Power Corporation of Canada

Thank you, operator, and welcome everyone to our quarterly analysts and investor call. It's great to have you with us today.

Thanks for joining us. Just to open it up with the regular disclaimer statements on forward-looking statements on page two.

And also disclaimer on page 3 regarding non-IFRS measures. And so, with -- today in addition to myself I’ve got Greg Tretiak, Executive Vice President and Chief Financial Officer of Power Corporation.

And I will just open the comment up by talking a bit about the third quarter. No question, this was a quarter where Power and its major operating businesses made really big strides in advancing our value creation agenda.

Our major public companies had strong financial results in the face of the COVID-19, and at the same time announced a number of highly attractive transactions that are not only strategic, but very accretive to earnings on the whole and value-enhancing. At the Power level, we continued to make good progress in building out our investment management platforms, as well as enhancing value of our standalone businesses.

And all the while across the group, at the public operating companies and at Power, we continue to push forward on our efforts to enhance our communication to the market participants, both in terms of the content the way we present and in terms of the frequency of the meetings. So, on page 6, you've got the fact that each of Great-West Life, IGM and GBL, have had their earnings out and their own calls or releases.

And the point of this call is not to repeat the material that was presented by them. Rather than that what we're going to do is provide our perspective on some of the key developments and then talk about some of the developments at the Power Corp.

level itself. Moving along to slide 7, I think, the word frenetic is probably not inappropriate, when you talk about what's been announced over the last few months.

There were five pretty significant transactions for them at the operating companies, plus the Wealthsimple announcement just after the quarter end, some -- and really significant, I think, in these deals in many ways. I'm going to address them in the pages that follow.

So, I'm not going to go through them on this page, but you can just see the piece of activity. And this didn't all happen, obviously, in the third quarter.

People at Great-West, at IGM across Power have really been working extremely hard on many of these, and they fell into place in this quarter. But, lots of people have been working for a long time to make all of this a success.

I do want to point out one thing on the page, which is not a transactional announcement, but the leadership changes that IGM, and my first chance to kind of publicly acknowledge what went on there at IGM. And first of all, thank Jeff Carney, and recognize what Jeff did from 2013 to September, when we announced his retirement as CEO of IGM.

And what he did really for IGM was fantastic, in terms of helping to reposition Mackenzie and its leadership position, helping Barry McInerney and the team, done a great job of continuing to build on really setting IG Wealth up for future success, putting in place an incredible team. And then finally, when he was diagnosed with early onset Alzheimer's, dealing with that in a way that allowed us to go out and properly plan how we were going to replace him and in effect, build on what he had done.

And so, Jeff has done an incredible job. And we're lucky that although he's no longer in a management position, we're going to benefit from his ongoing counsel and as an advisor to IGM and to the group.

Very happy with what we now have as a leadership team, very fortunate and thrilled to have James O'Sullivan join us as a full time dedicated CEO of IGM. And then, with the strength of the team at IGM, we've got Damon Murchison, as a CEO of IG Wealth, and of course, Barry McInerney and Chris Reynolds carrying on in the job they're doing and building up Mackenzie and IPC.

So, the whole thing -- we're thrilled with the management team, and I just want to acknowledge that here on this call. Okay.

Let me move along then and pass it over to Greg Tretiak to walk us through the next few slides and talk about the quarterly results.

Great. Thank you, Jeff.

I'll take you straight to page 9 and begin with the overview of the change in PCC’s net asset value. So, looking at the bottom of the table charts, you can see at September 30th, $34.94 is the share per -- I should say the NAV per share, compared to $30.79 in March.

That's up 13.5%. When I looked this morning, I think we're since then -- since September 30th, I think we're up another 11%.

So, good strength in the NAV appreciation over the course of the last little while. Looking at the publicly traded companies, you can see that they were up 12.4% as a group.

I just mentioned Pargesa and GBL, that transaction to eliminate, Pargesa moving well along and you can see that the NAV has increased from March as well there -- their net asset value at GBL on March 31st was something like $15.9 billion, and at September 30, it was $18 billion. Couple of other things to call it on the slide if I could, and that would be, take your eyes down to Power Pacific.

Power Pacific almost had $1 billion. You can see that it's up 37.4%, outperformed the CSI by some 20% during the quarter.

And we have a slide on that and will speak to it in a more detail little later on. Then, a little further down the line, you can see the fintech investments.

And that appreciation there you can see at 78.9% is reflecting basically the transaction that Wealthsimple announced in October where they raised capital at a value of $1.4 billion pre-money for Wealthsimple. And the only other comment I would have on this slide would be that just remind folks that not everything is mark to market on a regular basis as we do all the publicly traded securities, in particular, I call out China Asset Management, which is basically carried at equity accounted value.

With that, I go to page 10, and just a brief overview of the results. Couple of comments, one, this is a new presentation that we've used here, and trying to live up to our initiative to simplify things and actually be a little more transparent.

And so, we've done that not only in this particular presentation of our results, but also in our press release and in our MD&A. And the one thing you would have seen is the way we're presenting the contribution from Great-West, Life, IGM and Pargesa, we used to allocate all the consolidated entries to those entities.

And what we've done and chosen to do is actually show the three as they reported their earnings. So, it's much easier to go from their earnings to our share of their earnings with no adjustments.

So, it'd be very plain and should be very obvious to you. And you would have seen this in their reported results.

So, looking at the consolidated entries, there's a number of consolidated entries in there. One in particular that we're going to call out, and it's called in that bullet at the, I guess, the sub-bullet right in the top.

The re-measurement of the put liability on the non-controlling interests in Wealthsimple and Webhelp. As I mentioned earlier that there's a significant increase in value in Wealthsimple and also at Webhelp.

And that led to obviously a fairly significant gain. However, when they are consolidated entities, those gains are not reflected in the P&L.

And that's not like it used to be. Now, I'm showing my age, quite frankly.

There used to be something called dilution gains. But since we've adopted IFRS, there are no such things.

And gains, when you have a consolidated entity, do not flow through the P&L. So, that will be recognized, the equity in the fourth quarter.

However, associated with that is put rights that we have to revalue in the current period. And those put rights are in relation to options held by Wealthsimple shareholders -- mainly the non-controlling interest, quite frankly, not shareholders, just the non-controlling shareholders.

And those put rights have to be marked and reflected in the P&L. And in the current period, we did that.

And this resulted obviously in an expense in the P&L. And it was -- represents $0.16, $0.10 for the Wealthsimple mark, and $0.06 for the Webhelp mark.

And when you look at this presentation, you'll find the $0.06 affects the Pargesa line, $0.05 in the consolidated entries, that's Lifeco and IGM’s share of Wealthsimple’s mark, and $0.05 at PFC. And so, when you look at these results, we think you should take into consideration that obviously that $0.16 added back to the $0.65 would have reflected an $0.81 quarter, which is more comparable to the Q3 result.

We have slides later in the deck that address the platform contribution, also China AMC, and also the corporate operations. And so, I will turn it back to Jeff, and we will address those individually.

Okay. Thank you, Greg.

So, I'll turn over to the next page, which is a restatement of our strategy. And you've seen this slide before, but it's still relatively new.

So, I'm going to keep repeating it for a while, so that it's well understood. The strategy of Power Corporation is one that is focused on financial services, not diversification.

The public operating companies, which after all represent some 79%, 80% of the gross asset value of Power Corp., remain a very important part of our strategy. And they are continuing to pursue their strategies with our involvement and support to grow their values through organic and M&A transactions.

But, at the Power level, if I can kind of describe the words that are there, we're going to streamline and simplify at the Power level, and we're going to build value through the investment management platforms that we have. And if I can create a vision for where we see it being several years out, you're going to have a much simpler company with investment platforms that have seed capital that we’ll be able to show you and show you what we're running on the seed capital, and have investment management companies that have revenues and expenses and contributions, and we're able to show you that.

And we think, not only is that a recipe for creating value, but it's one that investors will be able to understand and hopefully value much more easily. And if we continue to push forward on our strategy to communicate clearly and enhance the clarity of our disclosure and the frequency of our interactions, we think that we will create value add at the Power Corp.

level that will be enhancing to what we're doing at the operating company -- for public operating companies. Page 12 is really just another representation.

But, we like to think of it in terms of how we organize our strategies around the three levers. You've seen them before: The OpCo organic leavers; the use of M&A; and then, what we're doing at the holding company to enhance the value.

So, I won't spend any time on this slide. I would like to spend the next few moments, just not going through the description of the transactions we announced, because they've all been publicly described, and you will have seen them before, but would like to just very briefly, on each, give you our perspectives on why we think they're exciting and why they add to the group, and in fact why we did them.

So, I'm on page 13, which is the Mackenzie acquisition of GLC Asset Management, and at the same time you had the contracts from Quadrus going back from Mackenzie to Canada Life. This does three things for the group: It enhances Mackenzie's leadership position in the asset management business in Canada; it also gives Mackenzie access to two channels, a much greater access to the Canada Life retail channel, but importantly, for the first time access into the defined contribution retirement channel in Canada, and so very important for Mackenzie, two important new distribution channels for them to pursue.

And then, from the Canada Life perspective a much stronger position in the wealth management market, as they in effect have a prime supplier with much greater and broader capabilities and are -- and through this transaction also have complete freedom to go out and use third-party suppliers as they have in the past. But, this in fact, facilitates that to be able to provide the very-best products for the Canada Life client.

So, we think those three things that’s a win all around for both IGM and Great West. Let me turn then to page 14.

Just on the -- I guess, two days before the end of Q2, we announced the Personal Capital transact actually closed, we got our approvals very quickly. You see at the bottom of the page, it closed August the 17th.

This transaction I think is really, really exciting. It does three things for Empower, Great-West Life's U.S.

retirement defined contribution player. It adds a best in class digital wealth management platform.

Personal Capital is a California-based digital hybrid wealth management business, which has outstanding technology, client experience and value, and it's quickly growing. So, it's a direct-to-consumer business now that Empower has in wealth management.

Secondly, Empower was already very-focused on building their retail business on the money that comes out of their defined contribution business, so the so-called roll over and roll in money. The Personal Capital tools and technology implanted into that is going to enhance that business significantly.

And finally, the Personal Capital tools and experience embedded in Empower’s defined contribution business itself will enhance the experience and enhance the growth prospects of that business. Very exciting.

Before I leave the page, I want to make a point that -- we've talked about Power’s or in the past fintech strategy. And there were really two major investments that took the most significant capital investments across the group.

One of them was Personal Capital, which IGM put about a $145 million U.S. into over four years.

And the other was Wealthsimple. The rest of the fintech strategy, while very exciting, the Portag3 strategy and the Diagram strategies, really didn't -- not a lot of capital, those were really more people build ups.

But the capital went into Personal Capital and it went into Wealthsimple. And this transaction validated that move, because it turned out for IGM that they made a very good return on their money.

And as the auction came, we were able through Empower to now have Personal Capital as a real value-added piece of the Great-West Life platform. So this is one of two fintech investments we made and it turned out very, very well.

Okay. Turning along to page 15.

Really the biggest transaction by far, the most meaningful over the last few months that we've announced is the MassMutual transaction. It does, in my view, four things for the Company.

It solidifies and strengthens Empower’s position as the number two provider in the growing retirement business in the state. It’s an $8 trillion market.

It's still right for consolidation, I think, over the next 10 years. And we are a clear number two to the industry leader Fidelity, through this transaction.

It's highly accretive financially. This is a classic Great-West Lifeco cost synergy play.

We know exactly how to do these. And so, the deal is on very attractive terms that will be highly accretive to the earnings of Great-West Lifeco, as those synergies are realized, over the next 18 months falling closing, which we expect really around the end of the year.

Thirdly, Empower becomes very important to Great-West Life. Once we've done this, in addition to the growth and the earnings we have at Empower already, Empower will be somewhere in the low-20s percentage of the earnings and contributions at Great-West Lifeco, as you look out, say, three years from now.

So, this transforms Empower from a attractive business to an attractive business that’s very, very important to Great-West Lifeco. And then, the final thing is that together with the Personal Capital acquisition that I mentioned on the previous page, this gets Empower into a position where it can really attack the retail wealth management business.

So, it transforms it from a DC group player into a company that has a real retail business going as well. Very excited about this transaction.

Page 16 is the Northleaf transaction that was announced on September 17th. And again, this is going to be a very attractive transaction.

It'll be accretive to earnings, but more importantly, I think, it's really going to help the strength of our franchises. The first thing it does is for IGM, both Mackenzie and IG provides them with very-interesting products to go after new client bases but also augment the returns in many of the products for their existing clients.

For Great-West Life, it does the same, they can embed some of these products and the products that they distribute to their clients, as well their own balance sheet is looking for these kinds of products and it provides them with direct access to Northleaf’s product. And finally, for Northleaf, association with the distribution with Great-West Life balance sheet within our group will augment their growth, which has already been significant.

Really high-quality company. We're just thrilled that we were able to come to an agreement.

And I think, everybody's very excited on both sides to pursue this partnership with Northleaf. After the quarter -- page 17, after the quarter ended, Wealthsimple announced their financing.

Greg's already mentioned it. I won't belabor it other than to say from a financial point of view, our group put C$315 million over the past four, five years into Wealthsimple, but a third of that roughly was at the Power Financial level and the bulk of the rest was at the IGM level, a little bit of Great-West Life.

This transaction values that at $934 million. So, a triple and on an IRR basis 44% annual return.

So that validates from a valuation point of view, the other big investment we made in the fintech space. And at the same time, it also going to provide Wealthsimple with another hundred and so odd million to continue -- funds to continue to build out their platform, and that the shareholders were the leading technology investors in the U.S.

here. And they are going to participate, there is some Board seats there, we get the benefit of their knowledge, their experience on realizing value and augmenting value in these businesses.

So again, it's a win all around. You see along the bottom of the page, some parameters there about the success that Wealthsimple continues to enjoy.

It's much more than just an investment business right now. They have a trading business.

They've got an acquisition and are offering tech services to their clients and the existing clients that existed in that business. I think, they got a C$1.5 million right now doing business, the Wealthsimple.

So, it's a very impressive story. Okay.

Let me turn then on to page 18. And we're going to continue to highlight the asset -- investment management platforms of Sagard Holdings and Power Sustainable.

Don't really have time on a quarterly call like this, particularly with all the stuff that went on in this quarter to spend as much time as we would like to on this, but we will continue to do so in the quarters ahead and through other forms that we will create. But, a good product.

This gives you on page 18, a quick snapshot. We have on the left hand side, bottom of the page $7.3 billion of assets under management or committed, the blue, $5.3 billion is actually funds that are deployed and there is another $2 billion that are committed but are unfunded at this point.

Of the $5.3 billion that's committed, you can see the dark blue at the bottom, $2.8 billion is from Power Corp. and $2.5 billion is from other parties.

Of the uncommitted $2 billion, 75% of that is from third parties. So, our emphasis going forward here is third parties that are funding it.

And as you move towards the right side of the page, you see our Sagard Holdings, which is -- the Sagard, a Europe private equity, the private credit business, venture capital, which is really a lot of that is the fintech Portag3 portfolios and our healthcare business, that is already primarily third-party and Power Sustainable Capital, which is Power Pacific, which Greg mentioned earlier, having fantastic returns in Power Energy that at this point is all 100% Power Corp. capital, but they're hard at work, and third party investors.

And the next couple of pages, I won't dwell on them, just quickly on 19, you get a little more profile on Sagard Holdings. You see the number of LPs they have, the number of investments, the number of people, where they're located.

And on page 20, you have some facts on Power Sustainable Capital, and what they're doing, both in the energy space, capital they have, some of the returns that they're targeting, and then the Power Sustainable Capital position that Greg mentioned. So, we'll come back and continue to provide more and more information on these businesses.

I'll quickly then run through, before wrapping it up, our other important investments. China Asset Management continues to do extremely well.

As you know, we have I think, 13.9% of this business, IGM has another 13.9%. So, we're -- collectively we're the second biggest shareholder.

This is in my view, the premier company in the Chinese market. It is the number two long-term mutual fund player.

It's the number one ETF player. It's got a very important institutional business, not mentioned on this page.

And you can see, the growth over the last year, at the bottom right of the profitability. Next to it you can see the growth in assets under management.

So, profit’s up 31% year-over-year. Power Corp.’

s share in the quarter of that profitability was $11 million, IGM of course would have had a comparable number. It's not making big, big contributions to earnings at this point, but it's growing very quickly.

And it's obviously in a market that is doing exceptionally well in an economy that's huge and growing and is under saved. Page 22.

Repeat what we said all along. I mean, while the businesses on this page -- standalone businesses are not on strategy for the business of Power Corp.

in the future. We are going to continue to work with our partners in these businesses and manage these businesses to maximize value and realize value in a way that works for Power Corp.

and a way that works for our partners. And so -- but -- and we've got some attractive businesses here.

There were some good developments in these businesses in the quarter. I’ll point out two in particular.

Peak sold its Easton Diamond business, that's a baseball bat business to Rawlings Sports; and then Lion, which is an electric vehicle manufacturer, based here in Quebec, and it’s basically trucks and buses, obviously, a very fast growing area. They entered into agreements with some major companies, including Amazon to supply them with vehicles.

They're already in a manufacturing space. This company is not just a field of dreams, and some really exciting developments there.

And we think there's some good potential for value creation in this business in the periods ahead. We are -- on 23, continued, committed to reducing our expenses.

It's not a big change in the run rates this quarter, but no change in our plans to reduce our run rate expenses by $50 million. Just two more slides I'll focus on and then we'll open it up for questions.

The page 24 is so important to us. And I'm pleased to say in over the past few quarters, we've made progress across each of Great-West Life, IGM and Power Corp.

in our communication. So, Great-West Life introduced the base earnings metric.

In the first quarter, it's been well received by the market, all the feedback I've received and they received. They have a new segment disclosure as they announced a new management lineup in the first quarter, and the enhanced resource of earnings and disclosure, the greater granularity in the second quarter.

IGM, I'm really excited about their new disclosure. IGM continually gets lumped in as an asset manager.

Well, that's true, it's an asset manager. We've been saying for a long time that the asset management piece of the value chain is a relatively small piece of it.

It's much more of a wealth management business. And with the new disclosure and with the agreement with both, IG Wealth, and with Canada Life on commercial terms, we now are able to break out very clearly IG Wealth and IPC.

This is what we make as a wealth manager. And here's Mackenzie, and what -- here's what they make as an asset manager.

And then finally, and just as importantly, there's another strategic bucket of assets that many of them shouldn't really be valuing on earnings basis, and so, should really be a sum of the parts. And here's what their value and here's their progress.

And so, this is an important first step in IGM, being able to explain to the marketplace how they make money and how the businesses work. So, very pleased about that.

And then, here is Power Corp. We continue with what started in the first quarter, our first earnings call, we've been extremely active in reaching out to investors.

And you see at the very bottom of the page including it says 31 one-on-ones with mostly investors and some analysts since the end of Q2, it's actually since I think September 8th, that's all after the MassMutual announcement. We've been very busy reaching out to our shareholders and to our analysts.

And I'll pull it all together on page 25. This is the same three levers but kind of giving it a little bit of additional life here.

And in a nutshell, what are we trying to do, in the first two levers, which is the operating businesses, we're trying to drive higher earnings. In the first instance, turning the very significant investments we've made over the last number of years to improve those companies’ competitive positions, turning that into stronger earnings growth.

Then adding to that through the use of M&A. And what can I say, this quarter, kind of it all kind of fell into place in one quarter, lots of good things happening.

So, that we have higher earnings and we have higher trajectory of earnings that the market sees because we're communicating it and they gain confidence in what we see as the earnings prospects. That has the possibility not only of benefiting from the higher earnings, but potentially higher multiples, because when we look at the multiples, we think that they reflect very low implied growth rates into the future.

And then at the Power Crop level, we are also working on increasing our net asset value, in some cases, realizing on that value and returning money to shareholders, and simplifying it and communicating it, so investors can understand it. When you add all that that up, it's higher earnings, potentially higher multiples, higher NAV, and potentially a lower discount if we do a good job in communicating it.

So, even without the revaluation, it's an exciting story. If you add revaluation to it, it’s extremely exciting story, which is why we're very pumped up about it, why we're very focused on executing the strategy.

And so, I won't go to the last page. It just kind of summarizes where we are in the quarter.

I think with that, I'll conclude my remarks. And I would ask the operator to open the lines up for questions from those that are on the line.

Hi. Good afternoon.

When I kind of think what you've done over the past couple of years, I mean, you've done a bunch of different things to simplify the structure, optimize capital structure. If we're thinking about going forward, other things you can do to simplify the structure, the story, disclosures, whatever else like that, that could surface value, but not including, say, for example, doing acquisitions.

How do you feel like right now where we are in terms of meaning of the ballgame of what you think right now, you'd like to do?

Okay. On the point of simplification, because I think the value-creation is also one of -- at the operating businesses, getting belief in the marketplace on the organic earnings prospects, as well as adding to it through M&A.

That's a big part of the equation. But your question is on the simplification piece of it, which is additive, but not the whole thing, right?

So, on the simplification piece, I think, structurally, we have combined -- we've done two deals, as you mentioned, Power Corp, Power Financial came together, and GBL and Pargesa. But, when you look -- and all my communications with market -- with shareholders and investors and analysts, when you look at Power Corp.

itself, and you look at the string of investments we have, people don't understand them, and they don't know how to value them. And most of them are not earnings driven valuation, they’re net asset valuation, unlike Great-West and IGM, which are principally earnings driven.

And so, we have a complicated long list of companies that people don't appreciate, can't value, don't know how to put metrics around. So, I think, the simplification that I talked about over the next couple of years will be less about structurally simplifying, and actually simplifying the business itself.

So that if you, again, envision, if we're successful in transferring it into, say, a few years out, all we have is the investment platforms. You would have two things to look at.

You would have seed capital that we could go to the market to say we have X billion dollars in seed capital, supporting all these strategies and we're earning at a rate of approximately 8% or 10%, or it'll depend on the mix between what the strategies are, and that's what we have, that's the value, that's what we're learning. And secondly, we have investment management platforms that have revenues of X and cost of this, and this is what they're contributing.

And I think, when we get to that point, it will be a much simpler story to explain and to value. And I think, if we do a good job communicating that that will enhance our value, because -- as opposed to -- right now, I think it contributes to the discount quite a bit.

So, I don't know if I answered your question. If you want to -- I don't know, if that's answer your question, Geoff.

It means disposing of assets. I mean, ultimately, I'm talking about disposing of assets at the Power level.

Right. Okay.

And then, on your asset management platform, like what's the -- do you have like a mix in terms of the types of investors, you've been able to attract into your various strategies? And also, two is, is there much in a way of cross-sell of them, investing in multiple strategies that you offer?

Yes, a good point. And the answer is, I don't have all of those facts in front of you.

You do have on -- I forget the page number on Sagard Holdings, which is where the third-party capital currently is. I think, they have a list of 200 LPs, if you see there.

And I know there are investors who are multiple investors. And those are a mix of FIs, institutions.

It's a broad list of institutional investors. Greg, do you want…

Geographically…

Geographically as well for sure, because a lot of -- because some of it is Sagard brands, but even then in the businesses of our fintech businesses and then the businesses of our royalties, and those have really gone out and our credit funds, there are third-party investors from around the world and those investors. So, I don't have that.

We will -- I think, what's best there is as we give exposure to those strategies, which is tough to do on a call like that, we’ll either have a session on the platforms themselves, whether it's an investor day, or we do it as part of an investor road show, and really highlight what's being done there, Geoff.

Okay. That would be helpful.

Okay. Thanks.

Thank you.

Hi, Graham.

Good afternoon. On a similar sort of topic, just there was an acquisition, I think, of Grayhawk recently.

Just maybe, could you provide some color on the thought process there? Is this a natural distribution channel that you're trying to sort of build and create around your alternatives platform in addition to historically what’s probably been more institutional client base?

Yes. Thank you.

Very good question. So, if you think about the private investment space, and you think about the strategies, whether it's classic private equity, whether it's real estate, whether it's -- which we're not in at the Power Corp.

level, whether it's infrastructure, all of these asset classes have historically had as their market, as you point out, institutions, and then, family offices, ultra-high net worth. And so, those remain important sources of demand.

Then, we believe through -- and you see that through the Northleaf deal that there's going to -- an overused word, but it's true democratization of alternatives, which is essentially finding ways and vehicles for which you can bring non-liquid investments to a broader part of the market into high net worth and into even mass affluent. And there's lots of strategies one can do so with, which IGM and Mackenzie and Canada Life and others across our group will be doing.

However, the ultra-high net worth and the family office opportunity is still a very important distribution channel for that. So, in Sagard Holdings going out and effectively buying what is a platform that accesses family offices and high net worth, they are looking to create a vehicle to distribute their products into that marketplace in Canada.

And that's not a big dollar ticket, or it would have been disposed, of course. But nonetheless, it is a very interesting group that is intended to provide them with greater distribution.

Okay, understood. And then, there's obviously lots of activity, both with acquisitions and some divestments at Great-West and IGM.

Should we expect a period here of less activity over the near-term, as you sort of focus on integration and whatnot, or do you feel like you’ve got the balance sheet capacity to stay active? Or are you going to pull back a little bit on the activity and focus on integrating these deals?

I think we'll continue to be looking very actively. There's no doubt that from a capital position or from a fire power position, Great-West Life is going to be focused on repayment of debt.

Fortunately, the MassMutual deal is not only accretive, but very cash flow positive. So that'll put a bit of a hamper on what they can do for the immediate, I think we should sit in too.

It'll be a couple of years before we're back down to the debt level that we started in Great-West right back where they were. They've got lots of capital, but they did utilize debt and cash to make the acquisition.

So I think that, from a Great-West point of view would say, you're not likely going to see a great big cash transaction. It's not all that likely in the next period of time.

But when you start, when you start to get to the point where you can see yourself you know getting yourself down to the right leverage level, these deals take a while to get done. So it doesn't mean we won't be looking ahead of time.

But at the same time, we'll continue to look at other areas where we can make acquisitions and there lots of them that we're active on. They may be of a lesser size than a MassMutual, but you know, across Great-West and IGM, we're looking at opportunities.

I’d just add to that, Graham. We tend to historically think of all the resources of Great-West Life and IGM being concentrated.

But I think one of the things you have to think about these days as well is that, we develop management teams Lifeco, management teams in several different geographies that stand up themselves right. And so their capacity and their capability to take on the new M&A projects opportunistically, has increased quite dramatically in the last several years.

And the same thing I would say about IGM. So I just want to make sure.

That’s a good addition, Greg. Thank you.

So, to follow on Greg's comment, you're not likely going to see Empower and make a big DC acquisition in the next 12 months. That would be highly unlikely given that that team is involved in the MassMutual, but there's lots of other teams across the group and the different businesses that are could take on activity.

Does that answer your question?

Yes, it does. And one last quick one, if I could there was a gain from your standalone businesses in the quarter, was there something else there or what was behind that.

Really small holding, Graham, health and it was not really a gain. It was a recovery of a previous write down.

So I think we realized something like $16 million on the transaction or something.

Modest progress on planned expense reductions in a quarter, I was wondering if you could just update us on the status of those efforts. What's left to get from 47% to a hundred, just some color around that objective would be helpful?

Yes, so, you know, we had lots of focuses this quarter. When we announced that we had a list of items that we were planning to follow up.

I would say a little bit of COVID-19 related. I mean, some of it is looking at our space utilization and maybe not the best time to be looking at space utilization in the market where everybody's working from home and nobody's looking for space.

So there is a little bit of that I would say is COVID-19 related. I'll turn it over to Greg, why don't you take this?

Sure. Yes.

So Nik, one of the things that we had initially looked at was certainly step to seeing our footprint. And you may or may not know this, but we have a real estate business as well that lies under the radar if you will.

And part of that is looking at selling some of the properties that we hold. And we are making some progress there, quite a bit of progress quite frankly in this environment.

And so, that's a big component of what we have to going forward. So hopefully in the coming quarters, we'll have more news on that, but the team has been hard at work at looking at opportunities there to look at the portfolio and take it down to a size where we're operating in those promises by ourselves and only our own people.

So that will be concluded over the coming quarters. The other thing I'd say is that we have fleet of planes that we use the, I shouldn't say, a fleet, but we have a couple of planes that we use, and we certainly aren't using those these days.

And we're looking at ways that post-COVID. The world is changing, and will change.

And so we think there's opportunities there too in the way that we're organized and we work.

And again, that was part of the initial plan that we were going to be more efficient, they're also going from three CEOs to one. But also just we were looking at our travel and how we do it effectively.

And that's kind of been sidelines a little bit right now. Our run rate expenses are actually way down in that regard, obviously in 2020, because of COVID-19.

But we're not trying to take credit for that, that we're trying to take credit for stuff which has kind of permanently embedded into our cost base even in a post-COVID-19environment.

Got it. Okay, that's helpful.

And then liquidity ended the quarter at $1.2 billion, still very healthy. I think you signaled that you intend to deploy that capital through the repurchase of preferred shares.

Can you give us a sense of comfortable you're getting given the evolving macro backdrop with drawing down on that capital as a holding company level next to some of those initiatives that go line late last year.

Yes. So our plan very much is to do share buybacks and to redeem as the pref shares.

And with the onset of COVID-19, we decided that at a holding company, keeping liquidity in that kind of environment was the right thing to do. And we're still in that mode right now.

And I think we're just going to continue to watch how the pandemic progresses and how the medical side progresses and what impact that can have on the economy. So, we're not in a position where we're changing gears, but we're monitoring it.

And the plan would be when we can kind of see our way through the back end with enough confidence then we would then be in a position to look at forgiving class to start to do share buybacks. And resume the share buybacks that we had at the start of the year that we suspended.

So I don't know if I'm answering your question, but I'm kind of saying no change in our current stance for the moment, but watching it actively and very much have in our plan going forward share buybacks and the redemption approach.

Fair enough. Last question on the investment management platforms.

I think you alluded to the fact that you're in the markets doing fundraising for both Sagard Holdings and Power Sustainable Capital platforms. I'm just wondering what Power Corporation expect to participate and can get some amount of capital to the next round of fundraising.

Or you're starting to back away from that as you emphasize the growth of third-party capital for those platforms?

Yes, really good question. And just on your first point, in the material here you see that Sagard Holding announce a closing of 450 million on their credit fund, second credit funds.

And so, there's an example of recent fundraising and the energy group is also actively discussing as is the kind of specific capital. You also saw in the slide that currently 50% or so of the capital that's at work is Power Corp.

And I mentioned in my remarks that of the 2 billion is unfunded for committed, that's 25% power money. And going forward, we would expect that to be lower than that.

What's the ideal amount? I think it'll depend on the strategy and the stage of development.

If we're launching a new strategy, investors are going to expect that they're going to want Power Corp more money. If it's a third fund of an existing strategy, it doesn't require.

So if you look on that page. I can't remember that number 70 or 80.

You'll see, for example, in the credit strategies, that we don't have a lot of capital in those. So, it depends, but it's going down and lower and lower.

And as the program has the platform gets more and more mature, we expect we will need to put less capital into the strategies.

A couple of questions. Just which struck me when you, Jeff, when you talked about potentially buying back stock, like 70% of your NAV is life insurance company and Austin's life insurance companies aren't allowed to buy back stock.

So I'm just wondering, there are -- you've got a holding company here on top of a life insurance company that kind of I guess you get around that little to some extent. Is that ECP with spirit?

I mean, how do you juggle that internally there?

Yes. So, the first thing is, we're not buying back stock right now.

But it's not because obviously said, no, it's because we, as a holding company, we have been prudent with liquidity, while at the operating companies, because you look at their financial positions, they've been taking advantage of the environment, quite frankly, to make acquisitions. But at the holding company level, we've been prudent with our liquidity and we're not buying back stock.

I think we got back into a mode of buying back stock. I do not believe it applies at the Power Corp level.

And I don't think that's right -- it does not, I don't think it's been failing, for the step with the spirit of it. And it's not quite 70 by the way, it's just the curriculum.

I think it's going to be something down around 60s where it is, but I don't, interesting question, it's not something that we think we're restricted by. But it's a academic question, if like without me being insulting Tom at this point, because we're not in the market right now in this environment buying back shares.

I'd also say that, when the second wave once we get hopefully everybody gets through the second wave in a short period of time and some of the darker skies start to move away. And I think attitudinally everybody will have a different perspective on those things.

So that's one thing that we keep in mind.

Just the cash at sales quarter-over-quarter, I think in the area of 250 million almost. What was driving that with some of those did you take cash out and put it into some of the alternative platforms or invest it somewhere else?

No. When you say the change in cash, we're talking about the 150.

Yes, that would have just been funding some of our commitments to the platform strong in the quarter, nothing, nothing unusual, quite frankly.

So when we see the fair value for an alternative go up, if you took 150 out of cash and put it in one of the alternatives within the fair value of the alternative got 150 in the cash go down by 150?

We're generally the accounting. Yes.

We may have used some of that for other assets as well. It's supposed to all uses that the corporation would have right.

Don't forget that we, when it comes to paying out dividends, we pay out pretty much everything that we get from our subsidiary companies. So at times, we will be drawing down our cash to fund virtually everything.

So it doesn't necessarily mean that it's all going into those platforms.

Okay, good point. What was driving the -- if you take out all the noise around the wealth, simple put stuff, they'd be consistent.

If we look at the alternative investment platforms, what sort of drove the -- which one in particular was driving the investment income that you got, that you recorded? Which one of the alternative platforms is probably the bigger driver of that?

Sure. So I think I'll give you.

Actually both of them contributed this time in different ways. If you look at Sagard Holdings, and I mentioned this to Nik, one of the realizations, there was stay on Sagard health which is in there.

But also, there was a good profit from peak performance. The peak performance is in the hockey business.

And it's seasonally strong, at this period of time. So that was one contributor.

But then power sustainable, in power energy itself, quite frankly, it was a contributor in the quarter. As you know, there's a lot of depreciation in that business.

But its revenues were strong expenses down on the quarter. And so it contributed more than it would have been a normal quarter.

And going forward, when you see those things, you have to be cognizant of the accounting for these entities, certainly when you're in the funds, like Sagard Holdings, most of that stuff comes through as realizations when we have a significant influence or we sold a property that's just for portfolio holdings, so we only recognize that when we realize things and that's the same as it would be when you look at power specific. But for power energy, that's an operating business and we pick up that basically in a full consolidation.

So, there's different revenue driver to the revenue streams on that, and thinking of topics for a special section or a special theme one time going, not that everybody was going to put up their hand and want to attend this one but the accounting for some of those properties is a little complicated. But we're trying to be more and more transparent on that as well.

So we're going to see if we can put something together to give you more of an understanding of how that does move.

Yes, that would be great. I mean, you've got to -- I mean the end up having these fair value adjustments that are put in here for these fair values and this predominantly level three assets to some of the Sagard Holdings tell you that this is the value of it and then you put that in.

Maybe just give us -- just a quick highlight or just quick overview as to how you get some of the fair values for Sagard Holdings some Power Sustainable? And so that we can spend hours on it, but do you have any quick way?

Or do you have any quick summary that you can share with us just so investors feel comfortable with the value we put on these things?

Yes, sure, absolutely. And quite frankly, Tom, one of the things that you'll recall is that, we did a full valuation, when we did project next and we took PFC private.

The marks there were basically right on top of where we had been marking our portfolios all along. And that was only -- it seems like it was years ago, but it was only about six months ago, quite frankly.

And within the RBC kind of --

Yes, it was, but we have a very disciplined process when it comes to doing the marks. Each one of the platforms is governed by a board of directors with valuation committees, gets independent audited financial statements.

They are quite frankly, distributing their products to help key investors. So they have to be disciplined about their marks and there is a disciplined process around it.

So it's one that happens every quarter. So when you're looking at the funds, in particular, including Power Pacific, which is publicly traded, quite frankly, so that's not hard to value.

There is a lot of discipline around it, not to say there is disappointment around the rest of the marks, but there isn't much left after that other than power energy, and China Asset Management. And that was, what I was questioning when I went through the NAV table.

China Asset Management is carried its equity accounting value, we don't mark it on a regular basis to market. We certainly can give some indication, quite frankly, of market values.

And I'm sure you would understand the market value of asset managers, especially in a high growth theater, like China. So we think that's a low mark, quite frankly.

We have a big strategic partner and they do not make those marks and those valuations public here. I'm sure they do them themselves, but we have to follow the lead of the Company and also our partner when it comes to that.

And when it comes to power energy, as I said, it's an operating business and right now, we do test the value every quarter because it's a significant amount of money. And we, at this point, test it more for any impairment that might be in the property.

And that's not because we think that the business is not doing well, but we don't do a quarterly mark on that one either. We do that every year and we do that in a rigorous basis because the management needs to mark the compensation and so accordingly we market every year.

So that gives you a very high and quick summary on it, but we pleased to hold something together that's more specific for you.

Is anything on Sagard? I mean, you mentioned, the others that you mentioned Sagard Holdings.

How are those marks to trending?

Yes, I did mention Sagard Holdings. I did yes.

And that's where you there is 200 LPs if you look on Page 19, they're in those funds. It's all majority outside money and there's -- so you're not raising money from third parties and then when they LPs evaluation to kind of do it this way whatever.

Like there's a lot of scrutiny if you're in the business of raising institutional money. But I think that's a great topic and I think all the questions here around profitability around the marks around these businesses are great and set up.

I think for future sessions where we can go into greater detail we need to because this is where we're building up the business. And we won't advertise it as an accounting lesson because then we won't have any attendance other than Tom and Greg.

Okay, thanks for that.

I guess, the question, my first area is just around the area of simplification. Hopefully, a lot of these will be pretty quick.

But is there any restriction on moving or selling China EMC down to IGM, because I know the original investment was done a power level the secondary investment was done at IGM? And is there any restriction on moving that down?

There's no restriction per se. The process if we were to want to do that would not be one that you would just completely move at.

However, there's lots of parties that would need to be involved in that process starting all the way from parties in China and regulators in China, boards of directors and management teams at Power and an IGM and independent directors and no doubt financial advisors and legal advisors. So the process would not be -- there's no restrictions, but the process would be one that would be highly scrutinized and would take a lot of effort.

It is something that we are -- that is out there as a question to answer just are we in the best position to have the CMAC holding in two spots, are we better to unify it in one spot? And do we get better value recognition, and by putting it in a single spot?

We're well aware of that as a question. We've been pretty busy as you can see from what we've been up to in the last few quarters.

But it's something we're going to be turning our attention to at some point here and looking at it, where is the best spot. And you're quite right just to repeat for other shareholders or others on the line who may not know the history when the first piece became available of China Asset Management in 2011.

It you know, we were provided an opportunity with buying with that first chunk and we had a discussion whether IGM wasn't the best place to put it. But at the time, our was an accredited investor in China and IGM was not eligible.

Things change over time. And so now we end up and so when other opportunities came, we balanced the position out and this now jointly own.

So it's timely and we're asking ourselves the question where is the best belongs.

And that's just the same kind of idea and it sounds like you're quite focused on staggered and building this out, but when I think of like simplification of the structure, the Northleaf transaction, the Grayhawk transaction. Would that be better suited to be down at IGM?

Or why wouldn't it make sense to have that down at IGM?

The buying into the high network is best for earlier questions Grayhawk. That was initiated out of Sagard with relationships that Sagard had and Sagard was looking to build out very distribution platform for their funds.

And so they start that opportunity, have the discussions with the parties came to agreement on it and did that transaction. So, we're not in the business of saying, when they're doing that, by the way, thanks for negotiating all that.

I think it belongs in IGM. I don't know whether the Grayhawk management would have even done that deal.

That's not the way the transaction happened or the agreement happened. So that's how that happened, you're asking a broader question and it's maybe not your question, but I'll turn your question into this.

We have private investments going on in power, and we haven't going on, within great life in real estate and other alternative areas, and we haven't going on at Northleaf, but IGM and Great-West of purchase. It's a big world, in private investments.

It's a very, very big world and there's lots of different strategies. And Power Corp is not going to satisfy all of it IGMs are great with life needs.

And those companies are public companies, and they're free to pursue their strategies, how they want [Audio Gap] to go out and get a presence in these asset classes for their own clients or for integrate with life paid for their own [Audio Gap] balance sheet as well. And so and powers good, very good in certain asset classes is very competitive in certain asset classes, very quickly just competitive and other.

So, the companies are it is what it is, we've got different businesses, different public companies, and they're all pursuing their strategies. And I think in private investments [Audio Gap] there's many, many years of high growth to companies areas, and lots of opportunities for our group to play in different ways.

I don't know, if I answered your question, but we do. Acknowledging we have it in different places.

And that is the way it is and I think we'll be that way for some time.

My question and you kind of give me a bit of a flavor. Now my question was just like Sagard as a whole within that structures and what it does, would it be better suited to be down at one of the operating companies?

And it sounds like no, that's not necessarily your thought process. I mean, there's a lot that can be done with those investment classes, in fact, long duration, liabilities and whatnot.

And so my question was, does it make sense that Sagard at the top, or does it make sense have down?

Sorry, I misunderstood it. I sort of addressed it indirectly.

But these are all people businesses, when you get free time with other people businesses. So the people that joined Sagard Europe initially 20 years ago in France and the people that have joined up to the fintech strategy, and the people that have joined up to the teams that are in the Sagard, joined the team, it was part of Power, Paul III is operating the business just with Olivia's on the power sustainable capital side.

They joined those teams, they got excited by what it was about, and then part of the opportunity is also to distribute through IGM or Great-West when IGM or Great-West wants to do it, because there's no way we can we try and force them. That's what they signed up for.

And they're in a company that they're working for. So you turn around, say, hey, well, it makes more sense to have it in IGM, a lot of people that came to work didn't, that's not what they trying.

Just like the people at Northleaf join Northleaf, and are part of that group. So, some of these things on paper, when you look at them, you might say, theoretically, it makes more sense to put it here, but they're actually people businesses and you do a lot of damage.

And you can, quite frankly, destroy what you have, by trying to do things that might look like they might be more logical and another place. I would add that to my answer.

And then just lastly, why wouldn't you back into 69 million put option liability like for me that that would be a completely unusual items. So, why not fact that is operating EPS and earnings?

Well, I guess, that's a really good question, Doug. And we'd like to take it to the AMF and ask that's why we can't do it as well.

But, the regulators are pretty fussy about when you back out items, and when you don't. And it was our view, not that we didn't go to the regular stuff and the question, but it was our views that this was explainable, that everybody was seated as we just captured it, and therefore treated accordingly.

And that way, we could be consistent with what, if you will, the spirit of the regulation, when it comes to the things that. These things are, I think, most people would say, part of that genre business where their startup companies that are need to attract capital, need to have owners that have an interest in the business.

And when you're in that business, its part of the business, so it's hard to argue that that's not going to be a onetime event. And so that's, that's how we got there.

So, for what it's worth. That's why we flagged it out, we call that out.

And we thought like, you're intimating like well, it makes sense to not have a third so why not.

Okay, thank you, operator. And, again, thank you each for participating and we will -- get lots of good questions here and lots of good thought as to how we follow-up some of these questions with some further presentations, and we look forward to talking to everyone soon and have a great day.

Thank you.