Morning, everyone. We're going to get started with our next session here. My name is Nik Priebe. I'm the Research Analyst at CIBC covering diversified financials. Very pleased to be hosting Power Corporation for this fireside chat. Joining me today is Jake Lawrence, CFO. So, Jake, welcome to the conference, and thanks for joining us. Thanks for having us. Is this a replica of the Priebe family room? It's a literal fireside chat. I love it. Great pictures, too. You were recently appointed CFO earlier this year. Why don't we just start off there? You can tell us a little bit about how you've been settling into the role and where you expect to be dedicating a lot of your time and attention over the next year, so. Sure. So, thanks for having us. And yeah, as you know, I'm relatively new to the role. Not new to financial services in Canada, obviously. Spent about 20+ years working in banking. And been with Power now for six months and one week as of today. So still in the probationary period, so hopefully it goes well today. When I look at it, Power is a very active owner of several assets, several different ones, including IGM, which you just met with. And it's a very attractive pool of assets, largely built around insurance, asset management, and some other pieces that we'll probably get into discussing today. And so the approach is really around that active ownership. So there's involvement at the board level. I've joined the board of Great-West Lifeco. I've joined the board of IGM as well. And that active ownership is really built around four pillars. So capital allocation, which I'm sure we'll talk about today, strategic direction of the operating assets and companies, which may also come up and obviously came up in your session with James O'Sullivan, leadership, critical to have key people in positions, and then major risk issues. So spending my time internally getting to know people, but also spending time externally getting to know the shareholders, hear some of their concerns, and really trying to focus my time internally around with the team working around those kind of four pillars of focus. Okay. Very good. Well, let's talk about the operating subs in a little bit greater depth. Sure. A logical place to start is with Great-West, which constitutes about 2/3 of your assets. Yeah. The team's engaged in a lot of activity over the last five years since the reorganization to enhance and reposition the retirement services business at Great-West. As you think about the expansion of that business and its suite of capabilities, are there any obvious gaps in the offering where it might make sense to tuck something in to bolster that platform? And maybe you can just talk a little bit more broadly about the appetite for M&A at the Great-West level as well. For sure. So Great-West is a fantastic business. Paul Mahon, the CEO there, Jon Nielsen, the CFO, have really done a great job in recent years. And you see that in the returns. I think their stock is around an all-time high currently. So they've been doing really great work on their side with the broader team. The business has quite a few exciting pieces and interesting pieces. Strong businesses in Europe. They've got, obviously, a strong business here in Canada. What I'll focus my comments around will be probably the business that won't be as familiar to this audience and people joining us today on the webcast, which is the U.S. business, which is Empower. And the U.S. is a fantastic market, as many people know, large, growing market. And Empower is a business. Most people will have some form of pension plan or manage pension money in the room today. They are the number two defined contribution manager in the U.S. And that's not really well known by people what that means. And so I don't think people in the room may have 401(k)s today. But they have $1.6 trillion in assets, and they also have 18 million Americans in their plans. And so there's a lot of client relationships there. And they're the number two player in the market. It's a market that's undergone consolidation. And you mentioned that repositioning. They've done about $10 billion in transactions at Great-West in recent years. So they bought the retirement business of MassMutual. They bought the retirement business of Prudential. They bought Personal Capital to help with the wealth side of that business down in the U.S. And there was obviously the disposition of Putnam as well. So there's been a lot of repositioning of that business. It's a growing brand. It's a strong brand. You tune into CNBC, you see Ed Murphy, the leader of Empower on TV, talking about markets, talking about the importance of retirement savings and investing. And we've been really pleased with the performance of it in recent years. You asked specifically about capital allocation and M&A opportunities. Well, timely to be here today. Empower goes out. They want to make sure they add more clients into their platform, more to the 18 million Americans. They talk to businesses. They get the Empower capabilities in there. And to help strengthen the capabilities, on Monday, they announced an equity compensation solutions acquisition, which is OptionTrax. There's other named OptionTrax, excuse me. There's other areas they can look to invest in. They can get stronger benefits and admin capabilities, tax services, as well as around health and wellness. Great position in the market right now at number two. Has had great growth rates in recent years. We expect that to continue, hopefully, in the medium term. There is the opportunity to deploy capital. The services I just mentioned that would be complementary to their core defined contribution capabilities, those would be add-ons. There could also be further consolidation. I mentioned MassMutual. I mentioned Prudential. There could be further opportunity for that. I wouldn't say it's necessary for us to be successful. We do have that number two position now, and we are growing. It's not a prerequisite to be successful. But if opportunities show up, and we expect they will, we'll definitely look at them. Okay. Very good. Well, maybe we'll stay on the corporate development file, and we'll talk a little bit about your interest in IGM. Yep. We just heard from James, which was a great discussion around some of the growth initiatives at the various asset and wealth management businesses that they own. But when you step back and you think about IGM's positioning in the market today, is there anywhere that you could envision IGM growing inorganically via M&A? Sure. So James and team have done a really good job, I think, positioning the story around IGM, right? Two core businesses, wealth management, which is about 2/3 of the business, and asset management. And within that, you have the core businesses, obviously Investors Group on the wealth management side and Mackenzie on the asset management side. But you and James spent a lot of time talking about some of the higher growth businesses on the strategic side, which I think are sometimes not always as apparent, and I'm not sure they always show up in the value that shareholders and stakeholders describe to IGM at the end of the day. So on the asset management side, you talked about ChinaAMC, the growth. James mentioned the $9 billion in inflows. $9 billion, impressive numbers. They have a number two position in China, and that continues to grow well. Talked about Northleaf, right in the sweet spot, mid-market, secondaries. So doing well there. And on the wealth management side, you spent some time talking about Rockefeller and Wealthsimple. So when I currently think about capital management there with Jeff Orr, with James, with the board, and others, there's lots of opportunity both within the existing organic businesses, the IGM, the Mackenzie to invest, have better services, better client experience, sustainable margin in that space, as well as there may be opportunities that show up in the existing investments. So you never say never to anything, Nik. Opportunities show up. But when we look at the three businesses in both sides, they're pretty nice, and there may be opportunity to deploy capital within them and not have to add in another business or capability at this stage. Okay. That's great. So Great-West and IGM constitute combined about 80% of your assets. But GBL is another piece that sometimes gets overlooked by public market investors. And GBL recently monetized a position. They returned a component of the proceeds to shareholders in the form of dividends, and you participated in that. Can you just elaborate on GBL's strategy and maybe how that's pivoted recently more towards private markets and how the company makes a determination on whether to return capital to shareholders versus recycle and reinvest that capital? Yeah. I think it's a good point. Sometimes GBL falls down the list. You focus on Great-West Lifeco. You focus on IGM, and then maybe some of the higher growth areas. I know you talked with James about Wealthsimple, which is obviously controlled within the Power Group, and GBL, maybe we don't spend as much time on sometimes, so they have announced an evolution of their strategy. And as you articulated, they're rotating out of public assets, which is the majority of their assets, towards private assets. The rationale behind that is by moving more towards private, their expectation is that they're going to be able to create returns that are less replicable. I'm sorry, I struggle with that word sometimes, and returns that are hopefully higher and stronger than what they've been generating in public markets in recent years. So as that rotation happens, you'll see some of the capital from public assets go into private assets, but some will also be returned to shareholders. And that's not a throwaway line. When you look at it, they recently announced what they characterize as an exceptional dividend. And so the dividend goes up to the board every year, and it'll go up again in 2025. And they announced a EUR 5 dividend, which is about an 82% increase versus the prior dividend, right? And so for a shareholder like Power Group, that means another CAD 75 million comes into our coffers and gives us optionality, right? We've talked about optionality on the capital allocation side M&A, but also gives us some dry powder to do other things with our existing shareholders potentially. Yeah. Okay. Very good. So we can't have a conversation about Power Corporation without talking about the simplification agenda. Yes. That's been a major theme since the reorganization was announced nearly five years ago now. There are still a few interests within the Power Complex that arguably could be candidates for a reshuffling. For example, the alternative asset management business and a component of the Wealthsimple investment reside at the Power Corp level, whereas some could perceive IGM as being a potential destination longer term. You've also got a few non-core legacy investments residing on balance sheet. So do you feel that there's anything actionable on the simplification agenda over the next 12 months or so, or would you consider that element of the strategy to be a little bit more multi-year in nature? Yes and yes. There'll be near-term and there'll be medium-term actions that take place. Coming up on the five-year anniversary, I think it was December 2019 that the reorganization was announced at Power Corp amongst some of the legal entities, the substantial issuer bid. And that was enacted just a few months later in February 2020. Coming up on that five-year anniversary, as you note. That was really to focus the platform on financial services. Today, you look at some of our standalone businesses. You've got Peak, which had two core holdings in it six months ago, one of which was Rawlings. That's been sold. That returns some capital into our balance sheet, into our income statement. It also holds Bauer in it, and that would be viewed as a standalone business. You can think of that as non-core. There's Lion, there's Lumenpulse. So there are businesses that we've characterized as standalone that were part of that simplification agenda. I think if Jeff were here today, he would readily admit. You go back five years, he thought those would have been addressed by now. COVID happened along the way, inflation, spike in rates, monetization events became more challenging, as everyone would know in some of these assets. And we've obviously seen some macro volatility around the world. If we look forward five years, I think Jeff and I would both be disappointed if those assets were still on our balance sheet. We hadn't surfaced some value for them and created optionality within the Power Group of companies. There are other businesses. You mentioned some that could go into other spots. ChinaAMC was consolidated within IGM in recent years. Wealthsimple, you referred to, it's held in a few different spaces. I know that presents. I wouldn't say a challenge, but it presents a requirement for stakeholders to look at investments like that across a couple of different entities. But I'd say for those entities, it provides them flexibility, and it provides them strong hands and strong leadership. I think one of the most unique things about Power, and it celebrates its 100th anniversary next year, is its ability to think long-term and act long-term. And so Wealthsimple, James did a fantastic job talking about the 10-year anniversary and highlighting it becoming profitable, CAD 50 billion in assets, the strong growth. That's a company that started, obviously, within the Power Complex and has grown quite strong because of the ability to take that long-term view. So I think that's a unique intangible asset that often doesn't get discussed and is quite special. Power invested across the group CAD 344 million in Wealthsimple as an example. That was monetized for CAD 500 million a few years ago. And the latest group valuation as of the last quarter was CAD 1.5 billion. So simplification may not always happen overnight. It may happen in different ways, selling of businesses like Rawlings. But it may also, the reverse of simplification, if we want to call it complexity, would be the ability to take long-term views and foster strong businesses like Wealthsimple. Okay. Let's shift and we'll talk about the alternative asset management platform for a moment. Okay. So you've recently highlighted how the asset management business, the focus has really been around the creation and the build of fee-related earnings. But investors might be overlooking the carried interest potential associated as well. So can you just help elaborate on that a little bit, maybe help us quantify by describing what the run rate distributable earnings profile of that platform might look like, inclusive of carried interest in a more normalized environment where we start to see a bit of an acceleration in private market transaction activity? I'm glad you said run rate normalized because the economic signature, the economic footprint of the alt business will look different because of the different components you referred to. So I think historically, we'd looked at the alt platforms and really communicated the goals and the financial goals for those platforms around FRE or fee-related earnings. I think we've realized that we could have been better communicators, and we could have really indicated that there's a few economic components to that story. So it's not only the fee-related earnings that we're going to generate from it. And you look at a business like Sagard, which is probably further along than Power Sustainable. Sagard's just launched Portage Fund IV. Power Sustainable is still doing some Vintage I funds. So different stages of maturity. But those platforms not only will generate the FRE, they'll generate for us carried interest. I think in our last quarterly results, we disclosed about CAD 150 million of carried interest. Not all of it is Power's, but we would control the general partner or the GP. A good lion's share of that is available to Power. The third piece is the proprietary capital that we put into these funds and investments to help get them started and to attract other investors and get funds launched. We would have about CAD 2 billion invested in there, and we expect an IRR north of 10% on those investments. When I try to articulate to you the run rate or normalized earnings, if I'm expecting a 10% IRR on the seed capital, that's going to show up along the lines of about CAD 20 million a year, right? It'll have some ups and downs on it. You may also see times where we have a secondary sale of an asset, and you've seen that of an LP position. That's happened before, and that's created a larger income stream that has come in in a certain quarter. When you look at the GP positions and the carry, that will have a much more lumpy profile to it at the end of the day and less predictable. The FRE will become hopefully a bit more of a baseline earnings stream as we continue to grow assets in the businesses. I think I alluded to Sagard's now at around $30 billion and growing. So that component will continue to compound and grow over time. Okay, and I mean, you've been busy repositioning the asset management segment over the past few years. You've brought in external partners at Sagard. You recently wound down the Power Sustainable Equity strategy. You've released the associated seed capital there too. When you step back and you think about the future of that platform, how would you foresee the next few years unfolding, and what could the potential end game for that platform look like? Yeah. Tough to predict future. I know I'll leave a digital footprint with this fearless forecast. We'll probably end up being wrong at some point, Nik. You do that for a living where you're not always right, perhaps, on forecasts. I'll join you for a moment on that. These are businesses we're committed to. We're committed to investing in them. We've seen really great growth. I'll use Sagard as the example. That CAD 2 billion of capital that we've put in, it's been a fairly constant number if you go back to the start of the platform. You've seen over time third-party capital come in, right? You've seen it come in into funds. You've seen it come into the general partner with ADQ, now known as Lunate, as well as BMO coming in and buying an equity stake. Those are validation of the strategies. We would expect over time to see strong growth in assets and to contribute to the earnings overall profile of Power. Now, when you look at a strong business like Great-West that produces a billion-plus earnings a year, we're not expecting it to show up in the medium term and really be competing and saying, "Oh, look at the earnings contribution. It's now coming 30% in the next three years from the alt platform." But we do think it's a way to diversify, diversify into financial services. And we think it's complementary to our overall financial services platform. And so Wealthsimple has a lot of tie-ins with these alt platforms and obviously has been very valuable to both the Power Group and back to Investors Group. Okay. Let's talk a little bit about liquidity at the holding company level and the topic of capital allocation. You're operating with about CAD 400 million of excess capital. How would you prioritize the various capital allocation alternatives that you have in front of you? Sure. I think that's one of the really exciting parts of the job, Nik. So I'm glad you asked about it. And we spend a lot of time thinking about capital allocation and not capital allocation for Q3 or Q4 always. It's capital allocation, maybe it's for Q3 or Q4, but it's Q3 or Q4 2035. And so, for example, the Empower business on the defined contribution side, that capital allocation discussion started 10+ years ago. I think it started, I think it's a late 2000s, right? And then the action really got rolling in 2015 with the JPMorgan platform. And so we've got a very strong balance sheet. You mentioned liquidity. We try to hold about two times fixed costs or $800 million on the balance sheet. We were well above that at last quarter end. We had some declared and unpaid dividends both coming in and going out, so we probably have around CAD 400 million of excess liquidity now, and so we have near-term deployment options. Last night, the stock closed at a discount to NAV at 24.4. I don't like that discount. Jeff doesn't like that discount. I don't think our board does either, and so we can buy back stock. Buying back stock has many benefits to it. It obviously will increase NAV per share. It will also increase earnings per share, and by obviously buying stock back, we're taking out the dividend associated with it. It'll add back some free cash flow from the dividend savings as well, so there's lots of benefits, so there's near-term capital allocation. We also look across the assets we hold, and there could be near-term. You asked about IGM. You also asked about Great-West. It could be more medium-term optionality, and so we want to be there. If there's an equity need for an IGM or a Great-West, we want to be there to support it as well, so we like having excess capital. We like having that optionality, and this company celebrates its 100th anniversary next year. I think they've proven and shown over time that they will be disciplined, and when the opportunity presents itself, it could be a transaction like Irish Life, which was a great acquisition. It will make sure it's got the financial wherewithal to execute. Because the dividend is structured at Power Corporation as a pass-through from the dividends received from Great-West and IGM, if you do draw down on that excess liquidity and you use it to fund buybacks or you deploy it to other uses, how would you expect to sustain buybacks going forward? Would it necessitate more realizations and the freeing up of additional capital? Yeah. One of the things I've realized only six months in, and I haven't realized all of them, is the multitude of levers that are available to the Power Management team as well as the Operating Company Management team to continue to grow and grow earnings in a sustainable way. So in recent years, you've seen the execution of some secondary LP sales, LP positions in some of the alternative asset managers. You've seen the Bellus disposition. You've seen the Rawlings disposition. We wound down the equity strategy over in Asia Pacific, as you noted, because we weren't attracting enough third-party capital for it to be viable. That brought in some capital earlier this year. So you could see monetizations. You could see a rebalancing of capital. I do expect you'll see strong growth in the operating companies that we've talked about, whether it's Great-West or IGM. You're going to see return of capital from GBL. I mentioned the excess $75 million, so there's lots of levers. We have businesses coming online, becoming more profitable, the alt platforms, so there's lots of things happening that are going to create capital for us as we move forward to give us the ability to look at the different options that are going to be presented to us. Okay. And you made reference to the NAV discount earlier. And the fact that you used a decimal point tells me that it probably matters a lot. Yeah. Only one decimal point, to be clear. So I think you've made a compelling case in the past for a tighter NAV discount than where the shares currently trade. What do you think prevents the market from bidding up the shares and narrowing that NAV discount? And what do you think it'll take to see a discount that's maybe more commensurate with the level of corporate overhead expense? Yeah. I don't want to be a hypocrite. So we do think about managing long-term, but we also know we look at where the NAV discount is. So it doesn't determine how I sleep every night where that NAV discount settles out because we're building companies, investments, and frankly, an earnings profile for the long-term at the end of the day. I'm not going to forecast where I think it should be. I think our activities on buyback would indicate we think it's not at the right level at this size, and we can buy back stock and get a fantastic multitude of benefits, as I mentioned, around earnings per share, NAV per share, and freeing up some excess cash from around dividends. So those are all positive. So I don't know what I think is the right level at the end of the day. I do know we're going to continue to grow and produce fantastic returns. I looked recently and over the past five years, which is maybe more medium than long-term for us, but maybe not for the room, outperformed the TSX by 300+ basis points, outperformed the financials by 300+ basis points. So I think if people realize the story there and the buildup of how you get total returns from this company is quite compelling, that's going to lead to hopefully some more buying in the stock. A buy rating would also support us there too, Nik. So let's bring it all together. I mean, you've identified a range of value creation levers. You've got organic growth. You've got M&A. You've got action that could be taken at the Power Corporation level, the simplification agenda. What would be the most likely lever you'll be focused on in the near to medium term? Do you see any low-hanging fruit that kind of stands out as sort of easily executable in the near term? That active management that I talked about in the first question and the active management of the operating companies, you mentioned it. You got 66% of the asset value at Great-West. You got another 14% at IGM. So we're talking about 80% there. That's the big stone. So you spend time there. You look at ways to add value, whether it's growing the DC business that exists within Great-West Life under the Empower brand, whether it's partnering with James and team on the wealth management space. There is significant opportunity. Within Canada Life, I think they've got a great new leader in there, Fabrice Morin, who's doing a fantastic job, and I think strengthening that business and creating a stronger earnings profile from that, those are going to be the big things that move boulders. I don't think we're going to take our eye off the simplification agenda, right? We won't just be distracted by those large operating companies. We want to dispose and monetize and create value from some of those standalone businesses at the end of the day. So you can expect us to be focused on that. And when you look at the dividend yield of those companies, the operating companies that flow up to us, so IGM, Great-West, that's a dividend yield in excess of 5%. You add in the earnings targets, 9%. And then if we're buying back stock or adding value in other ways, you get to the low to mid-teens pretty quickly. And I think that's a compelling story for a strong balance sheet, mature company with good liquidity. I think it's a pretty compelling story. So we're going to be focused on the big pieces of the business, the operating companies that are 80% of the asset value, as well as continuing to execute on that financial services strategy announced five years ago to simplify and surface value for our shareholders. Okay. That's great. We're doing pretty well for time. We've got a few minutes left. Are there any questions in the audience? This is dangerous. Yes. So one of the issues is a lot of the value creation of Power has been at the operating businesses, but having excess capital during periods of stress, things happen that you don't expect. You might be part of it. It It really feels one of the lives in Irish Life, at least some of the asset management side. Do you think you have enough? If something went very wrong, how [audio distortion]. Yeah. So the question from the audience Ian de Verteuil was part of the Power's value creation has been opportunistic transactions referred to London Life, Irish Life, and querying around the capacity. And so I think we have quite strong capacity, right? We've got a strong credit rating, obviously sitting up at the parent level. We talked about the excess liquidity. We've talked about sources of liquidity. And so you shouldn't expect us to take that CAD 800 million guideline, which is two years of kind of fixed and operating expenses in the near term and run it down, but with the right transaction, would we dip into that a little bit potentially to support an acquisition? For sure. We don't have a strong history of issuing equity. We like our equity structure as it is now on the common side, but there's the ability to potentially issue preferred equity or raise financing in the market. So I think there's often a lot of discussion around EPS and earnings. This unique company focuses a lot on balance sheet as well and having that. And I think, Ian, speaking of the track record and the focus on adding businesses in like London Life and Irish Life, which we both referred to, which were very timely acquisitions. I don't think that discipline or strategy has left the organization. And so I don't have a number I'm going to say right now because the balance sheet's constantly moving and you can have value creation from the disposition of standalone businesses and you can have partners show up on a transaction. But I do think there's a commitment to be smart around that. And if the opportunity presents itself, the track record shows that Jeff and the broader team have been willing to strike and take advantage of that when others haven't been able to. Okay. So we're just about out of time here. So I just wanted to say thanks very much for joining us, Jake. Always appreciate your time and insight. Thanks for having me. Much appreciated.