Power Corporation of Canada

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00:41Thank you, operator and welcome, everyone to our Q4 and year-end 2021 results call. I'm really pleased that you're here with us this morning.

And I will get right into the presentation on Pages 2 and Pages 3, you have the normal disclaimers regarding forward-looking and non-IFRS and non-GAAP financial measures. On Page 4, you've got the smiling faces of myself; and Greg Tretiak, who is our Chief Financial Officer is here with me this morning, and together we'll be going through the results.

01:23 If I move you to Page 6 in the presentation, you just have some highlights there, some of the recent either earnings releases, earnings calls or capital markets presentations that Power and its group companies have been involved in over the last month or so, and welcome all of you to go directly to Great-West Life, IGM or GBL for any information we have with respect to their results. And I know they would be pleased to engage with you.

01:59 And so, with that, I will turn to Page 7, which is really the summary of some of the highlights that I'd like to talk about today. I think 2021 and the fourth quarter, both evidenced the strong earnings growth and momentum that we've been talking about for quite a period of time, saying we have believed that our underlying businesses have strong organic growth and as well as those has been helped with the acquisition.

So we'll talk a little bit about that during the presentation. 02:30 Another highlight of the last quarter was on the 5th of January, the Group announced the consolidation of our interest in China AMC under IGM, so that continues as a further step to simplify our corporate structure, which continues to be a theme of our activities, as is returning capital to shareholders.

In addition to the dividend increase that was announced in November, and which was -- that dividend, of course, was also declared yesterday at the same heightened level of $49.5. We also relaunched a new NCIB in February and we will talk a bit about that as we go through the presentation.

03:12 And another theme, I would like to pick up on is the continued growth of the alternative asset management platforms with significant fundraising throughout 2021, including in the fourth quarter and then the acquisition by Sagard of EverWest from Great-West Lifeco which was added more AUM and scale to our asset management activities. 03:33 With that, I'll turn to Page 8 and pass the microphone over to Greg.

03:39 Thank you, Jeff. We’ll just do quick highlights on the earnings per share for the year and for the quarter.

We don't usually do the year, but given that it was a record, we thought we should at least acknowledge that and you can see that the adjusted earnings for 2021 were $4.77, up significantly from 2020's $3.07. 04:09 With that, I'm just going to go straight over to the Q4 results and give you a little color on the detail.

We're reporting a adjusted earnings per share of $1 up $0.07 from Q4 of '20's $0.93. You would have all participated, many of you and seen the results that were reported by our publicly traded companies and you can see that they contributed a $1.04 versus $0.89 in Q4 of last year.

04:47 Our alternative asset investment platforms, which basically is Sagard and Power Sustainable Energy that includes not only the management companies, but it also includes our seed capital and our proprietary capital devoted to seed capital to those platforms. And you can see, relatively routine quarter contributing and nickel, which was the same as last quarter or last year's nickel as well.

05:21 And so you may see, of course, it's already reported its results and IGM has shared that with you. We're showing it as contributing $0.02, in reality, it was $17 million versus $12 million in last year and that is a significant increase and they continue to do well and we'll have more talk about it later on in another slide in the deck.

05:47 The standalone businesses, no realizations in the quarter of significance other than GP Strategies and also, I would say that the 2020 number included a gain on Eastern, which is in that $0.07 that you see there. And finally, the corporate line, you can see that it's $0.13 negative, versus the $0.10 in Q4, and that is due to a tax benefit that we recorded in Q4 of '20.

06:33 With that, I'd take you to the next page, which is the NAV and again some very quick highlights, you will see that the NAV was $52.60 at the end of December, not a lot of change over Q3, but up 27% from the $41.27 in December of '20. You'll be wondering what the Ukrainian and Russian war has done to the markets in terms of the NAV and we'll see that on March 17, we have it at $50.11.

So it has come down slightly during this period of volatility. 07:26 And the only other comments, I'd make on the NAV slide are that, of course, we announced the CMAC deal and we marked it at that particular transaction price.

Here you see it rounded to $1.2 billion. It was actually $1.15 and Lion, which is in the standalone businesses is down about $200 million from the prior-year period.

And the other thing, I would say is cash is $1.6 billion at the end of the year and we'll have comments on that later on. 8:08 I'll pass that back to Jeff.

8:09 Thanks, Greg. And we're calling it adjusted net asset value from this quarter forward-based upon accounting guidance is my understanding, but adding the word adjusted actually doesn't change anything, it's the same definition that's always been.

It's just we call it adjusted net asset value. I'm a wannabe CA, as you know, Greg, you're aware of that.

08:32 Okay. So let me turn to then the next few pages, the next three pages, I'm on Page 10.

It's just a restatement of our strategy. I'm not going to go through these pages.

Most of you on the line have probably heard me and Greg go through them many, many times, but I am conscious and we are conscious of the fact we may have some new listeners on different calls and people often go to our last quarterly results when they are looking for a deck to describe us, so as people get introduced to Power Corp, we continually re-emphasize the playbook that we are following and you can see it again on Page 11, in terms of how we talk about the different levers that we are pursuing to create value. 09:12 And then on Page 12, we talk about the strategies that our major public companies are pursuing themselves, which is part of our overall value creation strategy.

So thank you for indulging us as we go through those three pages and continue to have them in our presentations. 09:30 I'll go to Page 13 and I talked at the outset about the year and the quarter evidencing the strong earnings growth and momentum, which we have been talking about for some time.

It was both organic and M&A driven. Very, very strong results in 2021, Great-West Life had record net earnings.

We could say they had record base earnings, but since they've only been covering base earnings or calculating them for a few years, it wasn't a very meaningful statement, but had they been, we expect it would have been a record, but on a net basis, it was record earnings. 10:03 Q4 had a little bit of weakness from Q3, the few things I think Great-West Life went through that Empower was down a little bit from Q4 -- from Q3, excuse me, sequentially, some of that was a little bit of one-timers and there's a little bit of higher expenses in the fourth quarter.

There is nothing in that quarter that changes our view as to the progress -- progress that Empower is making or the earnings trajectory that we see for the business going forward. So we thought it was a solid quarter and overall, a terrific year for Great-West Lifeco.

10:40 Same thing with IGM. In their case, it was basically all organic growth.

We have been telegraphing for some time that we thought the very strong momentum that IGM had been experiencing in the marketplace would result in earnings growth as the top line was growing, it had been driven and continues to be driven by McKenzie, but IG Wealth really illustrated in 2021, excuse me. And as we went through into even the first part of this year with their sales, it's just good momentum at IG Wealth.

So we're really pleased about this part of our story, which was, which we think at the end of the year. We look back out and say, terrific growth in the underlying earnings.

11:27 Page 14, just a few comments on the transaction to move the 13.9% stake that Power owned into IGM. It does a number of things for us.

First of all, it is very consistent with our overall strategy of simplifying the Group. The second thing it does is, we think that having the entire stake of ChinaAMC in IGM will result in much better value recognition, think, about the size of the overall 27.8% block and the earnings and the earnings growth within IGM, it's a meaningful part of IGM and we will continue to grow, we assume over time.

12:10 So that's something that we think will get recognized. Kind of got lost within Power Corp has as an investment of $1 billion or so within our overall stream of assets.

So we think it will get better value recognition with an IGM and it belongs there, quite frankly, from a partnership and industrial logic point of view. We were really pleased to buy more shares of Great-West Lifeco, very keen on what Great-West Lifeco is up to, so we were pleased to facilitate the financing of the transaction for IGM by taking, in effect, half of the money that we received in buying shares of Great-West Lifeco.

12:48 And then finally, it provides cash to Power Corp to continue with our return of cash to shareholders and so that's after the purchase of the Great-West Life stock and paying a little bit of tax in China that we anticipate still provides a good chunk of the cash that will help fund our buybacks. So there is four good reasons why we love the transaction and the business of CAMC continues to progress very well.

13:19 I'll spend the next couple of pages starting with Page 15, talking about GBL and looking at what GBL has done over the year. It recorded a very strong growth in their NAV 13% per share over the year.

The theme at GBL is very strong rotation of the businesses that they own. And you can see how the NAV traveled from the start of the year to the end of the year and really a greater emphasis on private companies from over the 12-month period, they went from having 17% of their assets in private companies to 25% of their assets, and it's a rotation that's continuing, Webhelp’s, the Canyon’s, you can see some examples of where they are putting their capital.

Sienna Investment Managers, not only are they getting into private assets, but they're also starting to get into the asset management business themselves with third-party asset management. So a real change happening at GBL.

14:20 You see some of that on Page 16 played out in terms of some of the actual disposals of public companies like Holcim, Umicore and then more money into private, some more money into Sienna. And I would encourage you to look at the March 11 results presentation that’s referred to on that early page.

If you go on their webpage, it does a very good job of describing the strategy that GBL was pursuing and the amount of energy going into building out that business. 14:51 Okay.

Then the other theme on Page 17 is the alternative asset management businesses that we are building at Power Corp and stop at the end of the year here and say down in the lower right, we ended the fourth quarter of the year of 2020 with $8.5 billion under management or committed, funded and unfunded AUM, and we ended the December 31 of this year with $19.1 billion. That was as a result of fundraising, a result of the EverWest transaction and a result of capital appreciation on the position.

So all three were driving it. 15:29 On the funded side, on the lower right of the slide, you'll see that the funded went from $5.6 billion to $14 billion.

So obviously the difference between funded and unfunded we got investors who have committed to put money up, but the money actually has to get invested in these funds. So that's the portion that's been invested and you see the growth there and you see in the dark, the Power Corp portion of that really has stayed constant and the growth has come from third-parties including in this case, some Canada Life involvement.

The overwhelming majority of the external funding is coming from parties other than Power and Canada Life. But in the EverWest case, of course, a lot of the EverWest money was Canada Life -- was Great-West Life Company, I should say in Canada Life money and so they are investors in that.

16:21 Let me flip to the lower left side of the page and you see some of the profitability from the asset management company. So Sagard, just from a management fee alone perspective had $100 million in management fees in 2021, basically getting close to breakeven here on a fee-only basis.

They had a very good year for carry, a lot of that was the carried interest, a lot of that was driven by their fintech investments that is quite an unusual, quite a very high number, it does not say it won't be done again, but we would not expect that to be an annual event on that level of profit. So this business is, Sagard is getting a lot of scale and getting very close to the point where it's going to be contributing earnings to the company.

17:08 Power Sustainable is got, is not as far along in terms of its development and to remind everyone, the Sagard business had some businesses that were already in the third-party funding business the fintech strategy, Sagard in Europe had been funding from third-parties for a couple of decades or 15 years at least. The strategies in Power Sustainable had really -- when we switched strategies two years ago, we were really a 100% Power Corp strategy.

So that group is out and had to build up their third-party their distribution building up their activities and they are making good progress in terms of third-party funding, but are not, but still have ways to go in terms of getting the scale on their management fees. 17:50 So just a little vignette into the profitability.

I'd just draw your attention to the last bullet point on Page 17, the fee-bearing capital, we just break it out here is, at the year-end is $11.4 billion versus the $14 billion that you see at the bottom of the page, at the bottom right. And of course, the differences is, you get paid on the committed capital, not on the capital appreciation, when you're running these businesses.

So we just break that out to help you reconcile, if you're looking at trying to tie fees with assets. 18:21 Okay.

I'll switch over to Page 18. And Page 18, it's just a little more detail as to how the strategies play out between Sagard and Power Sustainable and you do see at the top of the page, the breakout between the growth in the AUM that came from fundraising $4.2 billion, very significant.

And then, but we did have the acquisition of EverWest in the fourth quarter and you see now under Sagard, in the bottom right, that Real Estate Investing capability at the U.S. real estate platform is a significant part of their AUM.

18:57 I'll move to 19. And on Page 19, we just talk again about what are we doing here, building out alternative asset management businesses, well, firstly, we had a lot of these capabilities that had been built in Power Corp, we're now adding to them.

But even prior to us shifting strategies, we had these teams that had very good track records. So we are building from a position of strength.

We've been able to attract very good teams at Power and within these platforms. But also these synergies with what Great-West Life and IGM and GBL are doing, and we're helping each other here, and you've got some of the points there, Great-West Life is looking to advance its strategy to put alternatives on its own balance sheet, is looking for those assets to help with its own products and its own solutions for its clients and it's in the financial services business.

So being around a very active fintech ecosystem is very, very useful for them to understand what's happening in their businesses. 19:57 And then, on the case of IGM, very much the same strategy.

Their purchase along with Great-West Life of Northleaf is evidence of that but there are also investing in some of the strategies at Power and then GBL, I've already talked about their shift into private assets and their own shift into investment management. And so this is really a group effort and there is a lot of benefits that are going back and forth between the public companies of Power Corp.

20:26 Shifting gears on Page 22, our efforts to monetize assets and this is not just to create cash to return to shareholders, but is also part of the simplification of the group. You see the top four transactions there, four transactions we highlight over the year that resulted in proceeds coming into Power.

I think we've talked about each of them and so that created cash. And then, the January 5th, the announcements of ChinaAMC, as I mentioned in my comments, that also, when you take it, when you -- after the fact that we purchase Great-West Life shares paid a little bit tax in China, there is another $500 million that is freed up for capital that we're able to return to shareholders.

21:17 I've said in all of our comments that while we plan to buy shares back. We will always prioritize if one of our operating businesses is doing some sort of transaction and needs our support for capital, we would prioritize that but we always try and do those deals without putting much capital into them if we can and -- but that would be the priority if they had a transaction that required an equity infusion.

But in the absence of that, our intention is to return the capital to shareholders. 21:50 Page 21, those were the four standalone businesses that we identified when we launched the strategy, GP Strategy at the bottom has now been disposed of.

And on the other three, we are going to continue to support the build-up and of those businesses with the management teams and in some cases, with other shareholders, and we will be looking to monetize that and at the appropriate time that it makes sense for Power and it makes sense for our, for our partners in those businesses. So that still is very much on -- in the playbook and part of the strategy.

But we're not putting any kind of timeline to our and pinning ourselves into a corner that we have to do something by such and such a date that's not the right way to maximize value for Power Corp for our shareholders. 22:40 Greg, I'll turn it back to you to talk about -- make some comments on our capital the whole share buyback topic.

22:47 Great. Thank you, Jeff.

So I'm on Page 22 and start with capital transactions, you will have all seen that in October, we took advantage of some attractive rates on the perpetual press and as some of us want to say, this is a security that is traded by appointment and the windows to actually take advantage of those opportunities don't present all the time. So we were pleased to do that, that's going to yield about a $3 million reduction in our annual financing expense.

23:23 You'll recall that back at the time in next, we said that we would potentially entertain redeeming some press to reduce our financing expenses as well. I think at this point in time, we see greater opportunity for shareholder value creation to buyback our own common equity.

And so, we have re-initiated our program, our normal course issuer program and you can see that we bought $153 million worth of shares through '21 and in '22 year-to-date, we've done about $112 million and I just say that we -- I had mentioned earlier on, that we have cash on the balance sheet of about $1.6 billion, there is a dividend that's payable usually in the first weeks of the coming quarters, so we usually keep a little less in when we think about that number, so about $1.3 billion is what we think is the cash on hand. 24:38 And as you can see in the bullet point there, that we keep 2 times our fixed charges, which is roughly about $800 million.

So that's about $500 million of cash that we have available to repurchase stocks and of that $500, as I said, we've done about $112 million. So we've got about $400 million that we are looking to utilize to repurchase stock in the coming months.

And of course, then when CMAC closes in the second quarter, we should have an additional $500 million to work and we'll revisit it at that time and certainly talk to you about it. 25:25 That takes me to Page 23.

We've achieved our goal. We were almost there in Q3, but we've gotten there.

We have achieved our targeted expense reduction of $50 million. You can see our run rate and targeted run rate, our $38 million a quarter.

I'd just say that in addition to this, well as we were rationalizing some of the businesses and in particular our real estate business and we have sold or have commitments to sell five properties of the six that we actually hold and that's going to yield another $60 million in terms of additional cash that we can use. 26:13 And I think that's the end of the story on expenses.

Jeff, I'll turn it back to you.

26:18 Okay. Thanks.

So just before I wind up comments. I'll just stop on Page 24 and make a comment on the discount to NAV.

Yeah. We're obviously pleased after having historically been around 15% and actually, at certain times, even lower than that.

We had been traveled for a period of time, where our discount was closer to 35 and over the last three years of work, starting with the sale of the U.S. Life Insurance business by Great-West and the three-way buyback and then the reorganization and then the new strategy and all the things we've been doing, we've been driving that discount down.

We think that aside from the expenses that we have at the HoldCo, which gets you if you discount those, gets you to somewhere around a 3% NAV discount. 27:09 The rest of it is all open season for us to work on through our simplification and proving that we can, how we add value at the Power Corp level.

So the discounts continue to come down. It has widened out in the last couple of months here, as we've gone through some, I would say shakier markets and we just view that as an opportunity at this point, but we continue to be very focused on driving this as an additional -- the discount down is an additional lever of value creation.

27:38 Page 25 just speaks to what our Group is doing on the ESG front and every, every company and every public company is focused on this, every company should be focused on this. We think we're very well-positioned to continue to make progress on it.

Just highlighted at the top of the page there, that in 2021, Power is one of only three companies in Canada to receive an A leadership rating on the Carbon Disclosure Project, but you've got there for Great-West, IGM and GBL, all of our companies are very active on their ESG strategies on their net-zero commitments. 28:18 And so, and on their launching of funds and launching of products for their clients as well.

So they've got their own corporate activities and they're got their own balance sheets and then, they've got the money that we're managing on behalf of clients and they're all under intense focus from where we are -- what we are doing on the ESG front. 28:38 And I'll conclude with just the standard page on.

We're still very optimistic, we've got lots of opportunity across these three levers of value creation. We obviously have done a lot.

We've put a lot of capital to work in the past 18 months and no question from, in terms of the size of the capita , and then in particular, you look at Great-West Life they've got have got a period of time where they're going to need to rebuild their balance sheet and we've also got three integrations going on with Prudential Retirement, transaction has not closed yet, its targeted at the start of Q2 and so they'll have three integrations going on. 29:18 So that is obviously a focus of Great-West Life.

But it is not stopping us from looking at what comes next and laying the seeds from where we take the M&A strategy going forward, across the group, including at Great-West Life. So very excited about what we still have to do.

29:34 And with that, I will conclude my remarks, and we can turn to the period of the meeting where we take your questions. And so operator, I would ask you to open up the floor to questions.

30:17 Hi. Good morning.

My first question was, when you think about the potential acquisitions that Great-West and IGM could make over, say the next few years, if there was a need for them to raise equity, do you see the plan to maintain your ownership stake in them or would you be willing to dilute down your ownership stake? And the reason I'm asking that is.

I'm just trying to understand how you think about Power's balance sheet in terms of potential uses of cash both from the cash that you've got right now, but also as you monetize some of these non-core assets and whether or not that ultimately sees greater focus on share buybacks, given where the discount to NAV is today?

30:57 So thank you, Geoff. Good morning.

There's not a specific black and white answer to the question, so let me answer it based on the principles we would follow. As I mentioned in the call, if one of our operating businesses needed to raise capital and equity capital to do an attractive transaction we would prioritize that over buybacks any day, that would be our first priority.

The second piece of your question though, is we don't have a bright line as to dilution or non-dilution. We're not in favor of diluting ourselves in general, but if you look at the history of the acquisitions, London Life, Canada Life, for example, while the group put up capital to support the transactions, there were big deals in the context of what Lifeco was doing, and there was some dilution.

31:50 In other words, we -- Power Financial in that case, and at that point, at that time participated but we participated less than the public, there was a little bit of dilution that occurred, it wasn't part of a grandmaster plan, let's get ourselves diluted by a point or two, it was just simply we had an incredibly attractive transaction, it needed a lot of capital to get done, it needed the public markets and we kicked in, as I recall, $400 million, $500 million. I might have those numbers wrong but that order of magnitude.

So we would support transactions. 32:15 We typically don't like to issue equity if we don't have to in our deals, that's not the playbook we like to follow, but if it's a very attractive transaction when we need to equity to get it done, we will certainly do so.

We will support those and whether we dilute or we don't dilute at the margin, I think it just depends on how much cash, how much -- what's our financial position at the time, how big the deal is? It will be very situation-specific.

I hope that answers the question.

32:45 No, it does. And then my next question was, you have classified Sagard and Power Sustainable separately in your financial reporting.

I'm just wondering is there any merit to merging those two entities together whether or not it's giving greater scale and synergies or other reasons as you look to build up your third-party asset management business?

33:08 These are businesses that have capital and number, but they actually are people businesses. And they run and they succeed based on the people and the teams that are in place, just like any other asset management business.

And in these cases, these businesses actually were came up within power with different groups operating them they have different histories. They've got different people involved in it.

And as we look at that, we think that trying to combine those would actually do more damage than trying to leave them where they are. 33:41 So that's the first reason.

And it's the reason, as you go across our Group, and many other groups in asset management, whether it is public securities you're trading or private securities, you have different investment management companies existing across big Financial Groups, is because of the cultural aspect that -- everybody came to work at a certain place they bought in what was being done. And if you try and combine it with someone else you can really destroy -- you can think you're saving cost and getting scale, but you actually lose a whole bunch of your key people and you're destroying value.

34:14 So we are happy to pursue it at this time and they are pursuing slightly different strategies in the market as well in terms of their positioning. So that's the answer to the question, no plans at this point, Geoff, we think that would do more damage than help at this point.

34:28 Okay. And just my last question was on GBL.

They have their Sienna investment managers business. Just wondering if that's something you could see the source of collaboration by partnering to just do distribute some of their strategies and vice versa or even if it's a business that at some point down the road, might be interesting to acquire to scale up, again, your third-party asset management business?

34:53 Yeah. Good question.

So, very good question. So GBL in general and Sienna specifically, they have been cooperating with Power Corp, they've been incorporating with Sagard Europe.

They are -- there is a lot of communication, as you can imagine across the groups in terms of both getting product for their clients as well as deal flow. And I will just go back to the history of Sagard Europe in Power, which is going back to private equity business in France, was really came out of the GBL investments was one of the key motivators for -- GBL was focused on doing larger transactions in the European market, and they were getting all these opportunities that were below their radar screen.

And that was part of the thinking in starting the Sagard Europe private equity business that we can get a deal flow here, we've got -- we own the second largest holding company in Europe. They're all over the deal flow in Europe.

And so that -- the whole starting of Sagard Europe was in fact cooperation with GBL and that continues as we get into private alternatives to an even greater extent. Greg, did you want to add to that?

36:04 Yeah. I think you'll see, Geoff, that, in fact Sienna has invested in some of the Sagard vehicles and that collaboration also extends right up to the governance structure of those organizations where some of the senior officers of each of the groups will sit on each other's Boards Paul III is very active at GBL and also Colin Hall, the CIO at Sienna sits on the Sagard Board.

So there is a lot of cross-fertilization if you will.

36:44 Great. Thank you.

36:45 Thanks, Geoff.

36:58 Hi. Good morning.

36:59 Good morning.

37:02 Can you maybe just elaborate or provide some color just on the fundraising outlook for 2022, maybe what are some of those sort of strategies or what does the pipeline look for -- look like across your different verticals and then alternative platform?

37:16 So your question is with respect to the alternatives, right not across all the asset management.

37:21 Yeah. Alternative platform.

37:27 Yeah. So continued fund -- the plans are continued robust fundraisings in the existing strategy as well as with the launching of new strategies and I could talk a bit about that.

And the question mark is the current environment, Graham of kind of market instability and then, geopolitical instability of what's going on in Russia and Ukraine that's kind of got to obviously a question mark over everything as how does this play out and how much risk is in the market and I think, so that's there. 38:00 Part of the backdrop even before the geopolitical issues has been with inflation coming to a higher point in a much greater concern in the market in the last, going back, let's call it, till the start of the fall.

You've had a sell-off in the tech sector, so public valuations of tech companies overall has been well off as you're aware that NASDAQ is down. I think 14% year-to-date alone.

So in terms of the tech side of it, what does that do to fundraising on the fintech side, we've just raised a bunch of capital by the way in Portage III. As you know no doubt have seen and so maybe that's a good thing because we got into an investment cycle where evaluations pull off a bit, but for future fundraising.

38:48 So those question marks out there, Graham, I mean I think that we were -- the businesses had a great year in fundraising as you saw and I went through on the slide and they had ambitious plans for 2022, and we're just all aware of the environment is a little bit more challenging, right now than it was three, four months ago and so we don't know how that's going to play out, but it's not a positive development. So we could get through, could go through a harder period here in the quarters ahead.

And I think, Greg, yeah.

39:18 I'd just add that they are investors and they are cognizant of the environment and understand the challenges obviously and there is going to be dislocation for sure which brings sometimes opportunity, but they're also in spaces where there is a lot of money that has to go in, if you will, the green movement in terms of infrastructure and things like that. So there's lots of work that has to be done, there is capital that has to be put to work and not only in the parts of the world that we are operating in, but in particular, our own country.

39:59 Great. Did that answer your question, Graham?

40:00 Yeah. That was helpful.

And then I'm just wondering about sort of the outlook for rising rates here. As you sort of, at the Power Corp level, you look across your public -- publicly traded operating companies and also your alternative investment management platform may be at a high level, what parts of your business, are you thinking that rising rates might be a headwind and where might be a benefit?

40:23 Yeah. So that's a big, that's a big -- it's a great question and it's a big question.

In general, in our -- in the insurance part of our insurance business, which is a funny way of saying it, but as you know, not everything that Great-West Lifeco doses insurance. In the insurance business, higher rates is typically been a very, a good thing and lower rates put a squeeze on profitability.

As you know Great-West Lifeco runs a very matched book. So we don't have an existing book that benefits from rates going up because we're match.

But in terms of the profitability of new products that are being written when rates are higher, there is more room for margin and spread in profitability has typically been higher. So rates in and of themselves is a good thing.

41:10 Inflation is in and of itself a bad thing because all of these businesses have operating costs. And so when you got operating costs that are going out -- going up, either because labor is costing more, people costs are going up or there's shortages of supply and you've got cost going up in terms of other systems and whatnot that can put a squeeze on profitability and hurt margins.

So that would be two off the top comments and then what does the impact of inflation have in rising rates? What does that do to the equity markets?

What does it do to corporate profitability overall? How does that get translated if yields are higher in bond markets, and we've got inflation pressures across the corporate spectrum, what does that do to equity valuations and the whole loot around capital markets, that's a bigger macro question, that is less related to our business specifically, but of course, we are in a lot of fees on the market levels and we, our businesses grow better when there is a lot of investor confidence and money flowing into investment funds.

42:21 So those bigger macro questions would have an impact on our businesses, but it's too early to tell at this point, I don't have a crystal ball where it's that everybody is kind of thinking about and trying to get a handle on. So that would be my answer to the question, Graham.

42:38 Yeah. That was helpful.

And then my last one, if I could just, I know you did a financing round for Koho, subsequent to year-end. Is there anything material there from, I think you were involved in selling a bit of selling piece of that financing, anything material on your NAV there or is that too smaller on the investment for you?

42:57 Yeah. It was very small, I'm trying to remember the number.

I thought it was like about $20 million or $30 million, Graham.

43:10 That's it from me. Thank you.

43:11 Another example of the strength of our fintech franchise there and the kind of investments they've been making some. Thanks for highlighting it.

Is that it, Graham. Okay.

I think Graham has gone. Operator?

43:41 Okay. Good morning.

Maybe continuing on the conversation around your fintech platform. I just want to start with a pair of questions on Wealthsimple.

I just wanted to confirm that the fair value of that investment has not been updated in your NAV since the investment rounded May of last year, right? And how well funded is that business for 2022?

Are they're going to need to come to market again here?

44:07 So the -- you want to answer that. Go ahead, Greg.

44:09 Well, the fair value that has not changed. And I wouldn't answered necessarily for Wealthsimple about their plans with respect to their capital.

But I would say that I'm not aware of anything on the horizon that went costly coming back to the market, but Jeff I don't know, if you…

44:30 I don't have a clear visibility into that at this point as well. They raised a fair bit of capital, but we did a secondary, as you know, we ourselves and IGM sold $500 million.

There was -- I think $250 million of cash that went into treasury or thereabouts. And with that, they have continued to expand their marketing and their outreach into new parts of the market with the introduction of new products.

And as a consequence, they're getting more aggressive in the market and the investor base that came in to support them, expect someone and want someone to do that. So I think they're well-funded, but they're also out there building businesses and they are -- as a consequence, using up that cash.

I don't have clear visibility. I'm not even sure they're Board does at this point as to, but I don't have clear visibility specifically as to whether they need at what point, they're going to want to raise more capital.

45:29 Okay, understood. And then just a point of clarification and this one might be for Greg.

When interpreting the asset management earnings contribution presented on Slide 17, which I believe excludes mark-to-market gains on proprietary capital. Does the earnings contribution of $41 billion include fees and carried interest earned on proprietary capital as well?

45:57 The -- sorry, I'm just going to the slide, first of all. I lost it, okay.

Yeah. So the question is, does the carry I think include gains on the proprietary capital as well?

And I think the answer is yes.

Yes, it does. Yes.

So your Page 17, so in the $41 million of asset management contribution from Sagard and Power Sustainable, it does include the carry proprietor.

46:34 And Nick, the way to think about it as we think about the business in two buckets. We have an asset management business that we own a majority of the GP, all of the GP, the general partner in the case of Power Sustainable and a majority of the GP management and now Canada Life with the EverWest transaction on as part of that GP.

And we think of that as we earn fees and we earn carry. And the carry, of course, is split between the professionals in the business get some of the carry and then the GP get some of the carry.

So the source of the carry is all the capital including the third-party capital and the Power Capital. 47:13 We then have a second part of the business that we think of is, we're a limited partner and that's our seed capital.

So, we have roughly $2 billion, what have you across the strategies invested in, in the seed capital and in that, in that context, we're getting different kinds of returns, depending on the strategy and in effect there we're paying the carry, when there is a big gain. The limited partner investors, of course, provide carry to the GP when there is a realization.

So that's conceptually how we think about it and what's on Page 17 is looking at it as an asset manager the GP only.

47:46 Understood. Okay.

Yeah. I was just trying to get a better understanding of what the GP earnings might look like excluding fees earned on proprietary capital, maybe we can take that one offline, but yeah that's well.

Okay. So yeah.

48:02 Okay. Thank you.

I'm sorry, go ahead.

48:05 Yeah. That's it from me.

48:06 Okay, Nick. Thank you.

48:20 Yeah. Good morning and thanks for taking my question here.

It has to do with simplified the structure here with respect to ChinaAMC. And I'm just continuing that simplification question with respect to Wealthsimple here owned in pieces at both IGM and the Power Corp level.

So the question kind of is where do you think it's best to put Wealthsimple to optimize Wealthsimple and to get the best value recognition throughout the Power Group?

48:51 Yeah. Hi, Tom.

Good question. So the simplification, I'm going to -- I'm going to -- I'll go specifically to your question there and then I'll go more general.

The history of Wealthsimple is that we started with the fintech strategy at Power Financial at the time and the initial rounds were done there. And as Wealthsimple started to really grow, we started to realize that this could be a very significant distribution, a company in Canada.

And in our wealth distribution business, IGM is a big part of that and the management at IGM has been part of sourcing the deal originally. So the subsequent rounds, I think we did five or six rounds in total when we invested the 300 over three years or so.

49:39 Subsequent rounds came from IGM so they could get a direct stake in it and that's how it ended up being in two places. I know that's not your question, but it was done for, we didn't try to complicate things we didn't, we didn't set out complicated but we ended up within two places.

I think we will wait and see, with respect to Wealthsimple we've kept our optionality open in answer to your questions that you and others have had as to where do we go with it in the future. We own after having put in $300 million and taken $500 back between ourselves and IGM we own between 43% and 48% of the equity of Wealthsimple depending on how the options of management play out over the next few years.

They've got condition-based options. 50:24 So we're still, they’re very, very large and significant shareholder and how do we, what do we do with respect to Wealthsimple in the future that we continue to grow and be a major shareholder or do we let others funded.

I think we're not making those decisions today and so we'll make them in the future as the business unfolds, we don't need to and so why not keep -- we will keep our options open. We're delighted with what's happened so far.

But we're going to keep our options open. I don't think in the short-term, we would have as a high focus trying to concentrated in one place or the other.

I think we'll wait on that one to see how it plays out and ultimately decide where our position resides. So that's not kind of, if I look at things that we'd be working on in the next 12 months or so.

That's not going to be high on the focus unless some event Wealthsimple would bring it into focus. But I don't anticipate that at this point.

51:18 I want to go more broadly on your simplification point, because I think just to say, it's got two dimensions in my mind, one is, where we have complications, we get rid of the complications and the examples of that would be Power Corp, Power Financial two holding companies, GBL purchase two holding companies, CMAC in two places. In some ways the ownership of Great-West Life which through the transaction for CMAC, IGM took a step in terms of their own simplification and the Group's by using that to help finance that acquisition and get more with a life a bit Power Corp so that's structural simplification.

52:03 And the second piece of simplification is what we actually are, and Power Corp has historically through our diversification strategy owned many different businesses at Power Corp itself and none of them, in particular, being that material or meaningful. Therefore when investors look at that, they don't know how to value them.

They don't really know which part of the business is meaningful. And therefore, it becomes complicated to even understand who we are.

So that part of the strategy is also simplification and that is raising capital in a smart way from the standalone businesses and ultimately disposing of those businesses and getting Power Corp simplified into being a profitable asset manager with some seed capital that's supporting it and that's simplification of what we are at Power Corp, which is not necessarily structural, but in terms of what our portfolio is. 52:59 So, I'm sorry, I went beyond your question to make a more general comment, we think about simplification in two ways.

53:07 Yeah. That's good.

Just -- when you did a bid of the history here on Wealthsimple, I think you mentioned that I think it started-off as a fintech strategy at Power Fin and then as it started to grow. It seems like you sort of thinking there is distribution opportunities at IGM with Wealthsimple, have that -- is that ever materialized?

53:27 I didn't mean it from a context of necessary synergies. Although, there are synergies already that McKenzie is getting it has got some is providing some products into Wealthsimple.

I think if you go to the IGM material and talk and talk to IGM management, they've been talking about some of the flows that they've got and providing some products on that shelf and it's in the form of ETFs. So that -- there is that synergy, but I didn't really mean it that way.

What I meant is, when you think about IGM, we are in the wealth management business in Canada at IGM through IG Wealth, the traditional business. We're in that business through IPC, which is kind of a window onto the different part of the distribution chain and to the extent that Wealthsimple is becoming a financial services brand and stop for a large part of the Canadian population.

It becomes a distribution brand in the Canadian market and where does that best belong under the scenario where we own it for a long time and it becomes, I think it will become a very successful business management doing a great job. 54:40 Where would we own that?

I think over time, it's part of your first question, if we’re, if that ends up being something is real as it looked like it could be and we own it for a long time, probably wouldn't keep it in two places over time, we'd look to, we'd look to put it in one place and IGM are thinking in the subsequent rounds with IGM is a more logical place for that and Power Corp, but so that's -- just kind of sharing how we thought about it. I hope that helps.

55:09 Yeah. That's helpful.

So it sounds like it, in terms of anything Wealthsimple it doesn't sound like it's something that necessarily in the near term, but as Power evolves, we'll see where Wealthsimple takes us is that, is that a good way of summarizing it?

55:26 It is. And the only asterisk, I would put on your comment is Wealthsimple has never sitting around doing nothing for long.

They have a very active management team. They got active shareholders.

And so I sit here saying, well I don't see anything in the near term in terms of our agenda and we could be sure next quarter talking about something, because they are Michel catching on the team and the Board are always looking at doing things, so I just want to put that little asterisk on your comment.

55:54 I was going to say, I think Tom presenters of Power evolves is more how it will.

55:59 Exactly. That's it.

56:01 Yeah. Thanks.

56:04 Great.

56:20 Do we have? Go ahead, operator.

Sorry.

56:30 Yeah. Thanks.

Good morning.

56:32 Good morning.

56:34 First question, just on the impairment in the project under construction in Power Sustainable Energy. Could you give us little bit more color as to what drove that impairment specifically.

56:49 Yeah. That was the COVID has hit many industrials through the supply chain, so that in particular wind turbines have to be manufactured and we don't have any capacity to manufacture that type of equipment in Canada.

So it's usually the Germans or the Chinese, who are manufacturing that type of equipment. So there has been construction delays that have been basically due to the turbines and also the repricing of turbines.

57:28 The other thing is you all probably know that the carbon tax rebate on or credits, I should say, in that industry have been undergoing a change. I think the federal government to put out $170 per ton sort of high watermark and I think the industry has probably settled on something that's quite a bit south of that probably $110, $120, most of the big purchasers of those credits.

It's not a big group of companies in Canada. So the pricing on that is not, I would say it's not a fluid market its one that is dominated by just a few people, and so there is a lot of volatility.

And so we took a bit of a mark on that for that reason as well too. So that was just in general, some of the reasons for the mark at this time.

58:36 Okay. Fair enough.

Does -- did that mark also factor in any of the recent developments in Russia, Ukraine and that construction that might create as well on supply chains and this market or even in the other markets as well that could cause an impairment?

58:58 Yeah. No.

There was -- it was not a forward-looking mark, it was for events that have happened and that we've got really have line of sight on it. I don't think there is anything direct with respect to those events in Europe that would affect the manufacturing of our -- other than generally inflation.

And I think I would -- if I can, I'll digress on your question there Jaeme. One of the things that we didn't say in the call was that we do not have a lot of exposure to either Russia or to the Ukraine in our portfolio.

It's de minimis. We have gone through an exercise of looking at all the portfolios in the group and so just share that with you as well.

59:52 Okay. Appreciate it.

You decided this quarter to follow the Sagard Private Wealth Platform seem to be generating some losses, what was the thought process and purpose to pulling out that platform and disclosures?

60:14 Well, I might say just general transparency. It's, as you know, it's not a large operation.

It's GrayHawk. So that's the firm, you're talking about based in Calgary.

High net worth firm that is, got a wonderful product. I'm a client by the way, so I wanted to make sure that those guys are doing a good job.

So I make sure that got disclosure MD&A...

60:41 That is not what that let's call it humor, Jaeme. So, but also it is different, right.

We have Alternative Asset Management businesses that are running money for clients and there is a distribution business that Sagard purchased, which is a window into the high net worth market family office market and that market purchases a lot of alternative asset management businesses. So it is a, it's got a link and a synergy.

It's a distribution outlet for product and a window into a market, but it's not an alternative asset management business in and of itself. So, and it's at a stage where it's, it is not a lot of scale to it right now.

So I think pulling it out separates its profitability from the core asset management business. That was the answer that Greg intended to give you as opposed to saying he was a client.

61:38 Yeah. Okay.

I appreciate that, Greg. Does it speak to any read-throughs for the future or again, any other plans like pulled out, should I be thinking about this on a larger scale down the road or was it really just to clean up the asset management side of that this quarter.

62:01 I think it was for good disclosure and I won't comment on what we might do in the future how big it might become, or not. I think that would be speculative at this point.

62:09 Definitional purposes only, just to make sure that was clear.

62:13 Okay. Last thing for me then just to around third-party capital raising initiatives six months on in-process today, Portage III I think is done.

But what I'm curious to learn is blue sky, what would a good year in terms of third-party capital raising look like for Sagard and Power Sustainable on the alternative asset side. So we did $4.2 billion last year, like what would a good year look like in 2022?

62:50 Yeah. So, without being evasive, so $4.2 billion was a good year.

And the platforms are now bigger and they have more products are launching. So over time, we would hope to have the fundraising total continue to grow of that 4.2, but where I want to hesitate on what you because you put 2022 in your question in any given year, it's hard to predict what the number is going to be and fundraising is always specific to what the environment is and that's why I made some comments that the environment has gotten more risk in it right now people are being more cautious technology in and of itself is sector is not is getting beaten up a little bit.

So I just -- I had a note of caution, I would think we'd hope that before would grow every year as the platform grows, but I don't want to get into what 2022 will look like and we have a lot of risk around in the environment right now. So that's, I think the most complete way I can answer the question.

63:46 Great. Fair enough.

What's on the books so far, if I can ask that?

63:51 You mean committed?

63:54 Yeah.

63:53 Everything that's committed is on the books. I beg pardon.

63:57 What's been locked in, so far in terms of fundraising in 2022. There is the Portage III.

I think it's a...

64:02 It's 19.2 that you saw when we have committed on that page. I think it was 17, I can remember in the deck here.

We had funded and then we have committed and funded. But so that difference between the 19 and the 14 is what has been committed by investors that have not yet been put to work and there is nothing else committed that there is people out there talking about doing additional fundraisings but that's all that's committed.

Anything to add to that, Greg.

64:31 Yeah. Nothing to add to that.

64:32 Okay. Thanks very much.

64:33 Great. Thank you.

64:44 Okay. Great.

I have no final comments other than to thank everybody for their participation and wish everybody a good day. Thanks very much.

Bye-bye now.