Power Corporation of Canada

Thank you, operator, and good morning, everyone. Thanks for joining us this morning.

Welcome to our second quarterly analysts and investor call. We had a very strong quarter across the group from a financial results point of view.

We also continue to push vary hard in advancing this strategic agenda that we have been talking about and telling you about over the last few quarters. And we will try and give you a sense of that through today's call, while still leaving a lot of time for questions hopefully at – as we move into that part of the call.

Pages 2 and 3 of the presentation are the standard disclaimers and cautions regarding forward-looking information. Page 4, is our participants with me today digitally, not with me physically, but digitally is Greg Tretiak, who is the Executive Vice President and Chief Financial Officer at Power Corp.

And I am going to – then moving forward to Page 6. We have just the other investor calls and investor presentations that were made by companies in our group.

And this call is not intended to duplicate those calls and cover the information that they covered. It's really meant to compliment them and then really give the Power Corp.

lens on our group developments. And so hopefully, if you've got specific questions on Lifeco or IGM or GBL, you can follow-up directly with those companies.

Let me turn then just very quickly to Page 7, which is the Power Corp. highlights.

I am pleased to start off at the top with the recognition that Power Corp. received it and being included in the Corporate Knights, top 50 best corporate citizens.

And it's really to make the broader point, we are in a COVID-19 environment, a lot of scrutiny on the role of companies and what they are playing in our society. And I think we are very well positioned because Power Corp., – our operating companies, Great-West, Canada Life, Investors Group, now IG Wealth, Mackenzie.

Across the group, we for decades have put a big emphasis on investing in the communities, giving back being good corporate citizens. We didn't always tell that story very well.

In the last several years, we've really made an effort to tell the story and document it and Corporate Knights is just one of many, many recognitions we've received. There's a few – the more information in the appendices and also on our website and see we have a dedicated corporate social responsibility pages talking about what we do and how we've been recognized.

And I think in a world the ESG investing, I mean not – that's why we have done it, but in a world of ESG investing becoming more and more important, that's going to keep us in very good – put us in a very good position going forward. Three strategic transactions and announcements that were made, but there's a lot more going on than that.

We'll try and give you a sense of that. And I am going to talk about it during the presentation.

So I won't spend any more time here on Page 7, but I will do is pass the microphone to Greg Tretiak, who will go through our financial results over the next few slides. Greg?

Okay. Thank you, Jeff.

Good morning to all those on the line. I'm on Page 8.

Net earnings for the quarter were $0.99. Adjusted net earnings $0.79, which was up sharply sequentially from the $0.62 in Q1 and compares very favorably to last year's $0.83 given it was a COVID quarter, and the NAV at the end of the quarter was $32.96, up 7% from Q1 and after Lifeco, IGM and Pargesa had reported last week, we have a NAV of about $35.53 on August 7.

With that, I'll go to Page 9. Just to give you a little color on the results and the contributions from all the component parts of PCC.

You've heard already Great-West Life and IGM had a strong and good quarter. This last quarter up sharply from the Q1 quarter that you can see there on the page.

Pargesa is reflecting some of the dividend pressure on this portfolio companies. And I would note that our economic interest is up – snick over what it was in Q1.

I think we're up about 1.4% in terms of our interests, economic interest in Pargesa. The corporate operations there is basically the expenses of Power Financial, and you can see further down the page, our corporate operations again, which are the expenses in PCC, both of those are reflecting the work that we've been doing to achieve our goal of $50 million.

And of course, in part reflecting COVID-related reductions and expenses during the quarter as well, but trending down nicely quarter-over-quarter. Other investments, which includes Sagard Holdings and Power Sustainable Capital, you can see that line.

Quiet quarter in terms of realizations, but unrealized gains were up in the quarter, quite nicely $86 million or 16%, most of that coming from our China A-share portfolio at Power Pacific, which was up nicely in the quarter, and you'll see further in the slide, up almost 40% year-to-date. So the market in China is performing very well.

And also our European portfolio at Sagard Holdings was up in the quarter. China AMC, again, we have a slide further on, but – and you would have heard from IGM last week that they had another very good quarter, up 28% in terms of profit and that reflects China's emergence from COVID-19, which is happening rather quickly, or I should say quicker than we are experiencing in North America.

And with that, I would turn it back to Mr. Orr.

Okay. Great.

Thank you. So I'll move forward then to Page 10 in the presentation.

And as Greg mentioned, this was a very strong quarter. Yes, it's COVID-19, but the companies have performed very well.

We think we are well positioned from a balance sheet point of view, from a business model point of view. The nature of our business, we think, positions us very well.

I think I would like to focus on the bottom part of the page. We are continuing to push forward.

I think our attitude very much is, yes, we are being cautious with liquidity, but we're playing offense. And the focus of the group at Power within our operating businesses are very much focused on offence and moving our businesses forward.

You see that with our willingness to do transactions in this environment, but also we continue to enhance our operating platforms, the business models, our client offerings, that's been going on at a frenetic pace for the last several years. We are across the group growing in our optimism about how we are building momentum across the different client franchises around the world across Great-West platform, across IGM's platforms.

And then at the bottom of the page at the Power level, we are very intensely focused on pursuing the strategy that we outlined and spoke to many investors and analysts as part of the reorganization. It seems at the bottom of the page, a good progress on our investment platforms, Sagard Holdings and Power Sustainable Capital, but it's broader than that.

It goes great across all of the elements of what we are trying to do with Power. Let me flip you to Page 11, a slide you will have seen before, but this is really – we find it very helpful to think about our activities in these buckets.

We think as we are pursuing our value creation strategy, we've got three levers that we are pulling on. The first one is kind of all of the businesses going on internally across the Canada life, the IG Wealth Management's, the Mackenzie's, the Empower's, our asset management businesses, our UK, Canada Life business, Irish Life, Germany, our group insurance and risk group at Great-West.

The huge amounts of efforts and as I said, that continues with the strong momentum being built across those platforms. In addition to that, there's the M&A leaders that we have, and it's really deploying capital or in the case of some – as you've seen with us in the last couple of years, it could involve getting out of businesses that we don't think are going to serve us well over time.

And then we've got the third level, which is things we do at the Power Corp. level, and we are pulling aggressively on all three levers.

And as I go through some of the slides coming up, I'll try and put those in context for you and where they fit. Page 12 is our lever one, organically, and this just focuses on digital.

This doesn't state the entire strategies of the companies, but continued strong investment in digital capabilities at Canada Life, for example, on the individual side. SimpleProtect was launched last year to enable advisors to do all of their new business origination for Life on basically a digital platform with very quick turnaround, and that's been extended into other products, and really thank goodness that was launched because with COVID-19 forcing everybody into a digital way of operating.

We didn't launch it last year with that in mind, but we are very, very pleased that we did as a result. And then the second bullet point on the group side.

Our group business platform is very, very strong. And we are in a position where most of the transactions are happening digitally, and they are continuing to enhance that.

And then at IGM, again, fortuitous launch of a new advisor portal in the fourth quarter of 2009, and when COVID-19 comes, all of a sudden you get very, very strong adoptions. Normally when you put new technologies in with advisors that take a long time to get adoption, but all of a sudden, it's bad or it's very difficult to do business.

So we've had very good take-up. And with conquest later in the year, we think we're going to take our planning advantage which IG Wealth has.

We think relative to other financial services companies, we are going to take that to a whole new level with the next-generation of financial planning tools. So lots happening on the lever one organic side of the business.

Page 13, this is a bit of a look back over the last 18 months or so on the lever two and three, M&A activity and things we are doing at the holding company level. I would say, it's been a frenetic pace.

We have been – these are six things that we've announced publicly. It's like an iceberg.

You see some things above the water. There's a lot more under the water that's been going on, but these are things that have come to fruition.

The sale of Great-West Lifeco's U.S. Life business announced in just January of 2019, some 18 months ago, which gave rise to Great-West Life doing the share buyback and that gave rise to the possibility of Power Financial and Power Corp.

being able to do a simultaneous buyback and in effect arbitrage, the net asset value discount by selling shares at the net asset value and buying their own shares back at a discount. And that popped our NAV, which we think created shareholder value of both the Power Financial and Power Corp.

levels. The big announcement in December of the collapse of the duel-holding company structure, and just as importantly a more focused strategy as well as a cost initiatives and launching an NCIB, although temporarily suspended due to a current environment in COVID-19.

Then we followed up in March with an effect the same type of simplifying transaction with Pargesa and GBL. And in this quarter that was approved as I will – you'll see – we probably have seen, we've announced the acquisition of Personal Capital and then the GLC, Great-West Life, Mackenzie transaction, which I'll talk more about in the pages that follow.

So just like very, very busy, and we are keeping the pedal to the metal to continue to use lever two and lever three tools to enhance our value. So on Page 14, I'll say a couple of comments about the Personal Capital transaction, Great-West would have spoken about it.

I guess at a very high level and we have a great defined contribution group retirement business in the United States and Power's second largest business. What really unlocks the economics of a group retirement business is coupling it with a direct-to-consumer retail capability.

The best example of that is Fidelity, and it really unlocks the economics. We have been on a road.

You've got one option, you can build it. We were on the road of building it.

It's a very slow process. And it takes a long, long time to get any kind of scale.

We have been on the lookout for ways to acquire those capabilities and again, as direct-to-consumer that you need, and so you would have seen just in the last nine months, Schwab purchased TD Ameritrade for US$26 billion. Morgan Stanley purchased E-Trade for US$13 billion, like there's not a lot of direct-to-consumer companies out there.

And the ones that were mature and had profitability were very, very big tickets. Personal Capital is kind of right in a sweet spot.

California-based company, we think the – absolutely best technology out there, a company we knew because IGM had been investing in it over the last four years. And so we knew, the company knew the management had gotten very comfortable with it.

And it was at a price that Great-West Life could do. We paid US$825 million with an earn out could get it up to $1 billion.

It was a price that Great-West Life could afford, and it's been called by some expensive, well, and each stage of development, it doesn't have earnings. And so we were able – but it ended up being affordable from a size point of view and it’s on a very, very high growth trajectory.

This is a revenue synergy deal. And at that size, Great-West Life could make the acquisition plug it into Empower and still leave lots of capital to go and pursue other more – if I can call them traditional acquisitions, where you get a cost synergies as opposed to revenue synergies.

So very excited about this transaction and more to come on that as we move forward. Page 15, just last week announced that Mackenzie was going to buy GLC Asset Management business, GLC from Canada Life and going the other way that the Quadrus fund contracts, which are actually the contracts are owned and the management of them are owned by Mackenzie went the other way for a transaction that had an net proceeds of $145 million.

This is really a win-win. It's a pure win-win.

From IGM and Mackenzie's point of view, Mackenzie becomes $172 billion asset manager in Canada. That's scale is critical in asset management.

They have scale, and they extend their capabilities with new products and new teams. It gets them into the – being a very significant player in the group business, the group retirement business as a supplier there, and they end up being a principal supplier to Canada Life, the primary supplier to Canada Life.

From Canada Life's point of view, they end up getting a much broader and better supplier. GLC was a smaller more narrowed platform.

And they end up here being supplied by Mackenzie, which has just got a much broader shelf and greater capabilities. And they also, of course, have the freedom as they have to go out and get external third-party advisors when the capabilities are stronger there.

So this is really going to enhance their ability to serve their clients going forward. And that's the name of the game.

So very excited about this, it works for both the companies. Okay.

We can move to Page 16. And we talked about this at the last meeting.

I think the main piece of news is that it got approved since we last met. It hasn't closed yet.

There's still some steps to go on there, but the shareholders approved it. That's very meaningful.

And on Page 17, you have the – what it does to our corporate structure. And basically, a period of about six, seven months, we've gone from the left side of the page to the right side of the page, and really taking some very meaningful steps to simplify our corporate structure.

Okay. Moving forward then moving from the M&A side of the equation and the transactional side to what's happening at Power Corp.

itself. I'll take you to Page 18.

The investment platforms are really where we are building out in the future and we are taking major steps to try and bring light to what it is we are doing there, what are those businesses, how are we creating value. And the slides that you're going to see in 18 and the one that's going to follow are some of our initial attempts to do that.

So on Page 18, you see that we have the first bullet point. We have $4.5 billion of AUM in the two platforms Sagard Holdings and Power Sustainable Capital, but we do have full unfunded commitments of $6.4 billion.

In other words, investors have committed to money that has not yet been deployed. You see on the left side of the page, down at the bottom, you see how that is broken out between the dark blue, which is the Power Corp’s AUM and the lighter blue is third-party AUM.

And then the two bars at the top are the Power Corp., the $500 million their unfunded commitment and then the $1.4 billion is third-parties unfunded commitments. And then you get it broken down by the different strategies on the same basis.

You can see Sagard Holdings currently is funded to a very large extent by third parties across those strategies. Power Sustainable Capital, which had been a diversification strategy for Power Corp.

has pivoted and is very much in the quarter focusing on raising third-party money that currently is all money that is in with Power Corp's capital, but that’s changing as the strategy unfolds going forward. So just kind of initial attempt to layout for you where the money is, where the fundraising is, what the strategies are.

Page 19, is then laying out for you how it works financially. And this is a work-in-progress.

But you will see at the top of the page you have for Sagard Holdings, what's called management activities on that table. And at the top, we're breaking out the management fees and the carried interest of Sagard earnings – earns as an asset manager and their expenses.

And then the second bar, investment activities is what Power is earning on the seed capital that it has. So conceptually kind of two businesses here.

You've got an asset manager and then you've got Power’s capital as a seed capital investor at work. And you're seeing – we're going to be breaking that out for you, so you can differentiate the different parts of the business.

The Power Sustainable Capital at the bottom is not yet there. We will be coming forward very soon with a similar breakout as to what we have at the top of the page.

So we show you the economics of that business, but not yet broken out between the asset manager and the capital that we have at work. I'm going to move forward then to Page 20.

I'm not sure I can add to what IGM and Greg have said. On the slide here, we talk at the top of the page about the strong position that China AMC is in.

It's actually also the leading institutional player, which is not on the slide. But they've continued to press forward doing very well, great momentum and increasing share or contribution to profitability.

And so we are really pleased with the momentum that's being built at China AMC and I'm very happy with how that is playing out. Page 21, just to point out in a COVID-19 environment, digital offerings are doing very well, and Wealthsimple has continued to build momentum through this environment, and it has also broadened out the number of services and offerings that it has, including a trading business.

They've got cash products that are being offered to their clients, the tax products and so very, very strong progress, lots of clients coming in and growing assets under administration and growing profitability, which is all great to see. Page 22 is our standalone businesses, just talks about a few highlights.

And well we have said that in the future, we are not going to be making investments in one-off companies like this. That doesn't mean that we are not really pleased about the quality of the businesses that we have, and that we very much believe we've got strong businesses here that can provide good value to Power Corp.

And yes, we have been explicit that our strategy is to realize value over time. We are going to play that in a way that we maximize value as well.

And you see on the page here, some of the developments for Lumenpulse and GP and Lion, which is a very exciting electric bus and truck company, which is making good progress commercially in a very, very hot sector, a lot of demand there. So right now, we have these on our books.

It's a $660 million, you can see at the bottom of the page. We think that this is another source of value creation that we can pull on in the period ahead here.

Turning to 23, and Greg mentioned this up at the front. We continue to make progress on hitting our target of reducing our expenses by $50 million.

And then I'll just say on the page, I mentioned it earlier, the other parts of our strategy not covered in a slide here as we – I think I mentioned it earlier, the NCIB and the redemption of preferred shares. We did announce those in the fall and I think just to reiterate where we were in the first quarter, we temporarily put those on hold while we watch how the environment unfolds here in a COVID-19 type environment.

We'll wait to see how that goes, but those are very much part of our plans going forward. Okay.

I'm going to turn to 24. It is a theme you will approach from us a lot and really pleased about some progress we've made in the last quarter here.

And that's enhancing the disclosure that we have across the group, so we can enhance the visibility of what we are doing and get the market's confidence in the future the way we have confidence in the future. So Great-West Life introduced base earnings in the first quarter.

I think it was well received. We've got new segment disclosure around the Great-West Canada, the U.S., Europe and our growing capital and risk solutions basis.

And in the second quarter, they also had increased disclosure and detail on the sources of earnings. So this is a journey, but it's a journey that's picking up momentum.

I think the insurance sector in general and Great-West has probably been tagged with it being a bit of a black box. I think there's a lack of visibility that analysts would have on the future of earnings growth.

And I think we're doing our very, very best to try and get Great-West in a position where there's greater visibility and greater confidence so that the market share is the confidence that we have in the future growth. Now IGM Financial also announced that they are going to come out with new disclosure in the third quarter.

They are going to talk about it in September to the marketplace and divide their earnings into wealth management, asset management, and then strategic investments and other. And IGM is much more of a wealth manager than it is in asset manager and it's important to market understands the source of profitability, not to this asset management, but simply to state the facts that it has much more of its earnings from a wealth management point of view.

We are going to see that as IGM moves forward and explains where its sources of profitability is. And then continued group disclosure at the Power Corp.

level. This is our second earnings call, and I've already talked about some of the increased disclosure we are making around our investment platform.

So we are continuing on this journey. And to make a couple of comments on the market and then wrap it up.

On Page 25, the insurance sector globally and in Canada has been really come off since COVID-19. The general market, the overall broader market indices have basically recovered to where they were at the start of the year, but the insurance market is still down 20%, 25%, 28%.

It has not followed the recovery. So the market is discounting something big or something very, very negative happening in the life sector.

If you think about what the market's discount is put in the context of the Great-West Lifeco with its market cap, its market cap would be off in $5 billion, $6 billion, $7 billion depending on where the stock price is. There are scenarios as you roll forward with COVID-19 that if it carries on for a long time and you don't get funds being transferred by the authorities, they stop with their fiscal support or monetary support, could you get credit losses.

There are scenarios out there that there's not playing out right now, but you could – there are scenarios you can play that happen that way. It is difficult in the modeling that we've done to try and put that in the context of the amount of market cap that's been lost.

They seem to be completely on different planets in terms of the magnitude of the correction in the stock prices. So you can look at that pessimistically.

We look at that optimistically. There's a source of increased value coming forward.

Page 26 also goes to valuation a little bit. And holding companies by the way, post-COVID-19, if you look around the world, their discounts have tended to gap out in this period.

We're trading right now at about 28%. If you look at Friday's close to the net asset value, we historically had been up in the 30s on a double discount basis, if you look through Power and Power Financial.

But given what we've done collapse the holding company structure, the visibility we are giving to and we'll continue to give to the assets that we have at Power Corp., I mean, we think that this discount should go, we would be hopeful that it could get to the level of the single discount of Power Financial and through it because we think we'll have better disclosure and people will understand the value. So that's still a work in progress.

We actually made great progress right after the announcement. If you look at the blue lines there, right after the announcement and the deal got closed.

And then we – when the blue line spike up that's basically the market collapsing on COVID-19 is what's happening there. I am going to finish up on Page 27 with a kind of a snapshot about how we think about value creation and going back to the three levers that I talked about earlier on.

And I want to tell you how we see them coming together. So the OpCo organic levers basically, this has been a long work in progress, working very hard to invest in our leading franchises and build momentum in the underlying businesses.

And I would say across the board, we are extremely confident that our businesses are getting stronger and stronger and are going to be able to demonstrate that growth and then giving enhanced disclosure to have the market share and our enthusiasm. That is lever number one.

Then augment that value through acquisitions and associated synergies. As I mentioned, Personal Capital was a revenue synergy transaction and revenue synergies don't happen in the short-term.

They tend to happen in medium and long-term, not our classic deal. Our classic deal is where we go out and we do an in-market merger and end up with cost synergies, and we are very much focused on getting some of those done as well.

So that is the second source of value and then create value at the Power Corp. level through our investment platforms, realizing, creating and realizing value from standalone businesses.

Plan A would then be to return capital to shareholders. We won't have the blinders on if there's a very attractive use of capital at the Power Corp.

level or supporting one of our companies will, of course, make those decisions based on the choices we have at the time. But Plan A is to return the capital we free up to the shareholders, and then enhance our communication all the way along, so you understand it.

So on the box on the right, here's a little bit of the formula. We are driving higher earnings growth is the goal, and through that driving also higher NAV.

And so what could happen with that, that in and of itself creates value, but we also think there's a potential for multiple revision at the OpCos. If you look at Great-West Life trading at 8.5x, 9x earnings, like is discounting if you do any kind of required rate of return, you're basically discounting negative earnings going forward.

And hopefully, if the market gains confidence that we actually have growing earnings, there's a possibility as we prove that out, and we hope it's more than the possibility that you get a multiple revision on that. And then at the same time, we carryout this strategy, we think we can narrow the discount.

So at the holding company. So you put together the higher earnings, the higher NAV, a multiple revision and a lower discount.

And you got a formula where we get really excited about what the value creation is based on certainly where we're trading today. So that's really all I was going to say.

We've got a summary on 28. I'm not going to carry you through it.

I think I've made all the points. And I think what I should do, operator, is stop there and have you open it up for questions.

Okay. Thanks.

Good morning.

Good morning.

And I’ll start with the question on liquidity at the Power Corp. level, it looked relatively unchanged quarter-over-quarter.

I was wondering if you could just give us a bit of a sense of how comfortable you're getting around the deployment of that capital or perhaps what conditions you'd like to see to start drawing down on that liquidity again to execute on some of those initiatives that you've outlined earlier like the repurchases of the preferred shares and the resumption of buybacks?

Yes. It's hard to make that – answer that question in two formulistic way.

So I mentioned that we are playing offense and playing offense includes taking advantage of the environment at the operating businesses to make acquisitions. So just think of that, we're going out, we're playing offense.

And if we can – we're prepared to deploy capital in the face of uncertainty of COVID-19 and what happens. And well, the authorities have done everything I think from a fiscal and monetary point of view, they really responded in a very aggressive fashion, and I expect that they will continue to do so.

You can run scenarios where they don't, where things that don't happen and you end up with a financial environment that's not as good six months out or a year out. So there's a degree of caution we have.

And yet, we're playing offense, taking advantage of it. So in that context, keeping greater liquidity at Power for the time being is a smart thing to do.

While we encourage the companies in our group to pursue the opportunities that are in front of them and we keep our powder dry while that's happening in this environment. That's our current mode, Nik.

I can't give you a formula as to when we might say, okay, it's different now, we can move to a different stance. We’re just going to – we'll know it when we get there, I guess is the best way to answer it.

I hope that answers your question. I'm just trying to share our thinking with you.

Okay. Got it.

That's helpful. And then could I ask for a little more color on the evolution of the Power Sustainable Capital?

I know that platform manages Power's own proprietary capital. I was wondering if you could just give us a bit of an update on the status of those funds.

With respect to fundraising efforts to attract third-party capital, just what stage you’re at and how you see that progressing over the next year or two?

So to start by the strategies are equity investments in sustainable energy, wind and solar on the energy side and then there's the China fund management business based in Shanghai. We started in 2005 when we were one of two Canadians that got a license to operate in the country.

We have a great long-term track record there and great value creation not only from the market, but the outperformance that our team has realized. The team has been busy because it was a much bigger pivot for Power Sustainable Capital than it was for Sagard Holdings, which were already in a third-party model.

So they have been over the last six months and over the last three months, reorienting themselves to being in the business of bringing in third-party capital. They have got active discussions going on with some institutional parties that could come in and are interested in coming in.

There's nothing definitive to announce, but I can say that they've been extremely active at doing that. They've set their organization up to become a third-party manager where you're interacting with outside investors and they are going to build the organization around to do that.

They're getting their financials and their business plan, which is basically done, lined up that way and they’re actively fundraising, but nothing to announce at this point on the fundraising side, just a lot of activity and I think good progress.

Okay. That's helpful.

And then I want to ask one last one. Just about one of these standalone businesses, I understand that IntegraMed underwent restructuring in the quarter.

Can you just give us a bit of an update on what's happening in that business and maybe remind us how much that investment is carried out from a net asset value perspective?

Greg Tretiak, I'm going to turn that question over to you.

Sure.

On the NAV on the books and finish next question there. Thank you.

Yes. Thanks for that, Nik.

The IntegraMed property has been disposed of and is no longer on the books, and it was on that disposition, I think we realized the recovery of some $27 million. So it is no longer part of the portfolio and it was disposed of in the quarter.

Okay. I see.

All right. That's it.

Thanks for taking the questions.

Thank you, Nik.

Hi, good morning.

Hi, Graham.

Maybe I can just start with the cost savings. So you said you're at 45% of your targeted $50 million, what drove the initial savings and then what's expected to surface the remaining 55%.

I'm going to let Greg handle that. Greg, do you want to address that question?

Sure. So the initial 45%, there's three items on that slide that point to the majority of that quite frankly and you can see that certainly with the retirement of the two co-CEOs, and the changes in governance that contributed it.

We still are a public company at PFC. However, there are some of the expenses associated with being a fully traded public company in an equity sense of the term.

And those have been eliminated in the first eight weeks or I guess it's little more than eight weeks that we've been at this. And then we've restructured some of the services that we have in the group, including our research and our advisory services and those have contributed to the 45% reduction that we've attained so far.

When we look forward over the next periods, we see opportunities obviously in some of our other expenses, the biggest categories being our properties that we have. And so we see opportunities there and they will emerge over the next six quarters.

Some of them may take a little longer than we had hoped for given the COVID environment right now. But we feel confident that we're going to get to that $50 million over the next six quarters.

And we'll probably give you a little more transparency on how we see that emerging as we move forward over the next couple of quarters.

And Graham, I might just add to Greg's comments. One of them as well was look at our travel and in particular with going from three to one CEO and just looking more generally our travel expenses.

Of course, we've completely blown through our savings, but you really can't measure it right now because nobody is traveling. So that's – but there's a travel piece and the actual reported would include much lower travel expenses than what we would expect on a run rate basis, but there's travel as part of the run rate that we're looking at reducing as well.

So I’ll just add that. Does that answer your question?

Yes. That's helpful.

And then maybe if I could jump to – you've got liquidity, I think of $1.4 billion at the Power Corp. level, and then you're looking to redeem the 350 million of preferred shares at some point.

So when I think about your NCIB, you've got 23 million shares left. How would you fund all of that if you wanted to be active in purchasing all of that, would you have to monetize some of your standalone businesses to fund that?

Or how should I think about your liquidity and funding that NCIB?

Yes. We haven't – as I answer to Nik, we haven’t landed at this point about where the right level of cash and liquidity is on an ongoing basis.

We'll continue to review that. But over time, we would be looking to disposal of assets and freeing up of capital as we replace some of the seed capital that we have.

Those would be sources of liquidity for us as well as ultimately determining where we should land on the cash. But we're deferring that until as we see the environment basically settle itself.

Greg, I don't know if you wanted to add anything to Graham's question around funding of buybacks and sources is really where he's going.

I think you hit the nail on the head. On Page 22, as we realize value, we will certainly take that value that we've realized and put it to work in buying back shares, if that's the most opportune thing to do at the time, I think we'll balance that against our preferred share repurchase that we also signaled earlier on when we announced the transaction.

So that's the only thing I'd add to it.

Thank you.

So would that include your efforts to raise third-party capital for your sustainable investments? Should we think about that as a potential capital return?

Or would you raise third-party capital to just reinvest and grow your sustainable AUM?

It's going to depend on the opportunities in terms of the products. So there's a tension that exists there.

We are looking to free up capital by bringing in third-party capital into the sustainable energy portfolios because we have assets and we'll seed them. So that becomes a source of funding.

The flip side is what opportunities are there to launch new products. We do want to grow these platforms.

Obviously, the teams that are managing both Sagard Holdings and Power Sustainable Capital are looking to launch new products. If they get opportunities to do so on a profitable basis and grow their businesses and that's going to be a call on capital.

And we're just going to have to manage all of those tensions, if you will, but we'd call them opportunities is maybe a better way to put it. And because we don't have a perfect crystal ball as to how all that unfolds, it's hard to get precise, and I'm not trying to be evasive in the question.

It's just hard to be precise on saying how much liquidity comes free and that over what period of time it depends on the point you just raised. And then it also depends on maximizing the value on the standalone businesses versus realizing value and how that plays out over time, that you don't want to put yourself in a straight jacket by committing to doing this.

And then you end up leaving money on the table or missing opportunities. So sorry to not be more precise, but again, I'm just sharing with you the way that we think about it.

Understood. That's helpful.

Thanks.

Hi, good morning. You've done a number of transactions that you flagged involving the various entities within the power complex.

And in general seemingly call it, more active on transactions in the past 18 months. When thinking about simplifying the Power structure and surfacing value, like how would you describe like what inning you're in and if there's any sort of additional context you want to add to your answer?

Okay. Great question, Geoff.

Thank you. I think in terms of the simplification from a structural point of view, we don't have any other plans to – we basically have three public companies and we have wholly-owned businesses within Power Corp.

So structurally the biggest steps have been taken, but simplification goes beyond structure. Simplification goes to what you do and how the market understands it.

And so we still have at Power Corp., I would say a bunch of assets if I can put it that way, in a kind of loose way that I would say when we talked to market participants. They don't understand the strategy that pulls it all together and look at it more as a diversification strategy.

And if you play out what we've said to analysts and investors over the last couple of quarters, since we announced reorganization, we see if you reach out two, three years from now, you're going to have a much simpler holding of assets at Power Corp., where you'll be able to see some asset management businesses with some revenue and some costs and see how those are growing and contributing. And then you're going to see seed capital supporting those businesses, and that seed capital will have return attached to it and you'll see how that's creating value.

And so I think it will be simpler to understand in value, even though it may not – even though I think the big structural steps have been taken already.

Okay. So I guess maybe asking another way.

Is there – are there assets that you have in any of the different entities that you think may make sense in another part of the Power family?

The one that gets talked about and is an obvious, and you haven't – you've kind of stopped short of naming it, but we do have China AMC in two spots. And so I have spoken.

And Greg and we have at investors – in front of investors conferences over the years about the fact that when CMAC, first, the opportunity came to acquire CMAC through really the Demerit family, their long history of focusing on China, starting with Paul Senior and Andre, and Olivia has taken up the schedules there in terms of working the opportunities in China, while CMAC ended up being this prize that we had an opportunity to get a 10% foot holding back in 2011. But at the time, we had active discussions about whether it made sense an IGM or Power Corp., and Power Corp.

was the only eligible buyer from the point of view of participating in it and being able to buy it. So there wasn't really any choice we went to Power Corp.

When the second two blocks came, we thought that the best way to do it because they're synergies with IGM and maybe a more natural holding place. We'd split it.

And now we have the holding 50-50. So that's something we have talked about.

We talk about it from time-to-time, like IGM's pretty keen on their CMAC sake as they should be and as we are with ours. That's the one that we would – that we have discussions around, but I don't want to get ahead of ourselves, Jeff in saying, totally transparent.

We talk about that, but we have not made a decision at this point. And so to say anything beyond that, I think would be – I don't think it's appropriate.

Okay. And just my other question was, again maybe as a baseball analogy makes most sense, like is looking at Great-West from Power's ownership perspective and your investment there relative to firing on all cylinders, how would you kind of describe where the various businesses within Great-West are at in terms of once you feel they're performing well and ones that you think are still a work in progress?

Yes. Good question.

Everybody should cancel the next hour of their day and I'll answer. I’ll try and do that quickly.

I'm teasing. If I start with Canada, the group business in Canada for Canada Life is firing on all cylinders and it's kind of basically just sharpening this off, I can call it that way.

But they're – they've got great position, good growth. The Canada individual business has gotten more challenges in terms of where the products are right now.

But I would say from a management team, leadership team, strategy, they know exactly where they're going right now. And they have got a very clear strategy.

They're executing on it. They're executing quickly.

The digital offering I talked about, what they've done with GLC and Canada Life, it looks innocuous. I think that's going to – that's part of a much stronger wealth offering that they are coming out with.

I feel really good about the strategy that Canada Life has got for its individual business, so lots of work to do there, its early stages. But very clear understanding where they're going.

If I set the stage, Empower, what can I say? It's on a very strong growth trajectory.

And I think by plugging in a retail business, as I said in Personal Capital, that's going to really strengthen their offering both on the DC side, but also on the individual side, love to be able to do something that would grow there from an acquisition point of view. But you've got to be – we're going to remain disciplined, but that business is growing quickly.

Putnam has got – still a very difficult environment for active. Putnam has continued to manage their cost down while improving their shelf and the flows are really starting.

I mean, they obviously went through a hiccup in the first quarter, but the flows are starting to come around. You saw that in the numbers in the second quarter.

PanAgora, which is also in our asset management portfolio in the states. A quant has really gone through big outflows, but they've got it.

They've outperformed the Bridgewater's and AQRs of the world on many others strategies. We feel very good about that.

But there's an opportunity still to unlock value is the way I would look at that. Flipping over the UK, really strong business, really taking advantage of the Retirement Advantage acquisition they made a couple of years ago and building out on the wealth side, Irish Life, good momentum and Germany, very strong momentum.

And then on the reinsurance and risk group, you see it, I mean they're getting great returns on capital and that's a nice source of growth. I feel really good right across the portfolio.

I feel they're not all contributing earnings wise the way they're capable of at this point, but every business is moving forward. And I can say more optimistic than I've been at any time in the last four, five years about the suite of those businesses and where they're at.

That would be my assessment, Geoff.

Okay. Perfect.

Thank you.

One quick one for Greg, and maybe a follow-up to Jeff. Greg, I think you mentioned there were some COVID-related reductions in expenses in the quarter.

Maybe you can just quantify what you think the dollar amount of those were? And with – and what they might have been – obviously, probably related to travel, but if you just give us an idea what the reduction was as a result of that?

Yes. Tom, broad strokes.

I don't have a precise number, but I'd say $2 million in that neighborhood would be approximately what we would expect in terms of those type of expenses. And they'd relate primarily to travel, but travel on other related type of expenses.

So that would be it.

Okay. And thanks for that.

And then for Jeff, like when you embarked on this restructuring sort of conveyed to the Street that you'd be looking to sell some sort of the non-financial assets at the Power Corporation level. And obviously, the environment is different, but what probably the Street didn't expect was moves to sort of optimize efficiencies within the Power group.

And so to what extent are there more opportunities to sort of optimize efficiencies within the group? You've got three businesses that are sort of in the wealth management and asset management type businesses.

You've tried to optimize stuff within those functionalities between – with the GLC acquisition. But do you see other opportunities here with three businesses sort of doing some of the same stuff in terms of optimize efficiencies within those three groups?

Yes. I think if I got your question right, in particular, it's not really at the Power Corp.

level you're asking, but within the operating businesses, and the obvious overlap you're talking about is with an IGM, which operates in Canada and Canada Life, which operates in Canada because outside of that, you don't really have too much over at operate. It's Great-West Life.

It's in the States and then Europe and whatnot. So I think that what we've just announced in terms of the asset management change is the biggest opportunity we saw.

But we have – I don't know how much you are aware of how much cooperation has been built up over the years between IG Wealth Management, Mackenzie, and Canada Life and Great-West Life. I think we should probably do ourselves a disservice by not highlighting all of the distribution opportunities that go on across it, across those two groups because it's a lot.

And so you continue to have asset management, Putnam PanAgora funds are distributed across IGM, Mackenzie funds are distributed the other way. China Asset Management is not just working with Mackenzie to try and create products for the group.

You've got a lot on that side of it, insurance products, like I think IG Wealth is the – I think they're the largest single distributor outside of the Canada Life's own distribution of insurance products for Canada Life. There's a lot on the product side.

The system side was probably bigger before because it used to be that companies did all their own systems. So we had both groups working together for 20 years, but as everybody's moved to the cloud and moving more to an outsourcing model, the reality is that business model has evolved and changed.

I don't know if that's where you're getting at with your questions. That's what the way I would answer it.

Yes. I was just thinking just with respect to some of the asset management companies at the HoldCo level, is there any opportunity to see there with leveraging those capabilities down into the operating company?

Yes. Good question.

So I get just a bit. Very much so, the capabilities that we're creating at Power Sustainable Capital and Sagard Holdings are a good fit for Great-West Life balance sheet, which is trying to and is very much looking to extend their position in alternatives.

So right there, there's a good – there's a fit and they're actively working on those opportunities. Obviously, Great-West is not going to be exclusively looking at Power.

It's a big world out there. And then from a distribution point of view, there's opportunities for those products to find their way into some of the alternative products that are being built for retail high net worth clients, et cetera.

So that is going on. Thank you.

I missed that. What you were saying there, that absolutely, lots of efforts going on there.

More to say about that in the future.

Okay, great. Thanks.

Thanks, Tom. Operator?

Okay. Thank you.

And time flies when you're having fun. I see we're right up against a 9:30.

Again, I just want to – and on the note of how busy a quarter it is and we just got the pedal to the metal to keep driving it forward with more, and hopefully we can be successful at doing some other things that create value. Thanks again on our Monday morning and August for being on the call, and we look forward to talking to you again soon.

Bye-bye now.