. So the so first of all Ken a license there.
Consider their advisors to be independent advisors, but the advisors have different practices. Some of them are very well focused they would have <unk> funds, which is really just a protected a wealth product and mutual funds and increasingly wraps and discretionary so they've got a big wealth practice summer at the other end that are.
We're very focused on say power insurance and high net worth and ultrahigh net markets. Some of them are a mixed practice between insurance and wealth and a number of them are also focused on the group market. So they would have individual clients.
Who are running businesses in there and they make a practice out of.
Bring in group clients that also feed catalyzed group business. So you do have on the on the many many advisors that work with Canada life.
Myriad of practices are but a lot of them have wealth as a as a some part are an important part in some of their cases, the most important part of their practices. This sets, Canada life up to be a much better home for those advisors going forward as they build out these capabilities.
Okay. That's helpful. Thank you okay, great. Thank you Graham.
The next question comes from Tom Mackinnon with BMO capital markets.
Go ahead.
Yeah, Thanks, and good morning, a more of a kind of a radical kind of question Jeff here.
Simplified power and as a result, you sort of.
What we had before was maybe more of a complicated power Corporation and a somewhat more pure plays down below without kind of you know a significant.
Significant impact from say quote unquote other vehicles, but now if I look if with.
China, AMC now pushed down into I G M well simple still at IGN North Leif now at IGN.
There's still some great west at IGN.
Now Rockefeller at IGN.
It was like less than 75% of IGT ends earnings had really from I G wealth and Mackenzie so.
I understand the strategies involved in here, but have.
This is not necessarily a kind of a pure play anymore and even the push from the IGN peoples to almost doing better but some of the parts are almost in any.
Valuation approach to I G M. So I'll.
I'll just make this statement you say that you've you've certainly simplified power, but have you have you made the downstream company IGN them, a little bit more complex now.
And.
So I'm just curious as to what your comments are with respect to that.
Yeah. Good question.
I don't think we have but I think the brands can kind of get in the way of what's actually going on because I would describe the strategy a little more simply than that.
M <unk> has.
As in the wealth management business and it's in the asset management business.
In the wealth management business, it's got one business in Canada.
Which is <unk>, which is a much more mature substantial business.
And it's got a bacon well simple.
Which over time could prove you know as we look at we're long term holders as you know.
Like when I look back in 10 years, and say is that a significant part of <unk> or is it not a by GM excuse me or not I don't know, but that's kind of a you know a.
And investment in the future, which their cost base I'll remind you with zero actually it's negative right now because it's so so that's that's kind of not even that's a.
Our stake in the future and exciting one, but I don't view that as noise. It's it's it's not complicated. It's just is what it is so they have a leading wealth management business in Canada, and I G well poised.
Poised for growth and they now have a <unk>.
20% interest in a very exciting position in the U S and hopefully over time, we can increase our position in that company as opportunities come up we'll see that's their wealth management platform in asset management.
They have Mckenzie, but of course alternatives are very much where the puck has been going so they've taken opportunity to buy north leaf.
And and that's smart if you have a an asset manager in Mckenzie is not just sitting passively without they're taking the alternative products and incorporating them into their products and bringing them to the marketplace. So it is what asset managers. Many of them are doing around the world buying either buying into alternative space. So they they're in the wealth management business.
They are in the asset management business and they now have vehicles in China and the U S on top of their Canadian market, that's the way to think about it.
The sum of the parts and the and looking at the Strategics was I think really a means by which I G. M was pointing out to the market that theres, a theres a chunk of their portfolio that wasn't really earning money.
Great West life out of that for a second I was at an earlier stage of development and trying to and even China AMC at the time was.
Not earning as much money has been growing its earnings a lot kind of focusing on the fact that hey, maybe these businesses are worth over here Mckenzie and IAG wealth are worth X times earnings, but this part of the portfolio is to be looked at on a different basis I think that's what they were in my view doing in terms of putting it together our strategic investments.
So that's my answer to the question and Great West Life. All I'll say is you know just watch us by our actions. So you know that we we set that position up a long time ago, and and N. I G. M use that as a as currency in terms of our C myc transaction and great West life.
Natural home for that is at power Corp. In terms of our ownership and we took advantage of that transaction to increase our stake at power Corp, and great West life.
And that made the financing of that transaction worked for AGM and we were happy to buy more great West life, We're very excited about what's happening so.
That's.
That's what it is I don't view it as a complicated maybe it's just clear in my head, what we're doing but I don't view it as complicated.
Understood I hope we didn't Brent you know some companies Tom you don't I'm going to make a comment about one more comment on this.
A lot of companies your own employer.
Any big financial institutions, when they buy things they brand them with their own brand.
BMO this and BMO that even my old stomping grounds Nesbitt Burns that BMO Nesbitt Burns, we have had a different approach, where we have less brand standing in their local markets because we thought that they had.
We thought they had a lot of value and I think it ends up people looking at us and saying Wow, you really complicated because you've got this brand and you've got that Brown and you got this brand when in fact, we are a wealth manager and an asset manager at the AGM, that's what we are and and we probably.
End up looking a bit like a Christmas tree went well.
With all kinds of arguments on it when in fact, we're really in some pretty simple businesses and I'll I'll Tee off your question to talk about great West life Coast, New disclosure is great West Lifeco this quarter introduced but they're calling their growth drivers, but it is really a new way of segmenting what the businesses. There are they are in right now starting with workplace solutions and wealth and ask.
Management and other companies describe themselves that way and we don't we tend to use our brands and then people think we're complicated I don't think we're that.
I think we're in two or three pretty simple businesses around the globe.
Yeah, I mean, maybe I'll just add one comment on that too there was it in terms of this multi brand approach with respect at the great West life level years ago. There was like at least for brands, Great West Life, and London Life, Canada Life Freedom 55, and the decision I made there was to put it all under one brand.
So it wasn't going to be like a Christmas tree is there any thinking here about amalgamating thing.
Okta with I don't the IGF level yeah.
Yeah, I don't see that because Rockefeller has a great brand in the U S. You are not going to call. It I G well huh.
By the way, we don't control that so that's another reason like Mckenzie as Mckenzie as an asset manager that it's you're not going to put his brand the same as <unk> Ralph so.
I am.
I don't see us doing that right now is the answer so I think we just have to make sure we explain our business in a way that we think of it which is this is our wealth management activities. These are our asset management activities I think we need to move more in that direction. So we don't unnecessarily confuse people.
I think I'd just add on that Jeff is that.
Other perspective, when Youre looking at the brands is obviously the brands that are client facing.
And how they face decline so you know.
The distribution channel interplay with that as you know Mckinsey is kenzie as mckenzie to their clients and the brands that they're using for alternative asset managers stand behind them.
On the product shelf and I think that's well understood and the distribution channels and to the industry.
Client face yeah, So I think thats the other prospect and I think even BMO would do that in other banks in some other markets, but they don't report to the market that they won't report that they are you know I can't remember sorry to use. Your example of BMO example, but BMO won't report on its U K or its European asset management businesses. The name of the brand I will just say our asset.
Businesses when they report to the market when they interface with their clients they actually have more brands in that.
And we tend to report to the market that way and I think create some confusion, but anyway. This is you said it was a high level question, we're dealing at a high level here.
Tom and I always speculate discussion so thanks very much thank.
Thank you Tom.
Ladies and gentlemen.
No further questions. So this concludes your conference call for today.
Thank you for participating and you may now disconnect your line.
Thanks, very much bye now.
Yeah.
Yeah.
Yeah.