Power Corporation of Canada

Thank you very much operator and welcome everyone to our quarterly results call on this Remembrance Day. And I am here with Greg Tretiak.

In the usual fashion, we'll walk through and give your comments on what's going on at the company and then open it up for questions. I would draw your attention on pages two and three to the cautionary statements regarding forward-looking information and non-IFRS measures.

And so why don't I jump us all the way forward to page six and just draw your attention to the various materials that have been released by Power Corp. and by our principle operating subsidiaries with respect to their own earnings and different conference materials that they have participated in over the last quarter.

So, there's lots of other information too, for you to look at to supplement what we're going to talk about here today. So, with that, I will jump to page seven on the presentation and just give you our perspectives on the quarter.

I think first and foremost, this was a quarter where the earnings, momentum, and growth at our public operating companies namely, Great-West Lifeco and IGM were really in evidence. We have been, I think, saying for some time in our different communications with investors over the past several years that we believe that we had been building through our operating businesses basis for -- on which we could deliver a lot stronger earnings growth that would then we had over the previous years.

And that's been building for some time over the past year or so, but it really came into evidence in the third quarter with strong solid earnings at both Great-West Lifeco and IGM. So, really pleased to see that.

And I think that is actually the highlight of the quarter in my mind. Having said that, we have continued as well to look to divest of assets at the Power Corp.

level, which is part of our communicated strategy. In the last quarter, we had two events that provided some liquidity.

We had an opportunity in our Sagard Europe 3 which is our private equity business in Europe and we had an opportunity to sell through a secondary transaction Power's limited partnership position in that fund, which was also good for developing the investor base of Sagard as there was interest in our position and so we liquidated it for $334 million and also reported a gain, I think, of about $66 million pre-tax on that particular transaction. And then we -- one of our four standalone businesses GP Strategies, we entered into a transaction and that closed.

And so we've exited that position for pre-tax proceeds of $94 million. So, a couple of events there to create liquidity at Power.

And with that -- and we are also pleased to be announcing here that we're resuming our purchases under the normal course share buyback program. You would be aware that with the start of COVID-19, we took a conservative view in terms of cash and we suspended purchases under that program other than some small purchases to mitigate option dilution.

But aside from that, effectively, we pulled out of the markets who will be reinstituting our purchases under that program. We're pleased to announce that today.

Just while we're on the topic of buybacks, GBL as well, in their own interaction with shareholders, they have their own buyback program. They've been taking various measures to enhance their shareholder returns and they've announced an additional share buyback program.

You may be worried GBL has a net asset value discount and NAV discount itself. And it's been working on that and is looking to reduce their own discount.

As well as been a terrific year for fundraising at our alternative asset investment platforms and that continued the third quarter so far. This year, we got $3.4 billion raised from non-Power participants and we'll talk some more about that when we get in the presentation.

And then Great-West and Sagard announced a transaction which will put Sagard into the real estate business, a whole new strategy for them and enhance their AUM materially, which we'll talk about as we come to that particular part of the presentation. And obviously, in terms of a highlight, I don't think there's any company or any business or any investor today who doesn't have ESG at the top of their minds.

There's nothing kind of more topical going on in finance or in the world right now. And we're not blind to that.

We have -- we think we're very well set up for all of the efforts in ESG across our group companies, but certainly just a ton of work for corporations, a ton of work for really society, and a ton of work for Power and Great-West and all of our companies to continue to meet the expectations and the challenges that we all collectively face. In this regard, Great-West Life did publicly announced this week its commitment to net zero greenhouse gas emissions by 2050 and across the group, as I'm sure with many of you, as many of you are with financial institutions across the group, there's just a whole plethora of products that are also being launched in this regard.

So, with that, I'm going to turn the microphone over to Greg Tretiak, who is going to walk through our financials in the next few slides.

Great. Thank you, Jeff.

I'm on page eight and our NAV at $52.81 at the end of the quarter was up 2% from June and at November, it was up an additional 2%. And also when we look at it from a year ago, up 51% from a year ago.

Net earnings of $1.09 compared to $0.75, up 45% and adjusted net earnings $1.10 compared to $0.72 in Q3, up 53%. And we announced a quarterly dividend of $0.4475.

Go to page nine and just a couple of quick points here. You're all familiar with the NAV table.

Just saying Sagard, well simple is our interest and well simple is there, and that hasn't changed from the previous quarter, we kept the same mark from their last round of financing. And that's at $768 million.

It's the $1.4 million reflects the sale of Sagard 3 that Jeff just mentioned in his opening remarks. And that's $334 million that basically moves down the geography of the NAV table to the cash at $1.6 billion.

Remind you China AMC is showing that its equity accounted book value here and also in the standalone businesses. That's where Lion is and there is -- it's marked at $1 billion, which reflects its $0.1262 share price at the end of the quarter.

With that I take you to the earnings on page 10 and quickly go through those. Certainly, given the headlines already, Jeff has mentioned that a significant contributions from Great-West Life and IGM.

Great-West Life at $0.86, up 28% from the prior year and you can see that the momentum at Great-West Life is continuing with another strong quarter and we have a couple of slides in the deck. So, I won't go into any detail here.

And IGM up 25% at $0.25 -- $0.25 contribution in the quarter and that's record earnings driven by record AUM and operating leverage. At GBL in the quarter, Q3 is not a dividend paying quarter in Europe and so you can see that they had a negative $0.02 contribution in the quarter, the same as last year.

Both quarters had a mark -- negative mark with respect to a good event, which is the appreciation of Webhelp which they -- which is an asset that they hold a 60% interest in. Has had significant appreciation throughout the last couple of years and the mark comes from the liability associated with the non-controlling interest that management puts -- that have to be marked.

Wonders of consolidation accounting, we don't get to mark up, the increase in value on the holding, but we have to recognize the minority rate and management costs liability. So, too much detail quite frankly for the non-accountants.

But that's the nature of that particular item. Down the page to alternative asset investment platforms, that reflects the Sagard 3 disposition $66 million in there contributing to the $0.06 in the quarter.

China Asset Management's strong results, once again, in China. And later on, you'll see a chart and you'll see our contribution is up 62%.

Strong increase in AUM and performance of its mutual funds. And the other comment I'd make is, Lion is reflected in the standalone businesses.

And finally, on our corporate operations and other, a little tax noise in both the quarters. In Q3, we had a $0.03 benefit in the quarter.

In Q3 2021, we have a $0.01 negative effect from tax in the quarter. And with that, Jeff, I turn it back to you.

Okay, thank you, Greg. So, then the next few pages, I'll just spend very, very quickly on our strategy on page 11.

I'm not going to read the page. Many of you have seen this a lot, perhaps someone on the call have not and are new to the call, but this is what we've articulated as our strategy going back with the announcement of the reorganization.

And as you go through the various points there, I hope you will agree we have been executing on each of the points. These aren't just words on a page, we are -- we take it very seriously.

And we have been working on all of them, including at the bottom of the page, our communication strategies, not just to Power, but across our various public companies as well. And so I'll then turn you forward to page 12.

We are also pulling on all of these three levers of being the organic growth tools that our public companies have, the M&A levers that our public companies have, and then the additional value that can be created at the Power Corp. level through various tools that we have.

And those three levers translate into value creation for shareholders. On the right hand side, through higher earnings growth for that those parts of our businesses that trade on earnings, which is namely Great-West Life and IGM in this potential revisions, as we prove to the market that we have higher growth, that we have multiple revisions, as if we -- and as we execute, that that and what we do in those parts of our businesses that are NAV-driven, increases our NAV, and then we still think there's lots of potential on the discount side at the Power Corp.

level. So, that's what a tower strategies translate into value for shareholders.

And then on page 13, each of the public OpCos have their own strategies as to how they're pursuing organic and inorganic, and I point at this page too, as well, they're all on their own mission is to communicate. So, let me then turn to page 14 and I think this is really a quarter where we saw the growth, a Great-West Lifeco broadly based across these various platforms.

A little bit of noise in the reinsurance or in the capital and risk solutions part of the business, but strong growth across all the operating platforms, and then led by Empower, of course, with its strong organic growth in the market, and then the three acquisitions that they have done; two of which have closed, and then there's the Pru acquisition, which has been first signed and is not closed at this point. So, really strong earnings growth, and of course, Great-West Life did communicate in June at their Investor Day that they had medium term growth objectives for their EPS -- base EPS of 8% to 10% prior to additional acquisitions, and that announcement was prior to the Prudential announcement, of course, which came in July.

IGM is really firing on all cylinders. I think as the way to describe it and it has got strong flows, it's got strong growth in AUM.

It has got -- its businesses, all of them are showing really strong topline growth, IG Wealth is Mackenzie is right across the board and we're seeing the operating leverage in that business work. So, -- and obviously markets are helping, but we got markets, we got strong flows, and the operating leverage in the business is really becoming evident.

And we got good strong earnings momentum in IGM. So, that's really great to see and I would say that's the slide of the quarter, if you will, for at least in my mind.

So, moving on to page 15. So, far this year, we have sold assets for about $800 million pre-tax and those come from the transactions you can see on the page there.

I think all of them have been talked about before and so that’s part of the strategy. I think when we launched the strategy, we talked a lot about the standalone businesses being a source of cash.

But we also said that we were moving to lighten our capital commitment underpinning the investment platforms. And a number of the -- of what you see here, both on the first point and then in Power sustainable, while we're getting in third-party investors, we're also looking for opportunities when they're there to take some cash off the table and with the view to returning that to the shareholders.

Which then leads to page 16 and I think I already mentioned this at the outset. I think I've made the point.

So, I don't know that I'll repeat on the buyback point. I will point out we do have an objective.

The last point under PCC share buybacks, we do have an objective to maintain cash and cash equivalents and about two times are fixed charges. And then beyond that, that's available resources to return to shareholders.

I do want to say every time I mention buybacks, and I've said this many times that if ever one of our group companies needed capital, because they had an opportunity for whatever it was, obviously, we're going to prioritize supporting the growth of our underlying core businesses. But in the absence of that, then we would they would be looking to return the money to shareholders.

We've also worked on reducing our financing costs. And we -- you would have been aware we issued $200 million of press last month, and also redeemed virtually identical series in terms of its term -- in terms of -- its terms, excuse me, and took $3 million of after-tax annual financing costs out through that transaction.

And at the bottom of the page, we are very mindful that the group's leverage ratios are temporarily elevated because of the Great-West Life's very active acquisitions. As I think you're aware, Great-West Life spent about CAD10 billion over -- just a little over 12 months -- or has announced they're not all closed, as I mentioned on Pru.

And so they're -- their leverage ratios right now are right up at a -- where they were the top as they can be. And so there's a lot of cash flow coming from the businesses they've acquired.

So, we think that will get itself back into more normal levels in the near-term, but we're conscious of that and working on that as part of our part of the business going forward here. Okay, I'm going to flip then on page 17, to just a couple of comments on the platforms.

Continued strong third-party fundraising, which is a key theme, $3.4 billion from non-Power parties -- parties other than Power. To-date that includes the $334 million of the secondary and the balance is capital that goes -- is going into the strategies themselves.

And I won't read off all them on the page, but you see them there, the various key fundraisings that have been announced here to-date. And then on the right hand side of the page, you see the continual drop in Power's capital as a percentage of the total AUM.

The top of the page is funded and unfunded AUM and at the bottom of the page, the unfunded which is really the new fundraisings going on, you can see that, of course, there's an even greater percentage of third-party non-Power in the fundraising as we move forward on a lighter capital model for Power Corp. And then page 18 is just breaks it out.

You've seen this slide, this breaks out the funded and unfunded of $12.5 billion and then it take looks at the funded AUM on the right hand side -- or center right hand side of the slide and breaks it out between Sagard and Power sustainable. And then the dark blue is Power Corp.'

s own money and the light -- I don't know what that color is, I guess, it's blue. I'm looking around at Greg, he doesn't know what color it is either.

The light color there is his non-Power capital. So, that's just the breakout.

And you see in the sub-bullet at the top of the page, about $900 million increase in funded and unfunded AUM and just compare it to the end of the second quarter. So, it's good progress.

Okay, page 19. Sagard has got itself -- has launched itself now into the real estate, real property business through the acquisition of EverWest from Great-West.

This is a transaction that's a win-win for both Great-West and for Sagard. For Sagard, it launches an entirely new strategy and will add $3.8 billion to its assets under management.

And then as you look lower on the page, Great-West Life has made a commitment over the ensuing years to put another $2 billion into the strategies as well as another $500 million into a different Sagard products. So, Great-West was building out its U.S.

real estate business. It was doing so for its own balance sheet needs, and was also looking to manage third-party money.

Sagard has really built up a very large network of LPs or investors across it's different strategies. I think it's well over 100 investors and LPs and it's different strategies and become quite a fundraising machine.

So, that was something that Sagard was bring to EverWest. And Sagard is also -- have proved very adept at hiring talent.

And so all of that -- with all that Lifeco had on its plate and recognizing it had a desire for the assets, Great-West thought better way to go was to have Sagard, in effect, manage EverWest. And then you'll see here that Great-West took a minority equity stake in Sagard.

Very similar to the structure, they did it NorthLeaf and so they're very interested in getting, if you will, a lot of product flow and also being aware of how those strategies are unfolding and getting a window and a seat into that. So, we think there's going to be good for Sagard and Power and we think it's good for Great-West.

So, we're pleased to announce that. Okay, page 20, won't go on this page, just to say each of our companies when we're looking at alternative strategies, and I guess, private equity, private credit, real estate, et cetera.

This is good for Power, but each of our public companies is also focused on increasing their participation either for their own balance sheet, in the case of Great-West, or for their clients in the case of the Great-West and IGM and GBL is also building out its private asset capabilities through Sienna. So, this is a topic across the group.

Turning to page 21, you have got continued acceleration in the profit here of CMAC, China Asset Management. First we own just under 28% between ourselves and IGM.

We're really privileged to have a position of such size and such a quality company. We continue to believe that this is going to provide great growth in shareholder value for our group over time.

China is going to -- and is prioritizing the development of their savings and retirement business. It's one of the reasons why notwithstanding at times strained relations over the last few years, financial services companies have just -- across all major financial institutions, across the world, many of them are trying to establish positions in China and the reason is simple.

China is favoring the development of a savings business and a retirement business. They need to do so if they're going to move to a consumer-led economy, you need to have your population secure in their retirement.

And you need to have that broadly based and to do that you have to have a good savings business. So, this is a priority in China and China AMC is in a beautiful position to take advantage of that.

So, we're really thrilled to have this asset. Okay, standalone businesses on page 22.

So, we have taken action since the announcement of our new strategy to surface and then realize value in across the portfolio here. The most obvious one was on Lion Electric and through the spec that we did roughly a year ago and going public, and Lion continues to progress their business.

And so really thrilled. We have really surfaced a lot of value there.

I mentioned previously that Lumenpulse continues to progress on their business. We did make an attempt to bring the company public, ran into choppy waters there in the spring.

So, we decided not to push it at that time. But we continue to be very pleased with progress that Lumenpulse Peak in the fourth quarter of last year, actually did bring in an -- or part of their business, being Eastern Diamond Sports was in effect sold to Rawlings, all part of the Peak continuing to develop their business strategy to surface value.

And then as I mentioned earlier, we've actually sold GP Strategies here. So, that's been liquefied.

So, we're very active on these various businesses. And we've got great businesses here.

We continue to do what is smart for Power, which is to maximize our value, ultimately realize the value, and work with our partners, managers, and outside shareholders to do so. Page 23, we continue to work on our operating expenses and we've made continued progress here.

It was quick at the beginning and we were chipping away as we get to 100% goal. On the right hand side, it looks like we've already achieved our goal.

But the Q3, $38 million there, that's a little bit overstated. We've got lower travel expenses because of COVID.

So, when we look at achieving the goal, we're trying to normalize for being in a post-COVID world. So, we don't think we're quite that goal yet, but we're getting very, very close.

Page 24, I think I've mentioned everything on this page, so I'll just skip over it. I've already made the point, we're on -- we're all trying to communicate very aggressively.

Page 25, I think I've addressed as well. I just point out that Power Corp., does have -- has had for a number of years a separate website on various activities in the whole area of ESG and you can refer there to it.

And I think we'll all be talking more about this as we go forward. Page 26, continued progress on our discount.

To my mind, the voyage really started at the beginning of 2019 when Great-West Life sold its U.S. Life business and then we did the three-way buyback -- the three level buyback between Great-West, Power Financial, and Power Corp.

and we were really communicating we were going to be working on reducing the discount. That culminated in the announcement of the reorganization in the fall of 2019.

And then with the exception of the Blip, when we went into COVID, we've been steadily working through the various levers that we've been pulling on to reduce the discount. We still think there's opportunity to do that going forward.

So, there you see it. And then I will wrap-up on the opportunities for further value creation.

I think if you go to the top of the page, the OpCo's organic levers and just talk about roughly three quarters of our value is in Great-West Life and our control positions Great-West Life and IGM. They are principally earnings-driven.

They trade on earnings as opposed to NAV, little bit of an exception in Great-West and -- IGM excuse me on their strategic investments and they've been pointing out that they've got some assets there that don't get fully valued based on earnings, but they're still principally earnings-driven. And so we continue to prioritize driving earnings growth.

And you'll hear that from me, you'll hear it from Paul [indiscernible], you'll hear it from James Sullivan, managements are highly focused on taking advantage of past investments to drive topline growth and then drive the bottom-line growth. And so earnings growth is going to be a big driver of how we create value at Power.

In the meantime, we've got M&A as an additional tool. And yes, Great-West Life is in a position where it doesn't have a lot of excess capital sitting around, but that doesn't mean it's not very active and looking for opportunities.

And at some point here, we'll get those leverage ratios back where they need to be and we'll be in a position to continue to pursue transactions. And then IGM is also very active and looking at opportunities.

So, M&A will continue to be a driver of value. And then at Power Corp., I really think we're just getting going here.

We have got -- continue to have a lot of opportunities to create value for shareholders. First of all, in terms of the simplification of the group, through realizing value on non-financial services businesses, on simplification of where our assets are, on simplification of what's left Power, communicating clearly how we're creating value through our asset management businesses and how we're creating value through the capital that we have underpinning those businesses, increased communication with the stakeholders, and then continuing to -- as we do all of that, drive the NAV discount down.

And when I think about the discount, I do understand how for a number of years prior to 2013 to 2018, it kind of languished around 30% to 35% when you take into account both the Power and the Power Financial discount. When I talked about it, that's really the double discount.

But in the past, we've been as low as 5% and when I look at it going forward, I get if people don't understand the value of the assets, the Power, they're not going to put a lot of value on it. But as we surface it, realize it, simplify it, then I think that story changes.

And I -- when I look at the discount, other than the expenses, so you look at our operating expenses $150 million, $160 million a year pre-tax. If you do a present value on that, you get to maybe 2.5%, 3% of our of our asset value, you should have a discount for that.

I acknowledge that. Sometimes people raise, do we taxes if we were ever to sell assets?

Because we do -- and I guess that's a hypothetical question. Because I don't think we would do things that would put ourselves in a position to realize a lot of taxes on a disposition.

Those are the kind of legitimate issues, you can talk about a discount, they don't get you anywhere near 20%, they don't get to anywhere near there. And on top of that Power Corp.'

s got, in effect, better liquidity than our underlying operating businesses for those that want to buy and sell and get in and out. So, I think we've got a pretty compelling story as we continue to execute over the next few years here to drive that discount to a lower place.

So, with that, we remain very excited about what's going on here and the opportunities ahead. And as I see, we're coming up on -- we are on the half hour, I should stop talking and open it up for questions that you may have.

So, operator, that's it. And I would ask you to open up the call to questions.

Hi, good morning.

Hi Graham.

Maybe we can start with the transaction that we did with EverWest. So, you -- I guess what I'm interested to know is what's your ownership stake in Sagard and asset management or the overall asset management platform going forward?

Because I know you also recently sold or not sold, but the management of Sagard took on a 4.5% stake, I think, in that business. So, how should we think about your overall ownership of this alternative asset management platform going forward?

That's a good question. And I don't think we've -- first I don’t think we disclose the number yet, so we should come back on that, do that when we can do it to all shareholders at the same time, but I think we should do that.

And it's a fair question. I think we own a very, very large percentage.

It was a small minority position, that Great-West Lifeco has taken. And it was a small minority position that management has been taken.

But -- so that's kind of a half answer to your question. I've gone as far as I can without -- but I think it's a fair question and we should come back with a with a clearer number, but -- do it for everybody.

And then the second thing I would say, though, is going forward, if we do see opportunities to bring in outsiders even into the GP, if they can add significant value to Power's share of the GP, we'll be open to do that. So, in the case of EverWest, this puts Sagard into a brand new strategy.

It's a very big asset class. There's a lot of AUM that comes with it and it's got Great-West Life looking to put more capital to work.

So, that's going to build out the business for Sagard and Great-West Life rightly said, well, we're going to -- we want to do that with you. We believe we like EverWest, we bought it.

We think we can grow EverWest even more quickly under your hands. But if we're going to do that and make the capital commitment, we want a piece of the of the action at the GP and that was a fair thing for Great-West Life to do.

All of these deals as you know, if there's a transaction between Great-West and Power, then the Great-West Life independent Committee or related party committee, which has got all independent Directors on it gets involved in that. So, these are transactions -- so that's the background to it.

So, I've gone on a bit long here. Small -- we own the overwhelming majority right now.

They're small minority positions we will work on getting disposed so that we can be more specific about that. But going forward evidence that we're not adverse to bringing in other partners into if they're going to add a lot of value to our own state.

Greg, anything -- did you want to add anything to that?

No, I think you captured at all.

Okay. That -- Graham, that’s all I can -- as far as I can go right now.

Okay, that's fine. Was there any -- like cash proceeds involved with this transaction or just purely -- like an equity interest swap for the AUM?

I'm looking at, Greg, if there was cash, it was pretty small.

No, there was no cash.

There was no cash.

Okay.

And then I thought it was notable that you didn't speculate sales in your Sagard 3 investment. Is there -- is that something we should expect more over there -- other parts of your asset management going within the funds that you see potential to reduce your direct investment, mainly sustainable capital, is there an opportunity, right?

Yes. So yes, with Power, sustainable capital.

In fact, that did occur in the funding that was announced a year ago, when we did the billion-dollar fund of which 600 million was non-Power, Power role of assets in and took a little bit of cash off the table that's in that slide, can't remember the page now, earlier in the deck, there were four cash items, when I talked about the 800 million that was raised, you'll see I think it was 150 or so that occurred when that was rolled in. And there could be more opportunities, because Power still has -- Power sustainable still has a number of assets that have not -- that are still wholly owned by Power, that are in the development phase to wind and solar assets that are being developed.

And as they get developed, their plans are to roll them into that fund and other funds that we would have, bring in third parties and take some money off the table. So that's an answer, yes, on sustainable capital.

On the cigar side, we don't have immediate plans for that. And this was quite opportunistic.

I'll maybe digress a bit, but just talk about what's going on, lots of investors who are looking to get exposure to private asset classes are looking for secondary positions as well. And the reason they like secondary positions is if you put your money, say in a brand-new private equity fund, as you may know, takes three four years for that money to get deployed, and the returns come four or five years later, if you walk into a secondary position that's existed for three or four years, you walk into an investment, which is closer to the harvest period.

And therefore, the returns come and meet a more immediate period. So you don't go through, quote, the J curve of waiting in the desert for three or four years.

So there's a lot of interest in secondaries as part of what has driven the secondary market. In this case, investors who were looking at some of the fundraising that cigar was doing elsewhere, we're looking for secondaries and raised the possibility that they wanted to purchase our interest.

And so the team was really opportunistic, and saying, "Well, that's great, because Power is on a strategy to lower its capital". So it kind of came together.

And we were able to take some money off the table and expand the investor base for cigar. So it was a again, it was a win-win.

Will there be more of those, I don't want to promise those. And I'm not aware of any that are being worked on at this time, but we would certainly be open to them if those opportunities came.

Okay. And that sort of leads to your cash now has moved up slightly higher quarter-over-quarter, you did mention that you're going to be active on your NCIB.

But what about the original you talked about $350 million pref share that you're looking to redeem? Is that still on the cards?

Want to address the questions on the 350 million preferred shares? I’m going to pass this to Greg.

Sorry, Graham, I can barely hear you on that. So yes, we're going to continue to look at the market.

And in terms of opportunities, as you know, there's some interesting hybrids out there that may suit the bill. And we've been looking at them and as the markets evolve here, you can expect that that's something that we're going to be active and thinking about and there's opportunity, obviously to reduce the cost of financing through some of these instruments, other than the perpetual pref issue that we did just last month.

So I might put it -- I might add a note to that, Graham. I think when we originally announced the strategy, we had notionally discussed it in the context of taking $350 million of cash.

And we had a goal of reducing our financing expenses by $15 million, if you recall, we're thinking about, can we get there and not use $350 million of cash by lowering the expenses, the cost of our financing and not utilize the cash, but still get the 15 goals some other way. And we're not declaring victory on that.

But that's what thinking about and that's those, we're looking for those kinds of opportunities to continue to reduce the cost, but maybe do it with either no cash or less cash as we do so. So that's kind of behind Greg's comment.

Okay, understood. And then my last question, if I could just your comment on the discount to NAV and how you think it's appropriate some discount in there for your ongoing expenses.

But what about the potential for some tax leakage if you ever wanted to dispose of assets? Is there a reasonable discount that you think would account for that one missing when looking at the discount now?

I don't see one. I don't see much of one because I think it's a pretty hypothetical question.

And I think that – so -- and I think that if we were ever to do divestitures, we would be looking for ways to get our cost base properly aligned, and not pay big tax bills, unnecessarily. And in terms of -- so it's hypothetical, that we would be doing big divestitures.

And it's -- and we would be trying to be minimizing that. So, I don't -- I can't -- I can get really precise on a number when it comes to in my own head, at least when it comes to discounting operating expenses, it's a little more of a brain teaser to try and figure out a tax question like that.

That's very hypothetical. I don't think it gets you to 20%.

I just -- you could create cases, but I don't know that it gets anywhere near there. So I thought a very precise answer to your question, because the question is pretty hypothetical.

Anything, Greg, you're looking at my chart.

I'd just add Graham, that point to -- perhaps history and in that whenever we do things of that nature, and let's just that that is a that is a real hypothetical, but we've managed our tax and our tax attributes, I think pretty successfully over the years. And so we would be minimizing the tax bite on any transaction of that nature with advanced planning and in do care.

Okay. That's it for me.

Thank you.

Okay. Thanks, Graham.

Good morning. Just on the Sagard back to the Sagard business, I guess the first question is, any way to quantify the net inflows?

And I think you've given obviously some fundraising, and maybe the fundraising number is what the net flows would technically be, but just curious to get a to get more color on that? And then can you also remind us what you hold Sagard at in the NAV and not your what your investments are in Sagard, but what the actual asset management entity has held that within the NAV, and the reason I asked is, obviously, there's been lots of transactions in the alt space over the last little while just trying to get some color on that?

Yes. So on your first question, I'll give you a high level answer.

And I don't know whether we got a flow number. But of course, all of these funds are closed in funds.

If you think about them in the context of sort of public funds, they're not open-ended funds, once people have committed, they get their capital returned either through income, let's say on the private credit funds, but also return a capital or they get it to a return of capital when an assets been disposed of. But they don't actually have an opportunity to come and say, I want my money back, right.

So there's no outflows. There's return of income and capital.

So all of the gross fundraisings our net income and fundraising. So that's the way to think about it.

What we haven't tried to do is at least I haven't seen it is to look at the fundraisings and then to look at what return a capital has been also provided to the LPs. And then you got to add in the AUM growth through growth in value and I don't have that in my head.

I'm looking at Greg, I don't think we've got -- maybe we have that. I haven't seen it, but I'm not.

But given my answer is that that satisfy your question. Gross inflows are equal to net inflow because these are closed end funds.

Yes, I think others kind of baked in a little bit of the rich. I know it's complicated kind of piece, but I think some do kind of factor in some of the return of capital when they think again, that's where I was kind of going.

But if you don't have it, that's fine. But yes.

That's a good question, though. Go ahead.

Greg.

Dough, I think that that's certainly something that we'll look forward to disclosing in the coming quarters. We certainly have those numbers available to us.

But we haven't disclosed them yet. But I think that your question is prompted a job for the team here who's looking for something to do for the next quarter.

Always looking for feedback on our communication and IR. So that's good.

And we will work on that.

Yes. And I think the other thing that you asked was, what are we essentially carrying the management companies at?

And then I would say to you is that right now that they are basically valued on their book cost and in the case of cigar, it's essentially the cash that they have on the balance sheet. And I think it's something like $1 million or something right now.

So we haven't factored a value for the management companies into our announcement at this point in time.

Okay. Good to know.

Then you said and many times you intend to resume the normal course share buybacks. I'm just hoping you can elaborate.

If I just wipe out dilution from options, or could you be more aggressive and I think I've asked this question in past calls. So I'm repeating myself, but would you be more aggressive on buybacks here, you seem to think that discount the NAV should be a lot lower?

And then if you're not going to be overly aggressive on the buybacks, why not? Because you seem like you've got quite a bit of liquidity.

Yes. So good question again.

And just to be clear, in terms of our intentions, Doug, we do have about $1.6 billion on the balance sheet. And Jeff referenced that we’d like to carry in cash and cash equivalents about two times our fixed charges, and you can calculate the fixed charges from our disclosure in the MD&A and the two times specs is probably between $700 million and $800 million, depending on the quarter so in that range.

So, you're looking at basically a difference of $800 million right now in terms of where we're at. Now we'd like to carry a bit of a buffer, and the buffer would be fairly significant at this time.

So the range that you one might expect is anywhere from 500 to 700 being available. But we haven't been specific on exactly where we will travel over the next little while, but that's the range that we're thinking about.

Yes. So that's a way of saying that we're -- we are going beyond option.

We're not just doing option or mitigating option dilution, we're going -- we will opportunistically go into the market and put capital to work and buy shares back and reduce the share count. That's exactly what we're trying to do.

And that has a lot of benefits, including we're trading at a discount is pretty, pretty high. So compared to our underlying value, and we'd like the opportunity just basically on where the shares are going, or at least where our businesses are going.

So the answer your question is yes. And Greg just kind of played out how the math might work.

Perfect. And then just on the cash balance, that does not include the $94 million from GP, I don't think or you can correct me if I'm wrong.

And what else like in terms of cash inflows are coming into Q4? I don't -- there's nothing obvious to me, but I just wanted to see if I'm missing something.

Yes. GP is not closed, and we don't have the cash in the quarter yet.

It's in the door in Q4, but it's not in Q3.

Okay. Perfect.

And then lastly, just on the standalone investment earnings $58 million, can you dig a little bit into what drove that?

You said the standalone earnings $58 million, what drove that?

The standalone that's Lion. And as you know in the quarter, again, the wonders of consolidation accounting, certainly, Lion announced earnings and they're announcing them today, quite frankly.

And so that calls on right now. And that's our share.

I think our share is, just let me look at my note here, $56 million of their income for the quarter. And the income this quarter for Lion had an item in it where they had a revaluation of the Amazon warrants for, I think, well, for our share being $56 million.

And that was due to obviously the decrease in the value of Lion over the period. So that mark became income to Lion.

So hopefully that explanation you followed it, but it is the nature of recognizing that decrease in the warrant value that was issued to Amazon.

So that's where I was going. It seems like there was -- there's some unusual items in there.

But that's basically what you're saying, there was something unusual coming through as a result of the Lion, yes.

Yes.

Okay. Perfect.

Thank you very much.

Thank you.

Yes. Thanks.

I kind of want to follow on that theme, and just looking at the alternative and other investments platform. I know that well, I guess, a couple of questions on this.

Firstly, 2021 has been a pretty solid year from that line item in terms of driving earnings? A couple of, of course, one-time items helping support that performance.

I'm just wondering if -- has this gained like enough scale or have businesses -- the underlying businesses and assets gained enough maturity that we should come to expect that a bit more earnings contribution from this business on a consistent basis going forward or is it still kind of a very modestly positive earnings driver?

So, maybe I can take a start, and then Greg can save me if I -- can help clarify what I said. I think from a -- if we think of the business as a general partner being the asset manager and then as a provider of seed capital, and I think you need to separate those two.

And as a provider, as an asset manager, when you look at Sagard Holdings, it's got quite a lot of assets, it's got a lot of third-party assets, but it’s got a quite a lot of assets under management right now. And it's getting to the point where it's -- it can start to contribute.

But I don't want to say when, but right now it's pretty close to breakeven from a cost and expense point of view given the scale. And so as a GP, it will start to contribute if it continues to grow.

And of course, the income emerges, you get fees, and you have expenses, and then they have carry. And so how the profit emerges as a GP, it can be a little lumpy, you get a realization on a private equity position, and all of a sudden you got carry on it and some of that goes to the staff or management and then some of it goes to the GP.

So that -- we look forward to that, but we haven't been profitable up to this point, but it's getting to the point where it will be. And then the LP Cap, the Sagard Capital is a mix of strategies that are mature, such as a more mature I should say, such as the private equity funds in Europe with Sagard 3 is – it has been a Sagard, they're going to Sagard 4 now on the fundraising.

So those are more mature funds. We get realizations for those periodically.

The Portage III FinTech funding has had realizations that have driven profitability. The profit emergence on the credit fund is more kind of regular, if I can call it that.

There's an income stream, although, there are recaps and re-financings that can drive. So that -- so we are earning and we'll earn money on the LP Capital, but the profit emergence is a little lumpier.

And I think we need and we've stated it in previous meetings, Jaeme, that we owe it to our investor base to really lay that out and we're not quite there this quarter, but kind of talk about how that profit emerges on the LP. If I flip the Sagard -- to excuse me -- Power Sustainable Capital, there the AUM is not quite as developed and they're a little further away before they reach breakeven as an asset manager, they need to do some more fundraising.

The -- as an LP in that business, you've got energy assets, and you've got an in fact Chinese equities. And so two divergent strategies, but they come from Power’s history, which is why we have very strong teams in both areas.

And the profit emergence on that is quite different as well. But effectively, you're earning 8%, 9%, 10%, 11% returns on your LP Capital as an energy in the interest funds, and then on the Chinese equity side, well, then we can have a discussion about what kind of returns we get in the Chinese markets as an LP.

It's been very, very profitable for us, obviously, over the last 15 years, we've done really well on it. So that's, that's giving us some color, but not giving us some specific numbers and we're going to move forward.

Greg, you're going to answer this.

Yes. I just add to it, Jim, that, on slide 18, Jeff was scrolling through the various funds that are proprietary capital, or LP Capital is held in.

And a lot of it comes down to, vintage when you're looking at the private equity. And, we -- as you know, we did the secondary with the Sagard 3, so, Sagard 4 is basically just, being launched and funded.

So there are some assets in Sagard 4 right now. But, as you know, though, the return of capital and the private equity businesses will be, three to four years out.

We've already start to see some of the earnings emerge, if you will, from that, and they emerge on realizations, right. Private credit, of course, we'll get that as we get our dividend returns from private -- from the private credit fund, Venture capital, very much the same as the private equity, royalties, more like private credit as well and, and Power Pacific, the realizations there come as the portfolio is managed for either the market conditions, as we saw earlier this year, where the markets ran up significantly.

And there -- the team in Shanghai realized a lot of gains, and it was Q2, that most of the gains were realized. And so they'll emerge, not on a regular basis but on an intermittent basis.

So, the good thing, I'd say about where we have the seed capital is it's in a lot of diverse opportunities. And at some point, hopefully, it'll be a little more consistent and no balance, balance out each other.

But it is -- it is maturing, and as Jeff said, we've promised that will give you more insight into that in a future quarter. So we will do that.

It's great. Thank you very much.

Thank you.

Yes, good morning, Jeff and, Greg. The question just with respect to the buyback?

I mean, the company seems to leverage as high as certainly higher than normal at Great West. Why would you be buying back stock when you're -- when the objective here is to reduce the overall leverage of the group?

And just with respect to tax noise in the quarter? Greg, I think you had mentioned something about a $0.03 benefit and then a penny hurt and I'm not sure which one apply to the third quarter of 2021.

So if you could just clarify that please? Thanks.

Thanks, Tom. Let me start with the buyback and leverage question, and then I'll let Greg can add to the tax question, or address the tax questions.

So on the buyback side, the leverage of the Power Group is consolidated of course, it’s a consolidate leverage the Great-West life and IGM and everything else we consolidate. And the reason that the leverage is elevated is because Great-West life, did a lot of transactions and managed to do that without issuing equity, which we think is a good thing for shareholders.

At the Power Corp. level, we don't have that really.

We have a lot of cash. We've got preferred shares.

And we've already talked about our intent. We want to keep that capital structure base in place, we're going to work on reducing the costs.

As we said in response to a question earlier, but we're not looking to reduce, so that's it. We don't have that, like, we got to think $250 million a debt is basically across the group.

So in this 33, year dent,

30 year debt, right, thank you very much. So, we have -- so the cash is at Power, and we're going to return the shares that were returned or buy back shares with it, which does not affect or that really doesn't impact the amount of debt we have, of course.

But we don't have an opportunity to reduce the debt at Power Corp. That's a short answer.

Yes. Do the tax thing and then just a follow up?

Sorry.

Yes. Sure.

Sure, Tom. So the benefit $0.03 was for Q3 2020 and the $0.01 is in the current quarter.

So that basically is the entire difference between the two quarters.

Okay. That's great.

When rating agencies look at Great-West, would they look at -- also look at Power consolidated, would that have a factor in terms of the leverage for or in terms of their rating for Great-West? And if so then why wouldn't the consolidated leverage at Power a matter?

So let me take an attempt and then Greg, you can you can jump in. But do you want to start off.

I'm happy to jump on it.

Okay, go ahead.

And then you'll correct me if I'm wrong. So Great-West Life does the rating agencies look at Great-West Life as their own leverage, the rating agencies look at Power on a consolidated basis.

The rating of Power in our group rating can impact the rating of Great-West Life. But it's not through the mechanism you described.

It's not that they take the Power Corp. or the AGM consolidate that and somehow ascribe it to Great-West Life.

They look at Great-West on a standalone basis. But when they look at Power, and they look at our overall group rating, if our rating were to go down several notches, they have kind of rules within a group that you can't have a group rating being too many notches below the subsidiaries rating.

So they've got and so if Power got a bunch of downgrades that could impact Great-West Life rating, I think is the simple way to put it. But when they look at Great-West, they look standalone.

The end of your question, though is why don't you reduce your -- why wouldn't you reduce your debt at a Power Corp.? And I'll come back to my answer to your previous question.

We don't have that Power Corp., we only -- with a one series is 30 years would be very, very expensive to try and redeem that series -- and the preferred shares that we have outstanding. We're not looking to reduce the base we're looking to perhaps reduce the cost of it at this point is the way we're thinking through transactions.

Like we did this quarter. Greg, anything you want to add to that?

Or did I put my foot in it or don't get it right?

You've just proven that you sat through rating agencies meeting. So that's a good thing.

And so it really, really does start with the group rating though. And that's the news.

You start at the top and you look for the group rating and everybody's then measured on their own book, right? So Great-West Life is its rating is calibrated based on its particular position.

It is influenced by the group rating, but it is not. It is done standalone.

And that's the same for AGM as well, and that we could get into more of the subtleties in terms of what what's considered to be a strategic holding and what's not considered to be a strategic holding. But I don't think we should go there on this call, because that's probably -- if Jeff just gave you the 101 in the ratings and how it works.

So that's probably, 201, or 301, so we won't go there this morning.

Okay. And in your opinion, the group rating wouldn't be jeopardized by buying back stock is that correct?

Correct. Right.

Helpful. Thanks.

Thank you.

Okay. Well, I didn't -- I don't have any further questions.

So Greg, we'll just -- we will wrap it up. Thank you.

If there's no further questions I just -- again, thank everyone for participating. And we look forward to talk to everybody soon.

And look forward to our last questions on this call about disclosure around our platforms, and we really -- those are good questions and we will take that input and look forward to coming back and answering those questions in the quarters ahead here. Thank you very much.

And operator that's it bring the call to a close.