Q4 2023 Power Corp of Canada Earnings Call
Speaker Change: [music].
Good morning, ladies and gentlemen, and welcome to the Power Corporation Q4, 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.
Instructions will be provided at the time for you to queue up for a question.
If 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 Thursday March 21st 2024.
I'd like to turn the conference over to Mr Jeffrey or President and Chief Executive Officer.
Of power Corporation.
Please go ahead Sir.
Thank you operator.
Joining us will go through go through our results for the quarter and a little bit of a look back on the year as well and maybe even if your comments over the life.
As we look back over the last several years is sort of where we are at power on our on our journey as we execute on our strategy.
And I'd just remind you of the.
Disclaimers on pages, two and three regarding forward looking information and non <unk> measures.
And then.
Okay.
I'm here today with Denise <unk>, who is our VP and has been acting as our chief financial officer of effectively.
Over the last several quarters and then he will be working with me today to go through the presentation. We're also joined by Jake Lawrence who is on day four with power Corporation to welcome Jake we're not going to ask Jake to play a starring role in today's presentation, but just to say he is here and we're delighted.
To have him on board.
As we move forward here.
Start off with the Q4 results and remind you we will make some high level comments on great West life <unk> in terms of our prospectus, but each of those three companies have just recently.
Come up with their results and gone through with our extensive earnings releases our review of results.
With just a few days ago.
I'm in great West life, a few weeks ago, plus IGN had its investor day in December so theres lots of material if youre trying to dig deep into any of the three public companies that you can kind of reference or speak to those management teams.
So if I go to page seven.
Kind of reflect on where we are from a from an earnings point of view it was a and b.
For the quarter and the year, we had really strong results with great West life and they were broadly based clearly led by the emergence of empower, but but strong growth and strong results across a diversified portfolio.
I G M reported really solid results.
With an environment of headwinds with what's going on in their businesses right now, but we thought the results were very very solid.
And then as I move down onto some of the key points as we reflect on the quarter and the year.
The first one is with the Prudential integration coming to a successful close here the sale of Putnam.
Happened on January 1st it really.
Highlights and it is the completion of a five year repositioning our break less U S business and I'll make some comments in the presentation on that.
Greg This is art.
Performance.
Really for this year and over the last five years has been has been great I'm going to touch on that.
Really pleased with the positioning of a N G M O and I got to make a couple of comments on the way, we think about their positioning going forward.
As I mentioned, they're going to have an investor day, where they've laid out medium term financial objectives away at great West life had done back in 2021 G. B all continues to focus on executing its strategy and had a record year in terms of returning money to shareholders and then we've continued to build the scale of our cigar empower sustainable.
And cigars and entered into a number of transactions, which I'm going to walk you through very very briefly to enhance its growth and then not to be forgotten is we were we had our biggest year of share buybacks in 2023, and in Q4, and we announced a seven 1% dividend increase yesterday, so lots going on and we're excited to share it with you in.
To get into questions like he might have.
On page eight.
The market environment hasn't changed too much and we've got high rates and and in some ways. That's that's good like a lot of financial institutions. When you've got some parts of your businesses, where you have cash you have short term investments. So obviously earnings from those parts of the balance sheet.
<unk> mean, so you've got less money flowing into wealth channels less money flowing into the asset management products that are on those channels and whereas money going monies either going to repay debt to try and pay bills for a certain.
Parts of our client base, if they are investing.
There's more flows on a on an absolute basis going into new money products, including bank Cds and out of traditional wealth channels. So there is so I guess bottom line rates being higher can help your earnings here and there, but from a flow point of view and wealth channels and in asset management on balance it's a negative when you've got a couple of indicators there.
Of that in the Canadian channel, but we're seeing that across the markets, where we operate.
No.
Let me then with the turn.
<unk> over to a two day need to walk us through our financial results in a net asset values.
Thank you Jeff Good morning, everyone I will go to slide nine this is our Q4 financial highlights adjusted net earnings from continuing operations.
In the quarter were 579 billion. This is up from $3 $95 million in the same quarter with corresponding quarter of last year translates into <unk> 89 per share compared to 59 in Q4, 'twenty, two and I will address a breakdown of earnings shortly.
Adjusted net asset value per share was 50 353 at year end compared to 48 26 at the end of Q3, and our net asset value per share yesterday was 50 293.
That is Q4 meeting yesterday and it was Jeff mentioned earlier, our board of directors declared a quarterly dividend of 50 625 cents.
Our 225 on an annual basis and this represents an increase of seven 1%.
Turning to slide 10.
<unk> once again delivered strong results across all segments, including an increase in year over year base earnings from Canada, The U S and the capital and risk solutions, notably.
You'll see that great West <unk> U S retirement, and wealth business empower surpassed $1 billion in base earnings in 2023 exceeding the objective announced at the beginning of the year <unk> earnings and the solid performance, reflecting a challenging market environment.
Earnings at IGN were impacted by the partial sale of <unk> to power as part of the CMC transaction and Jim and Jim also reported losses in Q4 on hedging instruments. However.
However, we must consider this as a timing issue and going forward AGM will realize higher income, which will offset these losses as a reminder.
<unk> Q4, adjusted net earnings exclude the gain on sale of IPC to Canada life, and which in turn is eliminated on consolidation at power Corporation as it is an intercompany sale.
Moving to our NAV focused businesses Gbm's contribution in Q4 includes an impairment reported by email is.
And note that Wow, GBS Brexit asset fair value increases during the quarter.
These are not internally reflected in the results of some of these.
Companies arent consolidated.
It's like guard contributed positive earnings this quarter, driven primarily you might've fair value increases in our investments in the private equity funds and.
In cigars manager continues to make strong progress despite market headwinds slowing down capital fund raising and deployment.
Finally, as we have seen in the past by more sustainable negative contribution was driven by an increase in the fair value of third party capital in the infrastructure Fund.
This loss in our P&L results.
From consolidating the infrastructure fund.
A corresponding fair value increase of assets is not reflected however, we must recognize the increase in value of the units held by the Noncontrolling unitholders have defined.
If I turn to slide 11, we break down to 50 353 net asset value per share as of December 31 shares of our publicly traded operating companies performed well in Q4 with great West delivering a 13% increase.
Speaker Change: Great West remains a large component of net asset value and its performance essentially explains our quarter over quarter.
<unk> per share growth as a reminder, we now record.
<unk> management company.
The value of the management company at fair value and are now in Q4.
<unk> share of the management company value was $265 million with quarter over quarter changes only due to foreign exchange.
Movements power sustainable management company remains at carrying value.
Cash and cash equivalents decreased quarter over quarter.
We bought back shares at a higher pace in Q4 and this is also reflected in their participating share count decreasing from $658 9 million shares in Q3 to 652 million shares in Q4.
And with that I will turn it back to Jeff Okay. Jenny. Thank you. So then I go to <unk>.
Move forward to just a bit of a look at the last four or five years really.
Even though this is a quarter end report its also where at the end of the year or at the fourth anniversary of the completion of our reorganization and in my mind I go all the way back to 2019, where there was a lot of activity in 2019.
Through the year that led to the reorganization so a little bit of a look back here and the overall comment I'd make is that over the last five years. Our company has really repositioned itself. It has been.
Tire work done and it's we've been describing it through the three.
<unk> of our value creation, but we really have repositioned to each of the each of the businesses if I start with great West life.
It is a it's a different company than where it was five years ago I think it has got.
Speaker Change: Our strong businesses across its different platforms and is.
Speaker Change: Different markets and of course, the emergence of empower which was not a large contributor five years ago.
And our business in the United States with now the U S is emerging as the largest part of great West life is probably the most significant change, but there's been very significant investments across the rest of the platform as well.
IGN again.
Right now we're in an environment, where we.
Speaker Change: Channels are generally in outflows asset management channels are in outflows in Canada.
And so people are going well, you've got a lot of macro headwinds, but it does not when you look at it from a.
Our multiyear position here. This business has repositioned itself as well for much higher future growth in its wealth channel and as well segment. It's got it's got the core business of <unk> wealth and that's got a couple of very high growth drivers for the future and in this asset management segment has got his core business, the Mckenzie, which is in a strong market.
<unk> and then some very high strong growth drivers that are going to come back to that as we go through the presentation and then at power.
Really really big change from where we were five years ago, obviously, a simpler structure.
Speaker Change: How much software strategy and I would say as I look back lots of great progress made in terms of raising funds selling assets buying shares back enhanced communication, but I would also say.
Finished our work here and lots of lots of.
Lots of work still to do with if Theres a lot of opportunity I can put it in a positive way, but lots of things that we that we had set out to do and some of them were difficult over the last four five years. If you think about the environment we've been in.
But just overall, it's a different company and we still have lots of opportunity ahead to execute on our strategy.
Flip over then to the next page, which is page 13, just to remind folks. We did have another busy year from a transactional point of view. It was highlighted by the by the acquisition of the Rockefeller positioned by IGN by Canada life acquiring investment planning Council.
Which really enhances its position and its scale in the wealth business.
Canada, which is going to be a key focus for them going forward and then ultimately the sale of Putnam, which closed on January one of this year.
Frank.
So those were the three highlights, but I'm going to come back to the three on the bottom.
And what's the guards announced over the last little bit here, because it's interesting how cigar is used in transactions and a difficult fundraising environment to enhance its scale and its growth prospects.
Page 14 is just kind of a look back on great West Great West had I think a version of this slide in there in their deck, so I'm not going to belabor each of these points notwithstanding the very difficult market and well they have a lot of positive flows.
A lot of that comprise the majority of that was in the U S. Because empowers gaining market share and growing organically in the D. C market and they've got a wealth business of course, which I think is up to now somewhere around $70 billion U S.
With the combination of the personal capital acquisition in the existing wealth business. They have and they've got strong strong flows into that business. So that is a bright spot in terms of a difficult to wealth market and then down at the bottom of the page just to highlight.
We are in both Canada, and the United States, We've got much stronger brands and we had even a few years ago remind folks that have followed us for a few years. You go back three four years ago, you kind of like we are operating as candle life, great West life and London life.
It's only been a few years that we've emerged with the Canada life brand and then empower is investing heavily and we will continue to invest heavily in building up its empower brand in the U S. So we've got two strong positions here and we are very much.
Working under what we think are very strong brands.
Okay.
<unk> is probably the page in terms of change there's been as I mentioned, a few slides ago, there's been change across power I think nowhere more.
Dramatically if I can use that word I don't think its too strong a word as in great West U S business. If you go back to the end of 2018, great West on the left hand side of this page we had three businesses. It had great West financial which was its insurance business for those that followed us.
It was <unk> there was some close lifelock. It was actually the largest earnings contributor at that time, it had empower and it had partner and all three of those businesses in 2018, we're earning less than $400 million Canadian I think I've got 388 in my head, but it's someone will correct me if.
Im off but I'm, if I'm off I'm not off by much.
You go through what happened over the next five years, we kicked off 2019 in January with the announcement of the sale of the insurance business to protective life.
Great West call that up with three acquisitions over the next couple of years to defined contribution acquisitions, massmutual and credential and the personal capital acquisition and then start to this year.
Or at the in the Middle of this year announced the sale of Putnam and also the emerging of personal capital and.
And power's own wealth business into what's now branded as empower personal wealth and where are we today, we have one business empower.
The second largest retirement provider in the United States It.
It has got $18 5 million clients. It's got one 5 billion U S clients platforms is growing organically at very strong rate and in 2023.
Denise said it earned more than $1 billion and great west of there.
<unk> call are calling for that growth to be somewhere in the 15% to 20% range for 2024. So empower is now the largest single business unit contributor in great West in the U S is approaching somewhere 30%, 32% is the largest segment so.
Whole group has changed but this is really the biggest piece of the story.
And then.
We talked.
Four five years ago at the time of the reorganization really upping our game in terms of communication with the market transparency accountability part of that was in June of 2021, great West came out and for the first time in our group announced that they are medium term financial objectives, which you have on the left hand side of the page and.
At their recent.
Call. They reported what you have on the right hand side of the page their performance in terms of EPS growth of 11% for 2023.
<unk> five year growth is 11% on a <unk>.
CAGR compound growth rate, which is above.
The growth targets, they Seth you've got their Roe.
Performance there in the area.
Our payout ratio, which was above the range and will work its way down slowly.
As we expect or.
I used.
Speaker Change: The rally has been that the earnings growth has been higher than the dividend growth and through that a little bit of noise. As they went through a <unk> 17, but our expectation is that will move over time that payout ratio down towards the middle of the range it'll bounce around from year to year of course.
Over on the 17, just some comments on ITM and what they achieved in 2023 I think the Rockefeller acquisition is a significant transaction it will offer them the opportunity to have a.
Larger exposure to the high net worth ultra high net worth.
<unk> and it starts to give them more of a north American wealth presence.
Speaker Change: We forget, but the China AMC deal, which we talked a lot about I guess back in 2022, it actually closed at the start in the first quarter of 2023, and we think thats the right place to concentrate that position.
Speaker Change: And notwithstanding the challenges that.
China is facing right now an investor apathy I don't know I don't think Thats, maybe that's not a strong enough word in terms of their views of China.
That business continues to do really well.
There's a lot of savings going on in China, right now in China, Amc's relative position continues to strengthen so that's going to turn out I think over the long term to be a great.
Speaker Change: Great acquisition for four IGN and then they sold IPC as we've mentioned to Canada life to allow them to focus their time their energy their capital on.
Building up the businesses that they thought they had importantly.
There was an investor day held in December.
IGN and a couple of things were announced there.
Recast their segmentation into wealth and asset management.
Speaker Change: And.
Speaker Change: Basically no longer segmenting around their strategic investment segment, which I think is the way we think about it and they think about it in the right way to do it and they came out with medium term objectives for.
The first time very much the way at Great West Life I, just mentioned did in 2021 and the best slide to describe that is the following one page 18, where.
You see the segmentation on the left and I'll just go back to my comments earlier, they've got our core our core franchise in each of wealth and asset management and then they got some very much high growth drivers for the future and their earnings EPS.
Our objectives on a five year basis are 9% overall earnings growth and that's a specific number it will obviously.
They execute and be a range around that.
And it's 7% coming from the core franchise is more mature those are the bigger franchises paying the bills right now if I can use that expression, but they're more mature franchises and then they're expecting higher growth out of the out of the other parts of the portfolio here these assumptions assume normal market growth.
There's normal stock market growth assumptions in that there's obviously some volatility on a year to year basis. When those businesses. Okay couple of comments on 19 on JBL and just to say.
Record year core returning capital to shareholders.
Second point is they're refocusing their portfolio basically putting more emphasis on private assets. They sold out of three positions and they reduce their position a couple of accounts and they created a value in their private asset portfolio. So they continue to drive forward with their strategy.
A couple of slides on our on our investment platforms. It was just a little bit of a look back here to when we announced the new strategy. We said at that time, we were going to try and grow the investment platforms without putting additional seed capital from power into it we were going to rely on parties other than power and you got to look back there on the.
On the funded assets under management $3 7 million to $17 6 billion. That's over just slightly less than the Q1 to the end of Q4, so it's a little less than four years and then the dark blue bar our corpus.
But at the same amount of capital invested and if theres. Some theres some mark to markets in some of those numbers.
We've effectively done.
We.
We said, we were doing but still a long way to go clearly to get.
Speaker Change: These platforms into a point, where there are contributing from a from a.
A value point of view and that's the way, we're able to communicate that contribution to the market effectively but lots of progress.
Page 21 is.
I think is really interesting cigar everyone everyone. Following the.
Market in the private asset market knows it's been a difficult funding it's been difficult to fund its been difficult to actually deploy capital so the businesses across the world.
Speaker Change: Finding this has been in 2023 has been a difficult year from a growth point of view cigars done three transactions. So it's one thing to go out and ask people to invest in your funds, but they've done three transactions to expand their scale and their and their funding and their growth going forward, we talked about <unk> and the BMO now 80, Q now called <unk>.
Illuminate illuminate.
Coming in as a GP and committing to provide future seed capital for the funds, but also investing capital and cash in the cigar so that was a growth strategy.
But then in December and closing in January <unk> announced the acquisition of a strategic interest.
And that means we've got a significant equity interest and there is a path to control eventually in that.
And that transaction.
<unk> $9 billion.
Manager called performance equity management, and basically get cigar into the fund of funds secondary and co investment space.
Space, which is a very important space, particularly if you think about the shifts in flows going forward.
In the Alt space from having been historically institutional and a dominant led.
Now moving more into high net worth.
Speaker Change: Family office, and ultimately into retail of those products are very well suited for that and then they just announced a couple of weeks ago. The acquisition of a 40% stake in <unk>, which is a CLO manager out of the United States.
<unk> has got credit products this will extend the.
The range in the credit market and again, we will give them other avenues for growth so difficult funding environment, but they've got the capital and they are doing the transactions to expand their scale and extend our growth prospects through a different form which is using using M&A.
Hey.
And back to wrap it up here.
Sure I open it up for questions.
So.
Power you see our buybacks across the across the top of the page.
To remind you we had COVID-19, we were a little slow out of the blocks getting getting transactions done in monetization and has picked up in 2022 and 2023.
Speaker Change: We increased the dividend as I mentioned for buybacks going forward, our cash at $900 million is just a little bit above where we'd like to keep it. So we are very much focused on getting additional buybacks through 2024, and we will be looking to continue the monetization of non core assets as the key under for that.
And all the same time, maintaining our very strong credit rating.
I have to at least pause on page 23 for a second on our total shareholder returns. We're long term shareholders, but we are very much in business to create shareholder returns and while.
These all of these numbers are always very sensitive to start dates and end dates as you know we do very much keep our eye on what kind of total shareholder returns, we're providing to shareholders and then you've got some benchmarks. There we've done very very well against the key benchmarks that we look at in terms of those time periods.
Our performance.
On page 24.
Notwithstanding that the discount has widened out over the last 18 months or so.
And we're working hard on ensuring that shareholders see the value across all of the assets, we have including the assets that are at power and we do believe that thats.
We don't ultimately control that but our behavior and the actions. We take can certainly have an impact on it. So those returns were created even though we have widened that discount out a little bit and again I view this dose and the opportunity category.
Speaker Change: Page 25, just kind of summarizes.
Operator, we'll go into questions in a second.
Our three key drivers and in walks through where our businesses are today and where we.
I'll summarize the way I started we've got lots of work done here, but lots of opportunity to keep driving the strategy going forward with that operator, I would ask you to.
Open it up for questions.
Thank you.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you Lithia tone acknowledging your request.
Youre using a speakerphone please pick up your handset before pressing I think Keith could withdraw your question. Please press Star then two.
The first question comes from Graham Ryding with TD Securities. Please go ahead.
Hi, good morning, just.
Graham Ryding: On the guard in the minority stakes year to date.
Graham Ryding: To those.
Private equity and private credit.
Managers or CLO manager, what's the thought process there in terms of take a minority stake positions here as opposed to <unk>.
Controlling majority positions.
I think you should think of it as a.
Pass along a road.
So I mentioned for example.
We've got a path to control and in the first.
For instance, and so these are people businesses, you buy and you establish a major position.
And then you negotiate your ability over time to take a controlling position. So I just I don't think the intent is to stay in a minority position as the bottom line.
But to work with those platforms and ultimately.
Be in a position of control brand. It's tactical is what it is.
Okay Yep understood.
There were some.
I think fair value gains within power sustainable that triggered.
Your bookings to Noncontrolling interest charges can you maybe just give us some color on what drove the gains and just make sure we are understanding that correctly.
Denise do you want to take.
The gains were primarily.
Primarily in the.
<unk> private equity.
It looks like <unk> was a power sustainable capital question I think that yeah.
I'm sorry is the noncontrolling interest in the <unk>.
Yeah.
And for funding in the Infra fund the Noncontrolling interest as we've explained before the accounting mismatch.
That when you have a.
Graham Ryding: An increase in the value of the fund itself.
We havent redemption feature from the Noncontrolling unitholders and depth.
Turns into what we call the Noncontrolling interest.
Charge, because we have to report.
We also recorded on our books.
Graham Ryding: Increase in the value that goes to the.
NCR.
So put another way we consolidate this fund because between our position and Cannibalized got a position in that we're that we consolidated when the value of the fund goes up we don't recognize the increase in the value of the fund, but we do recognize the value of the minority non powered on Canada life shareholders and at that value.
<unk> flows through as a liability and flows through the P&L. So every time, we have good news and the value goes up we have a P&L loss with the current accounting so it's just.
Not at a layman's description of the outcome as opposed to the technical description of them, yes, but I think the gist of it is good news on the.
Graham Ryding: <unk> side results in bad news on the earning side.
Speaker Change: Yes, we should start every presentation grandmother going and really good news.
Sustainable capital, we add another loss.
Like I mean, it's.
It is what it is but.
Bottom line is the value went up and we don't recognize and we recognize.
The minority shareholders increased in value as a liability through the P&L.
Yeah, Okay, and what drove the increase in the fair value gain within the fund.
In the quarter itself, the fair value gain and the fund was essentially.
Looking at the future.
Electricity rates and Theres been a shift in the electricity rates. So that when you do your DCF of all of your projects that did turn into too.
Increases in the value of the funds at other times you will see.
De risking events as we've seen in the past, but that was not the case in the <unk>.
In the current quarter.
Okay.
And my last one if I could just.
Speaker Change: I think you mentioned <unk> 9 billion in cash so slightly above sort of that minimum level that you'd like to.
So that so if you are able to.
I guess continue buybacks this year at a similar level to what we've seen in 2022 and 2023 what are the.
I guess asset standalone or otherwise what are the assets, you're most likely looking to monetize if youre going to be able to continue to buy back shares at this level.
Yes, Greg I'd rather.
I don't want to name any specifics because you've got.
In the portfolio, we've got a series of assets that are clearly non financial services. So we've said for some time that those long term or not in place I've said before publicly I don't think I would have anticipated for years ago that it would still be we still have as much capital tied up in those but world unfolded the way it did.
Speaker Change: So those are there you've seen in the past that we see capital into the strategies of personal capital and cigar and when there's opportunities to do secondaries we've.
We've done that so if we sold out of positions.
Because we see them and then ultimately to get to a more mature state and theres lots of secondary buyers for positions.
So that's another tool that we have so we've got we've got a bunch and how we execute on them will depend on market buyers.
Negotiations and all of that so I don't want to.
Pre anticipate that so I don't I don't mean to be evasive, but I think it would be misleading to kind of name one or two because I actually.
Speaker Change: Year will unfold the way, it's going to unfold and we will do what we can most succeeded at doing what we do and that will have a bearing on the rate of buybacks.
Speaker Change: Execute on.
Okay.
Okay understood. Thank you.
Hey, Thanks Graham.
Once again, if you have a question. Please press Star then one.
Next question comes from Doug Young with tissue.
<unk> capital markets. Please go ahead.
Hi, Good morning, just back to the acquisitions and say good performance equity and how's the.
Can you talk about purchase price or what this should add in terms of financial terms in earnings and I know, it's at the margin, but what I'm trying to understand is the amount of capital that's being deployed.
And the potential return on the capital and how do we what are the metrics, we should be using to kind of gauge your progress as you kind of build this franchise or does it is it earnings EBITDA.
Speaker Change: Hoping to get some color.
Speaker Change: Thank you.
We're not in a position.
First of all is not material to power or we would have disclosed it and then secondly, we would've liked to disclose it but.
As I mentioned in our Graham's question Youre dealing with people business this year and often in these circumstances. The principles are the founders and we have in.
Speaker Change: And the agreements we have comprehensive how the agreements to state that we can't state the purchase price at this point so that's.
Awkward from a disclosure point of view, but it's not material amounts of money. So.
That's a polite way Doug is saying I can't tell you the answer to the first part of your question I think the.
Speaker Change: Where you went there is with the metric system, what we're looking for I think at this point.
When cigar is doing these transactions, it's about value creation right now and ultimately it's going to be at the GP level about earnings, but they are building up their scale big time.
And so they are at $15 billion.
AUM they've got another and that's.
Speaker Change: They've got another nine U S out of the performance equity transaction, but also.
Great new sector.
<unk>.
Hello.
Smaller AUM than that but gives them additional products in the 80, Q now illuminate and BMO deal.
Bart.
Equity position diluted us.
In that process, but put cash into cigar and that validated the value creation. So we marked if you remember we marked cigar up on our books I think it was a double in terms of the value that was somewhere around double.
So there is a metric of success, it's not producing.
Earnings that we will move the dial at power for the time being but the value that validated to third parties coming in and put it in double the value added cigar, but they also put cash into cigar. So the acquisitions that they are making of performance equity and healthy point.
Really that's not that's not we didn't have to throw cash and there is power that's cash that cigar now has and its treasury true true.
Through those those transactions and other sources through that through the queue on the BMO has.
We had some cash on there so.
So we haven't been injecting capital, but they are building out their scale their building out their value and therefore, what do I expect out of that I expect that youre going to see continued increase in the value of our position and cigar overtime as they build.
Build out that build up their scale and their position and ultimately.
It will be producing earnings the final thing I'll say on it is that there is a.
There's a little bit of a do we how much do we want to show profit today versus how how successful that we want cigar ultimately to be and so.
Speaker Change: We're at a point, where if we wanted to drive some earnings through it.
Theres enough there was enough revenue there.
That we could drive some earnings.
Speaker Change: Going to make a difference to power Corp on our P&L no.
And so you end up saying well, let's keep investing we got some cash here, let's keep building up the scale and don't make this into a much bigger business 345 years from now and Thats kind of the internal discussions that we have.
Final thing I think.
We disclosed the fee revenue for our cigar and I think it was.
Got it I'm looking at someone here, we now have it in our statements I think if you go back correct me if I'm wrong just in the past year is 130 537 million U S, which trend 175.
170, 175, Canadian So 137, 135 U S. I'm just going by memory here. So that's the run rate for the last year. So we got regards built we're just on the fees to steady fees, they're earning from their funds they got $175 million.
Speaker Change: Our rail business, it's got scale and they are trying to build that scale by these transactions is something even bigger and ultimately that liquidation contribution long answer Doug.
But.
Just kind of on average.
There you go.
I appreciate it and so the cash that you're using to buy these entities are the stakes in these entities is actually not part of the <unk> 9 billion at the Holdco. This is coming out the liquidity at CAGR does that do I have that correct.
Speaker Change: Yep.
Okay and then.
And then.
Just on <unk> question follow up on that one in terms of buybacks. It sounds like either you're going to use the liquidity at the Holdco, which is about $100 million in excess of what you want to hold it sounds like and then otherwise standalone businesses.
<unk> is there any other kind of lever you can pull to kind of finance buybacks.
Speaker Change: For sure.
Secondaries capital out of some of our positions in the in the strategies that we have that was.
That was part of what I answered Graham we did we raised I think over $300 million buy by doing a secondary of our position in cigar three which was scarred three fund as a European private equity fund.
Speaker Change: I'm looking around here is over $300 <unk>. So we did we raised $330 million that was a couple of years ago.
We've done some other small secondaries, we look across the funds. So what ends up happening you launch a new fund.
Doug and you have been in the sponsor, especially on our first fund and say well, we want to see the sponsors put up $200 million of capital if you're going to raise this $500 million front. So we ended up putting up a bunch of capital on the first fund and then it grows in three or four years later the fund has done really well we're onto the second fund we won't have to put up $50 million in the second fund because.
Because we were successful and now our $200 million has got a position of $350 million because I'm, making these numbers up okay. I am just giving you. An example, and the fund is three or four years old and there is a lot of buyers of secondary positions because a lot of for a bunch of reasons I won't get into but a lot of virus secondary positions and we at that point can take our 300 <unk>.
Cable then go and sell it so we're always looking at the $2 5 billion that we have and the seed capital pool, and saying where can we harvest that and where can we take a couple of hundred off here or $200. So it's not just the standalone is actually harvesting and some of that goes back into seeding new funds and some of that comes back to power Corp, and we buy shares back.
Okay.
Okay that makes sense and then just.
Just on the Standalone businesses, just correct me if I'm wrong. If you were to sell them an at need kind of showing what you hold them.
<unk> value I mean that would be marginal it's marginal but it would be marginally positive to operating EPS and that frees up cash to buy back shares.
On top of that right.
Speaker Change: You have it perfectly right.
Speaker Change: So to make your point when we closed.
The reorganization in February of 2020, we had on closing 683 million shares outstanding.
And we bought back $38 million over the last three or four.
So call it four years.
$8 million 7 million options exercised so we net bought back three 1 million shares. So we have 700.
Speaker Change: 652 at the end of the year. So that's $31 million last we have a dividend at this rate at two in a quarter or so.
So you can do the math, we have about $70 million less in <unk>.
Dividend obligations in the aggregate, which flows through to our cash flow.
Raised 750 or $1 billion wherever it is on selling a bunch of other assets that we put that back into cash flows. That's another 25 million shares at 40 Bucks.
You can do the math. So every time, we do this we are increasing our not only our peak and when we're buying back shares.
5% discount, we're increasing our earnings because we've got less shares outstanding and we create a lot of more cash flow. So that's you got it exactly.
And then just lastly, maybe this question or this statement, but it's like the $48 million negative impact on stand the mechanics of how it works why is that not an adjusting item.
That's a joint venture I'm not touching that one.
Yes.
This is the one for Jake.
I think you've been here.
Yeah.
Okay Alright.
I think that that is a fair question that is when do we start with in the past that could that could be a candidate for just putting it into the adjustments and it would be more in line with what we see as the type of adjustments at.
Great West Us and.
Speaker Change: Just on fair value.
Kind of unexpected fair values, how they affect your earnings as opposed to your run rate so that would be in our earnings but it would be it could be I'm, not saying it will be but it could be part of the adjustments.
That's going to take time.
Okay. Appreciate it thanks.
Okay, John Thank you.
Yeah.
There are no further questions I would like to turn the conference back over to Mr. Jeffrey or for any closing remarks. Please go ahead.
Jeffrey: Okay. Thank you again, everyone for being with US. This morning, and we look forward to talking to everyone. Soon and have a great day. Thanks, a lot bye bye. Thanks, operator, you can terminate the call.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
[noise].
Jeffrey: Okay.