Q1 2025 Power Corp of Canada Earnings Call
Good morning, ladies and gentlemen, and welcome to the power Corporation's first quarter 2025 earnings Conference call.
At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.
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I would like to remind everyone that this call is being recorded on Wednesday may 14 2025.
I would now like to turn the conference over to Mr. Stephen Huhn head of Investor Relations for Power Corporation. Please go ahead Sir.
Speaker Change: Thank you operator, good morning, everyone and thank you for joining the call to discuss our first quarter financial results.
Speaker Change: Before we begin please note that the live webcast link and materials for this call are posted under the shareholder parsed out on our website at power Corporation Dot com.
Speaker Change: Please turn to slide two.
Speaker Change: I would like to draw your attention to the cautionary note regarding the use of forward looking statements, which form part of today's remarks.
Please also refer to slide three.
Speaker Change: For a note on the use of non <unk> financial measures other measures and clarifications on adjusted net asset value.
Jeffrey: To discuss our results today, joining us our president and CEO Jeffrey <unk>.
Jake Lawrence: And our EVP and CFO Jake Lawrence.
Jake Lawrence: We will begin with opening remarks, followed by Q&A.
Jake Lawrence: With that I'll turn the call over to Jess Thank you, Steve and welcome everyone. Thanks for joining us this morning.
Speaker Change: I am going to just draw your attention on page five to recent investor disclosures at our various group companies of course, we've just come through a number of annual general meetings for great Western I G. M. N G. B L and powers is later this morning as well there is a great west Lifeco Investor day that had a lot of interesting information so lots of stuff available on.
Jake Lawrence: Various websites.
Jake Lawrence: Moving forward. This is a power corp's 100th anniversary this year. So we're celebrating.
Jake Lawrence: What we call with century stronger are they actual birthday was April 18th or just cleaning up the birthday cake around here now it's a big year for US. The company has been around a long time gone through a lot of change and so well.
Jake Lawrence: We're celebrating that this year.
Jake Lawrence: Moving forward to page seven.
Jake Lawrence: Yeah.
Jake Lawrence: We had I would describe a solid quarter on track the two businesses, great West life and I G. M that produced the basically all of our repeatable.
Jake Lawrence: Earnings.
Jake Lawrence: Solid earnings growth I.
Jake Lawrence: I mentioned, the great West life, Investor Day, I'm going to come back and highlight a few points on that our alternative asset management platforms did.
Jake Lawrence: Did a number of steps service since we last met which was only about seven or eight weeks ago I think for when we had our Q4 call. So another number of other developments, adding to the scale and the breadth of those organizations and there's a number of leadership changes that I wanted to give my comments too and to you and share with you as we go through.
Jake Lawrence: The presentation with that I'm going to pass it over to Jake.
Jake Lawrence: Thanks, Jeff I'm going to start my remarks today on slide eight it's.
Speaker Change: As Jeff noted, we're pleased to report solid quarterly results to start 2025, and Q1 adjusted net earnings from continuing operations was $787 million and that's up 11% compared to $710 million in the same quarter of 2024.
Speaker Change: When we look at the earnings on a per share basis Q1, adjusted net earnings were $1 22, and that's up 12% compared to $1 nine last year that incremental 1% growth in EPS is a direct result of our active share buyback program that program continued again through Q1, when we repurchased 3 million shares.
Speaker Change: Is it going to detail later in the presentation our results reflect growth at great Western AGM financial businesses, which Jeff noted can combine the vast majority of power's recurring earnings.
Speaker Change: Our NAV per share was 68 99 at the end of the quarter March 31, and that's up 14% compared to the end of last year December 31 2024.
Speaker Change: What was driving the underlying increase was great west share price, which reacted positively to its Q4 earnings release that occurred back in February.
Speaker Change: As noted we remained active buying back shares in the quarter and the reduction in share count contributed approximately 23 cents to the NAV.
Speaker Change: Our NAV per share closed at $63 60 yesterday, and that's in part reflecting the share price volatility we've experienced post quarter end.
Speaker Change: And then finally the board of directors did declare a quarterly dividend of 61.25 cents per share and this is consistent with last quarter's dividend and is up 9% year over year.
Speaker Change: Moving on to slide nine request once again delivered strong quarterly base earnings of over $1 billion and it's the fourth consecutive quarter with base earnings in excess of $1 billion.
Speaker Change: The earnings contribution rose, 6% and were driven by double digit growth in its retirement and wealth businesses, great. West also reported base, our OE of over 17% highlighting the growth and it's more capital efficient businesses.
Speaker Change: I G M contribution to Power's earnings were also up 6% year over year as I G. M reported record first quarter adjusted EPS to start 2025.
Speaker Change: These results were driven by record quartered au M&A and strong net inflows at both I G wells in Mckenzie.
Speaker Change: As well I G M saw impressive growth in client assets across its for strategic investments.
Speaker Change: G B else contribution to Power's adjusted net earnings declined year over year as the prior year comparable figure included a number of fair value gains associated with G. B LS capital G. B L capitals investments.
Speaker Change: As Jeff will outline shortly JBL continues to progress on its value creation strategy and earlier. This month, it's dividend a five year loss per share was approved.
Speaker Change: Moving to our alternative investment platforms. The guards contribution to earnings were driven primarily by fair value increases in our investment into the guards private equity and venture capital funds power sustainable results included improvement in its FRE and greater contribution from its energy infrastructure fund.
Speaker Change: As a reminder, in accordance with I F. R. S. We consolidate the underlying operation of operations at power sustainable Energy infrastructure Fund. This means that despite being a limited partner in the fund our accounting earnings will still pick up items, such as amortization as well as financing expenses.
Speaker Change: The increase in our corporate operations and other line. This quarter was driven primarily by operating expenses, where we had an adjustment related to the performance assumptions used in our equity based compensation a portion of the adjustment is onetime in nature and this adjustment is expected to reduce volatility in future quarters overall.
Speaker Change: Overall, we're pleased with our group's strong start to 2025 and believe this quarter's results are a testament to our group's ability to grow in challenging environments.
Speaker Change: Moving on to Slide 10, as mentioned, we reported net asset value per share of <unk> 68, 99 at the end of the quarter I'll draw your attention to the bottom left of the page, where we re emphasized at 84% of Power's growth asset value is comprised of great Western I G. M are publicly traded.
Speaker Change: <unk> earnings driven businesses.
Speaker Change: Much of our NAV growth this quarter was headlined by the strong share price performance at great West that I mentioned earlier.
Speaker Change: We believe the share price reaction represents the street's validation of the transformation great West has undergone in recent years.
Speaker Change: We also saw a solid increase in our NAV related to GBM.
Speaker Change: The garden power sustainable stayed relatively consistent quarter over quarter with fair value gains in our investment in private equity and venture capital funds driving a slight overall increase as a reminder, say garden G. B L entered into a strategic partnership whereby G. B L acquired a 5% fully diluted interest in this regard general partnership.
Speaker Change: And the value consistent with our Q4 24 level.
Speaker Change: Our cash balance ended slightly lower at 1.4 billion as we remained active in the N T. I B program of that 1.4 billion. We consider just over 1 billion to be available once we factor in dividends declared by power and I G M, but not yet paid.
Jeff: And with that I'll turn it back over to Jeff for some more remarks from Heaven.
Jeff: Thank you Jake is moving forward to great West life I a lot of that was covered by Jake I'll, just add that within great West life coach earnings strong performance continued strong performance by empower.
Jeff: And but but.
Jeff: Strong growth across the rest of the platform and that's the way we think of it we're going to get growth.
Jeff: In our view moving forward from all of the business units.
Jeff: Empowers, obviously, the lead growth, but there's solid growth coming from across the platform. The other thing I would just point out is.
Jeff: The capital position and the capital generation of Great West Lifeco is becoming I think clearer and clearer and I'll make another comment on that and on the next page, but there was a strong buybacks in the $2 5 billion of cash up at the Holdco. In addition to excess capital down in the regulated entities themselves so with that why don't I.
Jeff: Move to page 12 two.
To highlight I think he would've.
Jeff: Essentially seen this from great west, but great West life had.
Jeff: Come public with their medium term objectives and that was in early 'twenty one start to 'twenty one.
Jeff: And they at their Investor day in April kind of just did an accounting of that the.
Jeff: Had exceeded a coarser base EPS growth there, there's 16% to 17% ROE They had we're at 17% last year.
Jeff: And they had got to a payout ratio from about 60% in 2020 down to right around 50% so with that they revised their objectives. They kept the base EPS growth at eight to 10, but did note.
Jeff: That theres a potential for them to exceed that through the deployment of excess capital because theres a lot of excess capital they move their ROE target up to 19%. They introduced a new base capital generation measure and that goes across the segments. I think that's going to be really useful for people who are looking at great West Lifeco to understand how.
Jeff: The earnings actually translate into capital generation that can then be used to either move upstairs pay dividends and.
Jeff: Reinvest in the business, but that's kind of I hope and expect will give people a lot clearer understanding of the of the ability of the company to continue to generate capital and cash and they just are maintained their target earnings payout ratio. So hopefully that continues the group's march to creating greater communication greater disclosure greater transparency around.
Jeff: <unk> what's happening.
Jeff: The other thing I'd like to talk about is on the next page.
Jeff: Significant for the company is when you have a leadership change.
Speaker Change: Let me start with St. Paul was the CEO for 12 years, it's kind of remarkable.
Speaker Change: The business changes every year when you go back and we did so with over the occasion of pulse and us announcing that pulp was retiring as CEO.
Speaker Change: You go back 12 years, and you look at great West and it's a hard to recognize it today all of the change that's gone on significant repositioning went through that period and the first half of Pauls tenure, where they're just heavy investments going on not a lot of earnings growth.
Speaker Change: And the earnings growth numbers that I, just referred to over the last five years, we're really starting to hit our stride. The company has been really reposition called it a really great job he's going to stay on as a special advisor into early 'twenty 'twenty six to help.
And just make sure he's there too to make sure. It's a smooth transition with David not to David necessarily is going to need a lot of help David Harney has been with the group.
Speaker Change: Say that loosely for over 30 years, he joined Irish life.
Speaker Change: And when we acquired Irish life. He was running the group business. He was a several years later promoted to being CEO of Irish life.
Speaker Change: Four years or so ago took over as the president of olive great West Life's European operations, and then added responsibility for reinsurance.
Speaker Change: So it's got a wide remit as they say in Europe over the businesses of great West Lifeco piece.
Speaker Change: <unk> offers a math major in an actuary, but he spent most of his career building businesses doing client facing work are really talented guy and I think he's going to really do extremely well, we're really pleased with David's appointment.
Speaker Change: Okay, a couple of comments on I G M.
Speaker Change: So it was in fact, a record earnings for them for the first quarter. So that those are good results.
Speaker Change: A choppy environment, obviously, but they did have very strong inflows I G wealth are in.
Speaker Change: In in net inflows a lot of that driven true high net worth.
Speaker Change: Flows.
Speaker Change: Kenzie was also in inflows that was driven by institutional flows, but very strong institutional flows in particular into one of their strategies, which is getting good traction globally. It was not Canadian flows through our international investors. So lots of good momentum happening there and they themselves are of course returning capital.
Speaker Change: To shareholders and then in addition to dividends engaged in share buybacks. So you know, it's kind of a solid performance for our G M and Mackenzie if you turn the page however to page 15.
Speaker Change: You've got their strategic investments, which are not a little bit analogous when Jay was talking about our N V and talked about the the part of the great. The power Corp portfolio, which is not really earnings driven it's a V driven well that the strategic investments here, probably Jim are analogous to that with the exception of China.
Speaker Change: Management, it is producing strong margins, but the growth across this portfolio in the client assets for the last 12 months is really quite outstanding you got real simples assets at the end of the quarter up to 73 billion from 39 in the previous year. Rockefeller. These are there assets converted to Canadian dollars.
Speaker Change: <unk> strong growth year over year, China Amc's growth the 529.
Speaker Change: $1 billion Canadian.
Speaker Change: Assets are.
Speaker Change: And IGN loans, 28% of that so that's a big share of those assets are very large in north leaf and a difficult funding environment continues to grow through our fundraising so really strong performance by IGN strategic investments and that sets the stage as we move down in time for ultimately our earnings.
Speaker Change: Driven by those businesses as they reach scale and decided to focus on profitability.
Speaker Change: A couple of comments on GB L. A turning the page.
Speaker Change: So they did announce reiterate back in the fall they had their own investor day, where they are.
Speaker Change: Announced that they were targeting double digit T S. Our objectives through the continued execution of their strategy.
Speaker Change: They in the first quarter disposed of a lot of their S. G S stake and.
Speaker Change: It's about 2.4 billion euros going back to the start of 2024 of our assets that they have disposed of public assets that they've disposed of.
Speaker Change: And if you then Jake mentioned the dividend, which was approved and then on the right hand side you see the transformation of their portfolio over the past five years, they've been talking about it but you see it on a multiyear basis as they make progress.
Speaker Change: I'm going to switch the page here and then make my next comment on the leadership so yen galyen.
Speaker Change: Who is been the CEO of the company for the last 14 years has moved into the position of chair of the board of Paul Denver is been in the chair of essence, 2019 will move into the position of Vice chair and Johan <unk>.
Speaker Change: Joining.
Speaker Change: He had been the previous 25 years had been with KKR. He was chair of their European Middle East and African operations and he's been brought on started in the last several weeks.
Speaker Change: And I think he's got a lot of energy and it's very focused on.
Speaker Change: The strategy execution on continuing that rotation here and I think that will.
Speaker Change: Continue to strengthen the leadership over all of our group as we attract.
Speaker Change: Great person, who I think that will be a very good thing for GBM and for shareholders.
Speaker Change: Okay, a couple of comments on our.
Speaker Change: Alternative asset management platforms. This next pages, just a visual to remind everyone. How we think about it in the asset management activities of cigar and power sustainable we get value through recurring fee related earnings and also carried interest and ultimately through the growth in the value of the GPS or of the manager.
Speaker Change: And then we have capital that is in their various investing activities, our proprietary capital, which we report separately.
Speaker Change: And you could think of us as an L. P. A limited partner investor in there and we get returns on the different asset classes are those are the two main streams and we think of it broken up in those two ways.
Speaker Change: Turning the page to guard just continues to make progress in not only fund raising but it also looking at strategic partnerships.
I think we spoke at the last meeting about S E B L coming in as a 5% general partner and committing capital since we last met they have announced the acquisition of <unk> capital, which is a specialized secondaries firms second secondaries firm that they have acquired along with him.
Speaker Change: Last year and so they are building out their secondaries are capabilities and fund of funds.
Speaker Change: And so that not only adds to their scale, but complements the the lineup of products that they bring to market.
Speaker Change: Uh huh.
Speaker Change: Comment on power sustainable they in last few weeks announced the launch of their fourth product in fact, the successful closing of their fourth product I should say, which is a D. Carp private equity strategy was a U S based team with lots of experience.
Speaker Change: That have joined our group, it's a mid market fund that's focused on more resource efficient and resilient North American art in the North American market on resource efficient and resilient companies basically at the D card fun, but it's mid market private equity is the right way to think about it.
Speaker Change: So our power sustainable is now about four products all in the space you see them down the right hand side are they are up and running and are focused on continuing to fundraise and get scale through that so good progress of power sustainable.
Speaker Change: Alright, then all all complete with a few comments on power Corp itself we.
Speaker Change: Continue to return capital to shareholders of $135 million of buybacks in the first quarter.
Speaker Change: Got but a $1 billion in available cash.
Speaker Change: We get the question all the time about.
Speaker Change: You know if you're getting close to your rate 50 does that mean buybacks don't happen. We have lots of continued sources of available cash and a number of energy assets that remain as wholly owned assets at power Corp that were part of our Ah. They were in effect undeveloped when we launched a new strategy.
Speaker Change: They've been developed they are being sold in the into the energy fund the immediate source of cash over the next couple of quarters. We've also got about $2 billion in our seed capital or seed capital excuse me and.
Speaker Change: In.
Speaker Change: Basically our proprietary capital invested with the platforms. We've got a targeted return of about 10% on that which we monetize over time, we've got lots of sources of cash that we do not see ourselves we.
Speaker Change: We see ourselves being able to maintain the current pace of buybacks.
Speaker Change: And don't see any issue with that.
Speaker Change: And we've done all that and we continue to maintain a very strong financial position, which is particularly.
Important as we have a little bit of uncertainty in our end market risk out there with the current environment obviously.
Speaker Change: Our discount.
We're pleased that it's <unk>.
Speaker Change: <unk> tightened in over the last few quarters.
Speaker Change: I think I've said to people before it's hard you know I get myself to understanding from our operating costs that are if you do the present value of those you could get to a 2% to 3% discount.
Speaker Change: But then I can make the argument that there shouldnt be a discount beyond that not that I expect it to necessarily go to three.
Speaker Change: But we think there's still been an opportunity for that to narrow and we still do so we're pleased that we're starting to see that.
Speaker Change: Narrow down so it was a 21% I think that's yesterday's close if I'm not mistaken if we sat update okay perfect.
Speaker Change: And then flipping.
Speaker Change: Flipping over to 'twenty three.
Speaker Change: You've got the returns that we've created over various periods.
Speaker Change: The five year return there is a bit exaggerated because you go back into the downturn in 2020 of Covid. So we've got the number going back to the end of 2019, which is so five years.
Speaker Change: And four months I guess.
Speaker Change: So strong returns well ahead of our benchmarks and I just reiterate this is not a valuation story.
Speaker Change: You can do your own work on the two earnings driven businesses that we have great western AGM on their forward P E, but they're they're trading right around where they were at the start of the new strategy in 2019.
Speaker Change: And then you've had the.
Speaker Change: Our growth that's gone on but basically the discount which was around 24 25, when we announced the deal sorts of 'twenty one.
So you can do the math on 4% of our NAV discount in terms of over five plus years, that's not that's really not contributed much to the returns that we've created this does not evaluation stories. So people often go while your stocks have really done well you're on a run and I think just look through all of that and say yeah, well, it's because it's because.
Speaker Change: The earnings at Great West life, and AGM have grown the dividends have continued to be extremely healthy and theres been net asset value growth, which much of which had power Corp has been turned into cash and AR and put to use through buybacks and we don't see any reason why that strategy you can't continue.
Speaker Change: Given the announced targets that we have for all of our companies as long as we execute of course, we have to continue to execute which is not a not a given but we have confidence that we can do that.
Speaker Change:
Speaker Change: I'm going to skip page 24, our strategy remains the same and it's kind of.
Speaker Change: Finish on the on the last page, which is looking ahead.
Speaker Change: And this just this is the math behind how we think about our targeted T. S Ars 84%.
Speaker Change: Of our of our gross asset value as Jay pointed out is earnings based it's great West life and IGN. Each of those companies have got an objective publicly in the market medium term EPS growth objective eight to 10 for great West 9% for an AGM.
Speaker Change: Each have yields that are right around 5% in the case of great west they've been increasing their dividend for the last 10 11 years consistently.
Speaker Change: So you look at that and say if they execute.
Speaker Change: And there is no change and there are multiple which I would argue is not not all high multiple right now, but if they execute on the earnings growth and on their dividends and there is no change in that valuation. The math gets you to a TSA of around 14% the rest of our portfolio.
Speaker Change: Bulk of the rest of Power's assets, whether it's G. B L. R. R.
Speaker Change: Our our capital underpinning the the alternative strategies have got publicly announced targets of 10 or 10% plus will continue to harvest that as we move forward and do buybacks.
Speaker Change: Two.
Speaker Change: Shrink our share base and when we look at all of that if if we execute on that in the world behaves as it's supposed to behave I E markets continue to grow in the normal course.
Speaker Change: Youre going to get a return that's going to be going to be comparable to the numbers. We produced over the last five years of course, there's lots of things that can that can happen, that's not going to be a straight line, but that is the math behind our our strategy going forward and we are.
Speaker Change: Very confident in our ability to execute as long as the world behaves. So I will then finish my comments by saying as the world going to behave well you everybody's guess is as good as mine. There is a lot of risk and uncertainty out there and I will note that a number of observers have come.
Speaker Change: Commented that we are.
Speaker Change: A company that does well when there's been previous downturns financial crisis, where solid diversified company with our businesses diversified our earnings diversified in a fairly prudent approach to our risk management, which is not to say, there's no risk in our businesses, but we on a relative basis fairly prudent.
Speaker Change: But I do want to say like we do way better when the economy is doing well and when markets are growing and there is confidence and so.
Speaker Change: It's nice that people think of us as a defensive play, but when things are going well and the world looks better and there's growth that increases materially or a probability of being able to execute our value creation strategy and create the kind of returns I'm talking about so.
Speaker Change: So we are we're looking forward to the economy being strong and to.
Speaker Change: Some of the current issues.
Speaker Change: That are going on in the world being resolved appropriately.
Speaker Change: And that will be better for us, but if it doesn't work out that way. We think we're in a pretty strong position financially in every other way so with that I am going to conclude my remarks, and we'll open it up for questions operator.
Thank you we will now begin the question and Andy and profession to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request.
Speaker Change: You are using a speakerphone please pick up your handset before pressing the keys to.
Speaker Change: Withdraw your request.
Sue: Please press Star and then Sue.
Sue: We will pause for a moment as callers join the queue.
Speaker Change: The first question comes from Doug Young with Chardan capital markets. Please go ahead.
Doug Young: Hi, good.
Speaker Change: Good morning <unk>.
Speaker Change: First question I guess, Jeff and I think I've asked you this before but I'll throw it out there.
Speaker Change: Is there more and I get the valuation that you.
Talk about AGM, great West and the platforms, but is there more that you can do across the platforms between great West IGN manpower too.
Speaker Change: To surface value and one example, I mean.
Speaker Change: There was a wall Street Journal article talking about and we knew this was coming but in power is going to get into the <unk> business and obviously.
Power is a big part of the great West life platform and story.
Speaker Change: And you've got a very.
Speaker Change: Strong and growing business up at the power level, but.
Speaker Change: So just wanted to throw it out there.
Speaker Change: How should we think about just the value creation across the platforms and and the opportunity for <unk> with them.
Speaker Change: What what empowers can do on the outside.
Speaker Change: Yeah.
Doug Young: Hi, Doug Thanks for the question and the answer is that we are.
Speaker Change: Extremely active.
Speaker Change: In encouraging our different distribution platforms to engage with the manufacturing platforms to see if there's opportunities.
And in the case of empowers announcement this morning, but it's in the Wall Street Journal a cigar is part of that program just to make the point and that's the proof is in the pudding.
Speaker Change: But we so so we encourage dialogue we create opportunities for <unk>.
Speaker Change: People getting together and make sure that the distribution platforms are aware of what we are doing on the manufacturing side, we stopped short and we need to stop short of EVAR.
Speaker Change: Telling our distribution platforms, what they are going to put on their shelves.
Speaker Change: Because they have a competitive business to run they're all running their businesses. They have many cases fiduciary obligations to clients and even if it's not a fiduciary standard they need to be putting a competitive product on so the.
Speaker Change: Cigar for example in power sustainable while we think they have great products.
Speaker Change: They're still relatively small firms in the world evolves and their product suite doesn't satisfy the complete needs of all of our distribution platform. So it's not realistic to think that they're going to take the majority of the share of.
Speaker Change: Our distribution platforms, they're going to find if they have competitive products that are better than or equal with others that are out there theyre going to get an opportunity, but you you can't expect it to fill the entire shelf because they do not have the swath of products that save some of the very large players would have so but that's true.
Speaker Change: I'm just trying to give you a context there. So the answer is it is happening.
Speaker Change: And you know where we are the continual dialogue between.
Speaker Change: Between our plant our alternative platforms and our distribution.
Jack Lawrence: Platforms, just want to add to that Jack Yeah, I would just Doug. Good question I'd add there is the financial examples around product and distribution and then there's the ones that are sometimes less obvious to the investment community and so we look at the Fintech strategies that exist and so we've got partners in operating companies and Port company portfolio companies down at cigar.
Jack Lawrence: Partnering across the group and so conquest financial planning existing and IGN Nestor the mortgage backbone at IGN. So there's lots of ways that other parts of the group are contributing and as well that are worth noting that may not be as obvious intangible immediately in the financial statements or in asset flows yeah. If you go beyond <unk>.
Jack Lawrence: I can take a lot more time to talk about how much of great West life liquid shelf is managed by AGM partnerships on distributing insurance through AGM out of Canada life I can we can go on and on about what's happening across the platforms.
Jack Lawrence: So you know that.
So it contributes it helps.
Jack Lawrence: But you know there the platforms the old platforms has to go out and be competitive with third party non related investors first and foremost it can't just be relying on our distributions.
No. It makes sense and it gives me a bit of flavor and then on the <unk> acquisition can you talk about how much you purchased the main details on the agreement to buy up the rest and like employee retention.
Jack Lawrence: And I assume and it reads like this is only for private equity LP is is that the cases or is it further out.
Jack Lawrence: These.
Jack Lawrence: I've got to come back I didn't get the last part of your question. So I got the part about.
Jack Lawrence: The financial terms, which we're not disclosing.
Jack Lawrence: Why don't I answer them and then you can come back with what I missed or where do you think I missed the.
The people retention is always the key on this these are people businesses.
Jack Lawrence: And cigar spends an enormous amount of time as they are bringing in existing strategies and partners who have built those strategies.
Jack Lawrence: Then an enormous amount of time.
Jack Lawrence: Making sure there's there's there's a lot of exchange and that there's a cultural fit for it first of all the financial arrangements are setup. So people can't walk out, but more importantly than that they've got a very active program at bringing in their partners and end users and using their network and introducing them to their low global network as well as their Lps They do have.
Jack Lawrence: Great job of it.
Jack Lawrence: That is one of their core advantages because if you don't do that obviously you you don't mind the folks to the organization. So there's a very active and I think so far very successful strategy you I missed the last part of your question you were breaking up a little bit.
Speaker Change: Sorry is that only private equity Lps or is it a slew of all mlps that would that they do business in.
Jack Lawrence: Yes, so there's a lot of family and.
Speaker Change: And Becks I believe theirs.
Doug are you asking about the asset class, it's all private equity so there's no private credit or real estate private equity what I was yes, its all right okay.
Speaker Change: Okay.
Speaker Change: And as secondary secondaries, and secondaries that yeah, no I get that I just.
Speaker Change: Yes.
Speaker Change: And then quickly the size of the energy investments that are going to be folded into that fund that is a source of liquidity you talked about could you size that.
Speaker Change: Yeah, So it's going to depend on timing for different projects does but it's a it's greater than $100 million, we expect in totality.
Speaker Change: I appreciate the color. Thank you.
Doug Young: Thanks, Doug.
Tom Mackinnon: And the next question comes from Tom Mackinnon with BMO capital. Please go ahead.
Tom Mackinnon: Yeah, Thanks very much.
Tom Mackinnon: Maybe a question just with respect to the how you balance share repurchases with our investing into.
Tom Mackinnon: Cigar empower sustainable I mean, if I look at cigar and power sustainable they're not at the scale you certainly talked about how small they are.
Tom Mackinnon: Their product set that may not be as diversified as other alternatives.
Tom Mackinnon: And you need to scale to improve the fee related earnings.
These companies.
Tom Mackinnon: So it.
Tom Mackinnon: It seems like the strategy here is to take all the dividends you get from these earnings stories, and just buy back stock with with this as opposed to investing into cigar and power sustainable which.
Do you balance that.
Tom Mackinnon: Those things are probably better growers.
Tom Mackinnon: You talk about them being 10% plus growers to begin with and and how do you think that <expletive> don't you think that would help improve the discount to the any of the if you could show that you can add value at the holdco through growth in fee related earnings that's the garden power sustainable as opposed to adding value at the Holdco just by taking the dividend.
Tom Mackinnon: Buying back stock.
Tom Mackinnon: Yeah. So.
The dividend the way, we think of it as the following Tom the dividends that we receive from great West life and I G M.
Tom Mackinnon: Purchase a purchase at G B L.
Tom Mackinnon:
Those we view as the source their steady reliable and we use we view that as the source of the dividends that we pay on the power Corp stock.
Tom Mackinnon: So we put that in that bucket and we deduct our operating expenses and our preferred dividends and the interest on our small amount of debt and we and we say this is what the cash flow comes from that and that's available for dividends on the shares and we have about a 70 $585 million surplus right.
Tom Mackinnon: Now if you run that out so that we've got some positive cash coming in from that then the the other sources being we still have residual assets that we talked about energy that we're disposing of we have $2 billion of capital underpinning the alternative asset management strategies.
Tom Mackinnon: That is we think produces about 10% return, but it's not every quarter. These things are a mix of royalties or some debt funds or private equity theres some venture capital, it's a bit episodic.
Tom Mackinnon: And we occasionally then sell some secondary positions in them when they when the market is right for that there's a lot of secondary buyers out there. So we use the seed capital and the way we think of it we've got our excess cash flow or some of the assets. We haven't sold we have the earnings on the seed capital some dispositions to fund our buybacks.
Tom Mackinnon: And that's the source of the buybacks and we're trying to manage that 2 billion of capital to be roughly equal so that the growth in it we're recycling it but the growth in the capital that's producing the FRE as you mentioned that were in producing the carry as well don't forget as a G. P. You get carry.
Tom Mackinnon: That source of income is going to grow, but we're trying to get it to grow on a capital efficient basis I E. Other People's capital. Some of that is capped as Canada life. They they worked closely for example, with power sustainable on their U S infrastructure debt funds because they have their balance sheet once that they worked with some helped actually hired the team. So.
Tom Mackinnon: That's that's good that's not power Corp, 's capital that's meeting the needs of our apropos of Doug's questions earlier, that's kind of synergies between between our operating businesses in our old platforms.
Tom Mackinnon: So so so we recycled the $2 billion, we take the earnings off occasionally dispose of positions and fund our buybacks and the buybacks. We think adds a few points to our T. S. R. Because we're taking the earnings that we're getting from from great Western AGM, we're taking the dividends and as we shrink the.
Tom Mackinnon: Sure Beth we're adding we're adding some talk to it as well we're buying the shares back at a 21% discount hopefully that becomes an 18% discount going lower but right now we're buying the shares back added at a discount that bumps are N V. So we think that's kind of some icing on the cake that we're doing those buybacks, but it is not it's not funded.
Tom Mackinnon: The way, we think of it is not funded by dividends. It's funded by the rest of the portfolio. We have also.
Tom Mackinnon: Everyone kind of puts a line in the sand, we say, we want $850 million of cash around because that's what we'd like to sit around with a lot of cash and with lines of credit.
Tom Mackinnon: But if we got into a position the timing on these things are sometimes funny, we could go through three quarters, where are all of a sudden the platforms are launching new funds and we don't have a realisation for another 12 months on some assets and we could end up with a position where we are we might it looks like we're going to dip below 850.
Tom Mackinnon: Well, that's not going to stop us in my view from doing buybacks, we'll figure out how to how to manage that situation.
Tom Mackinnon: We were just giving you one kind of number when you look at power on a deconsolidation basis.
Tom Mackinnon: We have about $50 billion in gross assets and.
Tom Mackinnon: And we have $900 million of debt.
Tom Mackinnon: Like if we ended up in a quarter, having to you know.
Tom Mackinnon: Dip into our cash or end up.
Tom Mackinnon: Doing some short term borrowing or whatever I don't expect we'll get there if we did.
I think we want to just carry on right now our current strategy is to keep on a steady pace on the buybacks.
Tom Mackinnon: If I gave you I threw a lot at you there.
Speaker Change: Tim I don't know where the way I worded. The question was the source of the money maybe the maybe you can try to tackle this approach than the 2 billion you have underpinning here.
Speaker Change: In say gardens sustainable why don't you increase that.
Speaker Change: As opposed to buy back stock that wanted that help improve the scalability of those.
Speaker Change: You know they've got.
At the margin, but our strategy all along has been we're going to use other people's capital to do it and told those teams to do that and by adding a $1 billion over let's say, we cut the buybacks and over two and a half years, we had $1 billion.
Speaker Change: To the total capital underpinning those strategies is not going to move the dial at relative to what they can do with third parties and I think we personally we think we get better value.
Speaker Change: Because we're not sure at this point, that's the that all the market participants properly value. The <unk> part of our portfolio and so we think they do value earnings that flow through and increases in dividends. So these are all tradeoffs in life is not like is it black and White you go down. This route are you go down.
That route we're trying to balance all of those different interests and right now that balances. We think we can grow the platforms with the capital we have.
Speaker Change: And we think we can at the same time add to our T. S. R by shrinking the share base.
Speaker Change: Okay.
Speaker Change: And is there anything to read the previous N CIB was $25 million and new ones 20 million that you started in the beginning of March is there anything to read into that why it's a little bit lower.
Speaker Change: We're targeting to keep the buybacks at about the same level they've been at for the past many quarters.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you.
Speaker Change: And the next question comes from.
Speaker Change: Jamie Gordon with National Bank Financial Please go ahead.
Speaker Change: Yes. Thanks.
Speaker Change: Wanted to follow up on that last the last conversation.
Speaker Change: At a 1 billion of cash available in the 850.
Speaker Change: Sort of minimum holding level, but you said you would sort of go through it.
Speaker Change: How should we think about buybacks and not in that scenario would you.
Speaker Change: You've used a let's say $37 million I think already said this post quarter.
Speaker Change: But would you blow through it.
Speaker Change: Using buybacks or is this really just like look at those opportunities come along we will maintain the buyback as were going but as opportunities come. We'll we'll we'll push below that $8 50 level does that kind of the right interpretation.
Speaker Change: I think we're committed to doing the buybacks.
Speaker Change: And the.
Speaker Change: And do the buybacks on a more steady basis and the cash flow that we get in from either realizing on investments or the calls that happen from the platforms to put capital to work.
Speaker Change: More.
Speaker Change: Sporadic than that and.
Speaker Change: And we think we can manage.
Tom Mackinnon: And not get blocked by the by the cash position. That's what I was trying to say in my answer to Tom and we've got lots of resources to do that I mean, I don't think we'll get there I think we're going to liquidate some assets here and it's not going to be an issue.
Tom Mackinnon: We do have we've got some pretty concrete plans to dispose of some assets and keep keep the cash coming in over the upcoming quarters. So I don't think it's going to be an issue and if it were to be an issue youre getting hypothetical would we broke break down below 850 or would we go and draw. Some lines are doing something are we got lots of tools in the toolkit.
Tom Mackinnon: Not something I'm, particularly worried about at this point Jamie.
Speaker Change: Yeah, no understood and then.
Tom Mackinnon: You know in terms of the sources of capital.
Tom Mackinnon: Hum.
Tom Mackinnon: Where would the public golf coast rank.
Tom Mackinnon: And those potential sources.
Tom Mackinnon: You mean disposing of shares we were.
Tom Mackinnon: We like them, both that wouldn't be something that we would be.
Tom Mackinnon: Team to do.
Tom Mackinnon: We added to our position in great West when we moved the CMA sea position down.
Tom Mackinnon: Yeah, I don't I don't see that as I mean, you never say never but I don't see that as well.
Tom Mackinnon: Source of capital at this point.
Tom Mackinnon: Yeah, Jamie when we look for there's other pockets right, Jeff and I, both mentioned the five euro dividend coming in from GBM that that's an incremental source of funds cash coming into us over the course of the rest of the year. We've got some of the infrastructure energy assets. We expect we will be recognizing a sale on in the coming quarters.
Tom Mackinnon: There is lots of pockets that that easily pushed down any appetite to need to want to liquidate those core positions and I would put it the other way we've actually stated publicly James that if our operating subs being great West life, and AGM needed capital to do a transaction.
Tom Mackinnon: That would actually Trump buybacks, so and we have done that.
Tom Mackinnon: Nothing that would stop buybacks, but if we came to a point where were.
Tom Mackinnon: Great West life and are in the past, we've supported them when they've had major equity issues to do they haven't done one in there.
Tom Mackinnon: It's been well over a decade.
Tom Mackinnon: But there have been times in the past, where they need to do a transaction and they need to raise public capital and we've jumped in and put four or $500 million as a as a kind of underpinning of an equity offering and that would prioritize.
We would prioritize that and if that meant we had to.
Suspend buybacks for a few quarters or something I think we'd probably do that.
Tom Mackinnon: So that is a priority supporting those businesses. It just doesn't happen that often and then I'm going to flip the question around and say looking at great West life, they've got lots of capital on the books and where they actually need us to do something and they haven't for a long time that they spent a 10 billion Canadian in 2020, one buying personal capital.
Tom Mackinnon: Mass mutual in Peru, and didn't need any equity capital to do what they've got a lot of capital, but if it came to that that.
Tom Mackinnon: That would be right at the top of the list.
Tom Mackinnon: Our priorities.
Alright, thank you.
Speaker Change: And the next question comes from Graham Ryding with TD Securities. Please go ahead.
Hi, good morning.
Speaker Change: Jacob guesses questions probably for you just in terms of timing does that GPL dividend come through it.
Speaker Change: Q2, and then I think <unk> is also cancelling some shares in Q2 does that increase your relative ownership or do you sell some of your GBM shares into that buyback program.
Speaker Change: So simply yes, and yes, so the dividend will come in during Q2 and I believe they canceled just north of 5 million shares.
Speaker Change: And that will increase our ownership position, we did not we did not participate in the buyback.
Speaker Change: Okay great.
Speaker Change: Great and then.
Speaker Change: Sure.
Speaker Change: Jeff just on wealth simple does it need further capital at this point or is it is it now at the point of sort of being self funding and then going forward does it make sense to have.
Speaker Change: Power Corp's your broader ownership with Wilson will split across sort of power and AGM in Portage or would it make sense at some point to consolidate ownership into one of your one of your entities or with empower.
Speaker Change: Yes. It is.
Speaker Change: Got.
Speaker Change: Your first question in terms of needing capital I don't see the need right now, they're basically they're right around breakeven that you go through the first quarter. They spend a lot on marketing they get into a slight loss position, but they've got they are at the point.
Speaker Change: Where their revenues are just about equal to their costs in there as the revenues keep growing quickly.
Speaker Change: But you know you never say never that could come who knows whether they come forward with some something that they want to do but at this point, we're not anticipating a capital need the answer to your second question is it probably at some point it makes sense.
Speaker Change: But I don't want to get everybody's speculating that we're kind of focused on that because I don't see that happening in the short term or it's not something we're spending much time about focused on it came about through historical reasons I think I have explained that before when we launched the fintech strategy in 2015.
Speaker Change: Well simple was a different part of that Fintech strategy. It wasn't a boat.
Speaker Change: Investing in 50 different fin techs to get visibility as to what was going on and then hopefully you have some of those capabilities be embedded in great. Western AGM that was the Portage strategy and it's been highly successful we saw well simple as something that could be a long term part of our portfolio and we put $300 million into it.
Speaker Change:
Speaker Change: Before doing taking some money off the table and a subsequent secondary but the first few rounds of that it was really a power financial strategy and we financed the first few rounds as the things started to get going.
Speaker Change: The AGM.
Speaker Change: Management team and board really started to focus on the fact.
Speaker Change: This is this is.
Speaker Change: This could be a real business.
Speaker Change: Very successful business.
Speaker Change: And maybe it belongs in our portfolio and they funded the I can't remember it was around three four and five are round four and five it doesn't matter. So the first rounds got funded up here. The second rounds. They jumped said, we'd like to get part of this so we said great and we've ended up with it in two places.
Speaker Change: So that's the history of it and you know at some point it would be nice to put it in one place, but I I would not be out there.
Speaker Change: Kind of telling people to do whatever with your recommendations based on holding your breath that we saw an opportunity to do that at some point, we'd like to do that but it's not high on our on our priority list right now.
Speaker Change: Yes, okay.
Speaker Change: Yes that makes sense.
Speaker Change: So good growth there.
Speaker Change: I just wonder if it gets lost a little bit when it's split across so many different institutes.
Speaker Change: Probably thank you.
Speaker Change: Ram I think your observation is right I think that's a fair observation.
Speaker Change: Thank you.
Speaker Change: There are no further questions I would like to turn the conference back over to Mr. Stephen Hunt for any closing remarks.
Speaker Change: Thanks, everyone for joining us today following the call a telephone replay will be available until August six and the webcast will be archived on our website. We look forward to talking with you next quarter. This concludes our call and have a great day.
Speaker Change: Ladies and gentlemen, this concludes your conference call for today. Thank you for participating and you may now disconnect your lines.